Possibilities in Real Estate Part 1

Jessilyn Persson: [00:00:54] All right, today’s topic is the possibilities of real estate. This is going to be part one of three series. Throughout this three series podcast piece that we’re doing here, we’re going to talk about everything from understanding your goals, what makes you uncomfortable, what are you willing to do, right into the different asset classes, leveraging real estate, market dynamics, creative financing, multiple income streams, and how to measure that for success.

Brian Persson: [00:01:27] The reason that we picked this is because it’s a huge topic. We started writing it out and we realized this is too much for one episode. The reality is that you don’t know what you don’t know, and we haven’t talked a lot about true real estate investing, the nitty gritty of it. We also hope these episodes help you as a guide to avoid shiny object syndrome, which we had early on in our real estate career. Where we were hopping from asset class to asset class and chasing down all these different strategies that really didn’t fit our particular family, our mold, what we were aiming for in life. So we hope these episodes guide you into a quicker and faster way of investing in the right asset class for you.

Jessilyn Persson: [00:02:13] To do that, it starts with understanding your goals. When you’re looking at your goals for building your wealth and your real estate portfolio, you want to define your ‘why’. Why are you interested in real estate, if that’s the avenue you’re going down to build your wealth, why do you want to be wealthy? I know we talked about that on an episode before, and really dig into that. Whether it’s financial freedom, passive income, wealth building, legacy planning. Whatever that is for you, work with your partner and go internal to yourself and define your ‘why’ for your goals.

Brian Persson: [00:02:50] A lot of these things that we’re talking about, like legacy planning, you might not even be considering right now. You might just need to come have a call with us. Feel free to book a discovery call and we’ll help you find out exactly what your ‘why’ is.

Jessilyn Persson: [00:03:06] While you’re still working on your goals, you want to define short term versus your long term goals. Are you looking for quick flips or sustainable long term investments? Is your short term to learn real estate and understand it, to build your knowledge, build some passive income? Maybe long term it is to fully finance your life and your lifestyle, and maybe you want to step away from your 9 to 5.

Brian Persson: [00:03:33] Understanding your goals is really important because a lot of people aim for a goal that is often not the goal. We go to different real estate rooms and we go to different conferences, and there’s a general sort of under-knowledge, that if you polled a room and you said, everybody who wants to invest in real estate raise your hands. Most of the room would raise their hands. But the fact is that, the old 80 over 20 rule, only about 20% of those people really have what it takes to invest in real estate. When you are looking into your goals, you really got to be honest with yourself about how you want to invest in real estate. Everyone should invest in real estate, but it’s the entry point of how you’re going to invest in real estate that is very important to understanding your goals.

Jessilyn Persson: [00:04:25] Make sure you really dig into the clarity of your goals. I say that because, I know when we originally got into real estate, I got into it because I thought it was a great idea. I can’t say I had a really big goal behind why, it was just, I thought it was a good idea. Then when we landed our first property, closed our first property, I was super excited. I’m like, every two years we’re buying a new property. I never really tied it to anything. But one thing I did have as a goal throughout many years was, we needed to have millions of dollars. I would bring it to you, and I could never quantify it. You’d be like, how much? I’m like, millions. You’re like, but how much? I’m like, it doesn’t matter, it’s just millions. Finally one day, I’m saying one day and we’re talking years later you’re like, Jess, why do you need these millions? I’m like, so I can live the lifestyle I want to live. He’s like, what does that look like? I laid it out to you, and after I laid it out, you took it away for, I think it was, a day or two. You analyzed it, you came back and you’re like, here’s the actual numbers we need to live the lifestyle you want. I was like, really that’s it? You want to define why. In the end, now that I’m older and wiser, it’s like, I actually wanted time freedom. But I didn’t articulate it like that. I didn’t understand my motivation behind why I wanted to have real estate, why I wanted to build my wealth and have millions.

Brian Persson: [00:05:53] It’s fun and it’s attractive to have millions, but if you really get down to what your true goals are, most people are looking for time freedom. They’re not looking for just a big fat bank account that they do nothing with. Maybe you’re still working 8 hours a day or 12 hours a day, however your schedule is. It’s really about time freedom. For time freedom, you need quite a bit less than what you think you need. Because really, you’re just talking about recouping some of the hours from your job, if you’re in a job.

