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Podcast Transcription
Announcer [00:01:22] Tired of the 9 to 5? Tired of only dreaming about the things you want to do? Want to have more time for your family? More time for you? More time for you. This is the Breakthrough Real Estate Investing podcast, where we interview qualified guests in the real estate industry all across Canada. We want you to live life on your terms, and we want to help you break through to that life through the power of real estate investing. This is the Breakthrough Real Estate Investing podcast. Now your hosts, Rob Break and Sandy MacKay.
Rob Break [00:02:03] Hello and welcome, everybody. Thanks for joining us again for another fantastic episode of Breakthrough Real Estate Investing podcast as usual. Here with me again is Mr. Sandy MacKay. How are you?
Sandy Mackay [00:02:16] Fantastic. Yeah. Excited for another great show. How you doing?
Rob Break [00:02:21] How’s your summer, man? We’re closing out July right now.
Sandy Mackay [00:02:24] I know. It’s been fantastic. It’s been busy. And, like, this is one of the busiest summers I’ve seen in years. I don’t know if you’re seeing the same in Costa Rica. Canadians first summer back during events and whatnot, and then finally and also it’s flying by now.
Rob Break [00:02:41] Are you talking business wise or just, you know, activity wise, getting out there and being able to do stuff.
Sandy Mackay [00:02:48] Getting out there it is the most business is great and also like a bit odd right now because the market’s slowed down quite a lot. Right. So it’s a lot of a lot of interesting things happening. Amazing market to be buying properties in and to be going against the grain of everyone else and buying when others are fearful. Right. The classic, I guess it’s the Warren Buffett line, the greedy when others are fearful for everyone. Others are greedy. There’s not many great people out there right now, so it’s the time to get greedy.
Rob Break [00:03:21] I like it. I like it as usual. You guys now go over to our website Breakthrough REI Podcast Dossier. There you can, of course, listen to all of the past shows. You can hook up with the guests if you need to, because most of the time, at least, their contacts are in the show notes. If there’s somebody that you were particularly interested in, want to reach out to them, you can do that. Just go over to the show notes at our website or through REI podcast dot CA and you can pick up our free gift.
Sandy Mackay [00:03:50] The free gift, the ultimate strategy for building wealth, the real estates. And you will, of course, get that when you jump on there and subscribe and never miss out on the show, get updates to everything else that we’re doing and yeah, go do it. I think people underestimate what you might find when you subscribe there and learn about all the events we’re doing and get a lot more chances to engage with us. So yeah, do that.
Rob Break [00:04:12] Very cool. And of course go over leave us a rating review on iTunes. Helps us out a lot. You know, it doesn’t take long. Just go over, let us know what you’d like to see on the show, too. Like when you do the reviews, say, hey, you know, I haven’t heard much of, I don’t know whatever topic it is that you would like to hear of, or if you have a guest suggestion, please feel free to leave us some leave us a little bit of advice because we always like to hear what you guys want to know more about. So go over there to iTunes and let us know what you think.
Sandy Mackay [00:04:43] Absolutely. Absolutely. We always need more recommendations. If you go on eight years, we’ve got a lot of content. I know there’s still, you know, suggestions that come in every once in a while and we’re like, yeah, that’s never done that before.
Rob Break [00:04:55] Yeah, yeah, there still is.
Sandy Mackay [00:04:57] I mean, even today we’ve talked about basements and stuff and all that before. I think we’re probably going dove a little deeper even than most have heard before on this episode with our guests. So, you know, there’s always, always, always new things to do that are out there that are coming and new different strategies and whatnot. So let us know what you want to hear because we’ll go find the experts on that topic and bring them on.
Rob Break [00:05:19] Mm hmm. And today we’ve got Guy Solomon with us, and we’re really excited to talk to him, you know, topic near and dear to our hearts, of course. And a lot of people that are sort of just getting started in investing, they tend to I mean, he’s done a lot of things. But, you know, one of the things sort of that that guy focuses on is the basement suites. So we’re going to dig into that. And I think it’s a topic that a lot of people really like to hear about.
Sandy Mackay [00:05:47] Absolutely. What kind of money?
Rob Break [00:05:50] How are you?
Guy Solomon [00:05:51] Good. Thank you. Thank you for having me.
Rob Break [00:05:53] Yeah. I appreciate you taking the time today. I know we’re going to talk about a bunch of things, but of course, you know, the adding basement suites has been something that has really, really actually helped me a lot in my investing career. So I know that it’s something that can help a lot of other people, too. So this is a topic that is very important, in my opinion.
Guy Solomon [00:06:17] Yeah, for sure. I mean, we’ve been servicing basements since 2012 and, you know, back then it was not as common to develop legal basement apartments. Most business specialties weren’t even legalizing them. Right back, I think it was a 2014. I did my first basement apartment for a client, which was very like purposeful. They had the grandfather was actually quite sick and he wanted to leave a really good, like living quarter, safe living quarters. There was a generator involved. Like there’s a lot of detail to be the first project and then from there we just kind of focused on that market and it really didn’t pick up until probably 2018, 2019, where the real estate prices started to climb. And a lot of people looked at it more as a need to offset the rent, like the real estate prices. And then obviously investors followed suit and they’re ahead of it, too. And we do a lot of basement apartments and duplex conversions and it helps people in their in their birth strategies or whatever it is. Their strategy has is great rents coming out of the basement.
