Jeff Poh is not our typical guest. He is not a celebrated politician or university economist. He hasn’t built a condo tower or bought an investment property a month for years at a time. Jeff Poh is probably a lot like you: a bright person somewhere in their middle years with some investment wins and some losses under their belt. Jeff sits down with Adam & Matt to discuss what he has learned on his unfinished path to financial freedom. Why did Jeff sell Vancouver real estate during the pandemic? Where does he see current opportunities and how have those opportunities changed as his investing strategy has evolved? And what are some of the biggest mistakes that will keep you from Kokomo? This is an episode from the trenches that lead to the promised land. Listen up!
Vancouver Real Estate News, Market Updates, Insider Tips, Stats, & Analysis
Why real estate? How did you get into it?
When I graduated from university, I had no idea what I wanted to do. I read “Rich Dad, Poor Dad” as many people in real estate do. I didn’t come from a rich family but my parents were able to pay for my school by buying vacant land outside of Vancouver. So that showed me that real estate is the key to wealth. In 2007, I couldn’t find a job and was watching HGTV all day while applying to jobs. So I decided to buy real estate. Then the recession of 2008 hit and I realized I can’t buy real estate if I’m not selling real estate. And my career grew from there over the last 13 years.
What are your real estate goals?
It’s more about investment goals. I want to replace my income – whether that’s through real estate or other investments. I’m not just solely in real estate; I was for a whole decade. But now I’m in ETFs and other passive investments too. But I believe in real estate. The more it works for you, the less you have to work. You get appreciation in Vancouver, as well as the mortgage paydown and potential cashflow. I want to replace my income and be able to pass on that capital to the future generations.
You sold a property earlier this year. Can you tell us about that?
I’m a long term hold person; I’m not a big flipper. There’s a lot of stress, effort and labour involved in doing a good flip. If you just let it ride, you may net the same amount – while not doing anything. I’m a small time investor.
I purchased that property in 2010 and it was asking $595,000 for a 5-bedroom, 100 year old house in New Westminster. I was there a lot working out tenant disputes. There were growing pains for sure! The best way to learn is with a 100 year old house. I was painting, picking up dead mice, etc. But 11 years later, I reaped the rewards. The amount of work I had to do for how much rent they were paying was worth it.
It was 70 days on the market when I bought it and I ended up in multiples. I paid $586,000 for it and rented out three suites, getting $3200 in rent. I then rented it out as a house and a carriage home for lower rent, but less work. You’re not getting that 1% cap rate in Vancouver. But the apx 0.5% cap covered things, just barely, and I was managing everything myself. This was my first legitimate rental property.
In November 2020, I was looking at comps in my area and not seeing the same growth as what they said New West should be experiencing. In January 2021, I saw a listing go up on my block asking $1.1 million and it sold for $1.3 million. So I realized this was the time to get rid of a 111 year old, under-rented, beaten up house. I ended up selling it for $1.34 million in March 2021.
Can you tell us more about the strategy and why you sold?
I don’t usually monitor my markets as closely because I’m a long term holder. But I was getting the itch. I’m at a point in my life where I want to replace some income. In the Lower Mainland, you have low cap rates but higher appreciation. My daughter is four years old and I’ve missed out on a lot. So I wanted to liquidate and redeploy in a more passive income asset.
Two weeks after selling that place, I sold a property and it was a big sale. So I wondered if I had undersold my New West property. But you can’t think like that. I was wanting to redeploy that money right away. I was looking in Kamloops but was outbid on a few offers. It seems like the market is taking a breather so I can take my time.
Why New West in 2010?
It was about the carrying costs. I really leveraged myself: I borrowed 20% down payment from a line of credit and had 80% financing. So with the New West property having three suites, I was getting a lot more rent. If I was looking at a condo in Vancouver, I wouldn’t have been able to come close to the rent I was getting in New West.
I was living in a condo in North Burnaby at the time and was looking at houses in Burnaby too. But the numbers just didn’t make sense. You’re supposed to look for cashflow and it’s hard to find that in Vancouver. How much do you want to subsidize per month? I didn’t want to lose any money.
How did the rents move through the years? Did the house become easier to carry?
The house always carried itself. I refinanced on a variable mortgage and that helped. I once pulled out $100K and refinanced to do a renovation on my principal residence. Real estate gives you options. My expenses were the same and my rents were slightly higher, so I was able to do that refinance.
Why did you manage it yourself?
My mentor when I got into real estate had a very different mindset than many other people in real estate at the time. He had about 12 properties that he was managing himself. So I did that too. And I wanted to get handier. You don’t know how many times I was there with YouTube opened up and going on trips to Home Depot. I wanted to learn. The more I learned about tenancy, housing, renovations, etc. the better realtor it made me. But I’m at the point now where I don’t want to manage my own properties.
