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The 3 surprising reasons why more people don’t get rich investing in real estate

Statistically speaking, only about 5% of the population will ever own an investment property, yet it is the world’s most historically proven path to generating wealth. Andrew la Fleur gives his thoughts on why more people are not getting rich investing in real estate including 3 reasons that might surprise you.

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Speaker 1: Welcome to the True Condos podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.
Andrew la Fleur: Why aren’t there more people getting rich investing in real estate? Why aren’t there more Brad Lambs’, somebody like Brad who literally started out just as a regular guy. Had no special advantages, and go ahead and listen to the podcast episodes where I interviewed Brad if you haven’t heard his story. But, very … I find to be a very powerful, inspirational story just of somebody who started with nothing and now has you know, built a massive empire and is just, incredibly wealthy, to be frank. And it all started with just buying one property at a time and that’s what Brad did. He just bought one property and he turned into two. And he turned that into three, and five, and 10. And it’s somebody who’s made an absolute fortune off of … Primarily off of condominium investments. And just buying and selling, sometimes, condominiums. And he just continues to turn one into two and two into four and four into eight and so on. As the equity grows over time.
So, why aren’t more people doing it? Why aren’t more people getting rich? Why are so few people overall in the population, successful real estate investors and repeat real estate investors and people who are generating massive generational wealth through real estate investment? The pattern has been set. There’s no rocket science to it, it’s all been done before. You’re not reinventing the wheel but yet still, many people just have never taken the plunge. And if you are a real estate investor, you might be feeling that sometimes yourself and wondering. “Well, why am I doing this? Why is the rest of my friends not doing this? Why is the rest of my family not doing this? Why is everybody not doing this? Am I crazy?”
Statistically speaking, yes you are crazy. Statistically speaking people who are real estate investors will only be approximately, 5% of the population overall, which is interesting. Also, a similar number, to people who become entrepreneurs. People who start their own businesses, it’s a similar number statistically speaking around 5% of the population. 1 in 20 or so will take the plunge. And it’s a similar set of mindset and it’s a similar sort of, philosophy you have to have. And in some ways, when you buy a real estate, a piece of real estate as an investment, you are an entrepreneur. You do have a business in a sense. You are running a small business, that property is a business. It has revenue. It has expenses. It has debts that need to be paid. There’re taxes that need to be paid. You have a customer. You have a client, a customer who is your tenant. And you know, you have suppliers and professionals you need to work with and partner with and realtors and mortgage brokers and so on, lawyers. And you need to think of it like a business, and the most successful people do and it’s interesting that then, the numbers are similar.
So, I’ve been thinking about this lately and sort of, what triggered this thought to me is well … It was a little incident that happened to me last week on Twitter. I posted this Tweet, I’ll give you the background story and then, we’ll get into a couple of observations that I want to share with you. My sort of, answer to the question of, why isn’t everybody getting rich investing in real estate? Why isn’t everybody doing this? So, the back story here is, that I posted this little thing on Twitter about a week ago. There was a record high sale for a studio unit in the entertainment district, and I’m often Tweeting things like that, so definitely follow me on Twitter @andrewlafleur, is my Twitter handle. I had just posted that, this unit that was a record high sale price of $426,000.00 for a small 330 square foot studio unit in the entertainment district at the Bond Condos. It was around $1,300.00 per square foot.
My main observation in the Tweet was just that, even though it seems like a very high number and people are thinking. “Wow, how can we really sustain this? Our prices, you know. Wow, this price is so high. Is this going to continue?” I just wanted to point out that, it’s actually to own the unit, to buy the unit. It’s cheaper to buy the unit with 20% down in today’s market than it is to rent the unit, okay? It’s cheaper to buy a studio at $426,000.00 than it is to rent it. That means that if you are an investor … If an investor bought that unit with 20% down, and they rented it out tomorrow. They’re making a positive cashflow, by my calculations about $150.00 a month. $150.00 a month, paying what some people would say is a crazy high record price that many people never thought could be possible, for such a unit in the entertainment district.
