#28: Erwin Szeto


Download Now!
For years Erwin Szeto, along with his team, have been working hand-in-hand with real estate investors from all over Ontario to invest in St. Catharines real estate and its surrounding areas.

What started with a couple investments has grown into hundreds of residential investment properties worth tens of millions to our clients.

Find out morea bout Erwin Szeto at:
www.mrhamilton.ca

Stefan Aarnio: Ladies and gentlemen, welcome to the show, Respect the Grind with Stefan Aarnio. This is the show where we interview people who have achieved mastery and freedom through discipline. We interview entrepreneurs, athletes, authors, artists, real estate investors, anyone who has achieved mastery and examine what it took to get there. Today on this show I have a new friend of mine, Erwin Szeto. He’s a well known real estate investor out in Ontario, Canada. He’s got a real estate team. He does some coaching. Really great story. Erwin, thank you for being on the show, Respect the Grind. Thanks so much for joining me.

Erwin Szeto: Thank you, and I don’t know if I’m a master or nothing, but you know, much respect to the work that you do. I’m on some of your email lists, and I’ve bought some of your books. So, I get all the emails, and I’m sure there’s some people who don’t like it, but [inaudible 00:01:06] the amount of content you put out there.

Stefan Aarnio: Thank you.

Erwin Szeto: Happy to be on the show.

Stefan Aarnio: We’re doing like an email a day, and some people are like, no, no, no, and it’s like, you’re either in or out on emails, man. So, Erwin, great to have you on here. We’ve got a million mutual friends. I was saying like hey, you’ve got like everybody in Canada I know on your podcast. Really successful podcast, and for people at home who don’t know you, can you tell people at home a little bit about Erwin?

Erwin Szeto: I’m Chinese Canadian. My parents came here when they were like 18. That sounds crazy, but considering you’re Canadian, a lot of listeners Canadian. You live in possibly the greatest country in the world, and I followed a typical upbringing. Worked hard in school. I don’t know where along the way, but it was almost as if I was taught that you do well in school, you’ll make money.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: Went to university. Went to business school. And at the time I was graduating, I remember sitting in financial markets class my fourth year, and we had Internet at the time on our laptops, and that’s when the planes crashed into those buildings, horrible, horrible event, and then I was graduating into that. So, then it was a struggle to find employment afterwards. Entrepreneurship wasn’t really something that was on the radar, and then once I was working, I was realizing quickly it wasn’t enough money. Not for the lifestyle I wanted, and I also didn’t have the personality to be an employee.

Stefan Aarnio: Right.

Erwin Szeto: I think some people … I’m sure people who listen to this show will feel that as well. I just felt I wasn’t suited to be an employee. I wanted to create for myself rather than create for my employer, and I worked for seven years at a company that was acquired by IBM. I was there during the acquisition, and things got even more corporate. We had like seven passwords you had to enter every day.

Stefan Aarnio: Something ridiculous.

Erwin Szeto: Yeah, something ridiculous like that. If you left your email for 15 minutes alone, then they would ask you again for your password. It was painful. And, yeah, I started investing. I started investing when I was around 25. Read “Rich Dad, Poor Dad” which was what my father in law at the time. He’s now my ex father in law, but he is the one that got me to read the book, and started making a lot of sense, you know? I know we talk poorly about our government, because every government has issues, but Robert made a great case that the government is actually encouraging you to buy real estate.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: With all the tax benefits of doing so, and then he also … they actually basically do … the government does discourage you from making more money at the job. You just pay more tax. You pay more of it to tax, and then you get more people to deal with, and you have to work more hours, and then that didn’t sound great. That wasn’t the life I was looking forward to. So, then I got into real estate, and before we started recording, you asked me just to talk.

Stefan Aarnio: Mm-hmm (affirmative). Mm-hmm (affirmative).

Erwin Szeto: I started working with a real estate broker. He own his own brokerage, so he had like … I don’t know, like 30 agents under him, and like three offices. So, he was big time, and we were honored that he was … that he wanted to work with us, but he didn’t really understand real estate from an analytical perspective. Like cash flow, fine, but he didn’t really understand economics, for example. And the example I gave you was, I wanted to buy hear a highway that I was only five years old, right? Highways aren’t built that often.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: So, I wanted to buy near it, and he said, ‘Why would you want to buy near it? It’s already been priced in.’ So prices then were probably like 170, and today those prices are like well over 400.

Stefan Aarnio: Woo!

Erwin Szeto: Yeah, and so that relationship, I realized, wasn’t working out. All real estate agents … well, I’m a real estate agent. I don’t know if I … I do talk badly about most real estate agents.

Stefan Aarnio: Hey, me, too.

Erwin Szeto: Most of them say they’d know investments, but really they … in my interviewing of agents, most don’t. Not on the level that I was looking for. So then I went down that path of getting my license just to trade for ourselves. Just to trade for myself and my partners, and then at the time I belong to a real estate investment network and had friends there, and they were seeing what I was doing, but with my own investing, and then they wanted in, and then I kind of grew from there.

