Working Capital The Real Estate Podcast

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Mark is a Certified Financial Planner, a three-time #1 Best Selling Author and the owner of Lake Growth Financial Services, a financial firm in Chicago, Illinois. Over the years, he has helped hundreds of his clients take back control of their financial future and build their businesses with proven, tax-efficient financial solutions. He specializes in building custom-tailored financial strategies that are unknown to typical stock jockeys, attorneys, or other financial gurus. As host of the Not Your Average Financial Podcast™, he shares some of his strategies for working with real estate, paying for college without going broke, and creating an income in retirement you will not outlive.

In this episode we talked about:

• Mark’s Background
• Getting Started as a Financial Planner
• Approaching Clients
• Be your Own Bank 
• First Few Questions to ask Real Estate Investors
• Debt Aspect
• Mark’s Advice to Beginners in Real Estat

Useful links:
https://kickstartwithmark.com/

The book “The Bank On Yourself Revolution: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future” by Pamela Yellen

Transcription:

Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Ladies and gentlemen, you're listening to Working Capital, the Real Estate Podcast. My name's Jesse for Galley, and my guest today is Mark Willis. Mark is a certified financial planner, a three-time best number, one best-selling author, and the owner of Lake Growth Financial Services, a financial firm in Chicago, Illinois, and co-host of the not your average financial podcast.

Mark, how you doing today?

Mark (42s): Doing great, Jesse. Thanks for having me on.

Jesse (44s): Well, a pleasure to have you on. I know that we, we chatted a little bit before, I thought listeners, you know, whether they are investing in real estate, are interested in entrepreneurship and business, that they would get some value about having you on as a guest. And you can talk a little bit about your, your story and, and kind of what you bring to the table in terms of the financial world. But before we do that for listeners, you know, that don't know who Mark Willis is, why don't you give us a quick background of your background for listeners and we can, we can kick it off from there.

Mark (1m 18s): Sure, yeah. Well, I've, I've had the great privilege of working with clients all over the country, us, Canada, and around the world. I've been able to serve many business owners, real many real estate investors, even some N F L Super Bowl champions. But Jesse, most people I work with are just interested in having a bit more certainty, you know, assurance and maybe, I guess, you know, the belief that they're gonna actually achieve what they're trying to do. I feel like a lot of people are frustrated with their real estate portfolio, their financial lives, because what they attempt to do is just not working or it's not working efficiently.

So a lot of people who come to me say, mark, I feel like I'm just floating down the gutter of life and I, I can't seem to catch, catch on to a a, a log to move upstream financially. I can't swim upstream. So what we get to work with, and I have the, you know, great honor to do this is work with clients that wanna move upstream financially and become, you know, more in control of their financial future.

Jesse (2m 18s): That makes sense. And, and I like it. Appreciate that. That kind of, I guess, philosophy or goal for, for what you do, for your, for your background. You mentioned, you know, before that, how you got into this business. We talked a bit about 2008, and if for listeners that don't know, you know, your background originally was not kind of being the self-employed, the financial planner helping people out. So how did, how did you get, get started in that and, and where you are today?

Mark (2m 48s): Yeah, well, I, I certainly didn't grow up wanting to be, or even knowing what a financial planner was. So I think the, the first inclination that money was a part of my life was as I graduated college, sadly enough, I just never paid attention to money and found myself in debt up to my eyeballs in the middle of a great worldwide recession, you know, six figures of student loan debt and no plan to pay the thing off, Jesse.

It was, it was like a mortgage around my neck. It was like a, a weight pulling me down. And given that I had no plan to pay the thing off, it was just becoming worse and worse. And it was a surprise to me that there was no training, no education on money or money management for all of the education you get in college. It was surprising that there was no real basic budgeting pla class or whatever, at least not where I went to school. So, yeah, it got me really focused really fast when I realized that, oh yeah, these guys want me to pay them back.

So that was a surprise. And I got into a couple of businesses, you know, worked my tail off for a couple years in the middle of a recession where no one was hiring, did every job I could find, including some property management positions, which put me under the, under the, under the, in, into the darkest place you could probably imagine, which is under an elevator that's being serviced. And I'm there with a, a shop vac sucking out God knows what to clean this thing out.

And I'm, I'm hoping that they don't snap the wire and end me right there, you know, so that was the, that was the service I had to give the debt, slavery I had to give to my slave masters, Nelnet and Sally Mae and all the rest of the banksters that had a, you know, a knife to my throat as I was trying to pay off all this debt. Fast forward a little bit, I was working for a C P A trying to get my bearings on, on income, and I was listening to her. I was mainly doing tax prep and I was listening to her as I was doing some tax prep.