But, here we are. So, to me that tells you a couple things. One is, the rental market is red hot and we all know that. And rental prices for studios now are averaging about … The starting entry level for downtown studio now is about $1,800.00 a month, that’s the entry level. The average is higher than that. Some studios are fetching as much as $2,000.00 a month. As one bedrooms’ now are fetching more like, $22 – $2,300.00 a month. Studios are now … Some of them are now fetching $2,000.00 a month. But, the starting price for a studio is about $1,800.00 a month.
So, again. If you’re paying $1,800.00 a month for that studio. It’s going to cost you about $1,650.00 a month for that … For the same studio if you buy it with 20% down. Assuming the actual maintenance fees from the property, the actual property taxes from the property and an actual mortgage that you can today, which incidentally, I just got that mortgage rate myself which is, prime – 1%. So, with … And with the 30-year amortization, which is definitely the amortization that most investors will go with, 30-years as opposed to 25-years, given the option.
I Tweeted that out and the Tweet ended up getting a lot of attention. A lot of people latched onto that. A reporter from the Globe and Mail actually ended up reaching out to me and writing a story about studios. You might have seen that in the Globe and Mail in the past week, I had some quotes in there. But, what was interesting was that, when I … Whenever I Tweet something like that, I know that I’m going to get a lot of attention from the real estate bears and the nay sayers and the chicken little’s and the sky is falling. And so I definitely got the usual, criticisms and critiques and, “No way this is not … Look at this real estate agent, he’s just blowing smoke.” And those kind of thing.
Which is fine, it’s to be expected. There’s plenty of anonymous real estate bears out there on Twitter who spend their days doing that sort of a thing. But, what was most interesting to me was that in addition to the usual crowd of those guys was a lot of actually, industry professionals, real estate agents, mortgage brokers, those types were jumping on the Tweet as well and basically insinuating that these numbers can’t be accurate. “Andrew, what are you saying? This can’t be true. How can this be true?” And like I said, these are all just real numbers that I pulled. There’s nothing … There’s no magic secret sauce to it. There’s no smoke and mirrors.
So, I found that very interesting and very telling that … And it’s just another reminder that even people within the industry itself of real estate. Even people who make a living selling condos or getting mortgages for condos and investment properties. Even people like that don’t understand it, don’t get it. Are not investors themselves. So, if you are an investor, if you’re out there listening to this right now. If you’re learning to become an investor, be very careful who you’re listening too and the voices in your head that you’re allowing to influence you. There are people that … Don’t assume anything about anyone, even real estate professionals and people in the business. Ask them if they’re investors themselves. Ask them what their philosophy is about investing before you align yourself with them.
And align yourself with people who have achieved things that you want to achieve. Take a look at … For me, Brad Lamb is sort of, the ultimate example. He’s a public figure, he’s put himself out there. He’s an open book. He tells people exactly what he did and how he did it. Sure, there’s lots of other people who have made massive amounts of money doing similar things in the Toronto condo market over the last 20, 30 years. But, nobody’s really done it in such a public way as Brad Lamb. And so, I often will use him as an example. And again, if you haven’t heard his story, go back and listen to the podcast episode that I … And, I’ll include a link to that in the show notes for this episode. But, listen to that episode how he tells his story of how he got started in real estate and how he became who he is today. It’s very interesting and it’s again, there’s no secret sauce to what he did. He didn’t have any insider advantage. His dad wasn’t a developer. He’s no Donald Trump Jr or anything like that. He built everything himself from nothing. And just built it step-by-step and smartly over time.
And anyone can do it. That’s the main thing is, anyone can do it. Why not you? You can be the next Brad Lamb. You out there listening, you … 30 years from now, you could be where Brad Lamb is today. And if you’re starting from nothing, today. It’s incredible and the potential of real estate is incredible. And there’s nothing like real estate investing and condominium investment in particular, is just such a perfect powerful amazing vehicle for investing in real estate for people who don’t want real estate to become their lives and to become their full-time job. But who still want to do very, very well in real estate, condominium investment is the best thing for people like that.
