REIA 269 Matthew Ablakan: Don't Be A Victim - Entering The Real Estate Market At 19 Years Old

Welcome to Real Estate Investing Abundance, the show for busy, fulfilled professionals like you to learn how to develop financial independence built on solid passive real estate investments. Now here is your host, Dr. Allen Lomax.

Hello, enlightened investors, and welcome back to the show. I'm so glad you're with us today as we take a look at don't being a victim but entering the real estate market At an early age. At the age of 19, with zero help from his immigrant parents, using a flexible deposit payment plan and part of his student loan, Matthew Ablakana purchased his first pre-construction condo. Today, Matthew is the founder and owner of the Millennials Choice Group of Companies, a real estate, mortgage, insurance, and educational brand. Matthew, thanks for being with us today. Take us into the show and share a memorable experience that helped you to be who you are today.

Thanks for having me, Allen. And I would dedicate this whole memory that we're going to talk about to my parents who became entrepreneurs out of sheer necessity, not because it was a cool thing to do, but it was because it was the necessary thing to do. Their educational credentials did not get transferred over. from the Middle East to Canada. They were teachers in the Middle East. And when they left a totalitarian communistic regime to have a better life, it did not translate over. So they met here in Canada. They got married at a local church and they ended up becoming entrepreneurs out of sheer necessity. So on the weekends, my brother and I would be with our parents going to different wholesalers and buying products for costs that they're going to sell it for a higher cost so that they can make a little bit of money. There's a little bit of markup. And my brother and I would see this time and time again. Every single weekend we would be there with our parents because we didn't have a babysitter. They couldn't afford one. They didn't believe in one, and we were the ones helping them. So I ended up seeing this whole idea of buy low, sell high, and entrepreneurship and being in business for yourself at a very, very early age. And I think that programmed my subconscious. And I'm going to say that that was the memory that has stuck with me the most. And we've, we talk about it till this day, my brother and I, we talk about it with our parents. And that's something that I believe has shaped me into the entrepreneur that I am today. So shout out to my parents.

For sure. Yeah. And what a rich heritage there and what a way to have such a wonderful example to get into entrepreneurship and also leading into real estate. Did your parents both immigrate from the same country?

Yeah, both my parents were from Iraq and they left Iraq at around the same time. They did not know each other back home, but they met here at the local church. So they both have their own journeys and their own stories. And, you know, we're doing these podcasts and it's fun and it's great and it's educational, but they're the real pioneers. We're just, you know, our problems are not their problems. We're just trying to build businesses and do well and do well by others as well. And they met here. So. That's great.

Well, from those early years and that great and wonderful example your parents gave to you, you started into real estate at the age of 19. Tell us about that journey, those early days, and why did you choose real estate and how did you get started?

