"Inspired to Invest" Podcast

The Importance Of Understanding The Law To Protect Your Investments

• Serena Holmes • Episode 74

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Discover how a chance encounter can radically change your career path as we talk with Milena Cardinal, a former lawyer turned real estate maven.

Welcome back to episode 74 of the "Inspired To Invest Podcast". To watch rather than listen, click here.

This week, Milena Cardinal is here to open up about her journey from practicing youth criminal justice, where the emotional weight took its toll, to becoming a key player in the real estate sector. 

You'll hear how a fateful meeting with a mortgage broker redirected her professional path and led to the creation of a thriving investment portfolio alongside her husband, turning her legal expertise into a unique advantage in real estate transactions and community leadership.

We unravel the complexities of real estate investing, focusing on the strategic and legal elements of wholesaling and land banking. 

Milena shares invaluable insights from her successful land banking venture in Rockland and emphasizes the importance of strategic planning and patience in real estate. 

As market dynamics shift, we'll explore how to maintain investor trust through transparency and solid management practices, even when challenges arise. This episode is filled with practical advice on navigating the evolving landscape of real estate investment with resilience and adaptability.

Finally, the conversation highlights the critical role of estate planning and financial literacy for both active and passive investors. Milena discusses the necessity of involving family members in the real estate business, ensuring continuity and trust. 

We delve into the subtleties of real estate vehicles like Mutual Fund Trusts, stressing the need for thorough due diligence and legal oversight. With a focus on building wealth and achieving financial freedom, this episode offers a wealth of knowledge for anyone looking to fortify their investment strategies.

Thank you to Milena Cardinal from Cardinal Law for supporting this month’s episodes. To find out more about how her legal services can help you build your business and protect your assets, go to https://cardinallaw.ca.

“Inspired to Invest” is proud to support the Beyond Success Program, a not-for-profit financial literacy program for students, launched by More To Give & MAK Investments. Find out more at @more2give.ca.

Join us again on Nov. 20 to learn how to build a business and protect your assets with real estate law and structures!

Thank you for tuning into “Inspired To Invest”, hosted by @serenaholmesrealtor & remember, "when you invest in yourself, the sky's the limit!"

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Serena Holmes:

Welcome to the Inspire to Invest podcast, where we're sharing stories from real estate investors and how investing has changed their lives. This episode of Inspire to Invest has been brought to you by Cardinal Law. Hey everybody, welcome to Inspire to Invest. I've got Melina Cardinal from Cardinal Law here with me today. She has more than a decade of experience practicing law and seeing her firm to success. She is the go-to expert for untangling complex real estate corporate and estate planning conundrums. Known for her innovative and straightforward solutions, melina and her dynamic team are renowned for their holistic and collaborative approach to legal setups and transactions. She is a coveted speaker at events, associations and at high-profile gatherings, and she captivates audiences with her wealth of knowledge and charismatic delivery. Her unique perspective breathes fresh air into a wide range of legal topics, making her not only an expert in her field, but also an engaging and entertaining speaker. She's a trailblazer and she's redefining how law is practiced and presented. So thank you so much for your time today. How are you?

Milena Cardinal:

Thank you so much for that glowing introduction. I'm super happy to be here. I'm excited. I'm fresh off of vacation, so I'm feeling very refreshed and ready to tackle lots of big stuff.

Serena Holmes:

Awesome. So I mean, I've gotten to know you now for the last couple of years and I know a little bit about your background in law. But maybe you can take us back to the beginning and kind of where things started for you from the legal perspective, but then how that also shifted to becoming more of a focus when it comes to real estate and real estate investing in business.

Milena Cardinal:

For sure. Okay, so where can I start? So I was always very entrepreneurial. I come from an entrepreneurial family. So when I decided to start my law firm pretty much from the get go after I graduated and and at first I had a very main street, small town type boutique law firm, we did a little bit of everything. I enjoyed the variety and actually sorry, let me take a quick step back, Because what I really did is for a couple years I practiced criminal law. Yeah, after that that I started my practice and I thought I always imagined that real estate would be boring, but I totally fell in love with it and then that's kind of like what propelled me to have more like of a solicitor practice, doing a little bit of everything.

Serena Holmes:

So then, how did that kind of come about? Because obviously criminal law, you know, I think, from the outside looking in, I'm sure the public has a very different perspective on how it actually rolls out, compared to what it is. But what was it that made you realize like this maybe isn't for me, like let's try this stream instead.

Milena Cardinal:

Sure. Well, my focus was on youth criminal justice, meaning representing teenagers, and really it started to eat up at me as my daughter was getting older and just not being a good fit for me anymore. It was weighing on me. I did a lot of, a lot of my tasks. A lot of my day to day was basically a social worker, look for for recovery beds or try to find homes or that type of work, and it was. It was really grueling, so I decided to take a step back and I wasn't really sure what I was going to do.

