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Why Toronto is the Hottest Rental Market in the World Right Now

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Roman Bodnarchuk made his first investment at just 14 years old! Now after 35 years of experience in real estate markets around the world he says that he has never been more excited about a rental market than Toronto. Hear why he believes that and learn more about a very innovative solution Roman is now offering millennial renters and landlords who don’t want to be landlords in Toronto right now.

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Andrew la Fleur: Does Toronto have the hottest rental market in the world right now? Find out on today’s episode.

Speaker 2: Welcome to the True Condos Podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market, and condo investing in Toronto.

Andrew la Fleur: Welcome back to the show and thank you so much for listening. On today’s show I have a very special guest, Roman Bodnarchuk. Roman is a … Well, he does a lot of different things. One of the things he’s probably most known for is his company called, N5R, which is a sales and marketing company for real estate developers. He is also a developer himself, and investor, definitely an entrepreneur, a serial entrepreneur, always starting new businesses, and he’s been investing in real estate for a very, very long time.

You’ll hear more about that, and how he got started, incredible story, on today’s episode as we’re chatting with him. He believes that Toronto is the hottest rental market in the world. He’s got some very interesting … His latest business is looking to tap into that, and to the sharing economy. He’s going to tell us a little bit about that company there.

He’s also got an interesting proposition for landlords. If you are a landlord out there, and you own a property in the city of Toronto, with three or four bedrooms, then you’ll definitely want to listen, especially closely to this episode, because he’s got a specific offer that is of interest to you.

I’m looking forward to sharing this episode with you. Once again, make sure that you’re getting my weekly email updates, if you’re not already. Become a subscriber to my weekly emails. Learn more about unique investment opportunities that you don’t hear about anywhere else.

How do you sign up? Just go to truecondos.com and sign up anywhere on the site, and you will be part of that exclusive group, who’s receiving those emails from me every week. If you like this show, if you could leave a rating or a review on iTunes, that’d be great as well.

Here it is, my interview with Roman Bodnarchuk. All right, great. Roman, welcome to the show. Thanks for being here, really excited to chat with you today about real estate and all the crazy amazing projects you’re working on.

Roman: Thank you Andrew. It’s great that you made it to our office here in Yorkville today. It’s awesome to see you. It’s been a long time, so I’m really excited you came today. Thank you so much.

Andrew la Fleur: Yeah, we’ve been following each other, I think, online mostly over the last 10 years in the real estate marketing space. Yeah, it’s great to … I feel like we talk all the time, even though this is the second time we’ve ever seen each other face to face.

Roman: I’m one of your rating fans. I think you’re absolutely one of the best sales and marketing experts in the condominium field I’ve seen anywhere in the world. I’m a big fan of the work that you’ve done. I pay close attention to all the things that you do. I’m really excited that we’re having this conversation today.

Andrew la Fleur: Wow, that’s very kind words, especially coming from you, really appreciate it. Hopefully I’ll live up to the hype in your expectations here today, on this conversation we’re having.

I’ve seen you over the years. You’ve been involved with all sorts of different areas of the real estate market in Toronto, outside of Toronto. You have your own projects, which you’ve just been talking to me before we started recording about, as well as, you’re representing so many big clients and big builders locally, around the world. I think you have a really interesting perspective on things.

You’ve just made an interesting comment right before we started recording, which was … Maybe we’ll start there, which was, you said … Well, I’ll let you say it. Rental market in Toronto, talk to us about that.

Roman: Yeah. Andrew, I’m from Toronto. My first property I bought, I was 14 years old here in Toronto, near the High Park area, I was able to convince my [crosstalk 00:03:58] …

Andrew la Fleur: Hold on. Hold on. You slipped that in. You said, I think … What did you … 14 years old.

Roman: I went to [crosstalk 00:04:04] …

Andrew la Fleur: You bought a property when you were 14 years old.

Roman: My first property I ever bought, I was 14. I went to a Raymond Aaron Real Estate Seminar. It was a weekend seminar.

Andrew la Fleur: Okay.

Roman: I was so excited about [crosstalk 00:04:15] …

Andrew la Fleur: At 14.

Roman: Age of 14.

Andrew la Fleur: Why did you decide to, at 14, why were you even thinking about real estate? That’s very unusual. It’s amazing, obviously. [crosstalk 00:04:24] … Take me back a step.

Roman: Yeah, sure. I had bad asthma as a kid, so all my best friends were athletic. They were all doing tons of sports, and I couldn’t do all the sports they were doing. I thought, well, maybe I could do some business stuff. I saw an ad in the newspaper. This guy Raymond Aaron was doing a real estate seminar. It was at York University. It was a whole weekend seminar.

I went and I thought, this is a simple formula. You buy something, the bank gives you 80 percent of the money, as long as you’ve got rents that support it, you can make money. It didn’t seem that complicated to me.

The challenge I had is when I went to talk to the bank about this, they said, “Well we don’t give mortgages to 14 year olds.” My two biggest sales-

Andrew la Fleur: They’re funny like that, those banks.

Roman: Yeah, they’re a little bit tough. No stress tests back then, but it was still tough. I had to convince my parents, and my aunt and uncle, two partners, to cosign on the mortgage, and to do it. I had some of the money, but not all the money.

