Episode Transcript
[00:00:01] Speaker A: If you're looking for the skills and tools to succeed in real estate investing, you've come to the right place.
This show is about breaking through barriers, breaking through limiting beliefs, and breaking through to the life that you want to live through the power of real estate investing. You're listening to the Breakthrough Real Estate Investing Podcast. And now here are your hosts, Rob Brake and Quinton d'. Souza.
[00:00:29] Speaker B: Welcome back, everybody. Thanks for joining us again. Really appreciate you coming out every single time and listening to all the great guests that we have on the show. And as usual, Quentin d' Souza is there with me. How are you today, Quentin?
[00:00:42] Speaker C: Doing well. How about yourself, Rob?
[00:00:43] Speaker B: Nice. You're drinking that expensive water, huh? Yeah, I just drink out of the.
[00:00:47] Speaker C: Tap, so I'm, I like bubbly water.
[00:00:50] Speaker B: I, I don't Glad they blurred that out because we don't have any sponsors from them or anything like that.
[00:00:56] Speaker C: So you know what? I, I, I don't drink like pop or like soda pop, Coke or even diet anything. I just use the bubbly water. Gives me the same feeling. But, you know, it's, it's better for me and because like I found, because I lost a lot of weight, right, and one of the things that I had to do is just get off of sugar, all types of sugar, even like sweet drinks and things like that.
[00:01:25] Speaker B: And it's especially sweet drinks. Yeah, yeah, we've, we've kept that, those things away from our kids for the most part. Every once in a while, like once a year, something like that, we'll give them something and they don't even really want it. So I don't even know why I do, but, but other than that, what's going on? What's new with you?
[00:01:45] Speaker C: Working on some refinances. I've got, I got 23 unit that I'm refinancing. We bought at 4.4.4 and we just got an appraisal back at 5.9 and we're, we're working on MLI select on, on this just on the, we got points, tier 3 points on the MLI select. So we should, we're looking at a new mortgage of about 5.4 million, which will be really nice if we can get that all tied up.
And of course CMHC raises their fees.
When does it. Well, today as we're recording, July 14th and this is when the, the new fees come in.
So the, you know, just, I, we got it in last week, so I'm hoping to get it in before the, the fee increase and yeah, so I've got that and another three refinances that, that we're working on right now. So hopefully we'll get, I don't know, quite a bit back in across the portfolio and yeah, just, just keeping working on repositioning and by, you know, getting things done. Getting ready for another. I'm doing a hike at the end. Well, it was, that's actually a climb of Mount Mount Blanc the end of August so that it'll be more alpinism and it'll be a little, a lot more technical than I'm. I'm used to. So I'm getting ready for that as well. How about you, Rob? What are you, what are you up to?
[00:03:23] Speaker B: Not a whole lot here. Just enjoying the weather. We've gotten a couple of weeks of nice summer weather here without any rain, so that's been pretty cool.
And you know as well, just working on tweaking the hotel, the ins and outs of getting that thing up and running. And you know, I've had just like little technical issues with booking.com and, and other things that we've had to straighten out lately. So.
So that.
[00:03:50] Speaker C: How's it been like, like vacancy wise? Like have you, have you been able to keep it full?
[00:03:56] Speaker B: No, not really.
So this month has been great. But again, I've had just a bunch of problems that I had to deal with. Like we did a bunch of Facebook advertising which worked really, really well until I noticed that. I don't know if I mentioned this before on the show or not, but you know, I don't necessarily pay too close of attention to my bank accounts as I should. And so I got on there and started to see that, you know, over the past month or whatever Facebook was all of a sudden, you know, they were taking 200 and 300 and 500 out every single day. So it ended up that there was a bunch of money before I caught it like you know, missing. So then I had to cancel my cards and cancel all the advertising and everything like that and, and I figured out a new way to do it because it's very effective. Facebook marketing is very, very effective as far as that goes. So. So it went kind of dead for a couple of months. But now with booking.com fixed and, and with that fixed, things are, things are going well again.
[00:04:58] Speaker C: Awesome. So what do you, what are you looking at? Like what's your goal for the, for the year to kind of have as a, as a number or like what kind of KPI do you look at on a short term rental as or like a Hotel rental.
[00:05:15] Speaker B: As you know what I would say, it's really hard for me to do something like that because we essentially, we started this place, right. Like before that it was. It was just run by a guy who, if somebody walked in off the street by chance, then he would rent to them. So we're like, this is basically the first year of operation and we've only been open since the end of October.
So, you know, I don't have super high expectations for it in the first year. I mean, it's going actually well. It's going pretty well.
[00:05:48] Speaker C: Are you profitable or not profitable?
[00:05:50] Speaker A: I.
[00:05:51] Speaker B: Probably not. Not so far. I mean, because the thing is, everything slows down towards this time of year. Right.
So if you ask me at the year end, I probably say yeah, but so far I don't think it. It has been.
[00:06:05] Speaker C: Right. Well, we'll ask.
[00:06:08] Speaker B: Yeah, I gotta put the numbers all together later today, actually, so I'll have a better idea after I do that.
Let's.
[00:06:14] Speaker C: Let's revisit it and, and we can. Because I think that's learning for a lot of people too, right? It's. It's something different. So it's. It's useful.
[00:06:26] Speaker B: Okay, everyone listening should go over to Breakthrough reipodcast, ca listen to all the past episodes, get in touch with all the. The past guests that we've had on. And so all their contact info is in there in the show notes. And most of them want people, with the exception of Michael Dominguez, most of them want you to reach out to them for one reason or another.
So, you know, go over there, get the contact info, reach out, see if you can be of service to some of these people as well, not just. Not just take up their time and be asking them for this and that and advice and whatever. Maybe you can be helpful to them too in some way. But regardless, maybe you can join their courses or whatever they've got going on as well, go over to itunes and rate and review the show. It really helps. We've gotten quite a few, like, actually most of the people that. That are listening, I would say have went over there and. And left a review. But if you haven't, please go over and do it. It only takes a couple minutes and it really helps us out.
