Cash (Flow) is King

Scott McGillivray and Michael Sarracini teach cash flow through income properties

When it comes to income properties, Scott McGillivray and Michael Sarracini practice what they preach. Two of the real estate industry’s most successful landlords, McGillivray and Sarracini together have had more than 10,000 tenants throughout the United States and Canada. Despite a struggling economy, the team has continued to build long-term wealth through income properties, and they’re teaching would-be investors to do the same.

Forget about flashy flips and big-figure deals — these gurus are focused on time-proven cash flow strategies.

“We don’t sell the thrill with our real estate program, and we don’t like to promise a short-term strategy,” McGillivray says. “We believe it does take hard work. It does take dedication. You can’t tell us that we’re giving people bad advice because we’re not. It’s been going on for thousands of years.”

Together, the pros have owned hundreds of income (or rental) properties. Fittingly, it was a stint as tenants more than a decade ago that gave them their start in real estate.

Subsidized Rent

McGillivray and Sarracini met as university students in Toronto, Canada. Rent was one of their largest expenses and, like many, they struggled to make ends meet. One month, while depositing their rent payment at a local bank, the teller erroneously gave them a slip of paper that detailed the mortgage on the property — instead of their rental deposit slip. When they did the math, they discovered their landlord was charging $900 a month more than the mortgage.

“We started asking a lot of questions,” McGillivray says. Against the advice of their families, the men decided to become their own landlords. They pooled their limited resources and ended up with just enough money to make a small mortgage on a “dumpy house” near the university.

“Everyone told us not to do it but we knew that it would work,” Sarracini says. “So against all advice we ended up buying a piece of real estate.”

McGillivray says they had a lot of people telling them they were crazy.

“And I still think maybe we were,” he says. “But it was probably the best thing we ever did.”

Now, more than a decade later, their combined portfolio includes rental properties in 20 different states and two Canadian provinces. McGillivray is host of several TV shows including “Income Property,” “All-American Handyman” and “All-Canadian Handyman.” Sarracini worked on camera as a project manager on “Income Property” for a time, but now he focuses on the duo’s Lifetime Wealth Academy and Leading Financial Seminar Series.

Buy and Hold

McGillivray and Sarracini are among the select real estate gurus whose portfolio has actually increased in value since the market collapse in 2007. Their secrets? Sticking with each other and with what works for them.

“In our seminar series, we always encourage people to partner up with someone,” Sarracini says. “With partners you can create such a great synergy.  If one plus one equals three then you’ve created a profitable partnership.”

McGillivray agrees.

“Michael and I are real estate partners in 75 percent of all the assets that I own, because working on a team is powerful,” he says.

Together they’ve developed a system for buying, improving and renting income properties — and they’ve stuck with what works. The two started in the trenches, spending summers fixing up the properties on their own, but now have a construction team of more than 45. In all of their years as landlords, they’ve only had to evict one tenant — and even that went pretty well, they say.

“There is risk in anything that you do, but if you can build a system or follow a system that someone else has developed that works, you’ll be a lot better off,” Sarracini says.

The team has dabbled in flips and other quick cash deals but far prefer long-term strategies. In fact, they typically employ a one-for-one strategy — meaning, for every quick-cash deal they complete, they purchase a cash-flow property.

“Too often, investors get stuck in quick cash deals,” Sarracini says. “Have the self-discipline to roll it into your cash-flow properties. It is very difficult for people to sacrifice the good to get the great. Cash flowing properties are where you create real wealth.”

McGillivray says he’d rather be the tortoise than the hare when it comes to real estate.

“We’ll stick with our buy-and-hold strategies,” he says. “Even if the value of our properties goes down we are still getting our cash flow each month.”

Pay It Forward

A major reason McGillivray and Sarracini first got into real estate was to make money. And while they definitely appreciate the value of a dollar, the gurus have also learned the importance of taking time off from work.

“Time is more valuable than any dollar,” Sarracini says. “At the end of the day, the only reason any of us want more money is because we want the advantages money can buy.”

To that end, the team has automated much of their business so that it can run without their 24-hour care. Now, McGillivray has time to vacation with his wife, even if it’s just a short trip to check out real estate. Sarracini likes to travel with his family, too, as well as ride motorbikes and do home improvement.

But both men agree the most rewarding part of their jobs is seeing their real estate students succeed.

“Seeing someone become successful because of what we’ve done for them is better than becoming successful yourself,” Sarracini says.

“As we teach more and more people to become real estate investors, we are building a bigger community,” McGillivray says. “We never abandon. The way we teach and what we teach is a long-term game. We are going to ride this out and come out on top, and the more people we can have together in this community, the more we can help others.”

About Contributor

Lynn Alder

"Never buy a property with a negative cash flow. Negative cash flow means the rents from the property don't cover the payment and the expenses. I learned this the hard...

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