We bought a duplex, just off of High Park Road. What happened was, my Dad was a contractor. I knew that you could renovate things. We created a basement apartment, very quickly. I was able to rent that very quickly. Then, within 100 days, went to the bank and said, “Look we have a triplex now, here are the new rents, versus the old rents.” We got it reappraised. Within 100 days, they came back and said, “Oh, this is the new value.” We could take money off the table.

I thought this was amazing, how you could buy a place, 100 days later refinance it. With that extra money, I convinced my two partners, my parents, and my aunt and uncle, to buy the place right next door, and do the exact same thing.

Over the last 35 years, I’ve done this hundreds of times. I’ve done this now in a dozen countries. I love rental properties.

Andrew, I’ve been into some pretty bad economic times. I don’t know if you remember, we weren’t hit as hard in Canada, but I was living in the United States. We had an office in Las Vegas. I lived in Florida. About 100 percent of our clients, between 2005 and 2009, were in the U.S.

Andrew la Fleur: Okay.

Roman: Imagine your real estate marketing in the U.S., and the real estate market crashes. When it crashed, Andrew, in the U.S., it was really bad. I didn’t know there was so many chapter 7, chapter 11, there was a lot of chapters. Literally, we had 20 clients, 18 had filed for some sort of bankruptcy that year.

Andrew la Fleur: Mm-hmm (affirmative)

Roman: I’ve seen real estate go up and down. What’s exciting about what I can tell you is, when you own rental properties, that are cashflow positive, even when the market crashes, and even when the prices fell 50 percent, which is what I lived through in California, and Florida, and Arizona, and South Carolina, where literally, properties were at half, my cashflow positive properties weren’t affected. As a matter of fact, my rents went higher, because a lot of people lost their homes.

I’m a raving fan of rental properties, as long as they’re cash flow positive. It’s always been my criteria. For the last 20 years, I’ve worked with the best developers on the planet, in 15 countries, number one, and number two, developer in the world, with really smart people. I’ve learned that, if you buy properties that are [inaudible 00:07:24] cashflow, it doesn’t matter the market conditions, you’re always going to do fine.

To answer your question, never in my life have I been more excited about a rental market than Toronto. This is the hottest rental opportunity I think we’ll see in our lifetime. Again, this is a guy that’s been here my whole life. I can tell you, this is the hottest rental market in the world right now.

Andrew la Fleur: Incredible. Yeah, I’ve been preaching it on the podcast, and to people on my email list, obviously for years. The numbers are incredible. They’re off the charts. The growth in rental rates and everything, the demand for rentals in incredible. Why is this not maybe a bigger story? Why aren’t more people not paying attention to what’s happening in the market, do you think?

Roman: I think people don’t understand what’s happening. We had a data scientist that we’ve worked with for the last six months, you’re talking about a world-class data scientist doing comp analysis of Toronto rents. He would bring me in on a weekly basis, saying, “Roman, I think I’m doing something wrong.” I’d say, “Parhan, there’s nobody smarter than you. I don’t believe it. Let’s look at this.”

We’d be doing rental comps. Literally week over week, we’d see rents going up 10 percent, literally in a week. What you’re seeing in the press right now, you’re seeing Toronto rents are up 15 percent. We believe it’s way higher than that.

What’s happening right now in Toronto is, there’s more tech jobs that were created here than the three biggest other tech centers in North America combined. There was more tech jobs created in Toronto last year, than Silicon Valley, than L.A., New York combined.

Andrew la Fleur: Really, wow?

Roman: This week, IBM decides to move all their people to downtown Toronto. These things have massive effects on us. What’s happening is, we have a very high paid professional worker that wants to live in downtown Toronto, and there’s no accommodation for them.

Andrew la Fleur: Right.

Roman: The rents are off the charts. I think there’s a bunch of macro and micro forces in play. If you’re a landowner in Toronto, or a landlord in Toronto, this the right place, the right time in history, to be a landowner.

I think the reason you don’t hear more about it is, being a landlord is a really hard job. It’s a pain in the ass. I’ve been a landlord for 35 years. It’s hard. It’s difficult. As you get a sophisticated millennial renter, let’s talk about this millennial renter. This is a demographic that doesn’t like to do things. They expect things on demand.

You’ve got a tenant that is so difficult, that has such high expectations, and being a landlord is already difficult. What we’re creating, and we’ll get to this Andrew, the company we’re creating, it’s a management company to help landlords deal with the pressures of, what is it like dealing with a renter today? It’s much more difficult than it was.

The good news is, the rental rates are off the charts. The bad news is, you have a tenant that has tremendously high expectations.

Andrew la Fleur: Okay, which leads us to, I guess, you’re leading us into this Sociable Living, which is your new venture, your new idea, your new brainchild, which you’re working on. Sociable Living, tell us what it is, but it looks like it’s a WeWork, for living, for renting, for renters, it’s a co-working idea, taking that, which is a multi-billion dollar enterprise now. We’re doing this recording in a co-working space. You’re taking that concept and bringing it to rentals. 

Tell us how it works. How did you come up with this idea? Has it been done elsewhere? Is it going to work? Is it proven? Is it a big risk, how are you approaching it?

Roman: Let me give you some background now. Obviously you know a lot of this stuff Andrew, but some of your listeners might not even know what WeWork is, for example.

Andrew la Fleur: Sure.

