Raising a Money Rockstar and Financial Freedom | Tom Karadza

#056.  Today's guest is Tom Karadza.  Tom is the co-founder of Rockstar Real Estate Inc, a real estate brokerage focused on helping investors in the Greater Toronto and Golden Horseshoe areas create income to live life on their terms.  Tom is also the co-host of The Your Life! Your Terms! Show, where he chats about real estate, business building, the economy, bitcoin, monetary policy, nutrition, fitness and anything else to help us all live life on our own terms.

Tom shares spending time in Croatia, growing up as a child and how it shaped his views on how money works.  We dive into his unconventional path, from corporate world to entrepreneur.  Tom shares strategies of how parents can talk to their kids about money, and tangible examples of what he does with his kids to help them learn about money, as well as transfer info and knowledge to them.  We also talk about financial freedom, and his three bucket strategy for achieving it.  We dive deeper into a few of those buckets, including bitcoin, and how owning some real estate can be a beautiful thing - because of leverage to achieve higher returns to stay ahead of our currency debasement.  And two, how that same property can change over the years, based on the different strategies you can deploy for that same piece of real estate, in his example, a regular boring single family home.   

Show notes and more at:

https://moneydadpodcast.com/session056

Transcript

Justin: Well, I have the absolute pleasure of introducing my guest today, Tom Karadza. Tom is the co founder of Rockstar Real Estate Inc., a real estate brokerage that he launched with his brother, Nick, back in 2008 when they quit their jobs in the software industry. Rockstar Real Estate is focused exclusively on helping thousands of real estate investors in the Greater Toronto and Golden Horseshoe areas Create income to live life on their terms.

Justin: And they've collectively bought billions of dollars in real estate. Tom is also the co host of the, your life, your term show, a fantastic podcast where he and Nick chat about real estate, business building, the economy, Bitcoin, monetary policy, fitness, anything else really to help all of us live life on our own terms.

Justin: Tom, podcast. 

Tom: Yeah, Justin. Thanks for having me, man. Really appreciate this. 

Justin: I really appreciate you coming on here today. And, I really want to start off , taking us back to your childhood and what influenced your thinking around money. I've attended many, fantastic your life, your term events that you guys put on, , two or three times a year.

Justin: And I remember actually the last one that we were at, I ran into you Outside the washroom, of course, and I brought my nine year old son , and I talked about , some of the things that I do with, with my, my oldest around like helping him understand money and, at those, your life, your term events, I've heard you tell stories and reading through your monthly newsletters. Stories of how life was like in Croatia when you would, , visit your grandparents or your grandmother, your aunts and when your parents came here, can you share with us maybe a little bit about what your childhood was like as it related to your exposure to money and finances?

Justin: How did either your parents or maybe others influence your thinking around money growing up? , what kind of lessons did you learn along the way that you took away that maybe you still care with you today? 

Tom: Sure. Okay. Thanks for that, Justin. And I think growing up probably like many other families in Canada, so I'm born in Canada, but almost every summer until there was a big war there in the nineties, I was going over.

Tom: My parents would bring me over to Croatia, my father's Croatian, my mother's Scottish, who I had family in Croatia. I'd go there almost every summer. And hang out in the villages, like kind of in the middle of nowhere in that country. But looking back, it had such a heavy influence on me that, that I'll share.

Tom: But in Canada. We, our family just didn't talk about money. So here in this country, it was just never discussed. Only when there were money problems did I could then, I could then feel the stress in our family. Like you could feel it between our father and our mother and you, you know, You knew there was like a money problem, but even when it came to the point where CRA froze our family bank account at one point after my parents split up and it would, that was actually over real estate.

Tom: There was a big real estate crash in the nineties. That financial pressure was kind of the straw that broke the family, the, the, the camel's back. I think in their relationship and they end up splitting up and my father had not paid CRA appropriately or whatever the case was back then CRA froze the bank account and I remember at that point, I guess I was like 18 1920 was around that age going to pay some bills because I was depositing some money that I was earning into that account for our father.

Tom: It's just for the family home to pay the bills. And the TV teller said you know, CRA, there's a note on here. CRA has frozen your bank account. You can't get access to your money. And I remember going home and telling my father and he just like grabbed his heart out of like stress. And then he got back in his pickup truck and he drove away.

Tom: So even at that instance, we didn't talk about money. Right. And I forget how we got out of the situation on it's like all blacked out, but the lights did stay on. And we did always have food. So And there were many good times. It's not like I lived in poverty by any means, you know, it was like a middle class family.

Tom: It's just, we had money problems for sure. So I think in Canada, we just didn't talk about it. It wasn't discussed money was something that you just didn't bring up, but then going over in the summers to Croatia, looking back on that time, I realized I learned so much. from my aunts. So my, my father, sisters over there who took care of me, I learned so much.

Tom: So for example, there was one, one of my aunts would take me to the market in a little place called split on the coast of the Adriatic sea. And this, at this point, it was a communist government, you know, like running the country. And she was selling eggs on her little stand that she had, but on the side, she was a widower.

Tom: And she would dress in like, you know, totally like a big black skirt, black top and a black kind of what would you call that? Like what am I like handkerchief or something? That's not the right word. Some black scarf around her head. Anyway, that was the attire. And On the side of selling eggs, people would come up and I would notice as I stood next to her at the market, they were exchanging the DNR, which was losing value pretty rapidly there for German marks.

Tom: And she was operating this little, you know, black market side business of like, This money exchange business where people were trying to give her dinars and get German marks. And she was making a little exchange on that, you know, a little commission on every charge. Yeah. She was a bit of a hustler there.

Tom: And I, and I didn't quite add up what was happening. You know, I didn't quite think, Oh, like the dinars losing value and these people want to hold their savings in German marks. It was only later looking back, but that did have this profound impact on me later in life when I reflected on that. And then my other aunt in the village.

Tom: Taught me a lot about just how money works and how, you know, hard work can kind of really is, is what's the basis of kind of savings. And I remember her getting up and maintaining the farm there and every morning she would get up and one day we had to get up and take a cow to a market and we sold, we walked all day to sell this big bull at this market and she exchanged the bull for a calf and then some currency.

Tom: And then we walked back and I just remember thinking, I was like, Oh, that's like so weird. Like, I guess, you know, you can take something of value, you can go to this market and you like barter with other people. And then, you know, the value is not the same, this big bowl for this little calf that, you know, they made the trade.