You talked about growing pains. Can you unpack the amount of work it actually was?
Looking back, it was nothing. It was maybe four hours a month for the first year – letting in the plumber, putting up a backsplash, fixing a pipe with my Pops, etc. But if you think of the appreciation, I was making tens of thousands of dollars per hour. You’re letting your money work for you.
Side note: When you sell, set aside the capital gains so you can pay CRA right away.
Why did you choose to sell now as a long term hold investor?
If I look back in five years, I might be kicking myself. It’s about time in the market. But I’m going to redeploy that money. I’m going to buy more real estate. There’s leverage in real estate: you can buy a $500K property with just $100K. You also have cash flow, principal paydown and appreciation. So I probably won’t be kicking myself, because I’ll probably have another 1-3 properties.
I was watching a financial literacy guy on TikTok and he was talking about how you have to have an exit strategy. I thought I might be able to get $1.2 million for this house, which is 400x the $3000 rent I was getting. That’s a good number – so get the hell out.
I also wanted to be more efficient with my money. I wanted more passive income. I’m not looking to grow my real estate career; I just want to keep it steady. We have one child and we’re not planning to have anymore. I’ve already missed out on a lot of her life. I want to be a dad. So it all worked out well.
I didn’t sell in 2016 because I am a long term holder. If I didn’t have a kid today, I probably would’ve held onto the New West property. But I’m looking at new avenues for right now.
Now you’re at a pivot point looking for cashflow. Where are you heading now? What makes sense to you moving forward?
We’ve looked into Prince George, Kelowna, Kamloops and small towns like Trail and Cranbrook. We were even looking at Moncton, but I don’t know that market very well. I’ve focused on Kamloops. It’s a decent-sized city, they have a hospital and it’s not that far away. $700K there is going to get you close to $4000 in rent. Whereas in Vancouver, that will get you $2200 in rent. Even with a property manager, you’ll get some cashflow.
The last property I was looking at in Kamloops was $720,000 with $3800 of rent, and after property taxes, insurance, property manager, etc. I was probably going to get about $700 in cashflow per month. It’s not sexy but it’s a good return.
It’s about time in the game. Especially at today’s rates, principal paydown is huge when you get to that third term of your mortgage. You don’t get that if you’re flipping fairly quickly. It’s about longevity. It’s not timing the market – it’s time in the market.
Was it easier for you to pull the trigger at 28 than now at almost 40?
It’s not harder to pull the trigger but I do more research now. At 28, I was happy to take the big risks. But now with some net worth and a family, I want to do my due diligence. You don’t want to be reckless with the investments you’ve worked to earn. I don’t do crypto or individual stocks; I just do ETFs.
How did your first deal inform your other real estate investments? How are those doing?
I started in 2008 and didn’t make much money. In 2009 I found a condo I wanted to live in eventually so I got my parents to co-sign the mortgage and rented it out. In 2010, I bought the New West house in Sapperton, leveraging off my first place, getting help from mom and dad, and using a line of credit. I then moved into that first condo.
In 2013, I saw a house on Capitol Hill in Burnaby, just blocks from my parents and sister, asking $800K. It was a teardown but I knew I could revitalize it. So I put in the offer and sold my condo. My mentor at the time told me I was insane and was paying a premium. I refinanced the New West house to help me with the Burnaby renovation. And then I kind of coasted until my kid was born. I then teamed up with a partner and we bought a condo in Brentwood for our daughters.
I’m not a big time investor. I had three properties and now I’ve sold one. With the proceeds, I could buy 2-3 properties. But I might want to put it into something more passive. I have my money in some investments that give me 10% and I’m letting that money reinvest and compound. But I could just have it pay me in dividends. That’s an option for when I want to use that as my income.
What are you thinking about buying next?
I’m just going to take my time and not rush it. If it’s detached, it has to have a suite. Or maybe I partner up and get into multi-family. Or maybe I just buy one property and invest the rest. I haven’t fully decided. Inflation is high, real estate is high; it’s a tricky time. I may be losing out to inflation but I don’t want to rush it.
You’ve done a lot of great financial literacy videos on Instagram. What is something you see people doing that is a clear mistake when it comes to their finances?
We struggle with financial literacy worldwide because money is a taboo topic. We don’t talk about it so we can’t learn about it. Investing is great but you have to have money to invest. You have to know how to spend less than you make, save your money, have a plan, etc. Especially in Vancouver, people are trying to keep up with the Joneses. But the Joneses are broke.
I did it my own way. I didn’t care about looking flashy. I didn’t mind picking up the dead mice. But we don’t learn about financial literacy. You have to learn how to make your money work for you and stop trading your time for money.
Find out more: https://www.instagram.com/_jeffpoh_/