Real Estate Investing in the United States as a Canadian with Victor Menasce

On This Episode of Peak Market Watch...

Real Estate Investing in the United States as a Canadian with Victor Menasce

Victor Menasce, Managing Partner at US Real Estate Partners, critically acclaimed author, and host of the Real Estate Espresso podcast joins the show to share his expertise and experience as a US real estate investor from Canada. He also talks about his new book, Magnetic Capital, that shows how to raise capital for any venture whether it is in the USA, Canada, or anywhere in the world!

 

Episode Highlights:

  • Investing in the USA out of Canada
  • Picking markets based on the best upside opportunities
  • Price appreciation over the last decade caused him to shift from value add acquisitions to developments
  • Building what the market wants, whether it is multifamily or single family/town homes
  • Differences of developing in Canada vs. USA
  • Assembling the right team is crucial
  • How to be on the winning side of inflation
  • How to build lasting relationships with partners and investors
  • 5 key elements to successful money raising

Need Multifamily or Commercial Real Estate Funding?

Get in touch with our multifamily financing experts now and get a free loan quote!

Show Host

Guest Speaker

Connect with Victor Menasce

  • Website: www.victorjm.com
  • Daily podcast: “The Real Estate Espresso Podcast”
  • Book: “Magnetic Capital” – https://www.amazon.com/Magnetic-Capital-Raise-Worthy-Venture/dp/1537531581/ref=sr_1_2?keywords=magnetic+capital&qid=1637163071&sr=8-2

VIDEO TRANSCRIPTION

 