Tom: So the difference was made up in this currency. And we kind of walked back and it just always had this impact on me. Like, Oh, like, that's just so weird. Like how does money work? How does the economy work? So I think just. Seeing these things over in Croatia during those years had this kind of got me curious about the economy, trade money.

Tom: So that later in my life, in my twenties, when I started realizing, wow, I need to figure money out because I had finished, I done all the right things. I'd gone to school, got good marks in high school. You know, I was the student who got the nineties in the, in the early grades of high school. I stopped basically trying at the end of high school and still got eighties.

Tom: Yeah, just starting to have fun in high school. So high school kind of came easy to me in university. I kind of breezed through university, didn't know what I was going to do. Started in, you know, starting, I was supposed to accept a program in engineering at St. Mike's in the University of Toronto, ended up getting accepted.

Tom: Staying in Mississauga at the campus there and getting a psychology degree. So I totally, yeah, I have a degree in psychology and sociology. I didn't know that. 

Justin: Very random. 

Tom: Yeah. Yeah. It was totally random. I'm like, I don't really like engineering, but all the, all the counselors said, you're good in math.

Tom: You should go into engineering. Right. And I just, I didn't like it. And then I ended up at the university of Toronto, Mississauga campus was called Arendelle back then. And I ended up in chemistry for some reason. And then I realized. I didn't like chemistry. And then there was psychology and I met my wife in the psychology class there.

Tom: And so it all kind of worked out. There was a greater plan at play. But when I graduated, I had this like nightmare moment where I realized that the skills that I had earned or created for myself in university, the market wasn't really rewarding people with psychology degrees. Yeah. So then I had to go into it and I went into this post grad it thing for about a year to pick up some it skills, which were trending in the late nineties.

Tom: And then I got a job in it and kind of things took off from there, but that was also another lesson that made me reflect on just my upbringing that, wow, like your skills must match what the market. Is rewarding at the time. And as crazy as it sounds, like I flashed back to my aunt in Croatia thinking, Oh my gosh, she was able to like raise these cattle and have this bull.

Tom: And this bull was, you know, had a lot of value and she could trade it for something else of value. And I, and it just all kind of came, came together for me thinking, Holy smokes. Like I don't have any skills in the market. At least my aunt had that type of skill where she could raise cattle. And breed cattle and sell them off.

Tom: Like I don't even have that in Canada. So like I need to get some skills. So I ended up opening the Toronto star and I would go through the career section in the late nineties and I saw all the high paying jobs were in it. And I just cold called the companies. I just called because back then you could actually call the HR department that was hiring.

Justin: Oh, really? Okay. Yeah. 

Tom: So like, and people would answer the phone. 

Justin: Right. What a strange concept. You can actually call someone and someone actually pick up the phone. Yeah, yeah, yeah. 

Tom: So I would just call them and I would say, how do I get this job? Like you're paying for these database developers or these Java developers or C developers.

Tom: And it's like 60 an hour, like back then in the late nineties, I'm like, how do I get this? And they said, well, you need to become a programmer and you need to do this. And you know, you need to learn about database technology. And there was no schools teaching it. And luckily I found a program. In Toronto, that was 13, 600 for a nine month crash course for university grads to teach them about like Oracle databases and programming and visual basic and HTML and everybody made fun of me and I took all the money I had even borrowed a little bit from my mom.

Tom: Yeah, it was always supported me and put it in that school and that got me the skills to get a job in it. And then I started really kind of earning some money and then it kind of led me down the path of investing. What do I do with that money? But Justin, I've been all over the place there, but that's a little bit of my own path and my own kind of background on like, how does this all work?

Tom: How do you make money? How do you get ahead? How do you, how do finances work? 

Justin: That's an interesting kind of pathway around that. . So from seeing or understanding initially, it was like, yeah, money's not talked about at the home. , but going from there to, , seeing your aunt's barter and, and essentially, but it's, interesting cause it's like back in the day, like that is you're using, I mean, before they had, I guess there was money there that was not the value was not there that did not.

Justin: Right. Like, so you had to. You had to sell, you had to use your selling skills and things like that to make money. So that was really cool. And, very cool on your journey and your path around that. Something that I've admired about you is the way that you've built up your real estate brokerage business. You've done it, in such a powerful way that really resonates with everyday hardworking Canadians looking to really get ahead in life.

Justin: Or at least. Make it such that they're not falling further behind. And I've heard you, you know, you and Nick share stories of when you started the real estate business and, , focused on investors and everyone thought you guys were crazy, right? Like it's not going to work. This is going to fail.

Justin: And how one of your first offices was like a deli counter where, , you have like the deli lady, . Collect checks or whatever on your behalf, on these real estate transactions and how you had to switch offices, like, because he got locked out of them and, and really the struggles that you had to face to build this business up to where it is today, , into a very successful business .

Justin: My question to you is, was becoming an entrepreneur a natural evolution that, once you found something that you can get behind and it sounds like there was these, you know, you, you start to really think about . Money and, and how it worked and understanding that and perhaps real estate was a vehicle to do that.

Justin: So, it was a natural evolution that you found something that you can get behind and maybe talk to us about your entrepreneurial mindset and how that mindset allowed you to push forward, to achieving success in, in spite of all these obstacles and things getting your way. Sure. 

Tom: Yeah. I guess I didn't want to originally start a real estate business.

Tom: So when I was in the corporate world and it for those nine years, I extrapolated my life forward and thought, Oh wow, like I'm making pretty good income now. So I was earning quickly into the six figures in my twenties. And everybody was kind of patting you on the back, like, Oh, great job. You're, you know, have such a good job and you're doing well and all this stuff.

Tom: But I would look at some of the people that were older than me in that industry. And although it was a young industry, there were some people that were, you know, my age now and I just didn't like the life that they had. I saw that, that if they asked for more than two weeks vacation at any time, the sales directors would say, well, are you really committed to this company?

Tom: Because you know, we'll just take your accounts, your good accounts that are basically earning you a living and paying for your family. We're going to give those to someone else. Like you can't take more than two weeks. So it was a pretty cutthroat environment. Yeah. And I remember looking at that kind of situation and thinking, Oh my gosh, if I'm like 50 years old and I have to ask permission from another adult.

