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EPISODE 8: THE ONE WITH ERIK MITCHELL (EXPERT INVESTOR AND EDUCATOR)

EPISODE 8 THE ONE WITH ERIK MITCHELL (EXPERT INVESTOR AND EDUCATOR)
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Table of Contents - EPISODE 8: THE ONE WITH ERIK MITCHELL (EXPERT INVESTOR AND EDUCATOR)

Podcast Transcription

Rob Break [00:00:03] Hey Sandy. Hey, Rob, what's that you're eating? Oh, this it's the new book by award winning real estate investor Quentin D'Souza, the property management tool box is all of the tools and systems for starting out as a new landlord and all of the resources to create less stress while expanding your rental portfolio. It is awesome.

Sandy MacKay [00:00:24] Wow, that sounds amazing. We're going to get one.

Rob Break [00:00:28] Just go to w w w dot the Ontario landlord toolbox dot com.

Sandy MacKay [00:00:38] The property management toolbox, a how to guide for Ontario real estate investors and landlords. I'm going to order my copy right now. Breakthrough Real Estate Investing Podcast, Episode eight.

Rob Break [00:01:15] Hello and welcome to the Breakthrough Real Estate Investing podcast, we put this show together to inspire you and help you live the life that you want to live through the power of real estate investing. My name is Rob Break and here with me is Cindy McCain. How are you doing, Cindy?

Sandy MacKay [00:01:31] Arab. I'm doing great. And I'm super, super pumped up about this interview. We got to share with everyone today because, you know, he really brought a lot of super value to the table here and and a ton of energy. I think it's just going to be great.

Rob Break [00:01:48] Yeah, yeah. It was really, really awesome. And for everyone out there, if you have a question or a suggestion or comment, please go to break through our podcasts here. There's a section under each episode where you can leave a comment or if you would like to read us, which I would really appreciate if you guys would just take a couple of seconds to go on there and click five stars for us for all of our hard work. That would be great. Over on iTunes. Please do that.

Sandy MacKay [00:02:16] Yep. And and also just a reminder to go check out the seven freedom activities, the report there on the website Breakthru. Our our podcast Dossie want to encourage everyone to go download that report. Totally free. And yeah, I know there's lots of great value in there for everyone. So go grab that while you can. All right. So in this interview coming your way right now, we're going to talk with Eric Mitchell, who's, you know, really, really smart dude. And he's got to talk to us about why education is so important to your investing career and continuing education, but that he's going to talk about why he spent so much time in bingo halls and bars when growing his business and is going to tell you the three biggest mistakes people make in real estate investing in real estate.

Rob Break [00:03:01] Yeah, this one went pretty long because he just had so much great advice and information to share with us. So we're not going to spend too much time here on the show. We'll just get right into it. Here's our interview with Eric Mitchell. Perfect. Well, we really appreciate you being here with us today. We heard you speak a couple of weeks back and it was really an awesome so can't wait to get into things here tonight. Thank you for being with us.

Erik Mitchell [00:03:29] I'm glad to be here.

Sandy MacKay [00:03:30] All right. So Eric and his brother Kevin have been full time real estate investors and educators for over seven years now. They've worked over twenty five thousand hours growing their businesses. They've completed well over 50 real estate transactions and own properties all over southern Ontario in cities like Barry Kitchener, Cambridge, Hamilton, Sarnia and Chatham, Kent. They've designed real estate investment training programs for agents looking to expand their business by working with investors. They have also designed individual strategic investment courses and memberships for individuals looking to expand their investment portfolio through the purchase of real estate. There are countless hours of hard work and and tons of experience have established them as real experts in the field of real estate investing. So definitely very grateful to have you here right now with us, Eric, and anything else that the listeners to know there. Before we get into it,

Erik Mitchell [00:04:33] I'm sure whatever's missing go to that fantastic intro is going to be talked about some time at some point in time within the call here. So we'll leave it at that.

Rob Break [00:04:42] Yeah, awesome. So we're going to go with the typical first question, but never a typical answer. How did you get started in real estate investing?

Erik Mitchell [00:04:51] Well, that's an interesting experience in and of itself. My brother approached me back when I was still in university by boat nine years ago and came to me with the concept of investing in real estate. My brother has a background and went through university and became a certified registered teacher. My background was from the Richard Ivey School of Business and I understood the business aspect a lot more. He really didn't get much, I guess, anywhere with me, I don't know, because he was the older brother or because he was a teacher and he was really in tell me the business major, what to do sort of thing. But eventually he put the bug in my ear and kept on me, got me to read Rich Dad, poor dad. The old school mentality go work hard, you know, for a corporation, work up the corporate ladder, you're going to get taken care of sort of thing. That book kind of really shifted my mindset to something similar. But eventually, as I learned enough about the business, go expand and do it and purchase business or start a business on my own. Now, eventually, over the next year or so, he and bringing me to the Real Estate Wealth Expo in Toronto. And I heard some big names there. Bill Bertman, who he's a billionaire, Tony Robbins, Donald Trump. And I think hearing it from these professionals themselves and these business minds, how they talked about real estate really give me that shift. And it was Sunday afternoon after the event. I went across the street side, Mario's, and I was shaking like crazy. I remember cold pint of Canadian in my hands and I can remember that very vividly. And at that point in time, actually made the decision to quit my job the week after and start investing in real estate full time. Very different approach, I guess. And most people have lives at a fairly young age at that point in time. Wasn't really liking the job, was only there for about a year, but knew it wasn't for me. So we actually purchased an education program that happened three weeks after that. So I went and worked for a week, give my two weeks notice and hopped in that, I guess, education weekend and decided, you know what, let's basically jump on the dip and see if we can swim sort of situation. And, you know, I think I said not many people take that approach. We both came out of school with with a lot of debt. We had to go to over a hundred thousand dollars between the two of us and maybe between our parents, about forty fifty thousand dollars coming from a fairly low middle class income type family. So in that situation, luckily, in hindsight, I can see that that starts really led towards a lot of our successes that we've been able to achieve in real estate. But long story short, that's how we got started.