I would overhear the calls where she would be discussing retirement plans for her clients. I wasn't doing the investing necessarily at that point, I was just tax prep guy, but she would have those calls and it was the calls that you never want to have as a financial professional where you have to tell the client, I'm sorry, Mr. Client, I know you're 63, I know you're about to retire, but I just lost you half your life savings. Sorry about it. Click, you know, that's a terrible way to run a business. I, I hadn't no desire to have anything to do with it.

And I almost left the financial industry until I found some strategies that had nothing to do with Wall Street that helped us meet our goals without taking a bunch of unnecessary risk. And it also happened to help me pay off my debt too. So it was a, it was a light bulb moment. And in that moment my wife had the, the wherewithal to kick me in the pants and say, start a business, don't be some w2. Go out there and start the business. And at the time I needed to borrow her courage, but I did it, man. I did it.

And that was 11 years ago, almost 12 years ago. And here we are with, you know, several advisors that I get the privilege of working with and a little over 1200 clients around the country and around the world. So it's been a great honor to get to serve clients and help them meet their goals.

Jesse (6m 8s): That's great. And on that point with clients, when it comes down to, you know, you talking about your services for individuals that, you know, for our audience group, real estate investors, people you know, potentially with a portfolio or building their portfolio, how do you approach that type of client differently if, if at all than, you know, your average, your average, say employee of large company? You know, is it, is it a different value add or is it a, a different offer or discussion, you know, with real estate investors?

Mark (6m 38s): Well, I'll tell you what, I, you know, I think one of the best parts of being a business owner is you get to pick your clients after a certain point. And, you know, maybe not the very beginning, but at some point you really begin to say, I want this kind of person in my life. And that's a beautiful thing. Cuz if you're a w2, you get basically got one client and that's your boss. But yeah, when you, when you get to work with real estate investors, business owners, they make up the vast majority of our clients. Not everybody, certainly not, but a good chunk of our clients want some agency in their life.

I believe that in many ways, part of the reason why people stumble into th

Amanda is a Managing Director of Keystone CPA, INC. Amanda received her accounting degree from UNLV. As a CPA and real estate investor, Amanda has helped countless investors across the nation to supercharge their wealth building through proactive tax saving with her top-selling Amazon books as well as her teachings on prominent publications such as Money Magazine, Google Talks, and CNBC.  Amanda brings over two decades of tax planning and compliance experience from working in Big 4 Public Accounting as well as public and private companies. 

In this episode we talked about:
* Amanda’s Updates and Changes
* Tax Strategies 
* Depreciations 
* Trump Tax Regime 
* Cost Segregation Analysis
* Bonus Depreciation 
* Partnership Losses
* How much to Spend on Accounting 
* Tax Designation
* How to structure your RE investments 

Useful links:
Books: “The Book on Tax Strategies for the Savvy Real Estate Investor: Powerful techniques anyone can use to deduct more, invest smarter, and pay far less to the IRS!” https://www.amazon.com/Book-Strategies-Savvy-Estate-Investor/dp/0990711765
“The Book on Advanced Tax Strategies: Cracking the Code for Savvy Real Estate Investors” https://www.amazon.com/Book-Strategies-Savvy-Estate-Investor/dp/0990711765
https://www.keystonecpa.com/
https://www.keystonecpa.com/eBook-Download Tax Saving Toolkit
https://www.instagram.com/amanda_han_cpa/

Amanda is a Managing Director of Keystone CPA, INC. Amanda received her accounting degree from UNLV. As a CPA and real estate investor, Amanda has helped countless investors across the nation to supercharge their wealth building through proactive tax saving with her top-selling Amazon books as well as her teachings on prominent publications such as Money Magazine, Google Talks, and CNBC.  Amanda brings over two decades of tax planning and compliance experience from working in Big 4 Public Accounting as well as public and private companies. 

In this episode we talked about:
* Amanda’s Updates and Changes
* Tax Strategies 
* Depreciations 
* Trump Tax Regime 
* Cost Segregation Analysis
* Bonus Depreciation 
* Partnership Losses
* How much to Spend on Accounting 
* Tax Designation
* How to structure your RE investments 

Useful links:
Books: “The Book on Tax Strategies for the Savvy Real Estate Investor: Powerful techniques anyone can use to deduct more, invest smarter, and pay far less to the IRS!” https://www.amazon.com/Book-Strategies-Savvy-Estate-Investor/dp/0990711765
“The Book on Advanced Tax Strategies: Cracking the Code for Savvy Real Estate Investors” https://www.amazon.com/Book-Strategies-Savvy-Estate-Investor/dp/0990711765
https://www.keystonecpa.com/
https://www.keystonecpa.com/eBook-Download Tax Saving Toolkit
https://www.instagram.com/amanda_han_cpa/

Mark Kenney is a President and Chief Executive Officer at CAPREIT 
 Mark Kenney joined Canadian Apartment Properties Real Estate Investment Trust (CAPREIT), a TSX listed company, in 1998. In 2019, Mark was appointed President and Chief Executive Officer. 
 
