On today’s episode of Thought Leader Thursday, Matt speaks to Sarah Larbi, a real estate investing entrepreneur who takes the mystery out of home ownership for millennials and stars on her own podcast, Where Should I Invest? She shares tips for getting your spouse on board with your real estate investing dreams, how she began inspiring young professionals, a crash course on her seven-step investment process, and much, much more!
What You Will Learn About Sarah Larbi – Inspiring Young Professionals:
- How Sarah went from selling copiers to killing the real estate investing game
- Sarah’s big wake-up call
- Her first real estate investing goal
- How to get your spouse on board with your real estate investing dreams
- The biggest challenges millennials face and how to overcome them
- How Sarah began inspiring young professionals
- The biggest piece of advice Sarah has for real estate investors
- Sarah’s tip for how to create a great real estate investing team
- Specific tips for buying and selling in Canada
- A crash course on her seven-step investment process
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Speaker 1: This is Theriault Media.
Sarah Larbi: When you look at the stats, and 90% of millionaires are actually millionaires through real estate investing, it just seemed like an easier way to get there, and I always looked at my life and I said, “I have one life.” And I might enjoy what I’m doing now, but why spend it and work for 40 years making somebody else rich, only to retire and then you may or may not be healthy enough at that point in time to really enjoy your life.
Matt Theriault: Hello, I’m Matt Theriault of the Epic Real Estate Investing Show, and this is Thought Leader Thursday.
All right, so today I’m joined by a real estate investing entrepreneur who specializes in helping take the mystery out of home ownership for millennials, who she thought the real estate investment or they thought real estate investment was going to be out of reach for them. So she helps them kind of see the reality there, and she has earned their trust and respect by having the drive and focus to embark, build, and grow to a seven home investment property portfolio by her early 30s. Her goal is to inspire young professionals to realize their own property owning dreams by sharing her simple seven-step investment process that can result in going from first property while fully employed, to planning retirement in around 15 years. Her results-oriented approach has been featured on radio, TV, in print, the list is way too long to run down, but it’s been a lot, and she has a popular podcast of her own, Where Should I Invest. So please help me welcome Sarah Larbi to Epic Real Estate Investing.
Sarah, welcome to the show.
Sarah: Thanks Matt, how are you?
Matt: Oh, living the dream, having a blast.
Sarah: Good, happy to be here.
Matt: Good, I’m happy to have you here. So Sarah, before we get into your approach to real estate investing, what were you doing just prior to getting involved?
Sarah: I was actually working at [00:01:58] and selling copiers, 100% commission, in sales, and living paycheck to paycheck, basically. And then I got another job at [00:02:09], and actually I don’t know if I should be saying these company names, but-
Matt: Oh, we can edit those.
Sarah: Okay. So I got another job in sales, and I remember looking for our first property that we wanted to buy, just as a regular house that we wanted to live in. And I remember going to the bank, and I had been working for a little bit of time and the bank was asking me, “What are your assets, and what are your liabilities?” And I looked at my spouse at the time, and like we had nothing. We had been working for a few years, and I didn’t even know what an asset or a liability even meant, so it was actually one of those wake up calls, I think. You know, everybody has that one story or that one thing that happens to them and they’re like, “Oh, crap, I’ve got to make some changes here so that next time these same questions happen, I actually have something to show for.”
It’s not how much money you make, it’s how much money you keep, and what you do with it to make it grow. And so I actually went home that weekend and just Googled how I was going to get rich over, and over, and over. And it’s funny because, so real estate investment kept coming up. So did stocks, and so did starting a business. But when you look at the stats, and 90% of millionaires are actually millionaires through real estate investing, it just seemed like an easier way to get there, and I always looked at my life and I said, “I have one life.” And I might enjoy what I’m doing now, but why spend it, and work for 40 years making somebody else rich, only to retire and then you may or may not be healthy enough at that point in time to really enjoy your life.