Rob Break [00:07:21] You know, I think the other thing that’s driven it a little bit, too, is the fact that like for a long time there were certain areas inside every municipality where that that was the only area where you could add legal basement suites. So it had to be owned a certain way. Right. And now they’ve changed all of that. I believe every municipality pretty much in Ontario, which is, you know, where you guys are based, has brought out rules to allow secondary suites citywide or municipality wide, basically. So it’s almost all of Ontario where you’re allowed to employ this strategy now, which is probably made a drastic difference in your business.
Guy Solomon [00:08:02] Oh, for sure. And we serviced most markets, right, where with respect to Ontario, like we cover the entire greater Toronto area Kitchener, Cambridge, Waterloo, Hamilton. We have showrooms in those areas, Barrie. We have our office in Ottawa, so in London, Ontario now. So we’re kind of following where the market’s going. Obviously there’s less and less new construction for low rise in the GTA. So we go wherever. I mean we’re in Wasaga Beach right now. You tell us where and we pretty much go right there.
Sandy Mackay [00:08:32] He’s done more basement suites than you and Ontario.
Guy Solomon [00:08:36] I don’t know. From the start, like, we’re all private businesses, so I’m assuming we’re like. We’ve done the most. Maybe private groups have competed, but we’ve done hundreds.
Rob Break [00:08:48] Yeah. I thought like Sandy. Were you expecting him to know who it was right there and just be like, you know, turn to the side?
Sandy Mackay [00:08:55] I expected him to be confident, looked at us for sure. But I know based on the leader, I know you’ve done hundreds of them. And I and I also want to make sure the audience knows that that we got kind of the guru of them here with us today. And, you know, a lot of people, it’s great to hear all sorts of different stories on it. I know you’ve got a unique perspective because you’ve done so many of them for yourself and clients and in all these different markets, too. So there’s a lot of varied edibles as you go to different markets and there’s so many different things to, to think on. So, yeah, I’m excited to have you on here to talk more on that deeper on this topic because it’s a great one.
Rob Break [00:09:32] So how did you get into this? I mean, you mentioned that you did your first legal conversion of a basement in 2012. So obviously there is steps to being able to take on that challenge. So tell us how you got started.
Guy Solomon [00:09:49] Well, you know, I started the company I registered in 2011, started building just regular basements in 2012. So personal use spaces. I even avoided washrooms and we started just trying to keep it as simple as possible, like, hey, I’ll build your basement, here’s a plumber’s business card. But you know my background. I have a degree in finance and accounting, so I studied in school and I, you know, I was raised in the window indoor business. So I got to see the ins and outs of process and manufacturing and so on and so forth. So I had my own window door business too. When I was I registered, I started in 28, I was about 24 and I ran that for about two and a half years. And I just saw that, you know, that business was kind of fading with the fact that all the new houses already had vinyl windows as opposed to old and wood replacements. So when I registered Penguin, I saw it as an opportunity to just fall behind the track builders or subdivision builders and build all these personal use basements. And then as we move forward and as that Bill 140 came through, as you said, all the municipalities came on board. They’re more receptive to it somewhere, a little bit more or less at the start, but now it’s pretty much universal. And yeah, and like you just take it from process to process. And you know, Sandy and I’ve had a few conversations in the past where, you know, if you’re committed to continuous improvement, you just take whatever mistakes you made, roll that into a new process, and then the adjustment and you keep going and just doing that for the better part of eight years with conversions, like I think it was up until 2018, we weren’t even 2019 even, we weren’t even renovating the main floor because people would ask us for main. I’m like, That’s not systemized. So, you know, just the way the managers looked at it at Penguin and the way that was conveyed is like, let’s focus on the basement. Let a small contractor work upstairs. And by virtue of seeing that, you know, the upstairs took longer or they’re having a tough time finding contractors or even they’re getting over like all types of terrible experiences that if it’s an unoccupied unit, we’ll do it. It was just another basement. We’ll just we’ll sell the basement in its entirety and then we’ll treat the main floor like it’s change orders. And they work with the architect or project manager to like table. What are we just painting or replacing some floor, you know, more bespoke that way. So yeah, you just got to be flexible and lean and try to just solve problems, right?
Rob Break [00:12:14] Right. Speaking of problems, what were some of the challenges that you faced when you were starting out and doing this.
Guy Solomon [00:12:21] Basement apartments or the whole business?
Rob Break [00:12:23] Let’s talk basement apartments, I think, because like, you know, that’s sort of the focus where a lot of people are going to want to get their information from today. I mean, yeah, we can we can do a whole other business related. Sure. You know, at some point. But I think that that’s really where we should focus today.