Milena Cardinal:

And then a friend invited me to a networking event. And so I show up to this networking event. It's like small, like maybe 20 people, and it was one person per industry, and they were, they were still growing the group, and so, you know, new members had to kind of stand up and introduce themselves. And so I stood up and I said, ok, well, I'm a lawyer, and you know, and and this woman in the group goes well, I still see her face doing it and that was the moment, that was the break. I go see her and I'm like, uh, do you have like a traffic ticket or something? And she's like no, I'm a new mortgage broker and I'm looking for a lawyer to do real estate deals with. And I'm like, uh, I don't do real estate Pretty much like thinking that stuff's boring. It's not what I want to get into. Her answer, I kid you not, was, oh, you do now. And so she, I was ready for a change, though it was really timely. And, uh, we became really good friends Actually, I'm having breakfast with her tomorrow, so 10 years in where we've become really good friends she, um, she, she was really passionate about real estate and, uh, she was also a real estate investor herself.

Milena Cardinal:

So we kind of grew up together, I, we, she gave me my first deal to close as, um, as a real estate lawyer, and then taught me a lot about real estate investing. Uh, I remember her and her husband decided to flip this fourplex and so I invested a little bit of money in it and she would tease me, cause I would show up in like my lawyer clothes and my high heels and whatever at this, like at this site, and so she would tease me. And and that's about when I met my husband, yeah, and so I remember taking him to the site of this flip and he got very interested because my husband's American, so he wasn't allowed to work in Canada. So he was bored and he was like, hey, maybe this is something we could do, because he was allowed to own, he was allowed to invest.

Milena Cardinal:

So we decided to do our first flip and then we started to buy a couple properties. And then, um, because we had a few properties in town and we're like, hey, let's join some landlord groups Like I'm a social butterfly, I love hanging out so we joined a few land like a landlord group, a local landlord group. I started to meet other landlords, other real estate investors, and they would say well, because you're a lawyer and a real estate investor, you know, I would like, I would prefer to work with you as a real estate investor lawyer, because you're going to have a better understanding of these things, which we're not wrong.

Milena Cardinal:

But then it was actually my business coach in 2020, right after the pandemic hit, where I was kind of reconsidering the structure of the firm. We were trying to go virtual as quickly as possible to adapt, to continue to operate, try to do all these things. And one day she says you know you're never as passionate as possible to adapt, to continue to operate, try and do all these things. And one day she says you know you're never as passionate as when you talk about your, your, your clients who are real estate investors, like your real estate investor clients. And I was like, oh, you're totally right, I love this stuff so much, and um and so she said you should become a real estate investor focused lawyer. And I was like I didn't know that was a thing. And she's like, well, make it a thing. So I ended up shifting my niche to real estate investing.

Serena Holmes:

Yeah, no, I think that makes perfect sense.

Milena Cardinal:

Yeah, yeah.

Serena Holmes:

What would you say? It is then about real estate investing specifically. That lights you up so much.

Milena Cardinal:

I think it's the creativity. It's the creativity and the freedom that it brings. It's the creativity and the freedom that it brings. You know, I remember telling my husband a few years ago that I would be bored if we only ever did our own deals. I have to have my hand in like a bunch of different deals at a time. I love working with different clients, using different strategies. Right, we have clients who are wholesalers, others that do long-term buy and holds.

Milena Cardinal:

We have clients who do quick flips, like those strategies are, so it's so different the way that we structure things. I love working with developers. You can get really creative in how you structure deals for developers, whether it's the corporate structure, the financing structure. I love that stuff yeah.

Serena Holmes:

Can you talk a little bit about just because you mentioned wholesalers. So I have met some people at wholesale in the United States and I understand it can be quite different down there. But can you talk a little bit about how your clients are finding those opportunities here and what that process looks like legally in terms of them finding a property and then flipping the paper and you know just kind of their strategy with regards to that?

Milena Cardinal:

with regards to that. Yeah, well, I actually spoke with someone at an event I was at a couple weeks ago and he told me about bird dogging. Yeah, I think I got that right, yeah.

Serena Holmes:

I'd never heard the term before.

Milena Cardinal:

Yeah, and basically what he? What he explained is that he he flips a property or he he wholesales a property but he never gets it under contract. He basically just gets a referral fee. Yeah, so I guess some people do it that way. I've never worked with a client who does it that way, perhaps because they may not need a lawyer. Those clients may not need a lawyer, but typically when it comes to wholesaling, where we assist is in getting a very robust agreement of purchase and sale, understanding all the clauses that need to go in to protect the wholesaler but also make the contract attractive, because wholesalers sell the contract, not the property, so the contract needs to be really attractive to that buyer. So working with that, with the wholesaler, to create a very robust contract, and in individual transactions, helping with specific clauses and then the closing is is our job is relatively simple. On the closing, it's basically just make sure the wholesale fee gets paid, how that wholesale fee gets calculated, all of those things.

Serena Holmes:

So the process be like they find the property, they get it under contract with the seller and then during that closing period, whether that's like 60 days, that's where they can kind of shop, that deal around to possible buyers and that's kind of like they assign the contract without ever closing on the property. Exactly If I capture that properly.

