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episode # 197

Financially Free Through Passive Investing with Jodi Vetterl

Jodi Vetterl left her lucrative twenty year career in high-tech software sales for Fortune 100 companies to build a real estate portfolio that is truly passive. And when we say passive, we mean no flips, no tenants, and no headaches! Jodi sits down with Adam & Matt to discuss her recent best-selling book, Beyond the Banks, and charts her biggest wins and mistakes, unconventional money-making tips, and where she sees the opportunities.  Retired in her 40s and spending her time exactly how she wants, Jodi defines the space investors can occupy between active real estate players and the big banks – and make a lot of money doing it! Time to get aggressive about being passive!

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Episode Summary


 

Please tell us about yourself.

I’ve worked in high tech software for 20 years. During that time, I always had big territories and always enjoyed learning about other sources of income. I’ve spent many years doing education in real estate. So I have a background in software sales and real estate. I became a mom in my 40’s and created an opportunity for myself in lending. I was able to find financial independence and create a space for myself to write my book, Beyond the Banks, and educate others.

On real estate as a tool to recreate your life and take it back.

I love the idea of “fix and flip.” I have a background in architecture but “fix and flip” wasn’t realistic for me. So I went with buy and hold instead. I had properties in a few provinces and in the States, which was all I could handle in my demanding job. With private lending, I’m able to find more space in my life.

On the difference between the active investor and the passive investor.

The active investor is going out there, finding the house, putting the house under contract, finding contractors, managing contractors, staging, etc. They’re putting in the sweat equity. The passive investor is just putting in the money. They’re looking at the numbers and making sure the deal makes sense. They have to do their due diligence in finding the right people but it’s a minimal job compared to an active investor. It’s easy and straightforward.

Making double digits returns while being secured on the title of a property helps me to sleep well at night. Instead of an active investor going to a bank for a traditional loan, they look for cash lenders. A private lender becomes the bank.

What is private lending?

An active investor finds a property and needs cash to buy it. The private lender comes in to provide those funds whether it be with cash, home equity, a line of credit, underperforming funds, registered funds, etc. You can even lend through your RRSP. You can loan to people and have your money working. Once the property sells, everyone makes money.

Who do you work with?

There are a couple of programs that I lend money through. I work with limited partnerships and IRR Realty. That’s where I put my long term and US capital – instead of parking it with a financial advisor, I lend it and allow it to work in the background. For the income I live off of and to help build wealth, pay down debt or save for a vacation, I work with Epic Allowance out of Saskatoon. They have brilliant strategies and turnover is usually 4-6 months with 12-15% return. If you’re lending with home equity or a line of credit where you have to service it every month, you want to be able to take care of your payments and Epic Allowance has strategies for that.

How do the returns vary?

For example with Western Wealth Capital, they’re averaging about 30% returns and have done over 63%. I usually average between 16 and 32%. With Epic Allowance, I’m probably averaging 15% annualized returns.

How involved are you in the process and how does it work?

With Epic Allowance, they are fully in Saskatchewan and are now branching out into the US. I was their second investor so I jumped in early. I was able to watch them grow. They’re currently buying 30 houses in 30 days in Saskatoon. I love that they know their exit strategies. One of my money rules is having a clear exit strategy. They buy a house in their Fun to Flip program, flip it and sell it into their Hassle-free Landlord program. So as a Fun to Flip participant, I know they’re guaranteed a quick sale into their own program on a fast flip. The Hassle-Free Landlord program is a longer hold but it does create monthly profit which is great if you’re needing to pay off home equity or a line of credit.

How much is the minimum to lend?

With Western, it’s $25,000 as a minimum. With Epic Allowance, they used to do some pooling but have now streamlined things with single investors who can put in about $100,000. You can pool your money with someone beforehand but you need to come to the table with the money.

I know some investors do manage groups that pool money together but that’s outside of my bandwidth.

Are these your two major vehicles for investing?

Yes, these are the main ones. I also work with Horizon in the States. For example, they have five dwellings that are tenanted and cash flowing. Cash flow is important for private lending so there’s not a strain on the lenders.

If someone is listening and has $100,000-200,000 equity in their home but they have kids and not a lot of time, how do they get involved?

Firstly, take the time to put your numbers together. What is your financial reality? What funds do you have available? You also want to think about what you’re doing with that money and what you’re looking to earn. Use credit for investing, not paying down debt. Once you have your numbers, you want to learn about the different funding strategies. You want to learn about what an arm’s length mortgage is and work with people who can manage that.