Guy Solomon [00:12:42] Yeah. Yeah. So, I mean, the first thing is getting a building permit, right? So I think the most important thing in a basement apartment is coming up with the right designs. I mean, I have so many designs that come to us that are done by other architects where they’ve suggested it can only fit one bedroom. And by I could, even in our training and the way that we do it, we try to keep the living room and main areas the same and still add in the second bedroom by eliminating hallways, by maximizing the flow of space. The most important thing in a basement apartment is coming up with the most efficient design to maximize the potential rents and conveniences. Another trend, for example, is there’s a work from home. There’s a push to work from home. So a den, even if it’s going to be a five by seven type of room that is convenient to work with, it has a lot of value as well. So a two bedroom plus den in three bedroom in some markets. That’s really that to me, that’s the most important part of the entire process of getting the right design in in terms of challenges that we’ve had. I mean, it really comes down to the inspectors. I mean, that’s the variable. The building code is the building code. The way we build is the way we build. And, you know, certain inspectors want in a certain type of way. So we’ve noticed that we have sensitivity around the rough inspections. You know, like some of them want for us to do certain tests around the plumbing. You know, there’s different ways to fire. BLOCK There’s different ways to fire separate fire caulking, like. So what we do is we probably have a basement apartment. We’ll probably call for three rough inspections, even if there’s only required to be two, including like walking through the fire separation twice. So we don’t have to deal with that after we’re in the painting process. But once you clear all the rough inspections and everything’s cool, you’re pretty much smooth sailing. The job will be done in about two weeks, max. Three weeks. You know, I would say that there might be some outstanding landscape or something like that. But the critical point in any build, including basement apartments, is the drywall. So we know where we stand once the drywall goes up.
Rob Break [00:14:50] I guess one of the important things that we should mention here is the whole idea behind why something like this is so important. And I think there might be some new listeners here who, you know, are kind of going okay, but what’s the real significance of this? Why are we talking about it? Like, it’s so important and I think is so at least for Sandi and I. And I think a lot of people who are just starting out the best way to force appreciation in in some kind of a renovation project and also to keep something for a long term rental is to add a legal base, an apartment. So that’s what we’re talking about here. And it’s been one of those strategies has been super, super powerful. It’s the focus of our free guest and that you can get if you go over to Breakthrough REI podcast dot CA. But you know, just to buy a regular single family home and then add another rental unit into it right now instead of having one single family home, you’ve got to two legal rental units. So and then of course, that force of the, the, the value of the house to go up and you can go back to the bank and say, hey, you know, we’ve made all these changes. It’s now something else. Can you come back? Can you reassess what we’ve got, what we own, and then typically you’ll be able to refinance and pull a bunch of money out to be able to possibly go and keep on doing investing in something else. Right. So at least for me, being able to do stuff like this, we’ve been I’ve been doing that like that same thing for, I don’t know, like ten years now probably. And it’s been so powerful, it’s allowed me to get where I am, the strategy. And then of course the people along the way that we’ve met who have been supportive and helped us be able to do it as well. But I think that this strategy here is one of the best.
Sandy Mackay [00:16:50] And I’ve even rob even in house I can write like if you’re if you’re not necessarily thinking of it as an investor investment property necessarily. But you know, it’s one of the things right now is we’re seeing some of the market shift, their interest rates going up. You know, what are what are some things people can do to lower their costs of living out of base and sweet. Right. Like if you’re if you’re if you’re out of sweet to your personal residence, whether you’re, you know, if it’s your first time buyer type house, it’s a great way to offset that. If it’s not, your first time buyer has to be wanting to get rid of that you know, great way right now to get rid of the interest rate and that that that how would that affects your lifestyle is go take out maybe a loan on your property and out of base and sweep that off when you do that after that you’re probably offsetting that interest rate lately and able to maintain your lifestyle and, you know, all sorts of variables.
Rob Break [00:17:37] Well, I mean, that was one of the one of the major light bulbs to just in life in general. And what made me kind of, you know, start to look more deeply into the whole real estate investing side of things was one of our first I think our second place that we bought my wife and I was a was a legal to you and place. And then of course, at the end of the month, we’re like, wow, we’ve actually got a little bit of money left here. You know, it’s never been the case before. So, you know, seeing that is one of the light bulbs that kind of makes you go, okay, well, what if we do it again? And what if we do it again? And what if we do it again? How does that look for sure?
Guy Solomon [00:18:19] What I’ve what I found with respect to basements is I asked a simple question with customers, what is a basement really worth? So when I was growing up, the basement was where we played hockey and roll roller blade or whatever. It’s like an it’s like an insulated storage area. When you look at the fact that rents are anywhere from 1500 to 2000 in most markets and sometimes even more. And you put that as a percentage when you put that into a mortgage and you see that I can pay 300, 400 and $500,000 of the mortgage depending on what the rent would be. That’s truly what the basement could be worth. And that’s why whether or not you’re using it in a duplex conversion or a primary residence, it helps make everything just a little bit more affordable. And that’s it, right? A lot of people just looked at it as storage, but if you can utilize it in some other ways, another cool thing we do with that is trying to help them understand like you didn’t what was most people when it comes to a personal use basement, they only want for the most part, an extra place to watch TV and maybe a washroom. So you might need two or 300 square feet to do that. Yet you can still utilize the rest of the basement for a one or two bedroom rental, which would obviously pay for the rental and, you know, create some other flexibility. So there’s lots of options for people either as individual owners helping their children get into the market or creating an investment strategy. Just understanding. Okay, an insulated storage room now is a vehicle, but we have to put a value to what that basement could actually be. Worth less the cost of construction, obviously.
