Brad Cartier is a real estate developer, writer, proptech investor and advisor, and marketing consultant in the real estate technology space. Brad is a cofounder of Blair Capital Asset Management which develops and manages missing middle multifamily in the Ottawa area. Brad is also an advisor and angel investor to a number of property technology startups, and a marketing mentor for the MetaProp accelerator program. Brad is also a writer on all things real estate for Briefcase where he is a co-founder, as well as other outlets such as Motley Fool, Roofstock, and Stessa.
- Spreading The Knowledge of Real Estate
- Taking Existing Buildings and Maximizing Them
- Having Relationships With Officials In Your County
- Acquiring, Building, and Managing Yourself
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
Full Transcript Below
Intro
Hi. My name is Rod Khleif, and I’m the host of “The Lifetime Cash Flow Through Real Estate Investing” podcast. And every week, I interview Multifamily Rock Stars and we talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons to get notified every Monday when a new episode comes out. Let’s get to it.
Rod
Welcome to another edition of How to Build a Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif and I’m thrilled you’re here. I’ve got a very interesting gentleman on the show today. His name is Brad Cartier and Brad is a real estate developer, writer. He’s a PropTech investor and just really impressed with just a brief introduction I’ve had to him already this morning. Brad, welcome to the show, my friend.
Brad
Yeah, thanks for having me on, Rod.
Rod
You bet. So, why don’t you give us a little background on who you are and, you know, what you do in the real estate space, and let’s just take it whatever direction we take it from there.
Brad
Yeah. So I’m a bit all over the place, but it all comes back to one basic premise, and that’s real estate. I’ve been a real estate investor now for 15 years, starting in pre-development condos and now, specializing in missing middle multifamily development. So my current development company, we buy, build, and hold missing middle multifamily and secondary and tertiary markets up here in Canada, just outside the–
Rod
So let me just interrupt for one second. Forgive me. So guys, what he means by missing middle multifamily is, you know, there’s a great business model where you just go in and find in an infill area, in an urban environment, you find, you know, beat up old property and you tear it down and you build new multifamily. So that’s what he means by that. Please continue. Forgive me.
Brad
Yeah, and there’s a longer history to that. And I’m happy to get into why missing middle multifamily is actually referred to as missing and why I feel like over the next decade it’s going to be a booming sub-sector of the multifamily industry for a number of reasons. But we can get into that later.
Rod
No, I’d actually love to talk about that, but please continue with your background. Forgive me for interrupting.
Brad
Yeah. No. So main focus on the development company, but also have a lot of experience in marketing and writing and angel investing in property technology companies. So, I have a number of contracts there, I do a number of angel investments. I’m a mentor for MetaProp, which is a VC out of the US. So yeah, just really enjoy writing, reading about real estate, and educating folks about it.
Rod
Yeah, and I was impressed with you, Brad, as I said when we first came on is– you know, one of the questions I ask is what’s somebody’s outcome for being on the show. And typically, there’s a financial outcome. You know, they want to raise money or they want to, you know, bring attention to a course or a program or this and that, and so, you know, I always try to find the motivation. The motivation is– for Brad is just to add value. So, you know, Brad has a newsletter called Briefcase, and it’s “briefcase.email”, and it’s just an educational platform for, you know, real estate investors and developers. So, I was really impressed with his response there. So let’s talk about your development because I actually think it’s a great business model as well. I know I’ve had people on the show that do it in Boston, you know, and some of these really high dollar urban markets like Boston and San Francisco and things like that. So, could you speak to, you know, the way you described it, missing middle– what do you call it? Missing middle–
Brad
Missing middle multifamily.
Rod
Yeah, missing middle multifamily. Okay.
Brad
Yeah, exactly. So, thanks for the opportunity, Rod. The way the– housing in North America, post World War II, as you know with the invention of, you know, the mass production of automobiles and urban sprawl. We’ve had quite a huge exodus out into these suburbs. Really to the neglect of these small– what we call now missing middle multifamily units which are anywhere from a duplex all the way up to–there are different definitions but–
Rod
20 units. Ten units. Whatever. Yeah.