Jessilyn Persson: [00:06:27] True. Also, depending on what your long term goals are, I now have a different appreciation for millions, what that means. It’s when you know your ‘why’ and why you want to do it, that’s what’s going to pull you through the harder times. Whether that be the midnight calls from the tenants, the floods, or if you’re not doing a brick and mortar type real estate. Maybe it’s the ups and downs of what investment you had, the market shifts and suddenly your interest rate on your mortgage has gone up. Whatever your ups and downs are, if it’s a strong goal for you and something you’re motivated to do, it’ll help carry you through those times.

Brian Persson: [00:07:10] Which brings us to our next takeaway which is, what makes you uncomfortable. That’s really what we’re talking about. What makes you uncomfortable? Are you willing to push through it? Can you find a way to still invest in that real estate without never sleeping at night, always up worried with anxiety at night?

Jessilyn Persson: [00:07:31] Risk tolerance is a high one, especially in real estate. Not saying that real estate is necessarily risky, but there are risks involved just like any asset. It’s a matter of, are you okay if your money goes down and not up? Are you okay getting that call at midnight or managing a flooded basement? How much risk are you willing to take on? Whether that’s leveraging debt, watching the market volatility and some of the unpredictability of it, and there will be unpredictability in the market.

Brian Persson: [00:08:00] That’s why I like the way that we do real estate right now, which is suited houses and multifamily. We’re just starting to acquire our first couple of multifamily. The thing about these asset classes, is that you have multiple doors. If a door goes empty, then you still have other parts of your rent to cover some expenses and you’re not at a significant loss. So your risk tolerance is a lot lower. I can make sure that I have full rent, but during the hard times when a couple doors go empty, then my portfolio carries itself and that helps me sleep at night, and the risk tolerance for the whole portfolio goes down.

Jessilyn Persson: [00:08:46] When you’re looking at what makes you uncomfortable, to know it in there, you need to step outside of your comfort zone to really grow. That’s where opportunities lie. I know we’ve had many uncomfortable moments in our real estate portfolio. Things we’ve had to analyze and assess and make decisions on. Is this the right move for us, knowing where we might have taken a loss? But we’ve grown substantially from the choices we’ve made.

Brian Persson: [00:09:18] I’m currently taking a coaching program, one of the main tenets of it is, success is who you become. Not how fat your bank account is. A good chunk of the coaching program is figuring out what success looks for you. It’s almost not allowed to have a monetary value to it, in this particular program. You really should look at that, because real estate is a fantastic asset class for building your financial wealth, but it can also help you become a bigger, better, stronger you. You can look at it two different ways, and like Jessilyn just said, we have become totally different people compared to before we invested in real estate. I think if real estate wasn’t in our lives, I feel like it would be a shadow of the people that we could have been. Because real estate has stretched us to be more.

Jessilyn Persson: [00:10:23] I know we’ve shared this many times, but back in 2016, when you came home from work one day and said, you’re done, no more properties. I was like, no we’re not done. I signed you up for the real estate investment networking group, and I knew at the time you were upset. This is where it comes into that uncomfortability because I, as a partner, knew there was a bigger picture for us, but I didn’t really know how to communicate that. So I just signed you up to put you in a room with other people. While maybe you weren’t happy at the time, after that event and going forward with those events, it completely changed who you were around real estate, and it changed our whole real estate portfolio. Just the change that came out of that is immense. To imagine if I had not signed you up because I was scared, because I would upset you. It’s so big.

Brian Persson: [00:11:21] It is. That room definitely made me uncomfortable for the first bit, because here we are struggling with our real estate portfolio. I think at that time, we had just acquired our first high performing property. The first few properties before that, we didn’t know what we were doing, so they were okay. I’m not going to say they were anything great on real estate standards, but they weren’t high performing. Then I go into this room, where most of the people in the room already have high performing real estate portfolios, and I very much feel like the small fish in a big pond. What ended up happening was, the room became a magnet. All of a sudden, these people who have already done it, and they’re acting casually about it as if it’s no big deal, are pulling me along like a magnet. Because I could see that they were totally comfortable in their position, in their real estate, which was much larger than our real estate more often than not. It was like, there’s a way to not be stressed out and not be frustrated all the time about my real estate portfolio and have more. How do they do it? Then at that point it was just moving forward along with the stream.

Jessilyn Persson: [00:12:40] Not only did that room give you knowledge and insight to what’s possible in real estate, which helped you grow, but the people there who were supporting you helped you overcome the fears we had. With failing, with some of the current stuff we had, how we could change it, how we could shift our portfolio, which we did all in good time, of course. But fear, it can be really paralyzing. It can prevent you from, either moving forward or shifting something that isn’t really working in your favor, to something that is absolutely blossoming and can open up more doors for you.