As Canada’s largest publicly traded provider of quality rental housing, CAPREIT currently owns or has interests in approximately 67,000 residential apartment suites, townhomes and manufactured housing community sites well-located across Canada,  the Netherlands and Ireland. In 2020, CAPREIT was included in the S&P/TSX 60 Index. 
 
With over 30 years of experience in the multi-family sector and as President and Chief Executive Officer, Mark is actively involved in creating and implementing the strategic vision for the organization through the direction of company policy and oversight of the crucial divisions within CAPREIT, including property management operations, marketing, procurement, development, and acquisitions. A frequent contributor to BNN Bloomberg and other media, Mark is a passionate advocate for the role of Real Estate investor



In this episode we talked about:
* Mark’s Background and How he Got into Real Estate
* The Comparison of the Commercial Real Estate World of the 80s-90s and nowadays
* Difference between Commercial Real Estate and Residential Real Estate
* Pricing and Valuations of Industrial Multi-Residential
* Supply in Real Estate 
* Real Estate Deals in Suburban and Rural Areas
* Development Costs and Charges
* Areas of Investment into Manufacturing Housing
* CAPREIT Focus in terms of Real Estate Projects
* 2023-2024 Interest Rates Environment
* Advice to Newcomers

Transcription:

Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Ladies and gentlemen, my name's Jessica Gallen. You're listening to Working Capital, the Real Estate Podcast. My guest today is Mark Heney, president and Chief Executive Officer at Capri.

Mark joined Canadian Apartment Properties real estate investment trust, a TSX listed company in 1998. In 2019, mark was appointed president and chief executive officer as Canada's largest publicly traded provider of quality rental housing. Capri currently owns or has interest in approximately 67,000 residential apartment suites, town homes, and manufactured housing community sites. Well located across Canada, the Netherlands, and Ireland in 2020. Capri was included in the S N P and TSX 60 index.

Mark, how you doing today?

Mark (1m 3s): Great, Jesse, thanks for having me.

Jesse (1m 4s): Yeah, pleasure to have you on. You know, wanted to talk a little bit about, you know, the current environment that we're in right now, you know, your background in the industry and, and Capri in general. But I guess, you know, maybe we could start with you have over 30 years experience in multifamily in that sector, and I was just curious to kind of get a little bit of a background of guests that we have on. It's always interesting to see how they got into the wild West. We called real estate.

Mark (1m 32s): Yeah, so I, I don't know, like, because I go back in time here to when I was growing up, I think it was very normal for young people to be interested in cars and real estate. It was, so, it wasn't anything that special about being drawn to real estate. I think like a lot of people I would daydream about real estate and back then it was probably just what it would be like to have a pool and a, and a big yard and, and a bit of a fascination how people got there, which kind of always stuck with me, but I didn't want to be a salesperson in real estate.

I was obviously just fascinated. Again, nothing unusual about that. And, and I found my, my way into, into real estate primarily because I probably wasn't the best student in the world and I, I really wanted to do this. So the thing I maybe haven't talked about a lot in the past was, it was an incredible opportunity because nobody, there was no competition. So a lot of my friends coming outta school we're lawyers and accountants and, and, and I, I was not the academic overachiever.

I really was always focused on just working. I didn't really understand why people went to school unless you're gonna become a doctor. I thought this isn't really helping me. And, and so I went into a field where there wasn't a lot of competition. I was one of the first people to get involved that, that had a degree and I stood out. And so the, the pool of people even today who you're competing with for a great career in real estate, especially on the property management side, I don't think it's fully understood by a lot of people.

Young people wanna go into tech, a lot of people wanna go into crypto or sales or something glitzy. But the cautionary tale is like, you know, who are you gonna be competing with in there and where can you really, you know, stand out.

Jesse (3m 37s): Yeah, fair enough. I tried to ask every time I have somebody with your amount of experience in the industry, I find I find the late eighties and early nineties commercial real estate world kind of fascinating. Not just in in North America, but specifically in the, in the kind of Toronto environment. And I find that, you know, younger people in, in the industry, I consider myself included in that. I think it's important for us to understand the history of, of some of the times that we've gone through in real estate, whether that's the early nineties, 2000, 2008 and, and what we're currently doing today.