Rob Break [00:07:33] That's awesome. Did your was your brother already investing before you started, or was he kind of at the same time quitting his job at the same time you guys both jumped in like that?

Erik Mitchell [00:07:44] Well, actually, the two years that he was kind of getting on me about it, he had within that maybe the last year or so, year and a half, what he had done was he went out and purchased a flip in that period of time. And I had kind of helped him just understand the business a little bit more. And I think he wanted to be there to help with the bookkeeping. His organization is definitely not his strong suit. But, you know, there are so different that his weaknesses are my strengths and vice versa sort of thing. But he had done a little bit before that and he had also purchased a. Triplex, so he was into it at the same time, though, he was substitute teaching, working another another full time job or a part time job on the side as well to make the money. So he was dabbling in it, but definitely I don't think he expected me to take the leap. And once I did, he was right there behind me. I think he quit his job. A month and a half later, when the school year ended, he gave up teaching and jumped in with me.

Rob Break [00:08:43] And I guess your organization is why you encourage such a professional approach to real estate investing.

Erik Mitchell [00:08:50] Yes, absolutely. That's systems and procedures. I find that that is part of any good business. And the way we look at it, real estate investing, it really is. You have to treat it like a business. You have to approach it like a business. It is no different than having your own coffee shop or whatever the case may be. You are an entrepreneur at this point in time and each individual property is a business. So I don't care if you own one, five or 20 doesn't really matter. The approach has always got to be the same because if you don't, in my opinion, you'll be much more of an amateur. And when you approach real estate investing like an amateur. Sure. Can you make money? Absolutely. You can. Everybody can get lucky, especially when the market's doing very well. But if you don't approach like a business, you don't have the systems and procedures in place. You're really depending on luck because there's no way you can repeat that success because you don't know what success was, unless you can have a systemize way in which to invest and be able to refer back to that continuously and ensure that you're improving on every single step along the way. And that's the thing with the systems procedures. They're always being improved upon and made better so you can invest in a much better way the next time around. And that's what we've done over the last seven years. And I truly believe that was a big part of our success because we've been able to really tweak it and maximize the returns that we're getting from every individual property as we move forward as well.

Rob Break [00:10:18] Yeah, I got to be honest with you, that's one of my weaker suits. Is the organization, that kind of thing, like just for example, recently started looking into different insurance companies where I had been for the last couple of years, just grumbling and complaining about what I was paying for insurance instead of going out and looking for something else. And then when you do, you realize just how much money I could have been saving over the last few years.

Erik Mitchell [00:10:42] I can definitely test it out. I know where you're coming from. I think with our just our student rentals, I think I saved eight thousand dollars a year when I changed it over to a new company, which was amazing, right?

Rob Break [00:10:54] Yeah. It's my student rental that I just took a closer look at just recently and realized, wow, a little bit of time spent on something can save you a lot. So I've certainly

Erik Mitchell [00:11:04] now I've already switched insurance companies, by the way. I have. Yes, OK. Because I know Hub International has a fantastic student rental package that they've put together specifically for that. So specific coverage for that. And I haven't seen any better rates in the industry. I've referred over quite a few people to my contact there and I've never heard them getting denied or passed on. I think I don't know if it's a referral based thing that they allow some exceptions or not, but I can always pass along. If you're ever looking at, you know, going out and doing some more research at any point in the future. Feel good. Feel free to get a hold of me.

Rob Break [00:11:39] Yeah, well, I saved I saved ninety dollars a month plus almost four hundred dollars for that administration fee that they charge you just so you can pay monthly. Oh wow. Yeah. Yeah. That's a big

Erik Mitchell [00:11:53] savings. Thirteen thirteen almost fourteen hundred bucks. I did. That's fantastic. Yeah.

Sandy MacKay [00:11:58] Well Eric what type of properties do you specialize in and what do you prefer to invest in.