Milena Cardinal:

Yeah, so sometimes it's a matter of negotiating extensions of the wholesaler needs a little bit more time. It's a matter of making sure that not only the wholesaler has time for due diligence, but the buyer also has time for due diligence. So making sure those clauses are properly in place, trying to limit the liability of the wholesaler if the buyer can't close. That's a tough one because most of the time the sellers don't want that, which is understandable. But maybe finding some balance within that there's different things that we can assist with. Yeah, yeah.

Serena Holmes:

No, that makes perfect sense. I do find it really interesting because I know some people have been very, very successful with it in Florida, because I guess you actually don't have to have home insurance down there. So for people that have been victims of hurricanes and storms and things like that, if they don't have home insurance, you know they may not have any choice but to really walk away from the home because they can't afford to repair it. So someone will come in, offer them, you know, whatever price that is below market value, and then you know they'll flip them that way. So I just find it interesting and again, there are some big differences just in terms of how it's handled being south of the border, but I was just curious to see north of the border. Now that's looking right, because I can't say no very many Canadian wholesalers.

Milena Cardinal:

So, going back from the legal standpoint, uh, the the wholesaler gets it on the contract under a standard aps and then will assign it to the buyer through an assignment agreement, which is also an oreo form. That that's what's typically used. Yeah and um, just making sure those clauses are in place, because really all of that legal protection is going to be in schedule a.

Serena Holmes:

Yeah, yeah, no, that makes perfect sense. Now, going back to your uh portfolio, can you talk about what you think is your biggest success to date, or something that you're most proud of?

Milena Cardinal:

Oh, that's an interesting one. I think the one that jazzes me the most is our land banking deal. So realtors brought up that there was this land opportunity nine acres in Rockland and it was just outside of what is currently the city core, but it had already been rezoned in the new plan by the city as urban core. That area, which is basically just vacant land yeah, it's raw land. That area, which is basically big, just vacant land yeah, it's raw land. And, um, and we had an opportunity to buy it at a really reasonable price, especially compared to other lots and what they were going for. In the area, um, it which everything was being swept up by developers and, in fact, some of the land was already being, uh, leveled.

Milena Cardinal:

And the only thing that the city is waiting on in order to like approve all of these site plans, which a lot of them have even been submitted to the city, they won't approve them until the sewers come in. So we know there's this like waiting period, so we know we had to be able to sit on it for a few years. Yeah, so we raised on it so we wouldn't have any, any ongoing cost. The only cost is the taxes, which very minimal, and so so we're basically just sitting on it and waiting and then we'll see what we do with it. We'll see if we develop it or if we sell it, or maybe we flip the paper, maybe we get a site plan on in place on it. We'll see.

Serena Holmes:

Yeah, no, I think that's such a great strategy.

Serena Holmes:

There was actually some land that I saw that was close to me, that I happened to be driving by and I didn't go to see it for a few days, and then it sold conditional and then went firm, but it was essentially 10 acres and the surrounding area, tac had put in $500 billion worth of resources and then Doug Ford came in and put in the moratorium on building and all this stuff to do with like the green belt and all that stuff kind of was in flux. So now there's kind of this building ban that will probably be over maybe seven to 10 years or something like that, but this plot of land where you could either build you know 70 detached homes or possibly 150 townhouses. Imagine what that will be worth seven to 10 years from now, knowing that all those resources are already in place, it's already zoned appropriately, but you're just you have to wait. So I was like, ah, cause you could get you know a handful of investors and just raise the money and sit on it and do exactly what you're doing. But, um, yeah, exactly.

Milena Cardinal:

The tricky part is to is to carry it so for us to de-risk the project. We didn't want any debt on it. It was really. It was really about buying cash, which I mean, I don't know about you, but I didn't have like a million dollars cash in my back pocket.

Serena Holmes:

So yeah, this was like 3 million. So I was like, if you've got a hundred thousand from 30 investors that can stand to know, that's going to take some time and then you can decide what to do with it later on.

Milena Cardinal:

But savvy investors will know that, that, that it's all in balancing and having a variety of things in their investments, right? I've seen people throw everything at private lending, all with the same type of properties, and then you know the market shifts and then that's a little more difficult. Or you know, all in one in one, um, um, mft, or something like that, yeah, yeah, we're all in stocks, or all like right. So I believe in diversity and diversity, and so for real estate investors, it's nice to have this type of investment which is not dependent on banks. As long as there's enough money to pay the taxes, it it's just going to sit there. It's not going to devalue. Yeah, I mean, it might devalue over a short period of time, but over a long period of it can't devalue it historically, wouldn't.

Serena Holmes:

I think it also comes down to the expectations, right, like I think. If an investor goes in knowing this is like a long-term buy-on-a-bolt kind of strategy for seven to 10 years, that's one thing, as opposed to saying, well, this is 18 months or two years, which then later becomes something like 10 years. Yeah, and then a couple of those that I went in thinking there'll be 18 months of the chance to extend twice, and we're six and a half years in and we were told it could be another five years and I'm like what.

