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Podcast Transcription

Announcer [00:00:38] If you are looking for the skills and tools to succeed in real estate investing, you come to the right place. This show is about breaking through barriers, breaking through limiting beliefs and breaking through to the life that you want to live through the power of real estate investing. This is the Breakthrough Real Estate Investing podcast, and now here are your hosts Rob Break and Sandy MacKay.

Rob Break [00:01:10] OK, everybody, welcome to the show again. Thanks for being here. Sandy, how are you?

Sandy Mackay [00:01:17] I’m awesome, yourself?

Rob Break [00:01:18] I’m doing good. I’m OK. I’m getting lots of yard work done. I’ve got a bean in my driveway, one of those big green beans, and it’s just full of stuff. I was having a heyday yesterday. I was out at my garage with my wife just saying, what else can we throw away? I’m ready. Like, Let’s get rid of all this stuff and I’m ripping up my front deck because it’s on the flat roof of my garage and that needs to be fixed. So all of these things that we haven’t had time for before suddenly were finding time for them now. So it’s been good in a way, but my real estate is slowed right down.

Sandy Mackay [00:01:55] I don’t know about real estate is interesting for sure. That’s interesting times. Well, I mean, that’s we’re going to talk about it. So we’ll get into it and shed some light. I know. Yeah, exactly. So I think, yeah, I mean, it’s interesting. There’s we have we have a lot of listings that are still able to list and places on the realtor side, but then selling them is another getting of getting tougher. You can sense that for sure.

Rob Break [00:02:20] Hmm. Well, listen, we’re not going to do our regular intro today. We’re not going to go through all of the reviews and all that kind of stuff because we have somebody waiting and really, we’re going to get into the impact of this coronavirus is hard on everybody, you know, worldwide, really. And Cindy, I know you’ve been sitting in the house now unable to really do much for the last, what little over a week now. So probably just under a week left to go since you just got back from our country? How’s that going?

Sandy Mackay [00:02:56] Well, it’s my wife and me. We got we have no kids here. We had a few pets, so it’s the pets are loving it. I think what a lot of time with mom and dad here, so they’re liking the odds. It’s been interesting. I think the week was, I think I’m sensing, you know, I like to get out now and do some stuff. There’s some kind of okay things about it at the beginning. And now I get a little antsy financing, but all the opportunities and stuff are pretty apparent. I see online all the different, you know, ability to get content out there now and the amount of content that’s getting it out there is crazy. You know, Zoom is becoming maybe a norm for a lot of things now, which is maybe good

Rob Break [00:03:38] in some ways. So, you know, my gym classes, my CrossFit classes over Zoom, sometimes not every one of them, but sometimes. Yeah, yeah. OK, let’s move on. We’ve got Tom Karadza, who we’ve been trying to get to get on to the podcast for quite some time now. Welcome, Tom. Nice of you to. Thanks for having me.

Tom Karadza [00:03:59] Yeah. I had no more excuses, Rob. I mean, you know, I couldn’t. I couldn’t do you guys anymore. Like, there’s nothing going on. So we have time. I wanted to come on earlier. In all fairness, it was just my schedule, and your schedule were always conflicting in sandy schedule. So thanks for having it has

Rob Break [00:04:14] been that way, actually. Probably, you know.

Sandy Mackay [00:04:17] It’s crazy now everyone’s available, right? It’s really interesting. And I’m trying to book meetings with people and it’s like, usually you book it two weeks out and now it’s like, Well, I’m free right now.

Rob Break [00:04:28] Let’s go do it now. Yeah. Well, for those of you don’t know who Tom Corazza is, Tom, along with his brother Nick, founded Rockstar Real Estate, which is an investor focused brokerage in Ontario, and Tom is, although he doesn’t like to admit it. An economist, entrepreneur, and a speaker, he’s here with us today to help us discuss the impact of the coronavirus and the impact it’s had so far and how we can possibly navigate our real estate business through what’s still to come. So thanks for joining us, Tom.

Tom Karadza [00:05:01] Yeah, no. Thanks for having me, guys. Really appreciate it.

Rob Break [00:05:04] So give us a little bit of your background like your journey in real estate so far.

Tom Karadza [00:05:11] That’s a crazy question, Rob. My mom, our mom, my brother, and I have the same mom as that sounds. That sounds pretty crazy to admit, but I guess it’s true. Our mom was renting out rooms in Toronto, in the boarding house that we lived in as our family home for 12 or $14 a week back in the 1970s. Our father started flipping properties in the late 1980s. He got caught in the 1990 market correction, where we almost lost all our money and went bankrupt as a family. We didn’t go bankrupt, but we almost did. One house he was flipping in Mississauga went from $750000 in value to 450 in four months. That almost bankrupt us, but we survived. He sold it nine years later to break even. Nick and I started buying properties in the year. Kind of like the early 2000s, I want to say, like 2001, I was working in the tech industry, and I was taking the commissions that I was getting and buying rental properties in Hamilton. And all my friends were saying everybody was saying like, what are you doing? Like, why aren’t you buying more like Oracle stock or Microsoft stock? Back then it was like Cisco and all these companies and Nick, and I were buying rental properties, and that kind of led to our journey of just getting more and more involved in real estate. Nick flipped this first property when I was 21. I started flipping properties and then we decided to get our real estate licenses and we started rock star real estate to try and help people who want to invest in real estate. Basically, Rob, like you and Sandy, I’m sure we felt we couldn’t find people who are going to help investors. So we’re like, hey, why don’t we just get a real estate license, bypass realtors, and just do this ourselves? And that kind of grew into helping investors. And then it kind of led to the birth of a rock star. So that was about 12 years ago. That rock star was kind of born. Is that fast enough? Did I give you too much or too little?

