Table of Contents - Build a Portfolio and Retire FAST with Mike Rosehart
Dave Debeau [00:00:08] Hey, everyone, this is Dave Debeau Welcome to another episode of the Property Profits Real Estate podcast. Today, I'm really looking forward to having a chat with our special guest, Mike Rosehart, who you can tell from looking at the young fella is not that old, however, is a very, very experienced and very accomplished real estate entrepreneur and now a full time entrepreneur. His claim to fame is being one of Canada's earliest retirees, I believe, at age twenty four. Is that correct, Mike? Was it age twenty four? He built a portfolio of over 17 properties. Very, very quick time frame. We start off with 19, but his first revenue property of that age. So definitely rocking and rolling it. He's also very, very smart guy. You know, you've heard about Ivy League people, Ivy League students, Ivy League university graduate. Well, that's what he is as well. So he's got a very interesting background. But before we dove into that, Mike, why don't you tell us you called the BR real estate snowball method. That's what you've done a lot of your investing. What exactly is the BR real estate snowball method?
Mike Rosehart [00:01:24] Yeah, so the bird, by the way, thank you for the introduction. You're very kind about being smart. I feel like I'm just a hardworking guy. But, you know, the thing of it is I discovered kind of early on my, I guess, second property, I stumbled on the fact that you could buy a property that was undervalued and back in, I guess, 2012 and I was doing this. So a lot of people back then that we're talking about the it wasn't really a thing. It was like you could find undervalued property. You could fix it up. You could add some value to it. And, hey, if you refinanced, it's still cash flow. That was a huge win. And so the appeal for me with real estate was, you know, I was investing in stocks and things like that. And I'm like, I can't get the kind of returns I can in real estate because of leverage. So I can borrow at three and a half percent back then, even cheaper now or three 1/2 percent, and then lever up five to one so I can put 20 percent down and deliver it up five to one. And if I return, the asset was 10 percent. That means I can make 40 or 50 percent off the cost of debt. So and that was if I did be forced depreciation. Sure. Cash flow and a modest one or two percent appreciation. And of course, things typically go better than that if you figure out how to how to unlock that value. But the bird is the idea that you can buy an undervalued asset. And the acronym is you buy, you renovate, you rent it out, you refinance it, you pull out your down payment and you repeat process. And it effectively allows you to tax free, withdraw from the property because you don't pay taxes. So you sell all of your down payment and then roll into another property. And so you could theoretically. And I did a series of burs before I quit my day job. I worked in consulting. After I graduated university, I went to university at 17. So I was done by by 20. I was almost twenty one. I just turned twenty one for your four year Ivy degree. At the time I was twenty one. I was working full time and while I was working full time, I used that income to buy property. So I saw the job as a means to finance and use the job for as long as I needed to and as a means to slow down payments. I mean, once I had I did it to a point where I had my first document. Actually, I graduate school debt free. I worked full time while I was in school seventeen, twenty one, and then invested all that capital into into burring. And that's basically how I got going. I got the first and second one done with savings and then from nine to four and to mandate that for that to be sixteen and then retired and then blew up a real estate portfolio way bigger. And now I've sort of scaled back.
Dave Debeau [00:03:48] Very, very cool. So you went to university at age 17. What was it that so you obviously a smart guy. You went to Ivy League school. You're you're a smart guy. So what was it that inspired you to really dial it in and focus on real estate as an investment class at such a young age?
