The MapleMoney Show » How to Spend Money Wisely » Real Estate

Real Estate Investing for Cash Flow, with Eric Chang

Presented by Wealthsimple

Welcome to The MapleMoney Show, the podcast that helps Canadians improve their finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of MapleMoney, where I’ve been writing about all things related to personal finance since 2009.

Real estate investing has yielded solid returns for many years in Canada, but is the current housing market making investors nervous? After all, the last thing you want to do is buy an investment property in a housing bubble.

Eric Chang is my guest this week. He’s been investing in real estate for over 10 years, purchasing his first rental property at age 24. He now owns a portfolio of rental properties in Southern Alberta. Eric joins me on the show to discuss, among other things, how real estate investing can lead to financial independence and how to stress-test a rental property before you buy and figure out your personal risk profile.

Eric explains how he retired from traditional employment at a young age by building up residual incomes from several business ventures. However, with so much time on his hands, he found himself quickly getting bored. This is what led him into the world of real estate investing.

Unlike some real estate investors whose goal is to flip houses for a short-term gain, Eric prefers the slow and steady approach. When Eric buys a property, he’s more concerned with cash flow than capital appreciation. Like the Bank of Canada, Eric conducts his own stress test to make sure a property can generate positive cash flow, even if rental vacancy rates rise.

Eric is concerned when he sees people rushing into real estate, with property values in many Canadian cities exploding. As Eric puts it, real estate is a long-term asset. Do you want to rush in now when the property is inflated by $200,000? And what about mortgage interest rates? Investors need to remember that the 1-2% we see today is not normal and will not last forever.

The good news is that there is a way to win in today’s real estate market, and Eric shares a few secrets on how to have success. Make sure you listen to find out more!

Do you prefer to invest in socially responsible companies? If so, our sponsor Wealthsimple will help you build a portfolio that focuses on low carbon, cleantech, human rights, and the environment. To get started with Socially Responsible Investing, head over to Wealthsimple today!

Episode Summary

  • Eric explains how he invests in real estate.
  • Very few people talk about what life looks like after retirement
  • Eric’s investment journey began in the fifth grade
  • Why Eric stays away from short-term, speculative investments
  • The benefits of starting small
  • Eric has only sold two of his investment properties
  • The beauty of using leverage with real estate
  • The most consistent investors have a long-term mindset

Read transcript

Real estate investing has yielded solid returns for many years in Canada, but is the current housing market making investors nervous? After all, the last thing you want to do is buy an investment property in a housing bubble. Eric Chang is my guest this week. He’s been investing in real estate for over 10 years, purchasing his first rental property at age 24. He now owns Portfolio Rental Properties in southern Alberta. Eric joins me on the show to discuss, among other things, how real estate investing can lead to financial independence and how to stress test the rental property before you buy and figure out your personal risk profile. 


Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Do you prefer to invest in socially responsible companies? If so, our sponsor, Wealthsimple, will help you build a portfolio that focuses on low carbon, cleantech, human rights and the environment. To get started with socially responsible investing, head over to, today. Now, let’s chat with Eric…


Tom: Hey, Eric. Welcome to Maple Money Show. 


Eric Great to be here. 


Tom: To set us up, can you tell us a bit about what it is you do now with your real estate investing? 


Eric That’s a good question. When you first said, what do I do today I thought, “Oh, boy, I could go in many different ways with this question.” Specifically, real estate investing. I have built up a small, little portfolio for myself. That’s how I ended up reaching the financial independence status a few years ago. I sell in Alberta. As Covid hit and we all try to adjust to this craziness, I also have a marketing company that was severely affected during that time. I remember having all that time on my hands. I had to do something to keep myself busy because I don’t do well just sitting at home. That’s when I realized this was crazy doing this during the worst pandemic in the century. We’ve never had this experience in modern history. Cash flow still coming in and the majority of people were still paying rent which was actually my main income source during that time. So I thought this may be a good time to take a deeper look at that and expand the portfolio. Since then I have an opportunity to create a group together to actually help other people. One is to educate because I believe deeply in financial independence—to help people reach that goal using real estate. On top of that, I’m also investing actively by helping other people build their portfolios. 


Tom: First of all, I like that your immediate thought was to sort of pivot. When the marketing thing wasn’t working so well, thanks to the pandemic, you immediately decided to stay busy and find something that’s working right now. 


Eric: Yeah. To jump in on that one, I think I missed out a little tiny step which was, panic. It was impact, then panic, then pivot. 


