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Podcast Transcription
Dave Dubeau [00:00:09] Hey, everybody, this Dave Dubeau here with another episode of the Property Profits Real Estate podcast today zooming in all the way from beautiful Vancouver, British Columbia or thereabouts. We got the CPI capital gang got in a bit of soggy and August. Folks, how are you doing today?
Ava Benesocky [00:00:28] Great. Awesome. We’re doing fantastic. Even better now that we’re speaking to you.
Dave Dubeau [00:00:33] Oh my goodness, they’re in all the right things. Fantastic. Well, I’m glad to have you on the show, you guys. I had the pleasure of being on your show not that long ago, and I really want to take a deep dove today into what you guys are up to because it’s really kind of interesting. You’re in Canada, but you are focusing on doing larger real estate deals south of the border in the U.S. and you’re raising capital. You’re finding investors and investor capital primarily through Canadian investors to buy these properties. Is that being that fair?
August Biniaz [00:01:09] Exactly. Yeah. Yeah.
Dave Dubeau [00:01:10] OK, so let’s talk about that because that’s super-duper cool. So first of all, just a really, really quick synopsis. How did you guys get into this whole real estate thing in the first place?
August Biniaz [00:01:20] Yeah, absolutely. I mean, if I may quote first, there we our backgrounds are both in real estate where we were real estate professionals. Many times we do speak to people in the space who their background was and in a different type of business. Or they had they had a job and they pivoted to being involved in real estate. But both of us, we are background was in real estate me. It started out as a licensed real estate agent 16 years ago. Wasn’t really good at being a real estate agent, but it was good at finding deals. So I started doing small fix and flips. Early on I had investors, my own family invested with me, eventually moved on to start my own general contracting company, building single family homes, more on the luxury side and eventually scaled my business to do multifamily a ground up development. Eventually, at a certain point, I realized that this kind of idea or story that gets sold from usually it’s this immigrant guy that comes to this country with twenty dollars in his pocket and ends up doing small fix in place, but eventually builds high rises. This story sounds great, and it does happen but is not realistic. Is not scalable. Is not repeatable. It’s very difficult to do so. And I soon realized that there were many other hurdles also involved in my business, such as the time horizon that it takes for doing a ground up development. You know, different items that exist, such as the construction process could be, you know, there could be different issues where contracts with contractors are also coming up in the equity difficulty with rigid mortgage laws that exist here to, you know, not very business friendly, so different levels of government. So I was always looking for a different type of asset class to invest into that provided cash flow and appreciation. Ground up development projects don’t provide cash flow from day one, and right around that time is when I met Eva and we partnered up and started CPR Capital.
Ava Benesocky [00:03:08] Yeah, definitely. And with my background being in real estate, I was helping real estate investors for over a decade, if you will,
Dave Dubeau [00:03:15] as a as a realtor. Is that what you’re doing?
Ava Benesocky [00:03:18] Yeah, absolutely. And you know, it all started with, you know, when I was helping real estate investors were looking to for the two fundamental things that people want to see in real estate investing. And as Olga said, it’s cash flow and appreciation and very difficult to find in the major cities here in Canada, right? Vancouver and in Toronto, you’re not going to be able to hit both of those. So we kind of started CPR Capital on a problem that we wanted to solve. And what is the solution to that problem with helping real estate investors? So that’s kind of where CPI Capital was formed about two years ago, and we fell in love with this business model apartment syndication across the borders because we’ve seen opportunity that existed across the borders that we couldn’t find here in Canada.
Dave Dubeau [00:04:02] And that’s so what markets are you guys focusing on in the states these days? What kind of floats your boat because there’s so many different markets?
August Biniaz [00:04:12] Absolutely. Yeah, I mean, we follow the data as long as there is there regions that show consistent job growth, population growth, income growth, crime reduction, rent growth, those are regions we want to be in. There is an intrastate migration happening in the U.S. people are moving out of California, New York, moving into lower cost of living states. Same thing with actually Fortune 500 companies as well. Because of the tax benefits they’re moving. They’re bringing their factories; they’re bringing their warehouses to these regions as well. Our last deal that we closed on was in Orlando, Florida, in the submarket that we were in. Just to give you a bit of perspective here in this up market that we were in, that submarket had a 23 percent population growth just in the last year when we invested just to compare that to the Greater Vancouver. Area, the total Greater Vancouver area in the last 10 years has had a 30 percent growth. So and we have a 300000 immigrants that come into Canada every year, and most of them want to live in Vancouver. So that just shows you that the amount of growth that exists in certain markets and if when you have a strong team that pinpoints those markets, that as we focus our next investment is in,
Ava Benesocky [00:05:22] yeah, on the East Coast, we’re kind of doing we love the Florida, the North and South Carolina. And on the West Coast, it’s Arizona and Nevada. And then of course, we’re always interested in Texas, which kind of feels like a country of its own certainly does.