And I guess that's it for housekeeping. Let's bring on our guests.
[00:07:29] Speaker C: Yeah. So I've got a little bit about Darren. Darren with over 20 years of experience in real estate investing, 250 plus doors, he's passionate about sharing his knowledge as an investor. Trainer and coach. Currently manages portfolio value just over 30 million. Traveled across North America educating audiences on the subject of real estate investing and financial independence.
He's been featured in as an on air expert in on the goods in CBC, CityLine, CTV, City TV. He's also behind the scenes contractor on Save My Renault, HGTV and Game of Homes on the W Network.
So without further.
[00:08:18] Speaker B: Yeah, yeah. Darren, thanks for joining us.
[00:08:21] Speaker A: Well, thanks for having me on. I appreciate it.
[00:08:24] Speaker C: So he's a, he's, he's a television star, so that means he's better looking than, you know, Rob and I, because, you know, we like the audio. So it's one of those things. Sorry, I, I had to throw that in.
[00:08:36] Speaker B: Rob's. I appreciate you. Yeah, I appreciate you lumping me. And that's why, that's why most people just listen to the audio of this.
[00:08:46] Speaker C: Show, you know, that's why we're friends, Rob. And that's why I've got this little, you know, all of you here. It always reminds me of you.
[00:08:54] Speaker B: Yeah, well, it would.
Darren. Yeah. Thanks for joining us. So why don't you just tell us a little bit about how you got started. I know you've been in for real estate for a while now, but let's go back and talk about where, how you, how you came up.
[00:09:09] Speaker A: Yeah, it's a, it's a bit of a unique story for sure. I think I started back in 2002. I don't know that I was intentional about being a real estate investor, but the previous year I'd worked over in Japan. I worked, I used to, my, I worked in musical theater, theater for 15 years professionally. So that was my job before I was, before I was a full time real estate investor. But while I was over in Japan, I was able to save up some money and, and I came back to Canada at the end of that year and I was like, well, what do I do with this money that I've got? It wasn't a lot, but it was, well, it seemed like a lot of the time. It's all relative. Right. And yeah, I thought, well, I should invest in real estate. I should buy a house. I've heard that's a good investment. So I bought a property and I plan to rent it out for, you know, the foreseeable future. The first tenant I put in I had to evict, as probably many of us have experienced over the, you know, the years when we don't really know what we're doing.
The tenant after that was great. I rented to A corporation for four years, and they took care of their employees going in and out. And the property almost doubled in value in those four years. And I sold it and I bought three properties, you know, in a short amount of time after that. And so within five years I had three properties in the portfolio. And I was like, hey, this real estate thing is pretty cool.
And I think that's when I started getting a little bit more formally educated and. And then I kind of went through a few different paths and, you know, got into, specifically into development probably about five years ago. And I was doing a lot of smaller, sort of like adding additional units, like doing duplex conversions and doing a couple purpose built duplexes and triplexes.
And then when I kind of figured out the nuances of just going a little bit bigger, not too big, but just kind of being in this missing middle space on the development side, it kind of brought together two favorite things, which was definitely being a real estate investor, but also being on the construction side of things and seeing properties coming out of the ground. So that's what I've been doing, like I say, almost exclusively for the last five years. And everything else that I did prior to that, I kind of did it all. I tried flips and burrs and all that kind of different stuff. But I am in the development space now and I absolutely love it. So that's a little bit about sort of my journey on a, on a condensed level, for sure.
[00:11:23] Speaker B: I wanted to ask you.
[00:11:24] Speaker C: Yeah.
[00:11:25] Speaker B: Because most people, well, you just glazed right by it because now it doesn't seem like anything. But you mentioned that you evicted your very first tenant. And like, that's the kind of stuff that scares the heck out of a lot of people who are thinking about getting into real estate investing. So can you, can you tell us about that and how you got through it and you know, and didn't quit and went on to buy more and stay in the game?
[00:11:50] Speaker A: Well, I'll tell you the contrast to that, which is my parents. My parents were so close to, you know, being successful investors themselves.
They had a classic scenario where they bought a rental property and had a not so great first tenant experience.
They tried to flip a property and again they, they kind of broke even. But in my experience, in anything that I've done for the first time, it's never a huge success in my experience. Maybe you guys are different, but the first or the second or the third or the fourth sometimes are the ones you really cut your teeth on.
Then to me, you create systems after that and that's when you start to get really good. But in that first time of just, you know, getting through that first experience and, and having to evict that tenant, what I learned a couple things. I learned that, you know, my mom should not be my property manager. Right. That's the first thing that I learned. Not that she did anything wrong, it's just that, you know, she was seeing this guy. On paper he looked pretty good, but, you know, didn't really have any systems in place to vet him or anything like that to, to really figure out if he was actually a good tenant or not.
And I think the experience followed that was, was so in such contrast to the, you know, the eviction, then having a tenant for four years with basically no issues. The, the property management company that was dealing with the, the actual corporation that was renting from me, they handled everything. So that was very passive. So, right. You get this like these two contrasting experiences of like, oh crap, I gotta evict this person. And then you've got this hands off investment that kind of just keeps growing in value for four years. You don't really have to do anything. So that was, you know, if it had only been those like the tenant eviction and then another tough ten tough tenant, I probably would have been like my parents and said this real estate thing is not for me. Right. And got out.
But I think I had those two contrasting experiences and that's what kind of kept me going in the space.
[00:13:37] Speaker C: Very cool. So, you know, you, you mentioned the, the term missing middle.
And I think that it's becoming more and more term of what people, people are starting to understand what it means, but maybe you can, you know, explaining a little bit more and you know, why you feel that it's important for us to focus on in Canada and how it kind of maybe solves problems or, or a potential solution.
[00:14:10] Speaker A: Yeah, well, I, for me, you know, the missing middle is, is defined as kind of everything between that single family dwelling and, and the, and the high rise, you know, condo development.