Brad
Yeah, sort of that low to mid-rise, gentle densification, that type of living arrangement that’s been prominent in Europe for centuries that we’ve sort of neglected here in North America. If you look at, you know, National Association of Home Builder data on missing middle, specifically, it’s been woefully neglected over the last several decades to the point where it’s almost non-existent right now. Hence, the term missing. But it’s also the solution to a big part of the solution to our housing affordability and supply woes, because, you know, you don’t have to, you know, clear cut these huge areas for suburban development. It’s easier on the environment because typically you’re retrofitting. And for investors, there are a lot of positive headwinds with missing middle multifamily, particularly on the regulatory and zoning changes that are happening across Canada and the US with, you know, SB9 in California, Florida just issued a bunch of new upzoning regulations. And really what they’re saying is that we want more housing supply, but we want to make it easier on the environment, we want to make it easier on our neighborhood, so we’re going to enable this duplex, triplex, fourplex, six-plex model to allow people to more easily build them. And they don’t have to spend two years going through all these permitting and rezoning and, you know, spending–
Rod
Oh, so they’re speeding it up, they’re making it easier for the developer. So let me ask you a question. You said retrofit. I was thinking these were scratch off and rebuilds. So sometimes you’re taking an existing building and maximizing it. Is that accurate or is it both?
Brad
It’s both.
Rod
Okay.
Brad
But as you know, the term highest and best use.
Rod
Right.
Brad
If you can retrofit a bigger, older building into a fourplex, it’s much easier on the pocketbook and the environment than tearing it down and building new.
Rod
Yeah, for sure. Okay, so let me ask you this. Are you doing any conversions where you’ll find a small office building, for example? Have you done any of that, or has it been typically residential to residential? Just out of curiosity for me, this is to satisfy my curiosity.
Brad
Yeah. Well, from my experience specifically, it’s just been a ground-up development infill.
Rod
Okay, got it.
Brad
But certainly, there are conversions, there are retrofits, and there’s the sort of traditional infill development that can fit into that missing middle niche.
Rod
Yeah, and I would guess that in some of these markets, there’s probably grant money or low-interest loan money out there as well for, you know, anything affordable housing is the buzz right now. People can’t afford it. So, are you aware of any of that, at least domestically here in the United States?
Brad
Yeah, I mean, it really depends on the county and the state.
Rod
Right.
Brad
There is, you know, as you know, Opportunity Zone legislation.
Rod
Right.
Brad
And there are a lot of grants available for, you know, market-rate rents that hit a certain threshold of median income in that region. So I would encourage investors to look at those local grants, and they’re just making it cheaper now. Governments are wising up to the fact that you know, we need more housing. We need to enable the private sector as opposed to stand in their way, remove the regulations. There was a good study done by the Multifamily Council in the US that, you know, 40% of development costs go to some form of regulatory compliance.
Rod
Wow.
Brad
Whether it’s fees or permits or studies.
Rod
Wow.
Brad
And, you know, as a developer, I understand the need for some regulations, but, I mean, when you consider our current housing issues and sky high rents and sky high housing prices, why do you think they’re that way? It’s exactly because of the red tape that we put in front of developers and the zoning restrictions that we have across North America, which are 80% single-family zoning.
Rod
Yeah. Yeah. Now, has your experience to date been mostly in the Canadian environment, or have you done some stuff down here in the States as well?
Brad
From a development perspective, it’s only been Canada.
Rod
Right.
Brad
But like I said before, I’m steeped in the US industry from an informational standpoint. So happy to chat about that as well.
Rod
Yeah, no, I’d like to chat about that, so, you know, because I certainly have a lot of Canadian listeners. But without question, you know, the big bulk of my listener base and viewer base is domestic, here in the States. So, you know, if someone were to want to pursue this endeavor, I assume they’d either have to be a general contractor or hire a general contractor on their team. They’d need an architect. It probably starts with the architect, but it gives a high-level kind of an overview of the process?
Brad
Yeah, absolutely. So, all of our deals that we found and we have about six projects under works right now and a number of ones under management. And the key is, as you know, is you know, you make your money when you buy.
Rod
Right.
Brad
So most of our deals we find through off-market relationships. So having those initial relationships, those local relationships are extremely important.
Rod
Sorry to interrupt. Before you– I guess you even do that, you’ve got to geographically decide where you’re going to do this. Are there some tips as to what to look for in a particular, you know, urban environment, you know, before you go hog wild? Any comments there?