So when I was 16, I was working a couple of part-time jobs and I was in high school. Now I was learning from the people that are more experienced than myself about high-interest savings accounts, How you could invest in some safe mutual funds with low returns. So I was putting the $1,000, $2,000 that I had saved into these accounts and whatnot. So the return wasn't much, but it was the mindset that I was getting into that really helped me. And then at 17 and 18, I started learning about different forms of stocks and bonds and real estate, and it was just way out of my league. I had no capital. No control in the stock market, none of that stuff. So I said, you know what? That's not the route that I want to go, but real estate is something that I can do. And here in Canada, we have so much bureaucracy, so much red tape, and so much involvement from our governments at all 3 levels of our government that to develop a parcel of land into, let's say, a condominium building or a 300-home subdivision, let's just say, Takes years. So when a developer is starting to sell condominiums or townhouses, row houses, or single detached houses, they've already put in years of work leading up to the sales. And then once they get the sales, it's going to take years to construct the building or construct these properties. And one of the things we all know with buying real estate as an investment, you need time in the market, not timing the market. So we have that benefit of locking in something with pre-construction real estate here where you can buy it off of the floor plans, you can see what it's going to look like, but you lock it in at today's price and it may not be built for 3 or 4 years and sometimes even longer. Now, what the benefits of that is, you don't need a mortgage right away. You don't need to have the down payment or the deposit in full. There's a payment plan that a builder will put you on. And the beautiful thing is in Ontario, we have a home warranty program. It's a non-for-profit organization and it's backed by our government. 100% of your deposit monies that you're going to give to a developer are actually guaranteed by our government. So worst case scenario, projects can get canceled for financing reasons, or they don't get the approvals from the governments that they need. So a project can get canceled, your money comes back dollar for dollar. So at 19, well, at 17, 18, I was learning about this. At 19, I pulled the trigger. And why it worked for me was I don't need a mortgage. I wouldn't qualify for a mortgage. I don't have all the money to put into this as a deposit and down payment, and it's going to be ready 2 or 3 years from now. I'm sure there's going to be some equity or some appreciation that takes place. And that's how I got started. I used part of my student loan, part of some of the money I had saved at the 2 restaurants I was working at, And I got into my first property at 19. It was a pre-construction condo, and I still own it actually. Fast forward 11 years, I still own that property. I've never sold any of my properties in my portfolio with the exception of one in order to upsize to our primary residence. Wow.

That's quite a program. I can't think of anything really in the United States that comes close to that you have there in Canada. I mean, the only thing is our FHA and VA loans, but They are not at all comparable to that. They certainly don't come with a guaranteed no loss on the investment. Is that program still in effect in Canada?

Yeah, I wouldn't even say it's like a program that they can take away. It's just the way things are. We have so much red tape, so much bureaucracy, so much government involvement. It's going to take time to develop. So the time is there. And then the new home warranty programs that we have, Those are backed by legislation. Those are backed by the government. Those are backed by third-party insurance companies. And so your deposit monies are protected. So the worst-case scenario that can happen is if a project gets canceled, you get your money back. And unfortunately, there's that opportunity cost because you had invested your money, and unfortunately, the investment didn't pan out. Now, over the last 11 years, not one of the projects I've invested in has been canceled because we like to work with reputable developers here in Ontario who have a strong reputation, strong track record, and most importantly, they are well capitalized. Because in the last 2 years, with the, the cost of construction and the supply chain issues and the inability to get materials and lack of labor, we've seen projects get canceled by small to mid-sized developers. The large guys, they don't really have as much problems just because they— all the trades know they're going to have to accommodate these big developers because they have business and work for years to come. So the trades are going to obviously going to go work with them and they're going to get them the material, they're going to get them the products. But these smaller and mid-sized developers have canceled some projects. We've never been a victim of that. I know a lot of people have been, and it's been the story of, I guess, the last 12 to 18 months here in Ontario. And I've actually done some videos on this on my Instagram where people that didn't get the right advice, didn't do their own due diligence, They didn't purchase from the right developers. Their project got canceled. They got their money back, but then they played the victim card. Well, you signed a contract. The ability for a developer to cancel a project is in the contract, and you have 10 days to review it with your own solicitor. So if you do it right, it can be very lucrative, and it's something that I've done for the last 11 years in addition to some of the other properties that I've bought and shown my clients and helped them buy. I've done pre-construction and it's served me really well. It's like a, it's a no-brainer if you really think about it. You don't generate cash flow right away. You don't find a tenant right away. I understand that, but it's a very easy way to get into the market.

Yeah, it sounds fantastic. I suppose if the project goes belly up, they get their capital back, but there's probably no interest on it. Is that correct?

Some projects actually provide interest. So typically the condo projects will provide interest at a rate of approximately 8% a year.

So it's not bad at all. Yeah.

