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Growing Net Worth the Smart Way in Real Estate (Part 2 of 2) - Outside the Box With Michael Japuncic

4/11/2015

 
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Mike Japuncic, the 31 year old TYWLIS.ca addicted President of Azure Investing sat down with us and answered several questions about his goal of steadily building his net worth.

His method is almost entirely foreign to everyone around him. These people force their speculation on property investing in their own city, namely Vancouver and Toronto. Two of the most overpriced markets  to make steady cash-flow in all of Canada.

He is a doer.

He thinks outside the box.

The responses he shares should educate and seduce you like the five o'clock shadow does to a woman, or cleavage to a man. This is free advice from someone that walks the walk. You'll read more about real estate agents, getting investors and money engaged and mortgages.

Stick around, you just might learn something to show off to a colleague in the next 5 minutes.

TYWLIS – Can you talk about how you raised funds and form partnerships to invest?

I really have to give credit to my mentor Darren Weeks for this one, he is a “Rich Dad” advisor and author of “The Art Of Raising Capital”. He taught me how to create win-win-win scenarios with myself, my partners and my tenants. I help average people invest in real estate and enjoy all of the benefits of owning a great rental property without having to do any of the work involved in making it successful investment while. I truly believe that everybody should have buy and hold real estate in their investment portfolio, so I make it completely hands off for my partners. They can live their life doing whatever makes them happy and just enjoy the passive income rolling in. I provide my partners high returns with very minimal risk! The banks have brainwashed society into thinking that high returns=high risk but I’m telling you it does NOT have to be that way with real estate investing. I make sure that our risk is very minimal, even if our house burns to the ground we will make a huge return! 

TYWLIS – Do you fly down to visit your properties periodically? How are they managed and what is the cost to do so?

Yes I do, but not too often since it’s not really necessary. I can do everything remotely with the internet, phone, email and pictures from my team. Setting up a local team that I could trust wasn’t very easy, but now that I have everyone in place and they know what I expect of them, it all goes smoothly. My property managers are basically the glue that holds the team together down there. They do the inspections, hire the contractors, get the property rent-ready, advertise it and interview tenants (including criminal record check, income verification and credit check) and they don’t get paid unless the property is rented. For all the do they’re a bargain at 10% of the rent.

TYWLIS – Do you purchase through a US real estate agent?

I get some of my properties through real estate agents, but most of the time they are from auctions or from wholesalers (people who go and search out undervalued properties and then flip to investors). I rely on my realtors for property values, bidding for me at auctions when I cannot attend, making offers and writing contracts as well as giving me information about areas that I am unsure of. They are a very important part of my team.

TYWLIS – How does it work getting a US mortgage?

It isn’t always easy, but it is do-able. The trouble we run into is that traditional US banks cannot check our credit rating and are very inflexible when it comes to lending since the recession. There are a few Canadian banks that have US subsidiaries that will lend to Canadians looking to buy in the US but it varies on which states they will lend in, whether they lend for investment properties and other stipulations. There are private money lenders that will lend based on the performance of the property regardless of your personal credit. They will usually need a higher downpayment and their interest rates will typically be quite a bit higher than the posted rate.

TYWLIS – Are the taxes on rental income complicated to sort out with Revenue Canada and the IRS?

I wouldn’t recommend anyone trying to do their own taxes and filings in the US unless of course you’re an accountant. I have a great cross-border accountant that specializes in Canadians with US income. There are many different options for how Canadians can hold US property (in your own name, LLC, LP, C corp, land trust) and each will have certain advantages and disadvantages. Best thing would be to consult with a cross-border lawyer as well as a cross-border accountant for your personal situation.

TYWLIS – What is your goal with these property purchases – price appreciation, consistent stream of monthly income?

Definitely both of those, as well as buying below market value. I want to make sure that I am getting at least a 10% return from the cash flow and am buying the property at 20% or more below market value. I will never account for appreciation, that is just icing on the cake. I have close friends who were burned from buying a pre-sale condo in downtown Vancouver and were hoping that by the time it was done and the Olympics came that it would be worth even more… Well they were wrong, the market dipped and they were stuck owning a condo that they had to pay $500/month for until they sold it for a 5 figure loss! I just wish that I could have helped them before signing the contract. Remember that if you are just banking on appreciation, you are NOT investing, you’re speculating and that is a VERY dangerous game to play. THAT is when real estate gets risky!

TYWLIS – Any advice to people that only think local and in their own backyard?

At first, I was the same way and wanted to invest here. That way I can do the renovations myself, find my own tenants and be more hands on with every aspect of my investment. The problem with that is I would be doing tons of work and either losing money every month or barely scraping by! Each member of my team in Memphis does their job better and faster than I would if I were managing a property here. From the contractors to the property managers, they are all pros. If you were renting out a property or even your basement suite here, would you check their credit and do a criminal record check? Would you be able to serve them with an eviction notice and a $50 fee for being late with their rent payment? I would find it very tough to do ANY of those things so I leave it to the pros, they will do a better job than you or I. One of my mentors always said “Follow the money!” If you can find an investment property in your hometown that will put money in your pocket every month then great, go for it. But if not then you should seriously look at where others are making money and just do what they are doing.