Rob Break [00:06:56] No, that’s good, Tom. I mean, obviously there’s more to it than just that. But thank you for, I guess, summarizing it like and putting it into a nice little package for us all. Now you started rock star real estate and it’s grown. It’s, you know, you guys have done a fantastic job. You provide education to investors. They can you have a membership program where they can learn pretty much everything about anything to do with real estate investing at any given time through your, you know, membership, inner circle and you hold these big events twice a year.

Tom Karadza [00:07:32] Yeah, we do all that stuff, and you know, you are giving me a flashback. You know where I spent most of my I remember late 90s. I somehow convinced my wife to spend $5000 on a box of tapes from an American real estate trainer. You know, those are like American trainers that would come up to Canada. But I guess this guy was selling a box of tapes for $5000, and I convinced my wife to take like we didn’t have a lot of money, but so $5000 was an enormous amount, and I convinced her to allow me to spend this money on a box of educational real estate tapes. And I remember they landed up my front door in Mississauga and our very first house and I ripped them open. I started listening to the tapes and I remember thinking, oh my gosh, I know this stuff already. Like, I know all of the stuff that’s on these tapes. Why am I not doing more? You know, when you have that realization, you’re like, I don’t need to learn anymore, like, I just need to do, you know? And that was kind of the moment for me. I’m like, I just spent five thousand dollars on these tapes, and I didn’t even have a tape player in my car. I had to go to Zellers. I remember Zellers or my tool. Yeah, Zeller. Okay, so

Rob Break [00:08:38] that couple of years ago? OK, OK, OK.

Tom Karadza [00:08:40] So I went to Zellers. I bought like a ghetto blaster. Remember, it was a tape player kind of things, and I had to play the tapes on my passenger seat of my Honda Civic because my Honda Civic, even in the late 90s, didn’t have a cassette player, just had a CD player. So I had to play the tapes in my car driving around, and I remember picking up some friends at lunch and they were like, what are you listening like? What are you listening to? And I was so embarrassed. I’m like, oh, don’t worry about that. Like, I just kind of put it in the back seat. I’m like, I don’t want anyone to know. I’m like driving around listening to like real estate tapes. I think they were from Robert Allen, the guys. Remember Robert Allen. Yeah, if I’m wrong

Sandy Mackay [00:09:14] about anything with them. But I know, I know I spent a lot.

Tom Karadza [00:09:17] Yeah, I spent a lot with Robert. And I think for a year with those tapes, I got to go on like teleconferences with him and like Mark Victor Hansen or something like that. Anyway, you’re now. I’m now flashing. I’m flashing back. But that’s why we started rock star. We really wanted to give Kennedy like you guys. We wanted to give Canadian specific information to people, and we wanted the activity of buying the real estate to be the big investment, not the education of real estate, to be the big investment. Does that make sense? Well, okay. Let’s go do like let’s do like we’ll just share everything we know with you. We’ll share it. Like, here’s everything we know. Come to all the classes we can possibly put on. Let’s go do stuff. I don’t want to keep talking. Like, there’s a point I feel in all of our investing careers, and I don’t think you guys are like this, of course. But the people just kind of reading and learning and looking for the next great strategy. And I found in real estate from our own family’s experience that you don’t make money in real estate from trying to time the market. And I’m sure we’re gonna be talking about today’s market right now. But you make money in real estate from time in the market, and I didn’t come up with that saying, I can’t remember what book. I read it in, but you make money in real estate from surviving time in the market. And that’s why we’re like trying to give away a lot of education at rock. So we’re like, hey, here’s all the education, just let’s get in and survive. So when something hits like the corona coronavirus and it changes the market, we can survive it together. But that’s how you make money by surviving the market. Now I’m going off on a rant, Rob.

Rob Break [00:10:44] Well, a lot of the biggest regrets that we hear from people is either number one, they didn’t they didn’t buy something they had the opportunity to buy in the past. Or number two, they sold something that they wish they hadn’t.

Tom Karadza [00:10:56] Totally. Yeah, yeah.

Sandy Mackay [00:10:58] It’s not that I’m tired of it. Not gives all around time, right? Not having enough time.

Rob Break [00:11:02] And you’re and you guys have grown so much since then to, I mean, how many agents are in the office now?

Tom Karadza [00:11:10] Yes, a rock star. It was myself and nick at the beginning, and now I think there’s about 50 licensed people here at rock star and then our team inside rock stars. Also, there’s like, you know, kind of a team inside the office as well, maybe a dozen people. So yeah, we’ve grown. It’s been a lot of hard work. As you guys know, only ever, we’re all just kind of plugging away. It’s been it’s been hard work, but we’ve grown and the amount we’ve worked with thousands of investors now. We stopped counting. We crossed a billion dollars investment properties with investors some time ago. I think we’re creeping up to two billion, but I don’t have that stat handy. So please don’t hold me to that, that number. But yeah, it’s been a journey. And just crossing paths with guys like you. You know, that’s the best part. And all of it like. Really, that’s the whole the whole thing, the best part is just meeting other people who are doing stuff right and all trying to help each other. That’s what this is all about to me. And then when we hit something like the coronavirus, it really rings true to me how valuable our network is. Like, I look at people like you, Rob, and you, sandy is, you know, part of my own personal growing network. And I really think the value in my life isn’t just my real estate. The value in my life is the network and the value. I contribute to that network because I know that network will then support me. Does that make sense? So, yeah, so we’re weirdly I feel like rock star has like almost accidentally created this group of investors. They’re all supporting each other and helping each other. And when we hear that back, that’s what that’s what we like the most.

