The Wild West of Property Management in Canada

Welcome to Canada's Property Management Podcast, your number one resource for investing, managing, and maximizing the value of your real estate assets. And now, here's your hosts, Carla Browne and Adrian Schulz, Canada's rental property experts.

Adrian Schulz (00:19):

Yes. In today's episode, we're talking about the Wild West of property management in Canada, and you've probably heard some of the horror stories in the news over the past few weeks. One big story coming out of Saskatchewan, but there are many other stories as well. I don't know. I feel like I should have a horse and some leather chops for this episode just to be prepared for the ride that Carla is going to take us on. Wild West, what's happening?

Carla Browne (00:51):

I should have brought my cowboy hat and my guns. Could have had them drawn and turned around.

Adrian Schulz (00:55):

Right? I mean, you are from the Wild West like literally and figuratively. Let's dive in. What's happening right now in Canada with these promises of unbelievable returns?

Carla Browne (01:09):

Yeah. Well, I think the property management space, and I guess the investing in real estate space, has really, really blown up in Canada. We know that. We know there's just under 40% of Canadians rent. We know that there is over 20% of the mortgages that are being funded, according to the Bank of Canada, are actually being funded for investment properties. This is a big, big business.

Carla Browne (01:34):

When you have big things happening really quickly, I think people really gravitate to it and they're trying to like figure things out as they go along. Not always the best way to operate a business, right? I think that people have come in thinking that they could do things that maybe haven't necessarily come true, and it has affected a lot of people along the way. You're an investor, Adrian. You get this. I mean, people always want to invest.

Carla Browne (02:03):

Might not be able to have the funds altogether, so then they're looking at ways how they can get in quick, right? Because you want to get in quick because this is really happening and I could make a whole bunch of money quickly. You must have had people come to you and ask like, "Do you want to go in on this property together? What does that look like, and how is it going to cash flow, and what are the returns?"

Carla Browne (02:22):

Because those are the things that we always hear, right? How much money am I going to get tomorrow when I buy this property today?

Adrian Schulz (02:28):

Well, yeah. Owning property and being a landlord and real estate owner, it seems from the outside looking in like this really, and I think I'm allowed to say the word, it seems like this really sexy thing, right? It's an effort over time real property investment, but there is no fast money, quick money to be made. Granted there are some skilled property flippers in Canada. There are, okay? But I would argue that they themselves probably are general contractors and they're able to do the flipping themselves, right?

Adrian Schulz (03:13):

But as far as taking other people's money and investing in real estate together in private syndications, personally, I'm adverse to it. I think that if you're going to invest in real estate, you should be able and capable to do it on your own. Maybe with a trusted partner that you've known for a long time where you both understand the risks involved and both agree that it's long-term, or go to publicly traded syndications such as a real estate investment trust, right?

Adrian Schulz (03:52):

Go to a REIT that's publicly traded and regulated where you know that things are getting done the way that they're supposed to be. I'm not afraid to say it. I am not personally a fan of private syndications with people who have never done it before or people who are fresh to it. It's a profession. It's regulated. There's a reason that Canada has REITs, okay? I think that it's really, really important that people's little... Is it a glitter in the eye that people get?

Adrian Schulz (04:31):

There's something people get in their eyes or the big eyes. It's really, really important that there is no fast money and there's no free money.

Carla Browne (04:41):

To your point on the partnerships, I think partnerships can be a really great way for people to get into real estate together, but I would say make it a legit partnership. Get to a lawyer who understands this. Make sure you have proper documentation. Incorporate. Do all of these things that make the best sense in order to have this because real estate is a business.

Carla Browne (05:03):

But when you have somebody from another province buying into another province and just literally giving somebody else money, I don't even know actually how that happened, but it has happened. And that is scary because they do have the glitter in their eye. They have what they feel they're going to get for returns. It is not that easy. People need to understand, to do property management and to be doing real estate, you need to be licensed in, which is most of the provinces across Canada.

