subset of 80 lessons learned - wais bermuda · thurston, robert allan, patrick francey, robert...
TRANSCRIPT
subset of80 Lessons Learned
$80,000 to $80,000,000 in a Decade
Nov. 12, 2014WAISC, Vancouver
Thomas Beyer604 – 564 - 7673
tbeyer @ prestprop . com
www . prestprop . com
Page 2
Preamble / Legal DisclaimerReal Estate has been around 100’s of years� I didn’t invent apartment buildings nor its proper management nor its passive income nor its leverage potential
with income nor its tax deferral options nor its (usual) increase in value through time and improvements nor am I especially good at it .. Knowing what you want is important as is careful p(l)anning, but execution is key, as is a sense of urgency, listening, reading , kaizen… knowledge helps a lot, as does a sense of life’s opportunities and the ability to take advantage from them, but also useful is awareness of life’s risks and how to mitigate or manage them … being in the market at the right time helps, too .. And thanking God and others is important as is having fun while doing what some people call “work” .. And no GUARANTEES !
Knowledge is no one’s sole domain� I acknowledge shamelessly copying other people’s good ideas that I picked up during conversations,
telephone calls, meetings, presentations, education, courses, tapes and CDs over the years. Those people also learned and possibly also copied some of those ideas from other people’s books, tapes, CDs, courses, seminars or lectures. I have used material from the people used in the “Thank You” section and probably dozens more. Please forgive me if I have copied your original thought and not given you credit.
Thank You To:� Many people have influenced my life, my values, my thought processes and my real estate investment career
and I wish to give credits to their sometimes very small or sometimes hugely influential contributions, many of which are sprinkled throughout this presentation: Don & Connie Campbell, Greg Habstritt, Ozzie Jurrock, Raymond Aaron, Wright
Thurston, Robert Allan, Patrick Francey, Robert Kiyosaki, Douglas Gray, Tom Peters, Stephen Covey, Ron LeGrande, Tim Johnston, Douglas Thiessen, Dale Carnegie, Charles Givens, Harry Dent, John Murphy, Lou Gerstner, Jesus, Warren Buffett, Steve Jobs, Bill Gates, Terry Regenwetter, Janet Perna, Dave Rencz, Barry McGuire, Richard Bell, Neil Fenna, Lyndon Thiessen, Tom Docking, Gary Allard, George Fabi, John Stobbe, George Hilton, Matthew & Stephen Johnston, Zig Ziglar, Sasha & Greg & Mike Uhryn, Jim Vincent, Dominic Mandato, Paul & Monica Prochnau, Randy Jamieson, Brian & Donna Barnett, Rick Jenkins, Christian Lendi, Ross & Teresa Gilker, Neil & Sandy Kaarsemaker, Peer Rumland, Richard Dolan, Achim & Hilde Goldbach, Thomas Heiden, Howard Weale, Val Toffoli, Debbie Bradford, Rory Sutter, David Steele, Peter Hebb, Jan Fialkowski, Chris Biasuti, Nancy Ternowski, Christine Friesen, Larry Menarik, Brian Tracey, Dennis Aitken, Don Rumpel, David Jennings, Pat Gilker, Marianne Engel, Michelle Naffin, John Kish, Doug Bittle, Rick & Sheila Bayer, Bernie Garnhum, Len & Janica Williamson, Peter Tsukahira, Jeff Coors, Paul Szkiler, Pierre Doyon, John Beckett, David Davis, Scotty & Annie Grubb, Christine Kopr, Denise Odam, Keith & Linda Weaver, Charlie Bredo, Rick & Lyn Linklater, Adam Killam, Chad & Evie Willox, Mike & Sandy Hammerlindl, Keith McMullen, Prod & Elenor Laquian, Richard Alexander, Charles Menzies, Erica Frank, Jens & HsingChi von Bergman, my sister Barbara and her husband Steven Ongena, my brother Holger and his wife Martina Steinhauer, Abe & Elfrieda Friesen, my father Detlef, my mother Ursula, my amazing wife Lynda, and our two children, Sonja Marie & David Benjamin.
