Darcy, Aury and I chat about using a HELOC to purchase real estate. HELOC's are a great tool but should be used with caution, and you need to understand the good and the bad.

Episode originally aired on "Advanced Real Estate Investing Talk" Podcast on June 20th 2023

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EP279 Why Should Or Shouldnt You Invest Using A HELOC

This episode covers a broad array of strategies for making money in real estate, offering insights for individuals at various experience levels. Here’s a summary of key points and approaches mentioned:

Entry-Level Approaches

Bird-Dogging: Identifying neglected properties for potential investors.
Boots on the Ground: Assisting remote investors by taking photos or performing on-site tasks.
Networking: Attending meetups to connect with experienced investors for mentorship and collaboration.

Creative Financing and Active Investment Strategies

Lease Options: Renting with an option to purchase for cash flow generation.
BRRRR Strategy: Buy, Rehab, Rent, Refinance, Repeat, to scale a portfolio.
Wholesaling: Securing properties under contract and selling them to other investors for a fee.

Passive Income Opportunities

Private Lending: Offering loans secured by real estate to earn interest and points.
Joint Ventures: Partnering as a passive investor to fund projects in exchange for profit-sharing.
REITs: Investing in Real Estate Investment Trusts for indirect property exposure.

Specialized Roles

Asset Manager: Managing property managers to ensure efficiency and accountability.
Key Principal: Signing for loans on large projects, leveraging personal net worth.
Real Estate Agent/Broker: Facilitating property transactions for commissions.
Promissory Notes: Lending via promissory notes secured against properties.

Real Estate-Related Businesses

Home Services: Running companies that offer services like repairs, maintenance, or cleaning.
Teaching: Sharing expertise through courses (while emphasizing credibility).

Holding and Appreciation

Simply owning a home or property generates wealth through appreciation, inflation advantages, and principal repayment over time.

Key Advice and Best Practices

Reputation Matters: Avoid promoting products or services solely for commissions if they lack quality.
Start Now: The best time to invest in real estate is always today, as holding properties over the long term builds wealth.
Do Due Diligence: Whether it’s teaching programs, lending, or entering partnerships, research thoroughly.
If you’d like to dive deeper into any of these strategies or explore how to apply them to your portfolio, let me know!

EP170 What are the Many Ways to Generate Income with Real Estate

The discussion centers on creating value in real estate and entrepreneurship through intentional strategies:

Creating Value in Work and Entrepreneurship:

Value is created by solving problems, improving processes, or providing products/services.
Sharing knowledge freely, such as through podcasts or communities, builds trust and reciprocal value.

Real Estate Value Creation:

Forced Appreciation: Renovating properties to increase value beyond the cost of improvements.
BRRRR Strategy: Buy, Renovate, Rent, Refinance, Repeat – a way to grow a portfolio while improving neighborhoods.
Gentrification can transform areas, benefiting the broader community.
Examples include improving multifamily units, shopping centers, and mobile home parks through upgrades, infills, and better management.

Adding Value Through Process:

Robust systems (e.g., accounting, forecasting, and property management) reduce risk and improve long-term performance.
Small improvements in processes compound over time, increasing efficiency and profitability.

Key Takeaway: Whether through property improvements, process optimization, or sharing knowledge, value creation leads to growth, stability, and financial rewards.

EP171 How to Create Value in Real Estate

The discussion focuses on best practices for dealing with tenants and prioritizing stability over turnover. Key points include:

Clarity and Respect in Communication:

Respect and clear, honest communication build trust and goodwill with tenants.
Avoid relying on texting; verbal conversations preserve nuance.
Stability Over Turnover:

Turnover is expensive due to renovation costs, contractor availability, and vacancy losses.
Prioritizing tenant retention leads to predictable, reliable income.
Aggressively raising rents risks instability and attracting less reliable tenants.
Market Strategy:

Retaining tenants by staying slightly below market rent ensures longer tenancies and avoids costly turnovers.
Rent increases should align with market dynamics and tenant agreements (e.g., transitioning to month-to-month leases at market rates).
Adding Value:

Offer tenants value through good-quality units and strong service.
Treat tenants as customers, focusing on satisfaction and fostering loyalty.
Investing in proper repairs reduces long-term issues.
Calculating Renovation ROI:

Use cap rates to determine the ROI for rent increases following renovations.
Example: A $300 monthly rent increase at a 7% cap rate adds $51,000 in property value.
Sustainability:

Avoid overpricing units or attracting desperate tenants, which can lead to instability.
Banks value stability; turnovers can complicate financing as consistent income is required.
Overall, tenant retention, stability, and adding value are central to long-term profitability and maintaining healthy rental communities.

