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Transcript of Interview with Stefan Aarnio

INTRODUCTION

Dan Lok: Welcome to another episode of Shoulders of Titans. This is Dan Lok and today I have the privilege of bringing you Canada’s leading Real Estate Entrepreneur, best-selling author of multiple books, a professional investor himself, and speaker. Someone who started with very little and built a multi-million dollar portfolio. Someone who I consider as a friend, also doing great work and helping people. Stefan welcome to the show.

Stefan: Thank you for having me Dan.

Dan: Good to have you on the show, man. Maybe, just for listeners, maybe tell us a little bit about your background, and how you got into this real estate thing.

Stefan: Well, you know Dan, I started out when I was 16 years old. I was a kid that wanted to be rich, I wanted to be famous, and the only way that I knew to do that was to become a rock star. So of course there’s no school program to become a rock star but I went and joined the music school and my mother said, “you know, if you want to be a rock star, you know, you better get a degree,” which totally isn’t true. But I went to school and I started studying music and pretty soon I found out that music was somewhat of a path to poverty these days because there’s a very, very small percentage of people that can make money in music these days. And still wanting to be rich and still wanting to be famous I stumbled upon a little book called “Rich Dad, Poor Dad,” started reading about how people make money in business, and in real estate, and I just started going to every real estate event I could, and fast forward eight years later and it’s kind of cool because I won an award called Rich Dad International Hall of Fame 2014 and I’ve kind of come full circle. And it’s awesome to be a guy sitting in the audience at a seminar years ago wanting to get into the game and now I’ve got a company – we’ve got lots of employees, we’ve got millions of dollars of capital we’re working with every day and, you know, I’m out of the rat race, it’s awesome.

Dan: Mm, and now you’re the one at the front of the room and sharing your story, and sharing your knowledge.

Stefan: Yea, and what’s funny about that Dan, is I never wanted to do that. You know years ago, 3-4 years ago, when I started winning awards, people would call me and they wanted help but initially I said, no I don’t want to do that, I just want to do my real business – we were talking about that in the break.

Dan: Correct.

Stefan: I just want to do my real business but the phone keeps ringing. And every day my phone rings, my emails come in, I get Facebook messages from people who want help, and I’ve started up a company now to help and service those people. And I actually get a lot of service out of it, or I feel that I get growth and contribution out of serving these people and helping them and changing their lives, because the real estate education industry is a pretty dirty industry, they’ve got a lot of snake oil salesman, a lot of charlatans, and there’s very few people who have survived and done the real business to teach people the real way to do it.

Dan: Yes, and that’s one of the things – I have a love of what you do because like you said it’s a dirty business, a lot of people like the instructors or speakers within the real estate industry, they teach you, like, here’s what you do, but they actually, they don’t eat their own cooking, right? You know, you go through that. And I did that 20 years ago, right? We won’t name any names, but you know what I’m talking about.

Stefan: Yup

Dan: So I have a lot of respect for someone like you who’s been there, done that and continues to do it and that’s what you do, and you eat your own cooking, and that’s great because then you’re speaking from experience not just not textbook. And you can say, you know what, here’s the deals that I’m working on, here’s how I’m doing it. Because, you know, the market and the real estate it changes too right.

Stefan: Absolutely, I mean Canada, where we live here in Vancouver, I’m in Winnipeg. Canada’s been on a great run for 25 years and any idiot could buy any house and cash flow it and make money, but coming up to the next 25 years we’re not going to see that anymore. So a lot of the gurus and the people that are teaching people, those systems aren’t going to work anymore and you’re going to have to switch to different strategies and sideways markets and down markets.

THE PSYCHOLOGY OF SUCCESS

Dan: What I’m curious to know is – I always want to get the mindset and the psychology behind anyone that’s a self-made man, which is like your book, right, “Self-Made.” That back then when you were going through the workshops, you were going to the seminars, you were reading the books. Now, at the same time there were a lot of people who did the same thing in the audience. But 97% of them didn’t do the first deal, didn’t take action or they tried and it didn’t work and then they quit. What’s going through your mind, what drives you to go do that first deal, to take action? Like, what separates you from everybody else?

Stefan: Well that’s a great question, Dan, because I think the industry – I’m in the industry now, it’s about a 3-5% success rate for real estate seminars. My company we’re doing about a 47% success rate. We do things way differently. We harass you until you succeed. With myself, I didn’t succeed at all. And for about two years I went to every free seminar I could find. And I was a guitar teacher, I made $10,000 a year, so I’d save up $1000 and spend $1000, save up $2000 and spend $2000. And eventually I got myself into $10,000 of seminar debt. I started with $5000 of cash, put myself $10,000 into seminar debt and I became successful Dan because I was desperate and had to become successful. It was a desperation. At one point I was on the edge of bankruptcy, I was 90 days away from bankruptcy, and that’s really where I started to pull it together, because I had to succeed, there was no choice.

Dan: Yea I love that. Because I always say people change either because of motivation or desperation.

Stefan: I’m in the second category.

MY FIRST DEAL

Dan: The same with me right, sometimes we put ourselves in a corner and we have to make that work, you got to kind of burn the ship to take the island right. Share with us about your first real estate deal.

Stefan: Well, my first deal that I ever did Dan, I was at a free seminar and I partnered up with 5 other guys at the free seminar. We sat around, we were playing the cash flow game, and everybody in the group, the 6 of us, had some experience except for me. And I had a job working in the grocery industry putting chips on shelves at 4 in the morning for a company called Frito Way, who does Doritos and Lays and Cheetos. So everybody at the table had some experience and the phone rang. And one of the guys at the table is a realtor, he said, “guys I got a desperate seller. Why don’t we buy this house, the six of us, and we’ll cash flow it and we’ll be rich.” And I thought, wow this sounds like a good idea.

So here we are, at the time we each pooled together $1200 of cash, and that’s the only cash I’ve ever put into real estate of my own in my whole life. So $1200 of cash we all put it in. And everybody’s offering skills, one guy says, I’m going to be the realtor, I’ll be the property manager, I’ll do the rentals, and I didn’t have any skills so I said, I’ll hold the mortgage. Now that was a very stupid idea because we rented out the house, made some cash flow and after 3, 4 months, the house was smashed up, it was trashed, the tenants left, and nobody was answering the phone, nobody wanted to help me.