Stefan Aarnio: Wow. Okay, so, went from the corporate world into the real estate agent world. You mentioned to me earlier, I think it was off air that you’d buy property before you jumped ship and went into real estate, which is great. And then there’s a real nugget in this story about the broker or your boss telling you, ‘Hey, man, I don’t know if you should buy that property next to the highway,’ because a lot of people who are brokers, and I always say this, I’m a pure investor. I never … I bought the real estate course three times. I’ve never even opened it. So, three times I went, threw down 500 bucks or 1,000 bucks or whatever. Never got the license. I’m just a pure investor, and what’s interesting, though, about real estate agents. They’re touching real estate every day. They’re working in real estate, but they don’t own it, and they don’t think like investors. It’s interesting. They always think about the commission, but they don’t think about what’s the long term value of owning a property.
So, what changes your mind, Erwin, to go from a broker who’s running after every single commission like a dog running after cars, to somebody who’s able to look at the bigger picture and maybe the wealth and where the real value’s at?

Erwin Szeto: Right. Our business is simple. I can’t do what other realtors do. I’ll give a quick example. So, a friend of mine, she was looking at a house in our neighborhood. So, I was willing to somewhat help her. I wasn’t really helping her. I wasn’t going to be her agent. And then she … we walked into a house. It was everything she wants. Everything. And she had a difficult wish list as well. And then the only problem with the house was her dining table wouldn’t fit in the dining room. That was it. That was the only problem. Otherwise, it was a perfect house. Move in ready. Finished basement. Everything she needed. Room for her pool table. And it was like, oh, man. That’s why I don’t do that side of the business. I understand investors. I’m an investor. I understand that part.
And then when you’re an investor, and you work with investors, all you do is, I would buy this property, and literally it’s happened many times, they didn’t buy it. I bought it.

Stefan Aarnio: Right. Right.

Erwin Szeto: It’s just treat every client like your brother or sister, and then you’ll always have business, and that’s what we did. That’s what I teach my team as well. Would you buy it? Yes. Then you can offer it to the client.

Stefan Aarnio: Right. Right. That’s a great motto. Great mentality. My team does a lot of wholesaling. We’ll tie up I’d say a turkey carcass or a chicken carcass and we’ll sell that carcass, that messed up property to somebody, and it’s interesting, because in the wholesale world, what’s good for you may not be good for them. There’s contractors like to fix stuff up, and there’s landlord guys. Maybe they’re holding. Maybe you’re not. And there’s retail flipper guys. So, it seems to me that everybody’s got their own flavor. They’ve got their own needs. I love the ethics you’re bringing to the table. Say, hey, you wouldn’t own it, maybe you shouldn’t.
I remember my very first property, my agent took me to go see a property. He was an investor agent much like yourself. Smart guy, knew his numbers, knew chap rates, knew cash flow. Brings me to this property. It’s a little fourplex here, actually in the same neighborhood I got my office in here, and he says, ‘Stefan, this property’s $199,000.’ Now, that same year, that property, I think, was like 350, 400, probably 450 today. So, we’re talking like you would have made 100,000 in equity, and he says to me, ‘I passed on the deal. It’s cash [inaudible 00:09:24] fourplex.’ He says, ‘You’re walking away from this, and you don’t know what you’re walking away from. This is a great deal.’
Let me ask you this, Erwin. So, you’re buying property for yourself. You’re buying property for your clients. And you’re also coaching consulting. What makes a great property?

Erwin Szeto: First, it depends on the investor, because everyone’s criteria is different. I’ve bought property that we’ve had to jack up before, because half of the property sank. So, you had to jack it up, and you had to wedge shit under so that the floors would be level. I’ll personally buy almost anything. I think that makes sense, and for myself, for example, I’m a little further along, and I have a long term view. I’m buying for the five, ten year terms. So, for example, I like … I want property that’s adjacent to my existing properties.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: Right. And my criteria doesn’t match everybody else’s. For example, if I can get an adjacent property and break even on cash flow, I’ll take that all day, because the strategic value of that property is worth so much to me. Right?

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: Depends on my investors, right? I have investors, for example, who buy houses or condos for their kids. So, then their criteria’s going to be totally different, but I can put myself in their shoes. For example, if they have a millennial kid that wants to live in Toronto, they probably want to leave near a subway station or somewhere near a good entertainment district, right?

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: So, that’s not necessarily a good investment that either you or I would hold onto, but it would make sense for them, and then-

Stefan Aarnio: I love what you’re saying about the strategic value. That’s a very … That’s something people don’t look at. I just bought my neighbor’s house here. So, I’ve got the office in this property I own. I just bought the neighbor’s house, and now I’m going for the next neighbor.

Erwin Szeto: Yeah, yeah.

Stefan Aarnio: That’s the exact same thing. I don’t really care what I paid for those neighbors. It’s just 30, 40 years from now when you’ve got four, five, six, seven, eight properties in a row, that’s where the monopoly game kind of comes up.

Erwin Szeto: Yeah.

Stefan Aarnio: Now, let me ask you this, Erwin. You’re a smart guy. There’s an number of things you can get into. Some people are getting into online ecommerce cryptocurrencies, all these things. Why did you choose real estate of all things?
Erwin Szeto: So, I mentioned earlier, I’ve been a Rain member for like ten years. So, back in 2008, I remember walking into a Rain room and then within a few months, within a year or two, I met so many millionaires who made money in real estate, and in getting to know them, they weren’t rocket scientists, right? They weren’t like Gates for … like Bill Gates. They weren’t … they literally weren’t sending rockets to the moon. They were everyday people with varying levels of education, high school, university, nothing, right?

Stefan Aarnio: Mm-hmm (affirmative). Mm-hmm (affirmative).

