Jon Wiens: Thank you, Daniel. I am Jon. This is Drew. I am from Niagara on the Lake from Ontario. We have our box setup here today as most of you have already seen.
I'll just start by telling you a little bit about Auxbox and how we started. Daniel was right that Auxbox did originate in BC. So Landon and Morgan, the two guys you saw in the video, are the founders. And as they mentioned also in the video they were very frustrated with traditional building methods and just saw an opportunity to create something unique.
They actually started the company as studio models. So not really living spaces, more backyard offices, backyard bedrooms spaces that could be placed in your backyard without the need of a building permit. No plumbing, nothing like that. But since we have gravitated to living spaces, so the one that you see outside that's our Model 240.
It's our first living space. We have another one coming. I'll talk about that later. But so yeah, so this originated in BC and by Landon and Morgan, and this isn't working again. And so Drew and I’m going to be opening a second facility for Auxbox here in Ontario, specifically in the Niagara region.
That's where I'm from. And so that's gonna be happening early next year, 2023. Right now we're not producing them here. We are still producing them only in BC, but as of early next year, we'll be producing them right here in Niagara, or not here in Niagara. In Niagara and building them from scratch, delivering them from Niagara.
With a bunch of different companies that are doing this sort of thing already. One thing I wanted to point out is that our design, our model is tried and true. We have successfully completed over 50 units already. So not everybody can say that, but we have successfully done that over 50 times already.
I spoke to a bunch of you already about some of the various components of our units. So I just want to go through some of these points here. Again, I'm gonna go at a very high level here but we use high performing windows and doors. They're European style, tilt and turn windows and doors.
Structural components LVL beams in the floor with structural insulated panels for the floors, ceilings, and walls. Our buildings are all CSA certified, they each have a CSA designation, so the one that you see outside there is designated MHZ 240. And our next living space, our 588, is gonna be designated a 277.
This means they're built to the National Building Code of Canada. And our third party. Inspected by Intertech, and so they are fully engineered, fully certified, and they will also add on to their, they will be Terry on home warranted as well. So across the board we're covered. Auxbox exteriors are maintenance free, so we use steel siding and flashings on the outside.
On the top and bottom on the roof and under the floor. We use commercial grade TPO, vinyl roofing membrane. So everything's completely covered, maintenance free. Oh, and the deck is, Not the deck out there. The deck out there is cedar, but we have changed that to composite decking. So across the board, we're maintenance free.
The interiors are finished with durable finishes. So it's engineered hardwood flooring. It's tongue and groove pine nickel gap pine on the walls and the ceilings. As I mentioned before, steel siding on the outside is very durable and we offer a white glove service. I will talk about that on the next slide, so I'll just move along.
We are an established brand and recognized name already. As I mentioned, we've already completed over 50 units successfully.
All of our units are completed a hundred percent in the factory. So as you see it out there, that unit actually has driven across the country, right from Vancouver all the way to here. I didn't drive it, but it was driven by one of our staff members , they are built to travel.
They're built to move. They're very durable. And yeah, a hundred percent finished in the factory. So what that does is the day that it gets delivered, it can also be used the same day. Team is values driven and cares about every detail of the Auxbox. So yeah it's, I've been out west, I've seen the team out there, I know my team here in Ontario and we definitely care as much about the quality of our boxes, just as the founders do.
I think it shows in the quality of the unit that you see out there. The Auxbox design has minimal and modern appeals. So as Morgan and Landon mentioned in the video it's meant to be distraction free. There's no trims, baseboards, no hardware on the cabinets. It's all just meant to be a nice, clean, simple, elegant look.
Here's the white glove service. I'm gonna start on the right hand side first Actually, so on the right I wanted to do a bit of a comparison here of traditional building methods versus our method. So I'm sure most of you have had some sort of experience with traditional building in one way, shape, or form.
I come from a custom home building, renovating background, so I know I have plenty of experience in that and it is not fun these days as many of you can probably attest to. So the way that it would normally go is obviously you go through your design process, your engineering, your building permits, and then you finally get to site build.