Erik Mitchell [00:12:07] We specialize and actually prefer we don't do single family homes unless the opportunity to convert it into a student rental or add a secondary unit and turn into a duplex. Those sorts of things. We like specialized, multi residential, basically anything 12 units or less is what all of our properties fall within that category, I guess you could say. So that's kind of what we what we look for specifically and a lot of the the properties and the things that we do, we specialize in finding undervalued property, whether that means, you know, you have bad tenants. And I'm going to go on a little tangent here with bad tenants. That's causes a lot of headache for a lot of homeowners or property investment. Property owners can cause motivated sellers. We find opportunity there because a lot of them don't want to deal with the headache. We've had it where we can't even get into units when we're looking at a property because of the tenants that are in there, basically won't allow that sort of thing. And, you know, because they can't get them out, they want to sell the property. And we have a fantastic way to get people out. We basically just pay them. So we. We'll get the property they have the last month's rent on file, and before we close, we'll go in there and say, hey, if, say, we close on January 1st, if you get out by the end of January, yeah, I won't make it past January. Right. I'll give you your last month's rent back the day that you move out of all the places clean and now you have first and last month's rent for wherever you're going to go. Or if you don't want to move out, I'll give you 90 days notice because I'm moving in myself and I'm allowed to kick you out as long as I'm moving in. Or one of my immediate family members are 90 days. You don't get any free rent and you're out by the end of March. One hundred percent on time. They've always taken the money and gotten out. And it's fantastic because then we can go ahead, refill the unit or do some upgrades, renovations, whatever the case may be at that point in time. How about the higher rental amount afterwards and make more money on it? And I had already mentioned, you know, things like rezoning, adding units or we like buying illegal properties. We'll do the due diligence necessary beforehand to understand that we can do what we want with the property. But looking at, you know, example, I had a six plex in Hamilton. It was zoned to commercial on the bottom one residential up top. But for the last 30 plus years, I've been operating as a six plex. While I've made some phone calls, one to the city did my due diligence and that we went through the whole process of having a nonconforming legal six plex within that area. It took us a ton of money because we had to bring up to 2012 Ontario building code. But by the time we refinance it, we put a good chunk of change in our pocket and still own the property and only have an 80 percent mortgage on it, which, you know, from that perspective, the returns are infinite because we really have no money invested. We actually put money in our pocket in the process. So different things like that underutilized space, adding some bedrooms for student rentals or purchase properties with an unfinished attic or basement, those sorts of things. We really look at ways to try to improve the cash flow because that in and of itself automatically increases your equity, because as an investor, we only are willing to pay top whatever dollar that is for that property based on the amount of money we're going to get out of it. That's how everybody evaluates us all based on the numbers. So as soon as you increase the cash flow, somebody is willing to pay more for that property. You've increased the value immediately. So that's what we look at, ways to really maximize the returns that we're going to receive, whether it be through the cash flow or equity or a combination of both.

Rob Break [00:15:33] Awesome. Well, I wanted to just make a quick ask a quick question, actually, when you were talking about rezoning there, don't they have to put a notice out to everyone that lives in the area and then they have a meeting and everyone has to basically agree with what you're doing and all that kind of stuff?

Erik Mitchell [00:15:51] Absolutely they do. Yes. For the one in Hamilton, it was a change of views. But we've also done a few where we did like a grant for basically we knew the property was in existence prior to that magical date, 1993. I think it's September 1st or something where the provincial government has mandated all municipalities to recognize any units in existence prior to that date. So it just a matter of proving that that unit was there prior to that date, 1993. And, you know, I've called in a union gas had them verify the second meter was installed and, you know, 1988. Well, that will suffice to get that property grandfathered in and approved as a legal duplex that doesn't need any letters or anything going out that six works in Hamilton did. So depending on what the situation is, that was a change of zoning. But we've also done converted a commercial variety store into a we've had two units upstairs, turn that into a four plex. And they do send out letters. At the end of the day, if you understand what you're doing with the property and you're adding value into improving the look of it, you're improving basically the city in and of itself, as small as that may be, the city and the board that makes the decision as to whether they're going to approve your application, so to speak, and let you continue down that path. They're on your side. At the end of the day, you know, if you're not trying to squeeze in a bunch of units into a small house and try to make a house that should only be a single family, a duplex, try to make a triplex and you're going to cause issues with parking. And there's already not enough parking spots in the area. Those are the sorts of things that you can go to the city for when you still have the property under contract. Before you waive conditions, go to the city, ask the questions, find out what issues are going on in that neighborhood right now, understand what kind of applications are getting denied and approved. And then you get a really good understanding for what the chances of are for you to do what you need to do on that property before you can waive those conditions. Mm hmm.

Sandy MacKay [00:17:51] Awesome. I think that's that is the question.

Rob Break [00:17:54] Oh, yeah. Absolutely it does.

Sandy MacKay [00:17:55] OK, yeah. Easiest and best ways to to turn a crappy property into something great is just, you know, using one of those strategies that you mentioned there to add value, just as a quick example to see like how simple it is. Like I bought a property I guess a year ago or so, and within the first like in a bit on the market, sitting there on an MLS listed for three or four months, nobody was taking it. We went in. One of the big reasons was there was a tenant in there paying well well below fair market rent. So I know everybody's looking at it like it's not going cash flow. Right. And then four or five months down the road, we did exactly what you say. We paid them to leave, got the money. It took us a little while to get them out, but we got them out there in four months or so and brought up the value, just simple cosmetic stuff. And now at this point, we're cash flowing, you know, eight, nine hundred bucks off a duplex, just simple cosmetic repairs, you know, so it's crazy. And nobody want to touch that property.

Erik Mitchell [00:18:55] No. And it's surprising what people don't want to do, because at the end of the day, I believe it goes back to the lack of knowledge, the lack of of education or whatever it may mean. They just don't know. And if you don't know those things, you stay away from them because you're fearful. Right? Know being in this for seven years, full time, you start seeing all these little angles that you can take on the different investment properties and finding opportunity where people can't. And you're absolutely right. You run the numbers on where the rents were and people sit there and say, well, they won't even look at the property they see on the MLS listing. It's only cash, someone being rented out for, say, 800 people. No, it should be at eleven. Twelve hundred, which trusting that the landlords out there, they just don't increase rents for ten years because they don't want to do the two percent increase every year sort of thing. Right.