But I'd like to just get your perspective. Obviously you're working in the industry during that time. Do you see any, any applications or do you see anything that you know, was happening back then that are reminiscent of, of what we're going through today?

Mark (4m 26s): Well, very different back then. Just to touch on what I said a minute ago, apartments in the eighties were the dirty cousin of all real estate sectors. Like nobody wanted to be involved in apartments. So that again, was a reason to go there. And I, I'd like to say I was a visionary and saw that the truth is, I, I got a raise every six months and that's why I stayed in it and by a raise, I mean, all they had to do was throw 500 bucks a year at me and I was there to stay.

Most people my age that had gotten into multifamily and it was starting to happen early nineties, would be lured into commercial immediately. Like if a commercial job was to present itself, you'd leave multifamily, go into commercial, and, and that was the general trend as you aspired to get into commercial in some form, especially office in Toronto at the time. So, so for me, I guess partially because I was, you know, excited to get a raise every once in a while I dragged into the sector longer and the longer I stayed, the more experience I had and the more sought after I became.

Jesse (5m 41s): So in terms of the kind of the history that you had with, with Kareed in, in the career in general, like I come from the, the office world and you know, I, I find it still kind of amazing today that, you know, we're very specific about when we're talking about real estate, whether it's rentable, square feet, everything's per square foot, and I talked to our apartment team and you know, we're going by either the door if it's, you know, by the unit or by the bed if it's student housing. But how, how have you seen that evolve over the last, even, even 10 years in terms of how it's, I feel like it's, you guys have now kind of been more formulaic than you may have been in the past, but it's, there still seems to be a difference between the pure commercial stuff and an apartment world.

Mark (6m 24s): So apartments, I'll give you an idea. Like in 1996, I worked for a company by, by the name of Real start. And one again, one of my career benefits with Real Start is I was hired as one of Canada's first multi province property managers. I was a district manager with Real start, but I was overseeing property in three different provinces. I, I think I was the only one in the country at the time. Okay. So the reason that's important is that the consolidation hadn't even started then.

There was the consolidation of big ownership pools in multifamily has only really happened in the last 15 years if at at most. And that's where all the career opportunities come from. So you've got for the first time a handful of big companies that you can have a, you know, a a traditional career of promotion if you're gonna be an employee, but most of the sector is still private. Most of it still is. And, and it's a great ownership path.

It's a great investment path. It's not necessarily a career path. And, and I think that now in multifamily there are institutional owners like Capri and Starlight Hazel View. You've got all these different companies that are large or, and you can have a progressive career from the entry level right to the right to the top kind of thing

Richard Epstein is our returning guest. Richard is an American legal scholar known for his writings on torts, contracts, property rights, law and economics, classical liberalism, and libertarianism. He is the Laurence A. Tisch Professor of Law and director of the Classical Liberal Institute at New York University, the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution

In this episode we talked about:

• Historical Perspective of  Land Use and Regulation
• Government Real Estate Agencies
• Inflationary and Interest rates Environment
• Macroeconomic Outlook

​​Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Richard is an American legal scholar known for his writing on torts, contracts, property rights, law and economics, classical liberalism and libertarianism. He is the Lawrence, a Tish professor of law at nyu, and the director of the university's Classical Liberal Institute.

Richard, it's great to have you back on. How you doing?

Richard (39s): It's always great to be here, Jesse.

Jesse (41s): Well, we're gonna have a bit of a, a crash course here in in property rights land use regulation, and kind of talk about how we got to where we, we are right now in, in the US in Canada as it as it relates to property rights. And it'll be topical for anybody interested in real estate, real estate investing development law. And you know, if you're ever interested to see why certain investment firms pick different states or pick different countries, you know, we'll, we'll touch on the intricacies and differences between how some of these laws develop.

But Richard, why don't we, why don't we start from the beginning? You talked about a historical perspective when it comes to land use and regulation, so I'll leave it with you here.

Richard (1m 29s): Okay, look, well the first thing to note is that when densities and real estate densities are very, very low, there's very little reason to have any kind of land use regulation. Land use regulation is a function of having large numbers of people within relatively close levels. One way to try to regulate this is from the private law of nuisance dealing with offensive smells and so forth. And that certainly is a part of the system. But when you're dealing with modern zoning laws, it turns out it's a relatively unimportant part of the system unless you're dealing with certain kind of very difficult industrial manufacturing areas.

