Ep278: Daniel St-Jean – Decide on Your Investing System and Follow It

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Guest profile

Daniel St-Jean was born and raised in Montreal. Still, he has also lived in Whitehorse Yukon Territory, Vancouver BC, Ottawa, and now home is in Niagara-on-the-Lake, Ontario.

He is an entrepreneur to the core, and the last time he received a paycheck as an employee was in 1986.

Over the 34 years since, he has owned several businesses, including an art gallery and framing shop and a publishing company. As well, he wrote and published two Canadian bestsellers.

He started investing in real estate in 2010 with his wife Laurel because they needed a source of income that was not tied to them living in Ottawa, where they were working as consultants.

They wanted to move to Ontario’s wine region, so Laurel could pursue a life-long dream of becoming a winemaker.

It took them only four years to be in a position to kiss Ottawa goodbye and move to Niagara-on-the-Lake.

In their 11 years in the real estate investing business, they have acquired 62 properties worth over $25 million. The fantastic part is that to date; they are yet to invest one dollar in that portfolio—100% financed with OPM–Other People’s Money.

How to do that is one of the many things they teach the members of The REITE Club that they co-founded in March 2017.

 

“We are now following our investing system to the letter, no exception for any reason whatsoever. Now we’re successful.”

Daniel St-Jean

 

Worst investment ever

Daniel and his wife kicked off their real estate investing career with the rent-to-own strategy. They built on it slowly and got some real success out of it. In 2012, they went to Nova Scotia to expand their market. They found some cool people who wanted to do a rent-to-own deal, and they decided to get into business with them.

Breaking their own rules

Daniel and his wife had a couple of rules that they followed when looking for property to invest in. One was to pick a house that they could quickly sell should the people renting it walk away. The second rule was always to take a deposit. However, they broke these two crucial real estate investing rules.

Facing the consequences

After two months of renting the house, the people moved out unbeknownst to Daniel and his wife. They were now stuck with a house in the middle of nowhere with snowbanks so high. It wasn’t the easiest house to sell, but they managed to, albeit making a loss of $25,000.

Putting in place a reliable investing system

After that loss, Daniel spent the next three or four months, setting up an investing system. This system had about 52 points, and this was the system he would always stick to when making investment decisions.

Breaking the rules again

In the Fall of 2013, Daniel did a refinancing deal with a family that he felt needed his help. He didn’t like the house much, and he also didn’t take a deposit, but he went ahead and bought the house because he wanted to help this lovely family.

The family, however, panicked and moved out just as the purchase was being closed. Now Daniel had this rundown empty massive house in a little town outside of Ottawa. The empty house cost Daniel $2,500 every month to maintain.

Finding the elusive buyer

In the Spring of 2014, someone approached Daniel and told him that he’d want to rent the house and turn it into a daycare. He would be paying $4,500 in rent. Daniel got excited about the prospect of finally making some money from this property. However, after a year of waiting for the guy to get approval for his daycare, they found out that the water supply on that side of the street was insufficient for them to run a daycare, and so the client slowly walked away.

Finally, Daniel could rent it out to a tenant paying $2,500 just enough to break even. But when the people later moved out, it was a total disaster. The house was in a complete mess.

Fixing his mess

Daniel had to fix the mess before putting the house on the market. This cost him $90,000. Then as luck would have it, the weekend before Daniel listed the house, there was a huge storm that left the basement with two feet of water ruining the drywall and doors. Daniel had to spend another $40,000 to do repairs.

At the end of it all, Daniel made a loss of $226,000 and change on that deal, making it his worst investment ever just because he failed to stick to his investing system.

Lessons learned

Don’t deviate from your investing system

Once you put an investing system in place, do not deviate from it come hell or high water. There are many ways to invest, but once you’ve figured out what strategy works for you, never deviate from that system.

Don’t conduct business with your heart

Conduct your business transactions with your head to make money, and then you give it away with your heart. Don’t ever try to conduct your business transaction with your heart because, very often, it’s going to end up not benefiting you.

Andrew’s takeaways

Business is business; leave philanthropy out of it

If you want to help people, make a profit, and give it to them. But don’t confuse business with helping people in that way. If you use your business to help people, it will bring significant conflict into the business.

