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Become a millionaire in 7 years...this time

We all know someone who became a first generation millionaire during the last market cycle from 2001 through 2008. It doesn’t take impeccable timing, mountains of cash, or any uncanny business acumen. All it takes is a simple plan to follow and the discipline and guts to see the plan through. That’s it, there’s no magic here. Thousands of millionaires will be made right here in the valley in the next seven years, so let's make sure we’re on that list! So how do we ensure we aren’t on the sidelines this time around the merry-go-round?

The real estate market isn’t nearly as complex as we make it out to be. It does the same thing over and over, it goes Slump-Recovery-Boom! And then Slump-Recovery-Boom! And around and around we go. It’s also not hard to determine where we are in the cycle because we know what has already transpired. For example, we know that Kelowna Real Estate was in a slump from 2008 until 2013. We have all read the headlines by now that sales are up, inventory is down, and prices have started to head upwards. So what do you think might happen next?

So here is the plan, it involves purchasing five very ordinary houses in good areas that have legal suites. The suites are important, as without one, a house will rarely cover itself, let alone cash flow. The ideal property is three beds up and two down as these rent typically for $1500 up and $1,000 down in good areas bringing in a total of $2,500. The common two up, two down will work, it will just bring in about $2,100. Mortgage payments on a house like this will be $1,514 with 20% down, $1,703 with 10% down, and $1,798 with 5%. Each of these assumes a 25-year amortization and an interest rate of prime. As you can see, no matter how you finance these typical Okanagan homes, they will cover themselves and then some.

The additional cash-flow can be spent at your whim, used to pay down additional mortgage principal, or my favorite, wisely invested into the property to raise its value even more. I'm talking about new floors, paint, bathrooms, kitchens, this kind of thing. These little additional bonuses are not even considered in the chart below, neither are rental increases, but I don’t want to be too technical. So let's now take a look at a simple grid that shows what happens to our investments as we move through this next seven year recovery-boom phase.

So now it’s the year 2022, we’ve had a good run, factor in the down payments invested, we have a net worth in real estate in excess of 1.5 million. We could sell everything, pay some capital gains tax and be left with a little over a million dollars. Then we could sit on the sidelines and wait for a market correction, pick up great deals when no one else is buying, and put this whole plan on steroids when the market goes Slump-Recovery- Boom all over again. It would have been like having a million dollars cash back in 2009 and wisely buying up all the fire sales that were popping up all around you. Could you imagine what you would have done with a million in cash during the last big correction? Literally a fortune at your feet!

This article isn’t about hindsight however, it’s about foresight. Those that have it will be a millionaire seven years from now and a multi-millionaire 15-20 years from now. And all it takes is the first step.

If you’re a first time buyer, good news - you can start building your portfolio with 5 or 10% down. Those of you that are little more established will need 20% down. For this there are many options; borrow against your primary residence, or bring on a money partner, private mortgage, vendor take backs, the list goes on.

Now as an important side note, it’s crucial to choose a bank that will use rental income offsetting, so that each property you add to the portfolio doesn’t make the next more difficult to finance. I have found that TD is currently the most favorable to the investor when taking rental income into account.

I want to conclude this by noting that what you’ve just read is not inherently risky, anyone you know who has ever lost money in real estate, including myself, has done so by speculating on real estate. We are not speculators! We are investors, and we are hunting cash flow. It is this cash flow that recession proofs any portfolio, so that even if you decide not to sell off at the end of the next cycle, your investments will continue to be paid down and yield a return. I am speaking from experience on this.  I followed this simple plan to create a seven figure net holdings in real estate the last time around, and I’m excited to do it all over again this time. It’s an exciting ride, I recommend being on it.

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About the Author

AJ is the owner of Kelowna’s downtown boutique firm, Vantage West Realty. The firm prides itself in breaking the mold when it comes to how they practice real estate. Taking a consultant's approach rather than the tired, old-fashioned sales approach of selling kitchens and baths, they pride themselves in having a level of expertise not found in a classroom.

Having been a student of real estate through two market cycles, AJ has come to see an absence of truly qualified professionals specializing in investment real estate. This has become AJ’s role within the firm and the community, to consult clients on foreclosure sales, flipping, positive cash-flow, the benefits of lease option and other creative avenues that most agents completely ignore.

AJ is a firm believer that the current market is rich with opportunity and that there is a real need for a consultant who 'speaks the language' of the investor large and small, and understands their wants and needs. For example, many realtors would squirm from having to make low-ball offers, worried about insulting sellers and tarnishing their own reputation. AJ consults his clients to make the offer that makes sense to them based on their goals. If it’s a flip, then the mathematics on the firm’s handy 'profitable project work sheet' sets the max dollar. The same for cash-flow, if a client has a rate of return in mind, then that dictates the price.

With a well-deserved reputation as a real estate renegade, Hazzi is definitely an out-of-the-box thinker; a proactive agent willing to get creative and produce a solution during challenging transactions. He is very excited about the market we will see in the next 10 years, and feels that it will lend itself very well to his unconventional style.

AJ is an agent who practices what he preaches. He has built his own real estate portfolio up to include development property, resort property, rentals, fix and flips and cash flow properties. Arming his clients with the knowledge and confidence to invest has enabled many of them to build impressive net worth and passive income. His goal is to impart on people especially of the the X and Y generation, that depending on RRSP’s and Government Pension Plans to look after us down the road is risky business. Most people don't realize that as little as one or two properties added to your real estate portfolio now can provide a safe, cushy retirement in the future. The sky really is the limit.

AJ's past clients and business relationships are his largest asset. His business has been grown almost exclusively by referral. To hear what AJ Hazzi's clients have to say about his service view the testimonials.

For more details or to reach AJ Hazzi, please visit www.vantagewestrealty.com
Contact: [email protected]
cell: 250.864.6433

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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