Tom: to take time away that I can go spend with my family, you might as well stab me in the leg. Like that is the word I will never that freaked me out so much. So there's obviously something in me. That doesn't like authority, and I was just like, I can't live like that. There's just that upset me so much that I started looking for, for other ways to make money.

Tom: And that kind of started the entrepreneurial journey because I thought, Oh, like people who have their own businesses, they have some sense of freedom. They have some freedom. I'm going to go down that path. And I looked for everything other than real estate, although Nick and I bought rental properties in our twenties.

Tom: I wasn't drawn to the real estate business as the business. I was looking to try to build a website online where I could live on the beach and like sell reports and like make a million dollars while I'm sitting in the hammock and like selling PDFs to people about how to make money. Like I went kind of through this internet at that stage of the internet.

Tom: That was like the thing, you know, that was like the goal. And Or at least 

Justin: maybe, or maybe you were ahead of your time because it was almost like, you're selling like information, right? That you could get off the income from. 

Tom: . Yeah. Yeah. I started doing the math on that. And I was like, Oh, if I sell a PDF of some report for 20 bucks, how many of these things do I need to sell every day to like live the life I want to live in the math wasn't working out.

Tom: And we had a mentor at the time, basically just say, listen, The easiest way to get go into a new business as an entrepreneur is go to where the river of transactions are already happening and then bring in some new twist or some new value. But don't try to reinvent the wheel. When you first become an entrepreneur, where are the deals?

Tom: Where are the transactions? Where's the money already flowing? And we had already been in real estate. Nick and I bought rental properties and the real estate. Market is absolutely huge. The real estate business is huge. So I kind of almost begrudgingly said, you know what, we have this knowledge.

Tom: I know a lot about real estate. I guess we'll go into real estate and, you know, we kind of like, I mentally put this stake in the ground. Like I remember thinking, that's it. I'm going to stop looking around for other business opportunities. I'm going to commit, like, this is it, this is what we're doing. I'm not looking back.

Tom: And it didn't really kind of excite me, but what then excited me was the thought that can we bring something else to real estate? Can we work with investors? Cause back in 2006, 2007, when we were launching this as crazy as it might sound now, no realtors worked with investors. Yeah. Like that was not like a thing.

Tom: So I thought, okay, can we just work with investors? Because we're investors and we know the questions we want to answer that no realtor seemed to be able to answer. Why don't we just work with realtors and why don't we lead with education? And that kind of got me excited. I'm like, yeah, like. That's what I wish we had when we started down our real estate path.

Tom: I wish we didn't just have a realtor to shake our hand and say, real estate never goes down. You made a good purchase, you know, and then kind of like walk away from our rental properties. So this angle of working in real estate where the river of transactions and river of money was already flowing, but then stepping into that and bringing something slightly different, which for us was leading with education that kind of got me excited.

Tom: And that was enough to, to like, Propel me to quit my job and really commit to this. And then I had no idea how hard it would be the next three years. I, Nick and I barely survived. My Carol, my wife was at home, not working. I had a, when I quit, I had a 10 month old daughter, a four year old son and a mortgage on my house.

Tom: So when, you know, we were a few months in and we really weren't pulling it off financially. Nick looked at me one night, I'll never forget leaving our first office. And he said, you know, if we don't start helping some investors buy properties, because we are in a commission. Right. When an investor buys a property.

Tom: We're really going to be up against the wall financially pretty quick here. And it didn't even hit me. I just assumed we were going to succeed. But when he said that, you know, that was kind of like the moment where I thought, holy shit. Like. This, you know, I've put my family, I put myself into quite the pickle here.

Tom: Like we had some real estate and we had some savings, but I was burning through it all. Like I cashed out my RRSP to start Rockstar. 

Justin: Wow. 

Tom: We were, I sold some of my NetSuite stock that I had managed to accumulate when I was at Oracle and NetSuite to fund this. So I was up against it, but we just kind of kept pushing forward.

Tom: And you know, the first three years were tough. The first five years. We're actually pretty tough and then it just kind of flipped and we started, you know, the revenue started flowing. We, I could, I can not only pay for my groceries, but there was a little extra to save, you know, we can, we can start buying properties again because we started a real estate investment business and people were asking us, Hey, you're like, how many properties are you guys buying?

Tom: And we're like, well, I don't think you understand we're now broke. Like we have some real estate, like we are doing this only to be able to help you and hopefully provide enough value that we earn a commission that we go save up again to buy more real estate. But like, we come from nothing. Like we don't have a base of financial assets where we're just like buy.

Tom: And some people would say, why, like, if this property is so great, why don't you just buy it? Right. And I would have to explain to them. I'm like, I don't know if you quite get it, but like, I can't buy it. Like, I don't, I don't have the money to buy it. So, but it is a good thing. Like, look at the numbers on this property.

Tom: Like I would buy it if I could, but 

Justin: yeah. So 

Tom: the first few years were sketchy. And our, our very first office was actually a closet. Yeah. In a brokerage in Oakville that they used to keep the mops and the brooms, but they had kind of cleaned it out to like rent it out as the cheapest office. And we rented that little office out.

Tom: So no windows. It was even a little L shaped. It was like the tiniest little thing you'd ever seen. And I had a little desk and we had two desks by some miracle in there. And my desk was like around the corner. So like, I was like in this little thing that was like six foot wide by. Four feet. And it was just tiny.

Tom: And then that, that brokerage ended up going bankrupt. And then that led us to the Burlington, Ontario office that you're talking about, where we signed a lease. And we just rolled in there one day and we're like, do you have executive suites here? And they're like, yeah, they're right in the back. And we looked at one, we're like, okay, yeah, we'll sign.

Tom: And we signed the lease and moved in there. And that became our home for a few years before we moved back to Oakville. But yeah, yeah. So that's a little bit of like, kind of the journey of, of, you know, the real estate was that mentor who said, if you're going to go into entrepreneurship, just step into where the river of money or the river of transactions already happening, it will just increase your odds of success greatly.

Justin: That's brilliant advice. I mean, you really just trying to, you're not recreating the wheel here. You're trying to get in the pathway of. , this river of transactions are already flowing. For those out there that are looking to get into entrepreneurship, that's a great piece of advice to keep in mind.

Justin: . When you're deciding what to get into. 