Rob Break [00:19:53] Do you find that most of your clients are the homeowner that’s living in the space, or are they investors?
Guy Solomon [00:20:01] It’s a big mix. It’s a big mix. I think that because of the way the penguin is situated, we deal with a disproportionate amount of like individual owners that want to add rental space to their own dwelling. There’s a lot of service providers in the design and permitting that don’t service and unit homeowners because they take a bit longer to make a decision and things like that. But we’re built for that. So I would say it’s a good mix. I mean, it changes from season to season, month to month. But I have never really broken down. How many are individual homeowners? But we have a lot.
Rob Break [00:20:36] Well, here’s a good question for you then. Have you noticed anyone that started out as a client who was the homeowner? And then a couple of years later, you’ve seen them all of a sudden now they’re doing two, three, four or getting in or you’ve seen them again, right? Because a light bulb went off for them just from this project.
Guy Solomon [00:20:54] Exactly. So we you start off with their own residence and we usually advise to start with your own residence because it’s leased, you know? You know, you got to take it in baby steps, at least. Risky already own the house. So you spend the money for the right now you get the cash flow, get refinanced next time your mortgage comes due or just nice and slow, right. You have to take it nice and slow with an individual who’s doing it for the first time. But also, I’ve seen people do it as an investment strategy. They’re a bit nervous. They bought their first property and then I see them scale up. I’ve had customers come back for their fourth, those individuals fourth, fifth, sixth, seventh. It’s really cooled to see them all their strategy build confidence. You know, I always encourage them to get especially if their kids are older, get their kids involved, if they’re teenagers, whether it’s the demo, whether it’s the numbers, I encourage them to be a part of the meeting. I mean, that’s what this is really all about. This is a long term strategy. This is about building equity and transferring wealth and transferring the skills that it takes to come to the table is equally as important so that you become a part of their whole lives in some sense. And to be honest, that’s the part that makes it fun. It’s not fun to hear a job is delayed by two weeks or that we have to repaint the wall like the human element of this is like. I wouldn’t trade it for anything. That’s why I still deal with most of the customers myself.
Sandy Mackay [00:22:12] What were some of the or some of the challenges starting out with this this modeling? What are some of the early some of the common challenges that people have, either yourself experience or clients that are, you know, just have come up often or just seem to be.
Guy Solomon [00:22:27] Yeah, I think you just need to like it’s the knowledge of the building code. Right. Like ceiling heights, natural light, and how to deal with the inspectors. That information is pretty like, you know, once you built it, once you do construction constructions, construction. Right. Like, I mean, it’s a washroom or too. It’s a kitchen. It’s drywall. Different variable variances in terms of the type of drywall type of flooring. But that part’s not difficult. A lot of people get hung up because of the inspections, right? They don’t know that you might have to increase the water lines. You know, you have to deal with fire separation on the furnace room like they just don’t know. And often what they do is they get if you don’t right. Individuals or invest, they don’t know that you know the quote doesn’t include what they what isn’t yet in the approved permit set or site condition. So you really the biggest key to basements the basement conversion the duplex conversion is just understanding the building code and understanding what you can you can convince the inspector that is, you know, a resolution and what you have to come back and redo. So you just need to have that experience. And I think that we’re in a unique position that we service almost all municipalities so we can cross-reference. We have engineers on standby to stamp things like we can. We have our own in-house structural team. So like we, we can submit for revisions and continue with the process. So it’s all about keeping those keeping the process going and getting to final occupancy. We understand the time is ticking and dollars are expensive.
Rob Break [00:23:57] Yeah. And I think that that that relationship with the inspectors is actually one of the most important things, because if you get on the bad side, you know, they just start to look at the project a whole different way and I’ll give you a hard time. So that’s one of the things that I noticed anyways before. So how like, is there any other ways that you’re helping people invest in real estate?