Tom: Fair enough. Now, we met through the local chooseFI, Facebook group and Meet Ups. On a recent episode with Mark Seed, I mentioned that a few people I had met said they had crossed the line of FIRE but then found out they had nothing to do. I believe (if I’m right) you were one of the ones I was thinking of that said this too—that you hit FIRE but quickly found out it wasn’t going to work for you, just as being, “I’m retired now.” 


Eric: Absolutely. It’s funny because I was listening to some other episodes and coincidentally, I think it’s another Eric that you had invited to your show. I’m trying to remember his last name—Brotman, or something like that?


Tom: Yes, yes. 


Eric: Yeah, and he talked about what to do after the whole concept of retirement. And that’s what happened to me in my late 20s, early 30s. I had a very different approach to getting to my financial independence which was through building a bunch of residual business incomes and have all of them trickle in to meet the cash flow I needed to retire. But after that, I just realized, it’s crazy because all our entire life, people talked about Freedom 65—people who retire when they hit 65. And very few people talk about what you do after, especially for people that are able to do that sooner by restructuring the way they save. Without that proper planning it was hard. It took me almost a year to really discover what I really enjoy. My entire life up to that point, my family, my parents told me, “You work hard, make money and then you retire.” I did that in a little bit shorter time frame and said, “Now what? What’s my value. What do I have for society?” I never thought about that in the past.  


Tom: Yeah. That reminds me of a past episodes when Doc G was on. He was a doctor who retired early and had a huge loss of identity because when you’re a doctor, you’re a doctor. Everyone knows you as that. And all of a sudden it was like, “Okay, now I’m pretty much retired.” I think he did a little work on the side but he really felt that loss of identity that’s attached to your career. 


Eric: And it’s also hard from the pressure around family members that don’t understand what’s going on because my identity, up until that point was, I’m a hard worker. People looked up to me. They always said, “Oh yeah, look at him. He works hard. That’s what we should do.” Then all of a sudden I hit that mode and just switched over. For a while there, people though maybe I just lost myself or went on soul-searching trips. That was an interesting transition I had to go through. Looking back now, I realize that was really just the mentality. At the end of the day, reaching financial independence will help us look for things we truly care about and this gives us an opportunity to do that. Now, I consider that more like an empowerment process as opposed to just a financial moment. 


Tom: Yeah, speaking of the family, I know a blogger that has a good six figure income from his blog. When he quit his job, he’d have family members offering up money. They thought, “You haven’t been working… Do you need some help?” He said, “No, no, I’m good.” There is that kind of mindset where it’s just not a normal thing where you’re not working until 65 and following the traditional path. The reason I brought you up, you and a few others on the Mark Seed episode was, you’re not part of the usual blogosphere where we can all talk about FIRE but know we have a business already established. You seem more like of a regular person that can actually show you can actually hit FIRE but still be bored and need something else. I wanted to discuss what you’re doing  which is real estate but an interesting idea you brought up was how to look at real estate, your personality and risk tolerance. Can you go a little bit into what that means to you? 


Eric: Yeah. And if it’s okay, I’d actually like to take a step back to look at something a little bit more foundational. Real estate just happened to be one asset types that really resonated with me. But what I really found is, as you can imagine, I’m sure you get asked tons by tons by people that once they know that you’re good with money, you’re good with investing, it just seems like everybody come to you for investing questions. People have asked me— especially more recently about things like Bitcoin cryptocurrency and all of the other alternative coins out there. It seems like new ones are popping up on the market every day. I just tell them they have to find something that makes sense, that fits their risk profile, their personality. I started investing very young. Some of my early investments were when I was in grade five, if I remember correctly. I dragged my mom all the way to the bank and said, “I want to buy currency. I want to buy British pounds.” And my mum said, “What are you talking?” I told her I wanted to invest. Then later on I pivoted into investing in gold and some other things in my life. I started doing stocks when I was in my early 20s. I had a little bit money, made some money, lost some money. I think it was in 2006, there was a moment where I lost quite a bit of money doing the market correction. I remember just thinking about that moment where I realized that I just didn’t know how to handle the emotional ups and downs with the market as well as I thought. And that’s when it hit me— I need to do something that’s long-term because any time I was reflecting on my investments, even with stocks, the only time I made money was in long-term investments. I did decently well when Apple got into the online music store. This was before iPods and everything. This is iTunes downloading songs. I knew that was going to change the world. I knew that was going to put a lot of record stores out of business so I bought in and I held that position for 15 years. That was a big bulk of my wealth that came from that. I just remember looking back, thinking how that was what made things work for me. Any time short-term trading, day-trading, all of those in and out things—just didn’t work with me because my emotions were not capable to handle that. So that was on the back of my mind. And throughout the years I’ve been looking for long-term investments that fit my personality and I found it in real estate. I don’t do any kind of speculation. I don’t do flips for that very reason. There’s different ways to invest in real estate. A big part of what I do is something called the BRRRR strategy, which stands for buy, renovate, rent, refinance, repeat. It’s a very common acronym in the real estate investing world. It allows me to take my time, do my thing, and I’m not under the pressure to flip. I’m not under pressure to make sure it’s done in a certain amount of time—to get everything done and over because I know my entire focus is to make sure once this property’s done, there’s going to be tenants ready to rent at the amount of rent I believe they’ll rent for. That’s my entire focus. That fits my personality and it works to help me manage my risk. 