But again, there are people who just don’t get it, and the majority of people just will not get it. Even people within the industry itself, just will never get it and don’t get it, for whatever reason. So, I want to sort of, look at that here now on the podcast and give you a couple of observations that I’ve got from this and answering the question of, why doesn’t everybody get rich investing in real estate? Why doesn’t everybody get this? Why aren’t people able to figure this out? The thing that I think I’ve sort of, figured out myself. I’m obviously learning every day but, I like to think I’ve got some things figured out. And so many of my clients have figured out ,and not just so many people like Brad Lamb and others have made fortunes on it. Why aren’t more people doing this?
Well, a couple of observations. Number one is that, most people … First thing is that, most people do what they are taught and what they’re told. Most people do what they’re taught and what they’re told. So, what you’re taught is the school system, primarily. The school system, the public school system how we’re brought up in Canada, North America and the west. And you’re taught from a very young age a lot of things, but you’re definitely not taught anything about business, about money, about investing in real estate specifically. About using debt smartly as opposed to using debt to buy cars and things like that. That don’t help you get ahead in any way and don’t generate you any wealth in any way. So, the school system is a complete failure in my opinion, when it comes to teaching people anything about business or generating wealth. If you think back to your … If you grew up in Canada, if you think back to your … All your years in the public school system, can you ever remember once, anyone ever telling you anything about buying property, getting a mortgage, renting versus owning. Setting goals, planning ahead, taking a long-term view, understanding the money markets, mortgage rates, good debt, bad debt.
Do you ever remember any lessons, anything related to anything like that? I certainly don’t. And, there’s some movement now and calling for more education on these things. But, I’d be very skeptical of that and who’s actually going to be teaching these things and creating the curriculum on them. Is it anybody who actually knows what they’re talking about? Knows what they’re doing? Most likely, not. So, we are taught from … We’re not taught anything about money and about business and about investing in school. In fact, we’re really taught the opposite, I believe. We’re taught to avoid risk and avoid stepping out and essentially, know your role. Stay in your lane, don’t take any risk. Don’t stick your head out. Don’t do anything that the crowd won’t do. And let’s face it, the crowd is not investing in real estate. The crowd is not thinking like we are thinking as real estate investors. And so, that’s how we’re taught all the way coming up in school system to think that way.
So, most people do what they’re taught and the other side of it is, most people do what they’re told. And what I mean the difference there. You’re taught structurally, systematically in school and you’re told things by the people around you. Your friends and your family, primarily. So, most of your friends and your family are not real estate investors, most likely. Most of them are telling you that real estate investing is not a good idea. Whether through word or through deed, probably because it’s the fact that they’ve never done it so you’re reading that from them and saying. “Well, they haven’t done it so why would I do it?” Or they’re flat out coming at you and telling you like the many bears on Twitter that flat out coming and telling you that, “the real estate market’s going to crash. Look at all these cranes, they’re building too many condos.” I mean, you’ve heard it all a million times. The many different limiting beliefs and things that people tell themselves. The reasons why they are not investing in real estate. “It’s too risky, you could lose it all.” You know, goes back to the education systems. Stay in your lane, do as you were taught. Do as you were told and don’t take any risks and everything will work out fine. So, I think that is where it starts.
The second thing is that, the problem with real estate investing, condo investing, is that it requires courage and it requires conviction. Courage and conviction. Courage to do something that not everybody is doing. To step out and take a risk. Conviction that you actually believe in the thing that you’re doing. The problem is that most people don’t believe in anything. I don’t know about you, but this is what I’ve seen in my life so far. Is that most people don’t believe in anything. Most people have no convictions. Most people just float through life, from one day to the next without really thinking about anything. And just sort of, hoping to just make it by. And that’s good enough for most people. But, if you’re like me, that’s not good enough for you. And you’re looking for a lot more in this life than just that.