Carla Browne (05:30):

Then please make sure that they have the credentials. What kind of insurance are these people caring? Because you are counting on their insurance for liability and errors and omission. You got to make sure that these things are in place. If you are having them look after tenants, that is property management, so now they're taking money on your behalf basically. They're looking after and caring for your property. You need to vet them out, right? I think that this is where trust is a really great thing.

Carla Browne (05:58):

Probably Saskatchewan people trust maybe more than the average, but you still have to vet to make sure that everything is I'm not going to say legit, because I do think that companies can be legit and still not maybe do things all correctly, but you want to be able to really check them out and make sure that what they're saying is really going to happen.

Adrian Schulz (06:19):

Even licensed, professional, experienced, regulated real estate syndication such as a REIT, or a property manager that is licensed and qualified to do real estate syndications, because there are some that are, they still don't all go perfectly well. Even those have a level of risk. It's more of a conservative level of risk, but it's certainly a risk. Why would you go into the dark zone or the back alley of real estate investing when even the professional, qualified, regulated entities that do it properly have risk associated with it.

Adrian Schulz (07:07):

I would really, really always err on the side of caution. You know what? If you really want to be investing in real estate, why not start with your own primary residence? The next is take out the equity in your home and go and with your... Like yourself, go and buy a second property, a second bungalow and rent it out, right? Personally, I have found that simple, straightforward, real estate investing yields the best return.

Adrian Schulz (07:39):

It's the safest. It's the securest, and I'm not dependent on other people ruining my own financial future. Just stay in control of your assets and stay in control of your future.

Carla Browne (07:54):

It's that saying, Adrian, if it seems too good to be true, it probably is too good to be true.

Adrian Schulz (08:00):

Kittens and rainbows. We have a whole episode about it.

Carla Browne (08:04):

Yeah, exactly, exactly. The other thing that we see is that people put a lot of trust and rely on friends and family and maybe their realtor and things like that. You want to find somebody who has experience in this field. You really want to make sure, especially if you are investing out of province, which I'm totally... I feel that people should, because I believe that some provinces will operate better for property management at different times of the real estate cycle.

Carla Browne (08:32):

That's where I always feel it's great that real property management can assist those because we've got offices across Canada. But make sure that you're just not doing something that seems easy and is going to save you $5 by letting somebody you know look after it. Just make sure that you are... It's a whole picture. This is a business. This is where I just get so hung up on it. You're buying a property, you're buying a business, and that's really how we have to treat it.

Carla Browne (08:57):

There's so many moving parts in property management that it's not even just about that first investment part and the returns. It's everything that goes along with it. That's where I think things really have fallen down here in Saskatchewan with the couple of situations that have arose, is that they weren't able to keep up with what needed to be happening from the property management side.

Adrian Schulz (09:19):

One has to wonder, if a successful real estate syndicator is having to ask you for your life savings, why is it that they're not able to raise money in the traditional ways, such as banks and credit unions? You really have to ask that question. Why can't they raise money if they're successful and they're cash flowing? Why can't they raise it the regular ways? Like to me, that's just so obvious, right?

Adrian Schulz (09:53):

Because we have a lot of very high quality financial institutions, credit unions, alternative lenders, even private lenders that are willing to partake in these deals that know the risks, right? Why are people coming to you asking you for your money? Be cautious.

Carla Browne (10:12):

Yeah. I'll also just do before we end this episode a little plug for the Real Estate Investment Network because they are a really great organization that people can align themselves with. Low cost membership, tons of education, so that they can really help walk you through all of these pieces. They have people in their membership group that do possibly want to form some partnerships if that's what you're looking for, but you will do it in a way that will safeguard yourself and your investments long-term.

Carla Browne (10:41):

That is another avenue that people can check out if they're looking at getting into investment real estate in Canada.

Adrian Schulz (10:47):

Now that's real property management.

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