That’s what I always encourage people to do; understand what you personally is and what your risk tolerance is. Then you’ll find the asset type that fits your personality. 


Tom: You mentioned people asking you for advice on Bitcoin and stuff. I get that too. I’ve always said (including on this podcast) that I think Bitcoin is kind of speculation, maybe even gambling, whatever you want to call it. But certainly, it’s hard to treat it as an investment. At the same time, I feel like I missed out on something too, even though I’ve never once recommended it. I’ve watched it for so many years and think to myself, “Oh, I could have gotten on that. I could have multiplied my money many, many times,” but I still never recommended it. I get asked about stock advice too and I’m a pretty boring ETF investor. People think that because you know about one thing that you must be able to tell them the next hot stock. I just can’t follow it all. Like when you said you got into Apple, early on into iTunes. First of all, that’s awesome. But also it takes a certain amount of paying attention to what you’re about to invest in to see that coming. You’re not just going by whatever the current fad is and hopping in on that. 


Eric: Yeah, you hit it spot-on. History tends to repeat. They don’t rhyme, but they tend to repeat in some way. There’s was this situation back in the 1600s, the tulip mania, that happened in the Netherlands. It’s amazing to see what happened—how something so simple (that could have been looked at as a commodities product) became valued. I was doing some numbers before the show and it got up to a point where some of the more expensive ones were trading at close to $750,000—three quarters of a million dollars for one tulip. That’s just insane. So reflecting back, I am the same way exactly… Like you said, did I miss out on Bitcoin? Maybe, because I didn’t understand it. But at the same time, I look at my own portfolio, what I’ve done and exactly what I got out of it. I have a very consistent return from my portfolio. I continue to grow at double digit pace. In assets I’m 100 percent comfortable and 100 percent tested. A good friend of mine shared this with me, “Talk about the two oldest industries…” I want to talk about the first one, but the second one is, real estate. His exact words were, “I’m pretty sure even back in the caveman days, they was good real estate and bad real estate in the cave.” The wet area, the wet spots are probably what you’d get less rent for or people don’t care about that. But then you’ve got the dry spot, where everybody will be fighting for that real estate. Since the history of humans, there’s real estate. I tend to do something “I know.” I learned that from Warren Buffett just by watching how he invests. He just sticks to what he knows. And that’s what I do. I know how to build wealth in a very slow, steady pace, thankfully, so far (knock on wood). But at this point, I have never lost any money in real estate deals I’ve done and I think it’s just because of the time I spent researching and understanding what the asset class is about. 


Tom: When you say you didn’t lose any money, one of the things I thought of is I don’t know a lot about real estate in general. Buying real estate is just me buying my house. But it seems like we never really had a correction like the US did in 2009 or so. You look at places like Vancouver and Toronto—they just seem to keep going up. Here in the Calgary area it’s pretty easy because we just keep sprawling. It probably keeps the prices a little more in check. But do you think some of your success so far is related to that? Do you see the possibility of some kind of correction, some kind of drop, maybe if interest rates go up? What do you kind of see down the road for this? 


Eric: Yeah, this is a tricky question because if I give a prediction and it didn’t happen, that makes me look really dumb. 


Tom: But that’s what predictions are, though, right? For 20 years I’ve been a financial analyst. I get paid to make predictions that are wrong half the time, so I won’t hold you to it. 