Rob Break [00:19:37] Well, you start your tends to get upset with you.

Erik Mitchell [00:19:40] Yeah, exactly. Right. So people will look at that. I'm on the let's run the numbers and say, oh, it doesn't Cash-Flow where, you know, you take the extra step, you go in there, you check it out and say, you know what, it's not cash in just because they haven't increased rents. I have a strategy for that. Let me run the numbers based on what the fair market rents are as of today, not what this person's paying. And as long as you like you said you owned it for four months before you got him out. But that doesn't matter either, because you just factor in those extra holding costs during that period of time. Right? It just comes down to the numbers. Doesn't matter who gets paid out in the meantime when they've got to pay off the tenants or whatever. At the end of the day, if the numbers make sense, they meet your minimum requirements, cash on cash total. Why that sort of thing? There's still something to make sense to move forward with.

Sandy MacKay [00:20:21] Exactly. And that's why you want to keep educating yourself in this industry. There's so many different ways to do, you know, tweak a property in that way. And it always helps to know as much as you can. So you can. See something and envision something that others can't, right?

Erik Mitchell [00:20:36] Absolutely, and once you start going out there and actually taking that action and doing it, you start learning so much and then it just more and more tools that you have in your toolbox.

Sandy MacKay [00:20:44] Exactly. So, Eric, how many units or properties do you currently have in your portfolio?

Erik Mitchell [00:20:50] Well, about 70. We're selling a property on Friday. I'm purchasing another one a week and a half from that. So that's always a moving target. But we're at around 70 units across Ontario, mostly focused in the Barry Ketter Cambridge and Hamilton area. We have some down here in the Chatham concerning area just where we started out. And with the values of properties being where they are here, it was much safer, I guess, quote unquote, way to to approach it. You know, we figured if we made mistakes here financially wouldn't be as big of a head as we made the mistakes up in the markets where the house prices are double or triple.

Rob Break [00:21:26] Now, you mentioned before that you you were finding these undervalued properties. How do you go about marketing for these places,

Erik Mitchell [00:21:35] market and trying to find them? Yeah, the undervalued. We actually do have a company out there that we see property buyers that we focus basically in the area to try to find motivated sellers and properties like that. At the end of the day, you know, not much as came from those kinds of advertisements. We we do look on Kajiji and a couple of things offline like that. We also have our realtors come to us with stuff. You know, we like aged listings. That's that's a big part of it, because obviously there's something with that property we don't want to get in multiple big situations. It's very rare for us to get into something like that. Obviously, if a place comes on the market and we know it's undervalued as is, and we might go after that. But for the most part, we find them by putting in time and effort and looking on Kajiji and going and looking at a lot of properties that most people wouldn't just because of how the property's advertised and wherever it is, Kajiji or MLS or whatnot. So we do a lot of traveling and, you know, take chances on some properties. And, you know, some trips have been a complete waste of time. But at the end of the day, you know, you find that one that one hidden gem, so to speak, as well worth all the trips that we made.

Rob Break [00:22:46] So walk us through the process of how you were able to quit your job and go full time. I know you already touched on that a little bit, but, you know, I mean, there must have been some planning involved. It's not like you just with you know, maybe you mentioned that a Canadian in your hand, it wasn't like you had, you know, ten of them and then decided to quit.

Erik Mitchell [00:23:06] Absolutely right. This was I don't I don't think more than a quarter of that was drank when I when I was making this decision. So it definitely wasn't like that, to tell you the truth. You know, the decision then the process for me to quit my day job to me was was nerve wracking, scary, and one of the scariest things I have ever done in my life. At the same time, I looked at that and said, you know, I'm in a situation where I do not have any dependents. I was not married, still not. And I thought that my worst case scenario was if this didn't work out, I could go back to the working world. I was only 22 or 23 at the time. You know, a year at a university working. It was it was a pretty it was somewhat easy, wasn't easy to make the decision to have to move back in with my mother again because I couldn't afford to rent anywhere, those sorts of things. I just said, you know what, I'm going to figure it out. And the way we were able to succeed, I guess, when we first started was having to focus the ROIC driven investing, the return on investment driven type of investing. And that's really what we looked at. We didn't have much capital. We knew we had a ton of time. And we went out and we scoured. We went we go to Tim Horton's and Henno referral cards. We would go to bars and bingo palaces and put up pull tab fliers. You put a couple of ads in the paper, nice and cheap, but we did a ton of things, put up signs, you know, on Lightpost on a Friday afternoon because, know, the city workers were coming in on Monday morning and they wouldn't be ripped down until then. We just did a lot of those thrown up stuff against the wall. Something's going to stick type of mentality. When we first started out and, you know, we were very open minded, very creative with a lot of the deals that we did, always keeping in mind that we didn't really have any money to invest in any single property. So we had to find ways to be creative and be able to take down a deal and really have not much, if any, money involved in it. Get rid of it quickly, have a quick turnaround, make some cash and eventually built up enough cash that we could go out and start buying some buy and hold type properties. We're going to hold onto them for the next five, ten years sort of thing.