It’s crucial that you understand the numbers. If you can’t interpret the numbers, you might say yes to the wrong opportunity to invest. Do your due diligence and stick to your money rules.

How do you find active investors to work with?

There are lots of real estate networking groups. It’s about getting out there and networking. If you put yourself out there as a lender, it’s shocking the stuff that will come to you. For me, I’m always open because I’m curious about what people are doing. I won’t lend to everyone but I’m interested in new strategies.

There is this whole other world where you can be in control of your wealth building. It’s simplified and it makes sense.

What is financial independence and how does it shape your goals?

For me, financial independence doesn’t mean buying mansions and yachts; it means the freedom to say goodbye to corporate America and open up space for myself. I was exhausted in my job. I wanted to know how I could free myself from that demanding job so I could have more space and time to be present with my child. I also created the space for this project, to write my book and to help educate people.

Can you share one of your biggest mistakes?

Definitely jumping in without doing enough due diligence. I bought into a healthcare clinic in the early 2000s which became a $120,000 mistake. The stress was so bad. I didn’t understand the numbers, I didn’t take the contract to a proper lawyer, and I signed something I shouldn’t have. I had a very hard time getting out. I put my all in for two years but the numbers given to me were not truthful.

Another example was the time I invested in a private company that had designed a product. This time, I did put it through a lawyer and got a personal guarantee. They raised $2.2 million with 22 investors and I was one of the only ones who not only got my money back but also got my interest. I ended up on title of his condo and he ended up going to jail due to fraud. I learned a lot from that and really did my due diligence. I was fortunate not to lose from this one but many others did.

How do you analyze a deal?

First, I look at the numbers. The numbers need to make sense. Sometimes the contingency amount is a little tight; you want to make sure there’s enough contingency built in. What happens if the market goes flat? What happens if a condo building doesn’t allow rentals? You always want to be asking what the back up plan is. What needs to happen for you to get your money back with interest?

Are you investing in the people or the project?

Both. You want to make sure the people know what they’re doing. There’s a process where the active investors are being vetted, have a credibility package, are incorporated, are up to date on taxes, have a portfolio of past work, etc.

But sometimes you do end up with someone who is brand new. My first investment in Washington State was with people who were also doing their first investment. But they didn’t bite off more than they could chew; it was just a cosmetic flip. It showed in their approach and their numbers. They came out at $171,000 which was higher than their projected numbers and they made $25,000. I was only in for 41 days and made three months of interest, which was $2000 USD. It doesn’t sound like a lot of money but all I had to do was the paperwork and transfer money that was just sitting there.

In the last five years is there one new belief, behaviour or habit that has resulted in a lot of success?

I really defined my money rules. At first, I didn’t understand what that meant. It wasn’t until I experienced losing money and having stress around money that I was able to define my money rules. My first rule is understanding what I’m invested in. I don’t understand mutual funds; I have tried and haven’t had success with them. So I don’t invest in them. And that’s why I make sure I understand the numbers with private lending.

My second money rule is asking if I can sleep at night. For me, that’s my gut check. And my third rule is knowing the exit strategy. I want to make sure whatever I get into is pretty solid; nothing is guaranteed but I want to mitigate risk.

Is there a market you’re excited about? And is there a strategy you’re excited about?

I love what Epic is doing in Saskatoon. It’s brilliant and proven; I’ve probably done 25 deals with them. There’s also the B&B strategy that seems quite smart. I’m planning to buy the course in the new year to learn more about it. I’m interested in exploring that formula.

I’m very open and have always been a sponge for learning more. I like to put the time in to get educated on a strategy and then apply critical thought. The critical thought is so important and it’s where I apply my money rules. Real estate is so fascinating and there are strategies we have never even heard of before. There are so many avenues to make money and it’s a fascinating thing to watch.

5 wire:

Favourite neighbourhood: Deep Cove

Favourite restaurant or bar: Arms Reach & Blue Café (both in Deep Cove)

A book you would recommend to listeners: The Smith Manoeuvre by C. Fraser Smith

Piece of advice you would tell your 18-year old self: Buy real estate in Kitsilano

Something you have purchased for under $500 that has benefited you: Pilates

Enter to win a copy of Beyond the Banks at https://www.facebook.com/beyondthebanksJV and or by leaving a review for the Vancouver Real Estate Podcast. Find out more from Jodi at https://jodivetterl.com/ and join her next course at http://jodi-vetterl.mykajabi.com/btb-waitlist.

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