Episode 26: Should I Optimize Deals For Cash Flow or Appreciation?

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Discover strategies for evolving your decision-making process, securing assets in high-interest rate environments, harnessing data to project future revenue, cultivating a wealth-building mindset, and finding the optimal mix of risk and returns. Join us as we share valuable insights to revolutionize your approach to real estate investing and propel your success. Listen now and unlock the secrets to achieving remarkable results in the real estate market.

What you’ll learn:

  • Evolving Decision Making: Adapting to Market Changes
    • Discover how to navigate changing market conditions with confidence.
    • Strategies for evolving your decision-making process to stay ahead of the game.
  • Asset Security: Thriving in High-Interest Rate Environments
    • Unlock the secrets to securing assets when interest rates are high.
  • Harnessing Data: Projecting Future Revenue with Confidence
    • Learn how past data can be leveraged to forecast future revenue.
    • Uncover the power of data-driven insights for strategic investment decisions.
  • Mindset Mastery: Building Wealth with a Creative Approach
    • Discover how to cultivate a mindset that unlocks creative wealth-building opportunities in real estate.
    • Strategies for leveraging your unique strengths and resources to maximize returns.
  • Retirement Planning: The Cash Flow Conundrum
    • Should you structure a deal with negative cash flow if retirement is your goal?
    • Gain insights into the factors to consider when aligning your investment strategy with long-term retirement plans



Interested in Partnership Opportunities?

For those interested in potential Joint Venture (JV) Partnerships, reach out to us here.

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00;00;00;09 - 00;00;24;19
Kyle Pearce
Sometimes not doing something is actually going to hurt you in the longer run when you try to find those best deals. However, on the other end, you don't want to just rush in to any old deal, of course, but you really want to be looking at things at a higher level and kind of zooming out a little bit, looking around and thinking, Am I better off, continue to wait for the next perfect deal, which may or may not ever come?

00;00;25;02 - 00;00;51;11
Kyle Pearce
Or maybe there are some deals that are here and just kind of hidden in the background. Is some of this massive benefit that we can have or achieve maybe over the next 1 to 5 years down the road?

00;00;52;05 - 00;00;56;27
Jon Orr
Welcome to the Investor Teach podcast with Cal Pierce, Matt Biggley and John all.

00;00;57;17 - 00;01;12;25
Kyle Pearce
Get ready to be taught as we share our successes and failures encountered during our real life lessons. Learning how to build generational wealth from the ground up. Welcome investor students to another episode of the Canadian Wealth Secrets podcast.

00;01;13;02 - 00;01;32;20
Jon Orr
All right, folks. All right, folks. We are back with another episode and we've got kind of a brain buster. I don't know, my mouth just starts to say words and sometimes I'm like, I don't even know where we're going to go. But anyway, we're talking about a big idea that we've been rattling around in our minds lately, especially with high interest rates within the market.

00;01;32;21 - 00;01;54;03
Jon Orr
We've had previous episodes that we've talked about, about our three silver bullets in real estate investing and how to grow your wealth. One of those silver bullets we've really hit home with you listener as the King cash flow is king. We've said when you were getting into real estate, we were looking for making sure that the deal cash flows puts money in your pocket.

00;01;54;15 - 00;02;14;14
Jon Orr
After all expenses are paid, after the mortgage is paid. And the all of those things are kind of account of where we are making money on a regular basis on this deal. Now, with higher interest rates lately in the market today, how this is flowing, it is harder and harder to find cash flowing deal. It's forced us to be more creative.

00;02;14;14 - 00;02;38;22
Jon Orr
It's forced us to think about the deals and what we really are looking for. And so today in this episode, we're going to share our thinking about finding and creating deals that may not be cash flowing yet and how to think about those. What kind of mindsets going into those deals for you. So that you can also take that analysis and start crafting deals that are going to work for you, even though they might not be cash flowing just yet?