So it took me a couple years to convince my spouse that real estate investing was the way to go. He was a little bit more reluctant and was just petrified of having bad tenants. And so we just really saved. I ended up having two jobs at one point, where I would just save all of my second job income, I would be able to just whatever I could do to make more money. So for example, I actually ended up checking out some of my vacations instead of using my vacation in the beginning and making those sacrifices to be able to not only buy our primary house but then also buy a rental property.
So we bought our first rental property in 2013, and it was the smallest thing, little tiny bungalow, it was $129,000.00 in a town called Brantford, Ontario. And so the reason that we actually got into real estate was because his sister needed a place to live. Don’t rent to family, guys. She’s not that bad, I always just like to make that joke.
Matt: She’s not listening.
Sarah: No, she’s not listening [00:04:48]. However, it got us into the market. And I remember going to a seminar about goals, and just different things, nothing related to real estate investing, but there was somebody there that spoke and said, “If you just buy a house a year for like 10 years, you’re going to be set for life.” And for whatever reason, that’s the number I had in my head. I’m like, “We’ve got to do this, this is the 10 properties that we need, and we can have that freedom, we can go retire somewhere warm.” I mean, this is April and we’ve had an ice storm, which is a little bit crazy.
So and that’s not even really the number. You know, when you look back at it and you learn about real estate investing, 10 properties may work for somebody and it may not work for somebody else, right, it all depends on your goal, it depends on the cash flow number. So I learned that over time. But that’s really how we got started. And I think the biggest thing for me is I am a millennial, I did this with my spouse, and we worked our butts off to get there. And one of the things with living in Canada and living in Toronto, a detached house in Toronto is a million plus dollars. And so there’s a lot of millennials or younger people, older people too, but a lot of younger people, that just think that investing in real estate is totally out of reach, and they lose hope, and then they think they’re going to be renting forever.
So, one of the things that I want to do as much as possible is to be able to educate people and to have them be able to think outside of the box. Right? I mean, you live in California, you’re not going to invest necessarily right in the center of it all, you might have something better an hour or an hour and a half away where it’s more affordable, and it cash flows. So just being able to show those folks, the young guys and girls, that there’s ways to do it, and it’s maybe not right in your own backyard.
Matt: Mm-hmm (affirmative). Mm-hmm (affirmative). Boy, you said a lot there, and it kind of kills my next three or four questions.
Matt: You kind of answered them. One thing you said that really stuck out to me was your husband initially wasn’t on board, and through the large number of people that we’ve helped here over the last decade, I would say if there’s one sticking point, the most common sticking point, where they show an interest in investing in real estate, and with that interest, if something gets in their way, if it gets stuck, it’s just because they can’t get on the same page with their spouse.
So I’m curious, what was the breakthrough moment where your spouse gave you the thumbs up and said, “Let’s do this”?
Sarah: So my spouse is actually a police officer. So I will take a step back and say he probably sees the worst of the worst. And a lot of what goes on in his mind is, “Oh my god, I’m going to have a tenant that doesn’t pay, I’m going to have a tenant that trashes the place.” I mean, there’s definitely the thought of-
Yeah, he probably sees worse conditions than landlords actually see.
Sarah: Yeah, probably. There’s some places that you need to get undressed outside-
Sarah: Pretty much, you can’t bring those … you don’t know what you’re getting into. But though the fact that we started with a family member that he knew was definitely a good stepping stone. The way to keep going though, because I didn’t want to just stop at one property, was I ended up doing something a little bit different, where I actually find the tenants ahead of time. So for example, for house number two in Canada we have something called Kijiji, which is Craigslist, essentially, for the Canadian market. And I ended up finding a tenant that had posted an ad there for … she just wanted something a little bit bigger, she was a growing family, and she had to put her budget there. So we ended up actually starting to talk, and then we ended up finding a couple properties, and they ended up picking the one that they liked best, they’re still there to this day, and we knew who … by the time that we were working through all of that stuff with them, it was probably a good three to four months. So we got to know them fairly well.