I, I, I, I even define it, even me. It's, it's really around that 10 units or less. And there's a very specific reason why it's 10 units, especially in Ontario. But for me it's kind of taking that single family lot. We, we have a housing crisis and we have a housing shortage in Canada, but we don't, there's one thing we don't have and that's a lack of space.
We could continue to expand and expand and expand, but that's expensive for municipalities, right? They got to put in new sewers, new hydro, new water lines, new schools, new fire stations, all that stuff. And what municipalities are learning is like, look, we've got all these services already put into place. We spent the money on the infrastructure. The, the challenge is we've got two people living in a 4,000 square foot house on a 6,000 square foot lot. If you took that to any other country that this sort of has created density in their systems, there's no such thing as single family homes. Right? And, and the zoning for so long, that's all it ever allowed, right? You couldn't create more density because the zoning bylaws didn't allow it. It. But now municipalities are getting smart and they're getting, they're getting to the point where they're saying, look, we don't want to expand anymore. We want to use the existing infrastructure because it's, it's compatible with having more density on these lots. But instead of a single family dwelling there, we want a four plex or we want a five plex or even an eight or a ten plex where there used to be a single family dwelling. It still looks and feels like a single family dwelling, but it's got 12 or 14 occupants in that instead of two. Right. And so that's where I think the missing middle is, is really taking off right now. And I think it's one of the only viable strategies in Canada that, that makes sense in the development space. You can see all the big developers right now have put their pencils down on everything because nobody's buying condos. But when you're purpose built for the purpose of renting out those properties, you can kind of forecast what your number is going to look like regardless of whether there's an end sale or not. And so I think that's why I love this, this, this space. And for me, the missing middle, like I say, is specifically for me it's like 10 units and under, but most people would define it as like a six story and under building that's anywhere between, you know, four and 40 units kind of thing. So that's kind of where that missing middle comes into play.
[00:16:42] Speaker C: That's, it's interesting. I'm just trying to like, what, what.
When you say that this is probably the, the, the biggest opportunity for an investor right now.
What, like how are you underwriting that so that the, the numbers make sense in order to, let's say, densify an existing single family lot or you know, with the construction costs? Like how do you how are you underwriting that so that the numbers make sense?
[00:17:16] Speaker A: Yeah, well, I think, you know, there's, there's a couple of things. One, we were kind of talking off air, you guys were talking a little bit about, you know, the, the, the refinances you're working on with MLI select, we use the same program, it's just that we use it for new construction. Right. So new construction, MLI select, we can get up to 95% loan to cost, right? That doesn't mean we're getting up to 95% loan to value. So I could be 90. So let's, let's use some simple numbers. I could have a, I could have a $1 million project, right, that it cost me a million dollars to build. Well, MLI select says if I can qualify for it, if there's enough revenue in the property, I can get a loan for $950,000. I only need to leave 5% in the transaction. So $50,000 is technically only the, the only cash I need. Now, could that Property be worth $2 million? Absolutely. Could I be sitting on $1 million of equity if I can do this properly when I'm done? Absolutely. So I think that's where there's a, there's a great opportunity.
The, the, you know, and that's, that's where I'm seeing some of these projects pencil out. I am in Toronto, which is the most expensive market in the country besides Vancouver. So for me, my land cost is really high in relation to some of the other municipalities where I'm actually seeing the numbers make sense a lot more. It's just that I'm a Toronto, like, I'm a big believer in the Toronto rent real estate market. And I've. The most money I've ever made in my real estate investing career has been in Toronto. Right. And so if you can make it work in Toronto, then I think that that's where it becomes, you know, becomes viable. And a lot of people were like, oh, you can't make money in Toronto. And nothing makes sense. I'm like, well, yeah, you can't make money on a single family dwelling. You can't make money on a condo. You can't even make money on a triplex.
But if you can put eight or 10 units on, on a lot, there used to be a single family dwelling. And especially when you're purchasing at today's rates, today's market rates for, for resale, there's absolutely money to be made in, is just to give you some rough numbers, you Know, we basically buy land for about $1.5 million.
We'll put anywhere from eight to 10 units on that property.
So we're, you know, two million dollar construction costs and probably another million dollars in soft costs including development charges and all the things the cities love to, to hit us with. So we're in for about $4.5 million. Right, but that's our loan value essentially. Our loan value is right around the same amount of money and our valuations on our buildings are $6 million when we're done because it's a business like they're just looking at the net operating income and using the current cap rates. And so there's, there's a, there's a model there that makes sense but it's taken us a little while to get here for sure.
[00:19:57] Speaker C: So yeah, I know that in Scarborough they've started to do as of right, eight units and things like that. So it kind of, that, that's going to help the model just because it gives you more options than you would have had before instead of having to, to rezone. But Mike, what's the size of these units?
If you're doing, let's say you're doing eight units and it costs you 3 million 2 plus 1.
What's this, what's the size of your units?
[00:20:28] Speaker A: It depends on our lot size. So if we, we have some properties that are mostly one bedroom and some two and three bedroom mix.
We've got one of our buildings that we're just wrapping up now is, is six large, two bedrooms, 850 square feet on average. And then we've got four one bedroom bachelors in, in the basement. So that's our 10 unit building.
So that's kind of a mix. Our newest model is essentially we kind of have a mix of units. We have some small, four small one bedroom apartments in the basement. Again the main floor units are two bedrooms so they're about 750 square feet. And then we've got two units that are two story, four bedroom, three bathroom. So that's a nice little F family unit that you know, we've got on, on those properties.
So we've, we've tried a couple different models but this, this new eight plex that we've got designed is probably the most efficient use of space on the, on the land.
And it's also the most efficient from a build perspective because we've figured out the nuances to you know, if we don't have to go with shared entrances, we don't need a fire alarm we don't need a common stairwell and stuff like that. But we've learned that through this process of being able to cut our construction costs and timeline as well. So yeah, there's all kinds of different ways you can do it. But you know, the Alberta model is like they basically do four townhouses with basement apartments and they've got eight units and they go to, you know, MLI select and do an eight unit building on a, on a single family lot. So there's, there's a couple different ways you can do it, but it kind of works in a bunch of municipalities across the country.