I had the mortgage, I owned the home, nobody wanted to step up and I had to go and get some money from another investor to buy everybody out. And then I had to take care of the baby for 5 years: fix it up, we had to property manage it for 5 years, and finally sold it five years later. I brought it for $150 and sold it for $169. But that was again just jumping in, completely stupid. I wish I’d brought something different but hey, you know, your first deal you’ve got to get started.

Dan: Usually the first deal is the worst deal right.

Stefan: You know, I’ve done over 100 deals at my lawyers table, and within that, I mean, dude it’s crazy. I’ve done luxury homes, I’ve done crack houses, I’ve done a house that had 127 cats in it, I’ve done a murder house, I’ve done burned down houses, I’ve had houses burned down when I’m renovating them, I’ve had people break in and steal my kitchens, I’ve had my staging sets stolen. Absolutely everything has happened to me in my business because I’ve just done so much, and you get pretty tough after a while.

SUCCESSFUL DEALS

Dan: Yes. So maybe share with us a deal that you’re very proud of. Maybe one of your biggest deals or most successful deals.

Stefan: Well one of my most favourite deals was my second deal. My second deal I brought a burned down property. And I always say to people at my events, never buy a burned down property. But I brought a burned down mansion in downtown Winnipeg and it had parking that backed onto Great West Life, some people call it Great Waste of Life, but Great West Life, which is like a big insurance company. And so it came with a parking lot Dan, and if you like passive income, you’ll love parking lots, because, you know, people just lease out the spaces, there’s no toilets, no tenants…

Dan: No kitchen to be stolen.

Stefan: No kitchen to be stolen, no doors or anything. So it came with a parking lot. And the price I bought it at, I bought it for $160,000, that property could cash flow just off the parking alone. So I bought that and I thought, wow this is great, and I went out and I raised $150,000 of cash for renovations, and I raised the purchase price, because I learned how to raise money very early in my life, and I started renovating it. And of course 6 months of renovations turned into 18 months, and $150,000 turned into $250,000 and I actually had to quit my corporate job to get this deal done. It was 90 days away from bankruptcy, and I quit my job, in 45 days got it done, got it refinanced, and the cash flow from that deal, that deal today is worth about $600,000, and the cash flow from that deal – my goal with that was to make $2000 a month of passive income – that deal has kept me out of the rat race for years. I think I finished it in 2011, so I’ve been out of the rat race for 5 years because that one deal covers my living expenses.

HOW TO RAISE CAPITAL

Dan: Wow, and I think that’s kind of the tipping point, when you have passive income exceeds your expense, kind of what Robbie Kiyosaki talks about right. When you’re financially independent, no wonder it’s your favourite deal.
Now I’m curious, people must say that, well, you must hear this a lot from even people attending your workshop. Doesn’t it take money? I don’t have a lot of money; doesn’t it take money to buy real estate? You mentioned about something, only the first deal you put in your own money. Other than that how do you raise capital?

Stefan: All right well, it takes a little bit of a mindset shift Dan, I’m sure you know all about that being in business yourself, but I wrote a book called “Money, People, Deal” and recently rebranded it called “The 5 Million Dollar Book”, because that book that I sell online for $20 or whatever, that book is a manual for raising money. And years ago I got a job at a private equity company raising money and I worked for that company for free for about a year, and when I went and worked for them I had to learn how to raise money, because that was my job. And I took that skill of raising money and since being in real estate I went out and I raised my first one million dollars, and I raised my first 5 million, and today I do all my deal.

I have a massive line of credit with a private lender and I do all my deals, all cash with this one lender, and I have a relationship, so there’s no banks. Actually I haven’t done deals with banks in years. I haven’t done a bank since 2011, so in the last 5 years I haven’t been in a bank, because I do all my deals with private lenders, equity partners, sometimes credit unions, but it’s always somebody private that’s funding these things. And if you are interested in doing deals without your own money, just know that the money wants you more than you want the money.

Dan: Mm, I love that I love that.

Stefan: Because the money by itself is worthless, it’s worth 1% or 0.5% a year, but when you can take the money, the people and the deal and put it together Dan, that’s where all the value is created. But the pieces alone aren’t worth anything. When you assemble those three things, that’s where you can make those big returns.

Dan: And a lot of that has to do with your self-confidence and your shift in beliefs that there’s more money out there, good money, chasing fewer deals.

Stefan: Oh, it’s unbelievable Dan, think about this: how many guys you know out there have a million dollars out there to invest, but how many good operators are there? There are not that many operators who will operate that money well, securely, bring it back alive with a return. There’s very, very few operators. And so if you’re somebody who – I’ve traditionally done a lot of my deals with multi-millionaire investors – if I hook up with one of those multi-millionaire investors who backs my deals, I’m worth hundreds of thousands of dollars of interest per year to the guy. He picks up the phone when I call him because I’m worth money to him. And so when you can shift that around backwards, you think oh I’m begging for money, buddy you’re not begging for money, they should be begging for you.

Dan: It’s that kind of posture right.

Stefan: Yea true it is posture. Do you know a guy named Brad Lamb, he’s a real estate mogul out in Toronto?

Dan: He sounds familiar; I must have heard of his name.

Stefan: Yea he’s a very famous realtor and developer and he says, you know, oversell everything. And I thought, Brad, overselling, isn’t that unethical? And he said, no man, you got to be able to back it up. And I was thinking, you know, well, if you’ve got that confidence, and you’re right Dan, it is about confidence – but I’m a guy – I can walk the walk man. Some people they do one deal and they call themselves a speaker and a coach and a guru, if you can back it up, if you’re a guy who can back it up and say, yea I don’t need your money, and walk out of the room, guess what, you’re going to get the money.

Dan: Of course, correct. And do you find now that you have more track record and you’re working with investors now they probably call you like hey man, you got a deal coming up? Like I want to put some money into it right?

Stefan: Yea I think it’s two things. There’s a value in being a brand new guy and taking a chance on a new guy, I think everybody loves new. If you’re a marketer, new is always good. So if you’re brand new I think that you have an advantage. If you’ve been around for a while and you have a good track record, that’s easy for you, but if you’ve been around and you’re going through some challenges; I mean you’re only as good as your last deal. So depending on your positioning or how you’ve done in the past, it could be good it could be bad. I find that, what I find Dan is, I thought it would get easier over time, but if you’ve done 50, 60, 70 deals, it really doesn’t matter cos the deal you’re doing with the investor is always the first one. And you’re still got to sell like it’s the first one, and maybe even harder.

