Leveraging Pre-Fab Coach Houses

Jessica-Ann Boiron

Sarah: The next step is Jessica-Ann Boiron, a good friend of mine, Jessica and Luke. Jessica has completed $50 million plus in real estate deals by the age of 30 while working full-time as a lawyer in the energy sector. Since then, she's become known as the Airbnb Queen specializing in luxury cottage rentals.High-end, long-term rental properties as well.

Jessica, like you've done it all, the BRRRR strategy, fix and flips. You guys are probably the biggest wholesaler across Canada. Off-market multifamily and now you guys, and I should say you and Luke and you are here tonight with us, but got into Pre-Fab Coach Houses, which I'm really excited to hear all about. You've completed five so far in Ottawa. From an investor perspective, what can you give us as insights?

Jessica: Thank you for that introduction, Sarah. Good to see you on the screen tonight and good evening to everyone that's joining us.
A big thanks to the REITE club for having me tonight. And really what an exciting topic that we're discussing tonight. I'm happy to be here. I've got a couple of minutes. I'm going to jump right into it. And really, let me just share my screen. You guys can see my slides. But really where we're starting right now is with property prices skyrocketing the way they are across the province.

As investors we've really been pushed to become creative when it comes to looking at the highest and best use of a property. Gone are the days where you can pick up a deal off the MLS and expect it to cash flow from day one. It just doesn't happen anymore. We hear a lot of investors deploying sort of alternative strategies to create cash flow in a property, and that can range anywhere from house hacking to converting the basement into a secondary dwelling unit.

We've just heard a lot about bill 108, which is going to create a huge opportunity for Ontario to now build three units on a property that was once you know, a single-family home. And really, I'm going to talk today about coach houses, especially from a modular standpoint. And this is really where we're taking a single-family home, likely a bungalow. We know about adding that secondary dwelling unit in the basement, but now there's also this new opportunity opening up across the province to build coach houses.

Why coach houses? Why look into it? Why is it interesting? First and foremost a separate dwelling from the main house. It's really attractive to tenants who don't necessarily want to deal with somebody on the unit above or below them making noise, smell, sound, transfer, all of that.
You've thought of a separate dwelling unit. It's literally a little tiny house that's just for that tenant. Tenants are willing to pay a premium, especially if it's a brand-new building. And truthfully the cost is really not that far off from the SDU conversions in the coach houses, we're building out and we're doing a bit of a mix of modular and traditional sticks.

For about $150,000, we're building one bedroom, 500 square foot units, SDU conversions would run about that amount for an 800 square foot basement, all in total costs. Now when we look at modular builds they're very interesting and I think a lot of people might take a step back, have the stigma of trailers or think about it as something bad, it's not a modular home is a home like a stick-built home.

It's just built inside a factory instead of on the ground. There's some benefits to that. For example, speed of construction. We can build a coach house in the matter of a few weeks inside the factory. In the meantime, we can prep the area, make sure we get our permits, get the foundation in.

And then once the house is actually ready to be delivered, it gets delivered right on that site, right onto the foundation. You hook it up and it's ready to go relatively quickly and that translates to cost savings. There's a shorter construction phase. And we all know that, when we buy it at the new place, oftentimes we close on it with private money while we're doing renovations while we're bringing the property up to its highest use.
Financing can be expensive. Private loans run eight, 9% plus with fees on top. If you can shorten that amount of time and really get the coach house built as quickly as possible, not only are you now limiting the amount of time that. You're carrying that expensive financing before you refinance.

It just allows you to get tenants and faster. Get the place cash flowing faster, get the money out, burn it out, move on to the next project. And another benefit is let's design and build can happen year-round. In Canada we have four seasons, but really two seasons. We have a construction season and then a very difficult construction season, which is winter.

Some things you just cannot do in winter because of the climate. The great thing with modular builds. They're built in a factory that's climate controlled. As long as you can get your foundation and your hookups in the module can be delivered in winter time and you can really just have that timeframe short and deal with it.

There are of course some drawbacks. I'll talk to them. That was for sure. One of them is the customization of the floor plan. With modules there they come in long rectangular shapes. You can add one on top of the other and one next to the other, but really, you're looking at long rectangular blocks that you were working with.

You can't always have those interesting design elements on the exterior, on the floor plan. And you're limited a little bit there. In addition, shipping fees and size restrictions. Depending on where the modular builder is located relative to the property on which you want to drop off the modular build that.

