Great real estate investors always think big & the “Investorpreuner” Peter Leung is definitely not the exception. Peter’s real estate holdings span multiple continents & across varied asset classes. Adam & Matt sit down with Peter on today’s episode to chart his path from humble Vancouver beginnings to overseeing a bona fide global real estate empire from his perch in Hong Kong. Who is every real estate investor’s most important partner? How do you scale a real estate portfolio quickly, effectively & safely in any market? And why does a global investing strategy always provide better investment opportunities? You want strategies to level up? We got you covered today!
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What is an “investorpreneur?”
Besides marrying my spouse, investing was the biggest thing that changed my life. Investing as an entrepreneur can be powerful, which is how those words came together.
Who is Peter Leung? How did you become an investorpreneur?
I was born in Hong Kong and raised in Canada. I did all of my education in Vancouver and from a young age I always wanted to get ahead.
A life changing event happened when I went to a dentist’s home at 19 years old while working for a financial company. It was a beautiful home with luxury cars in the driveway. Everything was picture perfect and it seemed like the ideal life. But I was shocked when we sat down and learned this dentist was struggling to save $200 per month.
That told me that there had to be a better way. If making a lot of money like this dentist wasn’t working, I needed to find something that would. I wanted to figure out what could make my family and other families I work with financially free and able to leave a legacy. That’s how I found investing.
I learned the Rule of 72 which shows you how fast your money can grow at a certain interest rate. It showed me that mutual funds weren’t the answer. Entrepreneurism was always very exciting to me; I knew a typical job wasn’t going to get me ahead. I always say “job” stands for “journey of the broke.”
Historically, more millionaires have been created through real estate. So I decided to go into both entrepreneurism and real estate. At 23 years old, I started a chain of restaurants in Vancouver with two partners.
I noticed there was a huge influx of immigrants coming to Vancouver. People were buying in droves because Vancouver was so inexpensive compared to the international market at the time. I wanted to get involved but I couldn’t come up with the down payment. But once my restaurant business started to provide cash flow, I could venture into real estate.
I got into the financial industry through mentorship and decided to do the same thing with real estate.
How did you realize real estate was the right path for you?
As an investorpreneur, I believe in investing as an entrepreneur, and that includes in the stock market. But real estate is the core of my investments.
What separates the people who have really made it from those who haven’t is real estate. They have always had real estate as part of their portfolio. Some are involved in stocks and equities and some aren’t, but all of my mentors were involved in real estate.
It’s about what fits for you. Most people don’t find success with stocks and equities because they sell and trade too quickly. It’s similar with real estate. I’ve always said I’m a hoarder by nature; I like to hoard real estate – I don’t like to transact real estate. I prefer to buy and hold.
A lot of people in stocks and equities don’t buy and hold because it’s so easy to sell. With real estate, it takes a lot of time and energy to buy and sell. It’s a different commitment. So people tend to hold onto real estate longer. Because of my personality, I knew I would be more suited to holding onto real estate.
I can use data to help me find the value of my real estate. I also rely on my team. So with that data and my team, I’m able to have an edge in real estate. I don’t have that same edge in stocks and equities. That’s why I love real estate.
How did you get started in real estate?
I started in residential real estate in Vancouver. I started by identifying demand. In 2000, there was an influx of immigrants into Vancouver and everyone needed a place to stay. If people can’t find a place to live, they either have to move elsewhere or pay more.
Working in the restaurant industry was a grind but I was able to save enough for a down payment on a presale. At that time, presales were below market value. You only had to put down 5% initially, which I could scrape together. Plus, as an entrepreneur, I had a hard time getting a mortgage, so all I could qualify for were presales.
So my strategy was to buy presale contracts; I bought three in the first six months of my real estate journey. It was a risk but I had a few years until completion and I believed in my earning potential. The price of real estate rose in those years, giving me a big return. At that time, there weren’t assignment fees or strict rules from the developer. At one point, I owned 13-14 presales. I completed on most of them and still have quite a few of them in my portfolio today.
Can you tell us more about your real estate investment strategy?
Real estate is not rocket science – it’s not supposed to be! If you buy a good product at a good price, you can find a lot of advantages. I still buy a lot of presales today, mostly in the UK. I replicated my same strategy in the UK right after Brexit.
Every investment has some element of risk. If you’re living in the home, I say that is a lifestyle choice and not an investment. But with investments, you have to look at the best and worst case scenarios. If you understand timing, location and the fundamentals of real estate, you can build a business quickly.
You do need to put the work in and find mentors and a team you trust. You want mentors who have the same philosophy as you. For me, all of my mentors believe in creating intergenerational wealth like I do. From there, I was able to go into international and commercial real estate.
Don’t doubt yourself. No job is easy from the beginning. But once you figure it out, it’s about how fast and efficient you can be.
What changed in the Vancouver real estate market that made you change your strategy?