Serena Holmes:

You know that's a very different expectation from the standpoint of the investors. So I think as long as we are very clear from the outset what's involved and what they're looking at, then you know it can be done very, very well. But moving along to some of those other obstacles and challenges, what are some of the things that you see more commonly with investors that have run into some issues and snags with their projects and that may or may not involve investors? But what do you see as something that you know has come up a few times?

Milena Cardinal:

Um, the shifts that happened, I would say, in the last two years. When they first happened, they happened really fast and I don't think it's, I don't think they could have been reasonably anticipated to happen that fast and happened that drastically. It wasn't just the interest rates, it was also the requirements to qualify and it made a lot of investors have a very, very hard time refinancing. Yeah, and so there were a lot of investors that were just buying, buying, buying, because the market was very was, was, was ripe for that. So they were buying a lot and they were like, okay, like they, I could afford to sit on this a few months before starting renovating. The problem is, by the time they were ready to refinance, the market has shifted, the refinance was more difficult and a lot of them did not have, in my opinion, a good corporate structure and that caused a lot of difficulty in the refinance process because banks got very, very tight with on the corporate side and the corporate side and, like for investment properties, it got a lot harder. So I've seen some investors go under as a result of that, and so even some investors who had the best intentions and were treating their investors well and were making good decisions, didn't factor in the changes in the market, and that's, unfortunately, something that was so unpredictable.

Milena Cardinal:

I remember for our own portfolio, before all of this I had, I had this like confidence. I had this level of like yeah, we're good. You know, we're not over leveraged by any means. Our property value has skyrocketed during the pandemic. We're doing so well. And then the market turned. I was like, oh okay, maybe not so well. I'm glad I didn't bank on that.

Milena Cardinal:

Yeah, because there was a readjustment, there was a shift, it you know. Now we've got to. We had to shift gears from acquisition to actually enduring. Right, we had to get to a place of comfort of we can sustain when, when all of our mortgages come to term, because of course, we refinance everything at once. And then it was. It was, you know, making sure that we are in a position to endure the change at that point. So so it's a challenge. Navigating these waters is difficult. It's not simple. There's there was also a lot less deals on the market. I almost feel like now there's an uptick. I'm seeing more and more and more properties coming on the market, but I still think the prices may not be super reasonable. I think sellers are still a little bit.

Serena Holmes:

I feel like they're stuck in that mindset of like 2020, 2021, where things were up here, and I think that's one thing that I was talking to a mortgage broker recently and he was talking about how he doesn't think that we've seen the bottom yet, because there's a lot of five-year mortgages that were set up in 2020, 2021, that were those, like you know, before things started to climb and they're maybe in that range of one to 2% and with them coming up for renewals, there will probably be a fair amount of people, whether they're homeowners or investors, that won't be able to afford the new mortgages. Even though they are coming down. They're not going to be what they were, so obviously that can still have such a big impact. So it'll be really interesting to see, like what happens in the next, I guess, six to 12 months.

Milena Cardinal:

And we mostly pay attention to 10 plus units, and what I'm noticing is that it's so difficult to find a property that cash flows. And without cash flow, good luck finding investors willing to invest in your project. Yeah, yeah, right. And so, unless you have a very, very robust plan to grow the value and refinance and then cashflow really quickly, which is really difficult because of the of the of the rental rules, right, so there's there's a lot of complexity right now for investors buying multifamily because, simply, they don't cashflow. Even though the rates are coming down, it's still very difficult to find properties that cash flow from what I've seen, not that I know.

Serena Holmes:

Yeah, I mean especially here in Ontario, like I think, if you, are going to look in other places. That may be a different discussion, but for us here in Ontario that's kind of the hand that we've been dealt at the moment. Since you have worked with so many different investors and businesses, what would you say is one of the biggest lessons that you've learned just from kind of working with them and their experiences?

Milena Cardinal:

I've been speaking about this a lot. When I get the opportunity to speak at events and whatnot, I always try to slip in my talk maybe a little bit of the more boring side of things, which is management of other people's money. Right, we talk a lot about a lot of these real estate groups and real estate events. We talk a lot about other people's money and using other people's money to do projects, and while I think that's fantastic, I think managing other people's money is essential and that requires a deep knowledge by the investor of the foundational stuff, like sweating the details right Understanding the foundation, understanding finances, being able to provide information at a moment's notice, having standard operating procedures naming conventions, documents, sorting all of that stuff should be well established and then communication with investors, keeping the investors apprised.

Milena Cardinal:

It's unbelievable the response that we get when we send a monthly email to investors saying this is what's going on. Three lines, maybe a picture. This is what's going on. It's three lines, maybe a picture. This is what's going on with the project we promised we would be here. Either we're here or we've surpassed it or, more likely, we're a little bit behind because this and this and this happened and this is how we're fixing it, it doesn't. It's not about the success, it's about honesty and openness and I think that makes all the difference. Yeah Right, like treat your investors like you would want. You would want to be treated if it was your own money and the knowledge you would want to have and make sure that you have the answers. It makes all the difference.

