Note from My Smart Real Estate: We continue our interviews with the real estate investors and developers to understand how they started their real estate journey, how they do it currently, their tricks and tips to real estate investing. Below is the interview with a real estate investor and a developer: Andrea Gauntlett Warkentin.
Andrea is a former member of the Vancouver Police Department before moving to Red Deer, Alberta, and becoming a full-time real estate investor in 2006.
Since that time she has built up a substantial portfolio, buying and selling her own properties over the years. She has transacted over 60 creative real estate deals using seller financing to purchase properties and has used the rent-to-own strategy to sell over 50 properties over the past 12 years. She also owns multi-family properties and currently her portfolio of rentals in Central Alberta is sitting at 70 doors with a valuation of over 11 million dollars.
Over the past 6 years, she has been helping to teach creative strategies to investors across Canada through her partnership with Barry McGuire, a real estate lawyer of over 40 years in Edmonton, AB. They travel to Vancouver, Calgary, Edmonton, and Toronto to teach investors how to expand their portfolios using techniques such as seller financing, rent to own, options, wholesaling, and joint ventures. Andrea started her real estate investing career in 2003 and now has over 70 doors in her real estate investment portfolio. In addition, she recently engaged in real estate development and is in the process of building a 16-unit house.
Interviews with future real estate millionaires.
Andrea Gauntlett Warkentin
• Multi-unit investor, developer, licensed property manager, licensed commercial realtor
• Alberta, Canada
• Real estate investment portfolio: over 70 doors, 16-unit place in the development
My Smart Real Estate: Hello Andrea. Thank you for agreeing to meet with me. I reached out to you because I am not a professional in real estate investment. I have never done it. But I decided to learn about real estate investment. To do that, I am putting my thoughts into a blog to help people learn the real estate investment and learn myself. And I thought who else would it be to reach out other than people who are already in the midst of it, and they do that every day for a living. Thank you very much for meeting me. I hope that through our discussion, we can give some of the understanding of what you do, how you make money, etc. As well, we can talk about the market itself.
Andrea: Sounds good.
My Smart Real Estate: To kick it off, can you please tell me about yourself and how you do real estate investing?
Andrea: I bought my first real estate property in 2003, and I lived upstairs, and we had tenants in the basement. This was my first introduction to being a landlord, you know, receiving money from somebody. Not long after that, I was listening to talk radio, and I lived in Vancouver, British Columbia, at that time. I heard an interview with Don R. Campbell, who has just written a book "Real Estate Investing in Canada." And up to that point, I had never found real estate books specifically about Canada. There was a lot about the US, but nothing about Canada. So I went out and purchased the book. And then, as a result, I ended up joining the Real Estate Investment Network, which is an educational group that teaches people how to invest in real estate. So within a few months of joining that group, and listening to CDs, back then, the rain group used to do quarterly meetings in Vancouver, so it wasn't very often there. And so they had a recorded weekend of what they used to have as an introductory event for new investors. So we listened to that when we were on a trip to Alberta. And we decided to move to Alberta because back then, in 2005, Alberta was the place to be anywhere in Canada. Real estate investing, it was all about Alberta. So we moved to Red Deer. And our first purchase here in Red Deer was a four-plex when we lived in it while we fixed it up, and the market started to go up. So we refinanced, pulled out money, bought more properties, and it just took off from there.
My Smart Real Estate: That's interesting. That's a good way to start it. So you started before 2008, before the crash. And I guess by then, you already started investing, so I didn't hit you at all, the 2009-2010 debt crisis.
Andrea: So maybe I just didn't know that it was a crisis. But I kept buying property. So actually, in 2009, I bought 16 rental units. In 2010, I bought another 12 rental units. So I just continued buying. But that was part of the fact that I was doing a lot of creative real estate deals. So I was buying many houses with seller financing, so I didn't have to go to the bank and get a mortgage. I did a lot of joint ventures, so using other people's money. And I did a lot of rent-to-owns, which was helping people get into homeownership over a period of time.