Dave Dubeau [00:05:37] OK, very cool. So you’re focusing on these markets in some markets, in the states, they just make a lot more sense from a fundamental point of view. Crunching the numbers. So bit of a learning curve, I’m thinking being in Canada, doing these syndication deals in the USA, so. And then the added complication, I would imagine, of bringing Canadian investor partners on board to put up the capital to buy these kind of properties or get involved in these kind of properties. What were some of the steps you guys took to get up to speed on how to do that without running afoul?
August Biniaz [00:06:18] Yeah, I know for sure. I mean, Ava said it well, that initially started off with the problem and coming up with a solution to that problem. And the issue was a lot of people hear that, hey, real estate investing is a great wealth building machine that everybody should invest in real estate. But people in Vancouver and Toronto, when they want to invest in real estate, there is difficulty that pain points that exist right away. One of them is that, you know, the high price of real. So that makes it difficult for people. The entry point is very high. So those people have a difficult time purchasing their own primary residence, let alone now by a secondary or third investment property. Also, the thin line that exists between being a passive and an active investor and you know, and also because of the low rent to value ratios, is very difficult to prosper from cash flow and appreciation in a real estate investment here in Vancouver and Toronto. So we saw that problem initially and when we looked across the border and we saw other groups which would buy already built apartment communities, and they would do some small renovation to the units and sell at three to five years, giving great returns back to their investors. But what was shocking to us was that they were able to give returns to their investors from day one because of the high rent to value ratios in the US on a conventional mortgage of 70 30 LTV. They were able to from the rents they collected, they were able to pay their mortgage payment, taxes and fees. Third party property manager and still pay their investors eight to 12 percent PREF- returns annually. So that was what initially started with and now was OK. So when we started researching, a lot of the information comes from the U.S. about multifamily and this kind of concept of syndicated real estate investments, and that the information doesn’t really match the same terms and words here in Canada. When I went to my securities, corporate lawyer and I said, I want to do apartment syndication, he was confused. He’s like, You’re talking about syndicated mortgages. And when I start talking about all, we want to raise money, we want to use a five or six C offering is what is that? Yes. And so it was definitely educational journey that we went on for the first six months learning about compliance items, both the Hearing Canada and the US realizing that in the U.S. you have the SCC, which is federal. But here in Canada, every province has its own securities commission, different regulation when it comes to raising capital. We looked at accounting items where, you know, taxation, you know, the possibility of a relief from double taxation for our investors. And you know, it was
Ava Benesocky [00:08:44] it was in terminology on both sides, you know, offering memorandum mean something different in the US than it does with Canada. So we really took we won on this massive educational journey because of course, when investors are going to be entrusting us with their money, we better make sure that we know the ins and outs of the business. So we did all the hard work, we did all the learning, and eventually we kind of created this structure where we wanted it to be streamlined for Canadians. They didn’t have to have all the chaos of what all this means and how is it going to work and taxation. So when an investor contacts says we simply walk them through the process and try to make it a streamlined as possible?
Dave Dubeau [00:09:20] And what the what the what in a nutshell, what does that process look like? Yes.
Ava Benesocky [00:09:25] Yeah. So essentially, we find a diamond in the rough on the other side of the border. We bring this beautiful alternative investment to our Canadian investors. They invest into a Canadian entity. So we form a limited partnership where the general partners and our investors are the limited partners. They invest directly into a Canadian entity and we pull together Canadian capital. We take that entity and we invest as one single entity into the U.S. asset, which owns the actual physical asset in the US,
August Biniaz [00:09:51] a US fund that owns the
Ava Benesocky [00:09:53] US. Exactly. Yes. Yes.