Rob Break [00:12:42] Well, it’s funny. I was talking to a realtor yesterday and just, you know. Not given everything away, I guess, but just explaining what I do and how I help investors and they said, OK, and once we got through. OK, great. So how much do you charge for that? Not, nothing. But I don’t charge anything. They come back and they buy another house with me because I haven’t steered them wrong, and I’ve helped them through it. So I’m on the same boat. I like to. I like to give as much as I can stand. You know, you’re the same way. And yeah, and then it comes back to you, right? Obviously, things have changed a little bit over the past couple of weeks. So what does that look like for you and what adjustments have you made?

Tom Karadza [00:13:27] Yeah, OK. Yeah, that’s a good question. A lot of people have been asking us that, you know what? What adjustments are we making it and. And I think the adjustments have already been made from our point of view. And what I mean by that is because our family had such a near death experience with real estate back in 1990. And I know that seems like ages ago, but we learned a lot of lessons. So for the last 10 years, we ourselves have been practicing kind of a three-pronged strategy where we think everybody should have cash or access to cash. Everybody should have some hard assets in their life. Life has insurance and everybody should have some cash flow. So we’ve been gearing up for this for, I would say, a decade, Rob, where we’ve been kind of creating cash for emergencies and for survival, having hard assets in our lives because we believe hard assets are the one thing that just keep plodding along and growing in value and then creating cashflow, ideally from those hard assets because it’s the movement of money in the cash flow in our life, that income component of it, that we need kind of for survival. So during these times, we haven’t really made any adjustments. It’s more just been a test of our theories like, oh, did it make sense to maybe hold on to some extra cash that we’ve been wondering if we should invest for the last five years, but we’ve been purposely holding on to it? Was that wise? And now it feels like it was wise? And was it? Has it been wise to buy real estate assets and hold them? And yet I feel super wise right now to me, especially for what I think’s coming in the next three, four or five years for us and cash flow. Did it make sense to not just buy any real estate? Did it make sense to focus on cash flowing real estate, which I’m sure you guys get this a lot as well. A lot of people kind of, I don’t want to say attacked, but maybe look down on us a little bit because they’re like, oh, you guys don’t really not know how to make the big money in real estate because you make the big money in real estate through appreciation and buying these properties. And we always even though I grew up right next to Toronto in Mississauga, we were always kind of investing on the fringes of the GTA because we felt that’s where the cash flow was. And some people didn’t agree with us over the years, but now I feel like that was the best move. Like, we stay true to that, and I feel like that’s been the best thing. So for us, it’s been cash hard assets and cash flow, ideally from those hard assets. That’s what we’ve done over the last 10 years, and it’s helping us today. So I don’t know if we’ve done anything specifically to change for today right now, but all our kind of ideas are now. I would say maybe helping us feel confident in this environment. Does that make sense

Rob Break [00:15:50] from a business standpoint? Absolutely. And congratulations that you guys have done that because a lot of people don’t. And I notice, like even at Durham area I recently, which is the Durham Real Estate Investors Club that I usually attend, which is tomorrow night and now I think it’s online. But anyway, there has been a lot of, you know, evaluating your portfolio, how you can strengthen it, where you can, where you how you can prepare yourself for this kind of thing. Right. So I think that it’s pretty important now. On the other side, though, there is that human connection right with you and the tenants, and that’s a whole different thing where I’m sure that there must have been some adjustments there, like have you run into any issues or any kind of. Any kind of preparation that you’ve had to do to deal with the tenant issues that are going to arise from this?

Tom Karadza [00:16:49] Yeah, first off, we were shocked with just kind of informally pulling all the investors we work with at how many investors got rent on April 1st that we’re scared they were not going to get rent. I mean, I would say the percentage and again, this is just informal data is well over nine year. Ninety five percent. So I was I don’t know about you guys, but I was like, we were, I think was, Yeah, yeah, yeah, we were just bracing for like, whoa, OK, well, what’s going to happen here? But so that was that was good news. But then on the human element, you know, Rob, you’re absolutely right, is our property managers have been doing a great job with that and we’ve been encouraging them. But thankfully we didn’t even have to. They were proactive and the way we handled things is communication. So by communicating with tenants to let us know what they’re going through so that we can work something out together. I don’t think this is the time to draw the hard line where it’s like, you know, you’re not paying rent, you owe us rent. And at the end of the story, I feel it’s the time for grace and compassion and to be working with people so that if you can’t get the full rent, you can we arrange for partial payments? You know, can we set something up with tenants where they’ll catch up, maybe down the road. But for now, let’s document the partial payment plan, where you can pass X number of dollars this month and then in two or three months from now, we’ll kind of catch up on some rent and we’ll keep the communication going because even that might need to be adapted. So the biggest thing we’ve been doing immediately is opening the lines of communication. And again, for us right now, it has been our property managers doing that, but we’ve been very supportive of that. Yes, that’s the approach. Don’t you know, let’s not try to, you know, draw a hard line or, you know, on anything with rents, let’s talk to people, let them know that we’re willing to compromise and let’s show some compassion during these times. I’m not sure if that’s what you’re asking, Rob, but that’s kind of that’s number one. Like, that’s the first thing. Right?

