Why Real Estate Is a Generational Wealth Game, Not a Day Trade | Russell Westcott Interview

Russell (00:00)
I don’t know when real estate flipped from being a long-term generational economic producer, a wealth generation in decades. And it turned into people are dealing with it in like day trader mentalities. They’re, dealing with it in

in minutes and hours now when it should be looked at in terms of years and decades and generations is what it really should be looking to.

Dylan Silver (02:00)
Hey folks, welcome back to the show. Today we’re joined by Russell Westcott, a seasoned real estate investor, educator, and portfolio builder with nearly 30 years of experience in industry. Russell has built and managed a large real estate portfolio over decades and now focuses on helping investors start, grow, and scale their holdings with clarity and confidence through his content coaching and experience. He breaks it down, what actually happens and what it takes to build long-term wealth and real estate through discipline strategy and execution. Russell, welcome to the show.

Russell (02:29)
wow. Thank you very much, Dylan. Happy to be here and, you know, happy to be seen by a good fellow, an American, a brother from the South. You know, we’re from different countries, but it’s always good to reach across the borders, even though if our political leaders aren’t reaching across the border and being nice with each other, at least us individual real estate professionals can reach across the border and be nice with each other.

Dylan Silver (02:53)
You mentioned that

I’m a Texas licensed realtor. You mentioned that you’re investing often or looking at deals in the Texas of Canada. I didn’t realize that that was something that’s going on up there, that they say that up there.

Russell (03:05)
Well, the fancy term, it’s basically the oil and natural resources and energy hub of Canada, which is Alberta. And that’s primarily where, you know, I’m a firm believer in the way things are going in this world and the way things are trending and with things going more on AI and everything going online and we need more energy. We need more energy than ever before. And so you need to invest.

where the future is going, not where it’s been. And just some of the things I’m seeing that’s going on in my province that I invest in is Alberta. ⁓ I love it. I draw lots of parallels to what’s going on in Texas. It’s open for business. It’s an energy producer. It rewards hard work. It rewards people for taking risks and being an entrepreneur. It rewards people for stepping up and investing, investing, it’s very entrepreneurial friendly.

Like it’s so there’s a lot of parallels I would see there and, honest to goodness, and I don’t mean to cut you off there, Dylan, but what’s going on right now out there in the marketplace and honest to goodness, all you have to do is turn on Twitter or turn on X or turn on anything. And it’s just like, honest. think the Dalai Lama would get an anxiety attack with what’s going on. Everything out there right now. It’s just time in my personal opinion that everybody just takes a step back and just takes a big giant collective deep breath.

You know, just in and out and just, get into a little bit more Zen here, folks like real estate, you know, like I’ve been doing this for almost 30 years and

I don’t know when real estate flipped from being a long-term generational economic producer, a wealth generation in decades. And it turned into people are dealing with it in like day trader mentalities. They’re, dealing with it in

in minutes and hours now when it should be looked at in terms of years and decades and generations is what it really should be looking to.

Our team, we were just sitting back and we were just kind of looking at a few new projects and we just decided to get, let’s just get back to basics. Let’s get back to basics of analyzing the long-term fundamentals. Let’s get back to basics of, you know, what you buy, where you buy and who you rent to.

Like that is a fundamental that start was when I first started and it’ll be a fundamental when, I’m pushing up daisies 50 years from now or more that is just, you know, what you buy, where you buy and who you rent to you, you align your tenant profile in a property they want to live in, in an area that they want to live in. And you’ll have a good experience of this game with real estate and then look out into the horizon decades, not just minutes.

Dylan Silver (06:38)
Now, when you were starting out, if we’re going back to your first acquisitions, your first couple of years, what specific strategy did you use to stack properties early on?

Russell (06:50)
Well, you know, the specific strategy I used was I just did the one at a time model. A good friend of mine coined a term called the turtle in fifth gear, meaning it’s a long term race, but you’re at high output. You’re high output as a turtle. And it just literally was one property at a time. I just analyzed the place in my target market. I found out how to buy it, qualified for financing, and then I

bought that one place, was a townhouse in Edmonton, Alberta. And then lo and behold, I had some capital from family and friends, I could buy a couple more. And then slowly I hit that wall of that everybody runs up against is capital. And then I started to learn how to crack the code on on raising capital from others. So I actually, I don’t know if I didn’t, I definitely didn’t invent it. But I literally wrote the book on raising joint venture money. It’s actually

in the background here, this is the book that I wrote. It’s on real estate joint ventures on how to raise capital from other people. And not just raise capital, but provide a really good, safe, investable opportunity for somebody to invest alongside you. And then crack that code and build up a portfolio of properties for, for, geez, for a better part of a decade, ran into some financial crisis along the way.

had some challenges, to start all over again in some respects. Then we started getting into building new construction houses. And what I’ve been doing for the past seven to 10 years has been buying brand new construction properties. And then I reversed engineered that again, is now we’re starting to buy the land position and now we’re starting to build infill projects and new subdivisions where we take something where there’s one house on it. And when we’re done, there’s gonna be six to eight units on it after we’re done with it.

