Michael was a guest on The Everyday Millionaire in April. Over the next four weeks, we will be featuring different parts of the podcast. If you want to listen to it, you can find it here.

Part 1 – Michael Dominguez’s Success Systems can be found here.

How real estate investing changes lives

Patrick: When you were looking at real estate you said — you’ve mentioned that you ran into a group of people that were investing in real estate. Tell me a little bit about that because you crossed paths with this group of people. What were they talking about real estate that caught your attention at the time in terms of investing?
Michael: Well, it’s just that it made sense. I was ready to hear what real estate had to offer at that time. I think really I already said if I knew then what I know now but it almost took my 15, 20 years of life experience to realize that there was a better way. I started to learn about how — I’m sure we’ve all heard the stats — that upwards of 90% of all millionaires built a lot of it through real estate. I liken it to if you’re playing a video game and there are two paths to get to the next level and one 90% of the people do and do it very successfully, and the other one is this strange difficult way that I don’t know how to do, I would pick the way that 90% of the people do.
I started to emulate some of the people that had some success both people I actually knew and then I started my journey of self-education and kept rolling from there. That’s what happened.
Patrick: Do you see in a reflection as you mentioned that it took you — you had to do it for 15 years to get to where you are but always that is the case but do you see– are you able in a reflection look at all the years of experience that you gained being in the business of selling franchises and all the rest of it as a bit of an apprenticeship for being a really smart realtor and a successful realtor and investor. Do you link that experience to where you were back then and today?
Michael: Absolutely, Patrick. Without a doubt, if I’d have gone out of school and gone into real estate at 23 like a lot of others do, I don’t think I’d be nearly the businessman that I am today.

Everybody gets their lessons differently

Patrick: It’s always interesting that we have to sometimes go through it. We have to go through it to learn what we can be successful at next and it is that apprenticeship. What I also find interesting is you are a realtor who got bitten by the investor bug but statistically we know that realtors– there can be some very, very successful realtors in terms of their sales and their listings and all of the things that realtors assess their success by, but many of them, many, many, the majority by far don’t own real estate investments. Which I always have found quite odd and some of them don’t even own their home.
What have you learned in the industry along the way? Because in REIN and you’ve heard us many times, you’ve heard me many times on the stage tell investors you must work with an investor focussed realtor, but, fullstop, you’ve got to do that. 

What have you learned along the way?

Michael: One of my early mentors as a realtor was a gentleman by the name of Brian Buffini. He does coaching, he’s based out of San Diego. I just became a Buffini. I followed everything that he was saying, and early on one of his early lessons was you’ve got to buy real estate of all the wealth that he’s earned over his lifetime as a realtor and as running the Buffini & Company training program pays in comparison to the amount of money he made through real estate.I also had a couple of early realtors that I associated with who have this one gentleman by the name of Mike Montagno, an Italian guy, probably 80 years old. He would take me by the– he literally put his arm around my shoulder and said,

“Mike if you do anything, buy real estate, that’s what you’ve got to do.”

He said it’s made me a millionaire, just do that. I started hearing that same lesson over and over again to people I really respected, so I did it. Honestly, I got to tell you the honest truth is when I bought my first property or two, I did it for as much to make myself a better realtor than I did to build wealth for myself.It’s maybe a naive thought but I thought, “Okay. Well, now I can speak their language if I own something.” I did the same thing as a franchise sales manager I bought a franchise, and it made me a better franchise salesperson. I thought let me do the same thing here and it quickly sort of flipped the script over the years where I became more investor first. I can tell you the lessons I learned from Mike Montagano and others. I’m trying to now give back, not that I’m an old grizzled guy, but I feel like it sometimes and actually just this year I did give back programs to my local real estate broker — not a brokerage but the association.I’m starting to speak to other realtors to try to teach them, teach the next generation to invest in real estate. I call it insider trading. You guys know more than anyone else about this industry, just do it.

Patrick: Well, that speaks to what you’ve maybe learned of why realtors don’t and I think investors in general. You’ve worked with investors, you’ve worked with lots of realtors and so when you look at what it takes to pull off what it is that investors do, how much of it is just in general mindset because we talk about mindset often on the show and fear, and getting over those fears. What is it that you see on a regular basis that you hear may be from realtors or investors let’s talk two different kind of channels, but what do you hear from realtors, for example? Why don’t they invest in real estate? To your point, they’re stumbling across great deals all of the time.