Tom: And I think, yeah, and I think most entrepreneurs, you always have this idea. Like I had a million ideas, like, Oh yeah, why don't we do this, sell this product or do this often? My ideas anyway, involved creating a new market. Like it create, I would then have to create the awareness and create the demand for my new quote unquote thing where, and that's very enticing.

Tom: But when you step back and you look at it, like the odds of pulling that off and the amount of money you need to do that is incredible. But if you go into an industry that already exists and just bring your personality, your flair, your value to that market, it's a much easier path at first. Absolutely.

Justin: I'm curious. So I know, for many out there being an entrepreneur and having that life is not really for them, even though it provides that freedom to, to

Justin: but to not have to ask, can I go on vacation for a couple of weeks, ? Like having the freedom of time to do that. But I personally believe like it's important to expose our kids to activities or develop that entrepreneurial mindset. I'm curious. I mean, we're Talking before we jumped on here live like you've got two kids and are there or were there purposeful things?

Justin: that you did with your own kids to really help them think like entrepreneurs or was it simply modeling like this is the life of an entrepreneur to your kids and then having it rub off on them through osmosis like Is there advice that you would give to parents to help them teach their own kids to either think like entrepreneurs or gain skills that are, are useful, whether you're an entrepreneur or not.

Tom: I think for me, it was conscious decision to talk about money. So a lot of people will say, and a lot of books I used to read about becoming a father and how to talk to your kids would often say to hide some of the money talks. I think it's much more acceptable now to talk about money, but from. The time they were very young, I would just always openly talk about how much things cost, how taxes work, how when you're an employee, you know, the taxes are taken off the top of any salary that you're made.

Tom: We'll just talk about absolutely everything. And from the very, you know, from when they were young it was some conference I went to somewhere I got the idea, some book some report I read that really stuck with me and it really helped on the financial education. It was to use a couple jars when the kids were young and anytime that they would get money in their lives from a birthday party or anything, I would have percentages that they would have to split up that money.

Tom: So for example, if they got 10 from a birthday gift or 20, you know, or 50 from like a Everyone in the family and they got this money, they would have a savings jar and a spending jar, and then they would have a percentage that they must put into the savings jar first. So when they were younger, it was 80%.

Tom: So they had to put 80 percent into the savings jar and they, they would see it. I would create the change so they could see it. And then 20 percent in the spending jar. And then whenever they wanted to buy some gumballs or my, my son went through his Pokemon card phase or whatever, I would always say, well, the money in your spending jar, that's your money.

Tom: You don't even have to ask your father what you want to do with that money. That is totally up to you. Go ahead. You can blow it on gumballs if you want, because I was trying to teach them. If they spend the money really quickly in that spending jar, it's our, it's then gone for the next thing that they want to buy.

Tom: So like I wanted them to feel a little, that, that pain. And I wanted them to mentally make the decision. So I always said, that's your spending money, the savings money you don't touch. That's your freedom. That is the money that is going to give you freedom. You never touch that. And I would try to just, and I probably did it all wrong.

Tom: I would just like scare some, I would say, if you touch that money, you're going to live under a bridge in a cardboard box. Okay. So like, that's why you don't touch it. So I've gone the other direction. It's probably all wrong. You know, I'm sure you, when you speak to my son at some point, I'll probably tell you, yeah, my, you know, my dad should have never told me that.

Tom: Or that's, that's what I did. And then as I got older, the percentages would change. So as I forget what age exactly, but as a young teenager, I think it turned to, to, you know, 60, 40 saving spending and then 50, 50. And then , my son was able to help hold the 50, 50. My daughter still at 50, 50 my son was able to hold 50, 50 until I think he was 19 or so.

Tom: And then just some of the spending got so great, started driving, started needing some money. So then I spoke to him and said, Listen, once you break this percentage of 50 50 in your life, you will never save this percentage of money again. So be very, very careful. Once you start reducing this, pick a number that you're going to save because he started working, getting, you know, he had a.

Tom: Job at a grocery store. And I said, pick a number that you're going to change it to and stick by it. Cause every time you reduce your savings number now, you're never going to increase it. Life is going to come at you hard and fast. So just that little exercise. And then on the spending money, if they wanted to get a new laptop computer or a bike or anything.

Tom: From the spending jar, I would get them to have other jars and label those jars with the bicycle or the laptop. So from the spending money, they could then allocate into this other thing that they wanted. And my daughter took about it. And I'm really proud of her on this took her a year to save up for a new laptop from her spending jar.

Tom: She created another jar laptop saved from that spent not from her savings money. That was completely separate, but from her spending jar, she would take money and save for that laptop. So that was my way of them just understanding money and thinking about it and managing it. And then when they got older, we opened bank accounts for them, but with the same idea, saving spending, you know, so once her savings got to a certain point, I taught them about gold and silver on like, why is gold sound money?

Tom: So my, my son at one point asked me, you know, why don't I have a bank account? You know, why do I have these gold coins? And you're 

Justin: like, this is so much better than, yeah. And then, 

Tom: yeah. And then I discovered Bitcoin many years later. So that conversation came into it. But yeah, just that whole process is the foundation of, of everything because those jars then got us talking about, well, how can you make more money and how do you make money as an a salaried employee and how do you, how do you different salaries get dictated in different industries and how do you make money as a business owner yourself?

Tom: So it all stemmed from these crazy, simple little jars and just, it just naturally created discussions of money when they would get frustrated sometimes, like, why can't I spend the savings jar? 

Justin: Right. 

Tom: And it would just naturally do that. And then the other thing I did, it was, I got them both to read rich dad, poor dad, really young.

Tom: Just because I wanted that. And then something you know, that some people think I'm pretty crazy for as, as my kids get older. So my daughter's 17, my son's now 21 and they're late teens. I began paying them to read books. So like I D I determined which books I wanted them to read. And I knew at that time they weren't too interested in reading some of the books I wanted them to read.

Tom: But as their father, I thought, I want this information in their brain. I will pay to get it in their brain. 

Justin: Yeah. 

Tom: And then so they would have to, you know, they had little tasks like make a point out of every chapter and then present the book back to me. So then, you know, they're practicing their presentation skills or communication skills.

Tom: And then after they did that, I would pay them. And I'm not going to tell you the amount I paid them, Justin, cause maybe I'm slightly embarrassed, but it wasn't like five bucks. I was, I was, I was motivating. Yeah. Yes. It was more. And yeah. And that's just ending with my son now at, you know, 21. And my daughter's going to still be in that phase for a few more years, but definitely paying them to read books is something I just strongly believe in.