[00:22:08] Speaker C: But I mean, MLI select changed their rules because of some of the things that was happening in Alberta when, and this is just because couple, I know a couple of developers and realtors out there where they were finding that the rents that they were actually getting after they've done the build is lower than the actual rents that were underwritten. And that's also partly why MLI select has changed their underwriting criteria and the amount of funds necessary in order to build and then, you know, be able to, to pull out funds. Yeah, so the, the, I mean, that's always the challenge in those, those type of markets. Are you finding that is the same thing that's happening when you're considering your underwriting on Toronto? Because it's a very different market. For sure.
Yeah, I think that there's some challenges, I think, when you're underwriting for rents in the current environment. Right, for sure.
[00:23:15] Speaker A: Yeah. We, we ran up against that, you know, with some of our past projects where, you know, we were con, continually seeing these large rent increases on a year over year basis in a city like Toronto.
But luckily we were conservatively underwriting at the time and we just thought, hey, let's use today's rents instead of forecasting two years in advance of what those rents could look like. And so we used them on the pro formas and, and they've penciled out no problem.
But yeah, some people were a little more aggressive in their, in their, you know, estimations. And, and also too like, it's important to say this because I think people hear stuff like this and they go, oh, 95 loan to cost. Like, sign me up, I only need 5% capital. No, that's not how it works. And anybody that tells you that that's how it works is lying.
You can get to 95% loan to cost, but if you think you only need 5% capital to pull off a project like this, it's not the case. Like the banks are asking us and we use CMHC for construction financing too, but they really want to see about 25 to 30% of the project value that you've got in liquid capital to make this thing happen. If you get to the end of it and you, you know, like all of your rents hit and everything's like what you said it was going to be, and your construction costs are maintained, then yes, if you're, if you can debt service it, you can get to 95% loan to cost, but you'll need a lot more than that to take it through the construction process for sure.
[00:24:37] Speaker C: Yeah. Interesting. Sorry, go ahead, Rob. I'm dominating.
[00:24:43] Speaker B: Well, I thought it was interesting because you've honed in and you found certain things that work better. For example, you mentioned not having to have a common entrance because you've managed to get, you know, their own separate entrances for what is it, eight units. Yeah, four downstairs, two on the main floor, and then two four bedroom units side by side.
[00:25:06] Speaker A: Yeah. So it's kind of like a stacked town on, on top of a bunch of apartments. Yeah.
[00:25:11] Speaker B: So that's interesting. So, so what kind of hurdles does that get you around?
[00:25:17] Speaker A: So the, the current law, so it depends on the province. So in B.C. they just passed a rule that says and you can have one common stairwell that, that, that basically accesses all units. And they had, they, they added some provisions. Right. So they were like, it needs to be sprinklered.
The staircase needs to be more of like a public stairwell. Like so width of the stairs and, and stuff like that. Ontario hasn't adopted that yet. And so when we were doing our buildings, if we had any kind of common stairwell, well then every unit needs a secondary means of exit. And not like, I'm not talking about an egress window. That's, that's, that's a totally different thing. It actually needs a second way for people to walk out grade. So in a small building, like what we're building, like 6,7000 square feet, you put two stairwells in or you put a scissor staircase in these buildings and 15 to 20% of your building is stairwell. And so it's just, that's not leasable space. Right. So you're just, the design is not super efficient.
Now some of our buildings, like, and we have a project in Kitchener, the lot is wider and it makes sense to do a scissors staircase there. So we're doing that. It's an efficient use of the space. But got, you know, you got these tight like spaces in Toronto, you got 30 foot lot and you're trying to fit a scissor staircase in there. It just doesn't make any sense. And so yeah, coming up with some of these alternative ways to get everybody their own dedicated entrance. And if there's no shared space, if it's, the rule is if it's four units or more sharing a common entrance, then you need a fire alarm. And a fire alarm might not seem like a big deal, but it's kind of like an elevator. Right? Like as soon as you put one in, you got to maintain it, you got to do all this stuff. And the fire alarm is, is just, you know, challenging element. It's only a fifty thousand dollar line item on your, on your pro forma, which doesn't seem like a lot in the two million dollar budget if it's the ongoing maintenance of it and the challenge of having a system like that in your building. So don't get me wrong, you still need smoke detectors and CO2 and all that kind of stuff. You just don't need a fire alarm, which is different. Right. So even just those couple things, it's like you get a better design, you get a much lower cost to build and it's, and it's a lot faster. Right. To be able to get those projects out of the ground.
[00:27:23] Speaker B: And you still need a second means of egress.
[00:27:26] Speaker A: Not if everyone has their own dedicated entrance. So that's a weird rule. If, if you have a, if it's just your unit that is serviced by that entrance or exit, you don't need a secondary means of exit.
[00:27:36] Speaker B: Okay.
[00:27:37] Speaker A: Yeah.
[00:27:40] Speaker B: So what are some of the zoning hurdles that you've come across and been able to, I guess, get around?
[00:27:47] Speaker A: Well, the nice thing about our model and we think our competitive advantage is speed to market. So I, I talk to big developers all like, why don't you go bigger? I'm like, because the moment we go over 10 units. And this is why I was saying, in Ontario, they passed a rule a few years ago that said if you're 10 units and under, you avoid what's called site plan approval. And site plan approval can be in some municipalities, can be a six to nine month process. In my experience in Toronto, it's minimum 24 months. And the city pokes their nose in every part of your development. They're like, okay, well what, where's the trash going to be stored? What's the building going to look like? We want brick, we want this, we want that. And they have so much say in your development.