Rob Break [00:25:14] Bingo halls. That's a brilliant idea.

Erik Mitchell [00:25:18] Yes. And bars too. Like there was, you know, one of the one of the sections within the education because. Well, I know we we went for the one educational weekend and then of course we got we got up sold to nine thousand dollar package, which was. The taboo topic was 55000, which is which is crazy, but we took another one and one of those things was all about attracting motivated sellers and trying to find properties and showing us creative ways to do it. So we took a lot of that information. And then, of course, after you get that, that's about 80, 90 percent of the way there from the last 10, 20 percent. You got to make that your own. You know, we I know we purchased a property that the owners owned outright and didn't want to deal with all the leasing and everything. They called us up. They held the first mortgage for the first eight months. And then we said we buy it right from there. And within four months we went in, painted it and got it sold for a profit. And we never put a dollar into the property. And that's that's the type of properties and investments that we did at the very beginning just to be able to to get some cash injected into the business. So we go out there and reinvest in awesome.

Rob Break [00:26:26] OK, well, in your opinion, what are some of the biggest mistakes that people can make when they start investing in real estate?

Erik Mitchell [00:26:36] Well, I would say, number one is the inability to take action. If you don't take action, you can't invest. At the end of the day, that's you know, that's something that we've really prided ourselves on the shoot ready aim type of mentality. Go out there, do it, take your licks and keep on doing it. You can tell a kid how many times, several times of the stove's hot until they burn themselves. They're not really going to understand and truly believe. But after they do it once, they're going to never make that mistake ever again. That's kind of how real estate investing was. You know, we went out and got educated. There were still a lot of fear associated with going into this business. And the properties that we did end up purchasing. There was there was a lot of that fear there. We continued to have faith and took a lot of the education that we had and that probably limited our mistakes to about maybe 20 or 30 percent of what we would have experienced if we didn't take the education. So we knew was extremely important. But the fear of feeling, the fear of making mistakes, you have to accept that for what it is in this business. In my opinion, you would accept that failure and mistakes are part of the process. And I know I'm not talking about mistakes and not taking actions as a mistake, but that's much, much bigger than any of the minor mistakes you're going to make in real estate investing. If you have a good education behind you, you've learned enough information. You should have the confidence to go out there and be successful and real estate investing. If you apply those principles and what you've learned to to the business. Right. And other parts, I would say would be running the numbers incorrectly there. You know, I talked to a lot of people and, you know, we hear a lot of the great properties people have purchased and how much they're cash flowing and different things like that. And we start asking interesting questions about what they run for vacancies, a property management, a lot of these other things. And at the end of the day, they really don't know what they've made. It's all kind of speculative. They haven't really ran the numbers or they really didn't run them correctly. They purchase a property and they do all the repairs and maintenance themselves. They do all the property management. And the first year they didn't have any vacancy. So, of course, hey, look at I got a great cash flowing property. But what happens when you have a child or you get hurt and you can't do the property management repairs, maintenance yourself? You start paying that out, break it down. That's an actual negative cash flow in property. So it's not very attractive, in my opinion. You know, running the numbers correctly, if you do that, work yourself, the pay yourself, because the business, that property, that business pays outside contractors. If you pay yourself for the work, great. If you have to step back because your life changes, then that property, that business can pay somebody else for the work in the numbers don't change. That property is still going to produce the exact same returns whether you do the work or somebody else does. And that's kind of how we approach it. You have to look at the property and the business like that and a lot of people don't. And they might be a little bit aggressive with the numbers saying, well, the city average is two percent. I'm going to run that. We always run five minimum, five percent vacancy rate, you know, oh, this is a great property. It's news. When we five years old, I'm not going to have much repairs and maintenance. I'm going to run that at three, four percent. Don't do those sorts of things. Don't get yourself into a situation where all the numbers that you're running are very tight. If you know what the utilities are, don't put in today's numbers inflated by a good 15, 20 percent, because that's what you're going to be experiencing a couple of years down the road. And when we run, everything is very conservative so that we saw what's coming, like your worst case scenario. And I'm I'm OK with my worst case scenario before moving for the property, I'm going to move forward. And if you don't put in that money into repairs and maintenance, you need a pocket at the end of the day. That's fantastic. Under promise over deliver to yourself. Right. And lastly, I would probably say the systemize repeatable way in which to invest is another big part of people's failures. They don't know how they value to the property. They don't know where they look for opportunity. They just kind of got into it, got lucky and said, oh, look, I know how to do this. The next time they go out and do it, they may as well fail as miserably as they succeeded, I guess, in the first time. So those three areas, I guess I would say, are the biggest areas where people do make a lot of mistakes. So not taking the action, not writing the numbers correctly and not having a systemize way in which they invest.

Rob Break [00:31:08] All right. Everyone's going to have to send us about ten dollars to listen to this podcast. Now, just for the answer to that question.

Sandy MacKay [00:31:16] Yeah, yeah, I like those was a great response. I love those answers. And the thing about taking action, too, is so important. I mean, because there's going to be failures and you're going to. Mistakes, no matter what you want to obviously minimize as much as you can, but I think no matter how educated you are, no matter how skillful you are and whatnot, you're going to make little mistakes here and there. And those are eventually what are going to take you forward. Right. And make you grow and make your business grow and all that. Yeah. You can't do that if you don't take action. I love that first one. So maybe tell us if you made any big mistakes yourself or anything. That is kind of. Yeah. So maybe, maybe fill us in on a couple of those.