Eric: It’s all good, all good. I just love that because I love doing predictions myself and people love to come back to me and say, “See, you said Bitcoin is not going to get to this point and now you’ll must eat your words!” And I say, “Yep, I’ll eat my humble pie for sure.” Here’s how I look at it, I definitely got lucky. I didn’t really know much about real estate when I first got in, but I always had this attitude where I’d test small. I like to test things and spend time just understanding, get a feel for things before I go all-in. And what I ended up realizing is I was lucky enough to be able to start my real estate journey in a market that’s very, very boring. The way I explain it is because we have slow growth, consistent growth, but very slow. It’s a retirement community and it’s just one of those market that you don’t see a lot of ups and downs. That allowed me to really understand that principle and basics of real estate. But what it also taught me is that some of my mentors who have been in this space for a long time, as much as they could invest in the highflying market, a lot of wealth can be created that way. In terms of bubble, nobody knows what that means—when that will pop. I’m sure back when people bought a $750,000 tulip who thinks it’s going to go up to $1.5 million equivalent to today’s dollars or whatever the currency was worth back then. But then again, there’s always the last person holding the bag. For me, instead of trying to predict and think what’s going to happen, I try to look at things based on affordability and on realistic income because, realistically, only so much money can be allocated from your monthly income towards paying rent. And the amount of rent a landlord collects justifies exactly how much property—and house value they can actually buy because they have to be able generate a return. And granted, right now, with the low-interest rate, that number gets skewed. But I like to do my own stress test, just like the Bank of Canada does stress test on mortgages. I do stress tests on my own portfolio to look at what happens if the rent doesn’t grow, or even a worst case scenario, there’s a rent drawdown in the market where we hit a recession where people lose their jobs. Where there’s a small contraction that happened. That could be a possibility. I just tend to focus a lot about my own thing now than what the market is doing. And if what I start seeing the market doesn’t jive with what I am doing, then I find another market. That’s the approach I find works a lot more effectively than trying to predict where the market goes because that’s just hard to really pinpoint. 


Tom: I mostly buy ETFs but when I do buy stocks, I buy dividend stocks. It sounds really similar. I actually don’t really care about the current price of that dividend stock. I just care that the dividend keeps paying out. When you buy a property, are you ever selling them or have you just held them all and just collected rent? What’s that strategy look like for you? 


Eric: Yeah, I don’t sell them. There’s only two properties in my life that I ever sold. Those were both with my partners. I have different partners for different deals. He wanted out of those deals for various reasons and that’s the deal we made so that’s the only reason we ever sold. But usually, I don’t sell them. I like to hold them. If you look at the numbers—this is where I don’t understand why people go into real estate with a very short-term mentality. It doesn’t mean you can play that but it just really confuses me because there’s the realtor fee—commissions that take four or five percent of your sell price so why would you want to go in and out so fast? Again, you can do that in a speculative market, but in a traditional, slow growing, market, just hold the property for a long time because it doesn’t make sense to keep paying the commissions. 


Tom: I agree based on my investing knowledge. I’d like it if I can keep those fees down. Even with personal real estate, I hate moving and having to pay real estate agents and all the other closing costs and everything like that. So, yeah, I can see why you wouldn’t want to force yourself to do that as part of a strategy. 


Eric: And I do have a thought to connect that to stocks because a lot I think people tend to understand stocks a little bit more as well. In a way, I almost wish we were back in the days when you had to call in to place a trade where the stock trade used to be $30, $40 a trade. I just think that will remove a lot of the in-and-out type of mentality where if it costs a lot more, just stay in there. There’s so much research that’s been done that shows all of these in-and-out, just doesn’t—you’re really only making the brokerage fees as opposed to really helping your own costs. Very, very few people are successful with trading, especially when it comes to day-trading. 


Tom: Yeah, that’s another thing I don’t really understand. Because of things like fees and just the risk of in-and-out in general, seems like it would just increase your risk automatically. One of the other risks I thought of around real estate is the financing of it. You mentioned that you want your rent to be profitable. Are you financing all your deals or are you paying for them outright at this point? What’s that setup look like? 


Eric: Yeah, I do have a mortgage on most of my properties. That’s one of the reasons I love about real estate is the leverage factor. But leverage goes both ways. It can help increase your return. It can also hurt you when the market flips the other way. I do have those mortgages on there. And this is where I love for people to take a step back. Just try to understand that paying one to two percent in an interest rate on your mortgage right now is not normal. I know people get really excited saying, “Oh, I can buy so much house with that.” That’s all great in terms of excitement but pull a step back and realize that’s not normal. Take advantage of that. But plan for it. There is a reason why Bank Canada’s is running numbers at 4.5 or 5 percent stress test. So that’s the numbers I run my own portfolio against just to see what that would look like. Can I still afford to pay mortgages at that interest rate? And on top of that, at what vacancy? I built in a very high tolerance of vacancy so if I have to go vacant for some time for my properties, I would still be okay. 