So when they passed Bill 23 a few years ago. They said 10 units and under is a void from site plan approval. So we need a minor variance in some cases. So we might have to go to the. What's called the Committee of adjustments, and that takes about three to four months. So that's a relatively quick process. And then we go straight to permit. Right. So we don't get involved with the planning department at all. They don't really have a say in what our building looks like or feels like.
It has to meet the building code and has to go through the minor variance process, and that's it. So we're getting to the point now where speed to market is our competitive advantage. If we're adding eight to 10 units at a time, if we do it, everything's lined up. We can have a. We can be acquiring a building and 18 months later, we can be moving tenants in.
Right now we're at about 24 months, but we're creating efficiencies on every single build that we do. And so that's really our competitive advantage. I can talk to developers, and I see the projects all the time around my neighborhood.
I know that if you're going like six stories or whatever that building looks like, and it's 50 or 60 units, that project has taken about 10 years to get to that point. Right. And so when you think about adding 60 units over 10 years, that's six units a year. Right. And we're doing that. We can, we can scale this model out, no problem, by doing what we're doing, because we're just a lot faster to get into the ground and get completed. Right. And then when the rules change, when the market changes, you're not. Not into these fluctuations of, like you've projected 10 years ago, what the market's going to look like. That's a hard forecast to make. Right?
[00:29:56] Speaker B: Yeah.
[00:29:56] Speaker A: And so getting around those zoning changes and those, those planning departments is huge for us. And. And we try to avoid any kind of zoning change, any kind of interaction with the planning departments. We really just want to get a minor variance. And in some cases, we can do what's called as of. Right. Which means we don't need a minor variance at all, and we can just build exactly what's allowed by the. By the zoning bylaw.
[00:30:20] Speaker C: So typically, it's interesting, too, because the Scarborough change, with up to eight units.
[00:30:27] Speaker A: It's up to six units.
[00:30:28] Speaker C: Yeah, up to six units. Okay.
[00:30:30] Speaker A: Yeah. And they just adapted it for another 13 wards in Toronto as well. So it's, it's not just Scarborough anymore. Yeah.
[00:30:36] Speaker C: Okay, so with, with that, how easy is it for you to go up to, to, to take that six up to eight?
[00:30:45] Speaker A: Well, where I am in the, I, I work in the core of the city and, and the zoning in the core of the city has no unit restriction. So there isn't actually a unit count that they, that we hit up against. We could do 50 units if we could fit it onto our lot, which it doesn't make a whole lot of sense, but we stay under 10 for, for that specific reason. So we don't need a minor variance for the unit count. The thing about Scarborough and Etobicoke, for those of you that know Toronto, is they're, they were originally designed as like, like a lot bigger lots and they wanted single family dwellings on them. So for those neighborhoods, the zoning is different than the core of the city. So in those neighborhoods they only used to be able to go up to four units. Well, now they're saying, okay, we can go to six as of Right. But where I am in the core of the city, there's no restriction on unit count. So to go to 8 or 10 is no problem. But we usually need a minor variance for things like, you know, floor space index or sometimes we need setback requirements or whatever that is, depending on the lot. But for the most part we've got our variances maybe down to two or three on each application. And the planning department, you know, looks at our applications for sure and the committee is usually in favor of it, especially if we've, we've, we have 100% success rate at committee of adjustments so far.
And part of that is because we're going in and telling them we're building purpose built housing. Right. And so as opposed to the big bad developer who's just looking to profit from condo sales, we're kind of going in and saying, hey, we're doing something a little bit different. We're, we're building rentals and we're building them in neighborhoods that, that, you know, that need them. We're building them close to transit.
So we're taking into consideration all those things. And, and yeah, we've got a pretty good track record at committee.
[00:32:28] Speaker B: Oh, that's interesting because I would have assumed also that the variance was for additional units.
That's what I would have assumed.
[00:32:37] Speaker A: Yeah, that's actually a zoning change. If you could try to go from six units, that's only allowed and you try to go to eight units, that's actually, you got to go through the zoning change. Process, which is two or three year process again. So we, we only go in for as of right. Applications where the units are already allowed. Now what I'm hoping they're going to do in Scarborough and all these other areas is relax some of the bylaws as well so that we don't even need a minor variance. Like it's okay to approve six units as of Right. But if you still need a variance for like let's say a setback or front yard setback or there's too much density on the lot, you kind of defeat the purpose of it. The idea with this was to get, get things to go straight to permit and bypass, you know, the, the planning departments altogether. And that was what was going to fuel more housing being built.
[00:33:24] Speaker B: Oh, that's awesome. That's very interesting and you know a lot about it, so it's good to hear all this stuff.
But you know, that being said, there's not many people, I don't think. Well, maybe, maybe there's an opportunity for people to invest with you and get into that kind of thing. But it's very difficult I think, and super intimidating for people to go into what you're doing, you know, by themselves.
[00:33:52] Speaker A: It's.
Yeah, I, I think that you're talking about. So depending on the municipality too, I think.
[00:33:57] Speaker B: Right.
[00:33:58] Speaker A: Like I have some students that are doing projects in, in Alberta and, and they're, you know, they're all in for 300, 400K. I mean for some people that seems like a lot of money for our projects in Toronto that would be, you know, that would be one, one or two development charges, you know. So yeah, we're looking at our average project. We raise anywhere from a million to a million and a half dollars to make it happen. So for a lot of people that would be like, hey, I don't have access to that kind of capital.
You know, I don't have the expertise to kind of pull off a transaction like this. But, but it's not necessarily like you said, you don't have to pick the most expensive municipality in the country. You could go to other municip, little bit more affordable. So I've got students in Barry that are buying land for 700k versus you know, I'm paying double here in Toronto. And so there's other markets that it's more affordable. But yeah, you have to have a little bit of access to capital to make this happen. Do you need to leave all that capital in the deal? No, not if you can make it. If you can make it work, but it's, it's, I think sometimes not for the faint of heart. For sure. Development is tricky. There's always challenges that come up, up.
But I would say that about almost every real estate investing strategy. I think if you're, if you've been in it long enough, you know there's going to be challenges along the way. No matter what strategy you're doing.