Erwin Szeto: And I’ve never met so many self made millionaires with investment property, and then I learned about the systems that are involved in building a portfolio, and it’s something you can replicate, right?

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: Versus I can’t predict what bitcoin’s doing, right? And also funny enough, like many real estate investors, we’ve all done stock investing. So, think of the time. I joined Rain in 2008. I was a heavy stock investor from 2002 during the dot com bubble and all that stuff. 2005, 2006, and the credit crisis in ’07, and my portfolio was slaughtered.
But I was owning real estate at the same time, right? No credit? What happened? I had more tenants. I have a vacancy, immediately three people come line up and apply for the place, great applications. Like wow. Stock portfolio was getting killed in this correction, and I’m cash flowing better than ever on my real estate. So, this works, and I’ve met so many people that this is working for. I want some more of this, right?

Stefan Aarnio: Mm-hmm (affirmative). Mm-hmm (affirmative).

Erwin Szeto: I think a good number of people want to make good money, like making a million, making two, five, whatever, and it seems quite possible in real estate for almost anybody. So, I can’t find that, and I try to cover that in my show. I ask people all the time. This isn’t a real estate show. I know it’s called a real estate show, but find me a better way of making money.

Stefan Aarnio: I like that. Dude, that’s a great name for a show. Find me a better way … money. You just bring people on. Is it better? I like what Carnegie says. He says, the steel magnet, he says, ‘More money’s been made in real estate than in any other industrial effort. All other industrial efforts combined.’ It’s interesting, because I look at my career. I’ve been doing real estate for about ten years, and I’ve also got a business now for six, which is training and all sorts of stuff.
It’s crazy to look at over time, the business makes money. It makes cash, and cash is good, but when you look at over time, retained earnings … I mean, you look at the equity held, and you look at the consistent cash flow, man, real estate really is where it’s at. The buildings that the businesses sit in are really where the money’s at, and it’s funny, because I’m working on a 50,000 square foot warehouse right now, and I went in to buy the business, and they said, ‘Hey, why don’t you buy the building instead?’
And it’s crazy, because those people, they held onto that building for ten years. It’s a huge part of their retirement fund, and that’s a big cash out moment for them. Whereas they’ve been working the business, working the business, making the money, making the money, and then the real estate is where the real value’s at.
So, let me ask you this, Erwin. When is real estate not a good investment? Is there any time when you think it’s just not good for somebody or a time to not invest?

Erwin Szeto: I think it’s more of a personal thing, because I believe … for example, I do jiu jitsu, right? What my black belt teaches us is jiu jitsu’s right for everybody. It’s just not everyone’s right for jiu jitsu. Maybe I didn’t say that right. Anyone can do real estate investing. It’s just if it’s not a priority for you, it’s not going to happen. Now, I’ll flip that question around.
When is the right time to invest in real estate? Because I know we call it real estate, but this is business. Buy low and sell high. Hone what’s in short supply. So, I’ll throw some stats at you, if you don’t mind.

Stefan Aarnio: Sure.

Erwin Szeto: Ontario grew by 190,000 people in 2017.

Stefan Aarnio: Wow.

Erwin Szeto: And also there was a “Toronto Star” article where they stated, ‘700,000 millennials wanted to enter the housing market in the next ten years.’ So, let’s just do straight line, 70,000 a year. So, plus the 190,000, so you need 260,000 people potentially need housing. And then the Ontario average is about … the household is about 2.7 … 2.7 people per household. So, we need close to 100,000 housing units, home units, for new … for people entering the market.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: So, the GTA is on a record pace of producing 57,000 units. It’s like the most they’ve ever done.

Stefan Aarnio: Right, in the year, that’s a huge amount of units.

Erwin Szeto: In a year. That’s a huge amount of units.

Stefan Aarnio: Just, you know I’m in Winnipeg, we’ve got 55,000 rental units in Winnipeg. That’s all the rental units available. So, they’re doing an entire Winnipeg of rental units in one year, which is crazy.
Erwin Szeto: Right. In our market, almost everything … the vacancy’s between 1 and 3% in the Golden Horseshoe.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: So, there’s not enough housing. There won’t be enough housing this year. So, then all those people who don’t get a house this year, will try next year. So, it will be even worse, and it will just continue to be worse.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: So, don’t you want to hold something that’s in short supply? Right, that’s just business, and it happens to be the industry of real estate. That’s how I look at it. So, don’t you want to grab a piece?

Stefan Aarnio: Right. Right. I love that. They have that famous saying, ‘They’re not making anymore real estate. They’re just not making anymore.’ And since we’ve picked a land locked area where there’s just no more land or maybe a highway or a piece of water.

Stefan Aarnio: That’s great, now, Erwin, let me ask you this. So, you’re working with people who are investing in real estate. Maybe passively. Maybe as a second thing. Maybe they have a job, and they’re investing. [crosstalk 00:18:48]. Yeah, lots of those type of people. Do you think that success in investing is more about talent or hard work?

Erwin Szeto: No. I’ve met … hard work, yes, especially for the people that want more. For someone to buy like five properties, six properties, that can be very easy as long as they have the capital and credit. But for the people who want to go it alone, as in reproduce their income, yeah. That usually takes a little bit more motivation. Good example is I met someone from Toronto. She owned three triplexes … Sorry, I think just two triplexes, and she lived in one of the units, and so she had no … She could live off of that, right? She was financially free.