Page 3
80 Lessons Learned
� Life Lessons
� 5 ways to make money
� Business Lessons
� Asset Allocation
� Real Estate Lessons
� Real Estate is a Three Course Meal
� Leverage
� Volatility – Stocks vs. Real Estate
Part 1: Life Lessons
Lesson 1: Man Plans and God Laughs
Lesson 2: Clean up Your Messes (Part 1)
Lesson 3: Clean up Your Messes (Part 2) – Relationships
Lesson 4: Clean up Your Messes (Part 3) – the Bigger the Mess, The More Time it
Takes to Clean
Lesson 5: Clean up Your Messes (Part 4) – Phases of a Mess
Lesson 6: Build a Stable Base (Part 1) – Faith
Lesson 7: Build a Stable Base (Part 2) – Family
Lesson 8: Your Spouse is you Permanent 50/50 Joint Venture Partner
Lesson 9: Kaizen – Consistent, Incremental Progress
Lesson 10: Kaizen – Large Leaps can Lead to Low Confidence and Messes
Lesson 11: Growth in Discomfort – Taking the Next Step
Lesson 12: Growth in Discomfort – The Anatomy of an Uncomfortable Change (The
Stepped S-Curve)
Lesson 13: Growth in Discomfort – Change Gets Easier Each Time
Lesson 14: Ready, Fire, Aim – Take Reasonable Steps to Mitigate Risk
Lesson 15: Ready, Fire, Aim – Leap Before You Look (sort of)
Lesson 16: ASK – Learn By Asking Questions
Lesson 17: ASK – Asking Questions Separates You From the Crowd
Lesson 18: Know Yourself – Figure Out What You’re Excellent, Good, Average,
Poor, and Terrible At
Lesson 19: Know Yourself – Everyone is Good at Something
Lesson 20: Know Yourself – Patience
Lesson 21: Delegation – Don’t Confuse Getting Things Done with Doing Them
Yourself
Lesson 22: Delegation – You Can’t (and Shouldn’t) Delegate Everything
Lesson 23: Delegation – Knowing What You Don’t Know, and “There’s No Dash in
‘Micromanage’!”
Lesson 24: Delegation – Don’t Delegate Your Strengths, Work on Them
Lesson 25: Delegation – You Can’t Delegate Relationship Building
Lesson 26: Delegation – Employer/Employee Relationships Must be Win/Win
Lesson 27: Positive Feedback – Reach Out to Empower Yourself
Lesson 28: Mentoring – The Value of Informal Mentors
Lesson 29: Live Below Your Means – Your Car is a Money Pit
Lesson 30: Live Below Your Means – A Penny Saved is Two Pennies Earned
Lesson 31: Live Below Your Means – Except When it Comes to Your House)
Lesson 32: Challenge Your Belief System – Adhere to the Evidence
Lesson 33: Challenge Your Belief System – You’re not the Beliefs that you Inherit
Lesson 34: The Noble Art of Leaving Things Undone
Lesson 35: Principle Based Decisions Lead to Big Results
Lesson 36: Principle Based Decision Making – Know Where you Stand, or Be Pushed
Around
Lesson 37: Communication – Continual Growth
Part 2: Business Lessons
Lesson 38: Communication - Selling and Marketing
Lesson 39: Communication – Know Your Advantage and Communicate it
Lesson 40: Communication – Speak in their Language
Lesson 41: Communication – Sales Process
Lesson 42: Communication – Relationships Come First
Lesson 43: Communication – Presentation Skills
Lesson 44: Partnering – Don’t Partner if You Don’t Have to
Lesson 45: How to Choose a Partner
Lesson 46: Immediate and Delayed Income
Lesson 47 – Move Understanding Forward
Lesson 48: Have a Casual Disregard for Money
Lesson 49: Green Money vs. Blue Money
Lesson 50: Spend Money Wisely
Lesson 51: Creating Momentum – “The First Million is the Hardest”
Lesson 52: Generalist, Specialist, or Generalist Specialist
Lesson 53: Even Steve Jobs was Replaced
Lesson 54: Risk – How Conservative Do You Want To Be?