Serena Holmes:

Yeah, I mean, I couldn't agree more. I think that having that transparency, integrity and trust is really fundamental and even with some of the situations I'm in, like, I think there's nothing worse than having to send email after email and no response. Or they've said they will send an update at a certain time and they don't send it. You know, I think there is a lot of fear and uncertainty happening in the marketplace right now, so I think those on the active side need to be very sensitive to that, just so that they are managing things appropriately. But on that note, we're just going to take a really brief break for a word from our sponsor, which is Cardinal Law this month, and we'll be right back. Is it real estate investment? You're considering a gold mine or a landmine? Introducing propertycastio, the black magic of real estate investment analysis. Use propertycastio to analyze and underwrite real estate investment opportunities, unlock the potential of a property and share professional reports. Jordan McGregor is a commercial realtor and founder of PropertyCastio. He identified the need to simplify and streamline how properties are underwritten to help investors make better decisions and sound investments. To help investors make better decisions and sound investments, propertycastio is a best-in-class, purpose-built tool for real estate investment analysis. To find out more, go to propertycastio and to sign up, click the link in the show notes.

Serena Holmes:

I value transparency, integrity and trust. If you choose to work with me, you can be assured that business will be conducted honestly and openly. Time is of the essence in this industry, so you can expect nothing short of quick, clear communication from me. I'll keep you informed every step of the way so you feel comfortable throughout this entire process. Our homes are where we eat, sleep, relax and play. My clients' best interests are at the heart of everything I do and, with this said, my service to you doesn't end when the transaction does. As your realtor, I'll not only help you buy and sell your property, I'll also educate and support you along the way. I want to help you fulfill your goal of homeownership and become your trusted real estate resource for life. I can't wait to share my passion for real estate with you. More importantly, find you the perfect house to turn into your home. Looking to buy, sell or invest in Durham Region or Toronto? Let's chat.

Serena Holmes:

Inspired to Invest is proud to support the Beyond Success program. In today's complex world, it's absolutely crucial for our youth to learn how to take charge of their financial future. We believe that every young person deserves access to accurate, practical financial information. Designed to bridge the gap, the Beyond Success program leverages a comprehensive educational boot camp to equip young minds with essential financial literacy skills. With essential financial literacy skills. At Beyond Success, it's not just about teaching financial literacy, it's also about fostering a foundation for a prosperous and empowered future.

Serena Holmes:

Join us Together, we can build a brighter financial future for the next generations. Join us Together, we can build a brighter financial future for the next generations. Hey everybody, welcome back to Inspired to Invest. I've got Melina Cardinal here with me from Cardinal Law and we're talking about everything from successes to challenges and lessons in real estate and real estate investing, and before the break, we were specifically talking about being good stewards of other people's money if you are raising for any projects. Which leads me into my next question, which is one of the craziest things have you ever experienced as a real estate investor?

Milena Cardinal:

Interesting. Well, I got swept up in the concept of reserving pre-construction condo units and then assigning them when they're ready to close. Unfortunately, the one that we bought was ready to close in, I want to say, january 2021, which was like the absolutely worst time to assign. And number one it's like a harbor. It's a harbor property, the condo's on the water. So like the attraction is the water, it's the summer, the interest rates had just hiked, property values had come down, there were rules against. There were rules that had come around against non-Canadians buying properties. The non-resident speculation tax had now applied all over Ontario. So like it was a comedy of errors.

Milena Cardinal:

How everything was horrible, um, but I firmly believe that everybody has to make one bad investment at one point, and we ended up closing on the skin of our teeth. We were extremely lucky that we were able to close, um, but but yeah, that that one hurt, that one hurt. Sure, the one that was supposed to be easy was the one that hurt.

Serena Holmes:

Um, and it'll be interesting talking about the condo market, just because there are so many, you know they say shovels in the ground in the last couple of years and that has gone down. So with the number of new condos that are expected to kind of come out within the next one to two years time, it'll be really interesting to see what that consequence is on condo prices and stuff like that and even people's ability to close, if there's any issues that blow back on the builders and the developers. Now, I know you also have a really interesting short-term rental which you mentioned. I think it's an in that is automated, so maybe you can talk a little bit about that.

Milena Cardinal:

Yes, actually, I really, really love this property. So our office building that we were in before, which I purchased in 20, I want to say 2013. When we, we grew out of the firm, grew out of that space, and so that's when we moved in the building we're now, and so we didn't really know what to do with this beautiful century home because, because we'd been using it as an office for nine years, we had this parking lot in the back that we had to build. That was then making it very unattractive as a home, and in Cornwall, commercial buildings don't hold the same value, and so the concern with selling it as a commercial building was we would have to take a bit of a dive on the value a commercial building was we would have to take a take a bit of a dive on the value. If we sold it residential, we needed to pay the hsd plus. It wasn't that attractive as a residential, again because of the parking.