Tom: I actually was cleaning up some papers that have been holding on to too long, and I can’t remember the year—somewhere in the early to mid-20s, I think the rate was maybe just under seven percent. That’s not that long ago, first of all. And that’s quite a bit higher than what anyone investing in the last 10 or 12 years is used to. But it’s really not that long ago. You can talk about how high it was in the ‘80s for real shock value. But really, less than 20 years ago I think I was seeing around seven percent. So it’s quite realistic and quite possible. 


Eric: Exactly. I don’t want to open up a whole can of worms talking about negative interest rates but that’s not a healthy market. I just want to be clear. If we ever get into that, there’s something fundamentally wrong with our system. I hope we don’t ever have to entertain that here. They entertain it in Europe. They entertain that in Japan. But the result has still been mixed. In terms of the rate, I look at the possibility there’s a chance to go up higher than the chance to go down so that’s where I’m going to put my chips. That’s where I would position myself. 


Tom: That’s a really good point. And when it’s this low, the odds are more likely that it’s going to go up. Once you’re backed up against one edge of a spectrum, there’s only one way it could go. Or it could stay put which is fine, too. 


Eric: You must be a contrarian investor. 


Tom: Can you explain negative interest rates? I have a hard time with that in that it sounds backwards. It’s not really that the bank’s paying you to have a mortgage or anything, right? 


Eric: Well, that’s the crazy part. So far, based on what we’ve seen in Europe and Japan, that hasn’t happened. There is actually a negative interest rate that is documented on their mortgage. The way it was kind of structured was, after all the fees are backed in, a lot of those mortgages were essentially zero interest. What happened is, the central bank is charging an interest rate to hold the money so it’s completely backwards. Right now, if banks have access capital, they park their money with the central bank because they need liquidity. They just put it there so if they need money, they can just pull out. And then the banks (between each other) have these it’s called LIBOR Interchange Bank. They basically have these rates they can lend each other. Again, I’m not economist, so I won’t get into all those details but what happened was in a contraction that was going on in the European economy, the banks were just not lending. And the central banks needed to figure out a way to get banks to start lending money to the people. They wanted them to keep parking money with them so they started charging them to force these banks to lend the money out. The contrarian part of this is, it’s amazing from the consumer standpoint, which can be fun from a high-level point of view. But if you really look into it, it’s actually horrendous for the economy and for the structure of the economy, too. What they found is, all of a sudden there’s more fear. It inflates the asset price because you start making the asset prices even higher. And then on top of that, there’s fear that this could get worse so we start going to a contraction—a deflationary standpoint where the banks are actually trying to find ways to hoard capital even more than lending it now. A lot of times we thought one action would lead to a certain behavior, but a lot of times (in reality) it’s not so because there’s so many things at play. 


Tom: Well, even in our current mortgage situation, some of that sounds similar. When you talk about prices increasing and people being afraid about not getting in soon enough, I constantly hear from people who say they’re never going to be able to get their first house. While we may not have a zero percent interest rate, it’s not too far off. If you look at the amount that you’re paying in interest on a mortgage, it’s relatively small. Is it still kind of a similar situation here where our current mortgage rates are probably bumping the prices up on houses? 


Eric: Absolutely. I wish I could remember the actual data point because there was some research done that for every quarter point drop, it increases by however much in the actual property price. And that’s what we’re seeing right now. Once the cost of capital gets the point it’s so cheap—to the point almost as free, then the property price could technically go into infinity because then, it doesn’t matter how much you pay for property. It could be $5 million, $10 million. If it doesn’t cost you anything, that’s totally fine. That challenge, and the thing that really concerns me is, the US is very different than Canada in terms of our mortgage structures. The US have these long dated mortgages where once you’ve locked in, it’s 15 or 30 years. In Canada, usually most people go with the five year, whether it’s variable or fixed term. When it actually renews on mortgages, it could be renewed at a much higher rate if we hit a high inflationary period of time. And that is what really concerns me. Right now people are rushing into buying houses because they’ve seen $100,000 to $200,000 over asking which is insane, first of all. But real estate is a long-term asset. Do you really want to rush into it now and overpay by $200,000 when the property was worth literally $200,000 less, last year. Or wait for a few years for the market to come down and don’t worry by the formal situation. Just like we talked about the tulip situation—the tulip mania. For me, if we have our own plan, our own course of action, there’s still lots of places you can invest and get a good return. We really haven’t missed out on anything. That’s the philosophy I really believe in—stay on a true course. 