My Smart Real Estate: Okay, that's interesting. So you're very quickly moved from small houses to multi-units. How quickly did that transition happen for you?
Andrea: Well, there were also single-family properties for the most part. But I'm a person that takes a lot of actions. So when I believe in something, I just move forward with it. And I just didn't see any barriers in my way. So I bought as much as I could. So as long as the numbers made sense, I just continued buying.
My Smart Real Estate: And right now, are you primarily focused on the multi-unit, or do you mix with single-unit houses?
Andrea: I have some multifamily properties, mostly four-plexes. And I'm in the process of building a 16 unit apartment in southern Alberta. So I've transitioned. That being said, I still bought nine single-family houses this year. And I have a large development project in British Columbia. So over time, I transitioned from long-term buying holds to the more creative real estate strategies to developing.
My Smart Real Estate: Building is just another level of play for me. I live in Toronto, Ontario. I was thinking about real estate investing in current shape and market shape. Everywhere I look, it just feels to be too expensive. Even if I buy a house and break it into parts and rent out the upper part and the bottom part, meaning the basement, it still doesn't pay my mortgage. Is Alberta different in that sense?
Andrea: Yes, it is. So Alberta is not that expensive place to land. So when we initially moved here in 2006, we could afford to live on one income. So we had young children at home. And so I stayed home with the children, and I did real estate at the same time. It allowed me some flexibility while we lived off of our my husband's income. I was willing to make a move from Vancouver, which is an equally expensive market, but I saw Real Estate as a way for freedom. So we as a family made the decision to move. And of course, you know, people move all the time for work, or freedom from other countries, they emigrate to Canada. So, I mean, if you really want something for it, move to where you can make it happen.
My Smart Real Estate: And would you say that Alberta is your primary place of investing? Or do you invest across Canada as easily?
Andrea: Between Alberta and British Columbia, those are my two primary markets.
My Smart Real Estate: So you don't have anything in Ontario currently, do you?
Andrea: I have more than enough miles here. I don't want to go to Ontario.
My Smart Real Estate: Yeah, maybe that's the way to go right buying in Alberta. And maybe Manitoba or Saskatchewan. Prices have been crazy in Ontario. And right now, there are way too many investors here. They say 25% of all properties all owned by investors. So it is a bit scary. To my mind, I don't think it's a bubble. But who knows, maybe eventually it's going to grow into a bubble. I have been looking at the prices across Canada for the past several years. And I haven't seen too much growth in appreciation in the prices for the properties themselves in Alberta. Will you say that's not true?
Andrea: There, we've had a bit of inflation this year, partly because the price of goods everywhere has gone up. So when it comes to building a new house, you know, with the price of lumber and every other supply going up, house values have to rise, and they have risen a bit. Nothing dramatic. But what we do have working for us is cash flow, and you cannot live on equity that you can live on cash flow.
My Smart Real Estate: Right. Okay. So right now, you're saying you're primarily buying like four-plexes. And are you also building something bigger, like, multi-unit? How much ROI do you usually look for per year?
Andrea: Double digits. At least.
My Smart Real Estate: At least 10%? Okay. Because I've been reading quite a few books and trying to understand how much I should be getting. But okay, that makes sense. 10%? Sometimes, if you get higher than it's already good, I guess 15%? Sometimes, maybe 20%. But it's harder to get.
Given that the market in Canada has been growing this much over the past year, do you expect that there'll be any problems in Canada? Especially with the rumors about interest rates rising? Do you think in the next few years, the markets going to flatten out? Or maybe even slightly decline? What is your perspective?