Guy Solomon [00:24:25] Yeah. I mean, for the most part, they’ve been basement apartments in the personal use side. Just touching on that, even for some savvy like builders or investors. We do what’s called an f i y, so it’s a finish it yourself solution. So we do the bulk of the work and then they could do their flooring, their trim and their paint write miscellaneous carpentry. The thing is, we won’t do a finished yourself solution for someone who doesn’t have a decent knowledge of the building code or has done one themselves before because we don’t want to leave them in a position to deal with inspectors at the final. But for personal use, we do that. So like, if you overstretch your budget and buy a personal use home, great opportunity to pay 50 $0.60 on the dollar and then use your own human time capital to finish it off. But in terms of like investors, obviously the big thing now in Ontario is Bill 108 and the Garden Suites. And that’s something that we’ve taken to quite seriously as Sandy heard a little bit about. Right. So we’re looking at different markets as they’re coming on board. And it really is reminiscent of when legal basement apartments were coming on board a municipality. Municipality, I was going to different meetings and seeing what the bylaws are going to be. And we really want to be at the forefront of this because to me, the garden suite is the exact same thing as a basement once the shell is waterproof. So the exterior is, you know, we build the basement or put it down on footings or whatever the case would be over. We build the structure, get it ready, and then and then treat it as if it’s another, another basement or a duplex conversion. And now you can you can collect three different units, rents. And the other cool thing about the garden suites is they offer and it’s just a unique product. So it’s better for accessibility. You can design it whichever way you want. And obviously there’s certain bylaws you have to stay within, but it’s probably more similar to how you can build in Costa Rica than how people are used to building in Ontario.
Rob Break [00:26:26] Right. Like a little casita off to the side. You’re not stacked on top of each other, right? Because often especially, you know, when you when you don’t have the proper insulation in between, which I’m sure has never been a problem for you. But, you know, in the past, we’ve sort of cut corners where we could you know, there was there was different rules back at certain times. You didn’t need to make sure there was a certain amount of insulation in between, there’s grandfathering and all this kind of stuff. And then, of course, there’s sometimes some tension in between the tenants because of noise or, you know, thumping on the floor or whatever it is. So at these garden suites, there is a completely separate unit, which is great. Do you find that for the most part, the municipalities are allowing that as a third unit or in almost every case or are they.
Guy Solomon [00:27:17] In the areas that we’re focused in? So in Toronto, in Hamilton, in Kitchener, we found that to be the case. But, you know, it’s July, August 2022 and those bylaws are changing regularly. So we’ve even designed certain structures to meet certain bylaw, not realizing they haven’t posted the new bylaw. Right. So the latest bylaw, for example, in Hamilton is 75 square meters for a structure. And so we had to quickly redo a couple of designs to still fit a two bedroom plus den. Design. But, you know, constraints are fun. You know, if you just get a blank footprint, blank canvas, blank budgets, like that’s not fun. It’s fun to design something to a constraint. That’s what we’ve always done in basements. So we’ll work with every municipality as they, you know, on board their policy and their they adjust their policy and whatever the case may be. But the purpose is the same whether it’s to add more affordable housing to the rental stock or to help people pay off their mortgage or to amalgamate families, you know, like it’s a great space, but I really, really want these garden suites to be. Have these in their inception to be really a great option for accessibility. You know, I mean, these are bungalows aren’t really that accessible because you still need three or four steps up in tip five in a typical bundle. I want these to be maybe just a sill and a small, small, small ramp. And this is finally an opportunity for low rise housing to give homeowners a real alternative. So whether it’s aging in place, living in place, or they, you know, they have a slip and fall and they need something, they don’t have to always find an alternative that’s in a mid-rise or a high rise condominium. If that’s not what they’re used to or comfortable with, we can create an unbelievable like space and make it, you know, have them live with dignity and respect and a great state. Like, I personally don’t need a lot of space. So if you have, you know, 800 square feet inside and it’s well designed, it’ll feel like a thousand and you have a great garden and so much flexibility to it. So we were really looking forward to it. So it’s such a cool opportunity.
Sandy Mackay [00:29:36] Interesting one that a lot of people aren’t aware of yet either, or especially I love that if you can make them affordable, accessible, efficient. Those are like three of the key buzzwords that make up an hour. Everyone loves it. It’s a great it’s like you’re doing great things for the community, adding a lot of like how many people would love to have that? There’s so many your market for who would be interested in that is massive. So you’re opening up your, you know, on resale or all the different options down the road are huge, probably financing, probably will appreciate all those things to some extent now. So I know CMHC is looking for exactly that affordability, efficiencies, accessibility, those are three of their main terms. If all their different options they have out there right now on bigger buildings, those are the three keys. So I think you’re nailing you’re nailing those.
Guy Solomon [00:30:25] Well, I think I think we our goals should align. I mean, we’re all here to serve the community. So whether it’s CMHC or a little bit of politics, but the goals should all be the same. We’re here to serve people. Right. So that part is extremely exciting and just. You know, when we when we go to build, we want to be mindful of what the individual is actually looking to for like the end use case. Like, what are we going to design for? What is the solve that we didn’t solve before and just work through? But the reason that this industry is so now, when you buy a house, you can create two rentals, an additional rental. So it creates it creates a tremendous opportunity. But this opportunity has been created, in my opinion, because of overregulation. You know, whether it’s the land supply, whether it’s the way that you get permits, like for multiple reasons, labor availability, you know, this is an opportunity for individuals to become mini developers. And when you’re looking at some of these like older neighborhoods with larger lots, you know, you take the last 30 or 40 feet off the backyard and you turn it into a garden suite. So let’s say for argument’s sake, it used to be 140 foot lot, and now the house is effectively 100 or 90. When you look at any new development project within, let’s say, the Greater Toronto area, you’ll be hard pressed to find a lot that’s longer than 90 anyways. And the developers are getting these products, whether you like it or not, on the main dwelling. So you might as well get some of the economics out of out of the garden suite as well. So simply by we can be creating accessible homes, we can create affordable homes, but at the same time, we can get some real power. And you know, Rob, you mentioned it best. You’re like, this is a great the basement apartments are great investment vehicle and the garden suite is even more of an amplifier to getting people on the property ladder or making things more affordable. Because, you know, the rent rental, the rent in the garden suite should be could be as high as 50 or 100% more than the basement, depending on how it’s designed and what area it’s. And so if you’re doing both and you’re investing that kind of capital, you’re going to have unbelievable results with respect to how it covers the mortgage or how it gets on the property ladder. And it’s still services to service the community.