Roman: Seven years ago, there was a company that got started, an Israeli guy has this idea about going to landlords, and saying, “I’ll rent your office floor. Maybe I’ll give you $30 a foot, and I’ll renovate it, make it really cool and hip for millennials, and I might rent it for $60.” Regus Business Center had been doing this for 30 years before that. This was not a new idea.

What WeWork did was, really understand their demographic, this millennial market, and really understood how to make it cool and hip. That’s what they did.

Today, so fast forward seven years, WeWork is the third most valuable private company on Earth today. The only ones more valuable are Uber and Airbnb, then there’s WeWork. They’re the largest landlord in the world today.

What’s interesting with WeWork is, they don’t own any real estate. The model was about leasing at X amount per foot, and subleasing at a different rate, but providing services. Co-living, in my opinion, is a much bigger opportunity, because residential real estate is a trillion-dollar business. There’s been zero innovation in residential real estate. Again, I can only speak from my last 35 years being in the business.

But, 58 percent of landlords don’t use a computer. Think about, 58 percent of landlords don’t use software. Just think about, what other business would survive today if you didn’t use software?

Andrew la Fleur: Right.

Roman: 58 percent of landlords today don’t use software. There’s been zero evolution. There’s been zero innovation in residential real estate.

If you rent a property in 2018, or if you did in the 1960’s, it’s really the same thing. The landlord wants a 12 month lease. You’ve got this incredible move-in process. You’ve got to go buy all of your stuff. You get movers. You’ve got to set up your own utilities. If you’ve never had a utility, then you’ve got to pay deposits to utility companies.

Andrew la Fleur: Moving sucks, basically.

Roman: Moving, the entire process-

Andrew la Fleur: Everyone, it’s just a known fact, you ask anyone, do you want to move? No, moving sucks.

Roman: The pain of it, it’s –

Andrew la Fleur: A lot of pain points.

Roman: In terms of stress, there’s death, divorce, and then there’s moving. These are our most stressful moments in life.

We believe there is, just like WeWork has done on the office rental, we believe that there’s room in innovation, in terms of residential real estate.

Let’s talk about the problems. The problem is, and we’ll bring it down to Toronto. Right now, we have a couple hundred-thousand people in Toronto living with roommates. We also have a few hundred-thousand other adult children, that have professional jobs, living at home. We have more millennials living at home. These are graduates. These are graduates with jobs, that are living with Mom and Dad, because they can’t afford to move out.

Here’s why, it costs between 25 to $35,000 to buy all the furniture that you need in your place. You’ve got to convince a landlord to rent to you. Then when you realize the average millennial is making, let’s say, $60,000 per year, but the average one-bedroom is $2200 a month, the numbers don’t line-up.

Andrew la Fleur: Right.

Roman: Now they’ve got to get a roommate. Now, how do you get a roommate? Start going to Craigslist, or Facebook, they’re trying to find somebody that’s not crazy to live with. Then what happens is, one person’s clean, one person’s dirty. They’ve got to figure out how to collect $82, the roommate lent them. There’s all these nuances of having a roommate, which isn’t fun.

We believe there’s a better way. We believe that by furnishing, to hotel standards … Imagine moving into a place that it’s like staying at a Four Seasons, or Ritz Carlton, where there’s brand standards, where you know exactly, it’s a Casper Mattress. You’ve got certain kind of thread count sheets. You’ve got certain toiletries. Imagine that type of experience, where the cleaning is done professionally every week. Your roommate’s not messy. Every week there’s cleaners.

Imagine, you don’t have to worry about getting the Windex, or the toilette paper. That’s all done for you. All you’ve got to worry about is your groceries.

Andrew la Fleur: Right.

Roman: What we’re creating is a better user experience for people living with roommates. It’s called Sociable Living. We also believe that we live in a society, which is very connected to social media, but no one has any social friends anymore. People aren’t socializing. You look at people out, they’re staring at their phones.

We think that by creating an environment with really cool, fun roommates, that you want to live with, you’re going to have a better life. We know all the studies about longevity and happiness, relate to your close relationships.

Most who are living in a condominium, by themselves, they don’t know their neighbors. They’re lonely, sitting there in Instagram wishing they could go and have friends. They don’t have that. We believe there’s a better alternative. That’s what we’re going to offer people. We’re starting in Toronto.

Andrew la Fleur: That all sounds amazing. Is it still at the idea stage, or have you got any properties going now, or tenants?

Roman: Yes. Yeah, two things we’ve done. We’re renovating our first property. It’ll be open November 1st. It will be our first, our flagship location. It’s an area called, Wallace Walk. It’s literally a hundred steps from the UP Express train.

The reason we think this is important, and we spent three years studying a location was, you can walk 100 steps and you can be on the UP Express, and you could be at Union in under eight minutes. Imagine, air conditioned, for $6.50 you’re at Union. You couldn’t take a Ferrari, a Tesla, any quicker.  [inaudible 00:16:22] get you there even cheaper.

Andrew la Fleur: Oh definitely not quicker.

Roman: We’ve picked a perfect location. We believe it’s the next Liberty Village. We had an office in Liberty Village a decade ago, before it was cool and hip. We think this has all the semblances of what Liberty Village is going to be like.

This is the same kind of feel. It feels like-

Andrew la Fleur: Yeah, it’s a great area, a lot going on there.