Brian Persson: [00:13:19] Not knowing, it stalls a lot of people, and that’s basically where we were. Inside of this relationship, inside of this house, we were not able to know how to get to the next level of real estate. That’s where a group, or someone else, needed to be introduced to show what was beyond that. Until you see what’s beyond that, it can be very frightening to try and step over that ledge and not know what’s on the other side.

Jessilyn Persson: [00:13:46] Absolutely. To roll into our third takeaway for today is, what are you willing to do? You really want to be honest with yourself there as well. There are some things you’re just not willing to do as a person. In life in general, never mind real estate. We know that because we look at me and you, and we really had to get clear with our roles. Within a couple of months, we knew I was not meant to be the landlord, the property manager. It’s not that I wasn’t willing to do it. I would have, but it would have been a real stretch for me. Not stretched to learn it, but it would have really pulled on me emotionally and physically and mentally, because it’s not who I am and it’s not a comfortable space for me. But you stepped into it like a pro. You learned it, and you’re totally confident in your role and comfortable with it, which is amazing. If I kept trucking through, maybe I would have been great at it. But if you got a partner where the one does really succeed in one area or another, just own that and step into what you are comfortable with.

Brian Persson: [00:15:01] Don’t jump into it thinking that you’re going to conquer it. It’s January right now as we record this podcast, and I recently drove my son to a soccer game and ended up parking way further away than I normally would have. I thought for a second, why is this parking lot so full? I realized it’s January and everybody is trying to get their New Year’s resolutions going, so the gym is a lot more full than it normally would be. That is how a lot of people start real estate. It’s like, I want to get into real estate. I’m going to get into real estate. They get into real estate, and they lose all motivation for the real estate because they realize that it’s work, depending on how you do it. You got to carry it through. It’s not a short term thing, you are definitely carrying that real estate for a long time. So you got to make sure that if you sign up for the gym, you’re going to go to the gym for 12 months. Over and over again and not just give up on it after a few workout sessions.

Jessilyn Persson: [00:16:05] Do you want active versus a passive investment? Are you ready to manage those properties, or do you prefer to invest passively? Just ask yourself that, and be honest, and it’s okay. Whatever your answer is, it’s okay, you can be successful. But what’s not okay is if you’re like, I’m ready to manage properties, and inside you there’s this little voice or this little ‘knowing’ going, you really don’t like that, you don’t want to do that, but your ego is fighting it and you’re going to do it. You’re likely going to have losses later, because if you just give up on it and something goes sideways with your tenants or your property, you’re going to be angrier, it’s going to cost you more money. So just own it upfront and know, this isn’t my style. I’m going to invest passively.

Brian Persson: [00:16:45] You got to ask yourself, what am I willing to lose? Am I willing to lose money? Am I willing to put in all the extra time that’s required? If none of those answers are coming into a yes, then you definitely need to go to a passive investment.

Jessilyn Persson: [00:16:58] I like that you pointed out time, because time commitment is a big thing. The number one thing everyone wants when we’re speaking out in public and in networking rooms and with the people we work with in our coaching business, is they all want time freedom. Freedom to do what they want, when they want, how they want, whatever that looks like. You need to analyze your time. If you have a full time job, and your partner, and you have kids with extracurricular activities, if you also are running a business on the side, whatever that looks like. Then you’re gonna get into real estate, it’s like, really? Because you do need sleep.

Brian Persson: [00:17:35] What time do you have now to manage the real estate? Even some of the less active real estate portfolios, it still takes quite a bit of time. Our portfolio is dialed in quite tightly right now, hardly takes us any time. But there are times when my schedule has to be flexible enough that I can move things around. If, like you said, you have a full time job, you got kids, you got all these other things, it’s very hard to find that flexibility in that schedule. So you really want to consider that and look at passive investments.

Jessilyn Persson: [00:18:11] It’s not just time to manage your real estate, there’s time you need to dedicate to learning how to do it. What you’re doing, the rules, the laws, managing it, and then growing it. You don’t want it to just sit there. There is a larger time commitment, especially upfront if you’re starting real estate, than if you’re a seasoned investors like us where we, like you said, we have it dialed in, but time commitment is huge. If you don’t want to be putting in the time that it’s going to take to manage real estate from a brick and mortar perspective, then just own that upfront. Be clear with your partner so that you’re both on the same page when you do invest, if it’s brick and mortar versus passively.