Tom: How does someone figure out what their investment type is with this? Because again, just to take it back to stocks, I know they do those, “know your client” files and all that. The problem I always had with those is it’s on paper. If you have someone that’s just starting to invest, what’s your risk tolerance? Are you willing to take a risk to make more money? People could easily just flippantly agree. But until you’ve kind of gone through one of those corrections where you watch 50 percent of your value wiped out, you don’t really know what your risk tolerance is. Within real estate, how do you know what you’re really willing to whether. And what can you just financially whether in making sure you leave enough of a gap in a rental price that you can sort of do your own stress test? 


Eric: I didn’t know how I would react until I went through a market correction. I always tell people it’s like driver’s ed. Especially in Alberta we got snowed a lot on the highways. Drivers ed teachers always said, “Okay, if you run into a deer, you just hit them.” You don’t know how you’re going to act until you’re actually confronted by that situation. That was one of those things I wouldn’t know until I was being tested. So I tell people, don’t go all in on something. This is just basic investing one-on-one. Diversify and have a broad portfolio that’s balanced between stocks. Balanced between some real estate if you can get it in there. And have lots of cash on hand. That’s the biggest thing for me—we want to be able to make sure that when you do make decisions, it is not based on a stressful situation or you’re panicking to react as opposed to this being a decision you make that will actually make sense. There are some other things you can also consider. This is actually a passion project of mine that down the road, if I ever figure out a way to develop it, I would love to release it and share with your listeners. It would be some kind of assessment tool to help people identify their personality. I’m usually a very slow mover when it comes to things. I take time to study things, to learn things. I’m a fast tester to test things out but I’m a very slow mover into an asset class. That’s why I’m still researching cryptocurrency. I know about a lot more now than before. And that’s exactly it. That type of personality I just described, I think it makes a lot of sense realistic because it’s just such a long-term, very slow process to build wealth. But it’s very powerful when you compound over a long period of time. For some people that like fast, who have a good track history and notice that your personality is really good at observing, seeing the trend changes and you have good experiences—that “good timing” intuition, some people have that. I don’t, but some people do. And maybe that’s why it works for you. You can be a great speculator. Lots of great traders on Wall Street have done well by speculating. But I just want to make sure and caution people, especially listening to this, that is definitely not the norm. I find the most successful and the most consistent investors are the people that invest over the long-term just because it’s just hard to always get it right. When you go long-term, it’s a lot easier to get it right. 


Tom: Yeah, that’s a great point. I see these flipping shows on TV and it’s amazing how they make it work but it doesn’t seem realistic sometimes. It also doesn’t seem like something I would want to do. I mean, to buy a place, fix it up, and then flip it for a profit. It sounds like a lot more work than choosing a place and truly investing in it, holding it and collecting that rent. You mentioned your own “stress test.” A couple of thoughts I have there is, do you then make sure that the rent is high enough to cover, say, a five or seven percent mortgage rate? And how much of the house is under your control? Because you might need this amount of rent but that’s not what the rental market’s at right now. 


Eric: So the cool thing about real estate is people always need a place to live, right? So when I say stress test, I do look at the interest rate but I actually pay a lot more attention to vacancy. I also pay attention to what the market is doing. Even at the worst of the worst, during the last housing crisis in the US, the vacancy rate actually went down. What happened was people were losing their homes because they couldn’t get out of the mortgages so they just basically left. But they became renters. So for me, what I try to do is I look at my portfolio as an asset. I want to make sure I can stay competitive against the market. I want to have better product such as better interiors, better facility and amenities. Then, let’s say the vacancy rate gets as high as 10 percent—that’s really, really high by the way. Usually, in a hot market right now in Toronto and Vancouver  it’s less than one percent. My market is usually about four to five percent. I usually benchmark up to 10 percent. That just means I just need to create a product that’s better than the bottom 10 percent on the market. Then I will always get people that want to rent for me. I want to make sure my rent is comparable in that space as well. As long as it’s not the highest price and I can potentially move down to be competitive. But again, as long as I can beat out the bottom 10 percent, then my properties will always be rented and that’s always going to be protected. 