FINDING AND APPROACHING INVESTORS

Dan: Yes, maybe walk us through the process, cos I’m curious, for someone listening, where do you find these investors and how do you approach them, what do you do?

Stefan: Ok well there’s a couple of legal ways to raise money and there’s a couple illegal ways, and I focus on the legal ways so I stay out of jail. The most important thing for someone starting out is, I get, let’s say – you know, Dan are you married or are you single?

Dan: I’m married, I got married two years ago.

Stefan: Oh, you’re married, congratulations. So I’d say you and your wife Dan, statistically you know 150 people and your wife knows 150 people, so you guys need to put those 300 people on a list. And then I have a formula, an algorithm. We’re going to apply that algorithm to everybody on the list based on their age, their occupation, have they sold a business, do they own a business, using all these multipliers and these numbers. You probably have access to at least 5 to 10 million per average person. Someone like yourself you probably have access to over 100 million.

Dan: Yes.

Stefan: So you take that list, and you go down the list, and that’s your first generation. Now if you want to make another list you can make the list of who do these people know that might have money. And I use a model called the Seth model, and if you read “Money, People, Deal” it’s in there. And it’s about getting your first generation investors to bring in second generation, third generation investors, and you can end up with 100 million or a billion dollars pretty quickly if you start using the second network and the third network.

Dan: Awesome. And then from there so let’s say you’ve made a list and I assume you would call them up, like what you would say, like hey man I got a deal for you, like you must have some kind of scripted process right?

Stefan: Yea well I’ve got a couple of them, but the one I love right now is, I call up and say, “Hey Dan, Stefan Aarni calling,” we talk about the weather quickly, “hey it sure is getting cold in Vancouver, hey listen Dan, I know this probably isn’t for you but who do you know that would be interested in making somewhere around 8-12% on their money secured by a first lean in real estate in a 6-9 month time frame?”

Dan: Mmm I love that, very powerful.

Stefan: And you might say, “I don’t know, maybe my uncle has some.” And then I say “hey Dan well how about you,” and then you say, “yea I might be interested,” and then I say, “ballpark Dan how much money do you think you’re working with?” You’ll say “I don’t know maybe 200,000,” and I’ll say “ok great, well you know I work with a 150 minimum usually so you could qualify to work with me. Question, if this was for you Dan how quickly could you have the money ready to go?”

Dan: Mm I love the certainty and the confidence. You’re not trying to like sell it too hard, you’re qualifying them right from the first few minutes right. Are they interested, are they not interested? Very powerful.

Stefan: Well it’s interesting too, because the law in a lot of Canadian provinces is you have to raise a 150 minimum from someone that you don’t know that well. And it’s very powerful to say to someone, “You know Dan to work with me it’s a $150,000 minimum.” And just to say that alone, it’s just the truth, you have to do it. So when you can switch your mind – I know a lot of investors out there go for $10,000, $20,000, $50,000, man that’s a pain in the ass. Recently I had an investor pull out of a deal for $90,000 and I had to call and meet 10 people, Dan, to get the $90,000. I went and raised 2 million from another guy, took me 2 meetings, to get the 2 million. To get the $90,000 took me 10 meetings, and I didn’t even get it.

Dan: You know, it’s so interesting, even with various tax ventures that I raise capital for, I just notice the people who put in like a little bit of money, like 10, 20, 30, 50, they’re always a pain in the ass, right.

Stefan: Oh man, horrible.

Dan: Because it’s all they’ve got. And they call you every day like, “how it’s going, is it going anywhere.” The people that put in a million, they don’t bother you, because they’re busy right.

Stefan: Yea, well the guy that did 2 million with me, he has 100 million, and he just says, “how much money do you need,” and I said I need $900,000 and he goes, “ok it’ll be ready,” and then I say, “hey man I need a drop for construction, I need $30,000,” and he says, “ok we’ll have it out next week, take the money now,” he’s super cool to deal with. And recently I had some guys investing with me, I think I had 2 million from them but it was their only 2 million and it was a huge battle with these guys compared to, you know, I’m getting the bigger piece of money right now at roughly half the price of what I was paying before. Just because it’s a bigger mind, bigger guy, he’s got to deploy a hundred million, that’s a hard job, compared to deploying a million that’s your whole million.

STRUCTURING A DEAL

Dan: Correct. Now when you raise capital do you always make them, is it a debt financing, or is it equity partners? Let’s say take this guy who put in the 2 million, like how do you structure the deal?

Stefan: You’re going to love this Dan, I paid him a 10% preferred return, no fees, I pay his legal but he’s a preferred equity partner, a preferred return partner so he’s technically debt. I keep all the upside.

Dan: Wow that’s awesome.

Stefan: I know, dude it’s unbelievable because instead of making, let’s say 10 points on a deal, I’m making like 15 now. So if I do, I got a couple of million dollars of deals out there, let’s say I do a million dollars of business, I make 150 grand on that instead of making maybe 80 grand or 100.

Dan: Absolutely, and also you’re much more, well, it’s your deal, you’re much more involved in, emotionally invested into it right.

Stefan: Oh man, well I’ve done everything. I’ve done equity splits, I’ve done 60/40, 50/50. I’ve done equity splits with fees, I’ve done preferred returns, blended returns, all sorts of, let’s just call it bullshit. The best, most honest structure I think is the preferred return. The investor gets paid first, you keep the upside. That way when you win, you’re happy, if it’s kind of ok he’s still happy, if it goes bad and he takes all the money, he’s still happy. It’s good for everybody. The problem is investors are greedy, you know, they have fear and greed, and they always want a piece of the upside. And I always teach my students, you know, you’re raising money, a lot of my students raise a million, two million dollars, I want them to keep the upside because you’re right, it keeps them wanting the deal to succeed, it keeps them motivated, and that makes the deal more secure when the guy’s motivated to get his upside.

WHAT TO LOOK FOR IN A DEAL

Dan: And nowadays where do you invest and what do you look for in an area or a deal?

