Working Capital The Real Estate Podcast

Multifamily Investing from Toronto to Texas with Omar Khan|EP38

Jan 27, 2021

In This Episode

Omar Khan’s global experience has been leveraged across commercial real estate and capital markets. He has advised on over $3.7 billion of capital financing and M&A transactions. Being a seasoned professional in capital markets (capital financing, M&A, sell-side equity research), strategic planning and operations has provided him with a unique perspective. He has helped senior leadership in implementing global data-driven decision-making practices by focusing on relationship development, mentorship and talent management.

In this episode, we talked about:

  • Omar’s transition from finance career to real estate
  • Investing in real estate internationally
  • Types of deals he had
  • Raising capital and investing strategies
  • Multifamily investments philosophy
  • His firm, Boardwalk Wealth which is a private equity firm located in Dallas, Texas.
  • And MORE!

 

 

Transcript

Jesse (1s):

Hey everybody. This is Jesse Fragale. Before we started this episode, I just want to say thank you so much for everybody that keeps on listening, it really is amazing to me and I can’t. Thank you enough. What would really help us out is if you enjoy the show to go over to iTunes and leave us a five star review. Also, if you have a favorite episode, what would be great is if you could share it on social media, whether that’s Facebook, Instagram, or LinkedIn, anyways, enjoy the show. Welcome to the working capital real estate podcast. My name is Jesper galley. And on this show, we discuss all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me and let’s build that portfolio one square foot at a time Working capital the real estate podcast.

Jesse (48s):

My name is Jesse Fragale. We’ve got a special guest on the show today. Omar Khan. He is a Canadian ex-pat living in Texas. He’s an expert in dealing with multifamily investments in the U S especially with Canadian citizens. He’s got 12 years of experience investing across real estate and commodities. Omar has been involved with I’ve just been updated 4 billion in capital financing and M and a transactions. He has syndicated large multimillion dollar deals across the us and has advised high net worth individuals and entrepreneurs on real estate portfolio allocation. Omar, how’s it going, man? Hey, I’m good. How are you? I’m doing great. You know, we’re still, I guess you’re the first one in 2021.

Omar (1m 27s):

So hopefully this is going to be a, a little bit of a different year that we’re off to a great start. Jesse thinks about it that way. Fantastic. All right. What we’d like to do off the hop for, for our listeners, Omar is just a little bit of a background for you, you know, for yourself, how you kind of got in this world of real estate and what your, what your origin story was like. Well, look, my I’m a third-generation sponsor. So this basically means my grandfather was doing good. My father’s generation did it, but they did a lot of this with their own money. They had sizeable capital behind them. I didn’t get into it because of that surprisingly or weirdly. What happened is I lived in Canada, worked in Toronto, in Calgary, and then I moved down to the U S a few years ago.

Omar (2m 12s):

The reason for that is because my wife, my, well, my fiance at the time wife now, she she’s a physician. She was right about done with her residency. And she was right about to enter the workforce. And if she had, and we were getting married at that time, and if she’d come up to Cal Canada, then she’d have to get everything done from scratch again. And that was, I wasn’t going to subject anybody, but that kind of torture, right? So for me, it was very easy. I had done extensive students in finance, really had connections. I had my see I’m a CFA charter holder. So didn’t think it was easy for me to just move down. Right? So I moved down and I was also at a stage in life where I had a good book of contacts. I had a good experience as a builder, and I was looking to kind of figure out, okay, what do I got to do now?

Omar (2m 55s):

Because you know, a lot of times you need to change to really kickstart a lot of things into gear. You know, for me, at least that’s what I need. Sometimes feed more, more entrepreneurial. People can just stay at the same spot and just favorite like that. But for me, I’ve always needed a little bit of a change and that was the right chain. So move to the right place right country. And while I’ve just had moved down to Dallas, a very close family, friends are ours from Toronto. They have a little small family artists. They were transferring Wells to the next generation of people or other in the process of doing that. And for, I dunno, for some weird reason, this guy’s dad had bought, he did a lot of businesses and one of his business was costume jewelry. So in the mid nineties, early nineties, whatever he was in some conference at some conference in Houston, he knew a lot of the vendors there.