But if you're going to the sort of the city life, the, the story really begins in 1916 when in New York City they realize that if you put up certain kinds of large buildings, the equitable building, what it's gonna do is gonna block light in other parts of town. And so the question was, are you willing to suffer that and let people build as they will, or do you think that you could kind of regulate densities and distances? And the initial New York statute was designed to deal with exactly that. And so they put up kinds of restrictions and they were relatively modest, but nonetheless they were there.

The one that was put into place in Washington was a high limitation. And in 1909 the Supreme Court said it's okay for you to do that. There's some kind of average reciprocity of advantage in everybody having the same kind of stuff. And so it's also another effort to sort of attack the light interest one way or another. And zoning of that particular sort was a relatively modest affair. I think the entire zoning book was, you know, 20 pages or something of that sort. But the movement got Abe boost from a very strange location in the United States.

And that strange location was a Department of Commerce where the Secretary of Commerce was none other than Herbert Hoover, later known for his other kinds of deeds. And what he did is he called together a national conference of local people trying to explain why it was that a general kind of zoning law was something that ought to be put into place throughout the United States. And federal government at that time had no power to regulate zoning within cities today in the United States. And in principle has that power, but it is virtually never exercised.

But what Hoover did was to persuade all of these towns and all these governments that they should put together a zoning package which is much more comprehensive than the ones that they had before. The theory behind this stuff was how you organize land uses as opposed to blocking light. And the notion of a zone actually quite literally meant this. We put in this zone, we put manufacturing in that zone, we put commercial in this other zone, we put in apartment houses, this other zone we put in single family homes.

And the theory was that if you have each zone with a pure type of, what would happen is you would prevent all sorts of nasty kinds of interactions between people and everybody would be better off. It turns out that this is a colossal blunder in the way in which you organize because what it does is it gets you uniform zones within use. It prevents incompatible uses from taking place, but it also prevents compatible uses from taking place. And so if you wanna get a sense of how, for example, real estate is organized in a more or less voluntary market, take any city, whether it's Toronto or New York and just go vertical.

And at the bottom what you do is you see a series of real estate stores, mainly commercial one way or another in New York. And probably in many other places, the escalator in these real estate stores goes down, not up because what you do is you have a lot of space below ground that doesn't change the profile, the building above ground. And so you do that. And then above that what you do is you probably have some degree of office space, which is a different kind of use. And above that you start having hotels in one kind of amenities.

And then above that what you do is you probably have some residential units and on the top you have some fancy club where everybody could look out at fine dining or a conference center. So you get four or five different uses stacked with one another. If you change the order, you would realize that this is not a random phenomenon, it's the way of maximizing value. A traditional zoning statute makes that extremely difficult. And so when Jane Jacobs wrote her famous book in 1961, she was always against single use areas because she said, if you're alive during the day, you're gonna be dead at night.

Or if you're alive at night, you're gonna be dead during the day. If you have the right kind of mix, you can have a steady flow of people in and out of the city and get greater utilization of your public resources. So the zoning system essentially made this mistake. And the case that demonstrated this was a case called Ewa cited in 1926, which was the same year that Hoover called his particular meeting in Washington. And what was the UK case about? It was about an industrial site between the nickel white railroad and some fancy highway on the south.

And what happened was a unified plot, and it was ideal for a major plant of one kind or another, but the city fathers decided that they were gonna change the way that this thing operated. And so what they did is they created zones going from top to bottom in that area and there was a zone that was designed to be manufacturing and then there was a commercial zone and there was a certain kind of residential zone and then a over the apartment house and a play zone. And what happened is you start looking at this stuff, you realize that having divided this thing, the loss and value is necessarily enormous.

You had a single owner of this patent and as you know Jesse, one of the fundamental theorem of real estate is if you have a single owner, every time you decide to do something on behalf of one of your potential buyers of renters, you're gonna hurt somebody else. So your constant job is to try to figure out how it is that you maximize the net value of all the uses that you sell, taking into account direct and indirect benefits like views and so forth. And sure enough, if you start looking the way these things go, you never see any of these things where the rental units are buried down below and the parking spaces are above.

