From ZERO to 10,000 Properties in Under 5 Years with Janet LePage

About Janet:

Janet is the cofounder and CEO of Western Wealth Capital (WWC), a real estate investment firm based in North Vancouver. They specialize in multi-family apartment complexes across the U.S. Over the past four and a half years, along with their investment partners, they transacted over $1 billion in sales of buildings. Last month, they hit their 10,000th unit in five years. Janet’s background is in computer science and business, and she is a certified Project Management Professional.

On a day-in-the-life for Janet at WWC:

No day is the same. As WWC has grown, they’ve also increased their expertise and skill sets. Most of Janet’s days involve looking at the risk factors and macro-issues they face (e.g. finding markets to get into or pull out of, or ensuring buildings are going to plan and they have a correction plan with leadership). Last week, they had their year-end event where they distributed money, celebrated, and looked at the year ahead. Janet has grown as a leader and her team is a force across their markets and with their global investment partners. Moving from two employees four years ago to 28 now, WWC went from a small, boutique investment option to a global equity platform. This has caused Janet to spend a lot of time learning about the different cultures of those they work with.

On how Janet started in real estate:

Janet purchased a home in 2003 and received a letter of assessment. This was new to her at the time, but over 2004 to 2007 she clearly saw the house had experienced growth in value. This potential passive income inspired her to buy more houses. She got a line of credit and in 2008 found a real estate coach who helped her look for a cash-flowing home. At the time, our dollar was at par with the U.S. dollar and what we thought was the recession was only the beginning. She went to Phoenix and bought two investment rentals. Although the values went down, in early 2009 Janet flipped her first home (this was in Phoenix). With a loan at 18% interest, she would buy homes at the auction from a list received at 4:00pm the previous day, flip them, and within two weeks, she would put them back on the market. It was usually a simple flip. Janet did 58 homes in just over two years, before buying her first multi-family building in 2011. This all started out as a hobby and has grown into what WWC has today.

On the Arizona market and Janet’s connection to it:

Janet was working in a high-level corporate career and hadn’t spent much time in Arizona. For the first few auctions she was there in person, but after that she had a team. Someone in Phoenix would get the list and assess it against their criteria set (e.g. distance from schools and main thoroughfares). They would look for a location that fit WWC’s needs, how much it would cost to put the property back on the market, what they could sell it for, how many days it would likely be on the market, interest and rehab costs, and maximum bid price. These were empty homes that Janet sometimes would enter through a window or dog door, if they couldn’t otherwise be viewed. Because of this process, she became intimately knowledgeable about Phoenix.

They have scaled or grown by reducing the number of variables introduced each time they bought property. Anytime a new variable gets introduced, so does risk and additional time to execute.

Do something you know how to do and do it well, so you can replicate it fast.

On her coach, and how Janet educated herself on the rehabilitation process so quickly:

Janet spent about a year with her coach, meeting once a week by phone and three times in person (he was based in Florida). She learned global knowledge and how to finish a process. They went through everything there was to do with real estate (apartment deals, mobile home parks, tax schemes, office and retail space, houses, etc.) Over three weekends together, they probably went through 100 deals of all sorts. Her coach’s position was that everything is a deal, it’s just a matter of what that deal is. He provided a nice foundation of the different ways to make money. Flipping is a high-risk, high-return game and where people slip up is in the discipline and unwillingness to walk away. Anyone getting into real estate needs a coach. Define who you are and go deeper into that level. You learn by doing. Buy one at a time, and then improve and buy more at once.

On the draw to the American market:

Janet was drawn to cash flow which, at the time, meant the U.S. There wasn’t a market in Canada that she felt strongly about. Nothing in Canada compared to the U.S. in terms of the same size city and amount of growth. She also did not want to be in a small town, as a larger city would allow her to grow with it and Canada doesn’t have large cities. Janet shied away from rent control, as she wasn’t equipped for it. Rent control brings a whole other layer of things to understand. As a landlord, you need to build it into your budget. There is nothing wrong with it, but it’s another layer of risk that needs to be managed. As for her coach, his skills were transferable to Canada and the U.S.; an apartment building is an apartment building and, for the most part, ambiguous to where you are in the world.