Stefan Aarnio: Right.

Erwin Szeto: She didn’t own a car. Didn’t have kids. Didn’t have a whole lot of financial requirements, but yeah, she was financially free, right? I don’t think it’s [crosstalk 00:19:38].

Stefan Aarnio: [crosstalk 00:19:39] climb up on the roof when the roof leaks and do the whole roof by yourself?

Erwin Szeto: Doubt it. She was kind of what you’d expect of a city girl.

Stefan Aarnio: Yeah, I see. Okay. I’ll … go ahead.

Erwin Szeto: I have another friend. You’ll like this story. This is the grind ultimate. Barely passed high school. Failed college. So, he started a hot dog business in the restaurant bar area, and then he bought another hot dog cart, and another one. Grew to like, four.

Stefan Aarnio: Wow.

Erwin Szeto: And here’s the hustle and the grind is if you want to service the bar op crowd, what hours do you have to work? Right?

Stefan Aarnio: Oh, yeah.

Erwin Szeto: Midnight to four.

Stefan Aarnio: Yep.

Erwin Szeto: Midnight to four. Those are the hours nobody else wants. So, he’s capturing a lot of business, and then they turned it into like 10 houses.

Stefan Aarnio: Wow. I love [crosstalk 00:20:33] I love [crosstalk 00:20:36]. The hot dog cart, that’s my favorite story. I read a book about a guy. He’s actually … I think he was from California. I’m trying to just plug in my headphones here, because it’s telling me headphones are going to go in a sec. One moment.
All right.

Erwin Szeto: Oh, they’re wireless.

Stefan Aarnio: We were wireless, and now … Oh, dude, it’s Bose, man. It’s top of the line. They pay me a lot of money to say that. Yeah, so, I love the hot dog cart story, because my thing has always been with Robert [Kiasaki 00:21:16]. It’s build a business. Use the business to fund your real estate, and I’ve never had a job more than 10 months in my life, and the hot dog cart story’s great, because you can just take something basic like those hot dogs, and those basic little hot dogs, you’re selling those things for 4 bucks apiece or whatever, and converting that into a house, and you can get a guy to work the hot dog cart.
I was reading a story about a guy. His name was Errol Abramson. Abrams … Abramson. And he had a poo company. He was shoveling manure. Literally poo, onto plants, and him and I think four guys went around with a truck, and he took $25,000 of profit he made one summer shoveling manure, went to Hawaii before Hawaii boomed, and he bought 10 condos, $2,500 down each, and those condos turned into a multi million dollar piece of collateral. Then he borrowed against that on a couple apartment blocks in Hawaii, and became ultra ultra rich from one summer of shoveling manure.

Erwin Szeto: Yeah, that’s extreme.

Stefan Aarnio: It is extreme, and it’s unbelievable, because people make fun of him and say, ‘Oh, he’s poo boy. He’s shit boy. He smells bad.’ But you smell bad for one summer, man, and you get that invested in real estate property, and you never have to shovel again.
So, let me ask you this, Erwin, you got a pretty good brand online. I’ve seen your podcasts and the people you’re interviewing. I love what you’re saying about your team. You want them to sell the right things and have ethics to protect that brand. What’s more important to you? Do you think it’s better to have a great brand, or better to have a great business?

Erwin Szeto: Well, I actually believe a brand is your actions, because I was … I tease people who spend time working on their logo, or spend too much time on their website, stuff like that. Your brand is your actions, right? What is it you do? One of my favorite quotes is from “Batman”, and he says, ‘It’s not who I am that defines me. It’s what I do.’ Right? And that’s what I think my brand is, and then the marketing sign is just showing it. Showing people what you do, versus telling. I do charity work. Great. And now I share pictures of me doing charity work for my charity, right?
And, yeah, I think they tie in together, because my business funds my charity. We kind of position … and that’s actually a good point for people listening to this show. My charity is funded almost 90% by real estate investors. We’re not the demons that the government puts us off to be, like capitalist pigs who are looking to just squeeze the poor. No, we’re trying to help.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: Right? But, yeah, I think business and brand are almost together, because the brand doesn’t mean anything to me, and I think that’s the mistake that people make in business. A real estate business is a good example. You see a lot of people just pick a name, and they could call it Something Properties, and then they have … then I’m going to their website, and there’s no mention of who it is. It’s just a purely faceless company.

Stefan Aarnio: Yeah.

Erwin Szeto: Right? Even if you’re new, at least put your face on it. Let people know you’re a dad in your chair, and you go to school, and stuff like that. Right? Don’t be a faceless company. But I wanted to go back to a question you asked. When is a bad time to buy real estate? And let me give you an example, because I’m not a believer in real estate will always go up, because I’ve studied the 1989 crash pretty closely for the Toronto market.
Like a bad time to invest, for example, is in Japan. They allow no immigration. They’re not having kids. It’s actually a shrinking population. So, we have the opposite of that in Canda. So, that’s why it makes a lot of sense for us to do it here, but in places like Japan or Cleveland. I was in Cleveland last summer. The population’s shrinking by like 4%.

Stefan Aarnio: Yeah.

Erwin Szeto: You know? LeBron … what do they call it? LeBron’s place, right?