Justin: I want to drill down into a couple things you said there. One was, paying them to read books. I remember, Patrick bet David, I think uses that same technique where he would pay his kids to read books and then have presented, have a put down a summary of like, here's what the book is about.

Justin: And, and then present it to me. I think that's a brilliant way of motivating them to read and something that will, you know, whether it's Rich Dad Poor Dad or other books that you feel like that is useful information for them to get and hopefully use. So that's, that's an amazing technique that I know that I'll start to do with my, I mean, my, my oldest loves reading, like any spare time that he has, he's not reading business books necessarily, but he's reading like, yeah, regular books.

Justin: And that's like his almost natural default after like, if he has nothing to do, like, that's what he wants to do. So I don't think it'll be too hard to motivate him to like, he'll be like, Oh, you're going to pay me to read books. Sure. Like,

Justin: this is too good to be true. But and then the other thing I want to. . So the, jars thing that you did in terms of saving and spending. I think the important thing was changing the percentage. So having a higher percentage, 80%. To start and then tweaking that as they get older.

Justin: I think that's a great technique that a lot of parents, you know, our listeners out there should think about and incorporate into their own lives. , funny enough, like my wife, , My oldest had a piggy bank.

Justin: My youngest had basically like just a container that he would store money in. And so I want to create that save, spend, invest give jars. And so , she's very crafty. She, took Mason jars basically, and then ordered some stuff off Amazon to put on like lids on the jars.

Justin: And so now. That's what we're incorporating in terms of, okay, yeah, you have money. This is how you can allocate it between the jars. So Give a 

Tom: jar is yeah. And we've met and you know, at one point I think we had like eight jars. I didn't get into it all, but the give jars, like a huge, a huge thing. 

Justin: I wanted to talk about financial freedom and really like, so for me personally, I've. Purchased income producing assets. And in my case, it's real estate to really use as my primary strategy around pursuing financial freedom. I've heard you reference your three bucket strategy.

Justin: That's really served you well in, you know, reaching your financial freedom. And that's something that you encourage rockstar members to think of as a strategy. Can you just talk about and walk us through like what that three bucket strategy is, how to think about it, why it's important to follow. 

Tom: Sure.

Tom: Yeah. Yeah. I guess. So in my mid to late twenties, I think I started devouring or even early twenties, I guess, personal finance books. And I would just, I read so many of them. They all had different strategies of different mutual funds. And I think you went to a website called morning star or something to see like the historic valuation or returns of different funds.

Tom: And then there was index funds were popular and there was different strategies for everything. And then over time, I just came to realize. That the people in my life who were older than me, who seemed to have a real financial base that gave them a lot of security and freedom, they seem to have like a much simpler strategy.

Tom: And their strategy always kind of revolved around what I could identify in talking to them, these three things. And I just kind of incorporated them as my own strategy. And it was like the, I called them the three buckets. They didn't describe it like this, but bucket number one was have enough liquid cash for your day to day living.

Tom: And if you were an income property owner, like investing in some real estate for maintenance and, and, you know, that kind of stuff. So have like, whatever you were comfortable with three months, six months, nine months, 12 months, 18 months, if you could do it, whatever you could do to pay for your living expenses in pretty liquid cash.

Tom: And for me at one point in my life, that bucket did involve credit lines. So like, I didn't have enough to create like a year's worth of liquid cash, but I had a few months But I had credit lines that I could tap into if I needed to. And I was associating them as the same kind of thing. I kind of graduated past that eventually, but at the time that that's how I looked at that then bucket number two and number three, I always kind of interchanged them, but the next bucket would be have, Hard assets that were also income producing hard assets and those hard assets were things that like good property and some of the people in my life that I looked around again as they got older, they always seem to have real estate.

Tom: Like they always seem to have real estate. So it's like no matter what they did or what business they were in, if they were in a business that wasn't even anything to do with real estate, eventually they own some real estate. So I'm like, why don't I just start getting some properties in my life now, some income producing properties, the income pays for the debt on them.

Tom: And because they're hard assets, they can't get debased. So the, the, the dollar price of these things tends to trip trickle upwards. So like, you know, I'll create this thing of. Buying income producing assets. Our family had already done that. We kind of had familiarity with that. Nick and I were buying them already.

Tom: Let's just kind of double down and continue to buy income producing assets. And then that will be our focus. It's not going to be stocks. It's not going to be options trading. Not that there's anything wrong with those other things. It's just for us, I needed to focus and become an expert in an area. So I wanted to go deep in this one area.

Tom: So that became our next bucket. And then the third bucket would be any excess long term savings, save in a form of money that could not be debased. So remember my aunt in Croatia, that's when I started realizing, I'm like, Oh my gosh, she was, the DINAR was hyperinflating. She was getting people to exchange DINARs for German marks.

Tom: They wanted the German marks because the German marks held the purchasing value better than the DINAR. So I shouldn't hold Canadian dollars. Because Canadian dollars are inflating at a much slower rate. So it's a little sneaky, but it is happening. So I should hold in gold. Then that became my thing. And then after you know, after I had dismissed Bitcoin for at least four or five years, like literally laughing it off in the year 2020, I kind of realized how wrong I was.

Tom: And gold has for me been replaced with Bitcoin. So my third bucket is any excess savings that is not allocated to buying more income producing assets. Or short term liquidity in bucket number one should go to long term savings. And that for me is Bitcoin. And so those are like my three buckets.

Tom: And then the, the income producing assets could be starting your own business. It could be income properties, you know, it could be dividend yielding stocks, whatever it is for you. But like, to me, that's a really important bucket to create. So now I have operating businesses that produce kind of income and I have Hard assets that produce income in that bucket.

Tom: And that's kind of the way I look at things. Those three buckets are kind of how I drive my own financial future. 

Justin: I wanted to drill down into, so those income producing assets, whether it's, it's an operating business, whether it's real estate, whether it's , stocks that provide dividends.

Justin: So, you know, you've talked about one of the best ways to Let's say to, to produce or to have invest in those income producing assets is through single family, residential, real estate, you know, boring starter homes in good areas, good fundamentals. And so I guess my question to you is like, with the cost of real estate and the GTA now skyrocketing, and it's over the last decade, we're an average home now, you know, you look at it and you're like, wow, it's a million bucks.

