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Michael and Jenn Richter’s dream of becoming full-time real estate investors is on the verge of coming true. Their rapid success has allowed them not only to maintain their lifestyle, but also to enjoy it on a level they never thought possible

THE SLOWDOWN

JENN AND MICHAEL RICHTER’S PORTFOLIOLocation Property type Purchase date Purchase price Monthly rent Current value

Milton Two-storey townhouse November 2007 $261,990 $1,664 $590,000

Milton Single-family detached March 2013 $462,000 Principal residence $800,000

Milton Two-storey townhouse January 2014 $369,990 $2,100 $675,000

Milton Two-storey townhouse January 2015 $406,990 $1,750 $675,000

Milton Two-storey townhouse November 2015 $423,990 $1,850 $655,000

Milton Two-storey townhouse April 2016 $482,990 $1,850 $655,000

Guelph Three-storey townhouse April 2017 $422,400 Closing August 2018 $442,000

Guelph Three-storey townhouse April 2017 $433,461 Closing October 2018 $442,000

The frustration Michael Richter felt toward his life will be familiar to any investor who has realized that

the traditional road to the promised land of retirement – hard work, austerity and RRSPs – is really just a treadmill.

“I always thought that to be successful, to be a family man, I’d have to work and basically exchange my time for money,” Michael says. “That was the only mindset I had, so I’d work on the weekend, I’d work harder and harder, but I was never really getting ahead.”

When Michael and his wife, Jenn, made their first foray into real estate investing in 2013, that frustration began dissolving, creating an alternate path to the life Michael pictured for himself and his family.

Real estate had been occupying a corner of Michael’s mind since 2007, when he attended a weekend boot camp for potential investors. Despite his initial skepticism (and

two days of presenters’ upselling efforts), the seed had been planted.

“I think just being around like-minded people and seeing the everyday person in that room who’s actually doing it and participating in it, that changed something inside of me,” he says.

It wasn’t until he married Jenn in 2012 that Michael found the opportunity he had been waiting for. Both newlyweds owned their own properties in Milton, Ontario – Jenn a condo, Michael a townhouse – and had originally planned on selling both of them when they moved into their first home together. But Michael saw a low-stakes opportunity to test the investment waters: keep the townhouse, rent it out and see what happens.

The only problem? His new partner was not on board. Jenn had been raised in a family of stock and mutual-fund enthusiasts, and had been investing in them herself since she

was 13. In her family, real estate was seen as the surest way to have your savings wiped out.

“My whole family was like, ‘No, no. That’s not safe. Never do real estate. Just do stocks,’” Jenn says. “My mother’s convinced that we’re all going to lose our homes and end up living in tents. Both of our families were against real estate, but they also came from a generation where you could make money in stocks [and] mutual funds.”

Her husband’s excitement proved to be infectious, though. While intrigued, Jenn explained to Michael that it would take more than enthusiasm to convince her. She was prepared to go ahead with being a landlord – as long as they did things the right way.

“‘There’s a great idea in here somewhere,’ she recalls telling Michael, ‘but we need to discuss this, and we need to look into it a lot more. I don’t want to make mistakes.’” Assuming the first of many roles she would play as Michael’s partner, Jenn began

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educating herself on tenant law and lease structures.

By 2014, the townhouse was generating a steady stream of income as the equity continued to build in their home. The Richters were just beginning to realize what real estate had to offer. After welcoming their first daughter, Ella, to the world, they decided that rather than dumping their

savings into a low-yield RESP, they would instead buy her a house. It was a decision that would change their lives.

New builds for a new lifeThe two-storey, three-bedroom townhouse they purchased for Ella was the first of many new-build properties the Richters would purchase over the next three and a half years. Just as their parents were proponents of the stock market, Jenn and Michael are devoted to new builds.

“You’re getting a different class of tenant for new builds,” Jenn says. “They don’t mind paying extra for a brand-new product. There are quite a few tenants out there who want a home that’s never been lived in, and they’re willing to pay a premium.” The lack of maintenance required by new properties – and the five-year warranties they often come with – makes for a less time-consuming investment, which was an added bonus for the new parents.

By focusing on new builds, Michael and Jenn have also been able to purchase more properties than they would have been able to if they were concentrating on the single-family market. Because of the marketability

Know your numbers before purchasing. Be aware of current mortgage rates, market rents, property taxes, insurance, potential immediate or deferred maintenance, etc., to ensure you have a healthy profit each month.