00;02;39;02 - 00;02;55;03
Kyle Pearce
This is a, I think, such an interesting topic, John. I'm so glad we're talking about it today. And it really represents, I think, the maturation or evolution of our thinking as investors. And that's one of the things about real estate I love. It's so dynamic and it's always changing and so you have to be agile and nimble in the way you think about it.

00;02;55;03 - 00;03;14;28
Kyle Pearce
And you're so right. You talked about the three magic bullets, the three silver bullets, and those have been hard and fast rules of real estate investing. Until now, we've really had to reconsider the cash flow component of it. I mean, real estate prices have gone up. So so high. But oftentimes rents remain low for especially for tenants who have been in place for a long time.

00;03;14;28 - 00;03;40;08
Kyle Pearce
And that has the effect of really paralyzing people. I work through cash analyzers on investment properties with clients constantly, and we see those cash flow numbers are not coming up favorably. I mean, we've had to revisit cap rates, We've had to relook at the ways we buy prices. So do you just not invest and hope that prices are going to come down or fundamentally, we will never see prices come down year over year over any kind of great length of time.

00;03;40;08 - 00;04;00;13
Kyle Pearce
And so we need to reanalyze and come at this from a different angle. And that's where I think we've got some cool concepts to share in this episode and some ways to apply this. I love it. I love it. And I think something in this state openly that I've been sort of our most conservative is maybe one way to frame it.

00;04;00;13 - 00;04;19;26
Kyle Pearce
And we framed it that way before. But also, again, I think it actually beyond conservative, more than conservative, is almost like trying to be the best find that best deal. So that's sort of he said I've had to try to get over and that the bottom line for me, I looked at the best deal as being so all the numbers were amazing, right?

00;04;19;26 - 00;04;45;03
Kyle Pearce
And of course, other factors were in there, the building or the property, the location and maybe other aspects of the deal. But for me, the bottom line was simply the numbers are the numbers that much better than everything else. And I hyper focused on that. And we've sort of learned over time that actually if you focus with that mindset, which we did in the early years and in particular Matt and I, we focused on doing just that.

00;04;45;12 - 00;05;14;29
Kyle Pearce
We won on the deals we did. But I'm just wondering about what about all the other deals that could have been amazing singles that I discounted, right? Because maybe right now in this moment, the numbers weren't as awesome or optimal as, say, the last deal we did. Right? So if you're always comparing one deal to the next deal, instead of looking at the deal for what it is, I wonder where might we be now, given especially these past few years has been ridiculous, right?

00;05;15;00 - 00;05;36;15
Kyle Pearce
We obviously could have looked back and said, Hey, we lucked out massively because we bought every deal we possibly could. That might not be the best approach, but I imagine that there was a number of deals and some of the ones that we see listings come back up on the market. And Matt, being a realtor, is able to go and look at what did they end up selling for back in 2018 when we were looking at them.

00;05;36;15 - 00;05;51;19
Kyle Pearce
And I saw it, it wasn't a good enough deal. And what are they asking for now? And you're going like, Oh my gosh, how silly is that? And then I look at our cash flow spreadsheets from back then and I'm like, at that time they were still even cash flowing, but it was like not enough for me, right?

00;05;51;19 - 00;06;23;22
Kyle Pearce
So in reality, you really have to look at the situation and you have to really be strategic in terms of sometimes not doing something is actually going to hurt you in the longer run when you try to find those best deals. However, on the other end, you don't want to just rushing to any annual deal, of course, but you really want to be looking at things at a higher level and kind of zooming out a little bit, looking around and thinking, am I better off continuing to wait for the next perfect deal, which may or may not ever come?

00;06;24;04 - 00;06;36;24
Kyle Pearce
Or maybe there's some deals that are here and just kind of hidden in the background is some of this massive benefit that we can have or achieve maybe over the next 1 to 5 years down the road.