Rob Break [00:18:41] Yeah, absolutely. And Sandy, I saw you nodding your head there, but I was well, last time we spoke was right on April 1st. I think we were we were doing our interview with Quentin at about 10:30 in the morning that day. So I didn’t I wasn’t really sure how everything was going to play out. But I’ve been pretty good so far as far as the tenants paying back. I have one tenant, one tenant to who is a little bit short now.

Sandy Mackay [00:19:06] So we were we were up over. We had maybe two that we did a payment like personal ones that we did a payment plan with. Really, it came down to what was going to go on this week with the incentives coming into play in the emergency relief benefits, right? So I think those are going to help any other towns that we put on the plan are going to be probably paying in the next week, I would expect. And that’s what. Yeah.

Tom Karadza [00:19:30] Sandy, sorry. I was just going to add that’s what we saw, too. We had one tenant in one of our student rentals. Ask if they could apply last month’s rent to this month because they were going to be a bit out of work, and we agreed to it. You know, it’s not something we would normally agree to, but yeah, we totally agree to doing that with them. And Nick has I don’t mean to speak for Nick because he’s not here, but Nick has one tenant who is paying a little bit later this month. But they do have a history because they’re self-employed to pay, sometimes a little bit sporadically. So he’s kind of monitoring that. But us as well. We were we were shocked. That’s all we’ve seen as well. And that’s across like rental properties and student rental properties and that kind of that kind of stuff.

Sandy Mackay [00:20:08] And what do you think? I know last week we talked with Quentin, and it was we weren’t sure yet. So it’s interesting now seeing that everyone’s paid pretty well, you know, as normal this month. What about coming up in the next months ahead? Obviously, we don’t know, but I think, you know, we have to maybe have some plans in place for when that maybe happens and it does get a little tougher, perhaps for people. Do you have anything in place? Are you thinking about that at all yet?

Tom Karadza [00:20:32] Yeah, yeah. We are thinking about it a lot, and I think it might get a little worse. So, you know, I think we’re in for probably not as good next month as it was this month as people start to have a little bit of fear enter their system on their own employment situation. And for that, we are proactively looking at our mortgage to decide if we’re going to be deferring any. So we haven’t deferred any of our mortgages right now, but we’re proactively looking at that. We know a lot of investors have. So we’re looking at that and just trying to map out how long we could survive without any rent at all. Remember, I spoke about like our having our emergency cash, just writing out our own plan on like how long can we go? Like, how far can we survive? Because if we know that number, it allows us to make the decision sitting on mortgage deferrals and that kind of stuff. So we’re preparing ourselves to maybe make some mortgage deferrals, but we haven’t done anything like that. So that’s the biggest thing we’re looking at right now for the future because I do anticipate next month’s not going to be as easy as this month. I’m guessing, of course.

Sandy Mackay [00:21:31] Do you think people should be deciding on that deferring or not? What do you do you have any thoughts on? I don’t think it’s a blanket you should defer or not. I think it’s case by case. I think it’s

Tom Karadza [00:21:40] case by case. I think it’s what makes you sleep at night. So, for example, if you only have one, if you’re an investor whose leverage pretty high and you only have 30 days. Worth of survival money for you and your family. Defer. Like, what are we? There’s no discussion here. Defer. But if you have enough cash in the bank credit line access to survive for nine months without any mortgage payments, then you take it on a month-by-month basis. So I would say it’s whatever makes you sleep at night and with one caveat to that. I do believe that credit lines and I know I take some heat for sharing this. Credit lines can’t be looked at as guaranteed emergency money because the banks we’re going to go through a tightening cycle with the banks right now. There’s no doubt anytime there’s an economic change, the banks tighten their lending standards. So it should be no surprise to anybody that we’re going to go through tightening that. Part of that tightening may mean that banks reduce some of our credit lines that we all have on some of our properties. So if you’re solely depending on your credit line as your emergency money to carry you through that, I would kind of break things up and like, how much cash do you really have and how much is that available via a credit line? Because it’s maybe the banks change their mind and kind of reduce your credit line or closed it right? And I’m only sharing that to try to rob knows Sandy. I’m like, worst case scenario, guy. I’m like, What’s the worst case here? Like, what’s going to happen? So I don’t mean to say that to breed any sort of fear. I’m just trying to be realistic with what I think the banks can do. So that’s how it would look at it.

Rob Break [00:23:02] Well, it’s also like if, if, if that is a possibility, which it is. I mean, we’ve seen it in Europe at some point. Right. So it never hurts to take that preparation, obviously. And I heard you so just on that note. What information do you have on how the bank looks at future purchases if you are to defer any of your mortgages?

Tom Karadza [00:23:29] Yeah. So we just have talking to our bankers and our mortgage brokers who do quite a bit of volume and everybody has the same question. And some people are thinking that if you have a deferral from a bank on record now and you try to go to get a refinance on one of your properties, it’s not you’re not going to be in a good shape to get that refinance on the property because if you’re currently deferring mortgages, I’ll just pick a bank from the Bank of Nova Scotia. How motivated are they going to be to refinance you on one of your properties if you’re currently deferring mortgages with them? So it probably won’t impact you from getting a refinance on a property to another bank, but the current bank you’re with if you try to refinance a property, some bankers and mortgage brokers we’re speaking with are saying that’s probably going to affect you somewhat. And then some others are also saying that if you go for a refinance right now, you might want to be careful because you don’t want to get a decline on your record. So if you are deferring mortgages right now at one bank and you go to that bank for a refinance and get declined, that decline stays on your record, apparently, and you don’t want that as investors, you know it’s all about accessing capital at all times. So you want to be careful that you’re proactively asking your mortgage brokers and bankers what they think you should be doing at this time because you don’t want to get an arbitrary decline on your record right now. That then might show up on your maybe it shows up on some banking report that other banks can see. You know, there are some of those bank reports like there’s your credit report, but then they pay for those other reports. I don’t even know the name of them. Rob, I should say you. I apologize. I should have this name handy, but they can see some other information about you. A I don’t know if that decline shows up across all banks or not. So you just want to be careful at the time. This is this is where those relationships in your network become very powerful. You want to talk to your bank, or you want to talk to your mortgage broker before you make any moves.