EP172 Best Practices When Dealing With Tenants

Key Strategies for Finding and Keeping Reliable Contractors
Recruit Continuously:

Always maintain a pool of contractors to avoid delays.
Start Small:

Test new contractors with minor tasks before assigning larger projects.
Set Clear Expectations:

Communicate standards for work quality, tenant interactions, and cleanup.
Use contracts to clarify terms and identify red flags.
Pay Promptly:

Pay contractors immediately upon job approval, especially for small businesses.
Provide Feedback:

Collect tenant feedback and maintain open communication to ensure quality.
Build Relationships:

Respect their time, understand their goals, and treat them as part of your team.
Proactive Management:

Oversee projects actively to prevent issues and maintain standards.
Key Mindset: Treat contractors with respect and reliability to foster long-term partnerships.

EP173 How to Find Reliable Contractors

This weeks podcast delves into the mechanics of determining and leveraging cap rates in real estate investment, with several practical insights. Below is a summary and key takeaways:

Key Points from the Discussion

Understanding Cap Rates:

Cap rate is a measure of return on investment for a property, calculated as NOI (Net Operating Income) divided by the purchase price.
It allows for the comparison of properties regardless of debt structures.
A higher cap rate indicates higher returns but often implies higher risk.

Determining Market Cap Rates:

Connect with brokers, realtors, and appraisers active in your target market to gather cap rate data.
Use subscription lists from commercial real estate firms (e.g., Colliers, Avison Young) for current listings and sales information.
Study historical property sales and their performance for patterns and benchmarks.

Challenges with Market Data:

In smaller markets (low population or less activity), data scarcity increases cap rate variability.
In major markets, cap rates tend to be lower due to higher demand and liquidity.

Creating Value Beyond Initial Cap Rates:

Properties with vacancies or operational inefficiencies often have lower advertised cap rates but offer opportunities for value creation.
By stabilizing rents, filling vacancies, and improving operations, investors can significantly improve effective cap rates.

External Influences on Real Estate Markets:

International money inflows into stable countries (e.g., Canada, the U.S.) often prioritize asset safety over returns, inflating real estate prices and impacting local cap rates.

Practical Strategies:

Always verify data (e.g., actual NOI versus pro forma projections).
Build relationships with professionals who can provide insights on local markets.
Track and analyze properties over time for better decision-making.


EP174 How to Detemine a Market Cap Rate Without Access to Financials of Other Appartment Buildings

The podcast provides a detailed discussion on the pros and cons of using a home equity line of credit (HELOC) to invest in real estate, emphasizing several key points:

Pros of Using a HELOC for Investment:

Access to Funds: For many Canadians, leveraging home equity might be their only accessible source of investment capital without waiting for savings to accumulate.
Flexibility: HELOCs offer flexibility in accessing funds when needed, which can be useful for opportunities like the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat).
Potential for Returns: If managed properly, the borrowed funds can generate returns that exceed the cost of borrowing, making the investment profitable.

Risks and Considerations:

Cost of Borrowing: HELOC interest rates can be high (e.g., prime + 2.5%), cutting into potential returns.
It’s essential to factor in HELOC payments when calculating the project’s profitability.
Exchange Rate Challenges: When using Canadian HELOC funds to invest in the U.S., fluctuating exchange rates and transfer fees can complicate calculations and reduce returns.

Risk of Over-Leverage: Relying heavily on HELOC funds without a solid repayment plan can lead to financial stress, especially if the project timeline extends or returns underperform.
Tax Implications: For Canadian tax purposes, HELOC interest is only deductible if it's used exclusively for investment. Mixing personal and investment expenses in the same account can lead to complications with the Canada Revenue Agency (CRA).

Practical Advice:

Plan for Repayment:

Treat HELOC funds like private loans with a clear repayment strategy, such as refinancing or proceeds from a profitable project.
Clean Accounting: Keep HELOC transactions for investments separate from personal use to simplify tax reporting and avoid disputes with the CRA.
Assess Alternatives: Consider other funding options, like U.S.-based loans for U.S. investments, which might offer higher leverage and potentially better rates despite their own risks.

Know Your Numbers: Accurately calculate the costs, including HELOC interest, exchange rate fluctuations, and potential tax implications, to ensure the investment will generate net positive returns.

Vet Partners: When partnering on projects, ensure you understand where your partner’s funding is coming from, as their financial pressures could indirectly affect the project.

Final Thoughts:

Using a HELOC for real estate investment can work well if the numbers align and risks are understood. However, it’s crucial to have a solid financial plan, conservative assumptions, and clarity about all associated costs to make informed decisions.

EP175 How DO You Invest Using a HELOC

This podcast explores the nuanced topic of rent control and its impact on landlords, tenants, and housing markets. The perspectives shared reveal how different regulatory environments can shape investment strategies and housing dynamics. Here’s a summary of the key points:

1. The Definition and Forms of Rent Control
Varied systems: Rent control may cap increases at a set rate tied to the property or allow market resets when tenants vacate.
Examples of systems: Alberta operates without rent control, while Ontario and many U.S. states have prescribed limits on rent increases.