And most of them don't, however, but some do. Also, it's very important to keep in mind, if you're investing in a condo, your deposit monies are actually held in trust by a solicitor. So the builder never touches them. The builder never gets access to your money. And if they do, there's a very stringent process and they must have third-party insurance coverage. There's only 2 insurance companies in, I think it's in North America, but maybe we'll stick just to saying Canada. There's only a couple of companies that offer it. So it's a very, very strict process to tap into that money. So otherwise your monies are protected.

Wow.

I can't imagine that more people aren't doing this because I'm gathering it's not limited to just a— I mean, they don't like our FHA loans. You have to occupy the homes or you, and you can only have 4 of them without occupying them, but I'm guessing there's not even a requirement on occupancy. Is that correct?

That's right. It doesn't matter. When I bought my first one, they don't know if I had the money or not. They don't know if I'm going to live in it or I'm going to rent it out. And because it takes so much time to build, you might say you're going to rent it out, and then all of a sudden you're in a position where you need to live in it or you want to live in it, or vice versa. You wanted to live in it and it took 4 years to build, and now you've outgrown it, and maybe you've gotten married, and maybe you have a kid, and now that doesn't even make sense. So you rent it out or you flip it. We also have something in here where you can assign the contract.

Really?

You can assign it before closing. So imagine— Oh my gosh. And it's such a big and lucrative business. This is how you know that it's completely legitimate, completely above board, that our CRA, which is your IRS, our CRA built a task force over the last 10 years to tackle the unpaid taxes from people assigning their units because of how much property values were appreciating and people were flipping before closing, never needed a mortgage, And then they weren't declaring that they made that profit. So it's a very lucrative business. And before the rate hikes, because now demand has kind of cooled down a little bit across the board, you would blow out a building, 400 units, 500 units, a builder would sell the building in a weekend. That's how lucrative it is. And that's how in demand that it was. Now everything, whether it's resale or pre-construction, has slowed down. But things are still selling, but just not at that pace.

Do you have to be a Canadian?

No, you could be an international buyer. The only difference between a Canadian and an international buyer is typically Canadians, if it's a— we'll stick to a condo building. If it's a condominium building, it's a 20% deposit and it's broken down typically into 4 payments of 5% times 4. If it's an international buyer, the builder requires 35%. And for my American friends, you guys have a huge advantage because of the conversion.

I can't believe I've not heard of this. I mean, that 8%, that far exceeds the 1.5% or less that we're getting on CDs here in the US. So I can't believe I've not heard of this. Fantastic.

One of the main reasons why you haven't heard from it is because a lot of investors here as well, everyone wants to play that cash flow game and they want to buy multifamily real estate, which is definitely something I would like to scale into more than I already have. So I understand However, a lot of people can't get into the multifamily space right away. And a lot of the podcast experts, the real estate experts, they talk about joint ventureship, vendor take-back mortgages, and all these different types of ways and avenues you can achieve that, which I fully respect and I understand, and I've been involved in them. However, this is one other avenue. So we have a really big multifamily guy here, and he has a great story, and he's actually a good friend of mine. He was speaking to some of my clients just a couple of weekends ago, and in front of all my clients, he said, Matt, we've kind of taken a pause on buying multifamily, but I need to pick your brain about pre-construction. He said, I'm thinking about making some moves. I said, why not? And if you have the capital and you have the ability to just say, I'll park my money here for 3 years, 4 years, and what's the worst that can happen? It's very lucrative. But most people want to get in and have a tenant right away, and it's starting to generate equity. And I get all that, but one of the benefits of buying the pre-construction real estate is the time it takes to build the property. Once you get it, it's going to— it's a brand new property, even though it took 3, 4 years to build. And typically the rents are going to be a lot higher than when you purchased it 3, 4 years ago. So you get the best of both worlds if you're willing just to wait it out.

Sounds fantastic. Well, you named your company Millennials Choice. Tell us about the selection of that name.