The whole thing is organized in a way to sort of maximize access on the one hand and views on the other hand. And people really know how to do that and they're experts in excuse. So what you're doing is you're taking away the actual owner who's all the right incenti

Scott Pickett serves as the Vice President of Acquisitions of Post Investment Group. He has been in the Business for over 17 years and has invested over 3 billion  into Real Estate

In this episode we talked about:

• Scott’s First Steps into Real Estate
• Philosophy of Deal Structure
• Capital Raising Strategy
• 2023-2024 Outlook on Multi-family Real Estate
• Deals Creativity
• Going to the New States
• Interest Rates and Inflation numbers 2023-2024
• Real Estate Upcoming Opportunities
• Scott’s Advice to Beginners in Real Estate
• Resources

Useful links:

Working capital Podcast
Book “ The Philosophical Investor” by Gary Carmell

Trapp podcast

Contact: Head of Investor Relations: [email protected]

William Strange is a Professor of Economic Analysis and Policy at the Rotman School. William is former Editor of the Journal of Urban Economics (with Stuart Rosenthal), and he served in 2011 as President of the American Real Estate and Urban Economics Association. He works in the areas of urban economics and real estate. His research is focused on agglomeration, industry clusters, labor market pooling, skills, private government, real estate development and real estate investment.

In this episode we talked about:

• William’s Background and how he got into Real Estate
• Rotman School Real Estate Program
• Paper Analysis of Skyscrapers
• Macroeconomic Outlook
• Urban Economics Resources

Useful links:

Book “Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier” by Edward Glaeser

Book “The New Geography Of Jobs” by Enrico Moretti

https://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Strange.aspx

Transcription:

Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Ladies and gentlemen, my name's Jesse for Galley, and you're listening to Working Capital, the Real Estate Podcast. My guest today is William Strange. Will is a professor of economic analysis and policy at the Rotman School that's at the University of Toronto.

He's the former editor of the Journal of Urban Economics, and he served in 2011 as president of the American Real Estate and Urban Economics Association. He works in the area of urban economics and real estate. His research has focused on industry clusters, labor market, pooling skills, private government, real estate development, and real estate investment. Will, thanks for being here. How's it going?

William (58s): Thanks a lot for having me, Jesse. It's going great.

Jesse (1m 1s): Well, I appreciate you coming on. Like we said before the show, I thought there's a couple different areas of research that I thought we could jump into and, and I think the listeners would get a lot out of. But before we do that, why don't we kind of circle back to you in, in your current role at the University of Toronto and kind of what you're working on today, how did that all come to fruition? How did you get into, into this business of real estate?

William (1m 25s): Well, I got into real estate as an urban economist, so when I went to graduate school, my favorite undergraduate econ class was urban. I liked it because there are so many things going on in cities. Cities are just interesting organisms. And so I, I pursued a PhD at Princeton with Ed Mills, who is the father of the feet, modern field of urban economics. That ended up with me at U B C amongst the real estate folks. And I gradually came to understand just how interesting real estate is too, and just how much an urban economist will have to say about real estate, you know, both on the residential and commercial side.

I feel incredibly fortunate that I've lucked into a, a career as satisfying as this one has been.

Jesse (2m 8s): That's great. And the current role that you have at Rotman, so for people that aren't, aren't familiar, that's the, the business school at the University of Toronto. The, the teaching that you do there, is it predominantly undergrad is,

William (2m 21s): It's almost entirely MBA and PhD. I teach some vanilla economics, which I think is important too. Yeah. But, but we also teach a bunch of econ cla a bunch of real estate econ and real estate finance classes. One thing that I would say to your audience is I'm also the director of the Center of Real Estate at Rotman, and we periodically put on public events, we put on one on downtown recovery back in December that was addressing the different pace at which downtowns were repopulating as Covid fingers crossed, recedes.

And, and we were scheduled to do a housing market one with City Post in March, and we'll keep doing them as interesting policy issues emerge. We are, we, we welcome people from outside Rotman. Please come everybody.

Jesse (3m 12s): Yeah, that's great. The, and we want to jump into one of the papers that you did, you did regarding covid. Before we do that though, I'm curious, you know, people in our industry, when we think of schools that have a real estate program at the MBA or or higher level, you know, whether it's economics or finance or real estate, I think of, you know, Rotman, I think of Osgood. A lot of people have gone to Columbia and New York for their Ms. Red program. Has that, how long has that program been the real estate specific aspect of it? How long has that been something that has been at Rotman?

Because I, I feel like you guys were one of the first to actually have the, that specialization.

William (3m 48s): It's nice of you to say, but it was, it started building up when I came in 2001 and we've specifically p positioned ourselves to not duplicate other programs. Like I, I, I like the SCHOOK program very much, but there's no reason that we need to do something that's as specialized as their program is, given that they already have such a program that's, that's a good program. So what we have done is to set up a smaller real estate program. We have three electives of the 10 classes and MBA would take with the idea being that people in real estate benefit from taking things outside of real estate, you know, that a good real estate person needs to know about finance, a good real estate person needs to know about strategy and my various colleagues in Rotman can help in those ways very much.