00;06;36;29 - 00;07;05;19
Jon Orr
Yeah, that's a great way to think about adjusting your mindset about the best deal and home runs versus grabbing some singles along the way. And I think when we think about what we've been preaching here on the podcast and this has been your strategy, this is the way you guys taught me that strategy on real estate, investing on thinking about let's take our initial kind of seed money, our initial investment money, and if we put it into a property maybe in five years we've talked about it makes you sure in cash flow.

00;07;05;19 - 00;07;29;25
Jon Orr
So almost like your initial money went in, it was spitting you cash flow back and eventually that you refinanced that property and it appreciated that you guys had shared some examples like that. And then all of a sudden, right after refinancing, the numbers still work out where it's cash flowing and you pulled that money back and it's almost like we've given this impression that once that initial capital investment comes back, you can go do that with another property.

00;07;29;25 - 00;07;55;24
Jon Orr
So it's almost like now we have that property and that is operating in cash flowing. We have no dollars of our own money in there. We own it and it's spitting money back. We're building our wealth. That is the strategy we've been talking about here on this podcast. But if we think about it, guys, if that's the strategy, we're not at any time really contributing any dollars on a regular basis of our own money into these investments.

00;07;55;29 - 00;08;24;12
Jon Orr
We've taken this money and now we're going to do that again. And all of a sudden we're building this machine, which is an amazing thing if we can accomplish that. But if we think of other folks who are investing, people who are investing in their RRSPs and their 401 KS and their pensions or in their tax free savings account, all these different investment vehicles, most people are contributing a regular monthly amount, or maybe it's a quarterly amount, or maybe it's an annual amount into these vehicles out of their pocket.

00;08;24;12 - 00;08;46;20
Jon Orr
So it's kind of like they have a negative cash flow situation on their investment. They're taking, say, $500 a month, 300, maybe it's $100 a month and putting it into the RRSP and that is building their wealth. They're investing by taking money out of their pocket. Now, if you compare that to what we've been doing, we have been doing that because we have been taking money out of our pocket.

00;08;47;01 - 00;09;10;22
Jon Orr
We've never had this negative cash flow. We're trying to put money in our pocket, but as a mindset kind of thing about these investments that are for future wealth bill just like an RRSP would be, or just like maybe you're using your tax free savings account, investing in the index funds through that vehicle. Those people have the mindset that I'm going to use this money out of my pocket and contribute and eventually it will grow.

00;09;10;26 - 00;09;33;04
Jon Orr
That's that appreciation. And maybe sometimes I get a kick back with the dividend, which is cash flow. We have an episode that compares those vehicles in the same way, but if we think of that same mindset, if we have a negative cash flow property, let's say the property is cash flowing at, let's say a couple hundred dollars a month negative on that property, it's the same mindset you can use.

00;09;33;04 - 00;09;53;14
Jon Orr
The same mindset is that, wait, could I afford to pay $200 a month into this property that which will eventually grow in value because the appreciation the mortgage is getting paid down? I'm building my equity. We've been talking about only getting into deals where we cash flow, but a negative cash flow is the same as contributing to your future wealth.

00;09;53;24 - 00;10;15;15
Jon Orr
And if you can manage that with your budget or with your finances or your other existing portfolios, then it might be worth it in the long run. But we got to think about what that long run looks like. We got to think about what we're really after. Can we afford those things? But I think that helps with the mindset shift here in moving away from always making sure we're cash flowing.

00;10;15;29 - 00;10;39;01
Kyle Pearce
That's an incredible comparison, John, to some other investment asset classes that are so common. And you're right, it's all about that time horizon. So I think I love what you've said here. If we can borrow that sort of thinking and apply it to real estate, it really would open our mind up. And Kyle alluded to it. We've missed out on all kinds of opportunities because we were so stuck on this cash flow as being king.

00;10;39;01 - 00;11;01;06
Kyle Pearce
And let's look at other markets. We have investors coming to places like Windsor and going to Sudbury looking for cash flow because in the GTA, the only play there is largely appreciation. So really no one is able to cash flow in the GTA. The thing though is I think here it's not as though we're never going to cash flow, but the new question to ask yourself is will it eventually cash flow over time?