00:00

a daily

00:01

uh podcast

00:03

welcome victor it’s a pleasure to have

00:04

you with us today

00:06

uh great to be here yeah so you have a

00:09

very interesting background uh so why

00:11

don’t you share some

00:13

uh details with us

00:16

yeah my pleasure

00:18

my path into real estate investing was

00:20

definitely not the typical career path i

00:23

started out trained as an electrical

00:25

engineer

00:27

and spent the bulk of my corporate life

00:29

as a microprocessor designer and then

00:32

moving up to the ranks of various

00:34

both public and private companies

00:35

running engineering organizations again

00:37

almost always in the realm of

00:40

microprocessor design

00:42

or telecom design or something along

00:44

those lines

00:46

and some of the most fun i had in my

00:48

life to be quite honest uh working with

00:50

super smart people

00:52

working on interesting projects i’ve got

00:54

chips and all kinds of

00:56

weird and wonderful applications all

00:58

over the world

00:59

if you’ve ever flown on an airbus

01:01

aircraft the seatback display

01:04

for a lot of those

01:05

seat backs have a chip that i designed

01:08

that was essentially the microprocessor

01:10

for that display lg plasma tvs

01:14

cisco wi-fi access points uh hewlett

01:16

packard storage networks pachinko apache

01:18

slot machines in japan i mean the list

01:21

goes on and on of all these different

01:24

applications and around 2008 2009 we

01:29

were building a new cellular network in

01:31

japan with the number four carrier there

01:34

and

01:35

traveling back and forth to tokyo every

01:36

two weeks and it was

01:39

demanding on me physically just that you

01:42

know 13 hour flight and 12 hours of time

01:44

zone

01:45

flipping your

01:47

body clock upside down twice a month

01:50

was just punishing and it was burning me

01:53

out physically emotionally and decided

01:54

it was time to do something different

01:57

so i resigned my position as vice

01:59

president of engineering of a company

02:02

and moved into the world of real estate

02:04

investing pretty much full-time took a

02:07

hard left turn in my career i can’t kind

02:09

of haven’t looked back so that’s how i

02:11

got into this world

02:13

yeah a very cool story uh

02:17

kind of very similar to uh to mine

02:20

obviously i’m i’m on the financing side

02:24

and i grew up in banking but i was also

02:27

in that corporate world to live in asia

02:29

for seven years

02:30

uh also in tokyo for four years and hong

02:33

kong for three years so

02:37

i’ve

02:38

i shared that

02:39

that

02:41

view of of that taxing

02:43

dripped back and forth

02:46

to to the us and europe right it’s

02:49

when you are younger it’s uh initially

02:52

it’s a lot of fun right

02:54

uh but at some point it it gets uh very

02:57

taxing on

02:58

on on your body on your mind as well as

03:01

on your

03:02

family when you

03:04

particularly when you have a young

03:06

family as it was in in our case

03:09

but i certainly

03:10

uh

03:11

have have fond memories of all all the

03:14

various uh

03:16

places in asia

03:18

you mentioned that you’ve uh

03:20

you did the microchips for for some of

03:23

these slot machines to check machines in

03:26

japan

03:27

obviously anyone who

03:29

who visits japan they need to go to one

03:31

of these parlors because there is no

03:34

other place in the world where you see

03:36

these

03:37

these machines right

03:39

it’s crazy i mean i i remember

03:42

i got so good at traveling through japan

03:45

some of the people at the a a

03:49

on the panera raised the airline

03:52

started to recognize me by name and i

03:54

said oh that’s not good

03:56

you know when when the gate agent said

03:58

uh mr victor son nice to see you again

04:00

it was like oh no this is not good

04:03

and so i knew it was time to do

04:05

something different yeah

04:07

yeah very good

04:09

so you you

04:11

live in ottawa in canada right

04:16

and

04:17

i believe the majority of your

04:19

investments in real estate once you

04:21

started out uh maybe initially you

04:25

started out in canada

04:27

but then you quickly shifted

04:30

uh to the united states

04:32

uh as as a your main investment market

04:36

can you explain a little bit why

04:38

why you made that decision

04:41

absolutely

04:42

post 2008 uh really looked at what was

04:45

happening in the us and

04:48

while it was a source of tremendous

04:50

financial pain for millions of people

04:53

for someone who was not playing defense

04:55

but willing to play offense it was

04:57

really the opportunity of a lifetime

05:00

we were slightly impacted in canada

05:03

you know where markets went down

05:06

50 60 sometimes 80 percent in price in

05:10

some u.s markets

05:12

canadian markets went down two percent

05:14

three percent

05:15

it was not the same we were really

05:18

spared

05:19

in some in some cases markets went up in

05:21

price again driven by spline demand so

05:23

we didn’t have

05:25

the massive dislocations that happened

05:26

in the united states

05:28

and saw the opportunity to buy

05:30

properties at well below construction

05:32

cost you know when you can buy

05:34

you know apartment buildings for a third

05:36

of construction cost

05:38

a certain point you say to yourself i

05:39

said to myself

05:41

i have more upside than downside

05:44

which turned out to be true in

05:46

retrospect

05:47

so it was

05:49

really the opportunity of a lifetime

05:50

it’s a good time to get into the market

05:52

it was

05:54

a forgiving environment in which to make

05:56

mistakes and i made plenty

05:59

if i look back on it now if i was to do

06:01

it again i would certainly do it

06:03

differently

06:04

i ended up wasting a lot of time i

06:06

didn’t fully capitalize on the

06:08

opportunity that was present

06:11

and it was interesting having come from

06:15

the corporate world where i had done

06:18

mergers and acquisitions and had done

06:21

uh you know run engineering

06:22

organizations and raised a lot of

06:24

capital for startups and for you know

06:26

taking one company public and all of

06:28

this sort of thing and when i got into

06:30

world real estate investing i ended up

06:33

kind of starting at the bottom which

06:35

turned out to be a mistake turned out to

06:36

be a waste of time

06:38

um

06:40

so i learned a lot and today i’ve kind

06:43

of returned to what i would say are my

06:45

roots of

06:46

managing and developing larger projects

06:49

just like i did in the tech industry

06:51

and

06:53

today

06:54

fast forward we’re doing development

06:57

projects new development projects

06:59

multiple different cities both u.s and

07:01

canada

07:02

love what we’re doing we’re creating you

07:04

know brand new communities we’re

07:05

building products that the market wants

07:08

and not wasting any time flipping houses

07:10

or doing any of that crazy small stuff

07:12

yeah

07:14

that’s a great story now

07:16

as you mentioned right you took the

07:18

opportunity uh

07:20