Justin: . And it's not some mansion in wherever it's like a million bucks for a normal average home. Are there even such things these days, a boring starter home anymore? And really for those out there. Who may not necessarily be investors in real estate, how do you get them to wrap their heads around that?

Justin: There are still opportunities and strategies to get into real estate to really provide that income to provide that, , hard asset to create wealth so that they can, , make their way towards financial freedom. . 

Tom: Yeah. Cause that discussion comes up. I mean, our family has been in real estate, like I said, from the late eighties, nineties to today.

Tom: And this conversation comes up. Almost every year that like, Oh, it's over. And you know, it's, you can't find any more property. So thank you for asking that question. And I'll talk about it. But the first point I wanted to address on real estate is the reason that real estate is so good is not that the, not the real estate in and of itself, real estate just appreciates about 7 percent compounded annually.

Tom: And that's not really getting you a head to outbase the debasement of our currency too aggressively. That's just, Really keeping pace with the debasement of, of our money supply in this country. So real estate by itself, isn't really anything magical. It's the leverage that you get. So as an investor, you can put 20 percent down on a boring single family home, like you mentioned.

Tom: And if real estate. Quote, unquote appreciates at 7%, 7 percent on your 20 percent is a 35 percent return. Now I'm getting ahead financially. So real estate, the, the only really great part about it is the leverage that you're able to get through the banks and get these properties. Now, as far as the properties producing cashflow, The beautiful thing about real estate is the strategies can always change and especially with a single family home.

Tom: So I'm going to give you one home as an example. That we've, that we've run the, this home we purchased in Hamilton on the Hamilton mountain. I want to say the year 2000 or six or seven, this particular example, this home did not cashflow a straight rent back then prices were much lower. I, we bought that home, I think for 239, 000.

Tom: Fully detached, single family home, which sounds ridiculous now, but stick with 

Justin: it. Yeah. 

Tom: Yeah. But stick with me. It didn't, it didn't really cashflow because rents back then on that type of home were super low. It was like 1100, 1150. Like you couldn't, the rent at that point didn't pay for the carrying costs because rates at that era went up to in the fives, it was like 5.

Tom: 7, 5. 8. So when you took a mortgage on that home. And then you paid for the rent at that interest rate, didn't, didn't really cashflow, maybe barely kind of sorta covered costs. I would have to go run the numbers, but it was not great. But what we realized is we, we thought, Oh, well, we can change the strategy we're using on this single family home and we can offer it as a rent to own home.

Tom: And we offered it as a rent to own home, where we can charge slightly than a higher than average rent to a tenant who had good income, but for whatever reason had bad credit. In exchange for the bad credit, we would take an option fee. We would sell them the option to buy the house from us in three years at an appreciated price.

Tom: And we just took historic appreciation. So we just took the purchase price. We applied back then like five and a half percent and came up with the purchase price three years later. Then they had the option to buy the house from us if they wanted or not. But in exchange for accepting them as a tenant with bad credit, we got something like 10, 000.

Tom: Sometimes we got 7, 000, sometimes we got 15, sometimes we got 20. But 10, 000 was very common. So now on a home that didn't quite cashflow, I got 10, 000 within the first two months of closing on the home. And I got higher than average rent because I charged a few hundred dollars extra a month because it was a special program rent to own.

Tom: Now I took a single family home that Didn't really cashflow. I got 10, 000 up front and higher than average rent. And I turned this one single family home into this money machine for me. And so that single family home, that person moved in, they loved it. They were ecstatic. They wanted to be in the same area as their kids.

Tom: They, there was no rental properties in that area. They were very happy, but then they got a new girlfriend. I'll never forget. The girlfriend hated the home, wanted to move out. So the guy begrudgingly moved out and we said, Hey, you know, that 10, 000 that you gave us, that was to go towards buying the home at the end.

Tom: Remember we discussed it's not refundable. And he said, I remember he goes, you know, I'm moving on. And we're like, okay. And so he moved on and that home, we then turned into a student rental. That home happened to be close to Mohawk college. And when we turned that into a student rental for many years and as a student rental, when you rent out a home, you're basically renting out by the room to a group, but that the rent, actually, when you rent it out as a student rental, if you do have the appropriate number of bedrooms in there.

Tom: We were just killing it on cashflow because there's a student rental. It was really high. And today that's what we're doing a lot with investors. We're doing student rentals by Western university, a lot by Western, a lot by McMaster, a lot by Mohawk college and student rentals even today are cash flowing.

Tom: Yep. So we have multiple families from Mississauga, Oakville, Burlington, who are buying student rentals, one just by Guelph last week because they're kids or, you know, they see the opportunity one or the other, and they're buying purpose built student rental homes with four bedrooms, five bedrooms, six, seven bedrooms.

Tom: The rents on some of these properties now, low rent. Is now 925 a month, low rent per room, high rent would be like 1200 bucks. So if you get a house and you're fortunate enough to get one with seven bedrooms, you can do the math. Now, seven times the room rate there, you can create cashflow on a boring single family home.

Tom: So if I flip back now to our story on that property that we ran as a student rental for some years after a while, for whatever reason, I don't even know the reasons one group of students moved out. Oh, it was our property manager said they had a great family that they would like to rent them to convert it back to a single family home, standard rental and interest rates were low back at that time that we did that.

Tom: So we were able to lock in a lower interest rate at that time so we can control our costs and rents had risen. So it kind of made sense for us at that point. We're like, yeah, we can do it as a single family home rental. So now that home has been a single family home rental for the last few years. So now one single family.

Tom: Home boring property. We rented as a rent to own worked. We rented as a student rental worked. It's now back as a single family home, regular rental. It's working. And it's part of the reason that we like boring single family homes is that in any market, Whenever someone tells you it can't work with real estate, you can get creative and there are strategies you can implement to make it work.

Tom: So that's kind of one example. And Justin, I don't know if that's what you were looking for, but no, 

Justin: that's perfect. Just showcasing that there's that flexibility. I mean, when you're leveraging and borrowing, you know, basically borrowing from the bank to provide the majority of the, cash for the purchase and then using different strategies along the way and flipping to make it work for you.

Justin: And so, I mean, even on the student rentals, I know, like I own some student rentals as well, and now, I just rented one of them where, so for this upcoming fall, you know, the sign students for like, it's like a thousand dollars a room when, when I bought this thing back in like 2000 and.