How do you know your strength in real estate?

Michael: The two things that happened the most often is just fear of losing their wealth, and so they’re afraid of taking action even though I could show them stat after stat after stat of how it just makes financial sense to do it, there’s just this element of fear. One of the quotes that I tell people is, you think that taking action and doing this is risky, how about going through the next 30 years of your life and then being ready to retire not having wealth, that’s risky. The other one, actually probably the most common one with realtors is they just don’t want to deal with tenants, they don’t want the hassles and such like that, and I share with them again, as I call it, my line is it’s a part-time job.If anybody tells you otherwise, it’s not purely passive, but it’s a part-time job that can make you a millionaire. If you really want to avoid doing the day to day stuff, you can hire a property manager and I have provided them with local property managers, to say just buy it. As long as it covers itself, makes a couple of dollars, hire a property manage that’ll– even if you don’t make any cash flow at all, just own the asset and someone who’s actually taken action actually, on Wednesday I’m actually meeting with a realtor who I spoke to a couple of months ago and he’s buying me lunch and picking my brain a little bit. I’m happy to share with younger realtors that very same lesson that I learned from some of my mentors early on.

Patrick: How did you come here? You’re a veteran REIN member, let’s go back to six or seven years, how did you hear about REIN and what was kind of your journey? You met investors, how did you find your way into the REIN room so to speak?

Michael: Two things happened. One, I recently read a book by this upstart author by name of Don R. Campbell. I really liked his message. In my investor circles of my local investment clubs, they mentioned the REIN Group. Honestly, I didn’t know what to expect. I think we all think we’re a little better than we are and I thought:

“Well I don’t know how much they have to teach me, but maybe I can get some leads out of there, so sure, why don’t I join and sign up.”

Interesting enough, although I have made some great connections, I’ve made some great friends there and I’ve even done some deals with some of the local REIN members, that pales in comparison to the amount of education I’ve learned through REIN. The essence of how I look and how I think about investment now comes from the cycle of looking for strong GDP properties or areas and just growing from there. The amount of times I’ve shared some of the lessons that I’ve learned with REIN to other people has, again, it changed my life. I’m always going to be a REIN member even if I’m not investing in real estate just if I can teach the next generation. I think that’s my gift back.

Patrick: That’s interesting and I want to dig into it a little bit because once this, to me, speaks a little to mindset and often what I see. I’ve been involved with REIN 18 years. Early on as a REIN member going to what at that time was a quick start program. We call that ACRE now, but ultimately I had a similar– As an entrepreneur, I always said, “If I never buy another piece of real estate, I would stay in this room.” because understanding the economics, the community, looking at the economic fundamentals was also beneficial to my business aside from real estate because, of course, I’m making decisions on my business and looking at what’s going on economically.I asked you because REIN members come, some actually return or they go and then they sometimes return and often they don’t. What keeps you in the room? I’m just interested in this one. I’m just curious about it, but also what is it different for you coming to this room now for six or seven years versus somebody who after a couple of years goes, “No, I’m out.”? What do you think it is that you get out of the room that some people don’t get out of the room or get out of being a member?

Michael: On one hand, you can say I’m a slow learner because I need to hear the same message over and over again. No, more seriously is actually, I’ve had the chance to talk to — actually, Don Campbell, I would call him my number one mentor. He’s been very instrumental even if I haven’t had one on one conversation with him. Just hearing him speak and some of the others speak. I’ve learned what’s made me wealthy has been not so much going all over the map and making all sorts of risky investment decisions. I’ve got this boring dance step that I do over and over again.What I do is I buy a bungalow in a good neighborhood. I renovate it, I build a legal basement apartment, I get both tenants in. It’s cash flowing. I refinance it. Use the money, do it again and repeat and repeat and repeat. That’s been my strength. That’s what I’ve been teaching a lot of my investors is exactly that. The more I’ve built in this industry, I get so many offers and so many opportunities that have come my way of development deals and buying land and some multi-unit build. I do have own nine-plex and a six-plex, but that’s not my strength, it’s the two unit stuff. I just keep going back to it over and over again. Every time I start to think, “What about this deal in the Caribbean or this purchase out in Alberta or this or that.” I have to remember my REIN training of saying make your investments boring and make your life exciting. Going to those meetings help kept me on my straight narrow, whereas if I’m on my own I honestly I start to think of swaying a little bit. That’s where I can get myself into a lot of trouble. I stick with what I know and stick with I’m good at and it’s really done well for me.