00;11;01;06 - 00;11;19;23
Kyle Pearce
Could it cash flow? So where is in a market like Toronto, you're unlikely to be ever cash flow and you're just banking on appreciation here in the here and now. A property may not be cash flow because tenants have been in place a long time. The landlord hasn't responsibly raised rents over time as they should have to keep up with that.

00;11;19;23 - 00;11;38;28
Kyle Pearce
So maybe current market rents or current rents are low, but will market rents allow to cash flow? Real estate has a funny way of almost always feeling like you're paying too much in the moment. I've done this with every property and every bob being an investment or personal residence. I was on the phone to clients this morning saying, You're going to feel in the moment like you have overpaid.

00;11;38;28 - 00;12;05;14
Kyle Pearce
But here's this funny phenomena. There should be some kind of neighbor where in the course of two, three, five years, you look back and you feel like a real estate hero, the Warren Buffett of real estate. You've made such great decisions because the trajectory of property values over time is always relentlessly up and up and up. So this new question to ask yourself is, will it eventually cash flow?

00;12;05;19 - 00;12;34;22
Kyle Pearce
Could it eventually cash flow even if it doesn't on day one? I love that this ideas we're not suggesting that we ignore cash flow and then go all towards appreciation that, hey, appreciation is going to save us. Oftentimes that bonus that cherry does have a massive impact and does help over time. But in reality it's about looking at the short to mid-term or medium term to try to figure out is, is this thing going to work out?

00;12;34;22 - 00;12;57;13
Kyle Pearce
Well, we're not saying not to have a contingency plan, right, because if things don't work out so well, if we have maybe a dip for a couple of years in the real estate market. Are you so strapped for cash because you entered into this deal that you were sort of like, Well, by year three, I better not be negative cash flow anymore because this has been really difficult for me to manage or handle.

00;12;57;13 - 00;13;19;08
Kyle Pearce
That's obviously not what we're saying here. But if you really think about this, one thing that I sometimes wonder about is that we have some friends. We've been on the phone with lot of people who have said they're approaching retirement or will say, releasing themself from their regular day job, those golden handcuff jobs, and then maybe doing some other fun or interesting projects in life.

00;13;19;23 - 00;13;40;25
Kyle Pearce
And they want to turn to real estate as a way to almost had their income. What you find right now is that if that is you if you're listening, you're going like I'm retiring next year, This could be problematic unless you have a significant amount of cash to put into the deal up front. Right. So what I mean by that is that now your mortgage is actually lower.

00;13;40;25 - 00;14;04;14
Kyle Pearce
You've taken some of your nest egg and you've committed it to this asset class because you believe in the asset class and you're looking to receive some cash flow back instead of it getting sent towards interest payments to a bank. Totally cool. So really, if you're now going, wait, I'm five, six, seven, maybe ten years out from retirement, there is still time for you to be able to look at a property.

00;14;04;14 - 00;14;27;17
Kyle Pearce
And I'm going to use an example. There was someone from the GTA who reached out to us, said in five years they want to retire. That's their goal. That's their plan. They could look at a deal that is negatively cash flowing now. So given that they've already been saving up a down payment for this property, so they've been doing this every month, they've been putting, we'll use John's example, $500 instead of putting it into the stock market.

00;14;27;28 - 00;15;11;29
Kyle Pearce
They've been putting it into their seed fund for investing. So 500 bucks a month, they go into a deal now with what they have as a down payment and they continue to put $500 each month into maintaining or floating this particular property because market rents are low on that property. They are going to have some principal pay down over those five years and they anticipate that in five years time that will be a situation where the cash flow from the increased rents with call it two or 3% increase in rents just each year is actually going to put them in a position where now they're putting money into their pocket that can work out really

00;15;11;29 - 00;15;29;02
Kyle Pearce
favorably. Now one thing that I'm going to guess is that in five years from now, if they go, well, I want to do this strategy, but right now we're not cash flowing, so I'm going to wait until I retire for five years and then suddenly it's going to be a better situation. Well, now the asset price is probably going to be higher.

