Imagine being recently divorced with young kids, $40k to your name, and choosing tuition for a real estate seminar over a downpayment or security. This is the foundation of Epic Alliance and – believe us – it paid off! Rochelle Laflamme and Alisa Thompson sit down with Adam & Matt to chart their path from seminar to controlling $60,000,000 in six short years. Not only do they outline a number of exciting cash flow opportunities for real estate investors but also discuss finding deals, biggest mistakes, and the secrets to their success. This is an absolute must-listen episode. Trust us, it’s EPIC. Level up!
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Please tell us a little about yourselves.
A: Rochelle and I are serial entrepreneurs. We’ve built an epic empire!
You’re based out of Saskatoon. Can you tell us how Epic Alliance started?
A: Rochelle and I met in prison. Yes, really! We’re both electricians and we were taking our courses at the same time. An instructor came around and asked for volunteers to go to a women’s prison and speak about career opportunities. We both volunteered and met at the prison. After our presentation, we went for coffee and started talking.
Rochelle made the mistake of letting me know she was working on a project to build a one bedroom basement suite in her property. But she was completing her education and also working full time. I eventually wore her down and convinced her to let me help with the project. In 30 days we renovated the suite and got it rented. And it was during a heatwave in Saskatchewan!
From there, we started working on some new ideas. Rochelle had lots of great ideas for us to jump into real estate. After my divorce, I had a small settlement and had to decide if I wanted to continue with my crappy job or pay for classes and see where it led us. We learned about residential real estate investing, taking eight classes in 10 months, and then started our first flip. And the rest is history!
What attracted you to real estate?
R: I bought my first house when I was 20. I’ve always loved money and numbers. You only know what you know. My mom was a teacher but not entrepreneurial at all. But I was always curious about how to make money and was always working. At 20, I decided I would rather pay rent to my mom then pay someone else’s mortgage. I found a cute 5-bedroom house for $100,000 and my mom co-signed with me. I was very blessed to have a small price point for entry and to have my mom’s help. I lived in one bedroom and rented out the other four. That allowed me to live for free for a long time.
I ended up selling that house for $300,000 in 2008/2009 and bought a smaller house, where I wanted to build that basement suite Alisa mentioned. I owned that house for 8 months before I met Alisa. I was working way too many hours to have time to fix up the suite and that’s where Alisa came in. The goal has always been buying back my time and gaining financial freedom.
What does Epic Alliance do? How did you get from where you started to where you are now?
A: Once we took the real estate courses, we knew this was our calling. We started with our first flip, using a technique that was taught to us in our courses. We did 75-80% of the work ourselves and totally gutted the place. But the market was shifting in Saskatoon and it was no longer a flipping market. It was also a lot of work to do all of the flipping ourselves. So we knew we had to change but we didn’t know what it would look like.
I ended up meeting a landlord through a series of connections who wanted to downsize his portfolio package. At one time, this man and his wife had over 200 houses. We were very impressed by them! So we decided we wanted to buy a package of properties from them. But unfortunately, we weren’t finding any buyers.
R: It was crazy that we weren’t finding buyers as 75% of the properties in the package hit the 1% rule. That means the rent is 1% of the purchase price which will cover the mortgage, property taxes and it will cash flow.
A: We kept hearing from potential buyers that they didn’t want to deal with tenants or other problems. So we brainstormed solutions and eventually developed the Hassle-free Landlord Program. Basically, an investor purchases a renovated property we have and our company becomes their tenant. We then sub-lease it and we take control of the tenants, repairs, maintenance, etc. as the landlord sits back and collects the rental income.
Walk us through the Hassle-free Landlord Program.
R?: We currently have about 50 properties available that are $100,000 and up. The investor needs to put the 20% down cash, qualify for the mortgage, and pay the closing costs.
The investment is customized to our landlords. Most people in our program want cash flow. So for example with a $200,000 property, you need $40,000 down and about $3000 for closing costs. We don’t have land transfer taxes in Saskatchewan. 15% annual rate of return is what the client makes and they choose how they want that returned. So they would be making $538 per month in profit. The investor gets paid first and then we get what’s left.