Brad
Yeah, I mean, generally from an investment standpoint, we want to be, you know, following the path of progress or looking for that gentrification line and sort of building on that line or near that line so that we have that long-term appreciation potential. I really like– and this is even prior to the pandemic. I love small towns both in the US and in Canada, you know, anywhere from ten to 50,000.
Rod
Wow.
Brad
Assuming the labor market, and it’s not just one anchor employer.
Rod
Right.
Brad
You know, there are very few purpose-built rentals in these communities, so vacancy rates are almost zero acquisition costs are much lower. I have a lot of friends who play in, you know, the big urban markets and before we were recording, you know, you were talking about Boston and others.
Rod
Right.
Brad
That’s totally, you know, you can do missing middle in those communities as well. And a lot of people are and it’s a game changer for those communities. But I like the smaller markets just from an affordability standpoint.
Rod
It makes complete sense. It makes complete sense. Now, I will say this, guys, you know, what he just said is super important. You don’t want a one-horse town from an employment standpoint. You know, like one big employer, a plant or a military base even, or any of that, because if the horse gets sick or dies or leaves town, you’re in a big trouble. But what you just said makes complete sense because there are probably tons of these beat-up old urban town centers in the smaller towns. And as long as you’ve got some diverse employment because jobs are the most important thing with multifamily, as long as you’ve got some diverse employment, I could totally see the numbers working in an environment like that. Now, of course, the rents are going to be less, but I would guess that it’s probably easier from a regulatory standpoint as well because you can build, you know, halfway decent relationships with some of the people, I mean, you know, in the county or city or whatever you’re dealing with. Is that an accurate statement as well?
Brad
Yeah, absolutely, Rod. And, you know, I can pick up the phone in any of these small markets that we’re operating in and call the town planner directly.
Rod
Right.
Brad
You know, we have lunches with the mayor versus, you know, a place like Boston or New York.
Rod
Right.
Brad
You know, a lot of these places are just black holes when it comes to permitting and all that kind of stuff.
Rod
Okay.
Brad
So, yes, the rents are lower in the smaller markets for sure, but because you’re building newer sort of B-plus, A-minus, is what we’re focusing on. Our rents actually tend to be a lot more comparable to the urban center close to us, which is Ottawa, and then when you factor in our, you know, acquisition costs that are, you know, about half the price of what they would be in an urban center, it tends to pencil out a lot better.
Rod
No, that makes complete sense. So, you identify one of these markets, then a little more logistics, high-level, of course. But if you could just give us a little more of an idea of somebody that’s considering this what they need to think about.
Brad
Yeah, I mean, the crux of all this, and you already mentioned it, Rod is your general contractor, whether that’s you or your builder. So we actually have builder partners that are equity shareholders in the projects that they operate on. So we’re able to do a lot of these construction projects almost at cost. So our cost per square foot is quite low. But yeah, the key to all this is, yes, you have to acquire right but if you have the wrong GC or someone who’s inexperienced, once you kick in that construction financing, as you know, that’s expensive money. So if you have delays, if you have arguments, if you have, you know, any kind of hiccups, you’re going to be stuck holding the bag. So that’s the key, is really finding that partner or whether it’s yourself to actually build the thing or retrofit.
Rod
How did you go about that selection process? Was it through referrals, I’m assuming, but I don’t want to assume, I’m just curious.
Brad
Yeah, mostly referrals in our network, like I said before, all of our deals are off-market, so, you know, the old adage, you’re only as strong as your network around you, I think it brings true. So spending a lot of time building that up in a particular market I think provides a lot of value long-term. It’s a bit like compound interest, so, you know, especially in small towns, reputations travel fast.
Rod
Oh, yeah.
Brad
So you can get a good sense of someone’s track record pretty quickly in a small community.