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: You wouldn’t want to invest there. Shrinking population by 4%. That’s crazy. So, you know, people just need to look with their eyes, and it’s not about investing in real estate. This is a business, right? Still treat it like a business. Don’t buy a hot dog cart that doesn’t have any customers. Right?

Stefan Aarnio: I love that. I think one of the most important things in real estate is … I always say it’s the dirt under the building. That you can have a great piece of dirt and a really crappy building, and that’s better than a crappy piece of dirt and a great building. Can you tell people a little bit about that? Do you think it’s the dirt more than the building, or do you think it’s the building more than the dirt?

Erwin Szeto: The building depreciates, and I have this conversation with investors all the time. We’ll walk through a house, and they go, ‘Oh, that kitchen. Oh, that bathroom.’ And I’m looking at … I don’t care. I care about more of the expensive items. I care about where the house is located. If that house is located in one of my properties, I don’t give a shit what it looks like. Can I swear on this podcast?

Stefan Aarnio: Yeah, man. We can swear. We can do whatever you want. It’s “The Grind.” “The Grind” is okay with that.

Erwin Szeto: Because the building can be replaced, and where I live, it’s becoming more often. It’s happening more often. Stuff is being torn down to be replaced with something with higher … of higher value. So, building is more … i wouldn’t call it a short term, but it is your means to generate some income, but the land is … like we were saying earlier. We’re not building anymore of it. So, the lot is really important to me, and more important now in my stage than the early days.
Early days is all about cash flow, but now I am looking for strategic value. And I’ll give an example. Hamilton is close to allowing laneway houses to be built. Like 550 square feet, and I don’t know if you … and when I was in Vancouver last summer, and at the peak of that market, they were selling laneway houses for 8000 grand.

Stefan Aarnio: Woo! You get the land with that, too, or they just park that at the trailer park?

Erwin Szeto: No, you get the land under the building. But, yeah, that building ain’t worth crap. It’s that piece of someone’s backyard that’s worth 800 grand.

Stefan Aarnio: Wow. Wow.

Erwin Szeto: I’m not saying that’s going to happen here, but it may one day. My crappy laneway house might be worth some money. Right? So, that’s an opportunity, again, because of the lot backing up to a laneway. There’s opportunity.

Stefan Aarnio: I like it. I like how micro you’re getting with it right now, Erwin, because real estate is one of those games where it’s just basic, and it’s so simple, and I think people overthink it sometimes, just basic things. I love buying downtown buildings with parking. I just love downtown parking lots. This building I’m in, I wanted the parking. The one next door, I wanted the parking. The one over there, I wanted the parking.
Downtown parking is always good, and [crosstalk 00:28:58] 50 to $100 stall, I’m doing a … trying to purchase right now a commercial deal, and it comes with … there’s two parking lots. Parking, man. It’s the most basic thing, but we forget about it. Now, let me ask you this. Do you think making money is a basic thing, or do you think that it’s more of a complex thing? Are you a complex thinker, or a basic thinker?

Erwin Szeto: I don’t think it’s that complex. Buy low, sell high. And to put it simply, for example, if you bought at the peak of 1989, the 1989 crash in Toronto to today’s prices. On average, it’s gone up 7,000 a year. So, 7,000 a month, I think. Right? So, put simply, do you want to pay tomorrow’s prices, or do you want to pay today’s prices? That’s as simple as I can put it.

Stefan Aarnio: Mm-hmm (affirmative). Mm-hmm (affirmative).

Erwin Szeto: I think money is much simpler, and like you said, some people over complicate it. For example, some people will look for a unicorn. They’ll look for the house that has a laneway house that you can potentially downtown … that you can basement suite that’s near an LRT station. Yeah. If you’re only just looking for one house, just get almost anything.

Stefan Aarnio: Right.

Erwin Szeto: I was doing some simple math, and I’m sure you’ve had disagreements with other financial planners. I don’t disagree with them, it’s just what they’re offering is … doesn’t really compare, and it’s just some simple math. I saw ICFP was giving a presentation on getting 8% returns. First of all, can you really get 8% returns between the age of 30 and 65?

Stefan Aarnio: Consistently, that’s very hard. That’s very hard to do.

Erwin Szeto: Very hard, and then I just gave the example of buy a simple house for whatever, say $400,000. Use a depreciation rate of 3%, right? And people can decide what they think is reasonable, but I think 3% is pretty reasonable. And then, so, say you’re age 30. From now to 65, that’s going to be worth … So, also your house will pay off in that. So, then you’re cash flowing big on the rent, and then your house is going to be worth something like 1.2, 1.3 million, right? By the age of 65.
And what’s that 8% … what’s that 8% worth? Assuming a 50% investment. It’s worth like under 400 grand. So, how much easier does it get?