Stefan: Well I’m a believer Dan of being a specialist. So I do all my deals in my hometown of Winnipeg. I got 10 employees in my office, we do something like 20 offers a week, every week we’re going out there. And I’d say our office right now we’re doing about, our goal this year is 52 deals. I want to only do about a dozen flips. I used to do like 30 a year, that’s too much. We’re probably going to do about a dozen flips this year and about 40 wholesales, and what I want is liquidity. I think like an appraiser, I think like a lender, I want liquidity and what that means is I want product that’s going to sell right away, I want higher end product, I’m focussing on higher dollar volume homes, you know, upper median, lower luxury where the school zone’s really nice.

Dan: Nice neighbourhood right.

Stefan: Yea, like think about this: I call it the waspy Jew neighbourhood, where everyone is like a white Anglo Saxon protestant or a Jewish guy and he wants his kids to go to the Hebrew school, and you know, like, that’s the neighbourhood where the best high school in town is and if you want that high school you have to live there. So, you know, in those neighbourhoods people buy the homes, they sell right away if they look nice. I traditionally have done a lot of lower median homes, which is the starter home, and I would sell to Filipino immigrant families, Winnipeg is 1/6th Filipino. So we would have people come in from Manila, and they’d have some money, and they’d want the Canadian dream, so I’d sell them the starter home and that home would have been a crack house 5 years ago and now it’s a brand new home for a brand new Filipino family that’s a brand new Canadian family.

HOW TO GET IN THE GAME

Dan: What about for new investors, do you recommend them, like should they get into like some fixer upper or should they do like wholesale. Like what’s the easiest way to get in the game, kind of?

Stefan: Well I have a program that I do with people, Dan, and I think that everybody who gets into real estate needs to learn how to raise money and it’s easier than you think it is. It’s actually the easiest part. I think that everybody who gets into real estate should do a buy/fix/sell at the beginning to learn how to buy at a discount: cos we buy, my students all across the country, and myself included, we buy at 40-60 cents on the dollar. One of my students just brought a deal at, I think it was 24 cents on the dollar, and he wholesaled it for 57 cents on the dollar. That’s awesome, good for him. But what I want people to do is, I want you to raise money, I want you to buy at 40-60 cents on the dollar, I don’t care what your exit strategy is and I think it’s good for somebody to fix it up and learn a bit about construction, and learn a bit about how to sell a property, cos at some point you got to sell a property, at some point you got to fix it up, at some point you got to raise the money, and whether you’re doing an apartment block or a home or a commercial property, those fundamentals are always the same.

Dan: So within your portfolio you have some that you’re going to buy and flip, or buy and wholesale, are there properties that you just want to buy and hold and these are just cash flow properties and you just want to keep these for a long time?

Stefan: So I’m all about land. The building is never worth much. Buildings are – if you look at a dilapidated house and the appraisal comes in, the land is worth everything and the building is worth like $5. So I’m a big fan of downtown land. I told you about that building with the parking lot on the back. I still own that today, I plan on owning that forever. So I have my house and my office in downtown Winnipeg, I want to own that forever. So when it comes to the land and the cash flow, there’s some that I want to keep forever ad there’s some that you just never want to own. So I keep enough real estate to keep myself out of a job forever, and this year my goal is to pick up a 50-unit apartment building. I don’t know if it’s going to take me this year or next year but I’ve got the ability to raise the money. The trouble is, Dan, finding the product. You know, so many people who own those 50 units…

Dan: They don’t need the money, they don’t need to sell, right?

Stefan: They never sell! Until the guy is like 80 years old, gets colon cancer and his kids don’t want it, that’s when you got to knock on the guy’s door. But typically, people don’t sell because a 50 unit building and above can self-manage. And you’ve got onsite management and that asset is such a strong asset, it’s not like buying – some people want to buy a duplex or triplex or an eight-plex, those are all shitty assets, excuse my language, those are tough to manage. If you get a 50 unit or a 100 unit or a 200 unit, now suddenly you’ve got the scalability to have a management team that can actually look after the asset.

Dan: And also, even worked with a few investors from China that when they want to come to Vancouver, and they’ve got a lot of money, cash. And they want to buy these buildings like commercial properties, I said, well guess what, the people that own it they don’t really need to sell it, because, you know, the damn Chinese start to come in, the building is 20 million, oh I’ll give you 10 million. This is not that kind of, this is not flea market here right? You just don’t do that. They don’t get it right?

Stefan: It’s crazy. I mean the Chinese money: people always ask me about Vancouver and Toronto. The Chinese money coming out of China, they’re doing a currency trade. They’re just trying to get out of the currency and into a currency that’s not depreciating as fast, because China artificially depreciates the currency. And we have those same Chinese investors coming over to Winnipeg, Dan, and they’ll buy an apartment block at a 2 cap, so a 2% capitalization yield which is nothing, but if you consider how fast their currency is depreciating, it makes great sense to get your money out of the country.

ADAPTING YOUR APPROACH

Dan: Yep so they’re buying it for different reasons right. Like we’re buying it for cash flow and return on investment, but they have a different motive. Very interesting. I like how you structure a deal, which is fantastic. What if like, say, for someone who is – I want to know like with you, the first few deals that you’ve done, until now, what, how has your approach changed over the years?

Stefan: Well I’m getting more conservative Dan. I’m getting conservative in my old age. I used to be a gunslinger. Some of the deals that I did in the beginning I look at them now and I go, “how the heck did I buy that how did I do that?” Like that burned down deal that got me out of the rat race, like I wouldn’t touch that with a ten-foot pole today, but I was so desperate and so hungry that I forced that deal, I made it happen. Today I am a person, like I say no more than yes, I’m ok with doing less deals, I’m more diversified, I don’t need the money so I’m somebody I want to do really great deals that are going to drive my brand forward and deals that, you know, have kind of premium buyers to them. I don’t want to go into the hood anymore man, I’ve done so many.

Dan: Haha, crack house and 127 cats right.

Stefan: Yea man, 127 cats, 11 cats. I’ve done an actual murder house, I’ve done houses where they’ve ripped the kitchen and everything out. You know, if you talked to me about 3 or 4 years ago I’d say I don’t wholesale anything, I do it all retail and I got the money and I’ll outwork anybody. And now today I’m like forget it, I’ll wholesale most things and I just want to do choice deals. My eyes now are more on moving into the luxury properties: less deals, less headaches, less contractors and I do lending, I do flips, and we’re going to start bringing on larger apartment blocks pretty soon. I just want to have a better life, Dan. I don’t want to go out there and slay 30 houses a year anymore because that’s a young man’s game and that’s a crazy mans’ game.