Mike Rosehart [00:04:09] I think, again, it's the appeal to me, there's two things that appeal most about real estate over all other asset classes is one, I think it's very approachable. The first one's leverage leverage is, number one, the most powerful thing until you're really wealthy, like until you start getting the higher net worth. But you can't get leverage to buy a business. No one's willing to lend you the money, but the lender to buy real estate, even at night, is able to convince a bank to lend me real estate. They wouldn't let me anything for businesses. I tried to buy businesses and they wouldn't. I tried to borrow for stocks and they wouldn't buy into my portfolio of a solid piece of real estate, the cash. All of a sudden we had a different conversation. And so at a young age, I was able to convince the bank to lend me money. And that's that's the beauty of real estate. It's the easiest asset class to leverage, the highest loan to value. So some people give you five percent down their first deal or 20 percent down the 20 percent down method of borrow the rest to safety, private mortgage insurance. But the idea with real estate is, is that it's I think there's like three really attractive things as leverage is super attractive because you're buying strong Koshland properties with good return on investment. You're looking at levering five to one. That's an amazing return. You can't do in the stock market. You can't do, but you can do it later on. As a really rich entrepreneur buying businesses, you can leave five to one. But in the beginning, no one's going to handwrite three million dollar loan to buy a business. So I think it's a very for the average person, real estate is a very approachable asset class. And so that's the the allure of it. And it's from a I guess, someone you call me smart in the beginning and I just work. That's the truth. I study harder than everyone else did, and that's why I did well. Maybe I had a little bit of smarts, but really it's hard work. And that's the thing that I loved about real estate, too, is that when you look at the real estate, a lot of mom and pop, especially single family, duplex triplex and a lot of the market's institutional investors don't touch that space. They stay out of it. So it's easy to develop a competitive advantage in that market because it's so dispersed and it's so unsophisticated. So if you develop a good set of systems, which I did really early on, I was able to exploit a competitive advantage. I know that's something a lot of technical jargon, but the idea was that people don't know the value of their properties. They don't know how to maximize the value in their properties. So I would buy a three bedroom properties, the unfinished basement converted to duplexes, add three more bedrooms. And as a single family, I paid market value. But now the property is worth significantly more. I'm getting double the rents. The other owner was. So I've taken the same square footage property and re allocated the square footage, so it produced twice the rent for me. And all of a sudden now it's a really strong cash asset for the bank. More valuable to another investor and it's way more valuable to me
Dave Debeau [00:06:53] now makes complete sense. So one of the things that sounds like you got very good at, in addition to everything else but is finding off market deals. So Mike, what if it's OK with you? Why don't you share with us what's working for you now or what's been working for you recently when it comes to finding good off market deals?
Mike Rosehart [00:07:15] Yeah, it's a good question. In the beginning, I didn't find off market deals. I started on MLS like everyone else did, started buying there. And there was there's still tons on MLS. That's fantastic. Even today, I'm still proud to say, like over half of my deals have come from the MLS, from my pocket listings, or they just got the first day and we grabbed them undervalued or threw the real estate network of connections with realtors. We find a lot of great deals and I consider some of those deals private in nature. If it hasn't and if all the animals in MLS haven't seen yet, it's not technically a public deal. I think it's still partially private. So a lot of people discount the MLS or realtors as a source of private deal. That's been a big one for me. I just network with a lot of realtors and they called me when they sell you wants to sell the house. Just a bunch of people going through it. Mike, I just want to get quick commission. I know you're going to close on it. I'm like, yeah, thank you for calling because you have a half
Dave Debeau [00:08:04] percent of listing, right? So you get you get first dibs before it even. So, what you're saying is in those kind of situations, the realtors might not even put it on the MLS. They'll just connect with you because, you know, you can buy it quickly and you've got to direct. Yeah, that's my last.
Mike Rosehart [00:08:21] And I've already got an offer signed once all the realtors have seen it, once everyone's jumped on it. And so speed to market was one of the competitive advantages. But my first few deals were again just MLS deals around walked value. I found a I bought a single family, single family pricing, but then saw value. Other people did. And I saw my kitchen, a bathroom, a few bedrooms. That was a totally different space that rented differently. And so that was a big one was design. I just saw differently about the people, I think, and I let her down on that and did it big time. Right after I retired in twenty seventeen, I started joint venture with people. I started doing just to see what I could do. So we got like fifty or sixty properties. We had a lot of fun. That's when I started doing the door knocking techniques to find deals. I couldn't find enough on MLS. I could find out for myself personally to buy one a quarter on MLS, but to buy you're buying one a week for like a year at one point and divide that many and to connect that many deals with investors. That's when you have to start really going hard on the Facebook marketplace, the Kajiji running ads, just talking with like all the wholesalers in town. I had her daughters out there. It wasn't myself knocking doors. Her daughter is someone you pay a small fee to to connect to. So they just give you a phone number. If someone is interested in selling, they don't even remember contract. You go up on the contract. So a lot of that was a how I got a lot of deals later on. But yeah, private deals are a great way to find properties that are you can get a competitive advantage on.
Dave Debeau [00:09:45] Very, very cool. So it sounds like the other thing that you've really dialed in and systematize is a whole thing about working with investors and joint venture partners. So just give us a little idea of what does a typical deal with a joint venture partner look like for you?
