Table of Contents - Kick Up Your Context with Jesse Fragale
Dave Debeau [00:00:09] Everyone, this is Dave Debeau with another episode of the Property Profits Real Estate podcast today, zooming in with us all the way from Torana with an amazing backdrop in the background there. I'm just waiting for him to grab a cigar and a glass of scotch because he looks so laid back there. We've got Jesse Fragale and Jesse has a very successful real estate entrepreneur and a broker who started off a number of years ago in the single family home space focusing on student rentals. He's then jumped up, bounced up Leape after late getting into multifamily properties, apartment buildings, and started to do some really big deal. So, Jesse, thanks for being on the podcast.
Jesse Fragale [00:00:48] Thanks for having me, Dave. Pleasure to be here. And thanks for the compliment on the background. I forgot the Scotch, but we'll remember next time.
Dave Debeau [00:00:55] I'm going to belt one down in your honor right after we get off the call. So there you go. So, Jesse, why don't you tell us a little bit about why it is over the years and over your experience, you decided to transition from single family homes, from student rentals, all that kind of good stuff into multifamily apartment buildings floats your boat?
Jesse Fragale [00:01:13] Yeah. So exactly what you said there. I started in the single family space and it was a little bit of a hybrid. As you know, the student rental business can be quasi multifamily or call it multifamily and it can be owning just one place for listeners that don't know where I started was in Waterloo, Ontario. So about an hour and a half west of Toronto for if you have listeners down. So that's kind of our technological hub and in Canada. So I was really in a in a very cool environment when we first started. There was a lot of buzz there. The city was growing and started renting out to students. And what was good for me for future years and actually becoming more sophisticated was that the student residential market was somewhat regulated. So you would have to still go in and get licenses with the city. So you're almost kind of training wheels of doing larger deals and making sure that you're treating it as a business rather than just, say, a single family with one family living there. So that's kind of how I started. And then over the years, it just kind of you realize that the economies of scale are there when you start moving up to larger properties. The reality is for us Torontonians like Manhattan, L.A., Vancouver, our real estate has been and continues to be very expensive. So we're not like I was talking to somebody the other day that we took down 40 units in the States. It's like, well, depending on where in the states, that might be a five unit apartment building in Toronto. So there was a little bit of progress that led up to moving into apartments and that was buying condos in Toronto, doing preconstruction assignments, that kind of stuff. And ultimately, the move to apartments was the scalability of it. And then I think it was my exposure to the fact. Like you mentioned, I'm a broker and my partner, he is a broker specifically in multifamily. So when you start seeing people do 20, 30, 50 million dollar deals, all of a sudden the one to five start looking pretty reasonable and achievable. So, yeah, that was kind of the reason I made the switch. And now exclusively, we try to focus on where we can find deals in the apartment world.
Dave Debeau [00:03:28] Very, very cool. So were you already a broker when you first started investing in real estate or did that come after
Jesse Fragale [00:03:35] that came after it was probably about probably about six years into kind of the investing career where I had a neighbor came up to me and said, he's like, you love real estate, you're aligned with real estate, you're working at a job. At the time, I thought it was all the money in the world because I was living at home. So that paycheck was just going into the bank. And then it really was a was a great suggestion because it really connected me with people in the industry, which I find a lot of a lot of investors don't get unless they listen to people like you or you talk about meet ups, you talk about listening to like minded people. And I mean, we've talked about this before, but podcasts have really changed our access to information and investing. So, yeah,
Dave Debeau [00:04:18] very, very cool. All right. So you got started with the whole student rental thing. You got in a few different things. You became a broker is that your partner was selling properties to people and that helped that kind of forced your context to get a lot bigger? I would think so. That's one huge advantage to being right in the field, is you're not tiptoeing around like a lot of people where they're just kind of thinking about it. You actually got to see people doing it and you say, I'm sure you saw a few of them and said, hey, they're not the sharpest tack in the box. If they could do this, I could probably do it, too. And then that just led one thing to the next. All right. So tell us about your very first multifamily deal outside of the student rental. Feels like your first multiplex building.
Jesse Fragale [00:05:06] So and that's a good distinction, because we would call certain ones in the apartment world that were student residents, but the first one we did was in Hamilton, Ontario, and that was I was about three years ago. It was a 11 unit apartment building. We basically were looking outside. We were looking at areas outside of the city for the reasons I mentioned, extremely expensive. So we started doing we started looking into Windsor, Hamilton, London, Cambridge, Ontario, Kitchener, Waterloo, just kind of outside of the downtown areas. We found this one off market. Actually, another advantage of brokerage is that we have Costar, we have Altis. So a lot of these expensive software components that as an individual is extremely expensive. And when I see people on bigger pockets or whatnot paying for them, I'm like, that's impressive. You have to be doing a lot of deals. But we had that in virtue of being part of brokerage. And I found a property that was off market through kind of developing lists through Costar and we contacted the seller. Unfortunately, I had a bit of a suspicion that the sellers health was not great. It was an older gentleman who was managing the property himself. So we saw that there was some value add that it was it wasn't being managed in the best way it could be. And there was a little bit of a capital expenditure that that needed to be done with the property. So we underwrote the property. We basically sent it out for conventional and nonconventional and ended up getting CMHC mortgage on it. And that was the first one. And I'm happy to go into any of the details of the property.