Don’t break your investing process

Stick to your investing process, especially during the times that you are tempted to break the system. Your system may underperform for some time, and it can be tempting to change your investing strategy. But if you start to change your system midstream, you bring your entire system down.

Actionable advice

Whatever strategy you use, put systems in place and follow them. Period.

No. 1 goal for the next 12 months

Daniel’s number one goal for the next 12 months is to have 20,000 members in his REITE Club community. The goal of that community is to help people experience freedom, whatever freedom means for them.

Parting words

 

“Time is finite. So please build a team and use it to save time. Then you can use that nonrenewable resource to do more deals or just to enjoy life.”

Daniel St-Jean

 

Read full transcript

Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community. We know that winning investing you must take risk but to win big, you've got to reduce it. This episode is sponsored by a stance Academy which offers online courses that help investors, aspiring professionals, business leaders, and even beginners to improve the finances of their lives. And their businesses. Go to my worst investment ever.com right now to claim your discount on the course that excites you the most federal risk takers This is your worst podcast host Andrew Stotz and I'm here with featured guest, Daniel St. Jean Daniel, are you ready to rock?

Daniel St-Jean 00:45
I am. I was born ready to rock.

00:48
Ah,

Andrew Stotz 00:50
I am really ready. I'm excited to hear your story. And I want to introduce you to the audience. So let me do that now. Daniel St. Jean was born and raised in Montreal, but he has also lived in Whitehorse, Yukon Territory, Vancouver, British Columbia, Ottawa. And now home is Niagara on the lake, Ontario. He's an entrepreneur to the core, and the last time he received a paycheck as an employee was in 1986. Over the last 34 years since he's owned several businesses, including an art gallery, and framing shop and a publishing company. as well. He wrote and published two Canadian bestsellers. He started investing in real estate in 2010, with his wife Laurel because they needed a source of income that was not tied to them living in Ottawa, where they were working as consultants. They wanted to move to Ontario's wine region, so Laurel could pursue a lifelong dream of becoming a wine maker. It took them over only four years to be in a position to kiss Ottawa goodbye and move to Niagara on the day, in their 11 years. Now, ladies and gentlemen, listen carefully. This is a powerful statement. In their 11 years in the real estate investing business, they have acquired 62 properties worth over $25 million. And the amazing part is that to date, they're yet to invest $1 in that portfolio, 100% finance with OPM, other people's money, how to do that is one of the many things they teach in the right club they founded co founded in March 2017. And the right club stands for the real estate investing, training and education clubs. So, Daniel, take a minute in Philly, for tidbits about your life. Oh,

Daniel St-Jean 02:39
you covered a lot of things. But I just want to see, let's see, what else have I done in my life here? Well, I've been manager of a camera store, I've been a professional photographer, I've been a taxi driver, I have managed a historic site for the Canadian government one day, one day, Monday privatized some some historic sites was the owner, as it says, of an art gallery, I started a publishing company. In 2001, I joined the Canadian Association of Professional speakers, I've done a lot of speaking, coaching, training, etc. And since 2010, we are real estate investors. Yeah, that's it.

Andrew Stotz 03:20
And, you know, I have to before we get into the question, I really need you to tell us a little bit about, you know, the story of OPM and a little bit, just give us some background on what that means keeping in mind that some of the listeners may not even know that this can be done.

Daniel St-Jean 03:37
You Yeah, well. Very often I meet people and which, you know, they know that we've done real estate investing or doing real estate investing. And you'll say, oh, man, I wish I could do that. But I have no money. And then I just look at them. And I go, okay, and your problem would be so yeah, you're right. People don't know that you can finance a property, no matter what property with 80% from the bank and 20% from somebody else, and you just run it, you do a joint venture. That's it, you're just next week, you buy another one. And then in the summer of 2014, we bought 16 properties. And again, all with joint ventures and that's, that's so it is doable. And, and and again, it's doable.

Andrew Stotz 04:21
So and if the listeners want to learn more about that, they can go to the read the real estate, investing, training and education club, the right Club, which will have a link in the show notes so that they can go there and learn more about it, would that be the best choice for them,

Daniel St-Jean 04:36
as well. And the best part is that it's free. Membership is free. So come on, really, that's a no brainer. You just go to the website, click on it and join our community that is now growing coast to coast and Canada. And now we're starting to get some people in the US. So we want to build this community to 100,000 real estate investors in the next five years. So come and join us. It's free.

