He’s not your typical, brainwashed, think inside the box fella. Slowly and surely, he has spent most of his late 20’s and very early 30’s making calculated bets in real estate. AKA, he's a "doer".
But it’s not where you think.
By joining with a few like-minded individuals and having learned a few lessons early on, he’s refined his approach and making monthly cash flow.
He’s done this all the while watching his real estate assets appreciate in a rising market.
His story/strategy shows that you don’t need $200,000, a massive mortgage and banking on hope in a crazed real estate market. In fact, his first house purchase cost him $24,000.
Make no mistake; this is not a get-rich quick scheme. He’s already paid his tuition to get through the school of hard knocks. And he's sharing his story so you don't have to pay as much as he did.
I've known Mike for a long time and he is a man who is of sound character, always eager to learn and always willing to share knowledge with others.
If you want to learn a ton, you'll need just 5 minutes.
Here’s our interview…
First off I would like to thank you for teaching everyone about things you won’t learn in school, its a very noble cause and I STRONGLY believe that everyone should be learning to take control of their finances. Also thank you for letting me share my story and hopefully your readers get a lot of value from it…
It was 2009 and I was working my blue collared job painting cars. Even though I was making a decent living, it was going to be a long and tough 45 more years of work. I came across an ad in the local newspaper about one of those weekend seminars on how to invest in real estate and it just seemed like it was written for me.
I signed up and it really opened my eyes to what was possible and the life that I could create for myself with real estate investing. I was now hooked! So I kept on educating myself with everything that I could get my hands on; books, audios, seminars, webinars and especially working with mentors who have already achieved what I want to.
TYWLIS – Why did you decide to get into US real estate when you live in the real estate mania haven, Vancouver?
So as part of my first investing course I had to research properties and see if it cash flowed positive. Meaning I had to take the income (from rent) that it would produce, then subtract the expenses: mortgage, taxes, insurance, repairs etc.
The problem that I had was that the prices in the lower mainland were just too high to have it positively cash flow unless you were to put down a massive down payment. When I took into account vacancies which WILL happen with any rental property I would then be haemorrhaging cash and would have to pay monthly just to own a rental that is supposed to be making me money. As Robert Kiyosaki asks: “Why would you invest in something that knowingly loses money each month!?”
TYWLIS – Why did you decide to engage into US real estate?
It was 2009 when I started and the big US real estate crash was all over the news and the Canadian dollar was at an all time high. It was a perfect scenario for Canadians to take advantage of the greatest US real estate sale of all time. In Vancouver to get $700 in rent I would need to find a property that would cost approximately $200,000. In the US I was looking at 3 bed 2 bath houses for only $20-30,000 that would gross the same rent! Basically I could buy 8 houses for the price of 1 in Vancouver and collect 8 times the rent.
I was (and still am) buying houses for huge discounts (between 40-70% of their pre-crash prices), so my investors and I are are going to be making huge returns when the real estate cycle comes back up, which it always does. With Vancouver being such a desirable place to live for people around the world, discounts on real estate like that are pretty much impossible to find. For those reasons it was just a no-brainer for me to look at the US.
TYWLIS – What made you choose Memphis?
So when it came to choosing a market to focus on, There were 3 main criteria that I needed to fulfill:
1) I wanted to make sure that it had a stable yet growing economy to ensure that I would be able to find quality tenants and that property values would rise due to demand. Memphis is the distribution hub of the US with the second largest cargo airport in the world. I believe that with more and more people buying online that the distribution industry will keep on growing. Fedex is based there and Nike is almost done building a 1.1 million square foot distribution centre, so the economy is steadily chugging along. In many other cities in the US you can find great deals, but if the economy in the area is terrible (Detroit) then you might have a very hard time finding quality tenants and end up with some major headaches.
2) It has a fantastic price to rent ratio! A $50,000 investment can net you over $400/month! Cashflow is king and Memphis is great for cash-flow.
3) Opportunity to buy below market value. Savvy real estate investors know that you make your money when you buy a property, NOT when you sell. Buy at the right price and you’re almost guaranteed to make a killing.
TYWLIS – What kind of cash flow comes with buying such a house in Memphis (rent, property taxes, fees, maintenance, profit)?
So after paying all of the expenses (taxes, insurance, management) we would expect to net between $300-$500 per month. That would be for a typical 3 bedroom and 2 bathroom house that costs between $30-$60,000 after renovations.
TYWLIS – How do you decide which property you want to purchase – i.e. what kind of criteria do you use?
The most important factor would definitely be the neighbourhood and the street it is on. It really doesn’t matter how nice your rental property is, if it’s in a rough part of town or on a street with a bunch of abandoned houses then you are going to have a very tough time finding quality tenants. If you have a great tenant, then everything will be smooth sailing but a bad tenant can really ruin your day as well as your investment.
Properties in great school districts will always sell for more, rent for more and just be much more desirable. I try to buy the ugly house on the nice street instead of buying the nice house on an ugly street. Other than I just keep emotions out of my decision and crunch the numbers. If the numbers work in a nice part of town, I move quickly. If the numbers don’t work, then I move on. Simple as that.
TYWLIS – A lot of people find this strategy very intimidating as it’s not very normal. What do you say to those people?
Where has doing what is “normal” gotten you so far? Has going to the bank and investing in a well balanced portfolio of mutual funds or GICs made you financially free? Do you know anyone who has struck it rich from their RRSPs? (If you do, please get them to call me because I have yet to find someone who has). When you lose 30% of your RRSP portfolio value every 7-10 years does the bank still take their cut, kicking you while you're down? Hell yes they do! Do you think that your investment portfolio advisor at your local bank is rich from their investments? Or do they just get a commission from selling to you?
I’m not trying to pick on investment advisors or banks, but the majority of society just goes with the flow, does what is “normal” and gives their money to the bank… but then ends up having to retire late or never retire at all! Even if they do retire, they will live in constant worry and dread that they will outlive their RRSPs, will be too old to work and have to rely on their family or the government to take care of them.
That is one of the reasons I love real estate so much, the cash flow is constant and will actually rise every few years. The property values will increase over time as well (try to find me a property that is worth less than it did 20 years ago). Since I have a family, I want to pass down to them a legacy of assets that will continue to increase in value and make them more money for the rest of their lives as well, instead of a depleted RRSP account. This hits close to home for me because I have older friends who never got to enjoy their retirement since the market tanked right after they retired and then had to go back to work in their late 60s.
In the next part, you'll find out how Mike went about raising capital, US Real Estate Agents and other juicy details too hot for TV in just one long part.
Courtesy of his LinkedIn profile:
Michael Japuncic is a real estate investor, president and CEO of Azure Investing, LLC and Azure Management Inc. He is based out of Vancouver, BC with offices in Las Vegas and Memphis. He started investing in US real estate in 2009 and has focused most of his efforts on single family houses in Memphis, Tennessee. He helps clients looking for a safer alternative to the stock market by investing in cash flowing properties with above average returns as well as US tax liens and deeds. His specialty is helping Canadians purchase investment properties in the US (the right way) in order to take advantage of tax laws as well as protecting themselves and their capital. You can contact him at firstname.lastname@example.org or check out his website at www.azureinvesting.com
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