And then property three, four, five, we started doing something similar where we are able to, for example, ask for four showings when you buy a property, and put the tenants in within a couple days of closing on the house. So actually this month, I’m closing on two more, I’m going a couple different things. We bought a cottage that we’re going to Air BnB short term this summer, and year round. And we’ve got a flip property that we’re doing.
So the first two or three were fairly difficult, but over time I think he realized that it was a business, and it’s really not that bad, and his fears were put to rest when he realized that most of these tenants don’t want to be bad, and you’ll have the odd ones that are, but you’ve got to really screen them out and do your due diligence and don’t give the key to the first person that fogs the mirror, right?
Matt: Right. Good advice there. Write that one down. So, the answer I guess, summed up, would be start slowly, maybe start small, and go deep before you go in wide, I guess, right?
Sarah: That’s right, you actually just did a video on that.
Matt: I did. Yeah, it’s fresh in my memory, but it kind of applies to everything, I wasn’t talking specifically about how to get your spouse involved, but I guess it applies there just as well.
So, you work with millennials, you’ve focused on this, this is your peer group, your demographic, or your generation is the word I’m looking for. So as millennial, they get kind of a bad rap, you know?
Sarah: They do.
Matt: In the media, they’re lazy, there’s no ambition, and all this. And I’ve got three millennials, probably even slightly younger, they’re probably just barely made it into the millennial generation. They’ve been awesome, they’ve been amazing. And I’m curious, if this is your focus, and you work with them, and that’s where you want to make the biggest impact, are there special challenges that they deal with? And how do you help them overcome them?
Sarah: So I think right now the challenge that they’re facing is just in the past three to four years, and I’m talking about the GTA when I’m referring to this, is the market’s just gone crazy. Like it’s gone up about 20% a year. So-
Matt: What’s GTA?
Sarah: Greater Toronto Area.
Matt: Okay, got it. Cool, so you’re in Canada, that’s right. You’re in Canada, we’re in the United States. [00:11:07]
All right, we’ll talk about that in just a second but go ahead.
Sarah: Yeah, so I think the biggest thing is just being able to now say they didn’t miss the market, there’s other markets, if they start looking elsewhere, an hour or two, and maybe rent if you want to live in Toronto. Just like if somebody wants to live in downtown California, why don’t you rent there? And then start looking elsewhere. I think some of … there’s definitely some bad raps. Millennials get some … I think a lot of older people saying, “This person’s lazy,” and I’m sure there’s lazy ones, and there’s lazy Gen Xers and there’s lazy everybody else. There’s just more of us, right? I mean, if you think about the stats, in 2020 40% of the workplace are going to be millennials. So they’re really the ones that are moving the market and moving the trends in anything.
But I think ultimately, and for Canada too, we go to school, we get a degree, and really, it’s really, really hard for young people to start. And even just after a few years to make a decent wage. But I also think many, many of us go in thinking that we should be making 50 grand a year, year one right? And not put in our time, so I think it’s a little bit of both. I think some of them are hustlers, want to do well, and I think there are some that give us the bad rap, unfortunately.
Matt: Yeah. Every generation has bad rappers. You know? I think every generation complains about the upcoming generation in almost the exact same fashion. So they just happen to be the generation of the day.
So, super. So, now you’re speaking, you’re mentoring, you’re helping. What was it that inspired you to get involved doing that outside of just working for you and your husband?
Sarah: I think the biggest thing is I’m fairly involved in the community of real estate investing, and I actually have my own group, or my own real estate group, and we meet once a month. But outside of that, for us it’s so normal to have five, 10, 20 properties, we hear about it, we talk about it. And as soon as we’re out of that group, of circle of friends, they just look at your like you’ve got three eyes because you’ve got more than one property.