On the period between buying homes at the Phoenix auctions and when she founded WWC:

In late 2010 to early 2011, auctions started to dry up. There were homes, but there were also a lot of buyers and it was hard to make money doing it. Prices were being driven up and the amount between what you could buy for and then sell for was shrinking. Janet found this extremely frustrating as she had learned so much, but the opportunity was disappearing in front of her. It was scary, and she had to look at what she would do next. At the time, it was hard to get financing for apartment buildings, especially if you didn’t have a big balance sheet. There wasn’t much. She took a year of commitment to looking and learning and worked with investors she had made house deals with. In August 2011, Janet bought her first apartment building. It was near Arizona State University and was supposed to go to auction, a buying method she was comfortable with. When she arrived onsite, she saw that a bank from Ohio was the seller. Later, she called the bank’s President up and offered $100,000 more to not take it to auction. He considered it and agreed the next morning. Janet knew what the market could bear and was thankful the bank was based in Ohio and did not truly know the value of their asset. Over the next three years, Janet bought three new buildings and loved her work. She had a baby and was wanting to replace her corporate income with real estate income, so she could have the flexibility to raise her daughter. WWC bought its first property in early 2014, and the rest is history.

On if her life has simplified since and how involved she’s been in the work:

Janet started the business with no kids and was soon bringing two babies to work with her. Her daughter came to Phoenix at six weeks old. At the beginning, it was just Janet and her cofounder, so it was Janet finding the properties, doing all the paperwork and modelling, making the negotiations, and taking care of every other step along the way. As you grow, you can put someone into that role. WWC has transacted about 55 apartment buildings in 50 months and currently has three or four buildings in process to buy. Janet always sees the asset and is involved in the financial model signoff. They have set up a gatekeeping process for all critical risk points, but when it comes to steps like completing finance forms, Janet hasn’t done this in three years (now, she just approves them). Janet doesn’t know how to live without business and craziness. Every year they reach a new and different level of growth.

On the criteria used to evaluate apartment buildings and the risks they try to manage:

You can make money in many ways in real estate, but you must pick your bread and butter and stick with it. There are three ways Western Wealth Capital chooses locations.

1. They first pick locations to suit an economic profile which includes close proximity to where jobs exist, and then they pick the building. WWC chooses locations in the top job-growth cities by looking at census information, economic reports, and city-level projections. They have researchers who look at the nitty-gritty details.
2. Then, they look at what type of jobs are coming with a focus on “workforce housing”. This means service-level jobs such as repair technicians, call centre staff, support staff, hospital workers, etc. These people are usually first-time or long-time renters. They earn an income that allows them to eventually buy a house, and they are gainfully employed in the meantime. Pride of rentership is a big part of what Janet looks for. In Phoenix, for example, 40% of all jobs coming in are service-level. Data shows a high percentage of these workers will rent for a good period of time. So, you’re layering the type of job with the type of housing the workers need.
3. The third thing WWC looks at is the affordability index. This means the proportion of every dollar made that goes to housing. They look at this because they’re in the business of increasing rents, which thereby increases property value. In a city like Phoenix where $0.22 of every dollar goes to housing (versus Vancouver, where this is more than $0.50 on every dollar), increasing rent will not have a great impact on quality of living because Phoenix is lower on the affordability matrix.

Once in the city, Janet looks for an asset she can physically improve or increase value without betting on market appreciation and while removing risk. For instance, maybe adding a washer and dryer can increase the rent by $50 per month. That’s $600 in income per year, and on a 10% cap rate a $10,000 increase in value to the building. The same thing applies to interior upgrades including new paint, flooring, and appliances. In this case, spending $4,000 on an interior upgrade leads to a $75 per month rent increase or $15,000 increase in value. This total upgrade of $25,000 applied to the 200 building units is how WWC makes money.