USING THE SYSTEM

Dan: Oh come on man you’re 30 years’ old, still young. I’m 34 don’t make me feel old!
But I get it, I definitely get more selective, more quality, more niche. Now what if someone had said, listen to this, let’s say they’re from a city that property prices are quite high, let’s say Vancouver. Can they still implement your system or do they have to go to like other cities, like what would you recommend?

Stefan: Well I have students right now from Halifax all the way to Victoria, so all across the country, and the game works on spread, you know? You buy at some discount, typically I want your buy to be at 40 to 60 cents on the ARV (after per value), the fix is going to be 70 to 75 cents, the sell’s going to be at 100 cents. And I believe, if you look at the skyscrapers in Vancouver (every couple of months I’m in Vancouver) somebody built those skyscrapers on the model I just told you. They brought the land at 20 to 30 cents on the dollar, fixed it to 60 or 70, sold it at 100. You know, everybody in real estate follows that format, so it works everywhere. Now is it going to be easy, I don’t know. I don’t like to compete with Chinese money.

If Chinese money is coming in, and they want a 0% return because they’re doing a currency trade, I don’t want to compete with that. What I like Dan, I’ll tell you what I target, I target the value markets in the different places I invest. So value markets are places where people – let’s say, imagine, you know, there’s Bob and Mary. And Bob works at the meat packing plant and he’s cutting hogs all day and Mary is a secretary at a law office. Bob and Mary live in a blue collar neighbourhood and he has 1000 square foot bungalow and they got 1.8 kids, whatever that means, and a white picket fence and a dog. I like cities like that, rather than, let’s say Toronto, where they have towers owned by people that don’t even live on the continent, from around the world.

Dan: Correct

Stefan: And people are speculating, and the money is not even made where it’s spent. I like the market where the money is made and spent. You know, Winnipeg, Indianapolis, Charlotte, anywhere you don’t want to go for a vacation.

Dan: Ha ha I love that, hey, that’s the criteria, anywhere you don’t want to go on vacation.

Stefan: Right, you know Dan if I was like, “hey man do you want to go to Winnipeg?” You’d be like, “no thanks.” That’s not a place you want to go. But a little girl or little boy growing up in Winnipeg is going to say “I want to move to Vancouver, I want to move to Toronto, I want to move to Calgary, I want to move to LA or New York.” Those places as an investor, I don’t like them because they’re not based on value, they’re based on vanity.

Dan: Oh yea I love that, value versus vanity. So it’s kind of bread and butter, like minimum clause, stable population, that’s where you’re looking.

Stefan: Yea I mean think about it, the guy’s going to buy it cos his wife’s pregnant and he needs a bigger house and he lives in the area and he’s going to live there forever. That buyer I’ll deal with. The buyer I don’t want to deal with is: imagine Las Vegas; you’ve got a Chinese buyer wanting 8 homes all next to each other, the next year the market tanks and that Chinese buyer is dumping them and they can’t even find him. I don’t want to go to a market that doubles every year and then goes down to half every second year. I can’t operate in that. I want to be in a market where Bob and Mary, they’re just cutting hams every day and being legal secretaries and there’s nothing crazy going on.

BEING A VALUE INVESTOR

Dan: It’s interesting, almost your approach is very similar to kind of like Warren Buffet; investing in value, in stocks. In that you’re not looking to invest in, you know, speculate or – Warren doesn’t invest in tech stock, he doesn’t even own shares in Microsoft – Bill Gates is his mentee, but it’s just basic bread and butter stuff right, supermarket type stuff.

Stefan: Yea, well Warren is a value investor, I’m a value investor. I do technical trading; I don’t do as much long term. But I believe in the same thing. I love what Warren Buffet says; he says, “you know, I own Snickers,” he says, and Snickers is so intimate, you put it in your mouth, you’re not just going to switch over to some other chocolate bar, it’s so intimate. Or you look at Coca Cola, you own Dairy Queen, those are such intimate and basic products. And Bob and Mary who he works at the meat packing plant and Mary is the secretary, she’s probably eating a Snickers and they go to Dairy Queen on the weekend and that’s life and they’re never going to change.

ACHIEVING SUCCESS

Dan: That’s very, very true, very true. I’m also curious how do you, because I know you do coaching, you work with students, we’re talking about your program versus other people’s program. How did you achieve that higher, like, other people 3-5% success rate, versus yours much higher, 47%? Like what do you do different to ensure your student’s success?

Stefan: Well I’ve been around the industry for years, Dan, and I’ve spent almost 300,000 on programs in the last 8 years. I’m sure you’re similar, you’ve probably spent hundreds and hundreds of thousands educating yourself. And you know some people say education is expensive but let’s all try ignorance, it’s way more. So what I did when I started is, I had people phoning me from all over the country, I had a guy call me from Ottawa I’d never even been to Ottawa. I had a guy calling me from Toronto, a guy calling me from Vancouver, wherever, they want coaching cos I was in magazines and winning awards. I have YouTube and all these things and initially I didn’t really know what to do but I took the last coaching package I took, which was a blend of calls and spending one day in the market with your mentor. So I built a program where we do weekly calls every week for half an hour for accountability and a bit of an ass kicking, and then every quarter I do one day with the student in the market where we’re together looking at physical things.

Dan: Mmm nice.

Stefan: So It’s kind of like take your kid to work day. And then we added on an online library with every single piece of information you need about the business, and then I’ve started adding on classes: so there’s classes, there’s capital raising classes and there’s box sets of all the info you need to know. And what’s interesting about it Dan, is that a lot of the seminar companies out there who train people, they charge you let’s say 30 grand and they give you 4 courses and 3 days with your mentor in a classroom. That’s the standard industry thing.

Dan: Correct.