[00:35:18] Speaker B: Well, decide to start any business and tell me there's not going to be challenges.
[00:35:21] Speaker A: Exactly.
[00:35:21] Speaker B: You know, there always is.
You've got this Groundbreaker program. Do you want to tell us about that?
[00:35:28] Speaker A: It's pretty simple, you know, I mean I just, there was a need in the marketplace. I think everybody and their dog was teaching, you know, the Burr strategy and how to flip, how to wholesale and do all this kind of stuff. No one was teaching development and no one is teaching development, especially in this missing middle space.
So, you know, I've got a background and I've been teaching for a few different organizations over the years, real estate investing. So yeah, I created Groundbreaker. It's, that's I teach people basically what I do. So if they want to learn how to do exactly what I do, I guide them through the process. We do weekly coaching calls and they can jump on and ask me any questions. And then of course it's, it's introducing them to the contacts that I've made in the this space over the last five years. Because the consultants, your architects and engineers and planners and construction managers and everybody else, they're going to make or break your project. Right. As a developer, you actually don't need to be that involved in the day to day operation if you've got a really strong team. So that's kind of what I, I teach people is just to get the right team and, and you know, get the right folks that are working with you and your process should be a little smoother for sure.
[00:36:32] Speaker B: And then what would you say is like one of the bigger mistakes? You'll see new people doing that you're gonna try to help them avoid with your program.
[00:36:39] Speaker A: The biggest thing is just not knowing what they don't know. So just, you know, even underestimating the amount of capital they're gonna need. Like I say, they talk to a mortgage broker and the mortgage bro. No, no, no disrespect to mortgage broker. There's a lot of great mortgage brokers out there. But if somebody's not familiar with this space and they're like, hey, I can get you an approval and get you 95 loan to cost. And you only need 5% down. And they're running their whole full pro forma on this 5% capital. And then it comes time to do the deal. And CMHC is like, well, yeah, you can get 95 loan to cost eventually, but we need 25. Because you've never done a construction project like, they're, they're not gonna approve you for, you know, something you've never done before. Even when I go and switch up my model a little bit, we were looking at a 31 unit building versus a 10 unit building. And even CMHC was like, you don't have any experience of building a 31 unit. I've done, I've done multiple of these 10 units, but they're like, this is a completely different thing. So then they wanted bonding and they wanted all these different things that were going to cost a lot more money.
So if you, if you don't have that experience, you need somebody on your team that does. And then CMHC might relax that a little bit. But, you know, in terms of, like, most people going into their first project, they grossly underestimate what they need in terms of experience if they want to do it through cmhc, and they, they grossly underestimate what they need in capital.
[00:37:57] Speaker C: Capital.
[00:37:59] Speaker B: Okay.
Quinton, did you have something to say? I think I cut you off there a minute ago.
[00:38:06] Speaker C: I was just curious about the lot size that you're dealing with in Toronto, because you mentioned the difference in sizes in Scarborough. And like, I've, I've got my own.
Like, I've got a duplex that I've, I've re. I actually split the lot and I'm gonna put.
[00:38:25] Speaker A: Put.
[00:38:25] Speaker C: Able to put three on either side. But I looked at the cost of development and how much I would have to leave into the project afterwards, and it just didn't make sense for me to proceed.
[00:38:38] Speaker A: Three is tough. Barely makes sense. Even six.
[00:38:42] Speaker C: Yeah, six. Yeah. So, like, at six, I, I would just like, I'm going to put a million in and I'm going to refinance and probably leave like, you know, 700 in. And I'm just kind of like, well, what's the point right now? Cash flows like 1500amonth. I'd rather just hold on to it and, you know, solid if I have to.
[00:39:01] Speaker A: Yeah, our average lot size. Yeah, our average lot size is probably 30ft on average. 30 by 100 is kind of the minimum. Wow. 30 by 120 is a little bit better. 30 by 150 is even better. But yeah, we're doing these on 30 foot lots for sure. So in Scarborough, a lot of lots are 50ft, 50 by 150.
So you got a lot more, a lot more space. But in the core, yeah, we can do it on as little as like 25ft, but it gets tight. Yeah.
[00:39:33] Speaker B: Wow.
[00:39:34] Speaker C: That's. How high are you going to be able to get?
[00:39:36] Speaker A: Three story? Yeah, we go one story below grade.
[00:39:39] Speaker C: And three story, like 400 square feet. Like how the heck do you fit like a four bedroom, like four units in a basement at 30 by 100?
[00:39:50] Speaker A: Well, you know, we're pushing the boundaries. This is where we go for minor variants like we, we, you know, our footprints are usually around 1200-1500 square foot. That's our footprint. Right. So if you think about 1500 square feet divided by four units, you know those, those basement units are 375 to 400 square feet. Yeah, they're not, they're not big, but they're the affordable ones. Right. They're. The city actually likes that. They like some units that are smaller and on the more affordable side. And then you got the two bedroom units, you're stepping up in terms of two bed, two bathroom, you know, and then you've got the four bedroom units, which is like they want some family stuff too because there's not a lot of that on the market. Right. Other than, you know, you're renting a house, but people don't have $4,500 to rent an entire house. You know, our rents are probably, you know, 1/2 of that at 28 or $3,000. Right. And so that's where the city likes that kind of stock, where you've got a mix of different kind of units, especially in these neighborhoods that are close to transit at.
[00:40:53] Speaker B: So the four bedrooms are each 1500 square feet, roughly.
[00:40:57] Speaker A: Yeah.
[00:40:59] Speaker B: Okay.
You're also doing projects in Costa Rica, right?
[00:41:04] Speaker A: Yeah, yeah.
[00:41:05] Speaker B: Tell us about that.
[00:41:06] Speaker A: Well, a project.
[00:41:08] Speaker B: A project. Okay.
[00:41:09] Speaker A: Yeah.
[00:41:09] Speaker B: You've completed one though, haven't you?
