|Excerpt from Don R. Campbells ’51 Success Stories from Canadian Real Estate Investors’ Book
True Results Take Time
Tiffany Young and Corey Young
How do you learn to grow flowers if you never get your hands dirty?
Tiffany Young was afraid. Married at 19, she was afraid of the future she and her husband, Corey, were building with a small business that sold indoor air systems, provided cleaning services and kept them running from one sale to the next. She was afraid for her parent’s health and the fact that they didn’t have the financial freedom she thought they deserved after decades of labor. She was afraid for her young nephew, Rio, a boy she and Corey have helped raise since he was less than a year old. Were they teaching him what he needs to know to be financially successful in life? Could unconditional love ever be enough?
“Fear is a good motivator, but it’s a miserable boss,” says Tiffany, who was 24 years old when she attended her first real estate investment seminar in search of a smarter way to make a living. Others followed. “You name it, I took it. If it was in the paper, or on the radio, I signed up and went.” She understood that not all of it was going to help her, but one new idea that supported her vision would make it worthwhile.
She and Corey figure that education cost them about $10 000. It wasn’t all for naught, but the information they took home always stopped short. “You never really learned what you needed to know to take the next step so you could actually be a real estate investor,” is how Tiffany sums up the experience.
Fast-forward six years and you find her and Corey planning what they hope to be a five-month journey to Mexico beginning in the fall of 2007. There, they and Rio will volunteer their time to help the Mexican people. They spent two months there the year before. “It was the best two months we’ve had since we got married,” says Tiffany.
Their real estate portfolio will be working while they’re away from their acreage helping others less fortunate. Valued at $9 million by mid-2007, their portfolio is a hybrid combination of nearly 40 single-family homes, including condos and half-duplexes.
“Real estate investment has changed everything for us,” says Tiffany. “We can retire and never have to work again. For me, I think the biggest thing has been being able to show my dad that I can work with my brain and not my back. That’s what he used to tell us as kids. I also like knowing that he also owns 10 properties – and I helped make that happen.”
To Tiffany, real success began for her and Corey after they joined the Real Estate Investment Network in 2005. They and her parents already owned a condo together. “But we bought that before we really knew what we were doing. In hindsight, that property really didn’t meet all of the economic fundamentals I’ve since learned. But we still own it, and I think it’s fair to say it’s been a good teacher.”
More than anything, REIN helps the Young’s approach the investment business with an ever-higher level of sophistication. “I’ve learned you never need to fear not having a tenant. The cost of an extra month of vacancy is much better than renting it to the wrong tenant.” To her, patience is the key.
Hers is the voice of experience. “I once accepted half a damage deposit from one tenant. That was a huge mistake as you can’t get that money later.”
Experience has also proven the value of working with tenants when things aren’t going well. When an accident meant one tenant couldn’t make his rent, Tiffany struck a deal whereby he would help with everything from snow removal to picking up the mail. That gave her more time to focus on a deal to sell that property. It went for $100 000 above what they’d paid six months earlier. “I knew I was going to be okay and that gave me the freedom to help this tenant out. It was a good deal for both of us.”
From the start, the Young’s used joint venture money. They bought one property with her parents, then bought one on their own. After that, they sought JV partners who had experience in real estate. “These people understand investing,” says Corey. “We don’t have to educate them about the economic fundamentals. We don’t have to help them lose their fear.”
These days, Corey spends his days looking for properties, often with Rio in tow. “We’ve walked into places where Rio has told me, ‘Oh Uncle, no one is going to want to live here.’ That always makes me smile, because I know he’s learning the business!”
That business is focused on revenue properties that attract what Tiffany calls “an executive tenant. These people won’t bounce a cheque and they’ll pick up the phone and call a plumber if they need one. That works for me, because I self-manage the properties and I like it when tenants help out.” They treat these tenants with respect and in return they treat the Young’s and the property with respect.
The Young’s, who’ve bought about 100 properties since March 2005, admit that properties don’t always come with that kind of tenant in place. One of their biggest investments includes 40 units in a development with a reputation for unemployed tenants, many with substance abuse issues.
“We started taking units as they became available and, in less than a year, 35 of the developments 60 units are rented by quality tenants,” says Tiffany. “There’s also a new property manager at work and the profile of that building is really changing. It takes time, but we’re part of a move to offer better quality homes to people who need it.”
Increased financial freedom means they could retire and never work again. “Before, we made money if we were physically working. Now our money does the work,” says Corey.
That’s a side benefit to the real advantages of their success with real-estate investment. More importantly, the business gives them time to do the things they really want to do, whether at home or elsewhere. “Being able to be there when mom needs chicken soup or Rio goes on a field trip¸ when friends and family need help…that’s what it’s all about,” says Tiffany.
As for the fear that first motivated her foray into real estate investment? “It’s gone,” says Tiffany. “Now, it’s all about the economics for me. It’s like a science. I take the numbers seriously and, in return, I am not afraid.”
Don Campbell’s Observations
Although Corey and Tiffany have built a portfolio of over 100 properties in a very short time, they will be the first to say that true results take time. Many get into real estate expecting to create wealth and cash flow instantly. Sophisticated investors know that a property portfolio doesn’t really start to perform until you’ve owned it for at least three years. It is at that time that you will have built up a nice equity base and you should be receiving regular cash flow every month.
Investors should not expect much from their property investments in the first three years, a period we call normalization. This is the period in which you are completing your renovations, often changing tenants, increasing the revenues and spending money to decrease the operating costs. It is also the time where the majority of your mortgage payments are made up of interest rather than principal. Because the Young’s have built their portfolio in economically strong and stable regions, their 100 properties should provide them and their joint venture partners with a large equity gain and strong positive cash flow in just three short years. Patience is a virtue that exists in both of them.
Corey and Tiffany’s story can teach us many other lessons. Fear played a part in their lives at the start of their investment career; they just learned to turn this fear into a motivator. They quickly discovered that economic fundamentals help decrease the confusion in the market, which in turn helped reduce their fear of taking action.
The Young’s are definitely not sitting back waiting for “retirement”; they’re living their life now. Travelling internationally, finding ways to give back to those in need and becoming true inspirational leaders. With their recent experiences, they’re now able to provide financial leadership to their immediate family and friends, an obvious priority for them. Tiffany sums it all up best when she states that having the ability to be there when your family or friends need you makes all of the hard work worthwhile. Real estate is not about money and wealth; it’s about the freedom it provides you to do what you want, with whom you choose.