Rob Break [00:32:39] Yeah. So where do you see your business going in the future? I know we’re going to you’re going to be doing a lot of that. What else is in store.
Guy Solomon [00:32:48] For the business? But now I’m getting. So yeah, look, at the end of the day, it’s about housing solutions. So right now we’re taking a step past the basements because we kind of have it systemized. We feel as if we’re past COVID. So we kind of remember our system and our speed and fluidity in 2019 and the beginning of 2020. So we feel really comfortable. That’s why we’re growing into this space. We already have a footprint in most of the geography from a labor standpoint. But I want to I want to add to the housing stock, add to the rental properties and accessibility, and then, you know, with the right partners, explore what else this province needs. And that could be in multi rise, that can be in single family homes. Penguin homes is something that’s going to come on the table likely for 2023. We’re in the process of the cherry on application. And, you know, we think that on that front, for example, just the more the more we evaluated the numbers, like there’s a real opportunity to build some custom homes at roughly the same value of what you’re buying a subdivision home for. So it’s a very small step. You know, when you look at custom homes as an example, most if not all of the custom homes are built based on a cost plus approach. It really doesn’t allow for real negotiations with your sub trades because it’s not your cost. And the higher the number, essentially you’re just getting your margin on that. So and then there’s some practices with respect to tax like land transfer twice and HST on the finished solution, you don’t see too many spec builders that are finishing the house and then going for sale just with all those charges. So we think there’s some unique opportunities to help people get out of the subdivision home where they’re staring at their own with their neighbors glass the glass almost and get them into some custom home solutions. But that’s what’s so great about the garden suite is that at scale we think we can really refine our process and then move in at scale to be a custom home builder, as long as it serves people to get into something that makes a little more sense for them in the short and long term, a little more land and you know, they’re working from home. And so we can offer some new options and new opportunities because you can’t wait for these subdivisions to be approved. And then you’re not going to assume at this point that they’re ever going to be affordable again. So that creates tremendous opportunity to kind of break the mold and maybe build something custom. So, you know, there’s a long term horizon of constantly providing some new solutions that.
Rob Break [00:35:24] Will.
Guy Solomon [00:35:24] You know, increase options and increase affordability. So my math is very simple. It’s continuously producing more housing options and solutions, and the rest will hopefully solve itself.
Rob Break [00:35:40] Now. I like what you’ve done. I like what you’ve done as far as that goes. Like as far as business goes, you know? Learn, grow, learn, grow. I know there’s a lot of parallels, definitely, between, you know, running a business like this and, you know, running an investment business, you know, real estate investment business. So. Thanks for sharing and I appreciate all that. And that sounds like very exciting for the future. So wish you all the best.
Sandy Mackay [00:36:06] Can you can you comment on a little bit of the changes that have happened through Golden and how that’s kind of your business, but how that’s affected the consumer and how they’re working with you as well? Because there’s some pretty interesting changes, I think, that have happened that made your business more efficient and better for the consumer.
Guy Solomon [00:36:23] Yeah, I think I think. Oh, you mean like in terms of our whole.
Sandy Mackay [00:36:26] Operationally, I know you’re here, you know, when you know your taxes directory, finance and accounting background always that says to me you’re pretty detailed oriented and you can probably managed systems pretty well and I know you have good ones. So and I’m involved to help the consumer in a lot of ways. So I mean, it’s a little bit different.
Guy Solomon [00:36:45] If I talk about systems, it can take like all day.
Sandy Mackay [00:36:48] Three, four.