Roman: A lot going on-

Andrew la Fleur: The transit connection, the UP Express has really changed it a lot.

Roman: Event the pathway, the rail path, they have that goes four kilometers one way, now it’s expanding right into Liberty Village. You could literally walk, or bike ride, right downtown, not get killed. It’s really exciting.

That’s our first location. We also have an agreement with Timber Creek, which is one of the largest landlords in the country. They’re giving us an entire floor of a 40 story purpose built tower.

Andrew la Fleur: Oh okay.

Roman: Our business model is to develop our own units, as well as partner with real estate developers.

Andrew la Fleur: Right.

Roman: The reason I was excited to talk to you today Andrew is, I know you have a lot of landlords that, maybe love real estate, love the idea of owning real estate, and there’s no better place in the world to own real estate than in Toronto, but don’t want the brain damage of dealing with tenants.

Andrew la Fleur: They don’t want to be a landlord.

Roman: They don’t want to be a landlord, and I get it. Having been a landlord for decades, it’s hard work. The good news is, there wasn’t really a solution before. Airbnb is a great solution if you want to do short term rentals.

But what if you don’t want to do short term rentals? What if you want to have annual leases, and you want somebody to take care of all that for you? There really wasn’t a viable alternative. We believe we’re offering that.

What our mandate is, we’re looking for newer properties, built in the last five or ten years, three or more bedrooms, which I know is tough to find. But when you look at most town homes, semi-detached, those kind of … There’s a lot of three bedroom units in those. We’re looking for landlords that will … We’re going to give them great market rents, and we want to do 10 year leases with these landlords.

Andrew la Fleur: Hold on, 10 year leases.

Roman: We’ll do 10 year leases.

Andrew la Fleur: Wow.

Roman: With any landlord that has three plus bedrooms, in some core areas.

Andrew la Fleur: Obviously that’s going to be very attractive to a landlord, with a two or three bedroom unit.

Roman: Yeah. I think so. We’re paying market rates and we’re doing 10 year deals.

Andrew la Fleur: Yeah, it’s like, basically 10 years of guaranteed rent, pretty much no vacancies.

Roman: No vacancies.

Andrew la Fleur: No turnovers.

Roman: No turnovers.

Andrew la Fleur: No move-in move-outs.

Roman: None of that stuff.

Andrew la Fleur: You just like, here, I’ll lock it down, five, 10 years. I’ll pay you every month.

Roman: Yeah, and no different … That’s what WeWork has done. WeWork comes in with 10, 15 year leases.[inaudible 00:18:48] seen the residential side. We’ll manage it.

Andrew la Fleur: How do the numbers work, as in investor, and as, a lot of people listening, just they think, wow, that’s a really cool idea? Can you give us, I don’t know if, secret sauce or whatever, but can you give us a rough idea? How do the numbers work? Obviously you’re going to make a profit. You rent it for how much? Then you sublet it out.

Roman: Sure. Let’s say we’re renting at $2 a foot. We’re subletting it out at $4 a foot. There’s a spread. Now when we add the utilities, the furniture, the cleaning, all the hotel sheets, the towels, because again, we’re providing hotel-like service, we believe the margin will be 20 percent.

It’s no different than when the Four Seasons, or Marriott, or any hotel you ever stayed in, those hotel brands don’t own any real estate either. They have an agreement, a management agreement, with a landlord.

Andrew la Fleur: A lot of people don’t realize that.

Roman: Yeah, they don’t realize that.

Andrew la Fleur: When you’re at the Four Seasons, you’re not really at the Four Seasons.

Roman: They don’t own any real estate. Every hotel you’ve ever stayed at, it’s a management agreement with a landlord. We’re offering the same agreements and the same levels of service. We’re going in outfitting the place, everything from painting, to all the things that you’d have to do, and we’re running it like a brand.

Just like if you were to sublease your space for 10 years to a Four Seasons, or Marriott, it’s the same thing.

Andrew la Fleur: Right.

Roman: Every five years, we throw out all of our furniture, and we start all brand new. In hotels, they do a 10 year cycle.

Andrew la Fleur: Right.

Roman: That’s our business. I think under the new Airbnb rules, or I don’t know what they call the new legislation that’s coming to Toronto, a lot of landlords that have a lot of rental units, and they’re doing Airbnb, they’re not going to be allowed to do that moving forward. Unless it’s your primary residence, you can’t do Airbnb. 

We think a lot of landlords will be interested in our model, because it will comply with the new legislation.

Andrew la Fleur: Are you allowing the tenants, I guess, I’m assuming, the tenants can move around to different properties. Is that a big perk for the tenants? You could live in Liberty Village for six months, and, I’m going to go check out Yorkville.

Roman: This is the biggest perk we have.

Andrew la Fleur: You can just pack your suitcase and you’re gone.

Roman: You got it. For 20 years, I’ve been pre-marketing. We’ve been pre-marketing condominiums. That’s been our business for 20 years. We’ve done 10,000 transactions. What gets people to buy a condo are the amenities. They see the pool, the gym, the sauna, the steam room. They’re like, “Oh my gosh.” Now they may never use those things, but that’s what …

Andrew la Fleur: Most don’t.

Roman: Most don’t use it.

Andrew la Fleur: But they buy because of it.

Roman: They’ve got to pay those condo fees forever, as a result, but that’s what gets them in. We believe that the amenity that everybody wants today, moving forward, this millennial, and even the generation behind the millennial, it’s called freedom.