Lesson 55: Risk – Fail Your Way to Success
Lesson 56: Risk – Tolerance to Risk Fluctuates
Lesson 57: Know Your Worth
Part 3: Real Estate Lessons
Lesson 58: Investing – Wealth Planning is About the Wealth of the Planner
Lesson 59: Investing – Choosing an Advisor for your Investment Portfolio – Or Should You do it Yourself?
Lesson 60: Investing – Real Estate in your RRSP or TFSA?
Lesson 61: Investing – Maximize Your RRSP: Make 50% to 66% "On the House"
Lesson 62: How to Start Out in Real Estate Investing
Lesson 63: The Five Ways to Make Money
Lesson 64: Working – Earning an Income
Lesson 65: Investing Your Own Money
Lesson 66: Investing Other People’s Money
Lesson 67: Employing Other People
Lesson 68: Intellectual Property
Lesson 69: The First Steps to Becoming a Real Estate Investor
Lesson 70: Is a 50/50 Joint Venture Fair?
Lesson 71: Buying vs. Owning – You Make Money When You Buy
Lesson 72: Buying vs. Owning – The Three Rs of Property Management
Lesson 73: Real Estate is Not Get Rich Quick, It’s Get Rich For Sure
Lesson 74: Making the Jump From Single Family to Multi-Family
Lesson 75: Knowledge is Its Own Acquisition
Lesson 76: The Cash Flow Myth
Lesson 77: Good Debt vs. Bad Debt
Lesson 78: Income Thinking vs. Net Worth Thinking
Lesson 79: Choose Real Estate Investments That Make Sense to You
Lesson 80: Real Estate Transaction Costs and the Virtual Life of a Building
Page 4
Topics of Discussion� How we got here
� Life Lessons
� .
� Business Lessons
� .
� Real Estate Lessons
� .
� .
� .
� Final Thoughts
Page 5
Prestigious Properties ™ Overview� Founded in 2000 .. After 10 year of “gee, I should do s.th”
� Buying in bulk since 2000: like flower, less $s per pound !
0
200
400
600
800
1000
1200
1400
1600
89 909192 939495 969798 99'00'01 2 3 4 5 6 7 8 9 10 1112
Acres of Land
Units Owned
Page 6
Prestigious Properties ™ Overview� Founded in 2000 .. After 10 year of “gee, I should do s.th”
� Buying in bulk since 2000: like flower, less $s per pound !
� Currently own 15 properties (incl. condos, houses and two land parcels) with values exceeding $100,000,000
� over 37 buildings transacted so far worth $175,000,000, 20+ buildings sold (dumb .. dumb .. dumb) .. About 800 apartments as of Nov. 2014 , exceeding $10M revenue annually
� 700+ investors who invested well over $45 M so far
0
200
400
600
800
1000
1200
1400
1600
89 909192 939495 969798 99'00'01 2 3 4 5 6 7 8 9 10 1112
Acres of Land
Units Owned
Page 7
Prestigious Properties ™ Overview� Founded in 2000 .. After 10 year of “gee, I should do s.th”
� Buying in bulk since 2000: like flower, less $s per pound !
� Currently own 15 properties (incl. condos, houses and two land parcels) with values exceeding $100,000,000
� over 37 buildings transacted so far worth $175,000,000, 20+ buildings sold (dumb .. dumb .. dumb) .. About 800 apartments as of Nov. 2014 , exceeding $10M revenue annually
� 700+ investors who invested well over $45 M so far
� � OPEN FOR INVESTMENT: Kings Castle LP
0
200
400
600
800
1000
1200
1400
1600
89 909192 939495 969798 99'00'01 2 3 4 5 6 7 8 9 10 1112
Acres of Land
Units Owned
Page 8
Topics of Discussion� How we got here
� Life Lessons
� 5 ways to make money
� Business Lessons
� .