And so I think just having them be able to realize that there’s an opportunity, and I started working with some of my friends, and I saw them buy a house for themselves, and a house as an investment and just the lights go off in their minds. And being able to say, “Yeah, I can do this.” It’s just not this horror story that people say on the news, and the big and bad real estate market as if you buy on cash flow, and you buy on the right fundamentals, I think they wrap their heads around it. So after seeing a few people really be successful, I decided to try to see how many people I can help.
And I’m still just starting. But it’s just been very rewarding.
Matt: Yeah. I get it. It is rewarding. So, part of your bio, I was reading up on you a little bit before we got to talk here, and you kind of mentioned it here, and you might even be outpacing this right now, but you’re picking up one investment property per year. Sounds like you’ve picked up the pace here since then.
So from the experience, what’s the most impactful lesson, or lessons, that you learned, and how does that … how are you applying those lessons to your future investing?
Sarah: So I buy for cash flow. And I would say that would be the biggest piece of advice I can give somebody, is buy on cash flow, make sure that your rents are covering everything that you’re going to have to pay for, and then give yourself a buffer, right, you’ve got to calculate that. And I think it’s just going to be a lot easier to scale up, the banks will like you better because you’re showing that each property’s generating some income.
And also, like look at the fundamentals. So, if you’re buying a property in a market that people don’t want to live in, that has like one employer, and who knows what’s going to happen to that employer, like so definitely look at some of the fundamentals. For example, Brantford, Ontario, I like that there was a transportation increase, I liked that there was a lot of students coming in too because there was a post-secondary education that’s in full growth mode. I liked that, I liked that there were different employers coming there. The rents are increasing, there’s very, very … low [00:15:52] supply, and very high, those are the fundamentals that I looked for.
I think in terms of a lesson, one of the mistakes that I made specifically in the beginning, was not having the proper team set in place. So, for example, I was using a realtor from out of town where I live here, and that realtor was driving us to Brantford, didn’t really know the market, or anything like that. And then I was originally using the bank to, directly, to finance my properties, and in Canada, the mortgage brokers are probably the way to go if you’re trying to scale up. Because certain banks will loan certain amounts of properties, they’ll have different rules and regulations. And when I was going to a big bank in Canada, there’s five big banks, the Canadian banking system’s a little bit different than the US, they wanted 25% down after my second rental. So my first rental it was 20% down, the second rental was 25, and then they wanted 35 for my third one. And it’s just because that bank was not that investor friendly.
So mortgage brokers will be able to help you, and figure out what your goals are. And if I had worked with a realtor from the town that I was investing in to start with, and also worked with a mortgage broker, I wouldn’t have had to untangle the original mess.
Matt: Right. Right. Sounds like you and I have had the same mentors, or read out of the same books, or same experience for sure. So, what I got from that number one was invest for cash flow.
Matt: Couldn’t agree more. Number two was look at all the economic indicators. I mean, they’re not always perfect, but it’s a good starting point. And the third thing, which I think is probably the most important, is being very selective with your team. When it comes down to cash flow, as much as it is the tenant, it’s probably even more so the team and the management that goes along with managing your portfolio.
So, birds of a feather flock together, that’s why you’re here on this show.
Sarah: Absolutely. The other thing I would say as well is … when you set up your team, just make sure that they’re all investors themselves. Right? So like even your tax accountant. If they’re not investors themselves, they’re just not really going to be able to give you the right advice.
Matt: Yep. Bonus. That’s a bonus tip, I love it. So, you’re in Canada, we’re in the United States, I actually have a lot of Canada listeners. Would they be Canada listeners or Canadian listeners?
Sarah: Canadian listeners.
Matt: Canadian listeners. Because I know it’s Canada geese, it’s not Canadian geese, because they’re not native, nevermind. Going down a different path.
So, I’m asked, not terribly frequently, but I do get the email a couple times a month, “Hey, will this work in my country?” It sounds like the principles are the same, you’re buying for cash flow, you want the property to pay you more than it costs you to hold onto it. You can still access leverage, looks like the banking system might be a little bit different. As far as it comes to buying and selling on your own behalf, any restrictions there in Canada?