Dave Debeau [00:06:44] Well, no, that's OK. We won't go into too much about that. But I guess what I'm interested in, because it's kind of my schtick is how did you go about raising capital for your deals from the get go? How did that how did that part of your journey come along or do you guys self finance everything? What's your name?
Jesse Fragale [00:07:02] Yeah. So we are we are still bootstrapping through self financing. And I have a feeling that we will probably after the next one. We have a property under contract right now. We're going to be at a point where it's just it's not going to the reality is you run out of money at some point. So the way we financed this was actually partly my partner had done very well and brokerage had saved up, saved up quite a bit of his commission checks. And then on the flip side, for me, I disposed of dispositions for some of the properties I already had. And like I mentioned, Toronto having bought some condos in Toronto fairly early on, those went up seven, eight, nine percent per year on average. So I did some dispositions. He had some cash. We pulled it together. We did, like I said, CMHC loan. And then we added, I think it was one hundred thousand dollars in addition to that of a private loan. So that was debt financing. But I am yeah, we're at the point now where I'm trying to gear up for the fact that we're going to have to start raising capital. And I'll have to give you a call, Dave, and you can you can show me the way there, right?
Dave Debeau [00:08:08] Well, I think you guys are already way ahead of the game. You got podcast's goal and you got all this all this kind of stuff. I think you're very, very well positioned to start raising some serious capital quickly. Very cool, Jesse. So. All right, let's rewind way, way back. How did you first get the spark around real estate investing in general? How did you what was that first property you got into it? How did you do that? Did you run out and get a bunch of education stuff or you just kind of blunder your way through like some of us do? What what was your initial process?
Jesse Fragale [00:08:42] So if we go way back, I mean, for me, both of my parents are very entrepreneurial, always very fortunate to have encouragement from mom and dad. My dad was a mechanic by trade. He started an automotive business when his family immigrated from Italy and just kind of seen a hard work ethic from him was inspiring in general. And then as I got older, I realized that they weren't my dad was a landlord and in the sense of buying apartment buildings, but they had bought land and when they had little extra cash, they were investing in real estate was always something that seen as a good investment. And my mom on the on the same token, was always very encouraging when it came to that. So really, what I tell this story, it's when I was very young, my dad I'm a big car guy and my dad's friend had bought the at the time I had never seen a viper before Dodge Viper. And it sounds like a silly story, but I remember going to my dad when I was really young, being like Mickey. How does he afford these? I got to know what they cost. I had no idea I was too young. But they found out that he owned like twenty five single family rental properties. And that was kind of my first window into this idea that you don't have to go punch a card every day or have a specific job. You can actually be a business owner or be a land owner. And that was probably the first time I, I kind of saw that. And it wasn't until years later in university that I saw that friends of mine were actually renting out places to other friends that they lived with, or sometimes a one of your buddies, their parents by buy a house in a student residential town, and then they rent out to their friends. So once I saw that, it kind of all all clicked.
Dave Debeau [00:10:28] So you just ran out. So you're going to university at the time, is that correct? Or you're already well. Yeah. So how did you buy your first property? How did you decide to do the whole student rental thing? You saw that you saw your buddies doing that. But yeah, it's run out and buy a house and kind of flu out or whatever.
Jesse Fragale [00:10:44] So what happened was once I saw that my parents, they divorced when I was like 14, 15. So I say that because first thing I say to my dad, I'm like, Dad, you know, we've got to buy this property. Like, I can have this amount of savings. We can do it. He says, no, you're in school. You got to focus on school. You don't have time for this, maybe later when you're older. So what do you do when you have divorced parents? You go to you go to the mom and go, hey, my dad said no to something. OK, I'm listening. So she was actually she was instrumental in me getting the first deal. And what happened was it was a two hundred fifty thousand dollar single family house with five female students from the University of Waterloo. I put down I believe it was 10 percent that we needed to put down. And I had come up with ten or fifteen. And then she cosigned for a line of credit. And I, I like telling that story because so many times I hear people just say, you never hear how they got financing. And it's like nineteen twenty year olds that are in university do not get financing for things without some help. And I think everybody had had assistance in some capacity. So that's how I got into that, our first deal. And from there and this is part luck as well, our market from there, that would have been two thousand and nine twenty eight. So from there the market had gone up and I was able to reposition and refinance to acquire more.
Dave Debeau [00:12:06] Now, very, very cool. Interesting, interesting side note here. Just I've noticed this among a lot of my more successful clients is that they're either first generation Canadians or their parents were first generation Canadians. And they just they come to the country and they see. A bounty of opportunity where a lot of born and raised Canadians whose parents and grandparents and everybody, everybody's been here forever, don't see the same opportunities. What what's your take on that coming from? It sounds like both your parents are first generation.