Andrew la Fleur: Right.

Roman: Freedom gives you a chance to … You can rent from us today at Wallace Walk. Then, let’s say, in six months, or in three months, your job changes. You want, maybe … You have a job now in Mississuaga, and maybe our Kipling location is better for you.  Or, your job shifts and you’re now working in Scarborough, and one of our other locations work better for you. With our lease, you can absolutely, with 30 days notice, move to any of our other properties that are available.

Instead of you committing to that year, which you would at any standard lease, and you’re locked into it, and you’ve got to try and figure, how do you get rid of your lease, all that, and the pain of moving, and the cost of moving … The average move, Andrew, just on a one-bedroom apartment is $4000.

Andrew la Fleur: Yeah.

Roman: These are all costs you’ve got to factor in. The fact that all you’ve got to do is bring your toothbrush, your backpack, and we can move you in, in five minutes, this is a game changer.

Andrew la Fleur: Right.

Roman: I think our business is predicated on people living with really cool people, that we’ve done criminal checks, background checks, personality surveys, and interviews with. No one’s got a more thorough vetting process for your roommate.

Andrew la Fleur: Okay.

Roman: We’re building an app that’s … There’s a dating app called-

Andrew la Fleur: If you don’t like your roommate, you can just move.

Roman: You can absolutely just move. You have the freedom to do that.

Andrew la Fleur: Right.

Roman: We’re trying to take all the hassles of roommate, and all the things that constrain real estate-

Andrew la Fleur: Long term commitments, yeah.

Roman: Because the millennial, the average millennial’s now working nine months at the same job. They’re not there for five years, like it used to be.

Andrew la Fleur: Right.

Roman: They want freedom. We’re also working on co-living exchange program with other co-living companies around the world. If you get a job offer in New York, or L.A., or Miami, we’re working on an exchange program that you’ll be able to have an exchange. It won’t just be our inventory that you can move into, other companies. We’ll be the first company to offer that as well.

We really think this freedom is going to be the ultimate amenity that we can offer. I think it’s going to be much more exciting than the pool that nobody uses, or the gym that people aren’t going to.

Andrew la Fleur: How much, from the tenant perspective, their typical target millennial that you’re targeting, young professional, what are they paying for a room in your space, versus just like you said, getting their own apartment altogether? Is it-

Roman: Around $2000 a month. I think $1950 per month is our starting price. It sounds like it’s a lot of money, until you see what’s included. Once you break it down, utilities, cleaning, wifi, cable … Once you break it all down, and you look at, okay, so if I was to move into my own one-bedroom, or studio, it’s less expensive.

Andrew la Fleur: A studio is $2000 a month downtown right now.

Roman: Right, and that’s unfurnished.

Andrew la Fleur: Unfurnished. Yeah.

Roman: We have literally the best, hottest designers.

Andrew la Fleur: You’re locked in to a 12 month lease.

Roman: 12 month … We’re putting in, like … This is like living in a showroom that, West Elm showroom. You’re living in a showroom, and you have zero stress. If the TV was to break, if something … It’s like, you could pick up a phone-

Andrew la Fleur: What’s included? I assume internet, all utilities.

Roman: It’s all [crosstalk 00:24:21] … Everything’s included except your food. You have to buy your own food. Other than food, everything else is inclusive.

Andrew la Fleur: Right.

Roman: We think we [crosstalk 00:24:31] …

Andrew la Fleur: Could you see … Is your longer term goal to build an entire building, where the entire building is 100 percent, you know what I mean?

Roman: I think it’s going to move that way, and I think-

Andrew la Fleur: Has anybody done that in New York, or elsewhere yet?

Roman: They are. They are. There’s a lot of companies. There’s a company called Common. It’s happening already in New York. It’s happening in Silicon Valley. Toronto, we’re a little bit behind on this trend.

Andrew la Fleur: Right.

Roman: But I think the fundamentals actually work better in Toronto, than in some of those other cities. This will happen. I think what we’re offering is a service level that people will never go back to.

I was speaking to some friends last night. We talked about cleaning services. Once you’ve had a cleaning lady-

Andrew la Fleur: If you’ve stayed a night in the Four Seasons, it’s hard to go anywhere else.

Roman: You get a sense of [crosstalk 00:25:10] … It’s hard to get down. Even simple things like, once you’ve had [crosstalk 00:25:14] a cleaner, once you’ve had someone cleaning your home, you never go back.

Andrew la Fleur: Right.

Roman: What we believe is, even if you outgrow roommates, and you want to move-

Andrew la Fleur: Once you move without hiring a moving truck, you never go back.

Roman: Right. Yeah, or having one bill on your credit card, where everything is billed.

Andrew la Fleur: Makes sense.

Roman: We think what will happen is, as people move, and they want to move on … Maybe it’s a couple and they want to live on their own to a one-bedroom, we actually think they’re going to want Sociable Living to manage that for them. Even though they’ll be paying us a 20 percent premium, we still believe they’re going to want those services.

We’re starting off the business on a roommate model, with 2, 3 bedrooms, but we actually believe that the customers, as they evolve to their own single unit, they’re going to want-

Andrew la Fleur: So they get married.

Roman: They get married. They’re still going to want to use us to manage their lifestyle.