Stefan: And so what they do is they call it a deferred income model. And on the deferred income model what happens is the students sign up, they go home, they’re terrified, the student is terrified, he’s a little ashamed he spent the money. He never calls the office; the office never calls him. The $30,000 goes into the bank and the classes never happen for the student and he doesn’t succeed. What we do is we do the opposite. If you sign up with me on a Sunday, on Monday you’re getting on-boarded, on Wednesday you’re having your first call, and we harass you until your call is done every week. We also have a guarantee we print out, it’s got my name and my phone number and the owners name and the owners number and the guarantee is we work with you – it’s called coaching fees guaranteed – we work with you until your first deal is done or your fees are paid for. So we will never let you go and we’re going to harass you. If your coach doesn’t get hold of you, if you drop off of your coach who’s calling you every week, we have a team that’s going to reach out to you. We’re going to keep reaching out to you until you succeed. And nobody does that in the industry because there’s more money in letting the student fail than letting the student succeed. It costs me money to do that but I’d rather have the success.

Dan: Correct. And I think also nowadays, I think the whole education space, that industry has changed so much. I think back then, yea, you know, you sell programs for like 20, 30K and you never talk to the student so they don’t do anything. But now with internet, I mean things change. People post online and say, “you know what I took that course and it didn’t work for me.” I think nowadays reputation; especially internet reputation is extremely critical right? And when you have those success stories, it’s now, it becomes viral. People can see oh yea so and so took Stefan’s program and got good results. I mean people talk to each other now, it’s not like before. They can post on Facebook and do a lot of different things.

Stefan: Well if you read Purple Cow by Seth Goden, they talk about the old days it was buyer beware, but nowadays it’s seller beware. And if I sell, like, I only get one brand Dan, there’s one Dan Lok, and there’s one Stefan Aarnio, and if I screw my name up and Google says rip-off report Stefan Aarnio, I’m in trouble. I’ve spent millions of dollars developing this brand. I’m putting everything I can behind my name, I’m working as hard as I can and I can’t have someone wreck my brand, that would just be a tragedy. And most people, what I love about people is they’re typically honest, and if somebody signs up to my program and they don’t do it and they’re honest and they say you know what, you have a good soup, I just didn’t eat it, that’s okay. But we work so hard here to make sure the student has a good experience, and he’d recommend us and make sure that he can win. Because another thing is if the student isn’t winning and sending you the testimonials, I think that this is a worthless business to do. Henry Ford says a business that produces just money is a bad business. It takes so much out of you to train people, and it’s draining, but I put up a testimonial every day on social media, I don’t know if you see it, every day when a student has success I’m pushing it out, I’m showing it off every day, because those people are my products.

DRESS TO IMPRESS

Dan: And speaking of branding, one thing I love, because you see a lot of real estate guys they don’t have that proper image, right? You always dress very sharp, you never get a second chance to make a first impression, right? And where does that come from?

Stefan: Well, you know, years ago I was working for a private equity firm I got hired in. It was a very sharp group of people, dressed very well, and I came from the music industry, and I had you know, a pair of pants from dressing in the classic orchestra and playing the double bass, and I had a poofy white pirate shirt and I had a bad haircut my mother chose, a $1 tie from Value Village, and I was dressed like an orchestra, you know, music guy. And quick story from my book, “Self-Made.” What happened to me was I used to go to this music night every week, it was like open mic night at a little bistro, and I got introduced to this gorgeous girl named Celin. I was like 23, 24 and Celin was 18 and she looked like a mermaid. She had a gorgeous body, gorgeous face and she worked for The Free Press in Winnipeg and she was the fashion columnist.

Dan: Wow.

Stefan: So I got introduced to her by this guy named Howard, and Howard was this legendary radio DJ and he said, “Stefan, you got to meet Celin”, so he introduced me to Celin, I shake hands and go, wow she’s beautiful, and Howard would come to me and say, “Celin’s been asking about you, you got to ask her out, you got to go out with Celin, she’s gorgeous, she’s been asking about you.” So he starts pumping my tyres. So I’d ask “hey Celin you want to go with me on Saturday” and she’d say, “maybe, maybe baby whatever.” And so I’d ask her out 10 weeks in a row, 10 weeks in a row I’d get no’s or maybes, mostly maybes which drove me nuts, maybe baby. So Howard says to me, he says, “Stefan I got you some men’s magazines, I got you some GQs. Come out to my car, I want you to read these GQs.” So I go out to his car and Howard has, like, pretty much a pallet of GQs, like just stacks and stacks of these things and was like, “just take them home, study them.” So I take them home, and I have these GQs on my dresser at my mum’s house and I’m flipping through them, and I don’t get it: there’s articles about going to Las Vegas and gambling, there’s articles about the war in Afghanistan, and it makes no sense to me.

And finally I keep asking Celin out and Celin says “maybe maybe maybe”, Howard says “I’ve got more men’s magazines for you,” so I got more and my shelf is starting to break at home it’s so heavy. So finally I end up going to Alberta to work for this company and one of the lead salesman, his name was Luke, he’s 6 foot 4, he’s blonde, he’s tall, he looks like he’s a hockey player. He looks like The Terminator the guy is so built and beautiful. And he’s in his beautifully tailored suit, it fits his body perfectly, you can see his muscles, he’s got great shoes, great hair, great style. Me and Luke, we get in the car and we drive to Lloyd Menster, it’s between Saskatchewan and Alberta and we’re doing sales presentations and I’m wearing my pirate outfit, I look like the pirate from what is that movie, the Disney movie?

Dan: Pirates of the Caribbean.

Stefan: Yea I look like Jack Sparrow. And Luke, he looks like a GQ model. And we’re sitting at the table and finally we do the presentations, we don’t sell anything, but the days done and we pull out our phones and Luke shows me some of the girls that he shoulda woulda coulda wished he did. And I pulled out my phone and I said, “man I wish I could go out with Celin”, and I showed him this picture of Celin and she’s wearing a pink bikini and she’s drinking a glass of wine in a hot tub and she’s looking really saucy, and her hair is up in a bun. And Luke looks at me and he looks at her, and he looks at me and he looks at her, and he looks at me and he looks at her, and he says “Aarnio, you got to start reading GQ.”

So it hits me like a ton of bricks. So Luke takes me and he pulls out a GQ and he says, “look man you got to dress like this, your suit’s got to look like this, it’s got to fit like this, you’ve got to cut your hair like this, you need this haircut, you’ve got to polish your shoes, you need black oxfords that are polished.” And I go get a makeover, and finally I show up back at that restaurant and Celin sees me: I’m wearing my suit, I’ve got my shoes, and she goes “wow.” So you know I did it all for a woman at the beginning. And now I still keep that image, because what I find is, it’s something that people want to see in me. I personally don’t like wearing suits, I like wearing the same thing every day like Steve Jobs, but people want to see the suit, because it makes them feel good about me. So I wear the suits, and it’s GQ and you know some people are more DQ, maybe they’re Dairy Queen, but I’m GQ. Because that’s what makes the people with money feel good about giving me money.

