Jason Boccinfuso
Daniel: We are talking today to Jason Boccinfuso who is a development and pre-construction specialist.
Jason: Excited to work with you guys and provide some good education on how we create these opportunities. I did hear, you mentioned earlier on, in the presentation that as it's becoming increasingly difficult to find deals on the open market, and what we're doing is we're looking at additional ways in order to find and come across these opportunities, which includes pre-construction and really what we focused on doing as an organization internally here with our group is we've really gone out and created a lot of the opportunities ourselves.
So we went out and bought a bunch of land, took it through the development process in order to create the opportunities versus trying to wait for the market to bring them to us because it's been very frustrating trying to buy deals lately. You go and you try and purchase something and it's, you're paying $100,000, $200,000 over list price and it's really hard to find the deals.
What we're doing instead of that is a, gone out and created our own deals. I bought up a bunch of land and took it through the process. I have over 2 million square feet under construction right now. Various things, medical centers, commercial condos, industrial condos, office buildings, retrofit senior's apartment building developments, condominium developments, townhouse developments, single-family homes, and custom homes, and really gone out and blitzed, the Greater Toronto area, Golden Horseshoe, and even doing a number of projects in the United States including some deals in Florida.
You really have to work hard to find these deals and. It's interesting to see how you can bring those through the process. And I know we've talked about it a few times, but glad to include you and let you have a behind the scenes look or a front row seat, if you will, on how to take a project from a ground, I call it cradle to grave right from the grass all the way through the approval process.
What thoughts go through my mind as a developer, when I know it's a good piece of land or not, is how to take it through the process to get it approved, how to put all the approvals in place, how to set your construction budget, how to set up your financing and how to take it right through the entire process right to final product.
Daniel: I want to go back to that just for one second. I heard somewhere that you were the youngest police officer to join the forest in Durham. Is that right?
Jason: Yes, I got hired when I was 18 and started patrolling the streets at 19. So we laughed at that because I would work four days running around, saving the community. And then on my days off my team wanted to go to Las Vegas, I couldn't go with them because I wasn't old enough to go to the casinos, but we had a good laugh at that for a couple of years, but yeah, I did it for 13 years. It was great. I loved the job. If I could still do it one or two days a month I would, but I'm too busy with real estate.
Daniel: All right, you went from patrolling the streets at 19 to today. Tell people where you are today, because two things, one, I want people to understand what real estate can do for you when you do it well, and you do it profitably and successfully, but also want them to know if they're listening or reading right now, because this is not just any Joe Blow from up the street. You're just a guy who is amazing and connected. Tell us what were you doing today Jason?
Jason: Today I was at Derek Jeter and Larry Walker's baseball hall of fame induction ceremony. So that's the reason I was a few minutes late. I had to run from the induction ceremony and the events to get back to my hotel and fight through the crowd and stuff like that. And last night I was at Yankee stadium. Watching the Bluejays.
Daniel: You were in Cooperstown this afternoon. Did you say Larry Walker?
Jason: Yeah. Larry Walker. Good Canadian boy from BC. With the Expos and then he went to Colorado. So I was an invited guest to that event. It was pretty good. I got to meet a lot of people there, a lot of the players, former players I was with, Jeter and Walker, fortunate enough to be with them when they were announced in New York, a couple of years back.
Daniel: So we're going to take a quick case study, because I'm buying a piece of land in Nova Scotia and you're going to walk me through some of the steps there, so everybody can benefit from that. But before we get to the. In general broad terms. Tell us about development.
Jason: So with a development, it's like a blank canvas painting. You start with essentially nothing and you can create something from nothing. Land is just land without having the vision as to what you can turn it into and in addition to that there's a number of constraints in which you need to operate in.
So starting at a very high level in order to take raw land and turn it into something there's a number of things that have to happen. And the number one thing of course is there has to be access to services. So we've got to have sewers, water capacity, hydro. Gas in some cases not, but we're looking for infrastructure investing around the area because we want to be able to plug our land into existing infrastructure.
And the second thing is we want to know where the growth is headed to. And I mentioned this briefly before, when we were on one of our past webinars together, but everything you need to know about development.
You can learn from Wayne Gretzky's analogy and hockey, and they said to him, you know what, Wayne, what makes you the greatest hockey player? And he said, yeah, it's some talent and hard work, but at the end of the day, it's because I would go to where the puck was going to end up, not to where the puck is today. And what he was saying was he would get himself into a position where he knew the puck would end up and he could score or make a play on it.
And development really is no different. It's no more complicated in acquisition of land than that, you make all your money in your purchase, not in your sale.
So you're going to make the right decision when you're buying the land in the first place. And that's where all your money comes from. Because if you have buy the land right, and you have equity right from day one and then you can take it through the process and create additional equity, which I'll explain briefly in a few minutes, how you take that through what happens is you can have a lot of equity in a piece of property that you can then access that equity out to further the development by putting in the services and changing the use and getting the approvals because it is quite expensive and very difficult to finance.