Stefan Aarnio: Right. Right. I remember when I was young, my dad was … He said, ‘Oh, you know, I used to work in a bank in Sweden.’ So, I got one immigrant parent, and I got one Canadian parent. So, I got the Canadian experience. I got the immigrant experience. I got half and half. And my dad said, ‘You know, I used to work in a bank in Sweden.’ He goes, ‘If you make money,’ and he’d always say this every birthday. He’d say, ‘Oh, you got 20 bucks, what are you going to do with it?’ Grandma would say, ‘What are you going to do with that 20 bucks?’
And we’d always say, ‘Oh, I’m going to put it in the bank,’ because that’s what they trained you to do. My dad says to me, he goes, ‘Oh, if you put the money in the bank, that’s compound interest, and you’re going to make a return.’ And I go, ‘Okay, great, I’ll make a return.’ So, I’m like, I think I was young. I was maybe like 10, and I’m thinking, okay, I get a return. So, I take my 100 bucks to the bank. So, I got 100 bucks for my birthday.
Back in the ’90s, that was a lot. So, I got my 100 bucks, and he goes, ‘Well, I’m going to get a return.’ I go, ‘Well, dad, what kind of return?’ He goes, ‘One percent.’ And he goes, ‘That’s how people get rich.’ And I remember being a kid, and I was like … my brain didn’t make any sense. I was thinking, man if I won the lottery tomorrow and had $1 million, and took that $1 million, and if you had 2%, I’m like, I’d have 20 grand a year, and I could live on that 20 grand. This is me as a kid doing this math, and my kid brain couldn’t make it make sense how …
My dad was telling me that investing was the way people got rich, but then he was telling me the bank pays like 1% or 2%, and people put their money in the bank and got rich. I couldn’t figure it out. What was my dad missing in that picture? Or why don’t you tell the people at home … that’s my kid perspective. Tell me about your financial perspective as an adult.

Erwin Szeto: My parents were similar. So, it was mostly my dad who was responsible for teaching me about money. He did the best he could. My dad’s a doctor. So, he did well that way, and that was kind of like the path that he kind of taught us on how to make good money was become a professional. Get a professional designation, and then you’ll make money, right? But it wasn’t for me. It wasn’t my path to be a doctor.

Stefan Aarnio: He wasn’t giving you the 1% and you’re rich rule?

Erwin Szeto: No, not even. Not even. It’s funny to me, too, because I’m Chinese, and I only learned about buying gold and silver more recently, like the last five, ten years. Right? Nothing like that. The advice I remember getting was learn to make money with your head, not with your body. Right? So, don’t exchange money for labor.

Stefan Aarnio: Right.

Erwin Szeto: Was a good step. What I teach my kids will be very different about making money.

Stefan Aarnio: So, what are you going to teach your kids? Because I love hearing this. It’s the next generation. I have so many successful real estate investors. I show so many entrepreneurs, artists, athletes, all the people. I love hearing what people teach their kids. What’s some things you teach your kids to do it differently?

Erwin Szeto: So, each of my kids own a house already.

Stefan Aarnio: Wow.

Erwin Szeto: Yeah. Kids are expensive. Do you have any kids?

Stefan Aarnio: No, I don’t. None that I know about. I’m 31. No kids. No wife. No girlfriend, even, right now. So, single as it gets, man.

Erwin Szeto: So, I have a mind that’ll run away on me if I give it [inaudible 00:35:10] runway space. So, when I had my daughter, again, mind running away. I started just Googling, how much does university cost? Holy shit! I think the number was like 170,000 or something for a four year Bachelor by the time she’s 18. So, whatever that year is. And I’m like, so, panic attack. I’m going to have to come up with that money somehow, and likely for most people, they’ll just retire later. Just keep working longer.
I’m not interested in that. So, I bought her a house when she was only three months old. You tenants, you’ll pay for my daughter’s education, right? And then same with my son. Took a little longer to get his house. I forget exactly. Close to a year. My son was about a year old by the time he got his house. my daughter was three months when she got hers. Whatever.
I take my kids to showings, for example. And I’ll take my kid when a tenant moves in, for example. Especially if they have kids then I definitely want my kid there. Just for that relationship, and also so many investors, for example, or people in general, the general public, won’t get into real estate investing because there’s tenants. Oh, they trash places. They’re just there to stick it to you. They’re going to stuff my toilets, whatever.
But the context for my kid is a lovely young lady with her lovely song, and they’re nice people, and that’ll be their context for being an investor.

Stefan Aarnio: Right. Right. Exactly. Well, dude, I’m … love hate with tenants, because I had a whole bunch of rentals when I was younger, and then I downsized a little bit, and now I’m upsizing again. That’s one of those things, you know, you love them, and then you hate them, and then you love them, and then you hate them. What’s your craziest tenant story that you have, if you can even say it on air?

Erwin Szeto: Craziest … I’ve had some better ones. So, I’ve done a lot of student rentals. Oh, I have one. Yeah, I have one. I have a student rental near Brock University in St. Catherine’s, and I had a kid who was like … was paying rent with his ODSP, with his disability money, and I didn’t see it, but I was told he snowboarded off of my roof.

Stefan Aarnio: Well, good thing he didn’t fall and break his neck, and your insurance is on that.

Erwin Szeto: Yeah, he built a ramp up to my roof line, and then snowboarded off the peak of my roof down the ramp. He originally hurt himself, I think, BMX biking. He fell off that doing some jumps and stuff. So, he hadn’t really learned his lesson yet. Pretty wild story. I haven’t had anything nuts, like crazy parties or anything like that.

Stefan Aarnio: Oh, dude, you’ve got to come to Winnipeg, man. Winnipeg’s the murder capital. We’ve got a lot of good tenant stories, but maybe I’ll save that for your show.

Stefan Aarnio: That’s great. So, Erwin, if you can go back to your younger self, let’s say 12, 13, 14, 15, 16, somewhere young, what’s a piece of advice you’d give to yourself being somebody who’s seasoned in real estate now, been around the block, what would you give you yourself piece of advice?