Rob Break [00:25:14] So on the same note there though, wouldn’t they be able to see the deferral from the other bank?

Tom Karadza [00:25:21] As well. Yeah, agreed, agreed, yeah. Apparently not. Apparently not. But I’m guessing just as much as you, but this is what we’re being told that they’re not seeing the deferral right now. And then the next question becomes like if you’re deferring, does it have impact, your credit? And most people are thinking it won’t. However, some of them mortgage brokers. We’re speaking to our little concerned that the banks might have some processes in place that report a missed payment to the credit bureau. Even if you have a deferral. So I think it’s wise that all of us be watching our credit right now. Like, I don’t know about you guys, but I pay. I think it’s like $50 a quarter or something to get my like, my Equifax like kind of report. Like, if anybody does anything on my credit or there’s any new updates, I instantly get that alert. To me, it’s pretty important right now to be watching your credit so that if you do have a deferral and anything is reported on your credit bureau for that, you can call the bank and say, hey, guys, you guys approved this. Can you kind of remove this and you can report that to Equifax and that kind of stuff? Mm-Hmm.

Rob Break [00:26:20] Okay, good. Good information. Thank you.

Tom Karadza [00:26:23] I mean, I’m just I’m guessing like you guys that all of this, I’m just I’m just kind of sharing everything.

Sandy Mackay [00:26:27] I’m just sharing it. We can try and figure it all out, but we won’t really know until it takes place, right? Which is which being makes it challenging.

Tom Karadza [00:26:37] Totally. Yeah. And there’s something interesting that goes on in investors’ minds. I find, especially investors who haven’t taken action. Everyone’s kind of thinking they’ll buy their next real estate when the market hits the bottom. Right. I’m sure you guys hear a lot all the time like, hey, I’m going to wait. Sandy, Rob, I’m not going to buy right now. I’m waiting till the market hits the bottom. In my opinion on that gets I get a little heat for it because they’re like, well, guys, you own a brokerage. And of course, you’re going to say this. But I believe that if the market truly hits the bottom, it hits the bottom for a reason. The reason is likely that access to credit is gone or very difficult to get. So why do you think it’s at the time where the market hits the bottom that you think you’re going to be able to buy your first property or your next property if you haven’t bought one in five years? I don’t agree with that strategy and understand that makes me look bad because we own a brokerage and people can say, well, you guys are just trying to sell real estate. I don’t mean that you do real estate with anyone you want. I’m not speaking from trying to make a sale here. I truly believe over the next five years you’re going to want assets in your life, and you should think that banking is going to get tougher in the next three, four or five and six months, not easier. So if you’re thinking about buying a property now and I know the next two weeks might be crazy, none of us are. No one’s going out, you know, it’s hard to kind of show properties, but you know, maybe in the in the short term, you should be acting and not waiting for this magical bottom. Because at the bottom, I don’t really think you’re going to be able to buy. So or at least not able to access credit from the banks very easily. So it’s just it’s just interesting.

Sandy Mackay [00:28:08] Time is a great point. I mean, we’re all probably biased on that sensor right now, but I agree for sure. I agree. There’s no way, there’s no way it’s going to get more difficult and there’s going to be more Fiero there, probably to be, and it’s going to be even harder from a mindset

Tom Karadza [00:28:21] totally back in 2008. I agree. Back in 2008, when Nick and I were much smaller, Rockstar was much smaller. We made a list of all the people who told us they were going to buy. When you know, there was, there was like a low point. And then the U.S. financial crisis hit. And back then we probably had a list of 10 people, and they were all 100 percent. I’m going to buy when the headlines are negative, and everyone’s scared of real estate. Out of that 10, that absolutely told us 100 percent they were going to buy, and they were financially capable to buy. We had two people buy two out of the 10 right and is going

Rob Break [00:28:51] to say, actually,

Tom Karadza [00:28:53] you know, I know, I know, but they were already a group of investors. So like in the regular kind of general public, it was probably two out of like, what, 100 or so. But you’re right. You’re right. I think we were we were. We were surprised you. But those 10 told us adamantly. All 10 of them we will buy. And they didn’t. The two that did buy back then and survived that. Obviously, you know, what’s happened in the last 12 years are they’re really happy.

Rob Break [00:29:13] I mean, try to identify the bottom of the market to what is that? Who’s to say this is the bottom of the market? You know, you just can’t do it. You can’t time it out. If you see a good deal, then go for it. Look, there’s going to be there’s going to be good deals to be had right now that are going to be better than the ones that are at the so-called bottom of the market. It’s just you’ve got to look for them just what any other time.