� Real Estate Lessons
� .
� .
� .
� Final Thoughts
Page 9
Some Life Lessons Learned� 5 Ways to Make Money
Page 10
Some Life Lessons Learned� 5 Ways to Make Money
� Work
Page 11
Some Life Lessons Learned� 5 Ways to Make Money
� Work
� Invest (your own) money
Page 12
Some Life Lessons Learned� 5 Ways to Make Money
� Work
� Invest (your own) money
� Invest other people’s money (OPM)
Page 13
Some Life Lessons Learned� 5 Ways to Make Money
� Work
� Invest (your own) money
� Invest other people’s money (OPM)
� Invest other people’s time (i.e. delegate / build a team / JV / partner / small business)
Page 14
Some Life Lessons Learned� 5 Ways to Make Money
� Work
� Invest (your own) money
� Invest other people’s money (OPM)
� Invest other people’s time (i.e. delegate / build a team / JV / partner / small business)
� License / IP / Trademark
Page 15
Topics of Discussion� How we got here
� Life Lessons
� 5 ways to make money
� Business Lessons
� Asset Allocation
� Real Estate Lessons
� .
� .
� .
� Final Thoughts
Page 16
Prestigious Priorities
� Warren Buffett’s Rules for Investing
� Rule No. 1 - never lose money.
� Rule No. 2 - never forget rule number one.
Page 17
Prestigious PrioritiesOur Priorities• Return OF your money• Return ON your money• Quarterly Cashflow
� Warren Buffett’s Rules for Investing
� Rule No. 1 - never lose money.
� Rule No. 2 - never forget rule number one.
Page 18
30%
Medium
Risk
10%
High
Risk
Asset Allocation
(Stocks, Bonds and Private Equity)
60%
Low
Risk
Page 19
30%
Medium
Risk
10%
High
Risk
Asset Allocation
(Stocks, Bonds and Private Equity)
60%
Low
Risk
DISCLAIMER: IT IS NOT ADVICE. IT IS AN OPINION OF THE AUTHOR AND/OR PRESENTERS
Page 20
30%
Medium
Risk
10%
High
Risk
Asset Allocation
(Stocks, Bonds and Private Equity)
60%
Low
Risk
DISCLAIMER: IT IS NOT ADVICE. IT IS AN OPINION OF THE AUTHOR AND/OR PRESENTERS
Land Development
(with mortgages)
Second Mortgages
(construction)
Most penny Stocks
Construction Projects
(with mortgages)
Greek Bonds
Private Software Firms
Restaurants
Page 21
30%
Medium
Risk
10%
High
Risk
Asset Allocation
(Stocks, Bonds and Private Equity)
60%
Low
Risk
DISCLAIMER: IT IS NOT ADVICE. IT IS AN OPINION OF THE AUTHOR AND/OR PRESENTERS
Land Development
(with no mortgages)
Second Mortgages
(non-construction)
Most large CAP stocks
Euro Bonds
Gold, Diamonds
Commercial Real
Estate
Construction Projects
(with low mortgages or
In very high demand
locations)
Page 22
30%
Medium
Risk
10%
High
Risk
Asset Allocation
(Stocks, Bonds and Private Equity)
60%
Low
Risk
DISCLAIMER: IT IS NOT ADVICE. IT IS AN OPINION OF THE AUTHOR AND/OR PRESENTERS
Apartment Buildings
(with modest mortgages)
First mortgages
(non-construction)
Quality Corp. Bonds
Many Municipal Bonds
Government Bonds
Page 23
30%
Medium
Risk
10%
High
Risk
Asset Allocation
(Stocks, Bonds and Private Equity)
60%
Low
Risk
DISCLAIMER: IT IS NOT ADVICE. IT IS AN OPINION OF THE AUTHOR AND/OR PRESENTERS
Apartment Buildings
(with modest mortgages)
First mortgages
(non-construction)
Quality Corp. Bonds
Many Municipal Bonds
Government Bonds
Note: RISKY (according to
the security commission
rules) is an exempt
market offering with any
of these even if some
asset classes are less risky
than others!