August Biniaz [00:09:55] And the process, I mean, just to kind of touch on that a bit more initially. For us was to get the word out. Obviously, we have started our own thought leadership platform, our YouTube show. And we send a lot of content. But when somebody connects with us, the first step is getting on a call with us. We are very hands on. We want to meet the people. We want to kind of have a Zoom call having an actual kind of onboarding conversation. And obviously, depending on what exemption we’re using for that particular capital raise of his credit, the investor exemption, then we put our investor to the accreditation process through our EMD. And then investment offering is made to them, and the process is very streamlined to our investor portal, where they just upload all their information. We chose to invest, transfer their funds and watched our business plan be executed
Ava Benesocky [00:10:41] and everything’s in our investor portal. So it’s kind of a one stop shop for the investors. So all the documentations in one spot as they get monthly distributions back, it’s all kind of visible right inside the portal so they can keep
Dave Dubeau [00:10:53] track of that. That’s yeah, that makes a lot of sense, you guys. So that’s a fascinating idea. Hold that thought for a second. Hi, there this is Dave Dubeau and real estate investors hire me. Cory’s capital is the right way. Why? Because most of them are stuck with too small of a portfolio, and they don’t know how to attract investors and raise money for the deals. So I help them to connect, capture and close their ideal money partners. Bottom line when you’ve got a deal, you’re going to have the capital to do it, so go ahead and book a no cost capital clarity session with me at Book a chat with Dave dot com. Again, that’s book. I chat with a dot com. Again, I’m just trying because a lot of people that are watching us are active investors themselves. They might be thinking about trying to do what you guys are doing, but on a much smaller scale south of the border. So if I understand correctly, you’ve got an entity set up in Canada, that’s where the Canadian funds go into. Then that entity invests in another entity in the states as a whole. Correct. So does that do that mean you really from a compliance point of view, you’ve got to really focus on the Canadian side of things. But because you’ve got it set up this way, it’s not as difficult from the Securities and Exchange Commission point of view down in the States. Would that be fairer, miles?
August Biniaz [00:12:18] Great. Great question. Technical question. So when we raise funds here in Canada for a Canadian fund, we have to follow the regulation here in Canada. So for example, on our most recent deal in Charleston, we use the accredited investor exemption. So all our investors are accredited. They’ve been accredited to a third party, an exam market dealer, so they invested in our Canadian entity. Now on the U.S. side, the U.S. fund, which our Canadian fund will be an investor of that US fund, uses a certain exemption on the U.S. side. It happens to be the five or six see exemption under U.S. side, which is the accredited investor exemption. So for our fund to be able to invest into the U.S. fund and still comply on for the Securities and Exchange Commission, the fund has to be in an accredited fund and for that fund to be in a credit fund, there’s two ways. One is that every single one of the investors is accredited, or second is that the fund has over $5 million in assets and so that those are the two ways. So that’s how we stay compliant on both Canadian side in the
Dave Dubeau [00:13:19] U.S. So do you guys find it accredited? Investor qualifications in the states are pretty much the same as they are in Canada like that. That languaging us is. Those requirements are fairly similar. You know, as far as income range networks, range income, this kind of thing that that’s roughly the same.
August Biniaz [00:13:41] Yeah. So it’s similar. It’s not the same. It is actually easier in the U.S. in certain ways to be an accredited investor. For example, in the U.S., to be an accredited investor, you either have to make $200000 as an individual or $300000 within a spouse that is in USD dollars. So that is in a way a bit more than it is here in Canada because in Canada, one of those exemption is also making 200000 as individual 300k with your spouse that those are similar. But in the U.S. and other ways that your total assets are over a million dollars, not including your primary residence. Right? So if somebody owns a secondary home, you know, a secondary property or other investments that and as long as it’s not their primary residence that they get qualified. And here in Canada, one of the ways to be an accredited investor aside from the income is also net worth. And one of those net worth is your total financial assets. So you have to have a million dollars in financial assets and financial assets are looked at as a they’re more liquid. So stocks, bonds, other types of investments, cash and the other way to be an accredited investors having $5 million in total assets. So is one or the other of these. So it’s very similar with that. Some differences.