Jesse Fragale [00:12:44] They were their first generation. My dad was he was the first of his family to be born here. So all of his brothers and sisters there, they're born in Italy. My mother, she's northern Greece. Same same thing. I completely agree. I mean, the old saying it's usually the third generation or fourth that spends all the money. But, yeah, I think it is the the fact that you're seeing it so intimately, you're seeing kind of a hard working ethic and the fact that I think there's a sense that for people that are first generation especially, it's a privilege to be in this country. I have relatives in New York that would say the same thing about about the states, that it's a privilege to be here and it's an opportunity. And they definitely download that to the kids. And I definitely agree with with your sentiment on that. I've kind of noticed the same thing.
Dave Debeau [00:13:32] It's very cool. So we've only got a few minutes left here, Jesse. But before we jumped on started recording this, we're talking a little bit about expanding your context in your and your mind set and starting to to look at bigger and better things when you start doing real estate investing. Walk us through a little bit. You've talked a bit about that, but what does that mean to you, like this whole idea of thinking bigger and bigger?
Jesse Fragale [00:13:58] Yeah, yeah. Just to our conversation before, I think there is an aspect. One thing I love about real estate, it's it's kind of the butterflies you get when you're doing a deal that's that's kind of pushing your limits. And it's this weird feeling of being uncomfortable and excited. And I think the thing that I try to tell people that are getting into real estate is kind of pushing yourself to to kind of think that there are certain deals that you think you can do right now or you don't think you can do, and you really can actually go a couple of steps further past that point of comfort. So if you're looking at a quad or you're looking at a triplex and that is where you think that that's where you can do a deal, think about that seven unit 10 unit. And at this time, it seems like, well, that's just ridiculous. It's not like the secret. I'll just assume I can do it and all of a sudden the universe will give it to me. But the reality is, once you start seeing yourself, having the ability to buy a seven unit, that means maybe going out to see it, walking the building, going with the agent, having those conversations, it becomes more and more part of your DNA or part of your identity. And I know it sounds somewhat farfetched, but I found that I have always been most proud of deals looking back, and it's been the ones that I was the most uncomfortable and slightly scared about closing on. Right. Because it's not
Dave Debeau [00:15:18] what you said before. That's not what you said.
Jesse Fragale [00:15:20] Scared shitless. Yeah, scared shitless. That's exactly what I said. OK, this I forgot scotch and swearing. Yeah, exactly. And that's that's the reality, David. The fact that if I'm in a deal and I feel completely comfortable about the deal, I, I know that I'm not stretching myself and I'm not pushing. But I mean, at the end of the day, also just, you know, not pushing so far that when you get burned, you don't want to ever do a real estate deal again. I think there's this comfort zone. There's the sweet spot of just a little bit uncomfortable, excited, fearful. Those are the deals you should be going after.
Dave Debeau [00:15:53] Yeah. So, again, I mean, for most people, when they first get started, buying a single family home is a big scary thing because they've never done it before. So great. That's that's a good start. Once you got that, then maybe you're looking at about another single family home, or do I buy a house with a suite in it? Well, that's now you're doubling your doors. That's a scary thing for you as well. So stretch into that. But now you got that going. So now instead of just maybe going to a triplex where you say, OK, well, look at a four plex or even a five plex, you get that one going again. It's just a it's just a way of growing. And the bigger deals you start doing, the more comfortable you are and the less of a stretch the next step seems.
Jesse Fragale [00:16:35] Yeah. And it really that in conjunction with socializing this these ideas, like I mentioned, I had the good fortune of being in a brokerage and I saw these commercial deals happening. And like you said, sometimes the people, if they can do it, you know, you start saying, I'm pretty sure I could do it. I'm pretty sure I know some other people that can do it. And then I kind of got that out of being in brokerage, where I know a lot of people out there listening. They don't have that avenue or they don't work, say, in the field. And that's where listen to a podcast going up to meet ups, checking up local real estate groups. That's where you start socializing and then you're around people that, wow, it is possible all these people around me are doing it.
Dave Debeau [00:17:11] Yeah. Becomes normal. Exactly. Jesse, there's been a lot of fun. I know you've got an amazing podcast yourself. I was had the pleasure of being interviewed on it not that long ago. If people want to find out more about Jesse Fregoli and what you're up to, what should they do?
Jesse Fragale [00:17:25] Yeah, you can go wherever you listen to podcast. Working capital, the real estate podcast, and oftentimes I'm on Instagram and I, you know, people DM me there, I'm happy to answer, and that's Jesse Jesse for Gallie after a Gally. And, yeah, feel free to shout out if you have any questions.
Dave Debeau [00:17:42] Very good. Also, my friend, thank you very much. My pleasure, Ana. Take care. And we'll talk to you on the next episode. Bye bye. Well, hey there. Thanks for tuning into the Property Profits podcast. If you like this episode, that's great. Please go ahead and subscribe on iTunes. Give us a good review. That would be awesome. I appreciate that. And if you're looking to attract investors and raise capital for your deals, that 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 at Investor Attraction book, dot com again, investor attraction book, dot com ticker.