The first thing we ask when we look at land is, Is it in the way of development? So where is everything headed to? So if you were to take Google earth and they have a really great system there where you can look at Google from five years ago, 10 years ago and so forth and up to a couple of years ago. And you can actually see how it's swelling out. If you live in an area that used to be farmland, and now it's a bunch of houses, but wherever you see the path of development headed to you want to play almost like you're playing Connect Four or X's and O's you want to block, you want to build. Where the development's headed by buying the piece of land that's in the way. So in essence, you want to get in the way, so get in the way of development, get in the path of development. And what happens is people pay you a lot of money to get out of the way. Does that make sense?
The first bunch of money that I made in development was just simply buying land in the way of development and having big developers knock on my door and pay me 10 times what I paid for it. That's how I got my start, that's the way to look at it in a simple analogy, but it's absolutely critical that you buy in the right location and by where you're going to be in the way of development where it's growing now.
Here's a really good indication. In addition to being able to see where the land is, the fact that it's being grown all around you the population is growing all around the land. You're looking at.
Another key indicator is where is the government investing in infrastructure? A really easy place to invest in Durham region, for example, would be where they connected the 407. As the 407 highway kept expanding out from Toronto east. I bought all the land in the way, and I bought a lot of it.
That's where there's great opportunities is if they're going to be investing infrastructure money, the reason they're doing that is because they're telling you, it's a clue. It's like the government standing there yelling at the top of their lungs. Hey, we're about to build and have development go on all over this place. So we're going to put the infrastructure in first. So you just use common sense. You don't want all the houses without any roads because there'd just be a traffic jam, it would be a nightmare. So what they do first is they invest in the roads and in the infrastructure. And once the infrastructure is in place, they're telling you, Hey, we put the infrastructure in place so we can accommodate future growth.
That's really critical in the first stages of development in making money in investing now. Development differs from just buying the end product as there's a lot of profit centers along the way.
There's four stages to a development profit.
- The first stage is in buying the land. So you purchase the land. You have got lift on the land because you bought it right.
- The second realm of profit in a development is creating the highest and best use. So there's a vision, you look at it and you say, okay, what could this land be? And it's not just a matter of you deciding what it is. It has to go within the constraints of the provincial official plan, the regional official plan and the municipal official plan, which gives you a direction as to what they're going to support and what they're not going to support and what the zoning and future planning zoning would be.
When you overlay that on top of the dirt and you apply the principle of getting in the way of development mirrored over top of what the official plan is, you now are operating within the constraints. How far away is this investment from coming to fruition? What are the potential uses?
Generally speaking, if it's along a major road right now, a downtown city street in any municipality it's mixed use zoning, which means you can do ground floor commercial on a tower above it. That's pretty standard and straightforward. If you think of downtown Toronto, most places have ground floor commercial shopping, there's grocery stores or pharmacies, restaurants, and then a condo tower above it.
So that's the model that's been adopted and even in the smaller cities on the outskirts. It's the same principles. If you're on the main street, you'll be able to do that obviously on a smaller scale. But having that type of knowledge allows you to then pick off opportunities. I drive up and down the streets all the time.
People say to me a lot of times they say, Hey, how come you never take the 401? I say, because it's pretty hard to buy land on the 401 because there is none for sale. So I'll take the city streets. It'll take me twice as long, but I'll usually have five or six addresses written down. And then I can follow up with it and have my team follow up to try and buy those properties.
And what I look for is main roads with a land with an underutilized footprint. So maybe I have a 30,000 square foot piece of land with an 8,000 square foot building on it, or even better, a hundred thousand square foot piece of land. I got an acre of land with a 4,000 square foot building on it in a downtown core.
Those are really great deals. I buy them all the time, multiple times a week. And, because I know the future development of what's going to happen I can create additional value, buy something for $7-800,000. Go through the process, get the approval in place for a higher and better use and turn around and resell it for 5 or 6 million dollars, or I could turn around and develop it myself and take it to the finish line.
- The third level of profit in a development is actually once you have the approval in place, you can now sell the package to somebody who wants to go ahead and build it out. Okay. So that's the third. When you get your approval in place.
- Then the fourth section of profit is of course the final end product. So if the end product is a condominium building, then I'll go ahead and build it out. And when I sell the units, there's some profit there, or if it's a commercial plaza, I could sell it like I said, at the end of phase three, before I put a shovel in the ground with the approvals in place, or I could go ahead and lease it up, build it out and and realize some profit there.
So there's really four stages of profit typically for investors is how we've always looked at it.
Certainly where I got started was I was always buying the home after someone had already lived in it. I'm buying a resale and there are still some resale deals out there, but they're very hard to find. So we're shifting a lot of our capital to development and we're shifting a lot of our capital into pre-construction and we're stacking money into this area because it just hasn't caught up to where the resale market is going.
Daniel: I really like your four ways to make money.