Jesse (4m 33s): Yeah, no, that makes sense. So before we, we jumped on here, we, we talked about a paper that kind of pid my interest and it was just being in the commercial real estate world and it was a basically a, a paper analysis of skyscrapers. I thought before we jump into this Covid paper, we could talk a little bit about this, this paper that you did regarding skyscrapers.

William (4m 53s): The skyscraper paper is still pretty relevant. I mean, what it's motivated by is that we're living in a new era of skyscrapers that if you look at something online like the skyscraper page, you can see the big buildings that people are planning to build. The Empire State Building was the biggest building in the world for on the order of 40 years before the World Trade Center. It has since been sub topped by Burge Dubai. And there are other buildings that are, are also really large that are either recent or, or that are being planned.

The big question is, are these big buildings being built big because it's economical to do so? Or are they being built big for some other reason? You know, possibly ego reasons, possibly other stuff. And so we have analyzed skys, this is in my paper with Bob Helsley from UBC. In this paper we look at skyscrapers as a contest for who is the biggest, this, this is assuming that people want to be bigger than the other person. Let me give you a couple of historical examples of that.

I mean, people did look at whether h skyscrapers were economical in the 1930s after the big skyscraper wave of the twenties and thirties. That was mo allowed by things like structural steel and elevators. And we see there a lot of stuff that looks game theoretical. So one story is the story of the lower man of the Manhattan Company building, which is now Trump's lower Manhattan building. And, and, and the incredibly beautiful art deco Chrysler building.

And they were each built to be the biggest building in the world at the time. Manhattan Company building finishes first, so it has a ceiling on it, and they are very happy because the ceiling on the sky on the Chrysler Building is, is gonna be lower. So for some reason, the Chrysler building did not build an extra a hundred feet that would've made them bigger than the Manhattan Company building. And, and this has an added issue of personal interest, that the lead people on both of those projects hated each other. They used to be partners. There was a breakup of their partnership and, and not the owners of the buildings, but the architects despised each other.

Unbeknownst to the people who built the Manhattan Company Building with the Chrysler Tower, the most famous thing about it, if, if the readers Google it right now, you'll see it is the spire at the top. It was hidden inside the structure, so people didn't know what h

August Biniaz is the Co-founder and COO of CPI Capital. CPI Capital is a Real Estate Private Equity firm with its mandate to acquire Multifamily and BTR-SFR assets while partnering with passive investors as Limited Partners. August was instrumental in the closing of over $208 million of multifamily assets since inception. 

August educates real estate investors through Webinars, YouTube shows, Weekly Newsletter and one-on-one coaching. He is the host of Real Estate Investing Demystified PodCast - https://podcasts.apple.com/ca/podcast/real-estate-investing-demystified/id1650186768

In this episode we talked about:

• August’s Background and how he Found his Niche in Private Equity
• Nuances and Differences between Investing in the US and Investing in Canada
• Single-Family Rental
• Deals Syndication
• August’s Geography of Deals
• Syndication Structure
• Limited Partnership
• Syndication VS Joint Venture
• Difference between Funds and Syndication
• State of the Economy Overview
• Advice to Newcomers
• Resources and Lesson Learned

Useful links:

Books: “Best Ever Apartment Syndication Book” by Joe Fairless

“Raising Capital for Real Estate: How to Attract Investors, Establish Credibility, and Fund Deals” by Hunter Thompson

https://www.linkedin.com/in/august-biniaz-23291460/?originalSubdomain=ca

https://www.cpicapital.ca/

https://www.youtube.com/channel/UCBliV4We30bjaKqmqri8jQg

Transcriptions:

Jesse (0s): Welcome to the Working Capital Real Estate Podcast. My name's Jessica Galley, and on this show we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you're looking at your first investment or raising your first fund, join me and let's build that portfolio one square foot at a time. Ladies and gentlemen, my name's Jessica Galley, and you're listening to Working Capital, the Real Estate Podcast. Our guest today is August Biaz. August is the co-founder and c o of c p i, capital c p i.

Capital is a real estate private equity firm with its mandate to acquire multi-family and B T R S F R assets, and we'll get into what that is shortly while partnering with passive investors as limited partners. August has been instrumental in the closing of over 208 million of multi-family assets since its inception. August educates real estate investors through webinars, YouTube shows, weekly newsletter, and one-on-one coaching. He is the host of real estate investing demystified podcasts. August. How you doing?

August (1m 1s): Great, man. We're doing much better now that I'm here with you, brother.