Andrew Stotz 04:59
That's awesome. So listeners, take advantage of that, go to the show notes, click on the link, and join up. Now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to it. And then tell us your story. So

Daniel St-Jean 05:21
so when we started our career, in real estate we adopted, there's many, many, many strategies that you can use to be a real estate investor, there's at least a dozen different ways of being a real estate investor, we really liked the rent to own strategy, which when it's done properly, and ethically is a fabulous win win win win win situation. So that's, that's the one that we started, and we started slowly. And in 2010, we did 120 11, a couple, then we get to 2012. In the fall of 2012, we go to Nova Scotia, to expand our market. And then we find some, some really cool people. And anyway, they wanted to do a rent to own and then we said, okay, fine. And then we brought the first rule of, we brought two roles there, one, we bought a house that is not, that's a little bit off the beaten path. And that's not a good thing you really rent on you want the first question, you should ask yourself, when you do rent on this, can I rent this easily? And can I sell this easily, and those people walk away? Well, I didn't do that. So we bought a house, that was okay. And then the next thing is, you absolutely need to take a deposit, which usually would take 4%, for a lot of reason. And that would take an hour just to explain that. I didn't do that. So I broke two rules. And we bought a house for these people in November, and they moved out, unbeknownst to us in January. And then we were stuck with a house in the middle of nowhere with snow banks up to the Ying Yang. And we ended up selling that house. In later in April, we lost $25,000 on that deal. Now we have not lost any money on or done anything stupid before that. So I then spent the next three or four months setting up a, what I call a system. So a system or a checklist to do lists, whatever you call it, buddy use a different name. But So from now on, this is the system, ABC, there's about 52 points in the system. And that's what I teach people who take my course. So this is the system and you don't deviate from that. Yay. So now we do another deal. Another deal. Another deal. Now we're coming to the fall December of 2013. And again, for way too long to explain the circumstances. But I ended up doing a deal with somebody. And this is called a refinance. That means it's a rental deal where people are actually in the house, but they can't renew their mortgage. So you buy the house, their house, you keep them there for three years while we fix their credit. They buy the house back after three years called a refinance, but it's still rent on strategy. So I wasn't crazy about the house. But I really liked the people that sounded like the people we wanted to help them. There were like about 20 days from the bank taking their house back from them, large family, blah, blah, blah, blah. So what did I do, even though I didn't like the house that much. And also I did not take a deposit, I still went ahead and bought the house. Well. Yeah, so we closed the purchase in January 2014. And only to discover that between Christmas and New Year, they panicked. And then they moved out. They just cleared the house and moved away. So now we have an empty house in a little country, a little town, outside of Ottawa snowbanks up to the roof and the house is empty. Of course, with the mortgage insurance and taxes. It's costing like 20 $500 a month, so the house is empty. Okay. And then in the spring, somebody comes to me because it was it had seven bedrooms in our house, it was huge, like 45 or 4800 square feet. So somebody comes to me and said, Hey, that would be a perfect house to do a daycare. And if we were going to do it, turn it into a daycare, this is how much we would pay for rent. So I'm already like, you know, counting my chicken before they've hatched here and because they were going to pay something like 40 $500 a month to rent that house. Okay, fine. So wait and wait and wait, and they need permits and they need discipline enough anyway, wait a full year, only to find out that the water supply on that side of the street was insufficient for them to be able to do that slowly walked away. But in the meantime, I've spent another 12 months at 20 $500 waiting for the daycare to happen that never didn't. We're now in the summer of 2015. So we find out rented. And we're finally rent renting sorry, we finally rented. And for two years and 2015, and now we're in the fall of 2017. We were renting it for 2500. So we were just breaking even. But then when the people move out, oh, my God, total disaster, people, kids, and you know, use crayons on the walls. Anyway, so many things were broken and damaged and stuff. So we start fixing it. And, and the house had been turned from a. Anyway, whoever I've done the work, I've done a really shoddy job well, now. Now we can see that because now the house is empty, and we're actually in it. And now we're looking at it to sell it. And now we're going to fix this. And we're going to fix that. And we're going to replace this $90,000 later in our team, march of 2018. We are now ready to list the house. So I kid you not. This is the Good Friday and march of 2018. And now we're well we said well, we're not going to list the house on Easter weekend, nobody's going to show up. So you come in next week, take a photograph, and then list the house and then we'll sell it during that weekend, there's a big rainstorm, the sump pump decides not to work because of course, there was a power failure. So when we go back on Monday morning, there is two feet of water in the basement. Which course as now run up the you know, the drywall and the doors and everything else. So now we have to spend $40,000. And it took six months to because they basically had to get the whole basement and then anyway, the electrical, it was a nightmare. So now we're ready to sell the house by mid October, we finally sell it in February 2019. By the time we added everything from day one to closing date with the legal fees and the repair, the you know, the everything, our loss on that deal was $226,000 and change.

