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episode # 274

Investing Lessons from the Pandemic with Mark Ting

Did you meet your financial goals in 2020 and the first half of 2021? We know one guy who did and his logic and strategies provide a blueprint for investing in any market. Mark Ting, Guide to Personal Finance (CBC’s On the Coast) and Partner at Foundation Wealth, sits down with Matt & Adam to chart an epic year of investing. Find out what Mark thinks is today’s biggest risk to your economic well-being and his BEST three investments to take advantage of in today’s uncertain times. This is an episode that gives you the skinny while making your wallet fat. Eat it up!

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Episode Summary


 

Tell us about yourself and your recent real estate purchase.

I love real estate – whether it’s investing locally or internationally. My thing is always cash flow. Whatever I buy, I want to make sure it pays for itself with almost 100% financing. If I lose my job, things can still be sustained. 

I bought a duplex in the beginning of 2020. I usually buy with partners to spread the risk and liability. We buy houses that are quite labour-intensive; that duplex I bought was inhabitable. We fix it up and then rent it out. And that’s something I think the city needs. We’re filling unutilized properties with people. 

Doing a renovation during covid was an ordeal. A year ago, it felt like the world was going to end. Getting materials was very difficult and we considered giving up. Thankfully, we didn’t. The duplex has gone up in value and is cash flowing, and seven people now have a nice place to live.

How did covid change your plans? How did you mitigate those risks?

I’m all about risk mitigation – that’s what I do in my day to day job at Foundation Wealth. We actually bought the place in Nov 2019 (closed in January 2020), when there was no talk of covid. We typically buy a house in cash to get the best deal, fix it up, get it appraised, get a mortgage and then pay back the personal lines of credit we used to buy it in cash. That way, the liability stays with the house. 

We wanted someone living in the house as soon as possible. So we rushed to get it liveable and charged that tenant very minimal rent. In March 2020, panic started to set in and the stock market dropped about 35%. Because I believe in the power of diversification, I had investments that were not affected by the stock market, like private REITs. You want to sell high and buy low. So I sold my portfolio in private REITs to shore up cash. 

In the end, it was a good move. The government came in with programs like CERB and banks deferred mortgages, so I was able to take advantage of the change in attitude. I put that cash back into the stock market when things were selling low. 

I made a lot of money in 2020 but it was also one of the most stressful years. Ultimately, diversification saved me. 

I’m starting to teach at SFU and will be teaching personal finance. I’m going to push that power of diversification to my students. I think personal finance for young people is so important. 

What did you buy when you went back into the stock market? 

People always want to gravitate towards what is doing well. They sell the things that are crashing and buy something that’s doing really well. I did the complete opposite. You don’t want to give into fear and greed; you want to sell high and buy low.

I bought a lot of tech stocks and stay-at-home type stocks that had a low base; many went up 300-400%. Since that time, they probably peaked in Feb 2021 and are now down about 50%. But that’s still more than doubling your money. The reason those have fallen off is due to the inflation narrative. Inflation is good for hard assets like real estate, bitcoin and gold but not for highly valued tech stocks. That’s something to look at. 

Once those high tech stocks started doing well, I sold some and replenished all of my private REITs that I had sold high. I was also able to invest in real estate and looked at buying some new properties. That way, I still had my diversification. 

What’s your approach to real estate investing?

I love real estate. We put some bids out in 2020 but because of the way I bid, which is to low ball, none of them came to fruition. Everywhere across BC is still a seller’s market. I was looking at Bowen Island and wish I had got something there. I am going to miss 99% of opportunities out there because of how I make my bids. But the 1% I do get are great deals. 

You have to be patient and you have to not want it that much. The duplex I bought was an opportunity that no one wanted to touch. There were a lot of issues with that property. If you are negotiating from a place where you don’t really care, it’s easy to get a deal because your emotions aren’t invested. That’s a lot harder to do when it’s your personal residence. 

How do you analyze a market and see opportunities? 

Whether it’s crypto or real estate, you have to believe in it. I’m not a flipper. I tried it in Steveston but I hated it. You have to know yourself. I want to believe in a vision and an investment over the long term. If I believe crypto and bitcoin are going to do well over the long term, I’ll buy into it. It’s the same with real estate.

For the place on W 14th, I was thinking of the future. Mt Pleasant will be surrounded by skytrain stations and I can imagine there will be a ton of pressure for density. This property was an older house that had been forced into a duplex, it had a backyard and was in a good location. The backyard can also hold a laneway house. So we could have three individual properties on that land. I believe that real estate will keep going up.

This property also gave me flexibility. I have partners on this. I always do my numbers; I’m trying to cash flow with 0% down which is very hard to do. We thought that maybe in the future we could move into this place or our kids could, or we could put up a laneway house. It’s an expensive and lengthy process to put up a laneway house but it’s an option. 

There was opportunity in downtown condos but that only lasted about six weeks. The work from home thing is real so communities on the outskirts of the city are being bid up. Everywhere is hot right now. If you’re planning to buy, my attitude on that has changed a lot. If you have the risk tolerance – and there’s both market risk and inflation risk – you might be better off investing that money rather than saving it for a down payment. You have to be more strategic with your money. Inflation should be your number one worry. 

Can you talk a bit more about inflation?

Right now there’s a massive wealth gap between the haves and the have nots. The main difference is assets; wealthy people have more assets. Inflation does mean wage growth but the average person is now competing on a global scale for jobs. With work from home, people can work from anywhere in the world. Technology is deflationary – the better the technology, the lower the costs. Technology, like AI and Zoom, are capping labour costs.