Tom Karadza [00:29:35] Yeah, I think most investors look at investing as they look at the price of the asset. We don’t look at it that way. We look at it as you’re buying a stream of cash flow. So you’re buying a stream of cash flow. When you look at the property, the price is important. It’s an absolutely important component, but we don’t look at that as the be all and end all. We look at the cash flow component to the property and then we look we assign the cost of acquiring that cash flow and the cost is, you know, the price of the property. But we look at that that price as the price to acquire that cash flow, not just like our prices high or low, right? We’re just trying to buy streams of cash flow everywhere we can. And in that way, we feel we’re like killing two birds with one stone. We’re getting a hard asset, a nice, good property, and from that hard asset, it’s creating cash flow in our lives. So buying real estate right now to us is a is a win. And that’s just never going to change. But I think a lot of new investors always look at the price like, is that a good price is now, you know, Sandy, Rob, tell me, is this a good price or is this a good? You know, where’s the good price? And I’m like, Huh? If I can be the better investor who can analyze and acquire a property, know how to make money from that property and pay more for that property than you can. I’ll keep growing my portfolio if I can pay more for the property comfortably than you can because I know how to make it into a second suite, right? I can pay more than the guy next door, maybe because he’s going to rent it out as a single-family rental. But I know how to make it into a second suite and I’m going to almost double the income on that property so I can afford to spend $10000 more. And it’s not really that big of a deal to me because I know I know how to make money on that property. And you don’t. Right? So that’s kind of some of the way we look at it. My just ranting again, for you guys, I feel like I feel like you cut me off, cut me off.

Rob Break [00:31:22] We’re never going to cut anybody off.

Sandy Mackay [00:31:24] No, those are great points. I love that. Awesome. Place there. And so we did talk on the economy a bit there. And as you as you said, you’re not necessarily an economist. They do study a lot of this stuff heavily. Do you have any thoughts on? I mean, no one really knows everything that’s going to be in store for the next little bit. But anything you’re thinking about or looking at specifically, that’s maybe interesting for the listeners to get to know about here going forward.

Tom Karadza [00:31:47] Yeah, it’s I mean, it’s totally it’s a big topic, but I think if I was to kind of boil, it down to us Canadians here, I expect bank tightening in the next, you know, in the short term, there’s going to be more tightening, not less. So for example, last week, one of the big banks in Canada decided that he locks can no longer be used as a source of down payment on rental properties. Right. That shouldn’t come to, as a surprise, a surprise to any of us. I believe there’s going to be more announcements like that, not less. I also don’t get scared of announcements like that. I look at those as opportunity because as I can navigate through that kind of stuff and other people perhaps are going to freeze. So I feel the first thing we should all expect is more bank tightening over the next little while as banks tighten access to credit. It’s going to affect the real estate market, but there’s just no two ways about it is going to affect the real estate market. I don’t know how greatly we happen to have wonderful fundamentals in the entire golden horseshoe here with our population base and our job base here. So I’m not actually scared about that, but it’s going to have some negative impact on real estate in some capacity. That’s what I think. And then I think the policy response to that is the banks tighten their lending. I think the government in Canada and the government in the U.S. and governments all around the world are going to want the banks to lend money because they’re going to want to stimulate the economy. So I. Feel like we’re going to go through this weird environment where things kind of come down a little bit and then after some time and I don’t have the crystal ball to time this perfectly, but I feel like there’s going to be this moment where the banks are almost forced by the governments to lend money out into the economy, to try to get the turnover of money happening for the economy to grow. And at that point, I really believe assets are going to rise quite nicely. So I feel like there’s kind of two moments short term anything can happen, like a little bit of bank tightening, likely a little bit of stress on the real estate market. But then medium and long term, the governments need money to be spent. The governments need money to go into the economy. They need it. I feel they’re going to mandate that banks push money into the economy and then that’s going to be like fire for real estate. However, I don’t have the crystal ball. I don’t know if that’s like six months away or like eight months or three years or five years. And that’s why I tell her when you can’t time the real estate market, I’ll just buy the good assets and sit on them. And if banks tighten right now and the value of my real estate comes down. No big deal. Don’t even care. And then longer term, I kind of have a suspicion that like this is going to pay off really nicely because they’re going to push a lot of money into the economy. They need the economy to grow. The governments around the world need the economy to grow. Let me put it to you this way. Since 2008, there’s been $100 billion of new debt. Global go 100 trillion. The U.S. government has put in a six trillion-dollar stimulus package. Two trillion of that is to their economy. Four trillion is to offer liquidity. To the financial markets. Now let me ask you something, if 100 trillion dollars in new debt was created in the last 10 years, but only four trillion has been put into the market to offer liquidity for that debt. I think we have a lot more liquidity that’s going to come into the market because there’s 100 trillion in new debt, but only four trillion dollars in liquidity to make that debt move and survive. So my money says a lot more money is coming into the U.S. economy and then all countries have to follow because Canada can’t have its dollar rise faster than the U.S. dollar. We are an export-based economy. We have to have our dollar cheap and to keep our dollar cheap. Interest rates have to be lower than the U.S. and we have to put more money into the economy to make sure our dollar is of less value than the U.S. I’m all over the place now. There you go.

Rob Break [00:35:26] You know, all of these things. I mean, to me, that sounds counterintuitive, but I guess that’s just the way it is.

Tom Karadza [00:35:34] And by what means, what do you mean, counter intuitive

Rob Break [00:35:36] in the dollar low?

Tom Karadza [00:35:38] Yeah. Oh, got it. Yeah, yeah, got it. Yeah, we’re an export based to Canada, an export-based economy, so we want our dollar to be cheaper. But yeah, I hear you. It sounds crazy like it sounds crazy. Let’s like devout. Let’s make our dollar worth less. But that’s yeah, that’s how we roll.