Yeah. So 6 years ago next month, I was really contemplating now becoming more than just Matthew Applican as I was a realtor. I became licensed and we always promote our personal names. We're forced to legally, but I said, I want to build something that's going to last longer than myself. It's going to be something bigger than myself and it could grow into something huge. And I said, I have to brand it. And I learned from companies like Nike and Starbucks, you got to brand it. You got to have a story behind it and brand it. So I locked myself in a room for about 3 days and I was trying to think of names and I thought of so many different names and nothing really jived. And I'm a big believer on it needs to feel right and you'll know in your gut right away if it's the right thing. And I started working backwards because my training in university was that of a teacher. So they taught us the backwards approach. Where you would start with a final cumulative task that you provide students with at the end of the year. And so you formulate all of your lesson plans throughout the year to help the students get to that point where they can complete that project. And so at that point, the 3rd day, I said, you know what? All right, let me think about this from a backwards perspective. What's my target demographic going to be? What part of the demographic am I a part of? And let's work backwards. So I'm a millennial. I like the word. It seems like it was all over the news and Time magazine was talking about how we are so focused on selfies and instant gratification and all the bad stuff that comes with it. And I like that because whether it's bad or good, they say, you know, if they're going to talk about you, if one week it's bad, one week it's good, just make sure they're talking about you both weeks. So I said, this is going to be a great play for marketing. And I said, okay, but I have a vision to do real estate and to do mortgages and to do all these things under one roof. And I don't want to name them different things. I want to have something that's very, I guess it parallels like Millennials Choice Realty is what we have on the real estate side. Millennials Choice Mortgages is what we have on the mortgage side and Millennials Choice Insurance. So they all parallel one another. And I was not knowing what word I would use to connect everything. And then one day I just watched, I was watching TV and I saw the President's Choice commercial. And I said, Choice. And I looked it up and it was available everywhere and nobody had taken it and we secured it.

Well, interesting name there. Interesting trajectory, how you got there as well. Financial freedom, of course, is something important to all of us. And I think we define it differently from individual to individual. What does it mean to you and why is it important for you?

Yeah, it's one of those phrases that just gets thrown around. It's kind of like when, you know, here in Canada, everybody's throwing around the phrase affordable housing. Nowadays. So it's one of those phrases gets thrown around. It's kind of the cool thing to say. But for me, financial freedom is very, very simple. I could do what I want. My income far exceeds my expenses. And I don't have to go to work if I don't want to. That's as simple as that.

So why is that important?

I never bought into the whole idea of working until, you know, you're 65 or 67 and retiring. I seen my parents, we never went on a vacation besides once when we went to Disneyland or Disney World in Orlando, whichever one it is. And that was it. That was our first and Family vacation. I saw the struggles they went through their business of owning a convenience store, which is what they owned up until the beginning of 2022 when we finally sold it after 25 years. It's seven days a week, 365, and you if you have an employee or two, there's a lot of cash involved, a lot of theft that happens, and things like that. So difficult business. I saw that, and I never liked it. I never wanted it. My parents always pushed me to go to university because in Iraq, if you went to university, you were quite educated. Their education. System was quite strong back in the day. And so you were respected for that. And so we still have that about us where we respect people that have an education and have committed to their education. And so the only difference was I never wanted to be part of— I don't know, again, if it was from that memory and those experiences, I never fit well in a box. Like when I was in teacher's college and university, I never really liked the school system and the boards and being restricted to what I can or cannot do. And I really enjoyed all the things that I was doing in high school and at the jobs that I had earlier on where I was waiting tables, I was in restaurants, and I was bartending. I was basically creating the opportunity for myself in how I delivered my service and products and things like that. So that's what I really enjoyed. I really enjoyed entrepreneurship that way. And so when I did university, part of it was out of respect to my parents. Part of it was because I enjoyed the credentials. And, you know, in hindsight, I'm glad I did. And I have those credentials. I'm really glad that I did. But that's the reason why I didn't want to be falling into that trap of the rat race and having to work. And then maybe one day, 65, 67, someone's going to take care of me. That's, that's not what I wanted.