Tom: How do you do this research? Do you literally have a real estate website open and an apartment rental website open to see what’s out on both? 


Eric: I do it a few ways. Sometimes I just look at what’s on the market. I love to check it out to see what’s listed. I check out the competitors post. Look at the interior things. Another thing I also so is I love asking my tenants just for the feedback, especially new ones that move in. I ask them how this compares to what’s out there and where they stayed. And they tell me my place is one of the better places. And that’s awesome. That tells me I am still very competitive. Another thing, too, is it’s pretty easy to just ask people questions. Usually people will give you their opinion, “This is a really cool place. This is good compared to what’s out there.” And that’s usually my indicator of where I stand. 


Tom: Is there any other risk that we haven’t brought up that people should be aware of and look out for if they’re going to get into this and be able to test whether or not they can handle these risks? Is there anything we’ve missed? 


Eric: The one metric I follow religiously is cash flow. I know there’s a saying, that cash is king, but I personally prefer to say “cash flow” is king. And this is what’s happening right now in the high flying markets. The majority of the returns are coming in from appreciation, not from cash flow. Most properties I follow in the high flying market, they’re actually not cash flow positive. That means that every month they’ve actually had to put money in just to make sure they can pay the mortgage. Again, if you have a high risk tolerance, a very stable job, that’s fine. But what happens is, if you all of a sudden there’s a structural change in the economy—there are layoffs happening, people losing their jobs, that’s when the problems start. How do you pay a mortgage when your rent doesn’t even cover that? That’s where we see that cascading effect. We just don’t know when the bubble could potentially burst. And some people don’t even argue that there’s a bubble right now, which is possible. But like I said, I stay away from that kind of question. I focus on cash flow. That way I know, as long as I can continue to pay for the mortgage, I don’t care if the property drops by $20,000 or $200,000 for that matter because it doesn’t matter. The mortgage payment is the most important thing. 


Tom: I like that you focus on cash flow because that makes a lot more sense to me. It helps to know that there’s people out there that don’t think this way, though, because I’ve always been a little confused when people talk about it being cheaper to rent than it is to buy. And I’m thinking, who’s renting then, if renting is cheaper than buying? It didn’t make mathematical sense to me who would be renting these places out. But maybe they do exist and it could be someone looking more on the appreciation side in the long-run. 


Eric: They do. And that’s where if it’s me in a bigger city, I think I actually would be renting myself. I will own a portfolio of real estate in a good, solid cash flow market. That way I’m still involved in the real estate market to benefit from hedging against inflation and also the growth. That way I’m protected. But right now, I personally think it’s actually a really good time to be a renter. Especially because there are markets that have rent control. There’s a lot of protection for that. For my real investor friends, they probably don’t want to hear these types of things. They encourage people to move out so they can flip the properties. But for me, I’m just looking at it in an overall sense. This makes a lot of sense. And it’s the overall portfolio, what you’re managing in terms of what goes out, what comes in—that’s what matters. As long as it fits your personality and you can sleep well at night, that’s what I always tell people. People ask me how I sleep so well at night when I have all of these properties. It’s because I already did my risk analysis. I already figured out what’s going to happen so I sleep great. I actually sleep much, much better this way than when I was picking out individual stocks and trading them because that was that was stressful for me. 


Tom: Is there any other risks or have recovered them? 


Eric: I think I covered most of them. I think the biggest thing is always just to know who you are as a person. Then do some self-reflection. I’ve learned that a lot of the big investors seem very Zen-like. That’s what I started to realize so I’ve been trying to master that more nowadays and then actually worrying about the investing itself. I just focus on carving out my own path and my own strategy that works well for me. That’s all that matters to me. 


Tom: If someone is not sure what their personality is, there’s something called, the Myers Briggs test. A site I found was, If I’m wrong about that we’ll put it in the show notes. It’s called, 16 Personalities, and it does the Myers Briggs test. I’ve had it tell me I’m a few different things so it kind of feels like a horoscope depending on the day. But maybe you could take it three times over a span of time to see if you hit the same thing twice. It hits on a lot of the things you brought up—if you’re more analytical, more patient, a lot of those types of things. Even though it’s not specifically about investing, knowing your little four-letter-code isn’t that helpful but reading the description of what that might actually mean about you, might clear things up for you if you’re not quite sure which way you lean on something. Like I said, I’ve had my change on me, though, so it might depend on the day. And, also like a horoscope, you kind of find the things that you agree with where you say, “Yeah, that’s me but I’m going to ignore this other sentence though…” It will at least reinforce things so you can kind of match that up and consider how that might actually affect your investing. 