Sarah: It’s definitely different. So, when it comes to buying, like we don’t have houses we can buy on the doorsteps, as an example, in the court. A lot of … and the other piece of it is wholesaling, it’s there, but it’s definitely not as prevalent as it is in the US. So, a lot of the transactions can still happen through pocket deals from realtors, or privately, and then the same thing with the sales, they’re just … there’s far and few … wholesalers there.
The other thing is in terms of like the taxes, there’s no 1031 exchanges, that just doesn’t exist. In terms of the financing … so finance, I would say financing and taxes would the main two things that are different. And the other thing is in terms of buying and selling, just keep in mind, like we don’t have 30 $50,000.00 houses. I would say on the low end you’re probably looking at about 150, 200. When I look at Ontario, as an example.
One of the things that we do have is more appreciation than you guys. I think [00:20:11], depending on I’m sure which states, etc. and which cities. But in the GTA, we’ve increased even the immigration amounts, and in Canada every single year we actually have immigration numbers of about 400,000 immigrants per year that come in, and a lot of them go into that GTA. So it’s really, really pushing up the demand, and a lot of them are renting.
So there’s definitely some differences. I would say the biggest ones though are taxes, financing, and how properties are purchased. You guys just have more options than us.
Matt: Right. Okay, so two questions based on just that, but the first thing I want to go back to was, you said that wholesaling does happen, it’s not as prevalent. Is that because it’s just not the trend or the thing of the day, or are there actually laws that restrict it or get in the way?
Sarah: There’s no laws. It’s just not something that people have as much success doing. I don’t know why, but there are some that do well, they’re just not as many as you would find in the US.
Matt: Very good. And then as far as financing, can sellers carry back notes?
Sarah: They can. So it’s called a vendor take back. They can do that. And then otherwise, if they’re just going through the regular way, it’s for investment property, 20% down.
Matt: Got it. Perfect. All righty, so you have a seven-step investment process that you help your clients with, that can result in them going from their first property, working part-time, or doing the investing part-time while they’re fully employed, to planning a retirement around 15 years. Can you give me a crash course in those seven steps?
Sarah: Yeah, it’s basically what I do, right? Like when you identify a target market as an example, you figure out what you want to purchase, and you figure out the cash flow, you do the analysis, I was kind of actually reading your little coaching thing, it’s very, very similar to that. And so essentially we just … so, I really want to focus on buying whole, because I do believe that people should have more than one stream of income. And to be able to do something simple that’s not taking time into their workday, because you want to be ethical, and you don’t want to this stuff during work. So it’s based on the buying whole process, and how to fund the property, how to analyze the property, how to acquire rental property, how to manage the property, basically from start to finish.
Matt: Very good. Awesome. So, if someone, Sarah, wanted to get in touch with you, what would be the best way for them to do that?
Sarah: They can either go to my website and contact me on there, which is sarahlarbi.com, or they can email me at Sarah, which has an H at the end, so S-A-R-A-H, @sarahlarbi.com. And my last name is spelled L-A-R-B-I.
Matt: Perfect, perfect. And I notice you have a free book on there, My 10 Steps to Finding, Screening, and Keeping Great Tenants. Go grab that, you can never have enough tips on how to make that happen.
Sarah: Absolutely. And if they want to email me, I also have a bunch of additional questions that I ask the tenants as part of the application process.
Matt: Sweet. And you’ll share that with them?
Sarah: Yep, absolutely.
Matt: Sweet. Well, Sarah, it’s been an absolute pleasure, it’s nice to get to know you. Let’s do it again, sound good?
Sarah: Absolutely, thanks so much for having me on.
Matt: All right Sarah, take care.
Sarah: Take care, bye.
Matt: Uh-huh, bye bye.
I’m Matt Theriault, and to your success, God bless, we’ll see you next week for another episode of Thought Leader Thursday. Bye.