Jesse (1m 4s): Beautiful. Well, I'm glad that we finally were able to do this. There's a little back and forth I was traveling, but you look great. You always look sharp for those that are listening full suit and tie, so I'm excited to to chat today.

August (1m 17s): Absolutely. You gotta stay in character, right? When you're in private equity, you just gotta be in character all times. Yeah,

Jesse (1m 23s): The August avatar, So August, you know, for those that don't know, we, we did have a conversation, I think it was the beginning of 20, or the end of 2021. Time flies. I can't believe we're gonna be in 2023 very soon here. But we chatted a little bit of, a little bit about multi-family investing, the economy, and you know, I tell guests if I haven't talked to them in over a year that, you know, nothing really of, of substances happened since we last talked, so I'm sure that, I'm sure we'll have nothing to talk about today.

But yeah, I mean, for those that don't know you August, why don't you give a little bit of a background about, of how you got into real estate in general, and then maybe how you kind of found your niche in, in private equity.

August (2m 7s): Absolutely, yes. I've, I've spent the majority of my professional career in real estate. Started out as a real estate agent 17 years ago, and I wasn't the best at being a real estate agent, but I was great at finding deals and, and putting deals together. I I started doing small fix and flips, started my own general contracting company, and then I started building single family homes more on the luxury side, both spec and custom, always wanted to scale a deal. Came across my desk, which was a five single family home land assembly that the, that we could, we were, we were able to rezone and build townhomes.

We were able to build Tony Townhomes. I syndicated that deal before I even knew what this concept of syndication was, was basically I found a deal. I I, I went to some investors and brought on some JV investors and basically purchased that property. My experience was ma mostly in single family. So I brought on the experts, I brought on AR architect, I brought on a gc, and we, we started processing, we started building that project. And I fell in love with this model, with this concept of finding the deal, finding the investors, bringing all the experts on, and then, you know, being compensated relative to the performance of the project, the performance of the asset.

And I wanted to learn more about the space, how real estate private equity worked, how the world of syndication worked. And most of the content was coming from the us. You know, syndication wasn't very common and still, it still isn't very common here in Canada, but in the US it seemed to be very common. A lot of podcasts, YouTubes a lot of books, and I'm happy to go over that in a moment. And I realized about us multi-family, particularly the value add business model, and fell in love with that model. Wanted to initially duplicate that model here in, in Canada to be able to buy apartment communities.

There was some hurdles and pain points I faced early on the rent to value ratios. You always hear a complaint in Vancouver or in Toronto that rents are very high, but rents relative to the value of the properties are actually very low. The rent to value ratios, you know, in the US are much higher. In some cases they have a 1% rule where one month's, one as properties, one month rent equals to 1% of the asset value. And here in Vancouver, if you do the same ratio, you're at 20 basis points.

So the rent to value ratios weren't there. And, and also in the US they were, you know, a lot of groups, private equity firms were investing in the Sunbelt because the apartment buildings were garden style and two story, three story. We didn't really have that here in, in, in Canada and really we're not really a, a, a renter's nation like, like the US are. So that was the really the impetus for me to look at the us. And then when I looked at the landscape across Canada, I didn't re, you know, there were very foreign and few groups that were actually investing in US real estate that were syndicating deals here.

So the competition wasn't there. And when I compared that to being a builder here in Vancouver, or being a real estate agent in, in our province, there's over 23,000 real estate agents, and that's a bit of a historic number over 8,500 licensed builders. And when I looked at our space of what syndicating US multifamily deals, there were less than a handful of teams doing it. That was really a start to co-found c p capital with partners with our mandate to purchase US multifamily.

Jesse (5m 34s): Yeah, and I think listeners will know, like we, we try to do on this podcast is I, I try to talk both to US and Canadian investors. You know, being a Canadian myself, I, I experienced the same pain points that you did in terms of the education. I started investing in 2000, 2008, and we've, we've gone light years ahead of where we were even back then in terms of the resources, whether, you know, you're on a bigger pockets forum or you're just on YouTube, but 100%, you know, a lot of talk about the irs, a lot of talk about LLCs and you know, for the Canadians listening, you know, all those pieces have little bits of nuance and it's almost more dangerous when you do have people talking about real estate and you're getting informed, but dangerous in the sense that everything is so close that you kind of get fooled to a certain extent.

Or you can, you can think you're doing something correctly and, and in fact you're doing something that is, you know, abiding by u US law, for example, and, and not Canadian. So, yeah. Can you talk a little bit about that process of, you know, education and some of the differences and nuances between investing in the states as opposed to investing in Canada?

August (6m 47s): Absolutely. And you said it perfectly. I mean, it's, it sounds very similarly, sounds