Eric: I’m a huge Myers Briggs fan. Absolutely huge. It helps me for my own entrepreneurial businesses to understand what type of roles I should play. I’ll just throw this out there… My type is INTP. It’s supposedly fairly rare. So for any of the listeners out there, if you’re INTP, hit me up. I love to connect with INTPs because we’re kind of a unique bunch. It’s rare so whenever I meet another INTP we usually get along really well. There are stories we can relate to with the struggles we have being INTP in this world but also the things we enjoy.  


Tom: The last time I did it, I was ISTJ. But being introvert, extrovert, I’m right on the bubble. I come off as very extroverted when I’m in a room full of introverts. But at the same time, it still costs me some energy. I like that description of introvert, extrovert the best—if you’re in a room full of people, do you get energy from that or do you lose energy? I love being around people, but I’m going to a nap afterward. So it’s just one of those things where I do like that description. That’s the one that bounces for me a lot. And then the last one, I’m a “J”. The last time I took it I think the last one was “P” if I’ve got that right. Sometimes I’m right on the bubble that too—50 percent either way. 


Eric: That means you’re very well balanced. That’s a good thing, actually. 


Tom: Well, I took the ISTJ this week just knowing this is coming up. And a few of the words in the description (just as an example) were practical and dedicated and patient and determined. Again, it had nothing to do with investing but you could find those things within your type and think that might give a little better guidance on how you should be investing. 


Eric: And since you brought up that topic, thank you so much for that, because that’s the reason why I’m so passionate about this topic. For me, as an INTP, part of the challenge my personality runs into is we tend to get excited for the next big thing. This is another reason why stocks are not usually the best for me for short-term. It’s because I get really excited then I’m onto the next one. I’m looking at the next company, the next thing to research. That’s where real estate actually really helps me to stay grounded and helps me build wealth. I have other part of my businesses that I do in that in my entrepreneurial journey and pursuit that get to allow me to express my INTP and that’s how I create that balance between my own personality. 


Tom: Well, yeah. And that’s the one I really thought worked well for my investing. It was the “dedicated” word. I’ve watched some stocks run into the ground just because I was getting a dividend. I was like, “Ah, it’s good to turn around. I don’t want to sell when it’s low,” so there’s a negative side to it. But I definitely buy and hold of it. 


Eric: That’s funny. 


Tom: Well, thanks for walking us through all this. There’s a lot of people that listen to this podcast that are interested in investing in real estate, but I like this idea that they need to consider their personality and look at how that would affect them if they’re just getting started. They don’t know this from experience so they have to see it coming without any experience. To be able to lean on things like this test and just other experiences in their life, I think it’ll help them a lot just to be prepared and make sure it’s right for them. Can you let people know where they can find you online? 


Eric: Yeah, absolutely. I started a project called, 100.Properties. The website is, There’s no .com or .ca. People always ask me that but it’s just Very simple. 


Tom: One of those new ones?  


Eric: Exactly, it’s one of those new ones. I thought was a pretty cool one. I had to pay a little bit of money for it. This is a place where I’m trying to help educate people in a very conservative, methodical approach to real estate investing. I don’t talk about any of the fluff or “make money quick” stuff in the real estate game. I just don’t do that. But if this is something that people feel might really resonate with them where they want to build up a portfolio that makes sense for the long-term, wealth building process, check us out. We have a link on our website that will take you to our community on Facebook from there. 


Tom: Perfect. Thanks for being on the show. 


Eric: Absolutely. Thank you so much. 


Thank you, Eric, for your insights on real estate investing and for explaining why it’s so important to conduct your own stress test before buying a rental property. You can find the show notes for this episode at Are you a member of the Maple Money Facebook community? If not, I’d love to connect with you there. It’s a great place to ask a question or share a recent money win to encourage others. To join, head over to to share with the group. Thanks, as always, for listening. I really appreciate the community we’re building on both the Facebook group and through personal messages and reviews I’ve received. It’s been especially nice to be able to connect with so many people over the past year when we can’t see each other in person. I look forward to seeing you back here next week. 

Real estate just happened to be one asset type that really resonated with have to find something that makes sense, that fits your risk profile, your personality. - Eric Chang Click to Tweet