With big infrastructure comes big investment! Real Estate Mogul and Broker/Owner of Investment Revenue Realty Inc., Cynthia Aasen, joins Adam and Matt to discuss two major markets that need to be on every investor’s radar. With over 20 years of real estate experience, Cynthia has built a massive portfolio personally, while designing a proven investor-friendly development company with properties throughout North America. Learn her best investment tips, the metrics she uses to evaluate deals, and her powerful advice for aspiring moguls. Get ready to be inspired!
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Episode Summary
Cynthia Aasen is the Owner/Managing Broker at Investment Revenue Realty.
Tell us about yourself?
Cynthia is a business owner, a real estate investor for more than 20 years with properties across North America. She practices what she preaches in relation to real estate investing and owns multiple investment properties.
How did you become interested in investing in real estate?
Out of university, Cynthia worked in finance as a bond trader and realized there was not a lot of opportunity in that industry for her. She had always loved real estate, her mother was a Realtor, so she made the switch and began selling multifamily in the 1980s.
Cynthia developed a program to help absentee owners and investors. Over the past 25 years, she has worked with multiple developers and helped many investors add real estate to their portfolios by building systems to educate, inform, and to help people make decisions with which they are comfortable.
Can you talk more about the Investment Revenue Realty model?
The deep dive, due diligence today is so much easier with technological advancement. Cynthia and her team track GDP, job growth, industrial investment, commercial development, and housing starts, to name a few, in different regions in order to start finding exciting areas for investment.
They take a balanced approach focussing on different markets – not all people want to invest in energy hubs because they are volatile. Education centres are great ones and are stable and in bigger market places where vacancy doesn’t fluctuate as much.
It is key to understand that residential real estate is a laggard in the real estate cycle. The first money to move into any market is industrial investment, corporations buying land, developing industry, and then you have commercial money, pension funds, etc. Last you have residential. So, it is not hard to find the right markets, you just need to know what to track, so you can time the investment. They do not always buy at the very bottom or sell at the very top but if you are looking at the right information you can time the buy and sell quite well.
Can you speak more about the types of metrics you focus on?
Median income, the types of jobs that are being created, rental affordability, so you know the type of housing that will be in demand and will perform.
There is also managing tenants and engaging an expert network to help your property perform and monitor tenants/vacancy.
One of the things that is exciting about your model is it is actually focussed on absentee landlords and you take care to facilitate long term ownership with few headaches.
Cynthia argues people have three tradeable assets: time, money, and peace of mind. And they must be in sync for people to be successful with their investments, so they try to remove the emotional side. Cynthia and her team provide lots of data to make the decision and then they build a plan so investors can stay with the investment for the long term. If investors understand their risk tolerance, they can weather a lot of storms and not worry and feel uncomfortable.
It sounds like you take a lot of the leg work out of investing, which is fantastic. Do you have any areas you are really excited about right now?
Northeast British Columbia: the recent announcement by LNG Canada represents the single largest private sector investment in Canadian history. Cynthia and her team has been working very closely with Western Canadian Properties Group building brand new investment properties that are complete turn key solutions. It allows our clients to take advantage of what is happening up there without the hassle or the stress. The program has furnished rentals and a rental pool to share potential vacancies, so that rent is collected even if the unit is vacant.
Can you speak to how you handle the property management?
Cynthia and her team vet the best property manager. So, in Northeast BC, they use Sterling Management and they have over 2500 units under management in that region. Sterling understands the nuances of that market and are visible in that market.
Cynthia and her team negotiate a fat flee generally and, in Fort St John, Sterling manages our units for a flat fee of $50 per month. Why would they manage these units for this low price? Because they manage 400 units for Cynthia and her team, there is a discounted rate. Sterling screens, takes deposits, places tenants, delivers investors’ net rent etc. On top of this, Cynthia and team run an optional rental program in which clients can opt in for a furnished rental. Those in the pool collectively go out and buy 25% of the unit and that means you don’t own the furniture so you don’t manage it or maintain it but it does improve your bottom line in regards to revenue.
We know you are very involved in Fort St John right now. Everyone keeps on hearing Kitimat when it comes to LNG. Can you speak to Fort St John’s relationship to LNG and why you are so involved there and bullish on Fort St. John?
Cynthia and her team commissioned a huge report form the Conference Board of Canada back in 2012. Their research talked about natural gas development in Canada and it is estimated that 386 billion dollars will be invested in natural gas infrastructure in Northeast BC between 2012 and 2035.
76% of that investment will be in the “upstream locations,” where all the gas is located. The Horn River and the Montney Basins have 35% of North America’s gas. That is why you are seeing Mitsubishi and other big corporations investing in Fort St John. Residential is a laggard – so you watch the industrial investment first, which is happening, before you want to invest.