Rod
If you’re connected and you’ve got a lot of connections there. Yeah, I tell my students, my Warriors, they’re called got almost a little actually over a thousand around the country. And my most successful ones by far, something I’m really proud of, I’ll brag for a second, is they own somewhere in the 80 to 90,000 unit range now, and I’ve only been teaching for five years. Just super proud of that. But almost all of those 80 to 90 that we know of, thousand doors were done between Warriors, you know. It’s the connections that make these things happen. So, guys, here’s just another example of the power of that getting around. So even if you’re not in my Warrior group, you know, get out there, make relationships, get to you know, meet as many people as you can. Build deep relationships because your net worth is your network. And I know that’s cliche, but it’s the truth. So, you know, another thing you said, I just want to hammer home, you know, what an awesome strategy guys, if you bring in a general contractor that’s used to just making money, you know, that doesn’t have any equity in anything and you offer them equity in one of these builds and ultimately cash flow, that’s very desirable for a contractor. So if you find a reputable contractor that has good references, my God, that’s a home run to bring them on the team, let them do it for cost and basically, their contribution is that sweat equity piece. Am I describing that correctly, Brad?
Brad
Yes, absolutely, Rod. And that’s the pit. That’s exactly– you nailed it on the head.
Rod
Okay.
Brad
It’s., you know, you do the work upfront for the 12 months and we will pay. It’s not like you’re doing this for free.
Rod
Right. The subs get paid, but you just minimize or eliminate what you know— you’re– maybe a little bit for you but– you know, so you can survive. But yeah, right?
Brad
Yeah. They’re not taking the standard builder lift on materials and supplies and all that kind of stuff. And given that they have skin in the game, they’re a little bit more diligent when it comes to the construction.
Rod
Oh, yeah.
Brad
And then the pitch is, you know, we come in on the back end and property management manages it and we’ll send you dividend checks, you know, quarterly in perpetuity until we sell.
Rod
Beautiful thing. Beautiful thing. And then how do you find– I know you need a good architect, especially for new build and for, I suppose for a retrofit. Same thing, referrals. I mean, would that be the other key person in the project or am I missing anybody?
Brad
No, I think the key person is probably the property manager as well as the builder. But we do have a big team of contractors who do things like you know, geotechnical and architectural and surveys and [inaudible] and all that kind of stuff, but those are more peripheral team members. The core of– what I like to call a vertically integrated development company you know, where you acquire, build and manage yourself. The real key is the property management side because as you know that’s we–
Rod
Oh, sure. That’s the long-term– you know, and when we carve up, you know, a regular acquisition we purchase not a build, the asset management piece of the GP split is always the largest because that goes on for years. And so, yeah, no, that makes sense. Yeah, so you have GCs that wear the architect hat. Got it. Okay, interesting. Well, you know, this is really interesting. Let’s shift gears for a minute because you’re kind of unique in the fact that you do a lot of work and advise and you consult with real estate technology companies. Can you maybe– how did that happen, number one. And then number two, you know, what do you see and that’s exciting and cool., you know, maybe you can plug a couple, it’s fine, we can do that.
Brad
Yeah, I mean, how I got started was I just loved real estate and as I started investing in it, I started doing contract work with a couple of startups in Silicon Valley and it’s just sort of ballooned from there. And, yeah, I think, you know, there’s something like 9,000 PropTech companies globally right now. So there’s quite a lot of selection out there and it ranges from anything from, you know, tenant experience to access control to HVAC, you know, to your back end property management systems, to you know, tenant relations, screening, all that kind of stuff. So there are so many solutions out there for owners and investors to tap into and there are a number of directories out there that you can sort of parse through the different products that are available. The big one in the US is CREtech. There’s another big one as well, both in Europe and the European market in the US called Unissu. I tend to defer to those if I’m looking for solutions, and they both have really interesting procurement tools and I have no affiliation with either company, but they have interesting procurement tools that, you know, you can input what your needs are like, you know, access or security or package staff or whatever it is. And then they have teams that can suggest solutions for you. But, I mean–
Rod
They’ll be suggesting tech companies that are a solution for what your need is. Is that what I’m hearing? Okay, so you said CREtech, what was the international one? Could you spell that for me?
Brad
Yeah, it’s Unissu. Unissu. I believe it’s just “unissu.com”.
Rod
Unissu. Okay. Love it. Okay, that’s really helpful. So, okay–
Brad
And, I mean, just to go back to your second part of the question there, Rod. Sorry to interrupt.
Rod
No, that’s okay.
