Real Estate Made Me A Millionaire

Posted by Alex Wilson on Tuesday, October 15th, 2019 at 9:00am.

I was inspired to create this video and article when I attended a wedding last weekend where I had the chance to catch up with a good friend from university. He’d come to Toronto from the US to attend the wedding and had the opportunity to invest into some condos, as well. In the end, he chose not to invest in Toronto condos because he didn’t believe in the market.

If you’ve been on the fringes of investing or contemplating selling the properties you already own, I’m hoping my personal experience will encourage you to invest and keep your condos.

My Real Estate Net Worth

After the wedding, I decided to calculate my real estate net worth and show you what I’ve grown since 2012 with an initial deposit of $39,300. This involves taking current market value and subtracting all outstanding leverage on the properties. If I were to sell everything in my portfolio today, I’d be left with $3 million. This all came from an initial investment, then using the equity on the properties to continue buying and expanding my portfolio.

I bought my first condo on assignment for 5% down in the Bohemian Embassy. I can’t remember how much it was exactly, but for the purpose of this exercise we’ll round it up to $500,000. A 5% down payment of $500,000 is $25,000. Then adding the $39,300 deposit, which we’ll round up to $40,000, we’re looking at roughly $65,000 for two properties. I leveraged the first one to help buy some more investment condos, sold my principal earth in the Bohemian Embassy and used that money to buy my house. Once I had my house, I used the appreciation in the house to rapidly expand my real estate portfolio. Using the leverage from multiple assets helped create the down payment amounts to buy multiple condos which is how I’ve grown my portfolio today to 11 condos. 

Am I Selling?

If I sold everything today, I’d net out to $3 million. Now, am I selling? Of course not. I’m not selling anything. And the reason I don’t is because I don’t care what it’s worth today or tomorrow. I care about how much it’ll be worth further down the road.

I took the time to calculate what my current portfolio will be worth in 30 years. I chose this timeline because in 30 years they’ll all be paid off and be on mortgages on the properties. At a 3% annual compounded growth rate, allowing for the natural up and down periods, my portfolio would be worth $20.7 million.

So, in 30 years, simply by renting out the properties and doing nothing else, without factoring any cash flow from the rental payments, strictly from appreciation, my portfolio’s worth will have gone from $3 million to $20.7 million. 

Doubting The Market

People fear, when investing in real estate, that the market will go down and they won’t be able to recover from it. Though the market does naturally go up and down, investing in a condo in Toronto, a city that consistently continues to grow with such limited real estate, you just can’t lose. The real estate market is a whole different ball game than, for example, the stock market.

I had some money in my TFSA savings and I decided to buy some stocks. I was interested in BlackBerry stock. I was trading near a 52-week low in regards to the value and I had read some analysts’ reports which were indicating that it was a strong opportunity. So, I bought it at $9.50. It went down to $8.50, then shot up to $10, then had the biggest single one-day drop. I took a look yesterday and it was down by 25% from when I bought it. Even though the analysts had indicated it was a strong buy, they missed their earnings reports and the stock dropped in value. 

I brought this story up because this investment that I had made had outside impacts and outside technologies that I don’t have any control over. A downturn in a specific company may not be something they can recover from. What I do know is that when I invest in real estate, in the right location, the prices are secure and will continue to go up. I don’t have to be worried about the long-term stability of the product. Investing in Toronto is investing in that ‘right location’. 

RBC wrote an article referring to rentals in Toronto and, essentially, how renters are screwed. They looked at the current housing market and saw severe supply deficiencies, which we already knew. They went further and did the math and turns out we need to literally double the rental supply that’s currently on the market to satisfy the rental needs of the greater Toronto area.

These are fundamental market issues that can’t simply be solved by tomorrow. These are government policy based items, economic based items, and planning department items. There are so many different moving parts that we won’t be seeing a fundamental change in this issue for potentially 5 to 10 years because, not only for the simple fact these buildings need to be built, but for the ethic that the policy plays and the economics behind them to get them built. 

We know that we have severe rental shortages, we know that we are in the economic capital of Canada, and we know that we continue to have a strong immigration growth because this is where the money is. This is where the jobs are, so naturally this is where the people working these jobs are going to live. Pension funds are buying into apartment buildings, private equity are buying into them, and condos are your opportunity to act like a pension fund or a private equity institution and buy your own. You can assemble your own apartment building by investing in separate units. 

Rental-Based Generation

I’ve done it. I went from my first investment of $39,300 to a portfolio that now has a net worth of $3 million and will continue to grow over the next 30 years to $20.7 million. And I’m not buying and selling these properties, I’m holding them because the market conditions only point in an upwards trajectory. Even if there is some sort of downturn, it doesn’t matter because you’re going to have tenants paying down all your property costs.

We are turning into a rental-based economy. After doing the math, why wouldn’t I invest in this area? Real estate is always going to be there. People need roofs over their heads and this city isn’t going to stop growing, which means you’re going to continue to see an increase of value in your property. 

The best time to buy real estate was a long time ago. The next best time to buy is today. 

If you want to build your own apartment building through investing in condos, email me at contact@alexjwilson.com or call/text me at (416) 996-5181. I’d be happy to schedule a meeting with you and help you make your real estate dreams come true in building your generational wealth and financial freedom.

 

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