Erik Mitchell [00:31:57] I wasn't I definitely wasn't answering that question just from reading the book. I, I, you know, yes. I make mistakes. I would say one of one of the bigger areas of making mistakes is renovation side. Like I had mentioned everything that we that we do and needs work. Right. We don't buy turnkey properties. What I mean by turnkey is everything's already in place. You buy it and it's already run like a run, like a business. The property manager, a place, Hensen, place, all that stuff so we don't buy turnkey. So a lot of the stuff that we do requires renovations, no matter how minimal or how massive they are. That's what's required. Now, when we were first earlier on in the investing career, what we had done is misunderstood the market and not really had a clear understanding that in any neighborhood the chances are high majority chance that there's going to be a cap on what a property would be valued at in that market. And without understanding that you can get into renovation, you start renovating things like you would want them done as a homeowner, right? You start going high. And you know what? This would be beautiful. We had a we can add death and we kept on not really having a true budget to pay to to adhere to. And, you know. OK, well, you know what? We just saw this in for three hundred bucks and this for two. Well, this starts adding up and then thousands and thousands of dollars later, you're like, wow, I didn't realize that. That's where that's what the total cost was. Right. Wasn't really paying attention to the budget. And when it comes time for the refinance or you'll see the flip and you're going to sell it, it doesn't matter how nice it is inside, there is going to be that ceiling. So I could see you spent fifty thousand dollars on renovations. You could very well have spent thirty thousand dollars and get your house appraised at the same at the same price. So house appraised or sold because basically they're going to look at comps in the area. And if no comp in the area can match that higher value, if there's a ceiling there, that's what was going to come in. It's going to come on the high end of that ceiling. But that's still going to be a cap. You're not going to have a property appraised for one hundred thousand dollars more than the other most expensive property in that neighborhood. It's just not going to happen. So understanding where that cap is and making sure that the renovations are in line and the budgets in line so that you can still make money. And then adhering to that, we got much better within the scope of work that we do. We get all the way down to, you know, how thick the limit flooring is going to be. We make sure all that's decided prior to, you know, trying to weave contests as being a contractor and get all that figured out beforehand and then adhere to the budget. If we something happens, we open a can of worms. Then we go back to the budget. We fight and we already know beforehand where are some areas that we can cut, we can cut back, maybe not go with such high end fixtures or whatever it may be. And so we open a can of worms. We know where we can start cutting little pieces out within the scope of work and say we're not going to do this because this came up and sticking to that budget. So at the end of the day, we know that we're still going to make money.

Rob Break [00:35:00] Right. That's great. And it doesn't take too much for let's just move this wall out of here and open things up for that to turn into a big disaster.

Erik Mitchell [00:35:09] They can. So that's kind of where where our and our end was more of the, you know, go go with a high end. Also put brand new cabinetry in here. When the country that was there, we could have very well just got a peanut for, you know, instead of spending four grand or five grand, we could have got it done for twelve hundred. You know, those sort of things start adding up at the end of the day. And, you know, we thought with a new cabinetry, our price was just the appraisal value or whatever fair market value at the end would be that much more. But it really wasn't just because the neighborhood in and of itself couldn't justify that higher value. So understanding that was a big part. And that's one of the definitely one of the bigger mistakes that we made. We still made some money, made some money on the project. Like I said, everything that we've done, we've made fifteen percent returns, but fifteen percent returns is quite minimal. If you don't invest a lot of money into the project. So I know we didn't make very much money, spent over 100 hours on that project and that's really where the failure came from, was basically wasting that many hours, that many weeks of work.

Rob Break [00:36:11] This is just great. I wish we could keep you on the phone here for another couple hours.

Erik Mitchell [00:36:17] And again, I'm more than welcome to.

Rob Break [00:36:19] Oh, I'm sure. Absolutely. Would love to have you back on again. What is just a couple more here. Do you have time for a few more? Absolutely, absolutely. Well, what made you want to take the step to help others get educated and start these education businesses that you have?