It’s about timing. These days, you have to put a lot more down to buy a presale in Vancouver. You’re also in a situation where presales are more expensive than resales; you’re speculating that a future contract is going to accurately assess future values. There’s an expectation that prices will rise. I prefer a margin of safety rather than speculating about future prices.
Early on, I understood that financing would be a critical piece of my portfolio. So I transitioned into more commercial real estate in Canada where financing is not reliant on the owner’s income. In 2016, I moved into the UK right after Brexit. The pound dropped, which was a moment of opportunity for me.
How do you find real estate opportunities?
For me, timing comes before location. If you bought in Vancouver two years ago, you would’ve made money anywhere because the timing was right. Then you could have looked at location to get even further ahead, as certain areas in Vancouver went up more than others.
So I started investing in the UK after Brexit because of the timing. I bought residential properties that house multiple occupancies, called HMOs. I bought my first for about $70,000 CAD for a property with five rooms. That now produces over 40% return for me. The question became: How fast can I do it? Within the first year, I bought over 40 homes in the UK.
I had only been to the UK once before Brexit so I spent time making contacts and figuring out who I could trust on the ground.
The next big change was covid. In 2020, I bought in Newfoundland, New Brunswick and Nova Scotia where land and houses were inexpensive. Just like the UK, I bought properties with multiple units. There was such a margin of safety when we were buying because housing costs were so low. And then, thanks to covid, prices shot up.
I believe Canadian real estate will continue to be strong. There are very few places like Vancouver where people want to be, with great summer and winter weather, with friendly people, and with relatively affordable real estate on a global scale. Serious institutional investors are looking at Vancouver.
How do you analyze real estate markets and move with confidence?
I do pour into some data sources, like Bloomberg and the Wall Street Journal. But talking to other investors who are doing it on the ground is the most valuable core data to me. I spend a lot of my time speaking to investors.
Banks are an underutilized resource, especially in commercial real estate. Bankers have the data. If they give me a lower loan to value or a higher fee, that tells me what they think about a property.
I spend more time talking with investors and bankers than looking at the data. There’s a lag with data – you’re looking backwards. So I spend more of my time speaking with people on the ground doing things in real time. That’s how you gauge true demand in a market.
I don’t know everything and hope I never will so I can continue to grow.
Let’s talk about forecasting. How do you predict what will happen in a real estate market?
I always look at the best case, the worst case and the most likely scenario. I never look to buy at the bottom. There’s no such thing as a bottom or a top because no one knows. No one has a crystal ball.
But if I see demand is high, I can predict prices will remain high. When everyone starts talking about buying, that’s when you should be cautious. You don’t have to sell, but you should be cautious.
The key is to refinance your property as early as you can. That way, your adjusted cost basis will be very low and you’re not out of pocket. If you start using gains to play the real estate game, you’re in the best position.
Similar to Brexit and covid, is now the right time to make a real estate move?
Right now in the real estate market, we’re just cruising. We’re not stepping on the gas or on the brake. Everything takes time. There’s not always a trend to jump on – there are pauses in between.
Canada has gone through a big gain and it’s going to take some time for demand to get absorbed. Everyone’s a little bit more hesitant these days. The reason interest rates are rising is because the Bank of Canada wants to curb demand. Personally, I don’t want to bet against the Bank of Canada.
For me, it’s about the numbers. If the numbers stack up, I’ll do the deal. I’m definitely still doing deals today. But first I have to ask: Where is there cash flow? Can I get a margin of safety? Can I get a better deal if something has been on the market for a long time? Can I get alternative financing or add subjects? There are ways to be creative when structuring deals, whether the economy is good or bad.
I’m still looking at real estate in New Brunswick and Nova Scotia. But there are now rules against people from out of province buying. In Vancouver, I don’t see a sure trend upwards but I definitely don’t see a big drop due to the demand pouring in.
When interest rates stop rising, that is an indicator that things are more stable. But if your numbers work, anytime is a good time to buy. There will always be people who want to sell.
What role does Vancouver play in a global context?
Vancouver’s residential real estate always has a place in a global investor’s heart. It’s a beautiful place to be with great people, great food, etc. So Vancouver is on people’s radar.
A challenge would be the foreign buyer’s tax. There’s also the empty homes tax and speculation tax that are concerns. But international investors know those taxes aren’t going anywhere. In fact, speculation taxes will be implemented in more and more places around the globe that are desirable. Vancouver is a very desirable place for investors.
Everyone wants to buy the best stock from the best companies because they know those stocks have legs. It’s the same with real estate. Vancouver real estate is the best stock and everyone wants it. It’s a highly desirable place. Even if they have to pay a bit of tax, investors want to buy in Vancouver knowing prices will continue to rise.
What real estate advice do you have for investors based on a mistake you made?
Never have your capital fully deployed. I’ve missed many opportunities because I had all my capital deployed. So you want to make sure you always have some capital availableso you can take advantage of opportunities that come your way.