Milena Cardinal:

Yeah, we toyed with the idea of literally cutting it apart and making it into a four unit, and it's certainly large enough for that, but it would have taken away so much of the beauty and the charm, and so my husband decided to um, make it into this beautiful inn that's managed on Airbnb. So it's a five bedroom plus a side suite um in, where all the rooms are different styles, so we have, like a beach room and a romantic room and a retro room, a boho room and a Western room. That's awesome.

Serena Holmes:

Yeah, he did a really good job. I'll include a link to that in the show notes for anyone that wants to check it out if they're passing through Cornwall for any period of time. For sure I'd love that yeah so how have you found managing that? Because obviously short-term rentals are really an active business, so is your husband primarily the one that's taking care of, like turning over the rooms or managing cleaning and things like that.

Milena Cardinal:

Yes, he was. He was, uh, able to um focus solely on our properties. About three years ago he quit his job to to work on our properties and um, and so he manages that as well and um, it's it's self-managed on Airbnb, so it's not, it's not manned or anything like that, and then he coordinates the messaging and the cleaning and the management and we've we've got some good help too with it.

Serena Holmes:

Awesome. Well, I'm glad you're able to hold onto it, cause it sounds like something that's really special to you. So, even though it kind of served its purpose at one point, it's evolved into something even bigger and better and kind of creating memories for people at the same time. Now we were obviously talking about challenges and lessons and stuff like that. What would you say is either some of the best advice that you've gotten or advice that you want to pass down to an active or passive real estate investor that is entertaining different real estate opportunities.

Milena Cardinal:

I'd say for the passive investor is vet your active investor as well as much as you vet the project. And it's easy to fall into the trap of saying, oh, this active person was referred to me by someone else, so I trust them. I'm not saying don't, but I'm saying make sure that you vet them in light of the project that they're proposing. Yeah, right, I remember for one of my clients, one of their passive investors, in a meeting that that we'd hosted for their passive investors to ask questions about, about the structure of the deal and things like that. So sometimes I attend those for my active partners and one of the passive investors asked what happens if you die? To my client I was like that is a brilliant question. Yeah, and it's a big one.

Milena Cardinal:

Right, we invest passively as well. We invest in people before, like on, even more than we invest in projects, and so I thought that was a brilliant question of what happens and especially if, even if you have two investors but there are a couple, right, couples travel together or whatnot. So I thought that was a really brilliant question and the way that we ended up resolving it actually, on a side note, is what I suggested is that I undertook to make sure that their estate planning was in place and that they named a real estate, a knowledgeable real estate investor to take over on the real estate investments side of things, so that if something happened to both of them because it was a couple that they would name someone who would be able to take over the project and take it to the finish line.

Serena Holmes:

Yeah, I think that's. That's really wise. I was actually part of a group at one point called the executive council and one of our exercises was called a green box exercise. I don't know why green, but the whole purpose was if you died tomorrow, how would your business continue? And at that point in time, you know, I had thousands of people working for me on an event to event basis, part-time. And I thought, well, if I'm away, like you know, how would those people get paid and how would things get resolved? Like my husband doesn't even have my computer password, Like so I literally put together, like you know, policy numbers, passwords, access instructions and stuff like that. And when I went to go volunteer in Thailand with some elephants, I was like, well, if I'm going to die, maybe this would be it. So here you go. It's like just way ahead of the game with that.

Serena Holmes:

Yeah, and it sounds really crazy, but it is something that you know. I know other people, and even people that aren't business owners, but a loved one passes away and they don't even know what to do.

Milena Cardinal:

Or become incapacitated.

Serena Holmes:

Yeah, and it sounds really morbid, but I think you want to make sure that you are protecting the people that you are. You know all responsibility to and it is something that I think you've got to be really mindful of if you have a business or if you're running investments.

Milena Cardinal:

Absolutely yeah. And then the other thing in terms of the active partner's knowledge is finances. Because you know, an active partner can have phenomenal knowledge on real estate investing but if they don't understand how to how to um create financial statements or how to read financial statements, or you know, they may not understand the necessity and then they don't have the ability to actually report on the financials properly and make good financial decisions. On that front, I actually had an active partner one time and deal that we had invested passively send me a report on one of those monthly reports. They would send numbers with them and they had a line for vacancies and I, what I was trying to tell them is you have an allocation for 5% vacancy on your actual numbers. That's an underwriting number. Yeah Right, like you're saying, these are the actual rents and then you're reducing those actual rents. It was a 5% vacancy allowance. The vacancies are the vacancies. Now you're talking actuals.

Milena Cardinal:

So it's really important for your active partners to have understanding of financials. Now, does that mean that that person needs to be fully knowledgeable or does it just mean that they need to have a team member or maybe they bring in their accountant or their bookkeeper to assist it does. That's fine, right, but those are the kinds of questions that I would ask an active partner now that I wouldn't have before, whereas now I look at it very differently. Now it's not just about mindset and and knowledge of the deal, which, yes, is important. I want, I want an active partner who sweats the details. I want to know, you know, I want to you know, maybe test the waters a little bit by asking can you provide me this document? Can you provide me this document? Can you show me financials from your last deal? What did that look like? And do you?

Serena Holmes:

find the active investors are open to sharing some of those details.