Rob Break [00:35:58] So, I mean, you’ve already answered this where you are still, you’re still buying properties on?

Tom Karadza [00:36:03] Yeah, yeah. I blame. I blame. Nick has been buying more residential than me in the last couple of years, and I blame that I love my family, but my kids are older, and I’ve been putting a little bit more money into some family stuff. And then we had this office, and that’s been our most recent acquisition. I think I can’t remember if we were recording when I shared this or no, we weren’t. Yeah, but we bought this office. This is our first commercial real estate. We closed on it in February 2020, and it’s the new home of rock star and the biggest economic crisis that is to hit in. And maybe, maybe it’ll be our lifetimes, who knows, happened one month later. So on a timing perspective, that’s pretty good. Close in February. Market comes to an end one month later. So yeah, we’re still buying, and you know, we’ll continue to still buy. Right. So we’re believers in hard assets. It’s funny because people will tell me they’re like Tom. I don’t think like some investors will say, I just bought a property. I think I should sell like I think I need to sell. And I’m always intrigued by that because I’m like, Wait a second. If you have enough money for your family to survive over the next six and nine months, why do you want to hold cash? To me, if you’re really going to just try and time the bottom of the market, OK, you know, good luck with that. And yeah. Load up on cash, but I don’t think you’re going to have access to easy lending. But I can see where you’re coming from. But if it’s just sort of like, I’m scared to me, you want to own the asset. Every wealthy person in my life has owned assets, every wealthy person I’ve ever met. It’s why all of us, I’m sure, got into real estate, everyone’s owned assets. So why in this environment do you want to like dump an asset that is a good rental property that’s like at least paying for itself or making some money? It doesn’t make any sense to me, but I find that’s the fear-based reaction, right? People are like, oh my gosh, the real estate thing is going to go down. Sell it out. And I’m always just fascinated by that because they’re placing more value in the cash in hand than owning the asset, whereas I place more value in the asset that I own, not the cash in hand. Does that make sense? Absolutely. And that’s so I’m always trying. Yeah, so and I’m sure you guys agree to all this kind of stuff. So. So yeah, I’m preaching to the choir here. I know.

Rob Break [00:38:17] Well, I mean, it’s good for a lot of people to hear that are listening to this too, right? So I mean, they might have the different perspective, just as I’ve got some, some clients who, you know, their close is coming up and they have had the same phone call with them. It’s do you think that anyone else in your group might want this? I’m not really feeling it. Maybe you might want to get out of it right now. So it’s just something that happens. It’s, I guess, a human reaction to this type of thing. Not that we not that I’ve been through it necessarily that much, but I’m definitely seeing it this time.

Tom Karadza [00:38:51] Yeah, I remember when I was about, I guess, like 18 19, when 1990 hit and our father was flipping multiple properties and it’s people get crazy. Like I was old enough then to remember that because our father had friends who were flipping properties and people start selling homes because they think things are going to get worse and worse and worse. So actually, I anticipate real estate activity to pick up like as it as it kind of bottoms out whenever that happens over the next little while here. Real estate activity at some point picks up, and it’s not. It doesn’t always pick out pick up a bit of a positive. It sometimes picks up because people think things are going to get worse, so they start listing their properties to sell them right. And that’s where I think a savvy investor can really. I don’t want to see take advantage, but, you know, maybe sees an opportunity when people are selling, and you might be able to kind of snap up a good deal. So interesting times ahead. There is for the sophisticated investor, there’s definitely going to be opportunities ahead.

Rob Break [00:39:47] Oh, absolutely, I think. I mean, anyone that’s selling right now, they’ve got a reason for that. Definitely got a reason for it. Nobody’s, you know, in my opinion, there isn’t too many people thinking that this is the best time to, you know, cash out on their other house. So if they’re selling this, probably a pretty good reason for it and going through all of these precautions that has to be had if people are actually going in through properties to look at them, there’s deals for sure.

Sandy Mackay [00:40:21] Knowledge is huge. Obviously, we’ve talked about the action and importance of that experience without it, you know. Great time to soak up some extra knowledge or to if you have some time, become more of a sophisticated investor, like you said, because that’s how you that’s how you know what to do when the opportunities come. What are some things just to switch a little bit here? What are some things that real estate investors can do to support help the economy or the community, not the economists or the community? At this time, I mean, there’s a lot of, you know, we’re starting to see a lot more things happen with the real estate world in general. I think there’s a there’s some things we can do to help our communities. What are some of those things if we’re looking for some extra things to do when we’re bored here?

Tom Karadza [00:41:00] Yeah. Well, we’re all, yeah, we we’re just saying, I’m watching the Raptors games that are replaying on Tuesday and in sports that I’m treating them like live games. I’m like cheering. That’s when I know I’m losing it right? You and you’re cheering for recorded games like they’re live anyway. I think that I think the first thing that we can all do is take care of ourselves, number one, like protect this, protect your mindset. You know, what are you reading all day? What are you putting into your mind? I feel like the best way we can help our own communities is to first help ourselves have the right daily routines to wake up and put positive information into your brain. I really, really feel that that’s important. And then after that, it’s helping the person directly next to you. So if that happens to be that a tenant who needs to hear some compassion from your voice to help them get through the next couple of months, help that direct person. If that is your neighbor or us here like this over Zoom and give them some encouragement and some support, it’s just helped the person directly next to you because I feel that’s the best way, we can impact our community. Sometimes I feel we try to impact our community, and everyone tries to like, do these big grand things which are fantastic and sometimes motivating. But I believe help yourself help the person directly next to you at the grocery store who needs a hand, you know, be the friendly voice. And maybe everybody’s a little nervous in the grocery store. Help your family, you know, have some compassion at all levels during this time. And then beyond that, I really think we can help local businesses, the local person. I feel like in the next little while, we’re going back to local, you know, the local the independent coffee guy, the local grocery store, the local family. Let’s help our local business. That’s what you know, Sandy. If people are going to use you, you know where you are that’s affecting you and your family. You’ll then go spend the money you’re making on another local business, Rob, for you. You know, it’s helping our local businesses. That’s what I that’s what I feel, how we can help the best.