Justin: Oh, gosh. You know, so at, you know, and at that point in time it was like, you're renting out like for 300 bucks. Yeah. We rented ours out like 325. Yeah. Utilities 

Tom: included. Yeah. Exactly. Now, now my son, the one that got re rented out at Western where my son's living to the next group is 925 plus utilities.

Justin: Yeah. 

Tom: And in one showing it got snapped up. 

Justin: Yeah. It's just, it's like, 

Tom: just blows your mind, you know, exactly. 

Justin: I know. So, so there is, I think the message is out there that there is opportunities and there is a flexibility and strategies to making real estate still today, even work, whether that's student rentals or, others.

Justin: I wanted to switch gears into Bitcoin here. And I know, you know, you mentioned earlier, you kind of wrote off Bitcoin before. And it was like, Oh, it's a scam and useless. It's useless. It's , used by criminals for money laundering. And now you come to the realization that Bitcoin is actually one of the soundest forms of money that you can come across.

Justin: And I remember Like when I first heard about Bitcoin, same thing, like I had the same misconceptions, like, what is this thing? Like digital money? It seemed crazy to me, but over the last six months I've started to do more research into it. And I don't know if it's because I keep hearing, you know, you and you talk about it.

Justin: Or, but I just decided like, once in a while, okay, I got to, I have to like, look into this thing. And the more I learn about it, The more I realized that Bitcoin is a fundamental game changer , and it may not be tomorrow, it may not be years from now, it may not be decades from now, but it could be the world's reserve currency at some point.

Justin: And so for a lot of people listening out there, it may seem strange to, , be thinking of Bitcoin as a store of value that protects your purchasing power. So, my question to you is why should people , parents, others pay attention to Bitcoin and spend the time to get educated.

Justin: And then obviously once, once you get educated, take action and start to, accumulate Bitcoin. 

Tom: Sure. Cool. I mean, it's a, it's a big topic, but I'll try to describe it like this, that when you are investing in anything in today's world, it's denominated in the currency of the country that you're in.

Tom: So for example, in Canada, if I buy a bunch of stocks the stock is priced in Canadian dollars. And if I own, you know, a bunch of that stock and I say the Canadian dollar value of that stock is 10, 000, the amount I purchased 10, 000, well, the kind of the little sneaky part about that is that the country of Canada is constantly creating new dollars.

Tom: And they're creating new dollars at a compounded rate since the year 2000 of 7 percent a year. So if my stock does not go up at least 7 percent a year, I'm not even keeping pace with the debasement of the currency that the stock is denominated in. So I need that stock to go up 7 percent in value compounded every year.

Tom: Just to keep my purchasing power from the original 10, 000 that I put in. And that to me is a really hard thing for you to do in the stock market. Like the S& P 500 has like a pretty long historic rate of like 7, 8%, whatever it is and what time frame you want to pick. But you're not really getting ahead at seven, 8 percent a year.

Tom: If the money is being debased under you secretly, quietly, without you knowing at seven, there's 7 percent more currency units being created. Well then my 10, 000 in stock, even though it's going up and I see kind of my report card, your, you know, your financial statement. And then I see the dollars increasing.

Tom: Why can nobody have freedom? Like, why is nobody investing in anything in the stock market and going, Oh my gosh, like I've done this now for 20 years. And. Yep. I'm retiring at a beach somewhere. And I did it. I did bought all the index funds that everyone told me to buy. And now I'm on a beach and you know, you never hear those stories.

Tom: You just do not hear those stories. And the reason is because the currency units that these things are denominated in So even though you think you're getting ahead when you cash out, if you didn't match the 7 percent a year on your investment, you're actually behind. So your purchasing power has been reduced.

Tom: Whereas with Bitcoin, there's something kind of magical happening over here that I had dismissed is that Bitcoin has a finite number of units. It can never change. There's a 21 million supply cap at Bitcoin. And that supply is coming out incrementally over the next 140 years. There's already 19 and a half million Bitcoin already in existence.

Tom: And over the next hundred years, another little bit is going to be mined up to this known supply cap that is programmatically set that nobody can change. I didn't know that. So why, why that I find that characteristic of Bitcoin interesting is that I can put a 10, 000 amount. Of my Canadian dollars into Bitcoin.

Tom: Now I own this set percentage of the 21 million. Yeah. No one can ever change that. But my 10, 000 in the Canadian money system, if I at one day calculate what percentage of the entire money supply, the M two money supply that my 10, 000 represents, well, a year from now. That's going to change because there's going to be more M2 money units created in Canada.

Tom: So my 10, 000, my percentage of purchasing power against the entire money supply has reduced. Whereas with Bitcoin, if I own a little bit of these Bitcoin units, they're set in stone, nothing can ever change that purchasing power. So when people see the volatility in the dollar price of Bitcoin, I kind of chuckle now because yes, it changes in Canadian dollar price based on how the Canadian dollar is doing.

Tom: But my percent ownership of the Bitcoin network, the Bitcoin asset. Never changes. So I like that. Then I came to realize that, wow, Bitcoin's not just this thing that has a finite supply. It's decentralized and it's secure. What that means is people like me run Bitcoin nodes all over the world. There's thousands of people running this Bitcoin ledger on who owns what, All over the world, the government can't shut it down because they would have to go all around the world and find everybody with these little computers running this ledger and literally smash them with a sledgehammer.

Tom: And that's just really hard to shut down. And then on top of that, it's secure. There's these Bitcoin miners that protect the ledger. So that my ownership, what's, what's represented by my purchase of Bitcoin, it can never be altered because there is this computing power, these Bitcoin miners that secure the ledger and get paid, get paid, get paid, they're incentivized to secure it.

Tom: And I didn't realize all these things. So then when I started figuring this out, I'm like, Oh my gosh, not only is Bitcoin an asset that is a finite supply, and it's the first thing in the digital world that cannot be copied and duplicated easily. It's actually scarce. The digital community has never had a scarce asset before but it's also a network outside of the financial system So now some of my net worth is not tied into the existing mess of a financial system I'm actually operating this completely other financial system and I feel really happy having some of my net worth over here.