00;15;29;02 - 00;15;52;11
Kyle Pearce
So are you further ahead? And I think what I'm realizing through this entire discussion and you hear it all the time, it doesn't matter if you're talking about stock investing, real estate investing or investing in whatever asset class you choose. The message is always starting. Yesterday is the best opportunity and the next best time is today. But if you do wait, you're now kind of playing with fire.

00;15;52;11 - 00;16;18;11
Kyle Pearce
You're kind of looking at it going like, Yeah, I think the market's going to maybe dip in the next 12, 18 months. Maybe it will, maybe it won't. But like Matt said, if it does dip in the next 12 to 18 months, am I able to float this property and does that affect whether rents will increase or that I can bring the market rents up on that property because really, that's all that should matter to you if you're looking at this as a long term play.

00;16;18;20 - 00;16;48;28
Kyle Pearce
If that's going to scare you off, then I would argue that you're being too speculative and you're focusing too heavily on the actual appreciation, which to us is always just a bonus. It would be fantastic if in five years market rents are up your cash flowing and the appreciation has come back so high that you're able to refinance and pull money out in order to put it into another asset, maybe that will happen, but we don't want to plan for that necessarily happening, right?

00;16;48;28 - 00;17;10;15
Kyle Pearce
We don't want to put all our eggs in that basket. What we want to make sure is, am I still happy or able to contribute towards that negative cash flow until we get rents to where they should be, which is at this number that we're calculating using the data now as well as our projected data over the next one, two, three or five years.

00;17;10;24 - 00;17;37;28
Kyle Pearce
One of the applied is now guys. And I think, Kyle, you and I recently picked up the Gordon nine plex, which was a deal that probably old Matt and Kyle wouldn't have necessarily bought. And we got really creative with that one. And I think that that's helped us grow into this new thinking. And John Kyle, before we got on air today, you guys were discussing a building that again, at first blush wouldn't be a deal that we would have pursued or dug that deeply into.

00;17;38;05 - 00;18;05;20
Kyle Pearce
And you guys were sharing some of your discussions and thoughts around maybe how to approach it in a way that aligns with this new thinking and could end up having this longer term perspective applying that would lead to a potentially a big win. So why don't we apply kind of this new thinking to this potential property that you guys have been digging into so we can see what it looks like, it sounds like for investors asking themselves and if properties are viable ones that they're looking at currently.

00;18;05;20 - 00;18;28;29
Jon Orr
Yeah, I think that's a great idea. And just to give some background here, we had recently seen a larger multifamily commercial type building more than ten units and we were trying to play with the numbers because at first glance, the price point they reported our stated revenue and the expenses and thinking to considering all the elements that go into kind of our analysis didn't make this property cash flow.

00;18;28;29 - 00;18;51;09
Jon Orr
It actually using mortgage rates at current rates and all the other factors. This property was not cash flowing or we like to and we've done examples where we played with different things we've talked about, Yeah, good deals aren't found. They're made. So we like to be creative. So we're playing around this some numbers and we had a tough time even just making this thing cash flow while being creative.

00;18;51;09 - 00;19;12;27
Jon Orr
And then it led to us thinking about some questions we wanted to know the answers to because this was a negative cash flowing situation, but it was large. It was a pretty good multifamily building and we're thinking about that future. What does it look like five years from now? Six years? So one question, Kyle, I remember I asking you is I would really like they're saying what their current revenue is.

00;19;12;27 - 00;19;47;18
Jon Orr
And so when you kind of ballpark their current revenue, I think rent was going on average for all of their units, like $1,000 a month. But that's not exactly what current market rents were for this particular area. So what I needed to know and this is the a thought about my analysis is that would it be okay for us to negative cash flow for now in this deal knowing that we could use some data to kind of extrapolate and look to the future to go what would be our cash flow in, say, 3 to 4 or five years from now?