Guy Solomon [00:36:48] Okay. So I mean, the first, the first I’ll try to summarize. First thing is like Penguin at like 2017, 2018, I can’t track it, but we had over 50 employees not on the tools. So it wasn’t very productive and it wasn’t very effective in terms of, you know, getting a job fluidly built in. It had to go through all these people and site manager and then the other what we’re running right now is, you know, I think our meaning a mean and lean strategy, but even saying that is probably understated. So what we do when we take on a new client, we send a draft person out to the house and we do a proper draft and we do a 360 Matterport view in and out of both levels and the exterior. And then we jump on a zoom call with me or two others, and we come up with the layout. We, we explain our service offering. We do we complete the entire scope of work pricing. And usually in that individual meeting, clients tell us yes or no. And that’s super, super productive and it’s efficient and mutually beneficial. Then they meet for an hour with the architect on Zoom, and then they meet with basically the designer who helps pick all their finishes and it’s all done in one package and they’re ready to go. Our process is that architect they met with after the sale is responsible for their project now all the way until we hit boarding of drywall. And then the construction manager communicates with the customer and brings it home. Okay. And what happens is we have finishing supers in every market. And so once we get to carpentry and finish paint, they’re doing the miscellaneous access panels, maybe, you know, connecting a tab. They’re responsible like a PDI, like a builder to get it all done. But essentially, you know, it’s all streamlined from point to point where in the office now in terms of total management and stuff, we probably have 12 to 14 people and we’re doing double the volume. And so the key to that and understanding where all the jobs are at is that our trades, because they’re largely in-house or controlled, like the framers, that we frame most of our basements in one day. And at the end of the day, they’ll do a 360 virtual tour. And so we can see what they did at the end of the day. Same thing with the inspections. We virtual tours that we virtual tours the boarding because we did the backfill for the concrete. So at the end of whether it’s four days or six days, I have three uploaded virtual tours where I can see what they did, exactly how it was done. The work orders are in, payments are processed. So and then we’re already, like I said, in the finishing stage and that’s why they speak to the construction manager and he has resources to make it happen. But yeah, we just basically eliminated project managers, traditional site managers, salespeople driving their houses and selling our kitchen tables. We already have the CAD drawing done before they even engage with us. And then it’s really me and two guys that I’ve been working with for years and I love. Like one of my best, one of my favorite parts is working with the two of them to design, encode and sell these spaces, which I still do myself as well. So it’s super streamlined and it’s not involving too many hands. And our trades really love it because they’re dealing either with me, those two guys, the architect or construction manager. So it’s, you know, they communicate, they use the app, they do their uploads with the camera. Like if you don’t have all that control, you’re never going to get your trades to use your own CRM and learn how to use Matterport cameras with tripods. That’s just not going to happen. So we’re very fortunate that they’re on board and they’re benefiting from, you know, not going to site in it’s not ready now or, you know, being split among three jobs all against schedules are centrally controlled. That’s my best version of an abbreviated. That’s the business.
Sandy Mackay [00:40:40] Model. Let’s go with that. If I was an investor and living in Alberta, let’s say, and I bought a place in Ottawa or Hamilton or wherever. Like the need for being there physically is really totally eliminated and you’re going to actually get good feedback versus trying to text whoever and ask them for photos and all that sort of back and forth. Which is which is what I’m used to traditionally managing some of those projects. Right. You can sit in Costa Rica and buy houses up here and you get a really good understanding of what’s actually happening.
Rob Break [00:41:10] Well, then the bonus is, it sounds like extremely engaging for the client as well. You know, even more so than it would be if you did have all of the site managers and salespeople in place. Right.
Guy Solomon [00:41:23] Exactly. And they have customers in Nunavut, in Japan, whoever they can, they can you know, they have assets in Ontario and they just want to get it done. But yeah, like we all communicate with them regularly. There’s pre-scheduled meetings. There’s no need to drive around or anything like that. Just doesn’t make any sense.
Sandy Mackay [00:41:43] So what gets you going and what’s inspiring for you? I mean, you kind of touched on that with what you’re doing with the future build and affordability and all that. Anything else that’s that motivates you.
Rob Break [00:41:56] Maybe on a little bit of a personal level, what keeps you going? Right.
Guy Solomon [00:41:59] Yeah, I mean, I guess I guess I explain the business side of things. I think as long as you keep solving problems that that are, you know, helps the community. Like as simple as that is, that turns into a business and then you’ll be taken care of. And so I’m not really that worried financially anymore. So that’s taken care of. I think at the end of the day, when it comes to personal, you know, I’m going to try to do the best I can do with my career and my health and my family and friends and people around me. And I and I hope that that, you know, other younger professionals that kind of inspires them to push and see through some of these challenges and be consistent and make their own careers and their own paths. Right. I just hope that, you know, if I can inspire. It doesn’t matter handful one person to just say, okay, well guy didn’t really have an in-depth construction knowledge and he just battled through with seven day workweeks for the first seven, eight years and now six day workweeks. And that persistence and more about that story inspires somebody to just be stubborn and be patient and push through that. On a personal note, inevitably, probably ten, 15 years from now, that’s where my focus will be, that, you know, anything’s possible, you know, and if like I said, I’m not worried about competitors. I’m not worried about new entrants. And that stuff doesn’t matter. I welcome it. Right. I just I want everybody to kind of understand what the opportunities are in front of them. Similar, I’m sure, to you guys and. And just push through.
Sandy Mackay [00:43:32] Mm hmm. What’s up for the future? Where is your life in business?