you saw it and you you jumped into it

07:23

you mentioned you made mistakes right

07:26

i think back then in 2009 10 11

07:30

even a little bit later

07:32

uh the prices were that low that uh it

07:36

still allowed for

07:38

for uh investors to make mistakes right

07:41

because the

07:42

uh the price point the basis was was so

07:45

low that

07:46

that you still had enough of a cushion

07:49

uh obviously today is a very different

07:52

world

07:53

and when we look at some of the

07:55

properties that you

07:57

uh

07:58

bought back then and where the price

08:00

points are today so it’s kind of a

08:03

upside down picture now right back then

08:05

you you were able to buy

08:07

at the fraction of uh of a construction

08:11

replacement cost now today in a lot of

08:15

markets we have the opposite that is

08:17

happening where we have

08:20

buyers going into c-class properties

08:23

that are

08:25

priced above the replacement cost right

08:28

so

08:29

uh it’s it’s very interesting to see how

08:33

how markets shift uh and

08:36

i think with you now also being active

08:39

in on the development side uh also kind

08:42

of gives that indication

08:44

of your world view that right now it

08:47

might not be the best idea just to

08:49

uh to buy up uh existing assets at the

08:54

premium

08:56

well absolutely i mean if you have a 350

08:58

or 400 unit complex coming on the market

09:00

today

09:02

guarantee there’s going to be multiple

09:04

offers it’s an auction environment and

09:06

if you’ve ever

09:07

spent any time at an auction sometimes

09:09

auction fever takes hold and people end

09:11

up paying too much

09:13

and that’s exactly what’s happening i

09:14

don’t want to be the winning bidder

09:17

with 20 other people at the table it’s

09:19

almost going to virtually guarantee that

09:21

i’m paying too much

09:23

so how do you

09:24

participate in that competitive

09:26

environment and get out of the auction

09:29

so that there isn’t that fierce

09:31

competition

09:32

well if it’s a fixed asset and you know

09:35

the auctioneer is bidding up the price

09:37

it’s one thing

09:39

but if and that that happens when you’re

09:41

chasing deals when you’re finding deals

09:43

that appear in the marketplace

09:46

we would rather create deals

09:48

manufacture them out of an idea because

09:50

there’s no competition

09:52

for an idea that’s in your head or in my

09:54

head

09:55

it’s there it’s a secret you know i

09:59

don’t need a non-disclosure agreement

10:00

just don’t disclose it

10:02

and

10:03

now there’s no competition we can create

10:05

something out of nothing

10:06

that’s going to be much more competitive

10:08

and that’s the opportunity that’s

10:10

afforded to us

10:12

yeah that’s a excellent point

10:17

so you mentioned that you do development

10:20

both in canada and and in the us i

10:23

believe you have a large development uh

10:25

outside of colorado springs if i’m not

10:28

mistaken

10:29

uh well that one i don’t know that one’s

10:31

not quite a development yet that one’s

10:32

so intelligent so that’s in your head

10:35

that’s one of these

10:37

yeah yeah these opportunities yeah

10:40

it may work it may not we don’t know yet

10:42

we’re still in due diligence and it

10:44

might be you know it’s almost 1800 acres

10:46

so it’ll be a plant community if it does

10:48

go forward

10:49

um and uh

10:52

but but we don’t know yet it’s too soon

10:54

to say uh we we have other projects that

10:56

are you know uh definitely much further

10:59

along in the pipeline

11:00

that are

11:02

you know fully committed projects that

11:04

are going to be gorgeous communities

11:05

when they’re done

11:07

yeah yeah so are you focusing more on

11:11

single family developments

11:14

or multi-family and what is the reason

11:17

why you would go in one or the other

11:20

direction

11:22

it’s really all about supply and demand

11:24

and building the product that the market

11:26

wants

11:27

so in some markets we are doing single

11:30

family

11:31

we aren’t necessarily the builder

11:33

ourselves we will take the land through

11:35

the entitlement process we’ll subdivide

11:37

it we’ll put in all the horizontal

11:39

improvements the servicing the roads and

11:42

we may bring in

11:44

a national home builder to actually take

11:46

it forward from there

11:48

we have several projects that fit that

11:51

characteristic in some cases if it’s

11:54

there’s a townhouse component or

11:55

multi-family component where the density

11:58

is higher

11:59

uh then we may actually go vertical with

12:01

the construction ourselves that fits our

12:03

wheelhouse a little bit better

12:05

we’re we’re not we’re not a national

12:07

home builder but we can definitely build

12:09

apartments we can definitely build

12:10

townhouses where there’s a certain

12:12

degree of repeatability in the process

12:15

yeah

12:16

uh how would you say

12:18

uh where the main differences come in

12:22

in developing in canada compared to the

12:25

to the u.s

12:27

there’s

12:28

there’s striking similarities and

12:30

there’s differences as well

12:32

i would say that our environment in

12:34

canada is far more bureaucratic

12:37

in the major cities

12:38

you get into the satellite communities

12:41

outside a major city and

12:43

all of a sudden the process gets much

12:44

more streamlined although the

12:45

similarities in the process

12:48

canada tends to have a lot more by way

12:50

of development fees

12:52

to the municipality what are called

12:54

impact fees in the u.s

12:56

and i mean substantial ones so the

12:58

economics are quite a bit different

13:01

the cost per square foot is higher it

13:03

it’s just different but the process is

13:05

remarkably similar

13:07

we feel confident we can go into

13:09

virtually any community

13:11

and get smart quickly on what are the

13:15

pressure points in that particular

13:17

community

13:18

and

13:19

almost become as knowledgeable as a

13:21

local person in a very very short period

13:23

of time

13:24

uh because we put systems and process in

13:26

place uh you know going through zoning

13:28

is almost the same during the plant use

13:30

developments almost always the same all

13:32

the same considerations come into play

13:35

and you might say well how can you do

13:36

that you haven’t lived in i don’t know

13:38

boise idaho your entire life how can you

13:41

get a leg up on the local on the locals

13:43

well

13:44

we do things that the locals won’t do

13:47

what quite simply

13:49

the world has changed

13:51

every single city council

13:53

publishes their minutes sometimes the

13:56

entire recording of their city council

13:57

meetings and their planning meetings on

13:59

youtube

14:00

you can watch the entire meeting now

14:03

nobody wants to sit through 80 hours of

14:05

city council meetings

14:07

and the locals don’t do that either but

14:09

we’ve developed some process where we

14:11

actually get an entire written

14:13

transcript of all 80 hours of city

14:16

council meetings

 

 