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Know your strength for investing

Patrick: How important is being a contribution in that regard for you? You received very well. Do you feel an obligation to give back or is that part of what inspires you is giving back? How does that show up for you given all of your experience?

Michael: I’m going to give you a C, all of the above for that one. I really think that it’s imperative for those of us that have had some elements of success to share that. Not just from a purely monetary sense. Obviously, as a realtor you can think I have — I’m thinking maybe I can build my business, but obviously, if I’m helping out other realtors I’m not expecting to get their business. That’s not the point. It took me a little while to figure this out, but there’s enough deals for everyone. It’s not a I win therefore you lose mentality. Is I win and you win and we both win together and it’s fantastic. It’s not like I’m ever in competition with any of these guys or girls, but secondarily with regards to the education, that really drives me. The last couple of years I’ve really tried to figure out what my passion is and certainly I don’t see myself being a full-time coach or anything like that, but if I can help mentor the next generation, not that I’m old and grey, but I’d like to be able to do that.

Patrick: It’s interesting for me the observation that I’ve made over the years is that the most successful REIN members because I will talk REIN members. I certainly have a life outside of REIN, but when I’m looking at REIN members and real estate investors, there’s those individuals who come into the community looking for what they can get and then many eventually start to make it about what they can give. The most successful REIN members we see in our community right across the country are those individuals who are coming into the room going, “What can I give?” It doesn’t necessarily mean that they’re giving advice, it can sometimes mean I’m giving good energy or I’m being enthusiastic, but it’s not what do I get out of the room, what do I get off of the stage. It is more being in the community and being a contribution to the community. Time and time again when I’m talking to many realtors, as much as they’re there and they’re driving their business and growing it, they’re being a contribution and they’re spending a lot of time with their clients. Do you think that that’s a unique part of being a real estate focused realtor is the ability to want to put in the time? Because let’s face it when you’re dealing with an investor, it can be often time-consuming.

Michael: Yes. It’s far more relationship building and it’s not necessarily for every realtor to become an investor realtor. I get asked that question a lot as saying, what do I have to do to become an investor realtor? 

“Well, you have to go out and buy some properties on your own and then you’ve got to start taking a number of investment courses, reading a number of books, start networking with people, and after about four or five years, you can really start to build your database.” They say, “That sounds like a lot of work.”

That’s why I can tell everyone the path I did because I know not too many people are going to follow that path. Honestly, the amount of relationships I’ve built through that has changed my life. I think back to my network of friends that I had 10, 15 years ago and who I’m basically hanging around with today and it’s a very different group of people because — not that I’ve abandoned my old posse, but this new world of investors we are so like-minded. It’s all different nationalities and gender. It’s also different. We all have the same mindset and it’s a good group of people.

Patrick: When you’ve been investing, you started out early on. How did you get through your fear? What was your secret if there was a secret? What do you attribute? Did you have some big fear and trepidation when you bought your first property? How did you get past it?

Michael: I bought my first property right after the recession in 2008/2009, not that we had as big of a recession as the US, but we did have a bit of a downturn. I was a bit of a knucklehead. I went right into a six-plex in a town I really didn’t know that well in Cobourg. I’m telling you, I threw up many, many times. I just didn’t know what I didn’t know. I was pretty much scared shitless is the best way to describe it. I just decided to move forward and it’s funny my wife she says I love you, I trust you but I don’t want anything to do with real estate. It’s all on you. I decided to move forward, and it was around here, then the second year I bought another property. I’ve listened to a lot of people doing a lot of interviews and podcasts and I’m sure you’ve interviewed a number of people and it seems like they’re buying five, 10, 15 properties a year and you think, “How the hell do they do that stuff. It just doesn’t make sense to me.” My goal was to buy one property a year every year for 10 years. That was my goal. Fast forward, this year actually, I bought my 13th property. It took me 10 years to do it and I basically I’ve been able to refinance my money, recycle it over and over again, leverage my wealth, and it’s put me where I am right now. It’s a very repeatable process for anyone who’s listening. It’s not something that– I’m sure when you hear some of these guys speak and they talk about all this stuff they’ve done, you think, “There’s no way I could do that.” or, “This is stuff that if I can do it, you could do it.”