Andrew la Fleur: They want their own place.

Roman: Just think about it Andrew, if you’re working, and you’ve got to take a day off to meet the Bell guy, or day off to meet the Rogers guy, or day off to … We can’t do that. We’re too busy.

Andrew la Fleur: Right.

Roman: People understand the value of time and money. If I’m charging a 20 percent premium, we know people will be very happy to pay that 20 percent, to take all the aggravation away from them.

Andrew la Fleur: Right. Then it goes to demographic trends as well with people staying single longer, getting married later, having kids later. People need places to live for much longer than they did, 10, 20, 30 years ago.

Roman: The ages are changing. Our average customer-

Andrew la Fleur: They’re making more and more money.

Roman: They’re making more money. Our average customer’s actually age is 30, not 20 as you might expect.

Andrew la Fleur: Right.

Roman: There’s an interesting thing happened in our neighborhood. There’s a beautiful house across the street from us, and it was sold. It was a beautiful 3 1/2 million dollar house. I noticed they had six cars. I met my neighbor and I said, “You guys have a lot of cars.” They said, “Well, here’s what happened. We thought we were becoming empty nesters, because all of our kids went to professional schools. One’s an engineer. One’s an accountant. One’s a doctor, all really successful.”

Andrew la Fleur: Yeah, sure.

Roman: Well what really happened were, they got jobs in Toronto, and they couldn’t afford to move out. All the kids moved back in their home. Now they’re juggling six cars. This millennial, even though they’re working, they’re professionals, they can’t afford to live on their own.

Andrew la Fleur: Yeah. You could live in a three million dollar home, or you could rent some studio condo. Yeah.

Roman: That’s right. That’s right.

Andrew la Fleur: A lot of those people here are choosing that. But if they had a full service, Four Seasons sort of option-

Roman: Experience with really cool people.

Andrew la Fleur: Yeah, right.

Roman: That’s what we’re doing. We’re excited to talk to any landlords that love real estate but don’t want the hassles of being a landlord. There’s some successful companies.

I had lunch today with a company called, Airsorted. Airsorted is a company that they help people with short-term rentals. If you want to do like Airbnb rentals, but you don’t want the hassle, they do it for you.

Andrew la Fleur: Like a manager of Airbnbs.

Roman: Like a manager of Airbnb.

Andrew la Fleur: Okay.

Roman: They deal with the cleaners, and changing the sheets and towels. There’s a lot of people that love real estate, Andrew. I’m sure over the years you’ve met lots of people who love it, but they’re scared, or the pain of, or that one bad rental experience has scarred them for life. They don’t want that business.

Andrew la Fleur: Sure.

Roman: We want that responsibility. We want to be your manager, if you have a three bedroom plus place in downtown Toronto.

Andrew la Fleur: Interesting. Wow. Very cool. If people are out there listening, and they want to rent a place from you, are you taking rental applications for these, for your November 1st, or how’s that going?

Roman: What’s amazing is, we haven’t done an ad or anything. We already have a few hundred people on a waiting list. It’s exciting. It’s called, SociableLiving.com. We know there’s a tremendous need. Our issue now is getting more inventory.

Andrew la Fleur: Right.

Roman: SociableLiving.com is where people can register, and they can get on a wait list. Again, there’s a screening process. Again, we do criminal checks. We do background checks, personality. We’re looking for really great tenants that want to have a fun living arrangement. We’re not looking for people that are just looking for a room, we’re looking for people who want to build a great community with us.

Andrew la Fleur: Right.

Roman: It’s a special kind of tenant we’re looking for, but we’re excited about the growth in Toronto. We’d love to meet any landlords also, that have inventory, that want to rent us places for five, 10 year leases.

Andrew la Fleur: Wow. Interesting. Let’s shift gears a bit and let’s talk about the Toronto real estate market in general. Again, they’re just interested to hear what you think about it, having experience around the world, having experience in many other markets within Ontario as well. Stepping aside from the rental market now, and just looking at price, the resale market, and the pre-construction market, what’s your take on what the market looks like today, specifically talking to the real estate investor who’s looking for opportunities?

Roman: I think what’s exciting, Andrew, and I’ve been negative on Toronto previously, a couple years, because I thought correction was coming. Here’s the good news. The correction happened. Prices are back to where they were. It’s going to continue to go.

I was warning about this correction, and it really did happen. At one point we were down 20 percent. Believe it or not, things did correct. But the good news is, we’ve survived the correction. We’ve survived the most difficult stress test. 

There’s no country in the world that has this ridiculous mortgage stress test that we have.

Andrew la Fleur: Right. It’s the stupidest …

Roman: It’s the stupidest, craziest thing. Eventually that will be over. Somebody will get rid of that legislation. But regardless, despite our correction, despite the stress test, and all these crazy rules the government has put on us, despite all that, our market continues to grow.

Andrew la Fleur: Right.

Roman: I think that Toronto has survived this test very well. I think in 10 years, people that had an opportunity to buy today are going to hate themselves.

Andrew la Fleur: What do you make of the market, in the fact, like you said, you’ve seen these big crashes in the U.S., where you’ve seen this relationship between the rental market and the resale market, where they tend to … If one is going down, the other tends to go up.

What’s interesting is, in Toronto, the rental market is shooting up, and the resale, the for sale market, is also shooting up, especially the condo market. Both going up together at the same time at a very high rate, how do you interpret that?