14:17

so that we can actually go through that

14:19

and search it a full text search

14:22

of every word that was uttered in the

14:23

city council meeting over the last two

14:24

years

14:25

so if something is of importance like

14:28

let’s say

14:30

height restriction you can search for

14:32

the word height restriction or you can

14:34

work search for the word encroachment or

14:36

setback or whatever

14:38

keywords would be meaningful and you

14:40

zero in

14:41

on those elements of those 80 hours and

14:44

now you know what’s happening

14:46

in those meetings who’s saying what and

14:48

who’s objecting and

14:50

now you start to get a picture of what

14:52

those communities are willing to accept

14:54

and what they’re not

14:55

and you don’t have to be local to do

14:57

that it’s it’s very fascinating time in

14:59

which to be conducting business

15:01

in other markets uh so i love the fact

15:04

that technology makes that possible yeah

15:07

that’s uh definitely the case right

15:10

uh you mentioned the impact fees uh i

15:13

assume that you pick markets where

15:16

uh the impact fees and uh

15:19

and the overall entitlement process is a

15:21

little bit more

15:23

uh

15:24

favorable than in some others right so

15:27

you mentioned in canada it’s very

15:29

expensive there are some markets in the

15:31

u.s where it’s

15:33

outrageously expensive too right so you

15:36

you worked in silicon valley so that’s

15:38

uh

15:39

one of the places where it’s oakland or

15:42

san francisco we have a developer

15:45

client that is building there the impact

15:48

fees

15:49

or just out of this world

15:52

the entitlement process is is never

15:55

ending

15:57

so uh it’s important to pick the right

15:59

markets right and uh

16:03

yeah absolutely absolutely

16:06

and you know the way i the way that i

16:08

look it really comes down to both supply

16:09

and demand and ability to pay

16:12

so

16:13

if you think about the cost of new

16:15

construction

16:16

materials cost what they cost anywhere

16:18

in the country

16:20

it doesn’t matter whether you’re putting

16:21

them out in the field in the middle of

16:23

north dakota or you’re putting them on

16:24

madison avenue in manhattan

16:26

a sheet of drywall is 10 bucks pretty

16:28

much anywhere in the country

16:30

but the value attached to that sheet of

16:33

drywall absolutely is going to vary

16:35

depending where you put it

16:36

so it’s a matter of choosing those

16:38

locations where you’ve got a dislocation

16:40

a

16:41

sustained mismatch between demand and

16:43

supply meaning there’s more demand than

16:45

supply

16:46

there’s upward pressure on rents you

16:47

want to see those market conditions

16:49

persist for a good long time and when

16:50

you have those ingredients

16:52

and the the rents are high enough on a

16:55

per square foot basis the economics

16:57

support that new construction

16:59

and then you got to focus on have i got

17:02

the right team

17:03

because

17:04

uh a great deal

17:06

with the wrong people they’ll they’ll

17:07

mess it up on you

17:09

that’s

17:10

perhaps one of the most painful lessons

17:12

that i learned post 2008 as i got some

17:15

great deals

17:16

that i tried to execute with the wrong

17:18

people and didn’t get the result we

17:20

wanted

17:21

yeah that’s all about the people yeah

17:26

that’s an excellent point i personally

17:29

uh

17:30

was involved in a number of projects

17:33

large projects including ground up

17:35

developments

17:36

the ones that

17:40

went well

17:42

despite all the challenges and that by

17:44

the way was in the mid 2000s all the way

17:47

to the 2010 and past that so doing very

17:51

challenging times

17:53

so the team made all the difference

17:55

whether these projects ultimately

17:58

uh

17:58

uh were still a success or were a

18:01

failure right

18:03

uh so that’s that’s absolutely uh

18:06

crucial

18:07

now when it comes to the financing

18:10

obviously in the us there is there is

18:12

such a massive amount of liquidity

18:16

and financing programs that are

18:18

available particularly on the

18:20

multi-family side

18:23

can you tell our listeners a little bit

18:26

what what is available for you in in

18:29

canada in comparison on the financing

18:32

side

18:34

the problems are remarkably similar i

18:36

mean if you’re dealing with your

18:38

traditional bank

18:40

uh whether it’s a local community bank

18:42

or even a larger national bank

18:45

you’re typically dealing with recourse

18:46

financing where you’re signing personal

18:48

guarantees it’s exactly the same in

18:50

canada

18:51

you have if you’ve got a

18:53

an agency

18:55

that’s providing the loan guarantee

18:57

whether it’s fha in the u.s or

19:00

a mortgage insurer like fannie mae or

19:02

freddie mac

19:03

we have the equivalent in canada we have

19:05

cmhc that does a very similar program

19:09

so those things exist um

19:11

you know there’s a bit of bureaucracy

19:13

and

19:15

so you know the

19:16

the the heavier the guarantee the

19:18

heavier the paperwork is kind of the

19:20

rule of thumb here and the slower the

19:22

process to get

19:24

through the uh

19:25

to loan approval

19:26

but when you do get it approved whether

19:29

if it’s a hud loan

19:32

or a cmhc loan when you do get it

19:34

approved it’s a it’s a great loan with a

19:36

long amortization period at usually a

19:39

pretty decent rate that’s rate locked

19:40

for a long time

19:42

and

19:43

at the end of the day

19:45

i don’t care what

19:46

the government says the rate of

19:48

inflation is

19:49

i believe we are in a very inflationary

19:52

environment and

19:54

the

19:55

it’s a different game you know it’s a

19:57

little bit like

19:59

you know you think you you’ve been told

20:01

you know go to school get a good job

20:03

save your money

20:04

all of that usual traditional

20:07

uh

20:08

you know mantra that your parents might

20:10

have told you

20:11

it’s a little bit like putting on your

20:12

padding and your helmet and you go out

20:14

onto the field and you think you’re

20:15

paying playing american football

20:17

and then these other guys come out and

20:18

they’re also wearing padding and they’ve

20:20

got sticks and skates and they’re

20:22

running circles around you because the

20:23

game is hockey but you think you’re

20:25

playing football they’re playing a

20:26

different game and it’s a different set

20:27

of rules even though it might appear

20:30

that there’s similarities and the same

20:31

is happening

20:32

in the financial world in the world of

20:34

inflation

20:36

three things happen

20:37

people on fixed income

20:39

their their purchasing power gets wiped

20:41

out

20:42

people savings get wiped out

20:45