You have to own the property for two years and you can renew in two year increments. We become the rent-to-own tenants. If after two years the investor wants to exit, they can choose to sell the property back to us for the price that they bought it. There’s only about 1% appreciation in Saskatchewan every year. We’re in a situation where we have high cash flow and low appreciation; this can help balance out someone’s portfolio if they have property, like in Vancouver, that is high appreciation and low cash flow.
A: So the options are 1) renew for another two years, 2) sell the property back to us, or 3) buy us out of the contract and sell it on the market. You receive a report card before your two years are up to see all of the numbers and make the best decision.
R: We’ve been doing this program for four years and 95% of our clients renew. And many come back and keep buying houses with us. Lots of people hear this and think it’s a scam. But we’re all winning. We go into partnership with our clients – they need us and we need them. We now have 45 employees and that wouldn’t be possible without our partners. And we also have tenants who we are providing opportunities for.
What about maintenance?
R: It’s covered! Maintenance is part of the program and included. We renovate all of our properties. Which leads into our Fund a Flip program.
We’re just finishing up a campaign we did to do 30 deals in 30 days; we usually average 10-20 deals per month. Our investors totally stepped up and we actually ended up closing 31. Fund a Flip is where we buy properties to renovate with our Fund a Flip investors. Once they’re in a cash flowing position, we get it re-appraised and that’s how we create inventory for our Hassle-free Landlord Program.
For people who don’t understand the market in Saskatoon, can you tell us about where you’re working?
A: We have houses all over Saskatoon. Saskatoon is about 320,000 people. It’s a stable, good-sized city. Most of our properties are in the core, called the hood, but it’s not to the same scale as neighbourhoods in Vancouver or Toronto. There are some low-income families who we get to provide tenant opportunities to.
If you’re a true investor, the goal is controlling the dirt. The house is the by-product. It’s amazing to look at how we can control the area just 10 blocks from downtown by our presence.
We have all different types of properties and in all neighbourhoods. The system and team members we have in place work.
What are potential risks for investors?
R: In theory, if something were to happen to Epic Alliance, 15 days after we miss a rent payment in the Hassle-free Landlord Program, our contract is void. We lose out on the principal paydown we’re accruing and we lose out on the opportunity to buy the property back at the same price. That’s what we get so we’re not walking away from that. That’s why we’re in Saskatoon and not an oversaturated market like Vancouver or Toronto.
At the end of the day, we’re very tied to the properties. So if we did collapse, your risks would be needing to hire a property manager or selling your property.
Let’s talk more about Fund a Flip.
R?: We’re looking for someone who has cash, home equity line of credit or underperforming invested product. You can actually work with your TFSA or RRSP to invest. Jodi Vetterl has a great coaching program for this!
The investor funds a deal with us; they essentially become our bank. We have never gone to the bank; we always use private money. We pay a 12% annualized rate of return for the entire time the investor is funding the deal. We don’t have to jump through hoops like you would if you go to a bank. The investor is registered on title on the house, so they’re protected if something were to happen. We currently control about $60 million in real estate so I don’t think we’re going anywhere.
What are the requirements to get involved in Fund a Flip?
R: $150,000 is usually the minimum. We only have one client per deal so we don’t pool funds. This is the opportunity for the little guys. It’s a low-risk, high-return investment opportunity for the average person.
What’s the timeline for Fund a Flip?
A?: Generally it’s a six month deal but we do it 12% annualized. If it took three months to renovate and sell it, you’d get 3% back but we can put your money back into the program for the year so you can get to that 12% annualized return. There’s no down time as you can always jump into another deal.
On the other side of things, how do you approach buying real estate? What’s an attractive property for flipping?
A: We don’t look for properties anymore. They come to us. We know our neighbourhoods block by block and I know exactly what they will rent for and what I will need to put into them. So it’s just doing a quick formula to know whether or not it will work.