The beauty of this system is it does not require having to bet on the economy changing from where it is today.

On how competitive the properties are:

Very. The “value-add” space is much more competitive than it was a few years ago. It is very hard for new entrants to win in this market. WWC wins based on a couple of things:

• Reputation. Many sellers care about price and, just as much, the execution of the transaction. When you have sellers like this, they know they can compete and not have to pay a crazy price.
• Terms. You don’t win by not putting money down and hanging onto a property for 30 days. WWC moves quickly with high, non-refundable deposits. This makes it tough for new entrants to the market. WWC’s long track record puts them at the top for credibility. As they don’t compete on price, Janet is thankful for the time she had to build a resume when the market wasn’t as saturated.

On American markets outside of Phoenix that Janet is excited about:

WWC operates across five cities: Phoenix, Dallas, San Antonio, Houston, and Atlanta. They will be bullish in all these cities throughout 2019. They also really like Las Vegas, Denver, Salt Lake City, and parts of Florida and the Carolinas. Something they look for when entering a city is not to own just one property—they need to have [significant] size so that once in the market they can see fluctuations, while holding buying power, etc.  If WWC could only foresee one or two deals, they would not enter a market. Currently, they are holding back until they can get to the size with which they can have a long-term, large presence. Their investment partners will see them stay active where they are right now.

On mitigating risks and impacts to their business model with factors like: 1) the market being more competitive and people talking about adding value to multi-family properties, 2) interest rates increasing, and 3) some calling for a U.S. recession in 2020:

A huge part of Janet’s role is constantly watching these things, to ensure they stay nimble and are buying well below market value in a way to reposition property quickly, so they can exit quickly if needed. People don’t see how many deals WWC walks away from behind the scenes. It needs to be a slam dunk. They model interest rate increases into their plans. Janet feels another increase is coming in December, but next year will likely be slower as everyone needs to catch up from the numerous increases in 2018. There used to be more than enough properties to buy, but now there just aren’t enough.

On an American city Janet would recommend prospective buyers investigate:

There are still deals to be had by anybody in these cities, but you must expect to lose a lot. In 2014 when Janet started to buy real estate, brokers didn’t return her calls (being female did not help—Janet only dealt with four females at the time, two of whom were not CEO-level). So, she had to work that much harder to win deals. Get on a plane and get down to the location; learn everything about the property and the deal. It’s all about building relationships. Prove to a broker you will do what you say you will. Look at tertiary markets outside of growing cities (i.e. the suburbs or the next growing city nearby). For instance, they went to San Antonio because it’s very close to Austin, and Austin is a hot market. There is a corridor between the two cities that will be built out in the next 20 years. Many people can’t afford to live in Austin and can get a better quality of life in San Antonio, so businesses are moving there. Tucson is another place to watch outside of Phoenix. They aren’t too far apart, and you can get more for your dollar. Look at what happened in Coquitlam and how many years ago people weren’t moving there.

On how much your mindset plays into making deals:

So much. They recently lost ten deals in a row. A lot of energy goes into each build, so many team members fly out to the locations. It’s hours and hours and so much work. Janet now has thicker skin than before, but there are still days she goes home thinking she’ll never get another apartment building. You may think you could have done something better, but there are so many rules to stick to. As a leader, you always need to be “up” and don’t want to show this mentality at work. You get knocked down, but you must get up, dust yourself off, and try again – or you’ll never win!

On how Janet builds a team of the right people and relationships, and the process of scaling:

With everyone they’ve hired, there is factual discipline and there is heart. At WWC, 80% of their success is in heart. People are committed to its vision—first and foremost they are there to build wealth for their investment partners. They are there to show the real estate industry that you can do business on human terms, and not term sheets alone. They are owners who are thankful to the property managers that get up each day and work tirelessly with the [tenant] complaints and the hot summers. It’s WWC’s role to make these people proud to tell their kids what they do. It’s also their role to create safe communities for their residents. Janet has won deals because brokers are behind them on this and know they are thankful and will do good on the property. Some people don’t care, but WWC can use this as a competitive advantage. The skillsets of team members are basic, but Janet has found when they align culture and who they are with people, the heart takes it that much farther. Good relationships are how they choose to do business differently.