and debt gets wiped out all three of

20:47

those happen pretty much together

20:49

so if you know that’s the game

20:52

if you know that your purchasing power

20:53

is going to get wiped out if you know

20:55

that your savings are going to get wiped

20:56

out and you know that that’s going to

20:58

get wiped out how would you structure

21:00

your business differently

21:01

because there is a winning side of that

21:03

equation you just got to make sure

21:05

you’re on the winning side

21:07

i would not

21:09

bet against inflation i would end up on

21:11

the wrong side of history if i was to do

21:13

that

21:14

so if you know inflation’s a play

21:16

how do you structure

21:18

and i think the answer is you want to

21:19

borrow as much as you can for as long as

21:21

you can

21:23

assuming you have the right to prepay

21:26

and

21:27

use leverage to your advantage when

21:29

today the the bureau of labor and

21:31

statistics

21:33

said that in august

21:34

inflation was running a 5.1 percent well

21:36

if you can borrow

21:38

at 3.1 percent

21:40

on a 40-year loan

21:42

that’s a license to print money you’re

21:44

shorting the dollar

21:45

how do you lose at that game you can’t

21:49

that’s the key so structure your affairs

21:51

to win

21:53

the inflation game that’s the key

21:54

because the the the price increase not

21:56

the value increase the price increase

21:59

goes to the equity side of the equation

22:00

that’s where you get the multiplier

22:02

yeah uh excellent points there right

22:08

i i share your view right

22:10

obviously from a government perspective

22:12

they need to

22:14

they had to put the hat on and mention

22:16

that it’s a transitory inflation

22:20

but i think everyone recognizes that

22:22

that is is unlikely

22:25

the case

22:27

more recent comments only by by some of

22:30

the

22:31

the femme members

22:33

uh have already shifted a little bit

22:35

where they acknowledge that it’s

22:37

probably not as transitory as they

22:39

initially

22:40

indicated right but

22:43

whether it’s

22:44

ultimately

22:45

at two percent uh or slightly above as

22:49

they have targeted

22:51

or not

22:52

i would say the reality is is that

22:55

we we have a massive amount of liquidity

22:58

that is in the marketplace

23:01

uh and that money needs to go somewhere

23:04

we obviously we have and you you’re very

23:07

familiar with that we have the

23:10

uh the the global supply chain

23:13

uh

23:14

structure that has been uprooted by kobe

23:16

19 and

23:19

everyone now goes back from that

23:22

globalized

23:24

supply chain and

23:26

attempts to

23:28

onshore it again

23:30

at least to some extent and that all

23:32

comes with a cost right

23:34

so i think anyone who has been in

23:38

in active globally in in various

23:42

economies recognizes that

23:44

that all these shifts that are happening

23:47

or or have inflationary impact there is

23:50

just no other way around it

23:52

well when the producer price index goes

23:55

up 22

23:57

and it’s part of a food chain that

23:59

results in manufactured goods and

24:00

services

24:01

how is anyone to believe that

24:03

inflation’s only going to be two percent

24:04

at the end of that food chain so it’s

24:06

not possible yeah it doesn’t make any

24:07

sense

24:09

it doesn’t make any sense and yeah i

24:11

mean there’s going to be a certain

24:12

amount of onshoring i think what top

24:14

what will happen before that

24:17

is you know we spent a couple of decades

24:20

trying to get efficiency

24:22

built into supply chains so that nobody

24:25

was held

24:27

holding on no one was left holding on to

24:29

inventory for a minute longer than they

24:31

had to because that cost money

24:34

now we’re seeing

24:35

uh inventory being

24:37

being built in

24:39

various places in the supply chain to

24:41

provide security supply

24:42

because

24:44

security supply is far more important

24:48

than saving a couple of percentage

24:49

points uh on interest cost for for

24:52

holding that inventory especially with

24:54

the cost of money today so security

24:56

supplies is everything if you can’t ship

24:58

the product because you don’t have it

24:59

doesn’t matter

25:01

uh you know

25:02

it doesn’t matter that you saved a

25:03

couple of points of interest

25:05

yeah absolutely right i think it’s

25:08

important for revolution is also to

25:10

understand why that globalization

25:13

has been set in motion already

25:16

30 years ago

25:19

and it really picked up maybe 20 25

25:21

years ago i remember when when i was in

25:24

asia one of our activities was financing

25:28

all these global supply chains

25:31

and

25:32

the steps all these major companies like

25:36

like ibm like nike

25:38

in

25:39

consumer companies like disney went

25:42

through

25:43

was just uh

25:45

amazing to see right so they produced in

25:47

china then they realized though it’s too

25:49

expensive let’s move to the philippines

25:52

so it’s too expensive let’s move to

25:54

vietnam right and

25:57

that all worked out very well as long as

26:00

the supply chains all over moving as

26:04

anticipated but as we have seen now that

26:07

that’s uh

26:09

it

26:10

was disrupted very quickly and now

26:12

everyone is struggling just to get it

26:14

back moving

26:17

yeah absolutely and we’re seeing it in

26:18

energy as well i mean

26:20

you know i’m in europe right now as we

26:22

speak and

26:25

we see for example just the price of

26:27

natural gas

26:29

at a seaport in texas at a little over

26:32

five dollars per million btu that same

26:35

million btu is costing 30 in spain right

26:38

now in italy and france right and it

26:41

doesn’t cost you 25 to ship it across

26:43

the atlantic it just doesn’t you’re

26:45

talking 1.50 so the

26:47

the margins

26:49

on that sale are

26:50

massive but it speaks to spine demand

26:54

and bubbles in the supply chain and

26:56

those inefficiencies that have been

26:57

built into the system are going to take

26:59

some time to sort out

27:01

yeah definitely

27:03

you mentioned

27:05

the importance of the team earlier right

27:08

you you wrote the book magnetic capital

27:13

now obviously that is

27:15

is

27:16

the focus of that book is to raise uh

27:20

money for

27:22

for your business ventures whether it’s

27:24

real estate for anything else

27:27

but

27:28

obviously what is

27:30

absolutely crucial is that your

27:32

investors trust you

27:34

if they don’t trust you

27:37

nothing really matters right so can you

27:41

tell us a little bit some of your key

27:43

points

27:44

that of of your book i think by the way

27:47

it’s really

27:49

anyone who hasn’t read it it’s it’s uh

27:51

whether you

27:52

want to raise capital or just be in

27:54

business it’s really valuable points

 

 