Dan: That’s very, very true. I’m glad you shared that. Because I’ve always believed – one thing I’ve learned from my mentor, which is always dressed in like 3-piece suit, is like, Dan, you can’t get rich looking poor you know. Oh but Dan, what about like Richard Branson or like Steve Jobs, when you are Richard Branson or Steve Jobs you can wear whatever the hell you want, right?

Stefan: Yea exactly. Well, Steve Jobs wore a suit at the beginning, Branson wore a suit at the beginning. Like, you have to wear the suit. And my sales guys in my sales floor, they got to wear suits every day. My sales manager wears a suit every day. I wear mostly the same uniform every day, I’m kind of like Steve Jobs, but when I go out on an event and people see me publicly, it’s a suit every time. Because they need to see that, and like you said about real estate investors, most of them dress like bums, and they attract bum clients. My clients are amazing: I have an Olympic speed skater right now; I’ve got one of my students won investor of the year last year in Canadian Real Estate Wealth magazine. I’ve got sharp guys; I’ve got a guy who has an MBA who just signed up a while ago. I got sharp clients man cos I dress sharp.

Dan: Correct, correct. And I think on a subconscious level people want to see, okay, you ticking – self-respect and that, and then also people who are successful, usually they dress quite well as well, so they can see that they can relate to you, right? I mean, like, I’m going to give this guy a million dollars and he dresses like shit, I mean, come on right?

Stefan: Yea and I think you had a TED talk, cos I was watching your TED talk about self-image, and your self image – changing your self image is the beginning of you increasing your income, increasing your life. One of the fastest ways to increase your income is to dress up.

Dan: Yes, it’s very, very true, it’s very true. And just like my red suit, that’s kind of my uniform, speaking on a big stage. And it’s funny as hell, more people talk about the suit than the talk. Everybody talks about the red suit, it’s the iron man suit right?

Stefan: Yea and it’s those big peak lapels, those double breasted, man. I mean I think anything you’ve got to do have an edge, I think it’s a great idea to do the red suit if you’re going to be on stage and speaking, people have got to know you.

Dan: Yes, people remember that, they’re not going to remember speakers – oh yea the red suit guy. And the social media thing. A quick story: I was speaking in Toronto, I was sharing the stage with Seth Godin right? And Seth was like the key headliner speaker okay? And he had about an hour and a half on stage, I had 20 minutes. And because I wore the red suit. But afterwards, like on the social media or share on twitter, I got almost the same amount of shares and twitters and everything as Seth, and I wasn’t a headliner. Because of my suit.

Stefan: Wow

BRANDING TIPS

Dan: It goes to show you. What about like, what other personal branding tips, cos you talk about branding, I can see you’re a big believer in that. Branding wise, what else is there, what other tips can you give to entrepreneurs?

Stefan: Alright, well I’m a brandpreneur Dan, and what that means is if you ever take that test “wealth dynamics”, have you ever done that test?

Dan: Yes, the star, the lord, right?

Stefan: Yes, and I’m a creator, star, supporter. So creator is about creating products, I’m in business because I love creating products. Like there’s nowhere in the world that is going to pay me to create stuff, but I love it. Second one for me is star, which is all about brand. Third one is supporter, it’s all about building an organisation. So guess what, I have a branded company that creates its own products and I’m the CEO of building the organisation and I love it. So for me, I took the brand, as soon as I knew about brands and what brands were, I took it seriously right away. And I went out and wrote a book right away. As soon as I got a little bit of success, I won my first award, I wrote a book.

Dan: Smart,

Stefan: And my goal right now is to write 20 books in my life. So I’ve got 17 more to do and I want to do one a year. So I think that having a book is a huge piece of brand. Another thing that I do, I do business cards a little bit of a different way. My business cards are 70 cents a piece. They’re triple thick, it’s got an engraving of my face in the back, an engraving. And it looks like the fricken card from American Psycho.

Dan: Oh yes, yes.

Stefan: It’s on bone man, on pale nimbus. Every time I pull that card out, people go “wow.” And I think that your brand has to bring the wow, and in fact I’ve got a sign in the office that says “bring the wow.” You’ve got to bring the wow. On my books we’ve got gold letters, we’ve got the embossing.

Dan: Yes, I love the tickets, the golden tickets.

Stefan: Yes, we put golden tickets in the book and you can appreciate those tickets cost as much as the book to print. I’m the guy, I want to have the wow and I want to have more information in the market than anybody else. And you and I were talking about, before we got into the interview, about info marketing and info marketing for not info marketing sake. And I started out as a guy with a real business, as we say, not the circus business, a real business, and I had to market my real business. And now, it’s illegal to raise money in Canada to solicit money. So what I did, I started speaking on stages, I started writing books and blogs. In fact, my first book is just my 30 blogs I put together. So I’m a big believer that for personal branding we’ve got to have information these days. It’s, again, Seth Goden, Purple Cow, you’ve got to have your marketing and product rolled into one.

Dan: Correct.

Stefan: I’m all about making your products look way better than anybody else, I think that’s important.

Dan: Yes.

Stefan: I like to spend more on my smallest products, and what I find really interesting is my book, The 5-million-dollar book, I’ve put more effort into that book than my $60,000 course, because the book leads into the course, right? You’ve got three seconds to impress someone you might as well wear the red shiny suit.

Dan: That’s correct.

Stefan: You probably spent more money on that suit than, you know, you spent on your client proposal, but you don’t have to spend money on the client proposal because you spent the money on the suit. So I believe you’ve got to stack the money out front, and put the money where people can see it. And one thing that I believe in, and we talked about this earlier, is true value. Give people that true value so they go “wow, this is amazing.” When you give true value, Dan, and you know this, when you give true value, you don’t even have to be a good salesman. You can be a shitty salesman and still sell because you gave so much value. And if you give so much, the people they have no choice but to give you so much in return.