Milena Cardinal:

I mean, if they weren't, that would be a red flag for me. If you're going to be the steward of my $100,000, $200,000, I need to know that you're going to be transparent and as an active partner. 100%. I agree All of it right.

Serena Holmes:

People who have nothing to hide hide nothing, right? So at the end of the day, they should be very transparent. This is the health of our business. But I think the other thing that really came to light in the situation I'm in is not just the health of that business, but do they have other businesses? And also looking at, like you know what, what is the spider web look like? Right, do they have a three, four percent? Do they have 15? Do they have more than that? Do they have other partners, like? I think it's important to understand the full scope, because I think it can be very hard to find that detail just by researching and stuff like that, just to find out how many companies they really own and if there's exposure from any of those other corps and how things are connected and stuff like that.

Milena Cardinal:

I realized that I made a mistake when I was raising capital for a deal about two years ago, one of our own. I was raising capital and one of my passive investors said but do you have the time to manage this type of project? And I was like I made a mistake. I did not loop in my husband and introduce him to my investors. And I need to do that Because, as I was saying, well, I've got the knowledge. I'm a lawyer, I've been in this space for like 10 years. We're very knowledgeable. We have all of these doors. I've done all this.

Milena Cardinal:

Knowledge is not enough. They want to know. My attention is going to be where it needs to be. The reality is they're not wrong. I'm a busy lawyer. I don't have time to devote to the projects. That's why my husband had to refocus and be in it a%, and so that was a mistake of saying well, you know, my name speaks for itself, which to a degree I'd like to believe that it does. But on the knowledge side, on the due diligence side, on the integrity side, I can't go bankrupt or I lose my license. So, yeah, you know, I can't lose my investors money, but also for my investors. It's a reassurance to know that someone is going to be on it and the project's not going to delay because I'm busy.

Serena Holmes:

Yeah, I think that helps to understand the mechanics and I mean I've even seen in some instances that there's, you know, five general partners and a couple are couples, but they're kind of like not doing anything, like there could be like one person in each couple that has an active type of employment.

Serena Holmes:

It's kind of even like doesn't make sense that they're even necessarily in the GP structure. But just trying to understand again how those mechanics work and how things come together and what happens if a GP walks away, like that happened in one of my investments just in July. The person that was responsible for capital raising was having some different health issues and she just had had to step down. So the company has to kind of restructure and come up with a new plan and that's like a very pivotal part of their success is the ability to have enough money coming in to remain cash flowing and solvent to see the project through right. So it does have a really big impact when things like that happen. Now, in terms of what's next for you, what would you say is on your radar and where are you hoping to take this in terms of financial freedom and all of those great things?

Milena Cardinal:

My next learning curve is going to be trusts and MFTs. I really love the idea of MFTs and, for the right investor at the right time, I think they can be such phenomenal tools, and I'm learning a lot on it right now, and so I think that's one thing I want to delve into more, yeah, and so that I can guide clients through it as well.

Serena Holmes:

Now for someone that's watching or listening that doesn't know what an MFT is, can you? Explain a little bit about what that is and why that could be beneficial on the active side and also on the passive side.

Milena Cardinal:

A hundred percent. So an MFT is a mutual fund trust. It is a it's. It's a trust, so it's an entity. What's its job is to invest in real estate.

Milena Cardinal:

At least the way that I'm structuring this one that I'm, that I'm going to be involved in, and and so we're working with with a company that specializes in putting these things together. They are a glorious tool because what they allow to do is they allow passive investors to invest in specific projects. So one project can be siloed in the MFT so that that passive investors invest in the specific project that they like and get the returns, and they can invest through their registered funds so RSPs, TFSAs and whatnot as equity partners rather than as debt, because otherwise, typically, people will invest with registered funds as a mortgage, but then they can't invest in my land banking deal or in those kinds of long term buying holds with their registered funds, and so the MFT allows that that gap to be bridged. There are limitations and it's a lot of management wants the active investor wants to um wants to gather the required 150 members or 150 investors in their MFT themselves.

Milena Cardinal:

I've seen investors make the mistake of uh our active partners. I've seen active partners make the mistake of um delving very, very deep into that and focusing so much of their attention on that that their other projects tend to go to the wayside, and the end result is their investors feeling left behind and not cared for. So it's important for the right investor to invest in these at the right time, but they are really phenomenal tool and they can allow to raise capital in a much more, much more compliant way and a much more efficient way, while still having the investors invest in the particular project. You could have, if you want, a category that invest in all the projects together, but typically one category of units will invest in one project.

Serena Holmes:

Yeah, no, that makes sense. Now we were talking about some of the questions that you had asked of the passive investor, and I know we highlighted a couple of them. Would you say that there's any others that you wanted to add to that?

Milena Cardinal:

list. I would suggest passive investors to ask their active investors, including do they own their own home? What are other projects that they have? What are projects that they have succeeded in? What projects have they failed? As an active partner?