27:57

that you’re

27:58

making in there but maybe you just can

27:59

highlight some of the

28:01

key elements when it comes to teams

28:05

yeah thank you

28:06

i learned to raise capital in the tech

28:08

industry and one of the hardest things

28:11

to do

28:12

is to go to somebody

28:14

who might have some money to invest and

28:16

say i have an idea

28:18

i have no proven track record uh the

28:20

market doesn’t exist

28:22

i have an idea do you want to invest

28:24

that’s one of the craziest things to do

28:26

and that is the tech industry it really

28:28

is so if you can learn to raise money in

28:30

that environment

28:32

something as simple as real estate where

28:34

there’s demonstrable metrics uh is easy

28:37

by comparison

28:39

or even buying an existing business

28:40

where there’s a track record and revenue

28:43

stream and profits and all the rest is

28:45

very very easy by comparison so the

28:47

hardest thing to do is say you know

28:50

you know

28:51

it’s easier to raise 300 million to buy

28:53

an existing business than to raise 5

28:55

million for an idea

28:57

and it sounds counterintuitive

28:59

but

29:00

it’s absolutely true and i can tell you

29:01

from firsthand experience

29:04

when i moved into the world of real

29:05

estate investing i discovered

29:08

that

29:09

the same things that made raising money

29:11

easy

29:12

in the world of technology also applied

29:14

here i had to relearn

29:16

the process of raising money and then

29:19

when i did i said oh

29:21

this is exactly the same as it was in

29:23

the tech industry only easier and when

29:26

it’s easy

29:28

it’s because there are five elements

29:30

that are in place five principles

29:32

and if they’re all in place raising

29:34

money is remarkably easy and if any one

29:36

of those are missing

29:38

then it gets very very hard very quickly

29:40

so briefly go through what those are

29:43

number one you’ve got to have a

29:45

relationship with your funding source

29:48

people are not going to part with

29:50

hundreds of thousands or millions of

29:51

dollars

29:52

folks that they don’t know

29:54

it’s just not going to happen so it

29:56

starts with relationship now

29:59

i want i’m using the word relationship

30:00

very deliberately because it’s not the

30:03

utilitarian

30:04

thing of going out there networking and

30:06

collecting business cards it’s really

30:08

genuine relationship

30:10

and you know think about developing

30:12

relationships at a core level

30:16

you’re not there to use people for

30:18

business you’re there to genuinely

30:21

develop

30:22

what might be a friendship what might be

30:26

you know maybe you help each other with

30:28

advice

30:29

introductions whatever it might be and

30:31

maybe you end up doing business together

30:33

at some point as well but it starts with

30:35

relationships that’s number one number

30:37

two

30:38

is you mentioned it before and that’s

30:40

trust so but and trust is not just are

30:43

you dealing with an honest person

30:45

that’s

30:46

that’s a given or it’s well it’s not a

30:48

given because as we’ve seen

30:50

that not everybody is trustworthy but

30:53

the the psychological contract of trust

30:56

has a lot of layers to it

30:58

it’s not just are you honest it’s things

31:02

like can i trust you to put together a

31:04

good plan can i trust you to hire the

31:06

right team can i trust you to

31:08

communicate in an open and transparent

31:09

way can i trust you with small

31:10

commitments and on and on and on there’s

31:13

a whole long

31:14

list

31:15

of these things and and as

31:18

if some of these are missing it starts

31:20

to chip away at that trust

31:22

so you know trust is not something

31:25

to be

31:26

um

31:28

managed or manipulated it’s something to

31:30

be built over time and to be mindful

31:33

that it’s something that can be damaged

31:36

or destroyed in a very short period of

31:38

time

31:40

number three you’ve got to have a track

31:42

record

31:42

and that’s

31:43

i guess a little bit related to trust

31:45

but it’s a very specific

31:47

piece of it

31:48

show me that you know what you’re doing

31:50

you know if you’ve done if you’re

31:52

looking for me to invest

31:54

in this medical office building

31:57

show me you’ve done 10 others and that

31:58

this one’s just like the the 10 that

32:01

went before it

32:02

that you’ve got a track record that you

32:04

know what you’re doing

32:05

and if you don’t know what you’re doing

32:07

then bring someone in your team who does

32:10

so you can borrow legitimately from

32:12

their track record

32:14

i feel perfectly confident in

32:16

development projects that we’re doing

32:18