Rob Break [00:42:47] I agree, and it’s like my gym closed down. I was just talking about how we were doing some of our workouts over Zoom, whatever. And so I’m trying to, you know, support, help him stay afloat, right? Like, it’s not easy for a little niche gym to keep on going and when they run into something like this. So, you know, we’re not going, but we’re still we’re still contributing, right? And yeah, it’s important there’s a couple of other things that I’m doing to as well along that vein. So that’s a that’s a good point. I like that, and I think it’s very important as well. So, yeah, if there’s if there’s somebody that that maybe is been helping you out, like even somebody that, let’s say, cut your grass and they’re not cutting your grass for you, you can still, you know, help support them. I guess we’ve just you were mentioning earlier, this is going to be kind of a wrap up, I guess. Other investments, you know, other hard assets that you acquire to help support you.

Tom Karadza [00:43:53] You’re trying to get me talking about gold and silver, aren’t you?

Rob Break [00:43:56] This is your this. You talk about whatever you want. You mention it, right?

Tom Karadza [00:44:03] Yeah, yeah, totally. And yeah, the reason the reason we tell everybody that will listen about gold and silver is because we believe gold, precious metals. Look, there’s something over history that doesn’t change land, precious metals, and art. You go through hundreds of years of history, land, precious metals, and art. You know, they always hold their value. And I just remember our family, you know, we have family who lived in the former Yugoslavia. They went through the 1990s of hyperinflation in Yugoslavia and about seeing hyperinflation coming here by any means. However, I did make an interesting observation during that time that the people who survived with any sort of wealth owned things, if they owned properties, they survived because as one currency kind of went into a new currency, the property was still the property. It just happened to be denominated in you currency. Their wealth survived, and anyone who just had some money under their mattress or some money in the bank account, that money was just converted to the new currency. They lost everything. They lost everything because if they had like $5000 in the in the bank or at home and they were able to get the new currency, that $5000 turned into $50. The people who didn’t have properties, if they owned a little bit of gold and silver, they were able to maintain their purchasing power because if that gold and silver, it survived the currency change. So we tell everybody, the gold and silver in North America is very misunderstood, and it’s a form of insurance on your finances. That’s how we look at it, that you have some gold and silver in your life as a form of insurance. So if everything goes crazy in the financial world, you still have some form of money separate from the financial world that will protect your wealth. And there’s hundreds of years of history on it. So we look at it as an insurance, and aside from real estate, we’re big believers in owning some precious metals through this time. And I don’t mean on the stock market, I mean, if you can still get it to physically go and own it and there’s dealers right across Ontario that you can still buy some right now. And I say still, because in the last few weeks, inventories have gone really light in most of these places, when it’s our own family’s history, seeing what happens to a financial crisis that made me fully appreciate owning some precious metals, I’m like, oh my gosh, that’s one way to have insurance on my wealth, and I don’t want to be holding just, you know, just cash or dollar denominated things. I want to have other things. So real estate and gold and silver are important to me for those reasons. I don’t know if that. I don’t know if that was clear, Rob or not, but that’s kind of how we think about it. That’s pretty clear. Yeah, right.

Rob Break [00:46:43] Get in that. Well, thank you. You know, I appreciate you coming on here and sharing all this stuff. And like we said, it’s been a long time. I mean. Not for anybody’s fault, but we’ve really been trying to get you nailed down for quite what, quite some time. So I’m just happy that, you know, I believe in it. This is actually a good opportunity to have you because you do have despite what you think. I always have to preface this because Tom is like the humblest guy you will ever meet. You know, if I say something nice to him, he goes, oh, I don’t know about that. I’m just Tom trying to survive. That’s me, you know. But really, you guys have built something great, and you have a lot of knowledge that you can share in this interview is definitely evidence of that. So you can accept it or not, Tom, but thank you very much.

Tom Karadza [00:47:34] We appreciate it. And you know what? Just watching what you guys are doing is inspiring for us to you because you guys have been doing that. You guys, I feel like I’ve been doing this podcast for a long time. I don’t know when you started, but you are sharing information that we are sharing it. Think how many people you’ve benefited. So thank you for you guys doing this and we’re going to have to return the favor now. So now you’re going to, and I want to do it in person. So you’re going to we’ll have to wait. I don’t know. You may have to wait until 2021 or 2022. I, we’re allowed out again. I’m joking, but we’ll have to have you guys in the office in January 2021. Guys, I know. Jeez. I’m hoping it’s six weeks away. But anyway, we’ll have to return the favor and you’ll have to come on our podcast. So thanks for this. Appreciate it.

Rob Break [00:48:14] Sounds great. Thanks a lot.

Sandy Mackay [00:48:15] Sounds great. Appreciate it so much.

Rob Break [00:48:17] And OK, everybody, thanks. And we’ll see you next time. Now.

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