Patrick: You make an interesting point. Let’s dig into that a little bit around your wife, and she’s going, “I trust you, but I’m not in. I don’t want anything to do with it.”

Michael: That’s what she started with, yes.

Patrick: The question is, is that she disagreed maybe, or she didn’t like the idea of real estate but she aligned with the direction that you were going to go?

Michael: Yes.

Patrick: She wasn’t an anchor tied to you pulling you back, she was on-side with it although she was probably nervous, perhaps, a little skeptical.

Michael: Yes. Because that’s what she grew up with. Her family never took any risks. They were far less entrepreneurial than even my family was, and so she was very nervous about that. Actually, this is one of these things where I wish I was smart enough to have planned this ahead of time, but what I started doing was when my clients purchased properties, as my “Thank you” gift, I was taking them out for dinners or for certain entertainment, or something along those lines. It usually was me, my wife, and the couple that I was taking out. I would do that over and over again, and at least I was hearing the same message over and over again, not from her husband who doesn’t know anything but from couple after couple after couple. Fast forward a couple of years and she says, “We should buying even more real estate.” Fast forward to today, she actually now is our property manager for most of our properties. She quit her job at IBM in resources and is now a realtor on my team, and is the one who is pushing me to continue buying properties. Either, I’m a really, really good salesperson or I just got lucky, I’m not sure.

Patrick: Salesman aside, that takes relationship power. That’s a couple working together, hearing each other, listening and being able to work through it, so good on you. Well done. Let me go back to some of your deals. Has every deal you’ve done been a home run?

Michael: I’ve sold two properties. I currently own 13, I’ve purchased 50. I tried getting into student rentals because the appeal of student rentals is really exciting. After having done that for a couple of years, I realized that wasn’t for me, so I sold it, made a couple of dollars profit, but not a lot, and moved on. Then the other thing that I did was, one of my two [unintelligible 00:32:56] properties was in a really inferior location. After dealing with tenant issue number 37, we were evicting tenants for both the upper and the lower unit, we made the decision to sell that property at that time and then take the profits and then buy a couple of other properties. I basically started using the expression:

“A quality property in a quality neighborhood, leads to quality tenants and that brings you quality profits.”

That’s one of the speeches that I tell people over and over again is I’m less focused about cash flow and paper if it’s in a bad neighborhood, I’d rather buy the quality property in a quality neighborhood, and it’s done me well. I believe the real way to build wealth in this industry is not to– Making on the buy is awesome, but it’s holding on that property for five, 10, 20 years. If you’re dealing with crappy tenants all the time, it’ll break you. It’s having good quality tenants and people respect you. I’ve built a lot of wealth that way.

Patrick: Such an important lesson as a real estate investor is just what you said. Is there’s also the quality of the area and is going to attract the quality of tenants. Which is to say that there are many landlords, and I know many investors that actually work well in those fringe areas because they just do, but their business model is set up to deal with the turnover and all the things that go along with that type of tenant base. You sold those properties and you redeployed the cash or whatever you might have done with it. Along the way, would you call those — they’re not epic fails — have you had any epic fails? You’ve been pretty smart?

Michael: No, I haven’t. Actually, one of the stories I like to share is working with two units. Again, because through REIN and other mentors, they told me what to look for in a property. I didn’t buy in inferior neighborhoods. I didn’t buy in inferior markets. Every property I had, at minimum, covered their expenses. If shit happens I’m okay as long as they cover themselves. I’m okay, I always used the expression that I said if I never sell another house again, or if I have a heart attack or a stroke, I don’t want to have to be losing these properties. I want these properties to, at minimum, cover themselves and possibly cover myself. I can tell you that I’ve now done over 300 deals as an investor realtor and knock on wood.

Not one client that has been in a long-term buy and hold property has lost wealth, and that’s pretty cool.