The government printed money to give people cash during the pandemic, but they didn’t target only those who needed it. Loads of people who were still working got some sort of government assistance. That’s why we saw savings rates go through the roof. Those people were able to invest in real estate, crypto, stocks, etc. So those people are going to keep getting richer. But the people who needed the money to pay rent and put food on the table had to spend it. If their wages don’t keep up, rent and food costs will still go up. So all the money printing will hurt the group that is most vulnerable.

I will be telling my students that money in the bank is losing its buying power more than it was previously. They should be buying assets. There are so many strategies. If you’re five years out from buying and currently saving your down payment, you can invest in something relatively stable. 

People need to be way more strategic and worry about inflation risk, instead of just market risk. We have to change our thinking about inflation.

Is it a good time to invest in real estate right now?

Yes. Everybody should be investing in real estate in one way or another. If I was a young person with limited funds and wanted to buy something physical I could go and visit, I might have to buy something in Calgary or the US. 

For your principal residence, get in on the property ladder if you can afford it. You won’t get your dream home right away. But at least you’ll flow with the market and there’s advantages to home ownership. You can borrow against your property and use that to reinvest. The property ladder works so well if you’re disciplined and use the tools to your advantage. Owning a home is an investment, a place to live and a tool. But you can get burned if you use it incorrectly. 

People have been talking about the roaring 20s and a potential spike in interest rates. What investments would you recommend right now?

It depends on how much hassle you’re willing to put up with. I look at long term trends. I foresee there will be fewer mom and pop type renovators and landlords. The city is very intrusive in this stuff. Their rules are black and white, and many of the rules don’t make sense. That causes a lot of frustration which drives people nuts. It’s not worth it for a lot of people. There’s also roperty taxes, insurance, strata fees, etc. that are going up much more than your rent can each year. So I imagine a lot of mom and pop types won’t think it’s worth it. 

So who’s going to take over? I think the REITs and big players will buy tracks of homes, office, industrial, etc. They can make the numbers work because they do a lot of the work themselves and don’t use insurance. 

If that’s the trend, people can invest alongside the big players. They may not make as much money but they should have a stable return of 7-10% each year. For older people who don’t want to deal with the hassle of tenants, REITs are a great way to go. For younger people who don’t mind rolling their sleeves up, it might be better to buy the property and take advantage of the gains over time. It all depends on how much hassle you can put up with. 

The main thing would be sitting down to figure out what your priorities are, coming up with a game plan and figuring out how that works with your overall finances. 

What else is a good buy right now?

I bought crypto for my kids last Christmas. Elon Musk just caused a big drop but my kids are still up 200%. I want them to have something that is going to protect against inflation. I think bitcoin and cryptocurrency will play a big part in that. I would suggest that everyone just dip a toe in. 

I believe people will think less in terms of dollars in the future. We might say a house is worth some number of bitcoin. We’re seeing that happen in other countries that don’t have a strong banking system and have to rely on crypto.

I would say invest in more real estate than crypto but when you see a big drop in crypto, that might be the time to buy some. Just buy what you can afford to lose. There’s a lot of smart people who think crypto will be a long term part of our financial system. 

I buy the dip on everything. I never get the absolute bottom but in a few years, it really doesn’t matter. I bought my first place in Yaletown. It was listed for $230,000 and even though I bought it off my aunt, I still paid $250,000. Two years later, I sold it for $400,000. So did it matter that I didn’t buy it for the absolute lowest? No. 

The message is to keep investing. Invest early. Pick your poison. Invest in a bunch of things that aren’t correlated and that will give you a strong portfolio. 

So we’ve got real estate and we’ve got crypto. What’s your third buy?

Stock market. You don’t have to pick a fancy one. If you believe in inflation, you want to be on one side of the wealth gap. If you just buy an S&P 500, you get a breadth of investments. You can set it and forget it. Don’t look at it too much as it goes up and down.

The big mistakes happen when people get greedy or fearful. You have to resist over-concentrating on the stuff that is doing well. On occasion you can take profits, but keep it balanced. If something goes high, trim it back down to buy stuff that isn’t doing as well, because eventually they will flip flop.

Money in the bank will be struggling. You want your money in assets that are growing. Handling your own emotions is more important than picking the right stock.

Real estate is the same way. I like private REITs because there are no emotions; it takes a few months to sell a private REIT whereas a public REIT can be sold in one second. So you’re less susceptible to fear and greed with a private REIT. That’s why private REITs did well in 2020. 

Find out more at https://foundationwealth.ca/news/ & https://www.cbc.ca/news/canada/british-columbia/author/mark-ting-1.4834392

This Post Has 2 Comments

  1. Dang you guys, I love listening to you weekly, but these last two podcasts, I have forwarded to my 17 year-old nephew. So relevant, so educational. These last two interviews, although they last about 45 minutes each, sums up hundreds of hours of reading and years of lessons learned. You guys and your guests are priceless. Thank you for all you do!

  2. This was a really great episode – Mark had a lot of great info! And thanks for telling us about that “baiting” practice that real estate agents are doing right now. Wish I had listened to this before last weekend so I would have known about it. We put in an offer on a house (tied for the highest bid) and the seller declined all 9 offers, saying they wanted significantly more than the asking price. We were appalled. It made the seller look like a greed, and we thought the agent was incompetent for not setting an appropriate price and wasting everyone’s time. We walked away from it and didn’t re-offer; I would not trust dealing with people like that and I will steer clear of that agent’s other listings. He lost his reputation in my opinion. Please continue to ask all other agents to stop doing this unethical practice.

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