Omar (3m 41s):

They just started talking Houston at that time was going through a bit of a slump because of the oil price is going down. So they had just over a period of time, bought a lot of really nice real estate there, you know, retail, couple of offices, mostly retail. And now what was happening was, you know, the father is order and they want to kind of give some of the money to the, to the daughters, but he bought in some control. And he, he’s a really smart guy, but financially he wanted some help. And he’s a really old friend of mine. She’s like, Hey, you’re in Dallas. I’m going to come down to Houston for a couple of weeks here. You, why don’t we meet up? Cause they were friends. We should meet up. But the other thing is modern tool kind of helped me out. So we did that. I did that with them, you know, for a couple of weeks, I, it was right up my alley because a lot of this is reorganization.

Omar (4m 21s):

So the real estate part is one thing, but now you have to be very financially sophisticated as well. So we kind of help them through that portion. And in the process of doing that, I kind of enjoyed it. I thought it was interesting because I met a couple of really interesting guys. And then, you know, you got to, I didn’t necessarily plan it out. Like, you know, some people want to be a physician. Like my wife, always what she tells me. She wanted to be a doctor. I knew a lot of real estate people. Now that I meet them, they tell me they always wanted to be in real estate. That was like the thing for me, it was never none of those things, right? It was just having the right sets of experiences, having the right set of contacts buildup because of professional work experiences. Then making the move to Texas, which is a very entrepreneurial place and big market entrepreneurial place.

Omar (5m 4s):

And then, you know, meeting my friend at the right time, helping them through that process, that’s kind of how it started. So it wasn’t some grand plan. And then you don’t want to start on one thing. You just work, you keep putting one foot after the other. And luckily for me, I, throughout my life, whether it’s in Canada or the U S I have been the recipient of such maybe it’s luck or whatever it is such good will and such good luck that I met so many encouraging people along the way that it wasn’t necessarily my, I wasn’t intellectually superior. You know, there wasn’t like coming out with the school thing nobody knows about, but I’ve always been lucky enough to meet very gracious, generous, big hearted people who got to nudge me in the right direction from time to time.

Omar (5m 47s):

And that’s got to help me, you know, go, go my way. Yeah. That’s, that’s a great summary. And it reminds me just of that zero to one, really being the hardest part. And then when you’re at one, you can kind of compound off of that. I’m curious. So originally, and I think, I think listening to a podcast from before originally you’re from Pakistan and then came to Toronto and not dissimilar to a lot of individuals in, in finance or real estate. They, they moved from Canada into a us market and from a real estate, I’m curious from a real estate perspective. I’m curious what that process was like, because just taking a look at your LinkedIn too, it looks like you worked for, for our U S listeners, one of the big five banks in Canada at some point Actually CIVC and RBC. Yeah.

Omar (6m 27s):

So What was that process like of you moving from Canada to the States? Obviously like you were saying, it wasn’t a grand plan, but, but what was that like? And I’ve heard you say this before, even just as a final piece there that you wish you moved to the U S sooner. Oh, way earlier. Yeah. Look, I think I love Canada. Canada is always going to be home for me. Like my kids I’m in the process of applying for their Canadian citizenship, even though they were born in the U S Canada is always going to be hopefully right. But the thing is, well, what I think, so one is I think a structural issue in Canada and one is just a cultural thing. So the structural issue is we’re such a big country and we just don’t have any people, if you think about it.

Omar (7m 8s):

I mean, right. I mean, the Canadian population lives in and around the duty are one hour from the GDR. Right. But I mean, the duty has maybe like 1% of the entire Canadian or even less, right? So we’re a big country, not a lot of people to number one, the distances are so far apart. And a lot of times you need density, right? You need density, density needs, you need more people, more business happens. It’s just the cost of doing business is way less, right. So we have that structural disadvantage. But I think the other issue also in Canada versus the U S at least, is that in Canada, it just seems like people are very risk averse and I’m talking averages, right? I’m not sure Canadian billionaire who’s. I don’t know if the Thompson family, and I’m not talking about that person.

Omar (7m 50s):

Right? Average Canadians happen to be just very risk averse and that’s not good or bad. That’s just a face the way it is. And a lot of times what I figured, or at least what I realized is that you don’t opportunities don’t present themselves and then they don’t wait for you. They’re not going to be like, okay, here’s an opportunity nominal, wait, two years while you get your shift, right. He’ll be a couple more minutes. Right? So the problem for a lot of times when I’m not, I think Canadians also is that they expect everything to be perfect. But as an example, give you an example. If I’m doing a $40 million project, but $30 million project, some guy might be putting in 50 grand, but expects the service of somebody who’s putting in $2 million.