Erwin Szeto: So, two things. I believe that every that’s happened to me is part of who I am, but that allowed me to arrive where I am today, and I live a pretty blessed life right now. I have a lovely family. I have a successful business. Got property that’s doing well, right? So, I wouldn’t change anything, but if … what would make me feel better is going back to that kid. So, my parents came at 18. We spoke Chinese at home. So, when I was a kid, I didn’t speak English when I went to school. The school principal actually asked …
We switched schools, because we used to live in a worse neighborhood, and then we moved to a better neighborhood, and we moved to the better neighborhood. I was in grade one at the time, and the principal asked, ‘Has this kid ever been to school before?’ My English was that bad, and back in those days, immigrants weren’t that … nearly as popular. People who are familiar with [inaudible 00:40:07] in Ontario will laugh, because that’s like Chinatown now, but when I was growing up, there was like three Chinese kids in the whole school. One was my brother, and everyone assumed the other guy was my brother, too.
I’m sure you have lots of Chinese people running around Winnipeg now, but-

Stefan Aarnio: Oh, Winnipeg’s crazy, man. We got Chinese, East Indian, 16% Philippino in Winnipeg. So, we’ve got a real mix of people here, but Winnipeg’s always been and immigrant city. It was the Polish and Ukrainians in the ’70s, and I’m a half immigrant. Everybody here is an immigrant.

Erwin Szeto: So, I grew up in an almost entirely white neighborhood. So, then, if you remember being a kid, all you ever wanted to do was fit in and be normal, whatever normal meant.

Stefan Aarnio: Right.

Erwin Szeto: So, I tell that kid, you’re perfectly normal, and you’re going to be up to some cool stuff when you’re older. So, this time’s going to be tough, but you’re going to get through it, and it’s pretty awesome on the other side.

Stefan Aarnio: Awesome. I love that. Leaving the mystery and experience ahead. Erwin, we’re going to wrap up your couple minutes. Top three books that changed your life. What are they?

Erwin Szeto: “Rich Dad, Poor Dad” was massive. I graduated from business school. So, everything we’re taught was build big businesses, be good in finance so you’ll be good at your job. We learned about stocks. Actually what we learned about was really how the valuations are almost impossible to predict. Yeah, “Rich Dad, Poor Dad” turned that all around when they kind of … he introduced this new paradigm on entrepreneurship and tax advantages, the benefits of real estate. So, I’ll that. “Rich Dad, Poor Dad”.
Anyone who’s starting out, I always recommend that one to get them in the right mindset. “The Complete Guide to Real Estate Investing” by Don Campbell. That’s a great guide book. Especially for someone like me who likes systems analytics, and then I really enjoyed “More Than Cash Flow” by Julie Broad, because a lot of what’s taught out there is cash flow, cash flow, cash flow, and I still see … I see it in investors as well. They’ll buy off of a spreadsheet without understanding the reality of a property.
Oh, you have a crack dealer on this property. You have a prostitute in this unit. No one’s going to manage this damned thing, but yeah, it looks great on the spreadsheet when it’s fully occupied.

Stefan Aarnio: When it never is.

Erwin Szeto: Which it never is, and then who’s going to manage it? And again, you’re buying a business. It’s going to be complete disaster. So, I’d say those are my top three. They’ve been my top three for awhile.

Stefan Aarnio: Awesome. Awesome. I love that. So, now this next question’s one of my favorites. I ask every single person on this show this question, and what do you think is the one thing that young people, the millennials generations, that need to succeed these days?

Erwin Szeto: Oh, that’s a tough one. Get into real estate as fast as you can, because prices are not going to be in your favor tomorrow. And by tomorrow I mean next year, next 10 years. Even
if you need to borrow from your parents. Whatever you need to do. Borrow from your grandparents. You need to get into this market. Like where I live, for example … I can’t speak to other markets, but where I live in the GTA Golden Horseshoe, because if you don’t own your home, you will never join the middle class.

Stefan Aarnio: Wow. Wow. So, let’s talk about that reality for a second, because that’s a real interesting thing. You will never join the middle class if you don’t own your home, and the magical land of the GTA, which is Toronto, for people who are completely American listening to this show. Now, it’s interesting, because in the states right now, the boomers and the millennials, they’re not going into home ownership. They’re staying out of it. They’re staying renting, and I guess it’s affordable enough, but the dream of home ownership has been shattered down there temporarily.
What would you say to those kind of people versus you guys are up in Toronto. It’s hot as a pistol, and you’re adding as many units as we have rental in Winnipeg in a year. What would you say to the people in the United States who think that renting is the game, and someone like Grant Cardone, even, who says, ‘Don’t own your home.’

Erwin Szeto: Yeah, yeah, yeah. I saw that video. That was awesome.

Stefan Aarnio: Yeah, yeah. Let’s get controversial here for a second. Grant Cardone says don’t own your home. It’s funny, I kind of lean towards what grant says, but I always like to have an income stream, so I don’t kind of pay for my home anyways. It doesn’t matter.

Erwin Szeto: Yeah, yeah. Yeah.

Stefan Aarnio: Tell me about that advice. Don’t own a home. The opposite.

Erwin Szeto: I’ll give you a good example. That’s the advice I gave my brother, because they weren’t sure where they were going to be, where they wanted to live in the future, but they wanted to be in an area that they really enjoyed. So, I suggested rent there, because where they wanted didn’t have good fundamentals for an investment.