Brad
What’s been the most exciting, I think, you know, since the pandemic, you know, we were always on an upward trajectory with digital technology in the real estate industry, it’s just, as you know, with legacy industries, whether it’s banking or insurance or real estate, you know, it’s almost dragging, kicking and screaming. There’s a lot of legacy software out there that the bigger players are sort of holding onto and the fear of change and all that kind of stuff. But, you know, we were getting there slowly when the pandemic hit, everything just got accelerated out of necessity, there was no choice but to offer more hands-free digital solutions to your tenants, to your employees, and all that. So you’re sort of seeing the explosion of PropTech over the last couple of years. And even with venture capital, you know, drying up, you know, the printing presses are for the most part off in the US. Which I think is a good thing. But that means the era of free money is over. So, you know, VC money is drying up quite a bit, but you’re actually still seeing, you know, hundreds of millions of dollars a week poured into PropTech just because it is such an appealing industry for investors and, you know, startup investors.
Rod
Interesting. So I know, you know, you Angel Invest in some of these, as well. I mean, you get to cherry peek since you’re right there in the thick of it, seeing what’s exciting. Love it. Well, this is very interesting. And so you want to talk about your newsletter real quick because like I said, typically, we don’t allow promotion to speak up on the show, but the fact that you don’t monetize what you do, you’re just adding value is really admirable, number one. And that’s why I have no problem drilling down on a little bit. So what is Briefcase?
Brad
Yeah, so Briefcase is an educational newsletter focused entirely on real estate. We publish weekly on Friday mornings. I write all the pieces myself. And I have a co-founder as well who helps me promote and all the back-end stuff. But we have about 10,000 subscribers now. We have, you know, a 60% open rate, so a very engaged audience. And we really try and focus– we take a deep dive on one topic every week, whether it’s zoning, regulatory changes. Last week we spoke about, you know, the influx of real estate agents over the last couple of years and what that means for investors. We talk a lot about NIMBYs. That’s a topic that’s very near and dear to my heart. And the whole rezoning and upzoning and enabling more densification. So we pick a topic every week and write about it. And, you know, next week where we have a piece coming out about Pella, Ohio, and what the Pella Corp is doing there in terms of improving the–
Rod
The window company?
Brad
Yeah, exactly.
Rod
Okay. Okay. I’m sorry.
Brad
They’re doing some really cool stuff in Pella to try and encourage people to move there because housing is so scarce. So it’s a really good example of the private sector stepping in and enabling housing affordability. So it was a really great story. So we’re writing about that next week. So we pick a topic that, you know, we find very interesting, we take a deep dive on it, and we try to make it very accessible. We don’t like sort of the academic type content that we’re seeing out there for real estate entrepreneurs. And we kind of took a playbook from I don’t know if anyone has read the Morning Brew or The Hustle but just sort of those very not cheeky but conversational type newsletters. Make it a little bit more–
Rod
Instead of dry and boring. Got it.
Brad
Yeah. More conversational. We’ve got a lot of emojis and gifs’ and things like that. We try to have a little fun with it.
Rod
Nice. So it’s “briefcase.email”, guys. Well, listen, Brad, it’s been a real treat to have you on. I really appreciate you coming on and sharing some wisdom. And, you know, it’s a pleasure to have met you.
Brad
Yeah. Thanks, Rod. I appreciate it.
Rod
All right, take care.
Brad
You too.
Outro
Rod, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. Now, I know you’ve been hard at work helping our Warrior students do just that using our “ACT” methodology, which is Awareness, Close, and Transform. Can you explain to the listeners how they can get our help?
Rod
You bet. Guys, we’ve been going non-stop for three years building an amazing community of like-minded people and our coaching students which we call our Warriors have had extraordinary results. They’ve purchased thousands and thousands of units and last year we did over 1000 units with our students. And we’re looking to grow this group and take it to the next level. We’re looking for people who want to follow a proven framework that’s really step by step and then leverage our systems and network to raise equity, to find and close deals, and to build partnerships nationwide. Now, our Warrior community is finding success in any market cycle. So if you’re interested in finding out more about how you can become more of our incredible network and take advantage of the incredible opportunities that are coming very soon, apply to work with us at “MentorWithRod.com” or text “CRUSH” to “72345” and we’ll set up a call so you can check us out and we can check you out. That’s “MentorWithRod.com” or text “CRUSH” to “72345”.