Omar (8m 35s):

And they’re like, dude, don’t take this the wrong way, but you’re not equal these things that are not the same. Somebody who brings in $2 million is going to be treated differently. And that weirdly seems to be a concept. A lot of Canadian investors of mine don’t seem to understand, whereas Americans just get, they’re like, look, it’s a business. If I give you more business, you just have to devote more time to me. That’s, that’s just the given day. That’s just the way things are also Americans. I didn’t get, this can be both good or bad. Right. It depends how you do it. Americans are more entrepreneurial in the sense that they jump on opportunities with you. So they understand that a lot of times in life, you don’t have to have necessarily a hundred percent of the information, but as long as you have the big picture items taken care of, you can go for it.

Omar (9m 21s):

Yeah. So there’s cultural issues, but there’s some structural issues also, right? Yeah. I mean, that’s a great point. You know, it’s a, the sample size that we have that come on, this show is obviously a skewed sample size because we are entrepreneurial people. Yeah. And I think another thing too is because, you know, most of my, my older part of my family are immigrants and I’ve had different people on the show like yourself who are born in different countries. And to make that trip again by a sample size, because you have people that have kind of in their DNA have crossed, you know, whether it’s by plane or boat to another country. I’m curious though, your, your transition from finance to real estate, what was that process like? Was it a, you know, was it a straightforward process or was it kind of a Look, you also have to realize it also depends on what job you’re doing in finance, right?

Omar (10m 9s):

So if you’re doing some back office job, no offense, but if you’re doing some really like simple kind of whatever job you’re going to have a hard time, that’s just the way it is. Right. But if you’re doing one of these quote unquote front office jobs, like you’re a trader you’re investment banker, you’ve been through a lot of models. You deal with senior management, then your transition might not be as hard. Private equity depends what job you’re doing. So in my particular case jobs or technical skills wise, it wasn’t a big issue because I had already learned from very good people. Again, very lucky to meet the right people at the right time. So professionally I had that, but no amount of professionalism is going to overcome the fact that when you’re new, nobody gives a shit about you because I mean, what are you going to offer?

Omar (10m 50s):

Right. So a lot of times you just have to be very persistent. So a lot of people who are persistent in my estimation, obviously they can be completely stupid obviously, but people who are persistent and they just go for it and they don’t let go. They often, maybe in the short-term, they don’t go out. But in the long-term, they’ll go way ahead of somebody who might say, have a master’s or PhD and say deal structuring or real estate, but it’s just wants to sit behind their computer. That’s it, nothing wrong with it, but different types of, Yeah. So was it, you know, we talked a little bit before the show, you kind of, you move into real estate, you’re talk a little bit about kind of your investment philosophy, the, the asset classes, and, and then kind of that, that switch or that move from finance into real estate.

Omar (11m 37s):

Was that complimentary based on, on the philosophy that you have now in, in investing in real estate? Well, the number one philosophy goes to make money. Don’t lose, lose money and make it right. Look, in terms of, again, I’m wanting to differentiate the personal and professional right. Personally, or other professionally first professionally, the combined sexual experiences, both academically, but also like the day to day work, how to manage budgets, how to build models, how to look at a business, deconstructed, build it back up as a model from scratch. Those are things that any investment banker, any Southside analyst, any equity research person, most corporate finance, people should know how to build models because models will help you basically dissect the business and forecast and all that.

Omar (12m 22s):

And I would just, I would just add, cause it happens on the show all the time, build models from scratch, From scratch, from scratch. It doesn’t work. It doesn’t help you if you, yeah, because if you look a lot of times, people say, well, I took the school’s model. There’s not, it’s stupid to do that when you’re learning, because the issue is the whole point is that you can’t take shortcuts on the learning, but once you’ve learned something, dude, you can take shortcuts all the time, but you can’t take shortcuts to learning the fundamentals. So I think when you’re working in nicer companies into investment banking, equity research, all sorts of roles in top five banks or like good trading companies, the training is top-notch. So you’re able to get to understand these things and not just to train the people you there you’re around with our other high achievers.

Omar (13m 8s):

So you were pushed to do these things at a very early age. So professionally I did not have that issue. Now, personally, for instance, I, in one shape of capacity always wanted to be an entrepreneur, but maybe I was afraid of putting the trigger. Number one, that was potentially one thing. The other thing also was I was never really in a market where for instance, I could easily scale quickly because for instance, when I was in Toronto, I need you to know how expensive real estate is in Toronto. I mean, just trying to convince five people to go buy an apartment building. I may mean best of luck. Yeah. Right. Number one, number two, when I was in Calgary, the market was sold. Water died. I mean, at least I thought it was a blue dot that I necessarily didn’t think that was a good market for me to be investing in real estate assets, not stocks and bonds and all that stuff.