[00:41:12] Speaker A: No, I have not. No. I bought, I bought a couple a few years ago and then we ended up just selling the land.
[00:41:19] Speaker B: Okay.
[00:41:19] Speaker A: In retrospect, in Playa Flamingo, in retrospect, you know, know, now knowing what I know now, we, we were, the, the partners I had on it weren't exactly clear on, on the process in Costa Rica. And so, yeah, we just got our permits for. We're doing six sort of semi luxury villas in Nosara.
They're, they're large, three and four bedrooms.
Oh, wow. About 200 meters from the beach. So it's a small condo development basically and then we will, will clothes and, and use them as short term rentals and, and yeah, looking forward to that project. We're just starting the prep of the land now and now that we've got permits and, and everything and, and working on our financing right now for that.
[00:42:08] Speaker B: So yeah, that's super cool. So you're getting financing?
[00:42:12] Speaker A: We are, yeah we are.
[00:42:13] Speaker B: That's tricky, right?
[00:42:14] Speaker A: It is, yeah. It's not, it's not the easiest thing to do and, and you know we take it for granted I think in Canada, in the U.S. how easy it is to get financing for our projects.
But yeah, in Costa Rica it's a little more challenging for sure. But we're, we're managing they, there are some new lenders in the space for sure. There's some new lenders on the residential side, there's some new lenders on the commercial side and so yeah, we're looking at all those options and I think we've got one worked out that that's going to be going to make sense for sure.
[00:42:43] Speaker B: Okay. Very, very cool. Can, do you have any place where people can go learn about that yet or.
[00:42:49] Speaker A: No, my website has everything pretty much which is, is just my name darrenvoros.com it's got all of our projects on there and what we're working on. It's also got access to my, my courses and anything else that I do. So that's the best place to probably to connect with me and, and find out more about what we're up to.
[00:43:07] Speaker B: Darren Voros D A R R E N V o r o s.com and it'll be in the show notes too guys. So if you didn't catch that and write it down then just go over to the show notes and you can get the link there.
Oh man, I really appreciate you coming on sharing all this stuff.
[00:43:27] Speaker A: Yeah, it's great, great to be here. Thank you.
[00:43:30] Speaker C: Yeah, that was good. I, I, you know, I have lots of other questions but.
[00:43:35] Speaker B: Well no, I mean we're not out of time. I mean I just, we, we'll have.
[00:43:39] Speaker C: To, we'd have to just have you back. I think that's probably.
[00:43:42] Speaker B: There you go. That might be good a better way.
[00:43:45] Speaker C: Of doing it but I always have like, because I'm, I'm always interested in, in the space of development.
Like just honestly I've, I, I've been doing this for a very long time and dealing with the city sucks and if you, if you can deal with the City, like. Like, it's amazing. Good on you. But, like, I. I do not have the patience for. For it anymore. And just the type of people that are in the city and that you have who.
I'm sure there are good people there, but. And there's. And there's so many people that I. I know that have gone into development, and they've. They've basically told me, quinton, you're so lucky that you never went down that path.
[00:44:33] Speaker B: But even just doing what you were doing, Quentin, like, we dealt with the city all the time.
[00:44:39] Speaker C: Yeah, doing the duplex conversion's fine, but this is like, this is a whole new.
[00:44:44] Speaker B: But even that, like, that can be extremely frustrating.
[00:44:49] Speaker A: It's actually not that different from a duplex. They've made it that it's almost a similar process. Because I think when you're talking about development with some people, like, they are talking about these larger projects that have to go through site plan approval or go through a zoning change, that's where you lose me. I'm like, I'm out. I have no interest in it. I do not also like dealing with the cities, but when you bring them in at very limited times through your process, it's still frustrating, for sure. We have a project going to committee on Hamilton in Hamilton on Thursday that I'm almost 90% sure is going to get declined. And then we're going to have to appeal to the province. But that's one municipality out of, like, a few that we've worked in that that's been sort of like, you know, anti development. Which is funny, because Hamilton needs more, you know, needs better housing.
But, hey, if they want to choose to do that, then that's their prerogative. The one thing that I am seeing that's really changing the game a little bit is. Is at the. At the provincial level and at the federal level, they're providing incentives to municipalities to make these changes. And if they don't make the changes, they don't get federal and provincial funding. That's the only reason why this stuff is happening on some scales, right? So because the municipalities are not going to get funding from the. From the provincial government and from the federal government, unless they start implementing these changes, then that's what's really pushing the envelope. The next thing that needs to happen is they need to get out of the way because they still have this old mentality. And a lot of these people that have been there for a long time, they're like, well, we still want to say in that, no, the whole idea is that you don't get a say anymore. The whole idea is that we need to, as developers and as builders, you need to get out of our way. We're still building building code compliant projects. Right. We don't get to avoid that part of it. But you don't, you know, if we're, if we're getting involved, if you're getting involved on every single element of our development project, that's why it's stalling. That's why it takes so long. And guess what?
[00:46:40] Speaker C: What?
[00:46:40] Speaker A: When it costs us an extra half a million dollars to carry a property for a, for an additional year, who do you think we're going to pass that cost off to? We're not going to eat it as a developer. We're going to pass it off to the end user who is the tenant. Right? So if they don't make that correlation, they don't make that connection. If they're really working for the people, then, you know, it's like you're not doing yourself any service. So trust me, I get frustrated too. And we've learned to navigate these municipalities.
But you know, I think the changes that I've seen even over the last five years have been, have been staggering. Like what it used to take five years ago versus what it takes now.
It's crazy. Like you can find projects where you can literally just go and apply for a building permit and build a four, five, six unit building. And that's what we need to get to in order to really clear out this housing shortage that we've got in Canada.