The terminal is in Kitimat or “downstream” where the gas is brought via pipeline to be shipped to market. The long-term job creation and growth is upstream, in Fort St John and the Dawson Creek area.
We know you were involved in Fort MacMurray. Can you speak to your experience there? A lot of people are obviously hesitant when it comes to the boom and bust of resource sector markets.
Energy hubs are volatile but once they ramp up they never look back – especially with huge industrial investment taking place. Cynthia invested in Fort MacMurray since 1997. The first four years were bumpy and volatile. Once it hits that turning point, around 25 billion when Suncorp began to invest. Suddenly, property values tripled. Cash flow was very strong and my investments there carried other investments that were not as strong in terms of cash flow. It allowed Cynthia to expand her portfolio in other parts of the country, where positive cash flow was tougher, and weather storms when it came to mortgage rates.
Cynthia’s take away from Fort MacMurray is not to overleverage your investments, let them get payed off and use excess capital to pay them down so you own them. Build a plan, understand your risk tolerance, buy so you can stay for the long term, and learn how to present your ideas so you can secure money or help from others. Leave your emotions at home. Buy when no one else is after you have done your homework; buy low and hold is my mantra when it comes to real estate investing.
Can you talk about some of the mistakes you have made along the way? What is your biggest mistake?
Cynthia’s biggest mistake, in her opinion, was selling Vancouver real estate and/or real estate in general. She believes that after all the costs associated with selling, she would have been better positioned keeping her real estate over the years, especially since prices have trended upwards. She also argues that real estate is hard to replace with building costs and inflation. In her current position, Cynthia is now a ‘net buyer’, meaning she does not sell unless she it’s absolutely necessary.
What are your thoughts about the current state of Vancouver’s real estate market and which areas in the Lower Mainland are you excited about?
Cynthia is excited about Surrey, BC, among the fastest growing municipalities. She explains that the municipal government has invested heavily in the city’s public infrastructure, especially in Surrey City Centre. They are focused on job growth and social infrastructure – like restaurants, bars, cafes, and shopping – allowing employees to move there for work while achieving a metropolitan lifestyle with amenities and transit nearby.
As for the market more generally, Cynthia suggests that the current provincial government has done everything in its power to curb home prices from increasing. Regardless, she argues that Vancouver is still a very attractive city on a global-scale and will continue to appeal to international buyers. She expects similar growth patterns in the future.
As for the past five years, Cynthia is not surprised that housing in Vancouver and British Columbia has increased in value. At some point though, she suggests, the market needs to slow down. In terms of her optimism of the future outlook of Vancouver, she points to Don Campbell’s recent keynote address at the REIN conference in Vancouver, where he explained that over 500,000 people immigrated to Canada last year from all over the world and that immigrants will generally choose to rent, creating more opportunities for Canadian investors and landlords.
Did you see the explosiveness of the last five years in the Vancouver real estate market?
Cynthia is not surprised with the market increases in British Columbia in general. As a province on the top of the heap in terms of job creation – with the recent announcement of the LNG project in Northeast BC and the growing tech sector in Vancouver Island. Therefore, she thinks that certain markets in BC will continue to be lucrative investments.
From an investment perspective, Cynthia is less excited about Vancouver specifically due to how the revenue numbers breakdown. Due to the high buy-in, Vancouver is a very difficult market for cash flow neutral/positive properties, Cynthia explains. In terms of market growth and cash-flow potential, she likes Langford, Surrey, and Northeast British Columbia such as Fort St John and Dawson Creek.
Outside of British Columbia, what other markets are you excited about?
Cynthia is excited about the real estate markets in Atlanta, Houston, Dallas, San Antonio, and Pheonix. She explains that the United States is mid-way through its market cycle but there continues to be huge opportunities in the value-add segment in multi-family residential real estate.
IRR has partnered up with Western Wealth Capital, the second largest multi-family owner/operator in Pheonix, Arizona. Cynthia is very excited about their program which repays investors their equity investment in approximately four years, while allowing them to retain an ownership position. Western Wealth Capital also offers Cynthia’s clients diversity in their portfolio. WWC is focused on buying buildings where they can dramatically improve the net operating income – a strategy that generates incredible returns for her clients and is not depending on market increases.
Cynthia Aasen answers the FIVE WIRE (five questions about Vancouver):
1. What is your favourite neighbourhood?
Kitsilano
2. What is your favourite bar or restaurant?
Coast
3. Downtown Penthouse or West Side Mansion?
Downtown Penthouse
4. Where is the first place that you bring someone from out of town?
Stanley Park
5. What is something you have purchased in the last year for under $500 that has changed your life?
My iphone headphones without the cord