Brian Persson: [00:18:55] If you do ever choose active investments, there’s a whole other conversation that has to happen inside of that. The number of types of different real estate asset classes that you can invest into is huge. You have to ask yourself, what am I willing to do? If I do have the time, if I’m willing to put in the energy, if I’m willing to put in all my skills towards it, what, inside of real estate itself, am I willing to invest into? Like we said earlier in the podcast, we like multifamily, we like suited properties because you have many doors to one property. If one door goes empty, there’s not a huge loss. If you are investing in commercial, then you have commercial tenants. Which can be great, but very often it’s hard to find a new commercial tenant when one goes vacant. You have to be comfortable with carrying the property for a long period of time, on the order of months and months, in order to find that new tenant. If you’re not comfortable carrying a big load over the course of a number of months until you can find the new right tenant, commercial is maybe not the right one for you.

Jessilyn Persson: [00:20:09] By big load, you mean financially.

Brian Persson: [00:20:11] Yeah, you’re going to have to pay that full mortgage if you have less tenants, or potentially no tenants depending on how you invested, to carry that load. Carry all the mortgage, carry the taxes, the property, everything like that.

Jessilyn Persson: [00:20:27] Just be honest with yourself when it comes to what you’re willing to commit to, even with skill development. If you are starting new, or wanting to take on a different way of doing real estate, assess what skill sets you currently have, you and your partner. What you can utilize and what you’re going to have to learn, whether you got to learn how to negotiate with your tenants or market research, property management. Maybe you’re wanting to be the general manager in terms of fixing your properties, whatever that looks like. Make sure you have the time. If you don’t have the skill set, make sure you have the time to learn the skill set if you plan on taking that on yourself.

Brian Persson: [00:21:06] We hope this episode helps you dial in what you’re looking for in real estate. Because like us, we had a little bit of ‘shiny object syndrome’. Maybe in the long run it was beneficial, but we spent a lot of time building skills in a lot of different asset classes that we probably are never going to invest into, actively anyway. We’ll invest into them passively, but our active skills are very honed in now, and we definitely could have upped our game quite a bit sooner, like a number of years sooner, if we had focused our skill learning and only went into the ones that we knew were the right asset classes for us.

Jessilyn Persson: [00:21:48] Not just the asset classes, but the work it requires. In the beginning we were both doing everything, which was not a good use of both of our times. We just didn’t know. Then also in the beginning, you were the one fixing things.

Brian Persson: [00:22:01] That was a bad idea.

Jessilyn Persson: [00:22:02] That was such a bad idea. We spent more money in the long run after you did it. Fixing that too, on a lot of things. Or you spent hours, or sometimes weekends, putting in new flooring or changing faucets. It’s like, really?

Brian Persson: [00:22:15] That was the main problem, I’m learning everything as I go. If I’m starting to lay floor for the first time, then I’m learning to lay floor as I’m laying the floor.

Jessilyn Persson: [00:22:27] You’re going to run into mistakes as a beginner.

Brian Persson: [00:22:29] I would like to say my quality was pretty high, but the problem was that I probably spent ten times more time than I should have to do that floor. I could have been out meeting with other investors, or even spending time with the kids and finding a way to make up for that $500 or $1000 difference that it would have been for my labor, and what ended up being several weekends.

Jessilyn Persson: [00:22:55] That’s why we really emphasize assessing each situation. Being like, do you really want to be laying floor for a weekend or two, or do you want to be with your kids and out finding investors? You just hire a handyman to come and do that job.

Brian Persson: [00:23:10] Calculate what an hour is worth for you. What’s an hour worth for you, your kids? Maybe you got a side hustle, can you make more money there? If that hour is worth way more than what you can pay somebody else to do that, which it usually is, then earn that money on the side. Spend the time with your kids, spend that hour in the appropriate manner and let someone else do the job.

Jessilyn Persson: [00:23:33] Exactly. All right, to recap today’s takeaways, the first one is to understand your goals. Second one, what makes you uncomfortable? Really dig in and own what makes you uncomfortable and be okay with that. The third one is, what are you willing to do, and what are you not willing to do? Make those lists so you know straight out the gate what it’s going to look like. In our next episode, we’ll be talking about the possibilities in real estate part two. This is where we’re going to discuss different real estate asset classes, leveraging real estate for lifestyle design, and understanding market dynamics. Thanks so much for tuning in to this episode of the Life by Design podcast.

Brian Persson: [00:24:15] Before you go, don’t forget to visit discoverlifebydesign.ca to book your discovery call and build your customized wealth strategy with us. We release new episodes every two weeks, so be sure to hit the subscribe button on your favorite podcast app and join us on this journey to create your life by design.

Jessilyn Persson: [00:24:33] Thanks again for listening, it’s been a pleasure being with you today. We’re Jessilyn and Brian and we’ll see you next time.