Milena Cardinal:

I love that question. These are the times that I fell flat on my face and I'm still here. We're still doing well. So, all in all, like we've made good choices, but every now and then we make bad ones and we, you know, and we fall on our faces and we get up and continue, and so I think that's a really good question is fully understanding past projects. You know experience in that area, um and uh, there's a bunch more I can think of. Some people go as far as as as getting credit reports, um, to make sure that someone's not overly overextended and that they have a history of paying their debts. Um, I would probably do a Google search for criminal records or for just complaints against that person. Yeah, there's a whole list of things that I can think of and I I'd like to spend a little bit of time and think on it some more, but I think we talked about providing a list.

Serena Holmes:

Yeah, yeah, yeah, and we'll. We'll make sure that that's accessible for anyone that wants to see, because I think there's some of those out of the box questions that people have become, you know, almost too trusting of active investors and you know they get excited, they get swept away and you know the reality is that there are some incredible losses that we're seeing in our communities. Right, I can think of one that I mean more than one but one, for example, was like 11 million owing to 2 million in assets.

Serena Holmes:

One was 7 million owing to 1 million in assets. There's other situations right now that are, I think they had 30 million unsecured to 42 million secured. So think about hundreds and hundreds of people that are being impacted. That and they thought that there was, you know, a certain level of security that kind of came along with some of those investments. But I think the question goes to show you just can never be too careful and you can never ask too many questions and you never want to skip the due diligence and having things looked over and looked into by a lawyer just to make sure that your hard-earned dollars are protected. So we'll make sure that we include some of those questions below just as a guide to anyone that does want to consider passive real estate investing, because I think if it's done properly, it can be amazing. But you just have to make sure that you are handling things and you know dotting your I's and crossing your T's appropriately.

Milena Cardinal:

And all we're, all we're hearing about right now are the projects that went awry. Right Like it's. It's what's on everybody's lips. Everybody's talking about it. Yeah, there's a lot of money that's been lost recently in the in the last couple of years, from either it was mismanaged either a victim of shifting in the market. There's all kinds of reasons why some of these active investors have failed and swept some of the passive investors with them, and I understand that. But there are millions, if not billions, of dollars that are in really safe hands, growing well. Right, we just don't hear about those.

Milena Cardinal:

But yeah but there's real estate. I still believe real estate investing is a phenomenal investment. It's, in my opinion, much more secure than a lot of other things, and so I mean I'm really passionate about this space. I think it grows, it grows wealth, and so I mean I'm really passionate about this space.

Serena Holmes:

I think it grows. It grows wealth. It grows freedom. Yeah, really passionate about it. Yeah, Now, on that note, since the name of this podcast is Inspired to Invest, I also like to ask people what's a quote that motivates or inspires them.

Milena Cardinal:

I think I had one the last time we spoke, and now I can't remember. I should have thought about it. There's so many, there's so many, there's so many. I, you know, I so many, nothing's wrong.

Milena Cardinal:

Believer in mindset. Um, I'd say one that was the most influential for me recently and it may not be directly related, but one that was the most influential to me was at a mastermind group and we were talking about when you elevate your mindset, especially on wealth and whatnot. Sometimes the end result is that some of the people in your network are people that just maybe don't fit with your mindset anymore. And so you know, we, we, we often hear it's lonely at the top. And what that person reminded me this, this individual who is a phenomenal success but also a very humble leader, and he said it's not lonely at the top, it's lonely in the transition. Yeah, so you've got to find your tribe, you've got to reinvent your tribe as you grow your mindset, and that's what elevates you to the next level, and that's not always easy to do. Actually, it's quite difficult to do. But just remember that it's not lonely at the top, it's lonely in the transition.

Serena Holmes:

Yeah, no, I love that. There's another guest that I was interviewing that talked about that as well, and just you know, leaving behind the things that don't serve you any further, right, and just getting in those right rooms and being around the people that are on the same growth trajectory that you're on, and how important that is just in the long run. Now, for anyone that wants to get in touch with you to learn more about your opportunities, or may need some legal support, what's the best way for them to find you Legal support? What's?

Milena Cardinal:

the best way for them to find you. I would say the best way is email and I believe you'll post it, but my email is mcardinal at cardinallawca, or, even easier, info at cardinallawca. That will reach me as well. Perfect. Or you can also call and our website is wwwcardinallawca and all of our contact information is on there.

Serena Holmes:

Great, so we'll include all of that in the show notes below, of course. Thank you for your time, for being here and sharing all your pearls of wisdom with us. If anyone who is watching or listening is enjoying this episode, please make sure that you like, comment, subscribe and leave us with a review. You can also follow along on social at Inspired to Invest podcast. And remember, when you invest in yourself, the sky's the limit. Thanks again. Thanks again to Cardinal Law for bringing you this episode of Inspired to Invest. The views represented on this podcast are for general information only and does not constitute investment or other professional advice or an offering of securities. The host and guests featured on Inspired to Invest make no representations as to the performance of any particular investment. Should you decide to make an investment, you are responsible for conducting your own review and analysis. It is recommended that you obtain independent legal accounting and tax advice from licensed professionals.