Jason: Usually a target is a 30% per phase. You did mention that you've realized about a 41% increase so far on the Claret deals. So that would be above target, that's really good.
Secondary to that, your numbers would be even higher if you factored in how little of a down payment you put in based against the amount of profit you have. So in other words, if you put $90,000 down, but your unit's gone up 180,000, you're a 200% profit in that area. So that one was a grand slam to keep in tune with the baseball theme here today. But typically my go/no-go criteria would be a 30% profit at each phase. So if I took a project from cradle to grave, I'm looking at 120% would be a target, but I won't sacrifice one category for the sake of the other. So in other words, if I'm going to buy the land, I'm not going to overpay on the land and hope to recapture throughout the process. I want to see the 30% margin built into each phase of the development to make sense.
Daniel: That makes absolute sense. And I'll go back to something that you mentioned just like a few seconds ago, because this afternoon, before this presentation, as soon as I was finished, calculating those numbers, cause I just got the price list this afternoon. I called a buddy of mine who buys single-family homes and I mentioned this number to him and he said, wow. He says, you know what? You go buy a house anywhere in Niagara on the Lake, and it's going to go up 40% between now and next year. And I said yes, but here's the thing you had to buy the house. You have to get mortgage from the bank. You had to put the 20% on a property. Then you had to pay land transfer tax, then you have to pay your electricity, your maintenance, your taxes for a full year. I've gone and had a 41% increase in profit and all I had to do was put down a deposit. I haven't done anything else. I'm just sitting here waiting for the bill.
Jason: For sure, it's going to keep going of course, before we get there. Now, the other thing is that 41% you're talking about the value of the purchase price of the unit versus what it is now. If you do the calculation on, that's not 41% on your money, you have earned a lot more than 41% on your money that you put in the deal. If you tie up a hundred thousand, you'd have gone up 200,000, you've made 200%, on that one unit. Those are the deals that I look to do
One question is How do you know how to evaluate this? How do you know how to evaluate that? I like to keep things really simple. I just do my analysis on who is doing this, who's making money and I just follow the smart money. Anytime I've ever made money in real estate, it's always been because someone else has already figured it out for me. So don't spend much time figuring things out. I just find out.
What I mean by that Daniel is I would just follow you. Whenever you're investing in a deal, pre-construction deal, whatever. I know that you know what you're doing. So just let me know. and I'm in for a couple of units as well. It sounds like I missed out on Costa Rica, but if I got a chance to them if you bought 'em, and it may seem over simplified but the reality is whatever you're investing in. You're not the first person that's done this.
I have over 2 million square feet under construction currently right now, as I mentioned and I certainly didn't learn how to build stuff on my own. I learned how to build stuff from the best builders in the industry. So I learned from the best developers in the country. I didn't try and figure this out by going, doing some research and stuff like that. My research was who's the best developer in the country and how do I get somebody? That was my research just learning from them and having a front row seat and going into the meetings.
Daniel: The expression you used this evening that I love is a front row seat cause we all know, when you go to the theater, when you go anywhere, front row seats are very special, very pricey, very exclusive. So that's what we are talking about. Folks ithrough the fall as members of the REITE Club are going to get a front row seat watching how Jason does development and Jason is putting together some packages on some amazing projects.
Jason: Glad to help. It's just sharing wealth and the knowledge that nobody’s got here on their own and you just keep passing the torch.
Daniel: Somebody was asking don't you have to pre qualify for the condos. No, that's one of the beauty. Imagine Jason, if you have to pick all the five. To reserve those 14 condos and we did five there. We did two in Costa Rica and we might do six on your next project, when I say by reserve. So that's one of the beauties, as long as you have the 20% and you sign the documents and then there's an assignment clause you're in now.
Jason: Yeah, exactly and I'll explain, I'll touch on that. Why there's a lot of builders that do ask for the pre-qualify letter. But in, in the projects that we do and in the projects we're involved in we don't need that.
Very simply here is why it is needed from some others when a builder goes to get their construction financing to build the project it is a requirement by many of the financial institutions that the buyer also supply a pre-qualification letter. So in other words, the bank is evaluating the credit worthiness and the strength of the purchaser as a precondition to lending the builder money, to build the project.
I guess there's no other way to say this, but we're fairly strong financially. We'll leave it at that. The lender doesn't care at all about the strength of the buyers. In other words, they will lend them money to us directly regardless of who or if anyone's buying. So, we go in and we get the construction financing on the strength of our covenant versus some others who have to rely on the strength of the buyer's covenants as an additional security blanket for the lender. So I hope that clarifies the reason and that's why you don't require it from all builders. But you do for some of them.
Daniel: Okay, well, thank you very much. I learned something new. I have another criteria: no need for pre-approval because there are projects where you don't need to. So why would you want to go to a place where, they're going to basically almost have to go to the bank to reserve a condo and then three years from now you assign it. So you never really have to buy it. But in the meantime, It shows on your credit or whatever, and now it limits what else you can do.
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