00;19;47;25 - 00;20;10;05
Jon Orr
And could we maintain that negative cash flow so that eventually our projections are predicting that we have positive cash flow? And if that's the case, that would be amazing. So a question I wanted to know a few things was what is the capacity of that growth in changeover for getting market rent? How many units currently are going for market rent in that average?

00;20;10;05 - 00;20;28;25
Jon Orr
How many are below? How many are maybe even above? I'd like to know if a lot of them were higher as close to market rent as possible, then that kind of feels like it's capping our upside. It's like we're already there, we're out or ceiling. I'm not sure how much higher we can go. We can hope to kind of gain this the appreciation on rents only if we have high turnover, right?

00;20;28;25 - 00;20;59;03
Jon Orr
Only if some of these renters are kind of leaving and we can turn those units over. And so that led to another question, right, Kyle, as well. What in the past has been a data point that we could use to help predict the future? How many times in a five year period were renters leaving that property and new renters coming in because we could use that to help predict that change over that turnover rate could help us predict how much income we could potentially have five years from now.

00;20;59;03 - 00;21;11;28
Jon Orr
And if that's the case, if that all of a sudden changes the numbers when we project five years from now and it's cash flowing then and we can manage the negative cash flow up to that point, I think that could change things around in this particular scenario.

00;21;12;07 - 00;21;28;08
Kyle Pearce
I love it. I love it. In particular, you were saying and you nailed it. It was about $1,000 on average per month per unit in this building. And when we looked at that and we looked at market rents, there were some two bedrooms and one bedrooms. So there's a little bit of variance there, but we could wait it off.

00;21;28;08 - 00;21;53;24
Kyle Pearce
It's eight of this and 12 of that or whatever it is. You wait it all. And we kind of landed on this idea that there's about we would save $300 of and I would say conservatively meat on the bone there of market rents that's not being utilized in that building yet. So that's like a bonus. Now, of course, we don't want to run into a deal and just put all the money, all the eggs on the table and go from there.

00;21;53;24 - 00;22;23;25
Kyle Pearce
But when we use that for a calculation that allows us a little bit of flexibility in terms of like so how much or how negative could the cash flow flow be where this deal still feels like a good deal with enough upside? Now, I would argue that we're looking at this thinking to ourselves, okay, if I'm walk into this deal and I don't have enough to put down on the deal, right, or we don't have a JV partner that is willing or interested in doing this type of deal, then it's a debt issue at all.

00;22;24;04 - 00;22;46;05
Kyle Pearce
However, we're looking at this going, Hey, we've got money on the sidelines, we appreciate real estate. And ultimately at the end of the day, when we look back to our own data, we could pull even just from our own rentals and decide, hey, it takes X number of months or years for a unit to turn over typically. Okay, so when will we see the first turn over?

00;22;46;05 - 00;23;03;08
Kyle Pearce
Likely and we can use that projection. The other piece that's great about this particular property is if we get this number, we get this purchase price to a place that's a little lower, right? Because of course people are putting in a number and they're anticipating or they're hoping that people will sort of like say, yes, I'll take it for that price.

00;23;03;14 - 00;23;29;20
Kyle Pearce
We can get that number lower and then play with those details. And then even if a quarter of the units go to market rent right over the next year, what does that look like? Right. And then you can project all the way out over five years and say, given the data that John just shared, if this rate of turnover means that all the units that are underperforming will turn over in those five years, here's where we're going to be at the end of five years.

00;23;29;28 - 00;23;53;20
Kyle Pearce
Then we can also even look at just where we might be from a conservative appreciation standpoint, as well as just in general where we're at with principal paydown. So how much more of this building do we own at the end of five years? And then we're also going to cash flow at this amount in five years. Now the question just becomes, first of all, how much do we like the building?

00;23;53;20 - 00;24;16;29
Kyle Pearce
We actually do like the building. It's very nice. How much do we like the location and can I wait that long? Am I able to wait that long for this work to happen? And if not, that is really your hinge point as to whether maybe this deal is worth continuing to kick the tires or maybe this isn't a deal that we want to try to kick the tires.

