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episode # 209

Top Mistakes Investors Will Make in 2020 with Mark Ting

On today’s show: accelerated wealth-building through leverage, disciplined investing, and active risk management. Back by popular demand, CBC’s Guide to Personal Finance and Partner at Foundation Wealth, Mark Ting, joins Adam & Matt to discuss COVID-19, skyrocketing strata insurance deductibles, and other risks to our rising real estate market. But if there truly is a black swan swimming close by, then why did Mark Ting just buy real estate? Strap in for an action packed episode, featuring Mark’s best pro-tips on finding cash-flow in Vancouver, diversifying your portfolio, keeping what you earn, and managing risk along the way. Mark’s so confident about his financial strategy, he’s leaving three-wheeled circles around the competition!

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Episode Summary


 

Can you tell us a little bit about yourself?

I manage wealth for high net-worth families and businesses. We invest their money and watch it grow, with a focus on preservation of wealth and legal tax planning strategies. I’m also an avid real estate investor and bought a piece of property recently.

What do you look for in an investment property?

My realtor found this duplex and approached me last fall and we closed in January after some months of negotiations and waiting.

It’s in a great location – in Mount Pleasant between Main and Cambie. Walking distance to the skytrain. We walked the neighbourhood and it really drew me in. We spoke to the neighbours, as we’ve had problems with neighbours before, and they loved the area. We bought both sides of the duplex, with a possibility for a laneway house as well. However, it’s very run down and not pleasing to the eye. But these are the projects we like to go for.

On the inside, we just have to paint it, clean it and empty it. Thankfully, it wasn’t tenanted so there were no issues there. I have a friend who’s looking into buying a place with long term tenants and I think there’s a lot of risk there. It’s a lot of hassle and I don’t like having to evict anyone.

What’s are your real estate investment goals with this property?

We’re looking to repair it and tenant it. I always try to do long term holdings. I’ve done house flips before and just hated it. It can be very stressful. This place has 3 partners in on it together, and there’s potential for 3 places on the lot. I may even consider moving in myself because I love the area that much. When we repair we have a rule. Our family has to be comfortable living in the finished project. It won’t be there right away as we have a limited budget, but it’ll get there. We’re going to fix the inside, rent it out, then work on the exterior.

Should you use partners when investing in real estate?

The people I’m working with now I’ve worked with in the past and there’s a lot of trust there. Despite that, we still do all our paperwork properly. We hash everything out at the beginning when everyone’s happy, because things can go wrong.

When I have partners, I like to have a varied skill set. One guy is good with getting the project up and running, I’m better with the finances and due diligence stuff, and the third is a mixture between us. The other two are very handy and we do a lot of the work ourselves.

Should you always look for cash flow positive real estate investments?

We don’t do these projects unless it’s cash flow neutral at worst. This one is more difficult and we’re going to have to get creative to maximize our asset. It will be positive within a year but may be negative before that.

Why did you decide to jump into the market now?

It’s a value add and we knew we’d get a good price on the project. We love when a place has either a lazy realtor or lazy owners. Had the previous owners just spent $10-15,000 on fixing it a little, they would have probably made $200,000 more. I’m not overly bullish on the Vancouver market; it’s a sellers market now, but it was the right place.

What are your thoughts on the Vancouver real estate market right now? Should people still be looking at real estate?

With condos right now, it’s not a great investment. There’s a lot of insurance issues and they won’t be cash flow positive, even if you’re putting down a large down payment. So when I tell people that, they ask what I would do, if they should be doing the stock market instead. I tell them it’s not an either-or thing. I believe that you should still have your real estate investments, but you should also be looking at the stocks and making a nice split between two.

What is the best investment mix? How do you structure investments?

We don’t have a crystal ball; we know that we’re going to be wrong in some cases. For good advice, you need a strategic plan and to not let your emotions get in there. With stocks you see things go up and down daily, but with real estate you don’t. Studies have shown that people will usually pull out at the worst time. You need to do the opposite of what your gut tells you. You shouldn’t sell when the market scares you. If this insurance thing gets worse, there’s the opportunity to enter the market.

Is there a strata insurance crisis?

I don’t know. But from an investor’s point of view, I think that I should be investing in these insurance companies. It’s counter intuitive, but when disasters happen, insurance agencies make profits because people grow to accept the new normal of insurance proces.

I also foresee people paying a premium for buildings that are as leak-proof as possible. Insurance companies will react as well, likely giving deductions for various safety measures.

Eventually though, I think the market will solve this. There may be another player who comes into the insurance game. If this becomes a real crisis though, prices may drop as there’ll be many people trying to sell.

Should you buy a single-family home if you are worried about strata insurance?

That’s my thought, as it mitigates risk. If I was a new buyer, and was deciding between a condo in a large building or a townhouse with nobody above or below you, I’d choose the townhouse if you like them both.

How do you market a rental property?

When I bought this duplex, we looked at affordability and who would be living in it. We reached out to Amazon to see if they’d be willing to have access to the place for their workers new in the area to stay for a year or two before they moved into a place they bought themselves. You need to have flexibility to try to maximize rents. We’ve also looked at whether we should furnish it or leave it empty. We also are very pet friendly. Kids generally do more damage to a place than a dog will. You can also look at renting to temporary workers or people who are just wanting 6-month leases. We’re open for anything.

Best areas for investment in Vancouver?

It comes down to budget. I tell people to show me the deal and talk about why it’s a good idea. Transit is going to be huge and parking is less of an issue. It’s also always better to be closer to the city centre. I don’t really know what the best area is right now though. I still like New West, but it truly is property dependent.

What do you recommend for someone looking to buy a property similar to yours?

I highly recommend bringing all the tradespeople you know to come look at a property if you’re able. They’re able to tell you things that you wouldn’t otherwise know. Also, go to the city and you may learn things that weren’t previously disclosed. You need to do your due diligence and get your pricing right.

What are the biggest risks in the Vancouver real estate market for 2020?

What will tank the market is when we hit a recession. We’ve got a lot of migrating workers in the construction industry. If the recession hits, those people are leaving and our economy will really suffer for it. It’ll be great for renters though, as they’ll have more options. I don’t think that’ll happen this year though. Coronavirus could potentially cause a recession, but I doubt it. It’s hard to predict one, but you should always be ready.

5 wire:

Favourite neighbourhood: Mount Pleasant

Favourite bar or restaurant: Phnom Pehn Restaurant in Chinatown

One book you would recommend: The Wealthy Barber by David Chilton

One piece of advice you would give your 18-year-old self: Learn a trade when you are young (basic electrical, plumbing, drywall)

Something you have purchased for under $1,000 that has positively changed your life: Tuk Tuk driver’s license for my upcoming trip to Sri Lanka

Find out more about Mark Ting.

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