BUILDING TRUST AND GIVING VALUE

Dan: Yes, it’s very true. I think nowadays, back then, maybe years ago, it was like let’s just give them some teaser information, let’s hold back most of the stuff. And then if they give us money then we’ll give them a little bit more. And then we’ll try and upsell them to something else and a three-day training. Now I think it’s upside down, it’s the opposite. You need to be a great giver, you need to give as much as you could, just to get their trust, so that they like you, they trust you, now they want to work with you. It’s the opposite.

Stefan: Yea you got to give, it’s crazy how much giving. I call it the line of money. To get somebody to cross that line of money and become a customer or client, it is such a long journey nowadays. You have to give, give, give and I’ve even figured it out in the info space. Somebody has to spend literally an hour with your content to give you $1000. So if you have a $20,000 program you’ve got to give them 20 hours of consumed value to earn the right to ask for the business.

Dan: I love that. It’s a good way of looking at it. It’s a very good way of looking at it. An hour to spend $1000 it’s a very good way of looking at it.

Stefan: Yea so if you’ve got a $100,000 program you’ve got to put the guy through a hundred hours of consumed, good content that he likes. So he’s got to read like ten books of yours pretty much. To drop $100,000 with you, for you to have the right to ask.

FINAL ADVICE

Dan: That makes a lot of sense. I love that. Let me ask you this question. If you could travel back to, maybe when you were in your 20s, like still young man, like one of your early days and have a five, ten-minute conversation with your former self, to communicate any lessons and ideas you’ve learned through the school of hard knocks, what would you tell yourself?

Stefan: Oh man, well Dan one thing I think about all the time is I wish I could go back to my 16-year-old self and I would tell myself to drop out of school and start selling vacuums.

Dan: Wow.

Stefan: And some people are terrified of that, that’s the most terrifying advice, but I think back to it, to the high school curriculum, they ran out of stuff to teach you at about 10th grade, it was over. You know, it was kind of repackaging. So I would have went back to my 16-year-old self and I would have said, “look Stefan, I want you to drop out. I want you to get a job in sales, direct sales, you got to learn how to sell, you got to learn how to become a master salesman, you got to start now. Sell stuff that people don’t want to buy. That’s the key. Don’t sell shoes at the mall, that’s easy, sell some shit that people don’t want to buy and become amazing at it.” And I wouldn’t go to university either, I would skip university. That’s what I would do, I would become a salesman and I would start buying real estate and get into it early. The crazy thing is when I was sixteen, oh man what year was that, 2002. 2002 in Winnipeg you could buy a house for $10,000.

Dan: My goodness.

Stefan: You know, so like if I just went out and started selling vacuums and got into real estate: I think that there’s so much bloat in the education system these days The only reason why its 12 years of high school is because they’re trying to break you down and make you obedient. It has nothing to do with educating you. So I would get out of that right away and learn to sell.

Dan: I love that man, I totally agree with you, I couldn’t agree with you more. I mean the whole school system, it’s, well, nowadays it’s just outdated. It’s totally just, it’s designed to create employees, right? The other day I met with a friend of mine, she has a daughter and she’s an entrepreneur, a very successful entrepreneur, and I was talking with her daughter. The daughter is like 12 years old, and I asked her, well what do you want to do when you grow up? And she’s like, well I’m going to be a YouTuber. I love it, like, wow. And then she was so smart, and she was showing me, well I’m studying this YouTuber and that YouTuber and see here’s how they generate, monetise the channel. I’m going to have sponsors, I’m going to grow my following, I’m going to do this. And she breaks it down into a science, and I’m like, wow 12 years old right. Amazing.

Stefan: Well you know Dan, kids are smart, they look at what mum and dad do and they say this sucks.

Dan: Yea I don’t want to do that right?

Stefan: Yea, they say, “Dads’ getting bald, Dad’s getting fat, Dad’s tired when he comes home, he just wants to lie on the couch and have a cigarette, and mum’s not happy.” They just know that whatever mum and dad are doing, it sucks. So they understand. And that’s one thing I love about children is they’re so innocent and they just know what they want to do. They say that if you ask a man at age 7 what he wants to be, that’s the true man talking and throughout his life that’s what he is. A 7-year-old is a fully developed person, and when I was 7 I wanted to be an inventor. And here I am making inventions and I love it.

Dan: Yes, I can see that. I love this interview, this conversation, it’s so awesome. It’s so good to have you on the show, so good. We can talk all day long, man. Maybe share with us any final thoughts, and if our listeners want to get in touch with you, want to learn more from you, maybe about your program or your books, what’s the best way to do that?

Stefan: Well, you know, if you’re interested in knowing more about me you can go to stefanaarnio.com. I’m lucky, you know, Dan, my mum gave me a unique name, there’s only one Stefan Aarnio on Google, that’s me. So pretty cool. And you know, the one thing I like to say to people all the time, I say respect the grind. You got to respect the 10,000 hours and respect the people that have gone before you, and respect the mastery, and all the things it takes to become successful. Because you know it, I know it, you don’t become successful overnight, it’s going to take you a little bit of time, but if you respect the process and you can grind it out, you’re going to be a great success.

Dan: Yes. Thank you man. Thank you so much. And definitely get the books. What’s the new book you’re working on, that you can share with us?

Stefan: Thanks for asking. So I wrote that book Money, People, Deal, about raising money, then I wrote Self Made, which is about starting with no money. Third book coming out is called X, it’s called Ten Commandments of Negotiation. And that book is all about breaking down negotiation, because I’m in the real estate business and the only way to make money in real estate is through negotiating and I found so many of my students couldn’t get deals because they were just horrible negotiators. So this book is called The Ten Commandments of Negotiation and if you want to become a better business man you better get it, because negotiating is the only way that we make money as business men.

Dan: I agree and it’s not just about – it doesn’t matter if you’re listening, if you’re in the real estate business, if you’re thinking of getting into it or not. I personally learned a lot from Stefan’s books. Not just real estate but business principles and lessons there that I think you will find value. So definitely get the books and by the way they look spectacular. So just from the branding perspective, just get the book to learn the branding aspect, it’s worthwhile.

Stefan: Thank you Dan.

Dan: Thank you so much for inspiring us today with your just amazing story and knowledge and sharing your thoughts. I appreciate it man.

Stefan: Awesome. Thank you for having me Dan, really appreciate being with you tonight.

Dan: Thank you