That can add up if it's a very long distance, if it's a couple of hundred kilometers, you're going to be paying for that transportation in terms of size restrictions. The maximum module that you can fit on a standard sort of truck on the bed is about 16 feet wide. By about 70 feet long.

That's a bit of a limiting factor. You can't really go much over 16 feet for one module. You then have to do two modules, join them up. And that's when I'm touching on, when I say, you have a separate crew to button up and finish so once you drop off the module on location if there are multiple modules, you do have to join them up button them up.

Make sure that everything is as smooth and consistent and the flow is there and finish the modules. A flooring, for example, if you're joining two modules, you can't lay it ahead of time. You have to lay the flooring. Some of the fixtures have to be attached to that sort of thing.

I thought I would show you guys a coach house that we're currently building in Orleans, which is on the East end of Ottawa. That's where I'm focusing most of my coach house belts right now. And this happens to be a modular build. You can see it in the photos. I got the floor plan there as well. It's 420 square feet.

The size is 35 by 12 fits on one truck. It's one single module. The great thing about that. We can actually finish the entirety of the insight that we can lay. The floor is going to be painted. We're going to have the cabinets and it's going to be delivered pretty much in a final state in terms of finishing inside, which is fantastic.

It's actually being built in the factory right now, which is sighting. It's one bedroom, one bathroom. What type one bedroom? The heat source is going to be electricity. We're not running natural gas to it. It's a very small space and it's going to be spray foam insulated. Very efficient in terms of bills, we've got a key tack machine in there which is also great.

Some backup baseboard heaters. You can see that the hot water tank is tucked in next to the couch in the living room. And then we've actually managed to also squeeze in a laundry. It's something, we find tenants really are having their own laundry on sites. We've got that in the bathroom.
We've really tried to maximize the layout with the box we're working with here. The interesting part is we're actually working with a steel manufacturer to fabricate this coach house. It's actually going to be built with a steel frame, which is super durable.

Long-term, it's going to be a great solid structure for us and the outside is going to be covered in corrugated steel. Give it that, modern, industrial look, it's going to be black and charter. On the next slide, you guys can see where the coach house is going in. The property it's going in on currently has an end unit townhouse, and this is going to go in the backyard.

It's actually a very wide lot. We're going to be able to do two separate areas, one right in front of the coach house for a little mini front yard for the coach house. And then for the main house, the front yard and a bit of the side yard. We have one tenant in the townhouse, a separate tenant is going to be moving into the coach house and they will have their own dedicated outside space.

Since we're in Ottawa, I figured I'd show some of the limitations and these are current rules. This is not bill went await yet. These are just coach house rules and Ottawa. One thing I do want to mention that we've really focused on in our business is point number one. The primary residence, right?

It must be categorized as a detached semi-detached duplex for row house dwelling. The rule states that you cannot have both a secondary dwelling unit and a coach house, that's the current rules. You can have one or the other now in properties where the zoning allows a couple of our bungle open versions to duplexes.

We've really made sure that we're doing the conversion to a duplex rather than to a secondary dwelling. Practically, it's the same thing. You're adding a unit in the basement. That's additional in addition to the upstairs unit. But what that allows for an Ottawa is once you have a duplex, you've called those two units, you are then allowed to add a coach house.

We're adding retry flexing it that way. The regular rules are our coach has SDU or we can have a duplex plus coach house. That's the route we're going, where the zoning allows for it. Coach tells us about our service from the primary dwellings’ connections. Plumbing for example gets pulled from the main house to the coach house.

And then under point number three, I've added a couple of the rules in terms of footprint and size, it can't exceed 80 square meters for instance, and an urban area. But one thing, that from experience I've learned too, is a lot of investors, like just maximizing saying, how can I get the maximum 80 meters to build the biggest coach house possible?

Sometimes you run into variances. Really from my standpoint, I always run the numbers. I take a look and say, okay, if I can build a 420 square foot coach. And that will bring in, let's say, 1450 in rent every month as a brand-new unit versus if I can build an 800 square foot coach house, two bedrooms, maybe that can bring in 1750.

Is that incremental cash flow coming in from a larger unit? Does that justify the higher price I'm going to pay to build a larger unit? And I found that oftentimes it doesn't. That's why I'm saying small things. It allows me to have a decent amount of outside space too, for both units to enjoy in front of the tenants and in both units to be happy.

And that's where you know that this is coming from for this particular build. That's it from my end for coach houses. I'll be around to answer questions afterwards as well.

Sarah: That was awesome. Thank you so much, Jessica.