Then during the site build especially if you're doing an ADU or a garden suite in the back of the backyard of an existing rental property. Your property becomes extremely noisy and dirty. Major trade delays and poor reliability these days. That is definitely a true story. I can't imagine your neighbors being too pleased with a major construction project going on in your backyard.
Poor communication, extended parking issues, weather delay. Stolen and damaged property and materials, material storage, management, building inspections, major cleanup and extended budgets, and that's a big one. Definitely in my world. The prices are very volatile right now. It's nearly impossible to predict the prices on anything right now.
Finally you get to the occupancy permit and now you can rent and enjoy your return on investment. So that process doesn't seem too appealing to me. So you go over to the left side and what we offer is a white glove service. So we can take care of the entire process for you, starting with configuring.
Ensuring that your site qualifies, applying for permits and approvals, confirming all the design items for your unit. We build the box and do the groundwork and foundation simultaneously so you're not waiting for the groundwork and servicing to be done before you start building the unit.
They're happening at the same time and the disruption that's happening on your site is very minimal. It's a little bit of foundation work, a little bit of servicing work. It would take a week or less to get all that work done. And then we get to delivery and install, and then you enjoy your return on investment.
It's a pretty simple process, really. It came, like I said before delivery. You can use it the same day that it gets delivered. You just hook up the services and you're off to the races. So now I'll just go through the two living models that we have. So the 240 is the model that you see out there.
It is a little small, I'm not gonna lie. You guys all saw that, but it definitely has its sweet spot. So I would say, it comes with, it's a bit of a studio model, so you walk in living space, sleeping space is the same space. It has a small kitchenette, has a full bathroom and a little mechanical cutout at the back and a covered porch at the front.
I would say, the majority of the people that have purchased these units from us are using these for short-term rentals, vacation rentals. They could be used as student housing or bachelor apartments. But I would say for sure the sweet spot is that short term rental investment. That brings us to our 588, which is gonna be more than twice the size of the 240 that you see out there.
It's hard to see the layout here, but the size is gonna be 14 feet wide by 42 feet long. That includes the covered porch. Yeah, you got the covered porch, you got a main living area. You have a full kitchen, full bathroom with stackable laundry. And then a full separate bedroom at the back with a closet and a utility room.
This one would be much more ideal for a garden suite or an ADU. And this one would come the same as the 240 would be in one piece, constructed off site in our factory, fully finished, ready to come to you and ready to use the same day that it gets. Ease of install. Somebody was asking about this, about how we lift them in.
Here's a good shot of us screening one of our units up and over, but we do this all the time. This is what we do. It gets, our units get lifted over houses right into your backyard. Yeah, it's quite easy. Yeah, so I'm gonna pass this on to Drew now at this point.
Drew Toth: Thanks John. Guys, my name is Drew Toth, I had the privilege of speaking on the panel last month, and as you guys probably know, my primary focus is real estate development and construction. So what am I doing up here tonight talking about the Auxbox? Right now I think many of us are challenged to find investments that actually produce in a high interest environment and in the season of the market, we find ourselves.
Garden Suites is a fantastic way and with the Auxbox.. I'm gonna go over some cash flow. I'm gonna go over some models for the financing of this product in Garden Suites. One of the things that's pretty cool and stuck out to me is there's so many companies coming out now with pre-manufactured or modular construction, but many of them are new and they're really in the beta phase, so they have these models or you can go and see them.
Auxbox actually has 50 successful installations, and I can tell you . Our garden suites are allowed in many municipalities across Ontario. There really haven't been many installations me and John wrote in Branford and we were looking at the first one that was being built under construction there.
There's another one in Niagara Falls that's being constructed and it's the first one there as well. So it's a brand new model and as Doug Ford is releasing Bill 23, and it looks like there may be an as of right for Garden Suites across Ontario, which will be a real game changer for a lot of us to add that secondary suite, either as an ADU or as a garden suite.
One of the other things that's really attractive about this from an investment standpoint is the fact. Anybody else in construction or anybody who's done a construction project, myself, about 13 years building houses, construction. We know I have a contingency budget for a reason. It's not to look good or be there in case it's because I use some of it every single time.