I mean, another great example of sort of, this point is, if you go … Brad Lamb, he tells this story many times, going back to Brad and his story. How he used to represent a lot of other builders and sell their buildings for them as the sales company. And he would personally buy several units in every building that he was selling, as investments. And, the builder would … The builders would come to him and they’d say. “What are you doing? Why are you buying all these condos in this building?” And like, they didn’t understand like, they didn’t believe in … They don’t believe in their own product, and this is still true today. I get this myself as well. I mean, I’ll buy … Not every project, I’m not Brad Lamb yet, but I buy in a lot of the projects obviously, that I’m selling in. And again, I’ve had the same sort of attitude and thought from … Whether it’s the builders. Whether it’s their onsite sales reps looking at me like. “Oh Andrew, you’re buying a unit here, too? Oh, okay. Sure.”
And, it’s just amazing that, you know, people don’t even believe in the thing that they’re doing themselves. People don’t even believe in what they do for a living. The product that they’re creating for people, they don’t even believe in it themselves, for the most part. Again, this is not everyone but this is sort of, a general observation that I’ve seen and Brad Lamb has illustrated it well with his story, as well. So, that’s the problem with real estate investing, it’s a major roadblock for a lot of people. You need the courage and the conviction to do it, and that’s something that most people, lack. And again, it goes back to what we’re taught and what we’re told. Stay in line and don’t stick your head out. Don’t believe too strongly in anything. You just kinda, float through life and you’ll be okay. Don’t have convictions about anything. Don’t try to be too ambitious. Little bit ambition, it’s okay but don’t try to be too ambitious and we’ll all get along.
And the final thing … final observation is that, you know, most people suck at math. Let’s face it. Real estate at the end of the day, is a math game. And, if you can buy something that will pay you more than it cost you, then you’re ahead, right? In very simple terms, you buy something that generates an income, that puts money in your pocket. It costs you something, it takes money out of your pocket. But it’s also putting money in your pocket. If it puts more money in your pocket then it takes out of your pocket, that’s a winner. That is something you should look to acquire and get more of and find other one’s that put even more money in your pocket and take out even less money, and play that game over and over and over again. It’s a very simple game. But unfortunately, most people just suck at math. They don’t understand it. They can’t get past all that they’ve been taught. All that they’ve been told. All the crap that’s in their head. All the voices that are in their head telling them not to do it.
And they overcomplicated it. And again, even people in the industry are sometimes the worst offenders. People who do this for a living are sometimes, the worst at figuring out this math and getting past the crap in their head or whatever it is that’s preventing them from figuring this out. And I’m seeing this pattern just, over and over and over again. And unfortunately, when you suck at math over and over and over again. Over the long-term, your bottom line at the end of your life is going to look really bad. You’re not going to acquire wealth and generate wealth over the long-term if you suck at math, if you don’t understand this basic principle. If you don’t embrace it and live it and make decisions based on it.
So, those are my three observations about why more people are getting rich investing in real estate in specifically, condos. Bit of a ramble, bit of a rant but these are just some of the thoughts in my head that I wanted to get out to you and out into the world about this subject. Because, it’s something I do think about a lot and obviously, a big reason of why I do what I do is, I’m trying to get more people doing this. I’m trying to create more real estate millionaires every single day, it’s what I do. I’m trying to help other people achieve some of the things that I’ve achieved and some of the things that I am working still towards, to achieve. I’m trying to help you do the same.
So, I hope you’ve found this useful. I hope you’ve found some value out of this. If you did, go ahead and share this podcast with somebody that you know who might also benefit from it. And, if you liked this show. Once again, if you can leave me a review on iTunes, that would be the best way to thank me and let me know that you’re enjoying what I’m doing.
Okay. Thank you very much and until next time, happy investing.
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