Mike Rosehart [00:10:01] I I'll preface obviously with this, I don't give like I used to anymore. So one of my greatest learning outcomes for twenty seventeen to twenty twenty was I overvalued the capital. I didn't believe in myself enough, and I started being 70, 30 or not. I took 30 percent and I gave 70 away and I was bringing deals that were like 60 cents on the dollar. So we make one hundred grand and I make 30. They make 70. We do it like four or five months. And I left a lot of money on the table. And then I started scaling my church. I took no cash flow. I did 50 50 jobs right up to 50 percent of the upside. I gave them all of cash flow. I had some terrible jobs for me, a great jobs for my partners. Right. And so I learned quickly that it's important to negotiate in the JV structure. That was my attractiveness was that I was going for volume. And then I realized that, you know, sometime in twenty nineteen and I hate to say this, but I very rarely any anymore, only because of the complexity attached to a job having to have another stakeholder. I prefer to just raise the capital and then borrow the money at four or five percent and then the rest of it I'd say 10 or 12 percent. And if you're buying Koshland properties, you typically end up having more cash in your pocket and not having to share the equity. So I learned the hard way that JV partnership can be a great way to scale, but you're getting a lot less of the deal. And so I just it's just a change of preference, to be honest. Having to manage all of the JV partnerships and having all that communication is a great way to build a business. But it didn't feel that passive to me. So I guess I'm like, geez, I don't feel retired at all. I'm on the phone. My JV partner is like every day. I talked to a lot of renovations and stuff and I had a business partner who he left. And so when he left other job, I had to take on a lot of the and I was a lot of stuff happened. You know, life happens and a business partner and then it becomes very difficult to take all their tasks on to. So I've been through a lot in that experience. I learned that joint venture partnership is a great way to build wealth if you want to go that route. But if you're looking to maximize profit per deal, mentoring might not make the most sense. So just to
Dave Debeau [00:12:10] Palin, it sounds like you spoiled the hell out of your joint venture partners at the beginning. You gave away way too much. Yeah, fair enough. So so OK. So that was then. That's what you're doing that. So what does it look like now? How do you structuring your deals now moving ahead so that you're not using JV partners.
Mike Rosehart [00:12:28] If I JV with a partner and I do selectively and we expand it in the US went down to Orlando, Florida and we had some fun down there. So it's not just Canada. I want to spend my winters down there. So it's more of a it aligns with our goals. But I am still doing some joint venture partnership where it's a 50 50 split on cash flow and profit, which is the standard way of doing things, and that we bring in a management company. And a lot of the management was OK. So and I'll I'll compensate a little bit more to cover some of that stuff and I'll oversee like high level contractor. But there was a time where I was doing everything right and it was just too much managing all that. I felt like a job. And so that's how I do it better now or I do a fixed return with the investor. So I structured their piece as debt on the property. I'll secure it as data for the capital to bring in towards the deal and then I'll give them an equity sweetener. So I'll say here's ten or twenty percent of the deal and I'll give you a ten percent guaranteed return with some upside. Here's what I think the deal is going to perform. You're guaranteed your ten percent no matter what. That's a company and if it delivers better, there's just sweeter. So I've got a little more complex than how I do my partnerships, but it's more debt. I would call it the joint venture partnership. It's more like debt with a sweetener.
Dave Debeau [00:13:37] So they aren't necessarily on title then. In that case, you're you know,
Mike Rosehart [00:13:41] I have full control alongside all their securitized debt. So I guess it's a charge mortgage. I'm sorry they'd be on title as a as a chargee, like for a more
Dave Debeau [00:13:51] RRSP second mortgage
Mike Rosehart [00:13:53] or so. Yeah, exactly.
Dave Debeau [00:13:54] So you basically go in, you buy the property, you put in the 20 percent down, you do the rentals, you do all that stuff, then you bring in your debt partner after the fact one way or the other, usually some sort of a second mortgage type position. Is that correct?
Mike Rosehart [00:14:10] I'll bring that up right around the beginning and after. So if I refinance with a better with a lender and stay and buy them out, they still have a ten or twenty percent equity in the deal in most cases.
Dave Debeau [00:14:19] Very cool. So just out of curiosity, because you lost me on that one, how are you getting him in at the beginning of the deal without having them on on title or are they on title?
Mike Rosehart [00:14:28] They'd be on title, yeah.