Andrea: Well, I think it's interesting because most large publications only look at Toronto and Vancouver. And those markets do not affect us here at all in Alberta. So I think it's somewhat location-dependent. I mean, if you're already spending 76% of your income on housing because you live in Toronto or Vancouver, it's not a great quality of life. But what's happening to increase the values or increase the pricing is all the out-of-country buyers, right? So with that, you know, that's not something that's under my or your control. But as people look at Canada as an opportunity to have a safe haven for their money, many people don't even care to wrench their property.
Because for them, it's just holding the money, somewhere safe. So I think over time, if interest rates continue to stay low, the market will continue to rise, especially with inflation. So COVID is the ultimate excuse for no customer service. You wait for something until you get it. Nobody cares if you have to wait three or six months for a window. You know, it's it seems to be the ultimate excuse. So, it's definitely frustrating. And certainly, if you're doing new construction, your pricing is going up, you know, sometimes 20% year over year. So the quote I got this fall was 20% higher than it was last fall to do the same job. So I think, you know, as values of goods rise, values of housing have to rise, even if interest rates start to creep up. As long as inflation continues to rise, so will the price of housing rise.
My Smart Real Estate: Okay, that that's good news, I guess, for the investors. And hopefully, I will blend myself in to maybe start investing next year. And I was just worried if this was the right time. But I guess you hear this all the time. All those who are always on the edge of investing always think if this is the right time. Should they go now? And they never do invest.
Andrea: If you're afraid to make a mistake, you're never going to do one, never going to do a real estate deal.
My Smart Real Estate: Yeah, that makes sense. That's very interesting, and I've seen that you are actively recruiting joint partners to invest in your next real estate investments. If I would be interested in investing with you, what would be the minimum amount I can come with?
Andrea: $25,000
My Smart Real Estate: Okay. And when you're doing it as a joint venture, are you doing it for just this property? And then you form another joint venture for another property? Or would I be owning kind of shares? Let's call them shares across multiple units?
Andrea: No, we just typically do it property-specific.
My Smart Real Estate: Okay. I'm also looking for some joint ventures because I know you guys live and breathe this market. And every day, you wake up thinking about where the market is and where should I invest? And then you know, how to evaluate the investment, investment opportunities for us working nine-to-five, it's sometimes difficult to do that. So it's better to partner with people who know the market. And with $25,000, you said it is like a share that I would be getting. What usually is the return on dollars? Is it the same, around 10% or above?
Andrea: It depends on the investment itself and what we're doing with the investment. So it could be anywhere from 10 to 20%.
My Smart Real Estate: All right. I know, I'm taking your time. Just one final question. Do you have any tips or suggestions for those people who are planning to invest in the next year?
Andrea: I think it's important that you do your due diligence. So when you go to look at purchasing a home, I know it's very popular in Ontario, that there are bidding wars, and people don't use any conditions. And that makes it very hard for you to do your due diligence. So you know, if you can not be in one of those situations, I would highly recommend that because when you're buying your first rental property, you don't know what you don't know. And so it's important to get a home inspection. It's important to thoroughly review all the documents, especially if it's a condo or a strata property. And be aware of the rules or regulations, whether there are any cash calls coming up, those sorts of things.
And also, be considerate that you need to allocate funds, not just to cover mortgage payments and taxes and insurance, but also from vacancy and repairs and maintenance. I find that a lot of investors don't do that. As well as property management: if you're not managing it yourself, you do have to budget for a property management company. So if after paying all of that stuff, there's still money left over, it's probably a worthwhile investment.
My Smart Real Estate: And I guess it has to be always cash flow positive, right. Would you ever consider an investment that is currently not cash positive?
Andrea: Yes, obviously, in developing, it's not cash-positive immediately. There's a time frame and a process to that so that it certainly has its places.
My Smart Real Estate: Okay. And just to give our readers or listeners a bit of excitement, can you share how many units or how many doors you currently own?
Andrea: More than 70 at the moment.
My Smart Real Estate: 70? That's big. Okay, that's very interesting. Hopefully, you're going to do well next year. Thank you so much for your time. Thank you.
Andrea: All right. Have a good night.