Erik Mitchell [00:36:36] There's a lot of people that we've talked to not worked with word of mouth, whatever the case may be, just at the end of the day, aren't achieving the results that they want and hearing those kinds of stories. Of course, you know, us sharing ours and and them sharing theirs, they kind of saw us, I guess, in a different light in a lot of people starting and getting a hold of us asking for advice, what we were doing, you know, phone calls and consultations with people, that sort of thing. And Kevin and I made a decision back two, three years ago. Now, with all this coming in, it's sort of take up a lot of our time. And we thought about doing the coaching. We want to really feel we want to focus a lot more on on investing in and growing our portfolio. So we said if we if we started doing the coaching, if we got too busy doing that, can we really focus on our main business? So we decided, you know what, let's just take on a couple of coaching clients each year. Let's build something so that people can access it 24/7. People can come back and refresh your memory or they can read specific modules when they're getting into certain situations or certain types of properties. Right. So we thought that putting an educational system online for people to be able to tap into reference and utilize, you know, 24/7, 365, and we give them lifetime access to the stuff. We thought that that was the, I guess, fairest way to help people, because we didn't we didn't we weren't in that necessarily to sit there and say, hey, you know, let's make a ton of money here. Our main business, our main focus is investing in growing our portfolio. And we feel that that is why we feel so strongly for that to be of the utmost importance. You know, people have in our opinion, we've read some stats and one out of five Canadians actually has a plan in place to retire the age of 60. RBC did a study and reading things like that. And actually, it bothers us that I can't comprehend people being those types of situations. And then I look at the market and I start to understand why, you know, the average investor seems study average investor. If you earn more than three percent a year on your stock market investments, mutual funds, whatever, you are an above average investor. So we started looking at that and say that's barely over inflation. No wonder people can't do this. So we feel so strongly that real estate is the vehicle that allow people to have their money work hard for them. And we really just wanted to be able to share our knowledge and our experience with these individuals because we know what they're doing. They're trying to set themselves up for retirement because if they're not looking after themselves, nobody else is going to. Their financial adviser really isn't. So we saw, you know, these individuals that what they wanted and they just weren't able to achieve it their own way of doing it. So we said, let's go ahead, let's build. This has put all of our knowledge, experience, all of our resources that we've built in our business. Let's put all this into an educational system and allow people to really get into this for a very inexpensive, I guess, type of education. So and I don't know if that really speaks to your point as to how we took the step there.

Rob Break [00:39:42] But one of the big it makes perfect sense. We've got one in five people I thought was pretty high. I mean, I would have thought it was more like one in a hundred, to be honest.

Erik Mitchell [00:39:53] Well, what are you able to achieve? Those their plan or not is a different story, right? Like that just means only one in five actually has something in place that they're hoping to follow to get to there that end results. So.

Rob Break [00:40:07] So what is that website that where you offered this education?

Erik Mitchell [00:40:11] We actually if you go to invest, Invest Dré, which is an acronym for direct real estate investors, which is our company, that we have our portfolio. And so invest Dagobah I don't see you'll see the direct with the investors, which is where we have all of our properties, strategic real estate investing, which is our educational system online with that, too, by the way, we also have property analysis software that I have spent countless hours refining and perfecting. I guess, if you will, Kevin, Kevin can be a little aggravating sometimes because you just come back and say, well, why doesn't the why isn't your spreadsheet do this and why doesn't do this? And then go back to the drawing board for ten, twelve hours and then have the spreadsheet do that. Eventually I paid somebody to put it into a software so you can analyze any property, whether it be kind of like a three on one, you can do a flip and bring that up or you can do a rehab and refinance and bring up that analyzer or straight buy and hold where it'll take on your mortgage plus improvements. Or if you're borrowing money from your line of credit for your down payment, it factors in what interest rate you're paying on that, because really that's interest that needs to be expensive, the property, because that's debt that you wouldn't have, interest payments you wouldn't have if you didn't buy the property. Right. So the spread or the software itself, for absolutely everything that you could think of when it comes to numbers. Why? So you can truly evaluate a proper property the right way and make sure and go to, you know, go to bed at the end of the night being a. The sleep, because you know that every single number was accounted for. There's nothing missing. You didn't miss, evaluate or analyze anything. It's all there. And if the numbers make sense, they make what you want. You can have complete confidence, I guess, moving forward with it.

Rob Break [00:41:52] Awesome. And if people want to, you think you cut out a little bit when you are seeing the website. So invest D-R. I thought, okay, and we're going to have that in the show. No, it's just a link to it. You can get there from there. Is there a quote or a piece of info advice that's always stuck with you and how is it helped you

Erik Mitchell [00:42:10] thaa that real estate and wealth expo that I went to in Toronto? I heard it's a oh I'm sorry. It was it was that first one thousand dollar weekend course that we took. I got up, sold with the presenter there, said something to me and spoke to me and it stuck with me ever since. It's he said, you don't know what you don't know. And it took a little while for that to sink in. But you can't speak truer words than that because there's no way to know what you don't know is out there. And that's and when it comes to real estate investing, there's so many things that we just don't know. Unfortunately, people see this business as pretty straightforward. You buy your property, you put money and you put tenants and how hard can it be? Right. And that is you getting back to mistakes. That's a big one. But there's so much to know going out and getting educated. You're not going to avoid all mistakes and just not going to happen. But you are going to avoid 70, 80, 90 percent of them and some things that could be so costly that, you know, you make a massive mistake. You may never you may never invest in real estate again because you're too gunshy because you took such a hit on that. So, you know, that quote, I think has stuck with me the most and really humbled me because I understood business, but I didn't understand real estate investing. And that was probably one of the things that opened my mind up to go ahead and spending nine, ten, nine thousand dollars on some additional education, because I really didn't know real estate investing and I didn't know what there was all to know about it. So you know what I said? I got to go. I got to learn this stuff, have it hit home so I can have that education to help me move forward with this business and be successful.

Sandy MacKay [00:44:02] Right on. And that's a great one. I love that. Yeah. You don't know what you don't know. Can you can you can say there's so many great things about that quote. The other thing I want to mention too is and I don't know if you mentioned the website for it, but you were talking quickly about, you know, mutual funds and all that and inflation. And you do have the free report, the bank conspiracy and. All right.