[00:47:32] Speaker C: I think that that's, that's true in places like Edmonton and in like, and maybe in some parts of Toronto. But like I've, like, I, I'm still finding that there is a lot of challenges in other municipalities that I've dealt with. Like even like I've got a, that 23 unit building I have, the lot allows me to build another 20 units because of the, the size of it. I go to the town and they ask me for a shadow study, a traffic study. Like the stupidest studies about, about something or other. Like, so I have to spend $200,000 in studies before you can even tell me whether I can build this or not? Yeah, it doesn't make any sense. It's no, no business sense. So nothing in this municipality. This is Coburg, by the way. I hope somebody from Coburg is listening because they're all, they're, they're just full of like, they don't want new housing, they don't Want new do rentals. They. They just want to, you know, get some more fees to themselves.
But like, I, I just get frustrated with this, this sort of BS that comes from the municipalities. And you're right, the province and the federal government need to put that pressure on the municipalities in order to bypass them or just bypass them all together. And they're not going to be happy with, with that because it's building code. It has nothing to do with the municipality. It's building code. So if it.
[00:49:05] Speaker B: Well, is it in. Is it also one of the big things with Coburg? I know we're dialing in a little bit here, but that's got a pretty big heritage area.
[00:49:15] Speaker C: Oh yeah. Take a look at the buildings there. Look at how many are vacant and.
[00:49:19] Speaker B: Like retail steamed up here.
[00:49:21] Speaker C: Like, look at what they're. Look at what they're doing to their own towns because they're so blind to like trying to keep every. Who are you saving it for? Who are you saving these, these buildings for? Are you saving it for the residents or for somebody 200 years later who doesn't really. Not even born yet? Like, give me a break. Some of these, like someone's gonna smack them across the head and like, you know, get, get with it. People, like say the people who are living there right now, now. And that makes sure that like you have a, like a beautiful core that like encourages like businesses to continue to, to be there, that drives more people there who in turn will pay more taxes and make sure that you have a beautiful community in the. Sorry, I just got really.
[00:50:12] Speaker B: My advice to you is go build a single family home in Coburg somewhere. That's my place.
[00:50:17] Speaker C: I built, I built stuff.
[00:50:19] Speaker A: I.
Yeah, and that's, that's an interesting point though because like, I think if you look at, so the municipality, if you're, if you're meeting all their, their regulations, your single family dwelling could look like whatever you want it to look like. Like, there's no restriction on. You could, you could build it out of purple paint and whatever else you want to do. It could be the ugliest structure on the block. But the moment that you want to do a 20 unit building, they're like, hey, hey, hey, we need a say in this, right? Like why, why, why do you need to say in this? As long as, do you think as a developer I'm going to develop something that looks like. Of course not, because nobody's going to want to live in my building and nobody's gonna, you know, so it's like you have to let the free market do what the free market's going to do. Right. And if somebody builds something that's ugly and nobody wants to live in, well, then they're going to be having a challenge. But municipalities are constantly trying to stick their nose in and saying, we know best. Well, let the market, it's best. Right. And they did that in Toronto recently and they're doing in a lot of other municipalities where parking used to be a big thing. Right. You needed like 0.3 spaces per resident or per, you know, per unit. And they flipped the script on parking and they said, look, we're not trying to create more cars in the city, we're trying to create more housing. So how do we do that? Well, we do that through basically eliminating all parking requirements. It's now up to the developer. You tell us how much parking you need and if you can't rent your unit because is everyone in your building has a car, then that's on you as the developer. So that's the way it should be. It should be that way with every municipality. It's like you as the developer, you come to us, we'll approve your plan, but it's up to you to actually make that plan make sense. And if you go bankrupt because you can't rent out your building, you can't sell your units, well, that's on you as a developer.
[00:51:56] Speaker B: Well, and when it all goes sideways, come crawling back to us and we'll give you our advice then.
[00:52:02] Speaker A: Exactly, exactly. We told you you should have done something different. But that's much different than sticking their nose in in the beginning and try to make you're building what they think is going to look best. And that, that's, that's the opposite of what needs to happen.
[00:52:15] Speaker B: Right, Very good. Again, thanks so much for coming on with us today. We could talk for another hour. I'm sure we'll have you back, you know, and once you got a couple more of these projects under your belt, maybe after you've got the Nocera project started or on the way. But either way, thank you again for coming on today.
[00:52:33] Speaker A: Yeah, thanks for having me guys.
[00:52:34] Speaker B: Appreciate the best way for people to get in touch with you is the website we mentioned already.
[00:52:39] Speaker A: For sure. Yeah.
[00:52:40] Speaker B: Okay.
[00:52:41] Speaker C: Rob, how do people get a hold of you?
[00:52:43] Speaker B: Just email me. Robister breakthrough. Ca Quentin, how can people talk to you?
[00:52:51] Speaker C: Dot com is the best. So you can book a 15 minute call, we can chat about real estate, we can, we can commiserate about development project or we could.
[00:53:02] Speaker B: There you go.
[00:53:02] Speaker C: Do whatever, you know you to.
[00:53:04] Speaker A: Need.
[00:53:04] Speaker C: Need for. For help. Real estate.
[00:53:06] Speaker B: Oh, geez.
[00:53:07] Speaker A: You.
[00:53:07] Speaker B: You just open the door, you'll be like, I'm sorry I wasted your 15 minutes talking about the city again.
But also, you know what? I recommend everyone go to Durham. Rei.
[00:53:19] Speaker C: Thank you. Yes.
[00:53:20] Speaker B: And. And go to the website and check it out. All the resources that they have. There are a bunch of free resources that, that people can like a, like a calculator for cash flow on there, like for free. Just go over and you can get that.
So. But also go out to the meetings because they have so much value. That was a lot of fun. And that was how I got started.
For sure. I would not know anything that I know without Quentin, so I appreciate that, Quentin.
[00:53:51] Speaker C: I appreciate you, Rob. Thanks for that. It's amazing to see where you've come and where you've come from from and where you are now, which is really cool.
[00:54:00] Speaker B: Yeah, you too. You didn't own any buildings when I met you. Well, you like any multi family buildings anyway. All right, thanks, everybody. See you next time.
[00:54:10] Speaker A: All right.