Dave Debeau [00:14:29] Oh, they would be OK. All right. I get it.
Mike Rosehart [00:14:32] There are ways you could do it though. You could. Structure was thinking out loud, like if you had a corporation that had a lot of assets in it, you could borrow a look at the general security, your work by like a GSA or you personally guarantee it as well. And so they have your personal net worth and they have your companies, a GSA, against your company. If you want to do like a private lending that wasn't secured before, you could slap on a second as well. There are lots of ways to do it. If you wanted to keep title clean for the lender, then you could do it through a corporate structure like that.
Dave Debeau [00:14:59] Yeah, no, definitely makes sense. My goodness. Time flies when we're having fun, Mike. So tell me a little bit. I know you've got you've got a a big presence online. You've got a YouTube channel, that sort of stuff. Tell us a little bit about that, how people can connect with you and also what impact. That's had on your real estate investing business.
Mike Rosehart [00:15:18] Yeah, I got on YouTube just to get back as a way to teach others about financial independence, and it was supposed to be a channel that's really just designed to talk about money, how to spend less money, how to earn more of it, and how to maximize the returns on your your assets. But that was a great thing and it's a very rewarding feedback loop. So you put in a lot of time and you put out a piece of content and hundreds of thousands of people consume it and they send you back that positive feedback. It's it's great. It's also great when I share something and someone I know live every Wednesday, I go live for an hour, hour and a half on my channel. And I do the Microsoft show every Wednesday at seven p.m. Eastern. And people go on there and challenge me on some ideas and some of my plans. And I like that. I welcome that on Instagram and after and DMV. And they're there like I don't know what this idea had here. I don't know about that. Why do you do it this way? And so that's been a great piece like to learn. Right. And that I share. And then I also learn lots of great. It doesn't make a whole lot of money. So the whole YouTube thing for money, I wouldn't go for it if it were up for the money. But I suppose if you really monetize it, I don't have any courses that I sell or anything on my books yet, but I'd like to write a book someday when I have some time. The kids, you know, most of the time these days to so young right now. But yeah, I think that it could be it can be a great way to raise capital. I really was raising GE Capital, my YouTube channel smaller. Now that's bigger actually. Don't do a whole lot of raising capital from it, but I have raised capital before. Yeah, seven figures probably from the YouTube channel for sure of people who have found me consume my content, reached out and said, hey Mike, I've watched three hundred hours of your content. You don't know me yet, but I know you really well. Yeah, I'm ready to go. And so that was great. That was a good piece of building the brand online. That is helpful.
Dave Debeau [00:16:59] Well, then you have monetize your YouTube channel. It's done very, very well for you
Mike Rosehart [00:17:02] in that sense. Yes, I suppose we're building the brand has been has been good, but like creating the videos, it doesn't generate any money that way.
Dave Debeau [00:17:09] No, no. You're not getting any ad revenue from. Yeah. So an hour and a half a week. How do you come up with content for an hour and a half a week. It's live. So we do a live
Mike Rosehart [00:17:21] stream where people bring questions and like actually lot yesterday's was really good. It was action packed. We did well. I just I get these ideas out of people must have been Instagram and say, hey, Mike, I want a market update. We did not have a market update. And I just started with, like, what are the four things that you that determine the market outlook? So it's like demographics, interest rate, government policy and the economy. So GDP and things like that. And I broke down those four. And how that looks going forward, are we going to have a recession? And people keep the content alive by just asking me questions. And so they're like the host, right? I'm just I'm just answering their questions and a lot of ways.
Dave Debeau [00:17:58] Yeah, that sounds like fun accent. All right. So if they want to find you online, is the YouTube the best place to look for you?
Mike Rosehart [00:18:05] You're yeah. You chose the dotcom stuff from Microsoft or at Instagram and Microsoft. I'm pretty active on Instagram. I do about eight or ten stories a day. So if you want to follow along on my journey,
Dave Debeau [00:18:15] it sounds good, but like thank you very much and congratulations on all that you've accomplished at a young age. And yeah, it's been a lot of fun. I appreciate you sharing your knowledge.
Mike Rosehart [00:18:25] Thanks for having me on. Appreciate it.
Dave Debeau [00:18:27] All right. Take care, everybody. We'll see you on the next episode of. Well, thanks very much for checking out the property profits podcast. And you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us the review. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.