2. Landlords' Perspective on Rent Control
Investment decisions: Many landlords, including those in the U.S., prefer markets without rent control due to greater flexibility in setting rents and managing evictions.
Challenges under rent control: Strict controls may discourage reinvestment in properties, potentially leading to deteriorating housing quality.
Operating costs: Rising costs—such as taxes, insurance, utilities, and garbage services—often consume a significant portion of rental income, leaving landlords with limited funds for property upgrades.

3. Tenants' Perspective and Benefits of Rent Control
Affordability: Rent control can provide stability and affordability for tenants, particularly in low-vacancy markets.
Challenges: Some systems incentivize landlords to prefer tenant turnover to reset rents, potentially creating tension.

4. Market Dynamics and Supply
Role of supply: Expanding housing inventory is seen as a key solution to stabilizing rents without heavy regulatory intervention.
Case studies: Saskatoon and Edmonton were highlighted as examples where market adjustments (rather than strict rent controls) led to periods of affordability and recovery.

5. Broader Economic and Social Impacts
Social assistance: Inadequate government support for vulnerable populations often exacerbates housing struggles, overshadowing the role of landlords.
Political narratives: The dialogue critiques oversimplified portrayals of landlords as exploitative and tenants as victims, emphasizing the need for balanced discourse.

6. Preferences in Investment
Landlord-friendly markets: Investors like those speaking in this discussion prioritize jurisdictions with minimal rent control and clear rules around evictions.
Flexibility and fairness: Landlords often strive to keep rents competitive to retain tenants while balancing operational costs.

This discussion underscores the complexity of rent control policies and their far-reaching implications. It highlights the importance of balanced regulation that supports tenants’ needs while ensuring landlords can sustainably maintain and improve housing stock.

EP176 How Do You Invest Where There Is Rent Control


This podcast conversation reflects a thoughtful and multi-perspective discussion on bonuses and gifts within business and management practices. A few key points emerge:

Cultural Sensitivity:

Acknowledging cultural norms, such as the 13th-month pay in the Philippines, is essential for maintaining positive relationships with team members from diverse backgrounds.
Timing and Types of Bonuses/Gifts:

Many participants align bonuses and gifts with festive occasions (e.g., Christmas) or birthdays, and there’s a preference for practical gifts like Amazon gift cards or culturally specific packages.
Strategic Employee Engagement:

Offering long-term incentives like equity shares or performance-based bonuses can create significant alignment between team goals and individual efforts. However, not all employees are comfortable with or interested in such arrangements.
Discretionary Nature of Bonuses:

While some view bonuses as discretionary rewards for good performance or loyalty, others see them as integral to maintaining goodwill and retention.
Communication and Relationship Building:

Building trust and understanding the personal aspirations of team members helps foster a supportive environment. Books like The Dream Manager provide frameworks for managing people by addressing their aspirations.
Pragmatic Challenges:

Challenges such as aligning bonus expectations with actual business performance or managing contractor agreements show the need for flexibility and good communication in contracts.
This discussion showcases how tailored approaches to compensation and recognition can significantly impact business relationships and team morale. If you’d like, I can synthesize these insights into actionable advice or further elaborate on any aspect!

EP177 How to Determine Bonus's and Gifts

The podcast discussion offers excellent insights into getting started in real estate today. Here's a summary of the top tips shared:

1. Immerse Yourself in the Market
Browse Listings: Use platforms like MLS, Western Investor, or other local resources to analyze deals and understand the market.
Educate Yourself on the Details: Learn to interpret real estate terms, spot potential deals, and evaluate key metrics like pro forma financials versus actuals.
Talk to Professionals: Build relationships by calling listing agents and brokers. Personal connections can lead to off-market deals and insider insights.

2. Define Your Goals and Create a Plan
Set Clear Objectives: Decide on the type of investment (e.g., single-family homes, apartments, commercial spaces).
Reverse Engineer Steps: Break down your goal into actionable steps and identify what’s needed to achieve them.
Schedule Time: Allocate consistent time to research, analyze, and take actionable steps, even if it’s just an hour a week.

3. Seek Guidance and Build Relationships
Find a Mentor or Mastermind Group: Learn from those experienced in your target asset class. A mentor can help you avoid pitfalls and accelerate your progress.
Save for Down Payments and Financing: Understand your financial requirements, including rates and lending options, and be prepared to act.
Take Action: Don’t overanalyze to the point of paralysis. The best learning often comes from doing.

Key Takeaways:
Preparation is essential. Whether it’s through extensive research, networking, or mentorship, invest in building a solid foundation.
Real estate success often stems from a balance of education, clear planning, and decisive action.

Relationships play a critical role in uncovering opportunities and executing deals effectively.
If you'd like to refine these tips further or create tailored advice for a specific audience, let me know!

EP178 3 Steps to Get Started in Real Estate

Helping anyone invest in the U.S. real estate market from anywhere!

EP279 Why Should Or Shouldnt You Invest Using A HELOC

A Canadian Investing in the U.S.