Page 24
30%
Medium
Risk
10%
High
Risk
Asset Allocation
(Stocks, Bonds and Private Equity)
60%
Low
Risk
DISCLAIMER: IT IS NOT ADVICE. IT IS AN OPINION OF THE AUTHOR AND/OR PRESENTERS
Apartment Buildings
(with modest mortgages)
First mortgages
(non-construction)
Quality Corp. Bonds
Many Municipal Bonds
Government Bonds
Page 25
Topics of Discussion� How we got here
� Life Lessons
� 5 ways to make money
� Business Lessons
� Asset Allocation
� Real Estate Lessons
� Real Estate is a Three Course Meal
� .
� .
� Final Thoughts
Page 2626
• Appetizer: Positive Cash-Flow
Real Estate: A Three Course Meal
Page 2727
• Appetizer: Positive Cash-Flow
• Main Course: Mortgage Paydown
Real Estate: A Three Course Meal
Page 2828
• Appetizer: Positive Cash-Flow
• Main Course: Mortgage Paydown
• Dessert: Value Increase through
– improvements (if any)
– re-positioning
– reduced expenses / higher rents
– time
– roughly: real estate doubles in 15 -20 years !
Real Estate: A Three Course Meal
Page 2929
• Appetizer: Positive Cash-Flow
• Main Course: Mortgage Paydown
• Dessert: Value Increase through
– improvements (if any)
– re-positioning
– reduced expenses / higher rents
– time
– roughly: real estate doubles in 15 -20 years !
• Never sell ??
– Why sell ?
– Re-finance
– Full course Meal
Real Estate: A Three Course Meal
Page 30
Topics of Discussion� How we got here
� Life Lessons
� 5 ways to make money
� Business Lessons
� Asset Allocation
� Real Estate Lessons
� Real Estate is a Three Course Meal
� Leverage
� .
� Final Thoughts
Page 31
Why Real Estate? (with cheap levered money )
133%+
Year 5 @ 8%/year
Assumptions: 25% down, 25 year amortization mortgage,
low to break even cash flow (value in year 1 = 3000,
mortgage = 2250 going to 2000 in 5 years .. 25 year
amortization .. thus 10% mortgage paydown)
Page 32
Why Real Estate? (with cheap levered money )
193%
133%+
Year 5 @ 8%/year
Assumptions: 25% down, 25 year amortization mortgage,
low to break even cash flow (value in year 1 = 3000,
mortgage = 2250 going to 2000 in 5 years .. 25 year
amortization .. thus 10% mortgage paydown)
Page 33
Why Real Estate? (with cheap levered money ) � Even with conservative
market value growth of 4-5% annually, typical cash-on-cash returns can be in the 10% to 20% per year range (before costs, overhead and our profit)
193%
133%+
Year 5 @ 8%/year
Assumptions: 25% down, 25 year amortization mortgage,
low to break even cash flow (value in year 1 = 3000,
mortgage = 2250 going to 2000 in 5 years .. 25 year
amortization .. thus 10% mortgage paydown)
Page 34
Why Real Estate? (with cheap levered money ) � Even with conservative
market value growth of 4-5% annually, typical cash-on-cash returns can be in the 10% to 25% per year range
� Very doable and consistently doableif one has the experience and knowledge – or partner with the right people and buys in growth areas !
