Adding Coach Houses at Scale

Brady McDonald

Daniel: Good evening everybody. What a cute little couple there in that picture, Brady and Kristy McDonald. I met Christy for the first time at the networking event, it was seven years ago 2014. And they were just starting. And they did pretty well, I guess because after only two and a half years, Mr. Brady, who looks like he's wearing glasses, but that's not really what it is. It's spending all the time in the sun wearing glasses.

Two and a half years after you started, you dropped and you got out of your 120K a year job. You must have done pretty well there for those two and a half years and of course. Now you have four and a half years, you've renovated and purchased over a hundred properties. You've done well boy and girl and throughout this journey, Kristy and Brady created and perfected strategies and systems to make renovations. And actually, I want you to tell people was it last year or the year before where you spent six months away on your react or something from island to island. And during that time, you bought how many properties?

Brady: That was back in 2018-2019. It seems like it was yesterday, but yeah, we ended up still doing over 20 deals that year. And yeah, it's been this winter in Costa Rica for the last three and a half months. It wasn't any different really.
It's just we're all learning that we can work remotely. And by implementing, we always talk about the tools, the processes and the systems and stuff that really free you from your job or creating another job for yourself. That's obviously proven successful for us again this year where we've been able to enjoy that and still bored, but we have probably added 40 to 50 units in our portfolio in the last four months.

Daniel: And now you've discovered a new hobby coach house and it's really taken up for you.
And I think you called them the newest and greatest cash count. How many coach houses do you have now?

Brady: We did just we fit it. We're just finishing up about 21 that we started last year. And right now, we literally in the last one, every single week, we're pouring new pads this week. We've got four that literally I've got pads in and the framings being done.
And then right now we have about 18 that are lined up for construction so far this year.

Daniel: Tell me more about this. But one question I have is that when I'm listening to the people who were talking earlier, there was obviously somebody talking about a 200-page document for bill 108 or something. And then on top of the cities and stuff.
You must have somebody in your organization whose job possibly is to look at all of these numbers and all of these requirements and restrictions and whatever, and figure out where it will work and where it won't.

Brady: You know what? We were the first adopters and anything, anytime that our business does something new, it's pretty much me.
It's like I dive into it. I become the expert before I spread it off to the end. We were very approved this January last year. These are new and I knew about them in November of 2020 and 19. The rules are pretty clear here. Very max 10% lot size you need to have three parking spaces, there's some setback rules, but they're not overly intense.

And ultimately, they can happen on any property in this city. If any property that a second suite can happen, then these can happen. I quickly realize this is what I'm going to do. You send me an address as a realtor, or I look at a property. First thing I do is go on the interactive maps and I go, okay, lot size.

What is the lot size? Can I get my parking? And those are the two rules. If I can build something that's 400 square feet and get enough parking for four to five schools. Then for the right price, I'll buy it.

Daniel: I hadn't even nagged around the lake. And of course, in that ground, the league we have older parts of town with big lots. And Sabika, they go back to the fifties and sixties, and then we have developments like where I live, where the lots are 35 by 50. Obviously in anything that's pretty new, like this with small lots this is never going to happen here. When people are thinking about doing these coats houses, should they be looking actually at new developments, older developments, a little bit more out in the country because you need a minimum size, lots, and pretty hard to find 200-foot lot in new developments.

Brady: It's a great point and really when you're looking at properties, that can be second. Any of those 35-foot frontage lots then newer subdivisions are very difficult to get into enough parking that your tenants will be happy and not. All of our properties, even with second Swedes are in a little bit older subdivision, probably 25 years old is the newest subdivision.

And then back right to the stuff that's older downtown with the really large 150-foot frontages. We're like, ideally you want to about 50 feet, if you can't 40 feet okay, 40 feet frontage. And we're building our max size 750 square feet.

That's our max coach site, coach host sites. To get that you need like 50 feet by 135 something like that, a lot size like that. And then you get sufficient parking, you get amped, enough backyard space that it's not jammed. And but at the end of the day, if you can fit a 400 square feet coach house in there, there's value in that as well.

We're also looking at it as opportunities in those older neighborhoods like you're suggesting and some of the older downtown cores where there are some larger houses and bigger lots and higher densities is the opportunity to set up. And you could almost do your conversion, build a coach house and get another lot just again, another aspect to adding value and maximizing the use of land.

Daniel: Okay. Why would somebody want to do a coach house versus a tiny home?

Brady: You know what, at the end of the day, I think they're the same, but you know what we're trying to win. I think Jessica touched on this too, where you do have to think about the cost to build. For us, I see people not necessarily going the tiny home route, but maybe going the other way where we're maxing out at 750 square feet of a coach house and other people are like a thousand square feet and I'll put that in. Our thoughts are, it's the same as Jess is where you have to think about the cost of the bill versus the income, but not only that, also what is the appraisal going to do for you?

For example, if it costs me a hundred thousand dollars or $120,000 to build. And these are low numbers. Just I want to declare that just because we all do self-build. That's our number is 220,000 to build a 750 square foot house or 180 to build a thousand. If I'm not going to get any extra appraisal to cover that $50,000 difference, then I'm not going to build it. But then the other thing goes, it can go the other way too. If you do build it too small and then they start comparing your tripod new triplex property with your duplex and your kowtows associate to other comparable lower square footage sales, it could also drive your value.

You really need to think about comparable sales when you're looking at what you're planning to build and the square footage is of those sales, because that is really what's going to determine your refund.

Daniel: Okay. Earlier we had Jen talk about modular houses built in a factory. And while she was giving that presentation Karina from Ottawa was talking about a different way of building them, where basically, you bring all the pieces of the material, and you build them on the spot. Which one of the two strategies are you using?

Brady: We would be doing the latter. We're building slabs on grade primarily. That's an engineered pad, similar to what you'd expect when you build a garage. And then really the framing that we build is the same as what you'd expect to build a garage. We build the walls, put roof trusses on the top. And then enclose it in. That's our strategy because we can do that with our staff at cost. It helps us keep our costs down.
Some of the smaller properties that we have bought, we are putting basements in again, because our comparable sales are with second or detached coach hoses that are around that 750 square foot mark. If we only have a 400 square foot coach house, then that will affect our appraisal value.

I'm putting in that little bit of extra effort and costs associated with going down a full foundation and two bedrooms in the basement and a nice open concept kitchen living room upstairs is where we're going with smaller.
Daniel: Brady in closing here, I would like you to share two things with us.
The first thing is, give us avoid or don't when you're thinking about doing what you're doing.

Brady: When you're getting into coach houses, you really need to analyze the property and understand the planning. Because you can very quickly get yourself in a jam and then it may require variances that you didn't hope for or know that you needed.
And then you could literally have the project shut down. You really need to play within the planning. Bylaws play within those rules. I am a huge proponent for not going for variances because it's quick, it's easy, it's dirty, it's guaranteed. If you don't need a variance, but check your check, your planning bylaws for sure.

Daniel: Give us one more tip that will make it work for people being on this presentation tonight.

Brady: Yeah, the last one is we did a lot of bedding for our financing to make sure that yes, this was actually going to be appraised as a legal triplex.

That is what it is. And I've heard from pretty much everybody that has done this. A lot of people call me and say, how'd you get your financing? Cause I'm getting this road. Do your due diligence? You can reach out to me. I can help you, but do your due diligence, make sure you're going to get approval.

And if whatever you do show up on that appraisal and talk to the appraiser and make sure that they're going to appraise this as a legal triplex because that's what it is.

Daniel: Thank you. Thank you. Thank you. Brady, Mr. System.

Brady: Thank you very much guys.