00;24;16;29 - 00;24;40;23
Kyle Pearce
Both you John, said yourself every single deal. It's not that we go and find the deal and it just always works out. It's really about being creative about it, looking at it in a different way, and then just making sure that you don't flip flop on the reasons why you do something. So if we decided to make an offer on this building and we decided to go in because of these three things, we need to stick to those reasons.

00;24;40;23 - 00;25;01;26
Kyle Pearce
We can't flip flop around and then start changing our strategy with that particular building. We've got to stick to it and see it through. And of course, one of the options we always have is sometimes selling makes sense and that doesn't matter what the original strategy was. If there's a profit to be made, it might make sense to sell the building and move elsewhere.

00;25;02;05 - 00;25;33;03
Kyle Pearce
However, at the end of the day, if it's not cash flowing now and we're anticipating it's going to cash flow later, what's our end goal here? Are we happy? Is this going to be a long term play to continue for that cash flow or is it, hey, let's get it up to market rents and then the value of the buildings going to go up by this amount based on the income approach and therefore we can then exit out of that building and pass it on to another investor who wants to take on that building and probably have to do the same thing over the next five, seven, eight years.

00;25;33;09 - 00;25;49;01
Kyle Pearce
I thoughts and agree walk through through that particular scenario and that property that we're considering here. I think my big takeaway from this episode is just this new mindset that we've introduced this new way of thinking. I mean, guys, if we're going to continue to be active real estate investors, we need to evolve as the market has evolved.

00;25;49;08 - 00;26;12;26
Kyle Pearce
And of course we're going to continue looking for cash selling properties. That is our preference always and always. But to avoid that paralysis and to avoid that stagnation of not moving forward and not purchasing properties, this new mindset gives us some other perspectives from which to analyze and plan and think around future property acquisition. So I love this.

00;26;12;26 - 00;26;15;07
Kyle Pearce
This has been really eye opening in my opening.

00;26;15;16 - 00;26;45;16
Jon Orr
Yeah, and I think just thinking about the process that we've been using to think this way because we had to evolve, has I think, strengthened our skills to analyze properties and make deals and create deals. But in just discussing this with you two, we came to realize that we're using key results and objectives in our other businesses to kind of monitor where we want to be in the future and how do we want to see revenue growth and how do we want to make sure that we're managing hitting the goals that we set yet?

00;26;45;20 - 00;27;07;29
Jon Orr
Maybe we haven't always done that in our real estate side of things. I think kind of thinking at each property and each deal in having these kind of goals to hit in this five year goal on this particular property could be this great thing to work towards and having that kind of back up plan. If it doesn't hit there, then what are we going to do is obviously needed in any deal you make.

00;27;08;07 - 00;27;33;29
Jon Orr
But I think kind of stating what our objective is for this deal and what are our key results, how do we know that this worked out the way we anticipated? That forces us to think long term and think about what we want now and think about what's going to happen this time along the way to make that get to where we predicted and using data to fuel that decision making process I think is a big takeaway that I think we'll make sure that we're doing for every deal we make next time.

00;27;34;12 - 00;27;57;01
Kyle Pearce
I love it. For me, I think the big takeaway is really taking a good hard look at yourself. And I'm saying this because I don't think I did enough of this early on in the process to decide where are you in the journey? And when I think back and I look back to when I started, really, I was thinking about cash flow to make sure that I could float the deal.

00;27;57;04 - 00;28;21;07
Kyle Pearce
That was my biggest thing. I want to make sure I could float the deal, which is my hyper focus. But in reality, who I was as an investor at that time was someone early in my career, and I didn't have any plans of retiring any time soon. So my hyper focus should have been about locking up and securing assets that will grow over time and someone else is paying for that growth, right?

00;28;21;07 - 00;28;41;05
Kyle Pearce
So someone else is helping me to fund this asset and when I get closer to retirement is when I start shifting my thinking towards how much cash flow is actually going into my pocket. Now, for some people, their goal is cash flow right away. They want this to be their job. They want it to be their career. Amazing.