Erik Mitchell [00:44:24] Yes. You got a bank conspiracy gutsier. We talk about that in there. The stats itself was an RBC study that came out, I think, a year and a half, two years ago, something like that. And they did a ten year stock market in retirement, I guess, analysis. So that's they took ten years of stock market information and they took ten years. And basically they surveyed a bunch of Canadians as to where they sit with their retirement, so to speak. So that's where that came from. I, I can look at pulling that report up and maybe I can give you guys a link to it. I'm not exactly sure about that. I just know that I reference the article and I have the footnote in my slides. So I'm not plagiarizing for that. But all I know great.

Sandy MacKay [00:45:09] And I know if anyone's out there kind of listening to this and they're still thinking, you know, we're not sure if real assets for them, they want to invest in something else or whatnot, you know, just read that report and and they're probably going to get turned away from a lot of the other crap that's out there. Pretty quickly, I'd say.

Erik Mitchell [00:45:26] Yes. And that's and that's one that's one of the main reasons. When we wrote the the book, you know, our whole point was if you want to invest in market, go ahead. We just know that there's so many people that are uneducated investing that they just blindly hand the money over to the financial advisor, banking officer, whoever that they work with at the bank or wherever investors group, whatever the case may be. They hand the money over, they get the statements, they file away, and that's it. Our whole thing is go out, get yourself educated. If you want to invest in the stock market, go ahead. As long as that is an educated decision, not just a blind decision, not just a decision made because, you know, you just don't want to look into something that you don't understand it. Our whole point is have spent a couple hours or an hour probably to read that thing, get educated and then make your decisions from there.

Rob Break [00:46:14] Yeah. And there's a there's there's a great quote that's on one of the shows that I listen to. And when he's talking about mutual funds, he always says, like, there's a lot of things to consider, like you may be investing with a crook, you may be investing with an idiot and assume you're not. Assume the guy's confident, assume that he's not a crook. They take a huge management fee right off the top. So. Bunch of stuff to look out for right off the bat with that kind of investing, and I

Erik Mitchell [00:46:40] agree with that, you get to read some stuff, get educated at the end of the day when you go in and talk to him, at least you know your stuff. You can ask the tough questions and then you can find out while, you know, even if I do make six percent on my money after the fees, what am I actually making? Right. And there's a lot of tools and resources out there. Like I have a simple spreadsheet. People could email in and ask before and I figure out exactly what you're making at a mutual fund just by punching in some numbers. It'll tell you what your average yearly ROIC is since the time you started investing. Those are things that we should know about, especially if you're looking to get into real estate. You don't want him to get getting out of one investment that's been earning six or eight percent, which is highly unlikely. And you'll be holding on to the one that's getting two percent. Right. You do your own analysis. So you got where you need to pull money from first to start investing in the real estate and then getting the higher, you know, 15 percent returns on your money. And it's unbelievable what the difference is over the long term. Five, not just five years, but you look 15, 20, 25 years down the road. It's unbelievable the amount of money you could accumulate by investing that 15 percent as opposed to three, four or five.

Sandy MacKay [00:47:45] Awesome. All right. I guess, Rob, we've pretty much finished up every time.

Rob Break [00:47:50] Well, we're I'm sure there's just a couple more places like are you on Twitter? Where can people learn more about you,

Erik Mitchell [00:47:58] where you'll learn more if you go on Facebook direct real estate investors would be on there. But I would probably say if you go to invest Dré, that seet right on there, you can find out about us. You can find our Twitter handle, which is I do believe it's at Envestra and you can find the link to the Facebook. You can also Google there at real estate investors. You can Google strategic real estate investing. And I know it's not really the podcast, but investor agent training is our other company because there's very few agents that know how to work with us. So we developed some education for agents on being investigated, certified, we call it. So we educate them on how to speak our language, how to deal with us and how to really please us as clients. So that's investor agent training dotcom, which is another area. That's another one of our companies, but it has dried up. Seares has all three companies. And when I say Dre D as in direct R as in real estate, I for investors

Rob Break [00:48:58] this has been awesome. I really appreciate you coming on and we are going to hold you to that offer of coming back on.

Erik Mitchell [00:49:05] Absolutely. Yes. I have no no problems. I love sharing my experience, my knowledge. So hopefully somebody can take a little tidbit up from this and be able to improve their own portfolios.

Sandy MacKay [00:49:16] Yeah, and we got one last time. Just give our own endorsement here to go check out what Eric's got to share with everyone. If you're listening to this and and haven't invested yet or you're just really at any stage of your investment career, you wanted to get started or just learn more, learn about the craft. So there with mutual funds and all that stuff, Eric and, you know, through his companies have a ton of great education. I know. Ready there to share with you. So he's definitely at least take the first step to looking into them and see what they're all about.

Erik Mitchell [00:49:47] Yes. And no one else thought there that time permitting, I don't mind answering emails and help people out direct. So feel free to email me. Mitchell mit hgl investigate. Okay.

Rob Break [00:50:01] Awesome. Thank you.

Erik Mitchell [00:50:03] Not a problem. Thanks for having me on here. You guys have a great night. It's good speaking with you.

Sandy MacKay [00:50:07] Thanks, Eric. Awesome.

Rob Break [00:50:08] Great stuff. Take care.

Erik Mitchell [00:50:09] You too. Bye bye. Bye.

Sandy MacKay [00:50:35] They're still there. They're still there. There are other. They're still there. They're still there. They're still there. There are other.

Rob Break [00:50:59] Yeah, I can hear you, can you hear me? I got a.

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