Well, what is one thing that people are doing wrong or thinking about in the wrong way when it comes to real estate?

They're listening to the news. They're listening to the news. So one of the things we talk about is don't take advice from anybody on a certain topic if they are not the expert or if they have not achieved a certain amount of, I guess, level of expertise in that area. So as an example, when I have health-related questions, I ask my best friend who's a doctor in Michigan, and I say, what do you think of this? And What do you think of that? And vice versa, he'll ask me questions about real estate. So you got to clear the air, clear the noise, and get rid of all these distractions and focus on what's real and what's in front of you that's real. What information can you access? Because we all know that knowledge is the potential of power if you use it, if it's rightly applied. And so that's, I think, the biggest mistake. Like in February of 2022, I'm not sure how it was in your market, but in our market, For every property that was listed on the open market, there were about 40 to 50 offers, not showings, offers. So let's say there were 40 offers, 39 people are not going to get that property. So we have a huge shortage of inventory and supply. All of a sudden, March was our first rate hike of 2022. So what happens? There's this doom and gloom in the air. There's this, what if, what if the market's about to crash and all these things. And you fast forward, From March till, let's say, November of 2022, you know, you're, you're at 8 months, 8 months, and the market is going strong still. Now it's cooled down a little bit, which, which I think is okay. I think should be that way in the first place. But nonetheless, everybody is predicting this doom and gloom and this crash. And really, if you have a strategy, and like Warren Buffett says, he doesn't pivot based on interest rates. You have to make the right choices based on the information you have in front of you. We still have a supply issue. We still have a lot of people that need a place to live. In Canada, we have a very pro-immigration policy, 450,000 new immigrants every single year that come to Ontario, not to mention the rest that gets spread out into our other provinces. So this is something that's going to continue. The cost of construction is going to continue to go up. We also have a lot of land here that's locked, so by conservation authorities, which we cannot develop. So there's only one way to go, and that's up. So that's why there's a lot of condominiums. And a lot of people, even in a recession, have to realize that when people cannot afford to buy homes, they're going to need a place to live because real estate offers that utility. And so rent goes up during a recession if people can't afford it. So if you have a strategy, if you're going to go in this with an open mind and a long-term mindset, cut out the noise and just get in. It's about, like I said earlier, time in the market, not timing the market.

Always a good rule of thumb to follow. Well, Matthew, tell us about your company, what it is that you have to offer and how it is that we can get in touch with you to take advantage of that.

Yeah. So Millennials Choice Group of Companies, our core pillar is the real estate brokerage. So we offer services in terms of buying and selling real estate. And then together we offer our mortgage services. So we have Millennials Choice Mortgages. We're contracted with all the big banks here. all the B lenders, the private lenders. So depending on your situation and your needs, we can help you arrange the right financing to go along with the property. And then we have estate planning through our insurance division. So Millennials Choice Insurance, we can help you plan for the future if you're going to start passing down your portfolio to your kids and whatnot. So we have certified financial planners in our office. And more recently, the Financial Freedom Club is more for Our online e-learning platform, which we're building, we're almost done. And also our private mentorship and I guess learning sessions we do quarterly for our students. And our students are typically clients. They have to be my clients in order for me to better understand their needs and wants. And then if they fit for that program, then we could put them into that program. And we recently co-authored a book with a couple of fellow Americans, Robert G. Allen and the original Shark from Shark Tank, Kevin Harrington. And You're going to— Allen, if you want to share that with your audience, you certainly can, and we'll provide them with a free e-copy of that book.

Well, that's wonderful. And all of that information will be in our show notes. Well, Matthew, it has been a pleasure talking with you today and getting to know you and learn more about what's going on in Canada. Thank you so much for being with us and viewers and listeners. Thanks for being with us. Look forward to being with you in our next episode.

Thank you, Alan.

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