R: Two weeks ago, Alisa and I were down in Florida and our realtors walked through 15 properties with us. We offered on 12 and got four – and we weren’t even in the country!
A: I always tell people to figure out what your niche is. Are you flipping rental properties, first-time home buyers, etc.? Don’t get distracted by shiny object syndrome. It happens to everyone. My best advice is to stay focused, hit the ground running and talk to everyone. Let everyone know in your circle what you’re doing so people keep you top of mind for their real estate needs.
What is your market? If you want to flip, you need to know what houses sell in your market. It might not be your taste but it needs to move in your market. Every neighbourhood has a cap. It doesn’t matter if you add all of the extras; you won’t be able to over-sell the neighbourhood.
How did you scale your business so quickly?
A: We met in 2012 and incorporated six and a half years ago. Our whole business was built off of life, education and divine intervention. We’re getting so much better about having good team members around us. You have to know how to let people go and hand work over. We learned how to go from hands on to managers to entrepreneurs. If you can pay someone else to do it, pay them and do the things that you’re born to do. It comes down to systemizing and building the right team around you. You can’t do it all by yourself.
R: Taking a training to learn about systemizing and scaling was the magic that worked perfectly with our education in real estate. “E-myth” is the bible for entrepreneurs!
What are some of the biggest mistakes you’ve made in your journey?
A: For me, one of the hardest lessons to learn was being quicker to fire than to hire. If it’s the wrong person, there isn’t a bandaid for it. It doesn’t make them or you a bad person. It took me a while to learn that lesson. But you have to know when it’s not working and time to move on.
R: Lack of systems and the bookkeeping side were some mistakes we made. We didn’t expect to grow this quickly! We had to bring in teams to fix everything. The other thing is the lack of focus. We totally had shiny object syndrome when we first started. We focus only on residential now. You have to know your strengths and hire out your weaknesses. We also work with a coach which has been hugely beneficial.
How did you find your coach?
R: We’ve actually had quite a few coaches throughout our careers. Sometimes a coach will bring you to a certain level and then it’s time to move on.
A: We have coaches in multiple areas of our life, not just real estate. We are always learning. You have to feed that part of yourself or else you won’t grow. We now don’t let three months go by without going to an event or conference or bringing someone in to help elevate us in a certain area.
One of you is in Saskatoon and one is in Florida. Can we talk about moving Epic Alliance into the States?
R: Alisa and I have always had huge goals. We’ve always said we’re going to take over Saskatoon and then the world. People laughed but we don’t put energy into those people. Our goal is to control $1 billion in real estate. We have no need to move out of Saskatchewan anytime soon. The US market is amazing and there are lots of opportunities there.
We had so many US investors reach out to us about the Hassle-Free Landlord Program that we needed to create opportunities for them. So I’m in Florida right now to do research on markets to see where our Fund a Flip and Hassle-Free Landlord Program would work. Our goal is to be in 15-20 markets in the US over the next two years. And Phase 2 is having all of those cities growing like Saskatoon.
What are the top three US markets you’re excited about right now?
R: I’ve been super busy with our 30 deals in 30 days lately so don’t have that research yet.
A: We’re not looking for anything sexy. We’re looking for Saskatoons in the US. It won’t be coastal states because those don’t fit our model.
R: Safe and secure, not shiny and new. We’re looking for the boring markets. Saskatoon is boring but when it comes to investing, that’s great! It’s predictable.
5 Wire – Saskatoon Version:
Favourite Neighbourhood: Pleasant Hill, Caswell Hill, Mayfair
Favourite Bar or Restaurant: Mr. Mikes Steakhouse or anything along Broadway
Book you would recommend: Beyond the Banks by Jodi Vetterl, The Motivation Manifesto by Brandon Burchard
Advice you would tell your 18year old self: Follow what is in your heart and the rest will follow, Read Rich Dad, Poor Dad by Robert Kiyosaki sooner!
Something you have purchased for under $500 that has changed your life: Books or an audible membership