One of the attractive things is that when you run a performa on a project like this, the box in the garden suite, it's a set price. It's not gonna change. John and the group at Auxbox are gonna deliver it for the price that they give you. The only variable is gonna be your servicing cost, because it's gonna be how long that sewer pipe is, how long the water pipe is, and then it's the hydro connection, your servicing connection.
The other thing is your foundations. So what they've found is that ground screws or pure peers are the fastest. The least messy and the most cost effective for these installations. So you can really get a set finite eight budget when you're running your performer to add these in. If you'll go to the next slide for me.
What I did is I looked at some of the case studies that have been installed and I looked at how they were performing and then I also ran some performers. Now obviously, there will be a variable for the servicing, like I mentioned. So I ran the cost with the 240 model, which is selling for 144, and then I ran an average cost of $25,000 for servicing and ground screw.
That's what I ran my numbers on and I looked at it first from a long term rental. So there's a case where it was renting for 1225 per month. All Inclusive and then I ran the cost as putting 25,000 cash in and then a loan of $150,000 could be a heloc it could be if you remortgage when you're adding it on at 7%.
Cause I needed to know at 7% interest cost, right? We're running what about 5% interest right now? Think it's gonna go up. So I ran it at 7% to see how it performed .So on an annualized basis, it was returning a 4% cash on cash and 10% debt service. So it gave a total annual ROI of about 14%. Now, one of the key reasons why it can perform like that is because you're adding it to an existing land that you already own.
One of the other things, and Chris mentioned it in his presentation as well. You don't pay development charges on adding an ADU, which is a significant cost, right? Development charges are running $25,000 to $40,000 depending on what municipality that you're in. And then we looked at it as what if you furnished it and did it as a midterm rental.
We ran it at a 1400 rent, all inclusive, and it ran an annualized 12% cash on cash, 10% debt service for a total of about 22%. And if you'll go to the next slide for me. So where these things have really performed is in the short term rental. So what is the key difference? The key is you have the backyard, right?
Location, so, if you type in the Auxbox in Airbnb, you'll see where a guy installed the model 240 up in Muskoka. He had a hot tub there, a deck, and an outdoor shower. So obviously he spent some more, so he was. 300. If you look and you see he's making 300 bucks a night, he's running about a 76% occupancy and he was I think it was 20,000 for his fees for management and maintenance, cleaning, etc.
I dropped it and I did an example of 150 a night with 50% occupancy and 6,500 fees, and it performed at 29% cash on cash, 10% debt service for a total ROI of 39%. And then I ran it with, say you've got the better bar backyard, more like Muskoka, you got a nice lakefront property or rural property with a more desirable, I ran it at a nightly rate of 250, 50% occupancy, 6,500 fees annualized the perform at 102, cash on cash, 10% debt service for a total of one 12.
Again, all of these were with 25,000 cash. 150,000 of debt amortized over 25 years at 7%. So just to give you an idea of how I was running my numbers, obviously there's many different ways that you can set it up and you know the exterior that you do around the box and the better the backyard you have, the better it's gonna perform.
This gives you some examples to show that this thing can perform as long term, short term or midterm. Another one of the key things as a developer, one of the things that you need to know about garden Suites is what about the parking requirement? If you're putting in an urban setting, what about the set?
The side yard setback of four feet, or the rear yard setback, right? Each situation that you're going to install this in will be a little bit unique. So if you're interested in this or you're interested in garden suites, working with a gentleman like. Or specifically with this product, connecting with Jon, their team, like you mentioned as white glove service.
If you call them, they'll work with you to call the municipality and see if there is a parking requirement, do you fit it? Is there a four foot setback that fits in your actual yard? So they'll work with you on getting through that to make sure that it fits in your actual situation.
I do wanna invite anybody who hasn't seen it to come see us at the break and chat with us more in detail. Or if you'd, like Daniel mentioned, have lunch and learn tomorrow as well. We'll be happy to answer any questions. And we do have a special offer with free appliance, package free shipping, and 20% off for micro deposit.
That's specifically for REITE club members. That being said, if you haven't seen the unit, please come and visit us. Take a look at it, and we're happy to answer any questions you have.
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