Thanks for letting me talk a bit about my story and about my passion: investing in US real estate. If anyone has any questions about real estate, investing in the US or about Memphis I would be happy to help. Just email me at mike@azureinvesting.com


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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 michael@azureinvesting.com or www.azureinvesting.com

At TYWLIS we value the trust our readers put in the advice we provide, and endeavour to only endorse products that have been thoroughly vetted, rigorously tested, and exceed the quality standards we would use for ourselves or our interviewees. However, we strongly believe that you should always perform your own due diligence to evaluate whether such products or services are right for you before making a purchase.


 

B Riding
4/12/2015 06:12:12 am

The main questions that needs to be asked.

How much cash do you and your partners have invested at this current time?

How many partners do you have?

How much return after all expenses (tax, insurance, flights, accounting, website, employees etc.) do you see yearly?

And most importantly how many hours do you invest a year in this?

Then it makes sense if this is something I should be doing. Thanks

dirty foreign debtor
4/19/2015 06:57:29 pm

Agreed. Major hassles involved here. Unless you are doing this as a full time gig, and investing serious capital, why bother. So many variables a one or two asset strategy. Hit the markets with an advisor & diversified portfolio, and let the money do the work for you.

Better yet, earn dollars, spend pesos. Living a better quality of life here in Asia on $1200/month than I could in Vancouver for $6-8k. And talk about investment opportunity... These economies are growing at 6-9% a year.... From a business perspective, why not CHARGE dollars, PAY pesos...

Might be changing the name soon from dirty foreign debtor, to dirty foreign outsourcer....

MA link
4/20/2015 01:20:04 pm

Dirty Debtor,

Check out his website. You can choose the route that involves hassle (or effort as some people deem it) and get an equity stake.

Or you can go the passive route and earn 7-10% interest on a loan secured by a property.

This should be part of an overall strategy for most. For those who specialize and dedicate their life and spare time to it like Mike J. featured, perhaps it can be a major asset strategy.

Hard to argue positive cash flow and earning income in USD vs negative cash flow properties in most Canadian markets.

-MA

Mike Japuncic link
4/28/2015 12:16:51 pm

You're absolutely right, there is a lot to know, a lot to learn and a lot of hassles if you plan on buying US real estate all by yourself. Fortunately, there are lots of great real estate investors out there that do the same thing as a typical financial advisor; take your money, invest it and pay you a return.

I believe that true diversifying is investing in all 4 asset classes: paper assets, real estate, businesses and commodities. Doing what the masses do and investing all of your capital in stocks and mutual funds is very dangerous... Especially in a few years when the baby boomers (76 million of them) start turning 70.5 and are forced to start withdrawing their IRA or 401k

Don't funds crash when large groups of people sell?

Think about it.

Mike Japuncic link
4/28/2015 11:50:29 am

Hi B Riding,

I have 3 partners and we have around $300,000 invested in our Memphis properties as of right now. My returns have been between 8-14% each year including all expenses.

I invest quite a bit of time mainly because I enjoy all of the studying, searching for properties, number crunching, networking, team building and everything else involved in growing a real estate investing business... If you were to buy a turn-key property and were wondering how many hours a year you would need to run the property I would estimate only needing around 4-8 hours a year IF you have a decent team set up. The time would go towards an annual meeting with your accountant, insurance agent, signing and mailing a few cheques and then reading quarterly inspection reports... That is once you pick a market, then a property and get it up and running.

For anyone who wants to get involved with and enjoy the benefits of investing in US rental real estate without having to do any work, there are always real estate investing pros out there looking for funding to do deals and create win-win situations with cash investors.

dirty debtor
4/28/2015 11:54:03 pm

If you want to get into US real estate, you could invest in a US real estate indexed fund. Much safer and diversified.

We aren't living in ancient Rome. Today's markets are much more efficient in connecting capital than some street bazaar

B Riding
4/30/2015 07:49:01 am

MJ, sounds like you started at the right time. Our CDN dollar is at a low since 2008, and US real estate is gained back a lot of there losses since then.

My old boss bought a house in Maui for 258k US when our dollar was at 1.15. The house today is worth 580k US. He rents it out for 200 dollars US a day.

My moms friends bought a home in Arizona in 2010 for 150k now sitting at 325k.

I believe its timing, location, any home worth 30-75k to me is a gamble. Low rent, lots of work, small amounts of return.

In Detroit you can buy whole city blocks for 500 bucks.

Have you considered looking into commercial real estate?

I am a believer that residential real estate with anchor tenants is job.

I like your hustle, just not your business concept.

But thats what blogs are about. You put it out there and we tear it down!

Commercial property rentals 4 life!


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