Dave Dubeau [00:14:52] Little differences? Yeah, very, very cool. So you guys, you started this a couple of years ago, you’re making. Great strides, you’re doing great things, your rock and roll. Talk to me a little bit about the importance of the platform. Know, because going from being realtors, going from being in the construction side of things, all of this kind of stuff to now being syndicators, getting Canadian funds and buying American property, that’s a big change. Like that said. So hats off to you for making that that switch is absolutely fantastic. What? So a big part of this is marketing. It’s getting the word out, it’s getting exposed. That’s we’re getting exposure by being interviewed on People’s Podcast. What? What has worked really well for you guys, for getting new investors on board, new accredited investors on board?
Ava Benesocky [00:15:43] Yeah. So we do a lot of marketing, a lot of marketing to get the word out. I speak on as many platforms as I can across Canada. People hear what I have to say. You know, not everybody catches on the first time. There’s a seed that’s planted in their mind about this alternative investment opportunity that’s available to them. We do a lot of nurturing when it comes to that. So when somebody signs up to our database, they’re constantly nurtured with new educational content so that they can really learn about what, you know, never invest in a business that you don’t understand. So a lot of people follow us that way. We have almost 2000 people on our database that are constantly opening our stuff and yet a lot of really interested Canadians. But they are just it takes time for them to wrap their head around it. When they do, that’s when, well,
Dave Dubeau [00:16:25] you know, we’re Canadians are famous for being conservative, so you got to see it, hear it. And I think you guys are doing a fantastic job with what I call that constant consistent communication, right? So that your people come in and they’re not. It’s not just busy, busy, busy. When you’ve got a deal on the go, you’re constantly educating people, you’re constantly providing value. And when they’re ready, they click on the button and they book a call and you have a conversation. You see events.
Ava Benesocky [00:16:52] It set exactly just that. And we also have our YouTube show, which we bring on experts to talk about everything. It’s really cool because one of them we had a securities lawyer from the U.S. at a securities lawyer from Canada on the exact same show. So when people are watching that, it’s huge educational component for sure. YouTube University, if you will, and we bring on a lot of lot of experts that that speak of all different kinds of things
August Biniaz [00:17:16] Yes. Yes. For me, just briefly add to this is that again, just like how our company started with finding a solution to a problem which was allowing, you know, everyday Canadians to be able to invest in these large institutional type of assets and benefit from cash flow and appreciation. Our educational content also started the same way because we saw that there a cross-border kind of platform that teaches about raising money in Canada, raising money in the U.S., the difference, the kind of the cross items that exist. So that was kind of the impetus for us to start our YouTube show and lot of other educational content that we create. So it was to solve that problem.
Ava Benesocky [00:17:53] Yeah. And building off passively, who doesn’t want to make money while they’re sleeping? And not a lot of people know that that’s an option. You don’t have to be an active real estate investor. You know, you can put your money into real estate, write a check, sit back, relax and have two people like us do all the hard work for you.
Dave Dubeau [00:18:09] Well, that sounds like a hell of a word to me. So you guys, time flies when you’re having fun. If people want to find out more about Eva in August and CPI capital, how can they? What’s your YouTube channel called
Ava Benesocky [00:18:23] Canadian Passive Investing Academy? You can find us on YouTube. I love LinkedIn. I’m huge, huge. I’m huge on LinkedIn. I love doing lots of educational posts. So ever been Issaka on LinkedIn? You can find me there.
August Biniaz [00:18:35] CPI Capital Dot S.A. Give us a Google, I guess, business. You know, Google away. But Ava on LinkedIn, she’s a superstar, so follow her on there. Definitely.
Ava Benesocky [00:18:44] Super easy to get ahold of and we’d love to have a conversation anytime.
Dave Dubeau [00:18:48] Well, you guys, thank you so much for sharing some of your experience and your wisdom. I’m very, very impressed with what you’ve accomplished in a relatively short period of time, especially because just as you’re getting into business, this whole pandemic thing smacked all of us. So, I mean, here you are. Have you ever let that slow you down one bit? So hats off to you and keep up the good work. Thank you. Thank you for having us. Thanks for having us. My pleasure. All right. Take care and we’ll see you on the next episode. Bye. Well, hey there. Thanks for tuning into the property Profits podcast if you’d like this episode. That’s great. Please go ahead and subscribe on iTunes. Give us a good review. That’d be awesome. I appreciate that. And if you’re looking to attract investors and raise capital for your deals, I may invite you to get a complimentary copy of my newest book Right Back There. There it is the money partner formula. You got a PDF version, an investor attraction book dot com again. Investor attraction, book dot com. Take care.