Don’t buy just to increase your number of doors. Buy high-quality properties that fit into your specific portfolio. You have to make the distinction between being a consumer and being an investor.

Increase your amortization when applicable. This can help lower your total debt service ratio and look more favourable to lenders. This method can allow you to take on more mortgages.

Every investment property needs a HELOC. You need to have access to as much cash as possible at reasonable interest rates. Lenders are always willing to lend you money when you don’t need it.

Go above and beyond for your tenants. Creating a good working relationship with your tenants can ensure your investment is taken care of, the rent is paid on time and that all transactions go smoothly. Little touches like welcome baskets or Christmas cards/gifts can go a long way.

5 INVESTING TIPS

“You’re getting a different class of tenant for new builds. There are quite

a few tenants out there who want a home that’s never been lived in, and

they’re willing to pay a premium”

MICHAEL AND JENN RICHTER’S INVESTOR LESSONS

Get your partner on board. Like any other business, investing has its ups and downs. During the

downs, the support and encour agement from your partner can help greatly. You will learn how to communicate with each other while working toward a common goal as a team.

Use an interior designer when choosing colours and materials. This will help you stay

on budget, prevent the influence of your personal taste and create a timeless design that will last the duration of the property.

Work with someone who has already used the strategy you want to emulate. Choosing the

right mentor or coach will help shorten the learning curve, maximize your potential and avoid pitfalls.

Treat real estate investing like a business. The more seriously you take yourself, the more seriously

everyone else will take you. Create a logo, website and business cards for yourself.

Pick a strategy that reflects your goals and lifestyle. Buy properties that intentionally

align with your risk tolerance, stage of life, goals, skill level and the amount of time you have to commit.

of new properties, Michael says lenders are more willing to finance their purchases. New builds also allow investors who are short on available capital to secure units with little more than a deposit.

“We’ll put down money, even if we can’t afford to close on the property,” Michael says, adding that the 12 to 18 months provided to secure financing for new

builds is far more favourable than the usual three months allotted for closing on resale properties. It’s a strategy that has allowed the Richters to purchase a total of five investment properties in Milton, including another home for their second daughter, Emily. (They’re scheduled to close on another two in Guelph later this year.)

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Some might view the rapid scaling up of their portfolio as highly risky, especially in an uncertain market struggling under the weight of rising interest rates, but Jenn and Michael disagree. When analyzing a purchase, they run the numbers multiple ways, ensuring that they’ll be able to cover the costs of rising interest rates or other potential bumps in the road.

“We’re not pumping in our own income every month,” Michael says, pointing out that the couple’s rigorous screening process has also played a part in the security of their portfolio. “The tenants always cover whatever money we take out against the property,” Jenn adds.

As for those rising interest rates everyone is afraid of, Michael says they’ve actually been a positive. Sales may be down across most of Ontario, but rental demand in

The Richters’ Hatt Court townhouse at five months into the build and nearing completion in September 2017

BeforeAfter

The Richters’ Mulroney Heights property in the second month of construction, June 2017

Milton is at an all-time high. Bidding wars for rental units in the city have increased rents far faster than the Bank of Canada is raising the Richters’ mortgage payments.

Told you so ...Precise planning and the obvious joy they derive from working together has given the Richters a level of freedom and control over their lives that, four years ago, would have seemed like little more than a fantasy. The couple travels extensively and can now decide where and how their children are educated. They’ve started their own leasing company, Double E Properties, and are planning on starting a YouTube channel and a podcast so they can help other investors find the same level of happiness they’ve found.

“When we travel and go around the world

and do all these things, I feel completely alive. That’s what drives me; that’s what drives Jenn,” says Michael, who has been able to spend his increasing leisure time watching his daughters grow up. “It slows everything down to the point where you can actually take it in and live – and realize – your life.”

Also rewarding for the Richters has been seeing Jenn’s mom, who once warned her daughter against the evils of real estate, rent out the basement of Jenn’s grandmother’s home to tenants of her own. “She drank the Kool-Aid,” Jenn laughs.

Her mother’s first attempt at being a landlord carries with it a considerable level of approval – one that further justifies Jenn and Michael’s vision and dedication. “After eight properties,” Jenn says, “[our families] are like, ‘Maybe they know what they’re doing.’”

The kitchen in the Richters’ Dredge Court property, purchased in 2014

Michael, Jenn and baby Ella at the future site of

their Clitherow Court townhouse in March 2015