Roman: I think it’s [crosstalk 00:31:28] …

Andrew la Fleur: What does that tell us about the market?

Roman: In my experience in real estate, it’s always about employment. I think we finally have some great high paying jobs. Toronto has the wind at its back now. It’s one of the top AI places in the world.

The fact that Google could have gone to any city on Earth to build its Smart City, and they’re doing it here in Toronto, I think that you’re going to see-

Andrew la Fleur: Are we getting Amazon?

Roman: [inaudible 00:31:49][inaudible 00:31:49] Hopefully we’ll get Amazon. If not Amazon, have a big presence here-

Andrew la Fleur: You got any inside information on that?

Roman: I don’t, but I can’t imagine that Facebook, and [crosstalk 00:31:54] …

Andrew la Fleur: Quite a few potential tenants there for you, if they come.

Roman: This is a tech hub of the world.

Andrew la Fleur: Yes.

Roman: What happens is, this high paying-

Andrew la Fleur: And financial.

Roman: And financial.

Andrew la Fleur: Yeah.

Roman: These people need a place to live. I can’t imagine that over the next 10 years, Toronto is an incredible place to invest. I do have a predisposition for … I do like town homes. I do like any time where there’s something on the ground.

But I think that anything you can buy, that hopefully will cover itself, or has some kind of positive cashflow … Just so you know, I do believe anywhere that has furnished rentals, can have cashflow positive. Maybe as an unfurnished rental, maybe has negative cashflow, but the moment you move to furnished rentals, I believe that even … You would know better than I do Andrew. I believe anything that has a furnished rental right now in Toronto, will have a positive cashflow.

I think you can’t go wrong. That’s my opinion. The interest rates are still ridiculously low. As long as we can lock into those rates, even on five year basis, I think it’s a fantastic opportunity.

Andrew la Fleur: How do you see other markets in Ontario? One of the things that is a big trend with my clients this year, and people that I’m talking to every day who are interested in investing in real estate and condos in particular, there’s more and more people who are interested, but there’s more and more people who are priced out of Toronto.

Roman: Listen, it’s a real issue. You know I do a lot of business in this town called Smooth Rock Falls, just to give you the opposite Toronto story. I’ve been buying houses, $70,000 to $100,000 houses. Think about this. I’m buying houses. I’ll give you a lease I did today.

I bought a house in December for $70,000. I don’t think I spent more than $10,000, in terms of upgrading it. I’ve leased it now for $1300 a month, till 2020. Think about the cashflow in that. I think the mortgage on that property’s about $40,000.

Andrew la Fleur: That’s pretty good.

Roman: It’s about $200 a month, and the rent is $1300 a month until 2020. Listen, there’s opportunities everywhere. The question is, do you want to be a landlord in other cities? It’s hard enough to be a landlord when the property’s down the street from you. As you start getting into other cities, it gets more difficult. But I think there’s some incredible opportunities in small towns, in other markets as well.

But I do think a decade from now, if I look at appreciation, I think Toronto will eclipse, anything that I’m doing now in a smaller market.

Andrew la Fleur: Right.

Roman: I think there’s a cashflow argument to be made for smaller markets, but I think in terms of appreciation, Toronto will win out over any small town.

Andrew la Fleur: Driven by the job market.

Roman: By the job market, absolutely.

Andrew la Fleur: Yeah. It’s interesting. You think that the job market, and the growth in that sector, especially the tech sector, you’re saying it’s grossly under-reported on, or underappreciated, or misunderstood?

Roman: Yeah. I think we’re early on, on the terms of the tech opportunity that Toronto has. We’ve been a laggard. I think over the next decade, you’re going to be seeing Toronto being recognized globally.

Andrew la Fleur: Actually just today, just this morning, Uber … I don’t know if you saw that. Uber announced another, I think, $200 million new investment downtown Toronto, more jobs.

Roman: Yeah. It’s going to keep happening. These jobs, just to give you an example, I have an AI company. I was trying to hire some AI people. We’re talking about people that are in university. I’m trying to hire people from the university. I thought we gave them a very good offer, a very good offer.

The gentleman comes back. He says, “Well, your offer was very good. Thank you so much, love to work with you, but I just got this through Facebook, and they’re giving me a quarter million dollar signing bonus.” That was a signing bonus.

Andrew la Fleur: He’s in university.

Roman: He’s in university.

Andrew la Fleur: Okay.

Roman: What’s happening is, there’s a rush for talent in this city. The salaries in tech are incredible. We’ve never seen this in Toronto.

Andrew la Fleur: Right.

Roman: Toronto has had an issue with … We’ve had stagnant wages for decades. Well, that’s changing now, because of the technology business. I think you’re going to see a new boom.

My bet is, over the next 10 years, on the luxury side of the rental market, it’s going to be exciting. Now, on the other side, that aren’t affected by tech, maybe not so much. But on the luxury side …

I remember when I met with Brad Lamb. He was working on a project. I know you’re a friend with Brad. This is years ago. We did a project. He said, “You know Roman, I think that we’re going to get $3 a foot in rents for this building.” I think the project was called, King Charlotte. I said, “Brad, are you serious?” He goes, “Yeah.” He goes, “I think we’ll get three bucks rent.” He was forecasting a couple years ahead of time.