On WWC’s pride of rentership strategy:

What they’re doing is very simple. WWC has a program called “We’ve Got Your Back”, where a backpack full of supplies from the local schools is given to each child at every property. The message to these property managers is that WWC cares about the people they see each day. The residents will likely care for the property and stay there for the long-term. This is key, as the two biggest costs of running the business are the constant movement (from repainting walls, etc.) and the required repairs to suites left in poor condition. They also engage every broker and ask for donations in each city to do this; it builds community. Janet has won buildings because owners are really behind these types of programs; it’s been a tiebreaker when they’re compared to other buyers and most other factors are equal. It’s the soft stuff that deals can come together on.

On some mistakes or big challenges Janet has faced along the way:

Mistakes happen every day. Janet embraces the “uh-oh” moments (hopefully they’re not too big, but there’s a learning on the other side). If you can break through the moment when you’re so scared, you will be that much stronger afterwards.

WWC watches vacancy very closely. When you try to upgrade and change a property, you often have more turnover. There are lenient rules in good buildings, and the not-so-great tenants don’t want to be around rules. WWC needs these folks out in order to attract good tenants. Within this process, you need to manage occupancy. Don’t get so many people out that your property is half empty—you still need to pay the mortgage. There is a balance and Janet made this mistake a long time ago; it was a great learning. It will never happen again, as they spend a lot of time managing the process. Another mistake is legal agreements – document everything.

Don’t just take someone’s word; it’s more than fair to document everything.

On the Canadian and Vancouver markets, specifically:

Janet doesn’t think Vancouver will ever lose in the long-term, though she doesn’t know if something you buy today will make money in the next two to three years. But inevitably, it seems things always go up; if you’re going to be there for 10 years, you will absolutely make a great return. Janet doesn’t invest in Vancouver because it’s not a cash-flowing city and it’s not built on economics (i.e. job growth, supply) but instead on a lot of offshore investment that’s hard to quantify. However, she believes in the market and that you will always win with a long-term outlook. These are her macro thoughts as she doesn’t watch Vancouver’s market day-to-day.

On if Janet planned or foresaw the company’s growth and size:

No. However, when she was 25 she told her dad she wanted to be the largest mobile home park owner in North America. Janet hasn’t purchased one yet, but she’s still a fan. A speaker she heard once said to “make a goal and climb that mountain”. You might look over and see a lake you didn’t know was there and fall in love with it. Then, you love swimming, and suddenly you want to be a lifeguard. You learn a new way to swim and want to share it with everyone, and then you look over and see another peak.

This has been more of her journey, though at some point along the way she set the goal of going from, say, 15 to 30 properties. Janet remembers buying her first apartment building of 23 units and thinking she’ll never be as rich as she was then – and she’s hoped to hang onto this as she hasn’t felt it again. When she got her 200th unit she remembers thinking, “Forget 200, I want 1,000!” 1,000 turned into 2,000 before the year was done, and then she set that next goal (WWC achieved 10,000 units in five cities!) Set a goal to get you working towards something but be okay if that goal changes to something different or greater—you wouldn’t have got there if you hadn’t started the first journey to begin with.

Five-wire:

1. Favourite neighbourhood in Vancouver: Main Street
2. Favourite bar or restaurant: Chewies
3. First place she brings someone from out of town: Grouse Mountain
4. West-side mansion or downtown penthouse: Mansion now, penthouse later
5. Something she’s purchased in the past year under $500 that’s changed her life: Tennis racket (learning tennis has been fun and it’s great to learn something you’re not good at)

• Western Wealth Capital