And now we’re back in the train up even further into some larger project, maybe looking at some entire townhouse complexes and apartment complexes and back in the train up and just reverse engineering. But it’s all the same stepping stone, one property at a time over time being the turtle in fifth gear.

Dylan Silver (09:01)
Now, you wrote the book on joint ventures, right, and raising capital. At what point did you realize that unless you took on outside capital that it was going to be a bottleneck for you?

Russell (09:13)
From from property one. I, you know, I had the first the first property I ended up doing was with, since he was a joint venture with my parents, right. So it’s what did it very informally with my mom and dad. And then after that, I had to, you know, was with a friend of mine after that. And then after that, it was with somebody else that I knew. And then my network started growing and then it just started reaching out and going out there. And then I decided to to take it another step and operationalize it.

to also make it a business within the business. And then I’m also a firm believer in if you want to master something, teach it. So then I started teaching the system that I had, which then led into, you know, training programs and books and capital raising projects and all kinds of stuff like that. And now I’m branching off into working with a lot of my clients as we’re now building out, helping them build out funds, mutual fund trusts and building out larger capital, dealing with higher net worth individuals.

building out larger projects and raising things on REITs and stuff like that. So it’s just, it’s just been an evolution of one step at a time over, you know, 20 years later, lo and behold, you you’re an overnight success.

Dylan Silver (10:58)
Is that the biggest source of leverage in scaling a portfolio? Is those strategic partnerships? Or I hear a lot of people talking about, know, seller financing terms and different ways that they’re, you know, spending less marketing dollars to acquire properties. But is a JV partnership really the biggest lever people can access?

Russell (11:19)
It’s one of the biggest levers. think the two biggest levers it comes down to it’s real estate is like life, right? You know, it comes down to time and money. It really what it comes down to. ⁓ So either you have to if you have time, have to leverage that time and expertise and that for other people’s capital or that they have the capital and vice versa. So the two biggest bottlenecks that people run up against is they run out of time of trying to do everything themselves being alone, alone, the hands solo operator.

And they just can’t manage it because they don’t have the time. And then they stop growing because they’re too busy driving a dishwasher out to the, to the rental property, or they’re doing the cocking around the tub and they’re doing all this stuff themselves. So they run out of time that they can’t grow their portfolio. Or on the other hand is maybe you have that all built in operationally and you have it all there to scale. Then you run out of the capital. So you have to almost ⁓ marry the two of them up together.

And so those would be the two biggest ones that I would say is just the time and the money.

Dylan Silver (12:20)
Now, speaking of time, a lot of times people will say it’s all about the acquisitions price, but I’ve also seen from a lot of multifamily investors specifically that the management of these properties or rather the lack thereof is costing them the entire deal. So how much of a successful real estate project is truly management versus buying the deal right?

Russell (12:47)
Yeah. you know, price is what you pay values, what you get, right? And a lot of people get, get, in my personal opinion, get lost on the price and a pro forma. They get lost on that. don’t get me wrong. Those are very, very, very important criteria. But before we get to price and pro forma, I’ve analyzed,

an area, I’ve analyzed the tenant profile, I’ve analyzed the properties, I’ve analyzed, will this have a low return on time, like a low time involvement on it? Is this in an area that’s going to grow not shrink? Like I do a lot of background work to build up to that until you get to the point where you’re to have to start manage looking at the property and the prices. And don’t get me wrong, you obviously want to get it the, you know, as an investor, you want to get it at the cheapest possible.

and you want to be able to get the highest ROI as you can. But if you, if you line up all the fundamentals on the area and the tenant profile, you literally could just buy at market value and let the tide just take the entire, the entire market up with you. And I know some people that have actually bought, if you wait long enough in this game of real estate, I know some people myself included that if you bought property and you went through the ups and the downs and the ringers and lo and behold, 20 to 25 years later,

You could be sitting on an entire portfolio of free and clear assets that’s been paid for by somebody else. And I just had a great conversation with a friend of mine and he had more than a dozen places that he paid way over market price for it at the time. The market went down and he wrote it out and wrote it out and wrote it out and lo and behold, it’s now that was 07 to now. So it’s almost, it’s 19 years.

And he was telling me that every one of the mortgages on those places is less than $20,000 a piece. And he could arguably sell each one of them for, you know, net after realtor commissions and after all the fees and everything for probably $200,000 a unit. So he’s netting $180,000 per property that he did that. And here’s, if you really want to it all the way, analyze it all the way. And I know your tax systems may be different than ours.