Andrew la Fleur: This was only about five, six years ago.

Roman: Yeah. I’m like, “Brad, you know, it sounds aggressive, maybe.” Now, I’m seeing right now, $5 rents per foot. The rents that we’re seeing today, I think are really giving us a sense of what’s happening. But I think if you follow technology companies right now, because they’re the dominant companies, they’re loving Toronto. They’re just getting started here.

Andrew la Fleur: Interesting.

Roman: I think that we have a huge opportunity, again, on a luxury side.

Andrew la Fleur: Right.

Roman: I think it goes well, if you’ve got a [inaudible 00:37:02] that meets a need of a luxury millennial, that doesn’t want to commit, that wants all the services … Again, that’s why we built Sociable Living, for that demographic.

Andrew la Fleur: Interesting. I know you spend a lot of time in the Muskokas and Collingwood as well. That’s an interesting market as well. What are you seeing in cottage country market, Muskoka, Collingwood in particular? There’s a lot of development happening in Collingwood, I know.

Roman: It’s booming.

Andrew la Fleur: Muskoka, I’m hearing that it’s like a record year for the cottage market.

Roman: It is. It is.

Andrew la Fleur: What are you seeing in those markets, and what does that tell you? How do you tie that into the bigger picture of what’s happening?

Roman: Muskoka is a great market. The rents are very high. If you want to do, for example, luxury rentals, in Muskoka’s rental market. The challenge in Muskoka has been that they’re anti-development. It’s very difficult to get projects done. There’s very few projects.

Andrew la Fleur: Sure.

Roman: Listen, there’s a tremendous wealth in the city of Toronto. When you become wealthy in Toronto, you love to get out of the city on weekends. There’s a few places that we tend to gravitate to, and Collingwood is one, and Muskoka is one. I think they have a built-in market. I’ve seen a tremendous boom in Blue Mountain, the last couple years, like literally the last 12 to 18 months.

To give you an example, I bought a place, pre-construction. It doubled in value in two years. These are incredible things. This isn’t in Collingwood. I think there’s a pent-up demand of baby boomers that are now able to work two or three days a week outside of the city.

Andrew la Fleur: Yeah.

Roman: Yes, I’m seeing that boom happening in Collingwood, which I’m really bullish on Collingwood. I think there’s a lot of growth there.

Andrew la Fleur: Interesting.

Roman: Muskoka, I think is still more of an end user market. It’s a great place to go, but it’s kind of dead outside the summer. While Blue Mountain and Collingwood, specifically, it’s booming because it’s a 12 month season. You’ve got a place that you can be in 90 minutes. I would be very bullish on any projects in Collingwood.

Andrew la Fleur: Interesting. Interesting. Any other areas, any other areas within striking distance of Toronto that are maybe on your radar screen, or you’re seeing interesting things happen, or there’s reason for a lot of optimism? Just curious.

Roman: I think Canadians need to really think deep and hard about their lifestyle, and U.S., and the weather, in places like Florida. They make a lot of sense to me. You can buy a beautiful condo in great places in Florida for $300 a foot. At $400 a foot, it’s spectacular.

Andrew la Fleur: Right.

Roman: The rents support it. I think that you need to think beyond Canada. It’s not scary to buy in the U.S. I think it’s okay. The U.S. economy is booming. It will continue to boom for a long time.

I do think that outside of Toronto, Muskoka, Collingwood, think about where else you’d like to be at.  I’ve owned condos in Phoenix, owned places in Florida. These are just great places. I think they will continue to do well as well, long term as well.

Andrew la Fleur: Interesting. Roman, it’s been great chatting with you. Is there anything I forgot to ask you, that you wished I had of asked you in this chat we’ve been having?

Roman: No. Andrew, I think you’ve done an incredible job to all of your customers. You’ve done such a good job of analyzing market trends, and being very transparent with, what are the hot projects. I think, as long as we let people know the long-term side … I think we’re not day traders here. Real estate is a long-term play.

Andrew la Fleur: Absolutely.

Roman: I think if your investors look at the long-term of real estate, if they don’t have the appetite, or the time, to manage their own properties, giving them an alternative of, hey, here’s a company that will manage their property. They’re still going to make great returns, but like mutual funds, they can sleep at night. They don’t have to get calls on the weekends to deal with backed-up toilets.

Andrew la Fleur: Right.

Roman: We would love to be their partner on their real estate property management.

Andrew la Fleur: Awesome, great. If people want to get ahold of you, or learn more about Sociable Living, N5R, your various other companies, where’s the best place for people to go, or do you want to give an email or phone number?

Roman: SociableLiving.com. Yeah, Sociable Living is a great place if you want to learn about co-housing. We’re going to spend a lot more time educating people about co-living, and co-housing. We’re really passionate about this.

Sociable Living is great for that. Then for real estate developers that might be listening, N5R.com is our company for 20 years. We pre-sold now over $5 billion of projects in 15 countries. We always like to look for great projects around the world.

Andrew la Fleur: Great. Okay, we’ll definitely include a link to that in the show notes for this episode. Thank you so much for your time today.

Roman: Thank you very much. I appreciate it.

Speaker 2: Thanks for listening to the True Condos Podcast. Remember, your positive reviews make a big difference to the show. To learn more about condo investing, become a True Condo subscriber by visiting TrueCondos.com.

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