Andrew Stotz 12:13
Ah, why? Why is it that the most dramatic stories are always real estate. Like there's so much attached to real estate, you know, compared to I don't know, buying a stock that just seems like something that people don't really know. But there's so much attached to the idea of investing in real estate. It's just very fascinating, but you know, obviously very painful. So,

Daniel St-Jean 12:43
you're right about that,

Andrew Stotz 12:44
huh? So So what lessons did you learn from this? I mean, really, it's an amazing saga. And, you know, I just, it had me riveted as I was listening to it. So tell us what you learned from it.

Daniel St-Jean 12:56
Okay, all right. So if you put together a system, and if you're a real estate investor, whatever strategy you're using whatever strategy you're using, you with your own experience with your own style, with, with help from the people around you, you're going to put together a system. Okay, so the lesson here is, once you put in place a system do not deviate from your system come hell or high water. That's when you mess up. So now, please realize I'm not saying no follow dirt system like that everybody else is doing. For example, I have three really good friends. And they're all members of the club. And they've all three of them have presented at the club, when we were doing live events. And their strategy is flip. But Danielle as a system, Susan as a system, and Brian as a system, all three of them have their own system, they're all successful, their system are all different. Which means it's not like there is one system to do flip. There's many ways you can do it. But one thing that they all told me is that once they figured out what the system was working for them, they never ever deviate from that system. So after the incident in Nova Scotia, I set up a system so that I would not repeat the same mistake. What did I do, I walked away from my system repeated the same mistake. Shoot me now. And then that's what happened. I lost 25,000 bucks The first time you would think that that's education that would lead to something positive. But in that case, and then so however, I can promise you that in the last 40 deals since that one, the $226,000 education as you know left an imprint, and we are now following the system to the letter, no exception for any reason whatsoever. Now we're successful.

Andrew Stotz 15:02
So for the young people out there when you meet us old folks, and you talk to us, and you say, Why are you so rigid, you know, come on, be more flexible. Now you understand why we designed our systems, and we follow them. And that's because it works. Let me share a few things I take away from your story. I think the first thing is, Business is business. If you want to help people, make profit, and give it to them, become a philanthropist become give, make pay a portion of your salary, pay a portion of your profits to people you want to help make profit and donate it. But don't confuse business with helping people with in that way. And if you can do it that way, then I challenge you make a million bucks in profit, and give it away and really help people. But the thing that you're going to, you know, use your business to help people starts to bring a significant conflict into the business. So that's my first thing. The second thing is about the system. Now I've spent all my life, you know, in investing in the stock market and analyzing it and thinking about stocks. And you're exactly right about system. Also in the stock market. It is the times that you are tempted to break the system. That is the time that you're supposed to stay with the system and in the stock market, it's possible that your system could underperform for one year, two years, three years, four years, five years, six years, seven years. If you look at a investment strategy of investing in value stocks, as an example, that strategy is underperformed for a long time. But if you start to change your system in midstream, what ends up happening is that you develop a system to perform during let's say, a down market. And now you've developed a whole new system. So the integrity of the system, obviously, you got to test it and you build it carefully over time. But it is the time that we are challenged to to break the system is the time we need to stick with it. So that's my takeaway is anything you'd add?