Guy Solomon [00:43:37] School of business. I mean, we’re going to continue we’re going to continue doing basements, basement apartments. How different? Housing solutions. So that’s pretty straightforward. I mean, from a personal standpoint, at some point I need to get married. I think that’s like my mom is now. It went from like annual conversation to a monthly conversation weekly, now almost daily. So I’m feeling the pressure. I’m getting up there in age. So I do need to settle down and probably have a family and all that. But yeah, that look, I’m still taking care of myself as we talk about Sandy and that’s important to me as well.
Sandy Mackay [00:44:16] Healthy lifestyle there CrossFit are we got to view CrossFit as on the call here and I’m an ex CrossFit and myself but we’ll get you in there. Not maybe for long. I don’t know. We’ll see. We’ll get you back in. Yeah.
Guy Solomon [00:44:29] I mean, there’s diet. I’m researching all kinds of things to try to improve longevity. And for anybody who’s interested, like, I’ll tell them about it, but I usually don’t bring all that up because most people do want to hear about it. But there’s, there’s so there’s so many opportunities as well to improve our healthy, active lifestyle. And, and so for a lot of my customers, I’ll spend too long, you know, trying to convince them to do that more so than theirs project. But, you know, it’s all part of it, right? It all makes it fun. You kind of the business evolves to be a part of you. And it’s I’m very fortunate for that.
Sandy Mackay [00:45:02] So like moving to Costa Rica, a healthy, active, fun lifestyle and using Penguin to do basements within Ontario, one of the best one of the best places is to invest in the in the world. That’s a good model. They never need to come back to Ontario. Really.
Rob Break [00:45:16] Oh, thank you, Sandy. You summed it up perfectly. I mean, really, what else does anyone want to do with their life? I agree. Just do exactly what Sandy said right there. He just laid it all out for everybody.
Guy Solomon [00:45:27] I think if you’ve never been to Costa Rica, which I’ve been there, you have to go. It’s such an unbelievable place in terms of safety, the community, the weather, the opportunities like. And as soon as I heard you’re down there, Rob, I’m like, of course it makes all the sense in the world. So I’m glad you’re there.
Rob Break [00:45:48] Yeah. Yeah, it’s well, I mean, obviously it’s been life changing, but just one of those things where it was a life goal realized. Right. So it has been amazing. And again, we’re going to talk more about like the investment stuff, obviously, but there’s been like a drastic sort of shift in focus to, you know, family and personal goals and that kind of stuff, too. But the I don’t know if you guys can hear it, but next door, they’ve been working on this house for like, I don’t know, like months. And it doesn’t seem they start like 630 in the morning and it’s just all day long. So that’s why I’ve been like muting my mike constantly through the interview. But hopefully they’ll be done soon by.
Sandy Mackay [00:46:38] Season 12, maybe, and they’ll be done.
Rob Break [00:46:40] Yeah, exactly. Sounds like, you know, I mean, hopefully, hopefully while I was too late on that opportunity, that’s something else. I’m always trying to get in on every one of them, but unfortunately it can’t be all of them. But no, I mean, it’d be exciting to see down here at some point to.
Guy Solomon [00:46:59] Believe me, I’ll be on Expedia today.
Rob Break [00:47:03] All right. We’ll have a drink.
Guy Solomon [00:47:04] I know from I’m fortunate I don’t drink, but yes, I will have a drink or something.
Rob Break [00:47:09] That’s something, right? Yeah. Well, thanks for sharing all this. I mean, we could have probably talked a lot longer, especially about the business stuff. I mean, I know it’s very relatable to everyone that’s listening most likely. So we’ll have you back on and we’ll talk a little more in depth even then. So appreciate your time and thanks for sharing with us today. How can people reach out to you?
Guy Solomon [00:47:35] Well, firstly, thank you for having me. It’s always fun and I get warmed up and, you know, it gets it gets more comfortable as we go. But, you know, in terms of reaching out to us, just. In every market. Just look up penguin basements. And when you call in, Ryan is my administrator. So he takes in all the calls. And if you’re doing any work, you’ll transfer the call to me or schedule it and we’ll help you with your project or chat about CrossFit or anything else yet.
Rob Break [00:48:02] So simple as that. Just Google Penguin basements. Yes. They’ll be able to get in touch with you at Fantasia’s.
Guy Solomon [00:48:09] Canada.
Rob Break [00:48:11] Basements. Canada. Yep. Right. Online. Okay. And again, guys, that’ll be in the show notes, but pretty easy to remember if you want to reach out and talk to Guy more, which I’m sure you do, that’s the way to do it. Sandy how can people get in touch with you.
Sandy Mackay [00:48:26] Signed up for it and reps dot com or just look me up on the socials and connect with me there.
Rob Break [00:48:32] You can reach me at Rob. Mr. Breakthrough dot CA, thank you for joining us. Everybody will see you next time.
Announcer [00:48:39] You’ve been listening to the Breakthrough Real Estate Investing Podcast. We hope you’ve gotten some useful and practical information from the show, and we hope you’ve been inspired to take control and live life on your terms. We’ll be back soon. But in the meantime, make sure to like, rate and review the show. And don’t forget to subscribe and listen on Apple Podcasts and Spotify. See you next time.