but in some cases a lender will look at

32:20

me

32:21

and say victor you’re a rookie by

32:23

comparison

32:24

so i’ll bring people into my team to

32:27

have a tremendous amount of experience

32:29

one of my business partners has built

32:31

over 10 000 units so far in his career

32:34

so

32:35

when

32:36

you know when a lender

32:38

asks for track record well i push my

32:40

partner bob to the front of the line

32:42

and we present his track record even

32:45

though i feel perfectly confident and

32:46

confident in my own ability

32:49

they look at that track record and i can

32:51

give you lots of examples where we’ve

32:53

had you know where we’ve done that

32:56

number four

32:58

you’ve got to have a compelling

32:59

opportunity and this is where most

33:00

people start

33:01

you know everyone thinks that especially

33:03

the world will be able to investigate

33:04

it’s all about the deal

33:06

and it’s never about the deal you got to

33:08

have that and it’s gotta make sense but

33:10

it’s never about the deals but at the

33:12

end of the day you have to have a

33:13

compelling opportunity

33:15

and then finally you’ve gotta have

33:18

alignment

33:19

between the goals for the money and the

33:22

goals for the project and if that

33:23

perfect alignment doesn’t exist

33:26

don’t take the money it’s not going to

33:27

work if there’s any element of it that’s

33:29

forced it’s not going to work

33:31

and the analogy that i would use it’s a

33:33

little bit like

33:35

you know you go to the to the shopping

33:37

mall and you’re looking for a pair of

33:38

shoes and

33:39

in the window there’s the most beautiful

33:41

pair of shoes and it’s your lucky day

33:42

they’re on sale

33:44

but if they don’t fit you’re not a buyer

33:46

it doesn’t matter how beautiful they are

33:49

or

33:50

or

33:51

or how deeply discounted they are they

33:53

don’t fit you’re not a buyer so

33:56

you know what is that what is that fit

33:58

it’s well what’s the size of the

34:00

investment what is

34:01

the rate of return what’s the risk

34:03

what’s the security what’s the tax

34:04

consequence what’s the control structure

34:06

and on and on there’s a whole

34:09

laundry list of about a dozen factors

34:11

that you want to consider

34:13

and if you have a fit on

34:16

9 out of 10 or 11 out of 12

34:19

it can be seductive because it feels

34:21

like it almost works

34:23

and something that almost works usually

34:25

doesn’t so you’re really looking for

34:27

that perfect fit

34:28

and if there’s any part that’s forced

34:30

don’t do it

34:31

that’s it you do all those things uh

34:33

raising money is very very

34:34

straightforward

34:36

yeah uh

34:38

absolutely great points

34:40

right i think uh a lot of uh

34:44

syndicators or

34:46

people that start out and want to be

34:48

syndicators they

34:49

they really forget about that alignment

34:52

element that is so crucial right so

34:55

ultimately it’s not really what you want

34:58

as a as a deal sponsor or a developer

35:01

when you raise money you need to think

35:03

of what what are your what are the needs

35:06

of your investors right and do you align

35:08

with their with their needs rather than

35:11

telling them what what you think they

35:14

should

35:14

should believe right and i think that is

35:17

what very often gets lost in

35:20

in the messaging it’s only oh look this

35:22

great deal look what i have done

35:25

uh rather than really thinking

35:28

how all of this really aligns with with

35:30

the investors needs right

35:33

exactly

35:34

that’s exactly right

35:36

and

35:37

and by the way once you’ve raised the

35:38

money

35:39

you know a lot of people say okay i got

35:41

to the finish line well no you didn’t

35:42

now you just got to the start of the

35:44

project now that now the hard work

35:46

starts

35:47

raising the money is the easy part of

35:48

these projects it’s about the execution

35:51

it’s about the you know taking it right

35:54

through the process whether it’s

35:55

entitlement

35:57

construction construction management

35:59

uh

36:00

asset management uh leasing and sales

36:03

all of these

36:05

steps along the way you’re adding value

36:06

to the project and every single one of

36:08

those it’s an opportunity for you to

36:10

mess it up

36:11

so you’ve got to

36:12

have the right team in place for all of

36:15

these critical functions

36:16

um so you so that you have a viable

36:19

business at the end of the day

36:21

yeah

36:22

absolutely

36:24

so uh uh all great points uh victor you

36:28

i mentioned it initially you are uh the

36:31

host of a of a podcast that is uh not

36:34

just a a monthly bi-weekly weekly but a

36:38

daily podcast and you’re right now