Assumptions: 25% down, 25 year amortization mortgage,
low to break even cash flow (value in year 1 = 3000,
mortgage = 2250 going to 2000 in 5 years .. 25 year
amortization .. thus 10% mortgage paydown)
193%
133%+
Year 5 @ 8%/year
Page 35
Why Real Estate? (with cheap levered money ) � Even with conservative
market value growth of 4-5% annually, typical cash-on-cash returns can be in the 10% to 25% per year range
� Very doable and consistently doableif one has the experience and knowledge – or partner with the right people and buys in growth areas !
� yes, even a 40% -50% value growth in 5 years is very doable in certain markets
193%
133%+
Year 5 @ 8%/year
Assumptions: 25% down, 25 year amortization mortgage,
low to break even cash flow (value in year 1 = 3000,
mortgage = 2250 going to 2000 in 5 years .. 25 year
amortization .. thus 10% mortgage paydown)
Page 36
Topics of Discussion� How we got here
� Life Lessons
� 5 ways to make money
� Business Lessons
� Asset Allocation
� Real Estate Lessons
� Real Estate is a Three Course Meal
� Leverage
� Stocks vs. Real Estate
� Final Thoughts
Page 37
Stock market
After MER of a typical mutual Fund
10 year average3% per year
Average TSX10 year average5% per year
• TSX Index Performance over 10 Years Raw Index and
after 2% MER / year
Page 38
Stock market – 7 Years
After MER of a typical mutual Fund
7 year average-1% per year
Average TSX7 year average1% per year
• TSX Index Performance over 7 Years Raw Index and
after 2% MER / year
Page 39
Apartment Building Growth
$0
$25,000
$50,000
$75,000
$100,000
$125,000
$150,000
$175,000
$200,000
$225,0001997
Asian
Financial
Crisis
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
““““Consistent positive growth over
the past 27 years””””
ICREIM / IPD Canada Residential
"Apartment" Property Index (TR)
$197,968(Dec-31 2012)
2008/09
Global
Financial
Crisis
1987
Black Monday Crash
1998
Russian
& LTCM
bailout
2000/02
Internet
Bubble
Bursts
& 9/11
$10,000 invested (Dec 31-1984)
7 Source: REALPac/IPD Canada Annual Property Index as at Dec. 31, 2012. This index is referenced as it is the longest direct property data series commonly used by institutional real estate investors.
It is an unlevered index. PAST PERFORMANCE MAY NOT BE REPEATED.
““““Positive calendar year Total Returns every year over past 27 years””””
Page 40
Source: JJ Barnicke, Edmonton – 1995-2007 & REMAX Real Estate, Alberta Data Search – 2008-2013, 2014 CommercialEdge
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Av
era
ge P
rice
pe
r D
oo
r
Year
Average Price per Door - Edmonton, AB
Page 41
Invest where the people move!
41
� Alberta Population
� Today: ~4M
� In 2020: bigger than BC
� In 2040: 6.2M
� Calgary = 2.4 million
� Edmonton = 2.1 million
Page 42
� Income & growth-focused investment
� Backed by income-producing apartment buildings
� Earn 6% DRIP or 5% Cash Distribution annually
� RRSP / TFSA / LIRA eligible
� Target Annual 8 - 10% ROI
� From only $10,000
Consider a Private Apartment LP
Annual ROI Target 8-10%+
Page 43
Advantages of a
Private Apartment LP
Apartments One of the safest real estate sectors
Private Lower volatility
Limited Partnership
Growth orientated, tax-advantaged returns
Proven business model,
hassle-freeProfessionally
Managed
Become a Landlord. Without the Hassles.TM
Final ThoughtsBecome a landlord - Without the Hassles ™
The real estate roads are paved with gold … but you have to bend
over to pick it up !
Lever sensibly with low interest rates !
Don’t wait to invest in real estate –Invest in real estate and wait ! ™
When you check into the old folks home ….
ActionCome to our booth !
Sell: Decent Risk Adjusted ROI !
Join 700+ investors !
Get a copy ofmy book !