00;28;41;11 - 00;29;13;11
Kyle Pearce
I'm guessing that's not the people listening to this show, right? We have most of these people who are white collar or maybe in careers where they want to get in. They want more than what they currently have. However, there is no urgency for them to earn additional income. Now, start thinking about this and go, wait a second, I want to position myself so that when I get closer to retirement or I am ready to call the idea of retirement a reality for myself, I'm not getting up and going to work and earning a paycheck on a regular basis.

00;29;13;21 - 00;29;49;21
Kyle Pearce
That's when we start shifting our thinking, and that might mean reallocating some of your portfolio. If you have some properties that still have a mortgage, that might be the time where you unload a property to pay down a different mortgage over here. So now this thing is cash flowing to support your lifestyle. So I know for us we are less concerned about cash flow now because we're just thinking about how do we set ourselves up to be in a position where we get to retirement, when we get to that place where we're like, I just want to make sure that there's money coming in, that we have enough assets in place that we can restructure

00;29;49;21 - 00;30;14;27
Kyle Pearce
those assets in a way that will start to spit off the cash and actually utilize the cash. We're just in growth mode right now. Right. We just want to make sure that we're positioning ourselves so that our net worth rises to a point where when we require cash flow, because we don't require our cash flow at this time, we don't need cash in our pocket, It's actually better for us to be putting this into these assets.

00;30;15;03 - 00;30;47;25
Kyle Pearce
And that's something that I don't think I really thought about. I wanted it all. I wanted growth and I wanted cash flow and I wanted it all and that was it. But if you really figure out who you are as an investor, that's going to help you determine which deal you want to get into and which one you don't, if you're in the middle of your career, I'm going to say cash flow is less important to you and you want to start thinking about will this building continue to produce for five, ten, 15, 20, 30 years into the future so that when that becomes a reality for me, I'm ready to go.

00;30;48;02 - 00;31;09;20
Kyle Pearce
You're ready to retire now? Maybe less buildings is better for you, less leverage is better for you so that you can cash flow more quickly and start using that cash flow to support your lifestyle. We are so, so appreciative and grateful for you having spent this time learning from us and alongside us and with us. Thank you so much for your listening today.

00;31;10;02 - 00;31;29;07
Kyle Pearce
We'd love it if you would leave us a five star rating and review. We'd love it even more if you would share this podcast with your friends and family so they can learn alongside you. Make sure you hit. Subscribe on all social media platforms, Share it with your friends. We are at Canadian Wealth Secrets on YouTube, Twitter, Instagram, Facebook and Tik-tok.

00;31;29;16 - 00;31;48;26
Jon Orr
All links and resources and the complete transcript from this episode can be found over on our website. Invest in Teacher TerraCom. I specifically head to investor Twitter.com for episode 26 to get all of those things and any of the links and resources we've set here. So a message Teacher dot com for episode two six.

00;31;49;11 - 00;32;09;09
Kyle Pearce
My friends over on the Canadian Wealth Secrets dot com website. We've got a couple of goodies for you ones a blueprint to get you started on that journey or to just help you rethink your journey. Maybe you've been on that journey and you just don't feel like you're making the progress that you really want or need. Head over to invest in teacher dot com forward slash blueprint.

00;32;09;09 - 00;32;30;12
Kyle Pearce
And you'll also notice we have a book list. It's like the Ultimate Investing book list and it goes all over the map from real estate to stocks and options. And it even talks about some of the tools like infinite banking, head over to Canadian Wealth Secrets dot com forward slash books and go check it out when you have a moment.

00;32;30;21 - 00;32;47;28
Kyle Pearce
All right. Investors students class dismissed.

00;32;47;28 - 00;33;02;08
Jon Orr
This is a reminder, folks the content you heard here today is for informational purposes only. You should not construe any such information or other material as legal tax, investment, financial or other advice.

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