36:41

you’re in rome right

36:43

and uh you’re still recording that daily

36:46

podcast

36:48

so

36:49

why don’t you tell our listeners what

36:51

that daily podcast day so and hopefully

36:55

many of them will will sign up for it

36:59

so the show is called the real estate

37:00

espresso podcast just like the italian

37:02

shot of coffee and it’s literally your

37:04

morning shot of what’s new in the world

37:06

of real estate investing

37:07

and the show speaks specifically to not

37:10

the rookie investor but the

37:11

sophisticated investor we have many

37:13

listeners that own thousands of units of

37:16

apartments we have you know people who

37:17

work for the major constructors the

37:19

show’s doing great

37:20

and

37:21

it’s a it’s a passion project

37:24

now

37:25

a little over three years into

37:27

the show and haven’t missed a heartbeat

37:29

so love producing that content on a

37:32

daily basis the weekday shows are just

37:34

me five minutes so it’s literally your

37:36

morning shot of espresso and the weekend

37:39

edition are interviews with notable

37:40

people from the world of real estate

37:41

investing so love to have you as a

37:43

listener

37:44

and it’s the real estate espresso

37:45

podcast yeah

37:47

that’s

37:48

absolutely great so when when do you

37:50

usually record the daily ones is it

37:52

first in the day

37:54

or is it later in the day what’s what’s

37:57

that you you must have some form of a

38:00

daily process so that you don’t miss

38:02

that beat right

38:04

if i’m if i’m organized i’d like to

38:06

record in the mornings or if i’m not

38:08

traveling or something like that so my

38:10

usual routine is to record in the

38:12

mornings

38:13

sometimes life gets in the way and

38:15

occasionally i’ll be recording at 11 30

38:17

at night i usually prefer not to do that

38:20

but i’m committed to the show and so

38:22

do what it takes to get get the show out

38:25

yeah okay so again i highly recommend

38:28

anyone to to listen to it write one of

38:31

the the recent ones was

38:34

about

38:34

evergrand in china

38:38

why they failed right and again it’s

38:41

it’s it’s not everyone can talk about it

38:44

but

38:45

it’s you you add additional element to

38:48

it because you you worked in in asia you

38:51

have visited these places you have that

38:53

additional insight and i think that’s

38:56

that’s always very valuable to to anyone

39:00

who is listening to podcasts

39:03

to hear people talk about

39:05

what what they see

39:07

and

39:09

what what their opinion is of what they

39:11

see based on on the the history they

39:14

have in in the business world and that

39:17

is a perfect example right

39:20

absolutely

39:21

you know there’s so many shows out there

39:22

there’s a lot of people putting out

39:25

content on a daily basis

39:27

and if all i was doing is regurgitating

39:30

what you could otherwise read in

39:31

bloomberg or the wall street journal it

39:33

wouldn’t be adding any value

39:35

we dig a little bit deeper we look at

39:37

what’s beneath the surface and provide

39:40

insights often and i’m amazed by this

39:43

quite frankly that often we report

39:45

things

39:47

weeks before you see them in the

39:48

mainstream news uh we it’s happened over

39:52

and over again

39:53

that you know we predict what’s going to

39:55

happen with oil prices or what’s going

39:56

to happen

39:58

in terms of the economic numbers even

40:00

before it’s published and i don’t know

40:02

quite how i do that quite frankly and

40:05

i’m not saying that to pat myself on the

40:06

back it’s just a it’s been an

40:09

observation now

40:10

from

40:11

the show after a few years that wow

40:15

boy the the news we’re really slow in

40:17

reporting that yeah so that’s been kind

40:19

of a neat part of the process yeah

40:21

that’s that’s great uh so victor uh

40:25

again uh our listeners can can listen to

40:28

your real estate espresso podcast

40:31

so please sign up for that

40:34

uh you have your uh book

40:37

that we already mentioned so please look

40:40

that up too

40:42

what other ways can can our listeners uh

40:46

reach out to you

40:48

my website is very simple it’s

40:50

victorjm.com

40:52

my last name is a little bit difficult

40:54

to spell so victorjm.com

40:56

and you can get in touch with me

40:58

directly to the website listen to the

41:00

podcast

41:02

happy to connect with your listeners

41:05

all right very good thanks again victor

41:08

for for coming on uh all the way from

41:11

across the

41:12

uh the atlantic it was really a pleasure

41:14

to have you on and uh

41:16

wish you a lot of success uh going

41:19

forward with all your projects

41:21

thank you so much yeah thanks