Stefan Aarnio: Right.

Erwin Szeto: For example, it wasn’t near good transit. It has a decent amount of crime in that area, and instead … so rent, and then use your capital to buy an investment property in one of … in a really good area for investments. So, that is … so, yeah. I gave advice for renting to a family member, and also they have rent control. Right?

Stefan Aarnio: Yeah, yeah.

Erwin Szeto: And they’re paying less rent that what it costs that owner to own that property. So, that’s kind of winning, right?

Stefan Aarnio: Dude, that’s totally winning. I mean, it’s … I think there’s a weird emotional hook with home ownership, and I’m kind of a bit spoiled, especially in the last 25, 29 years or so. We think, oh, man, it always goes up, and in the states, they had that … they had 2008. They had a huge crash, and it’s really interesting. I go to American, and I got to real estate banks all the time, and they don’t have that same magical home ownership idea that we do, and they don’t have the same buy and hold like Rain style investor where they just want to buy a bunch of homes, because the people who did that went bankrupt.

Erwin Szeto: Oh, yeah.

Stefan Aarnio: And they’re there to tell you about what bankruptcy’s like and how they were eating cat food for like five years. So, it’s interesting, and I love this kind of conversation fully opens up. Erwin, we’ve got to run. How can people get in touch with you if they want to know more, if they want to get in touch with you and what you do with your business you coach?

Erwin Szeto: Oh, I have way too many websites. Bad business practice. I just run into stuff and go, oh, I’ll just call it this, and let’s run with it. So, my main business website is
titaninvestmentrealestate.ca or .com, I can’t even remember. And my podcast website is truthaboutrealestateinvesting.ca. So, those are the two best places to follow me. Or on Facebook as well. I’m there way too often.

Stefan Aarnio: Awesome. Awesome. So, that’s how you get in touch with Erwin. [crosstalk 00:47:13]. Yeah, go ahead.

Erwin Szeto: I have a U.S. rental story. So, I won’t say who or where, but Americans I knew that were in the buy and hold business of real estate, they just continued to … they just stopped paying their mortgage payments during the crash, because all the banks were so backed up that they couldn’t catch up to everybody. So, they actually lived in their home for seven years not paying their mortgage until the bank foreclosed on them.

Stefan Aarnio: Wow.

Erwin Szeto: So, if you … depending on your ethics level, and this is not what I recommend, but this is what people will do … knowing that you can get away with that … that they were getting away with it back then, not making mortgage payments, they would just collect the rent, and not make mortgage payments.

Stefan Aarnio: Wow.

Erwin Szeto: So if a disaster ever hits on that wide a scale again … because think of how many people went belly up. They can’t get to everybody right away.

Stefan Aarnio: Yep. That’s unbelievable. Well, thank you so much for being on the show, Erwin. Any final words to people at home?

Erwin Szeto: There’s one thing I wanted to share. One of the questions that was emailed to me that was asked was about … I forgot what the question was, but I mentioned earlier it was my … it was actually my father in law who is now my ex father in law who was my rich dad. Like Robert [inaudible 00:48:43] first dad. He was the one that was … keep pushing me towards entrepreneurship investing. And then when my marriage to his daughter broke up, I had to sell everything.
I broke down. That’s one of the darkest moments of my life, and now looking back, it’s not nearly as bad as what’s happened, or as bad as things can get. Having your health is much more important than a marital breakdown, and so when the discussion was over that the marriage was over, and when I stopped crying about three hours later, I made a decision to myself, I will win this breakup.
Because I’m a competitive guy. Meaning, when we come back and we see each other again in a year or two years or three years, whatever it is down the road, it will be known that I won the breakup. And I’m not sure why I want to share that, but I think … and I’ve talked about this many places. If you’re crazy motivated, this real estate stuff is easy.

Stefan Aarnio: Mm-hmm (affirmative).

Erwin Szeto: And I was just … I’m just … I’ll find ways to get myself motivated, and that’s one of the things that motivates me is just the competitive drive. But who am I really competing with? Just really competing with myself. So, grinding is good, but you have to be motivated to grind.

Stefan Aarnio: Mm-hmm (affirmative). I love it, man. You got to respect the grind. Respect the grind, Erwin. Awesome. Thanks so much for being on the show today. It’s been an absolute blast. I loved having you here. And thank you so much, Erwin.

Erwin Szeto: Thank you. And I’ll have you on my show as well.

Stefan Aarnio: Awesome. Looking forward to it.

Erwin Szeto: You’ve had it way more tense than I have, so I want to hear some of this craziness.

Stefan Aarnio: Oh, dude. Tenants. Murder houses. Cat houses. We got it all. Okay, I’ll speak to you soon, man. Thanks.

Erwin Szeto: Thanks, Stefan.

Stefan Aarnio: Hi, it’s Stefan Aarnio, and thank you so much for listening to my podcast, Respect the Grind. If you enjoyed this podcast, I want you get a copy of my original book, “Money, People, Deal“. “Money, People, Deal” has been the key for me for raising millions and millions of dollars through real estate, and it’s helped people all over Canada and the United States raise money for their real estate deals. You can get a copy at moneypeopledeal.com/podcast for a special offer just for podcast listeners. Once again, go to moneypeopledeal.com/podcast to get your special offer. We’ll see you on the next episode of Respect the Grind.