Tom: And it took me a lot of time research like Justin, you're going through to really get comfortable with that. And I used to work for a database company, Oracle. And so some of my background kind of ties into this. So when I started reading about how this all works, I was having multiple aha moments and it gave me more and more confidence to put more and more of my own savings into this thing called Bitcoin.

Tom: So I'm kind of summarizing it. Pretty quickly. Cause it's a huge topic, but those are like some of the things that kind of attract me to it. 

Justin: And I think a lot of people out there need to pay attention to that. And, and I loved how you brilliantly summarized some of the key attributes and key characteristics of why it's so important to pay attention and put your money into Bitcoin.

Justin: I know we're running out of time here, so I want to make sure. I want to ask you one question, actually, before 

Tom: the rapid 

Justin: fire round, . What advice would you give to parents to help them raise money rock stars to help raise kids who are financially illiterate?

Justin: And just killing it, not only with their understanding of money, but how, and how it works, but being able to deploy strategies to get ahead from a young age. Any advice that you would give to the parents? 

Tom: I guess to, to just encourage their curiosity around it, that if someone's taught, if they're talking about something to do with buying something or saving or how it works to encourage those discussions.

Tom: And even if you. Don't know a topic yourself. Maybe some guide them to a resource or a person that can answer their question. Just encourage curiosity around how money works. I feel it's just not discussed so nobody understands it. So for me, it was the jars and then it was books, but just encourage curiosity and you know, around the subject.

Justin: Okay. So I wanted to transition to the rapid fire round here. So I'll fire these off to you. Question number one is what's the most fun that you've had with money? 

Tom: Oh, geez. You know what? I guess it's the ability to have experiences with my family. So like money in and of itself doesn't really give me any happiness.

Tom: I've learned you know, once you can go to a restaurant, once I be able to, once I was able to go to a restaurant and order the steak without looking at the price. That like after that moment for me, money didn't really, I shouldn't say that money matters. I don't want to say it doesn't matter. It just, it didn't really provide me anything else.

Tom: You know, I was like, Oh, I can order. Cause before at the restaurant, I'm like, can I get two appetizer, like two appetizers? Are they cheaper than the entree? And will I get more food? And once you kind of like get past that you know, things, things get a little easier, but I think it's it's the experiences.

Tom: So like to be able to go on amazing family trips with my in laws and my parents, like when we were, when we're on the coast of Croatia, all sitting around a table, having a big meal with the sunset and the water in the background, you hear the waves and you're eating great food. And we're there for days together.

Tom: That to me is like my. ultimate joy. So the ability to do those experiences with my family and my extended family, that's, that's what money does. And you know, I can't tell you how that's just my, my number one, number one thing. 

Justin: And those are priceless moments and core memories, right? Take away. You'll never forget.

Justin: And just, yeah, that for sure. Question number two is what's one of the most important money beliefs that you've had that's changed over the years? 

Tom: That's changed for whatever reason you know, our mom really always taught us that the universe and the world is abundant.

Tom: So I think I've always believed that anything is possible in my life and money is abundant. And even though if I don't have some right now, there's always the opportunity to get it. I, I, I think maybe what's changed for for me is just understanding the mechanics and the plumbing of money. So.

Tom: You know, understanding that, wow, there's these forces, like how I alluded to the M2 money supply that are like, it doesn't matter if you're actually making money, someone else is just printing it. Like I work for it. These guys over here just print it and then they charge you to borrow it at a set interest rate.

Tom: So I think, you know, I've always thought it's a, your life is abundant and money is abundant, but what's changed is that they're recognizing that there is some forces under underneath all of this that you should pay attention to because they're kind of working against you and they're rarely discussed.

Tom: So maybe something like that. 

Justin: Question three is what's one of the best piece of advice that you've ever been given? 

Tom: I think I read the book. Someone told me to read the book, how to win friends and influence people by Dale Carnegie early in my life. And I haven't read that book in probably 25 years, but I remember when I read that book and I put it down, I realized I read something really important that would impact the rest of my life.

Tom: And I, handed out and I recommend it. It's one of the books I got my son to read. So reading that book, how to win friends and influence people by Dale Carnegie. That book set me on a new course. Okay. 

Justin: And then lastly, if you could sit down and have dinner with anyone dead or alive, who would it 

Tom: be?

Tom: And why? Probably my like great, great, great grandparents, like just figuring out like, how did they end up in the part of the world that they were in? You know, like how did, how were they there? What did they go through? What was their life like, you know, just some of their experience. So probably my own like DNA.

Tom: I'd like to go back multiple generations and just talk to them. Like, how did they do it? Like that looked hard. It looked hard. You know, when it's cold outside, I could barely survive with a jacket. How did they survive? Right. Right. That's probably one of 

Justin: the, that's probably one of the most common answers that I've got.

Justin: Actually that everyone wants to talk to their grandparents. Yeah. To go back and have those conversations with them. So very cool. And then, so as we wrap up here where can my listeners stay in touch with what you're doing? Become a rockstar inner circle member or work with your team on investing in income producing assets like real estate.

Tom: Yeah, just rockstarinnercircle. com on that website. Well, our YouTube videos, our podcasts and all the information's on that website. And Justin, I just want to say to you, like, it's an honor and a privilege to be able to do this business and cross paths with people like yourself and what you're doing and the information you're sharing to your community.

Tom: And what you're doing is really valuable to The rest of us. So I just want to say, you know, thank you for what you're putting together and thank you for being a rockstar member because it's like the quality of people that are rockstar members is really kind of something that is very gratifying for Nick and myself.

Tom: So just thank you for supporting us and thank you for you doing this and what you're doing. It really means a lot. You know, I think together as a community of people in the world, we can all lift ourselves up together and what you're doing is a really important piece. So thanks, Justin. 

Justin: I appreciate that, Tom.

Justin: Like, and I, and I just want to say on to you as well, like, one of the most important and impactful things that I've taken away just being a, you know, member in your community is just the level of people and the quality of people that, , are, that I surround myself with and just the level of knowledge and, giving that you guys do, I mean to provide, , that information and, and support to the community.

Justin: So I just. . Thank you so much again, to you and Nick for that. And encourage everyone out there to not only listen to , your life, your terms podcast, or just become more entrenched with what you're doing. So thank you so much. Appreciate this. I could honestly speak to you for hours, but I know I know 

Tom: you got to go.

Justin: So thank you so much for this. 

Tom: Thanks, Justin. Thank you very much.