Daniel St-Jean 17:31
Sorry,

Andrew Stotz 17:32
is there anything that you would add to that my discussion about business is business and following this? I know you're 100%

Daniel St-Jean 17:39
correct. Yes. So yes. So you're supposed to do business, you're supposed to conduct your business transaction with your head. And then you make money and then you give it away what your heart but don't try to conduct your business transaction with your heart, because very often it's going to end up not benefiting you. And then of course, if you lose $426,000 on the deal, guess what? I was not very generous for the next few months with the charities that we normally support, because I had to recover from that. First and foremost. cessful. Yeah, anyway, you're right.

Andrew Stotz 18:16
Yeah. And I know a lot of young people come to me with their ideas about business. And they say to me, I'm not in it for the profit. And I say to them, you will be when the profit turns to loss. And the challenge that I always say to them is, I challenge you to make profit, make a million dollars in profit, and give it away. That's my challenge. And for the listeners out there, that's my challenge to you. If you end up saying to yourself, I'm gonna do this not for the profit, then I challenge you to make a profit and give it away. That's hard enough. Right there. Yeah. All right. So based upon what you've learned from this story, and what you continue to learn, what one action would you recommend our listeners take to avoid suffering? The same fate?

Daniel St-Jean 19:04
What one action? Well, whatever strategy you use, put systems in place and follow them. Period.

Andrew Stotz 19:14
Beautiful, simple and clear. Last question, what's your number one goal for the next 12 months,

Daniel St-Jean 19:22
the next 12 months. That will that means end of 2020. We want to by the end of 2021. We want to have 20,000 members in our right club community. And again, the goal of that community is to help people experience freedom, whatever freedom means for them. So you want to use real estate investing so that you can quit your job quit your job, you want to keep your job, keep your job, you want to move somewhere where there's no snow because you hate it or you want to move somewhere where you can go skiing, you would have that freedom if you and you can use real estate to do that that way use real estate To move from Ottawa there was nothing wrong with Ottawa but we needed to move to Niagara on the lake. And, and our consulting in Ottawa was tied to Ottawa because of the people we were working with. So we had to find a way to get away from Ottawa. And that's what we did took four years. But now we live here and we're not moving.

Andrew Stotz 20:19
Hmm, fantastic. Well, listeners, there you have it, another story of loss to keep you winning. Remember to go to my worst investment ever.com to claim your discount on the course that excites you the most. As we conclude, Daniel, I want to thank you for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever in the best teaching moment. Do you have any parting words for the audience?

Daniel St-Jean 20:49
Oh, does that mean Andrew, I can get up on the soapbox for 30 seconds or All right. So when you go to Ottawa on Sussex drive, you find you see a really beautiful building there that looks like a castle from the 15th to 16th century, it's actually the Canadian, the Royal Canadian Mint. What they do there is they print money. Now, I'm sure that if somewhere in Thailand, there's a place where they print the piling money, and affiliate or the Philippines or the US, they're all over the place. But I challenge people you're listening to this, to send me a photo of a building anywhere in the world that manufactures more time. Okay. So as we get older, and I just passed a birthday that has a zero in it, I'm not going to tell you the first number, but it was pretty dramatic. Time has become really, really important. And what I realized more and more, and as more and more I talked to people is I was talking to somebody a few a few days ago, who has 23 properties, he does his own management, he does his own taxes, he does his own repair. When I asked him why he's doing that it says it saves money. So think about the logistic the logic here, this person is saving is using a non renewable resource called time in order to save money, which is risky, totally renewable, their everyday they keep printing more they can making more, you can always refinance a building to find money. I don't care how many buildings you find a refinance, you will never ever, ever get more than 24 hours in a day, 60 minutes per hour. That said, it's finite. So please, please build a team. Use a team to save time. And then you can use that non renewable resource to well do more deals or just to enjoy life.

Andrew Stotz 22:50
So true, and so inspirational. Let's value the limited resource we have of time. Well, that's a wrap on another great story to help us create, grow and most importantly, protect our wealth. And now I'm thinking to add in and our time, fellow risk takers. This is your worst podcast host Andrew Stotz saying I'll see you on the upside.

 

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Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company that provides institutional and high net worth investors with ready-to-invest stock portfolios that aim to beat the benchmark through superior stock selection.

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