But we’re taxed in Canada based upon capital gain versus what you bought it for, what you sold it for after an adjusted cost base. And you only get paid, you only pay tax on the gain, a percentage of the gain. Okay. And so if he bought it for a certain price and sold it 20 years later for the exact same price, he’s going to pay no tax on it, but he’s got $180,000 of equity that he’s going to cash in when he sells. Right.

Dylan Silver (15:25)
Yeah, I

mean that’s-

Russell (15:26)
So if you wait long enough, ⁓ everything will turn around for you.

Dylan Silver (16:13)
That does seem to be one of the most spoken to reasons why people get into and stay into real estate is for the tax advantages. And it makes great sense why it’s incentivized because you’re providing a much needed resource housing for people, right? But at the same point in time, most people, think especially over the last 10 years or so, we’re trying to make money quickly. And when you look at historically, like you mentioned earlier,

the longer time horizons and the perspective of real estate being a generational game. I think for a moment there, it got away from that, but people got humbled over the last five or six years or so. And now we’re starting to see, think more of that sentiment of, you if we’re buying multifamily, it may not come to an exit in two and a half, three, or even five years. You may have to look for longer time horizons, maybe seven years, maybe longer.

Russell (17:06)
Yep. Well,

if you’re, and most of your listeners are probably very active practitioners out in the marketplace. And if they’re out there actively looking at multifamily and even just let’s call it say that a nice little tier of small multifamily, let’s say seven to 17 units, give or take, right? The majority of those are owned by people that probably built them in the seventies.

the 1970s. They’ve owned it. It’s now free and clear. They’ve got grandkids and they like to go around collecting the coins out of the laundry machine and they have no motivation to want to sell. And they’re probably sitting on a free and clear asset that’s out there right now. And they don’t have a care in the world really because the cashflow from that one little 17 unit that’s free and clear pays more than all their expenses required.

And a quick fun, fun story. one of my clients in, in the prairies was out there and he was dealing with somebody and they might get the numbers wrong, but it’s directionally correct. So let’s say he had 17 units and he had eight of them empty. Okay. And, ⁓ and the guy’s going, Jesus must be really motivated seller. He’s got, he’s half, he’s only going to half eight. He’s only half full. So he went to negotiate and and the, owner just basically said, well, you

fill those other units. You don’t know how much tax I have to pay at the end of the year when it’s all this profit coming in on stuff. He was totally fine having a half empty building that he was cash flowing on quite nicely. like, don’t get me wrong, I would be the opposite, but I’m also not in that boat where I have an entire portfolio of properties free and clear and I don’t have to rent them out if I don’t want to.

Dylan Silver (18:47)
Yeah, I mean, that’s

a good spot to be in, I would say. And I think oftentimes one of the patterns people can get into is looking at real estate through their own circumstances. When someone else may purely be looking at it for a cashflow perspective, another person might be looking at it as a tax write-off perspective. And so they’re saying, hey, look, I’ve got, like in the States, a high W-2 job. Maybe I’m a high-powered doctor. And if this is negatively cash flowing for me,

I’m okay with that. I’ll bank on the appreciation. It’s a long term hold. And I get to write this off against my W-2 taxes. So it’s really through the lens of who’s the person owning the real estate, what’s their goal. We are coming up on time actually here, Russell, any new projects that you’re working on and then as well, what’s the best way for folks to get in contact with you?

Russell (19:37)
Well, I’ll answer the second one first. The simplest answer is just in your show notes, you’ll probably have my name of Russell Westcott. If you Google that out there, you will probably come across a podcast and a YouTube channel and a website. Just by all means, ⁓ hit me up. I’m pretty old. I’m still old technology. I like to deal things with telephones. If you want, we can book a telephone conversation or send me an email. All good.

What we’re doing right now and just some projects is we’re just looking to between myself and the team that I work alongside. We’ve just identified some really cool land positions out in Northern Alberta. And we’re just in the process right now of getting finalized on some land contracts and some developers are putting down some deposits on our behalf. And we’re looking to just build out some rental communities.

And I’m really just trying to look out there of getting the word out to some high net worth individuals that are just looking to maybe get a good return on their capital, not have to do much of the work, if any, and just sit back and, you know, enjoy, enjoy returns like a developer would and just let somebody take care of all the details for you.

Dylan Silver (20:44)
Yeah, that’s huge.

And I think a lot of people are looking at getting into real estate, but don’t want to swing a hammer, not sure how to do it. And I think it’s a great opportunity for folks. Russell, thank you so much for taking the time today. Thanks for joining us.

Russell (20:56)
Well, happy to help.