Omar (13m 54s):

So when I moved to the U S one of the things was in Texas, at least you have a big enough market. I mean, it’s a bigger economy than Canada. Number one, it’s got about 7 million, less people, but DFW or Dallas Fort worth is about around the same size. People-wise as Toronto. It’s, it’s bigger in size. So you have enough rich people, low cost of living enough business on, in a densely packed area. So that allows you to do a lot of things. Pretty plus people are more entrepreneurial. So for somebody like me who just needed that extra little push for, it was naturally a salesy sort of type person, but just needed that extra push. That was the right environment for me to be.

Omar (14m 35s):

So Actually just, just cause I’m curious, it’s not a, I’m pretty sure it’s not a no, no income tax data, but it’s like, it’s low. It’s like five or 6%, right? No income tax state, but a lot of that is admit because it’s low income tax, but the property taxes are so high and it makes up for right. So they, they advertise the no income tax and get everybody excited. And then you get hosed on the bribery dices. You’re in a, so you moved to Texas now, what, what is the first, maybe let’s say the first deal that you work on from the real estate Vantage point. So look, it was the one that I was telling you with my friend, right? Who moved down from Toronto. I helped them reorganize. So it wasn’t like my ideal, but I helped them basically do the entire thing from scratch.

Omar (15m 17s):

Then I basically was a junior partner with a couple of these guys had met for some deals in San Antonio and Austin, San Antonio for such an Oscar. But very quickly I realized that a lot of this is a good and bad part about America. Okay. The good part is everybody has the greatest Saturday of known, known to mankind. I mean, America is the King of positive thinking. Okay. It’s a bad part is every idiot also thinks positive. So does that mean you have to be smart? You’re just thinking positively. So not that my partner is reading it. I’m not saying that. But what I realized when I was working with them was that they do not have that level of technical expertise that I thought they did. And I was like, well, shit. If I got to do a lot of this work, I might as well make more money.

Omar (15m 59s):

Yeah. You’re a tough bar though, man, you got a pretty you’re charter holder. Okay. So, but what I’m thinking is, look, if I’m going to do all this work I want to learn, then I might as well do it for myself. Right. So I learned a lot from them, started doing it for myself. Coincidentally, my first deal wasn’t in Texas, it was in Jacksonville, Florida. It was about 130 or whatever, 40 unit deal, apartment building. And that’s that basically got the ballroom. Awesome. So let’s talk about that because we have a range of listeners, you know, ones that are self financing, syndicating deals, you have funds, somebody hears that 140. You have somebody that’s only been doing only investing for a few years, not at the institutional level.

Omar (16m 40s):

How were you structuring a deal like that? I’m assuming a limited partnership where you raise capital. It’s a typical LPGP structure, right? We’re limited. We raise money from limited partners. We managed the deal operationally all the, to start operational end and they get a preferred return. Let’s split up the profit. So I’m hearing a lot of, like you said, the G word a little while ago, guru. So you’re seeing, especially in the States, I’ve, I’ve even in Canada, I find that, you know, Everybody could go to anybody who can’t find a real job is suddenly life coach. We have to redo these days. Somebody who’s never had a real job in their entire life. Yeah. Yeah. And then the thing that we’re, I see it a lot oftentimes now is especially over the last couple of years has been in sponsorship in GP on these real estate investments.

Omar (17m 24s):

And I think the last year has kind of shown us, you know, the GPS that are worth their salt and that can actually manage their portfolio. But I want to talk a little bit about, so that deal, that first deal that you had, you know, obviously you don’t just have a, a client Rolodex of LPs so that you gotta go Bullitt. Yeah. And yeah. Phase $4 million. So just to give you an idea. Okay. So that was, yeah. Yeah. So I re I mean, I raised The bulk of that and I had another two partners, but I raised the bulk of it. So look, my point is, I don’t know exactly how I did it to be very honest with you. I kind of like give you a 10 step process because a lot of people try to make it sound like a 10 step process and it’s not bad.

Omar (18m 6s):

Number one, number two. The other thing I can tell you, all the people for sure, that I thought were going to give me money gave me $0. Not a little bit, not a little bit more than I thought, Oh no. $0, zero with a zero, not exaggerating. And the vast majority of people who I thought were never going to give me money were broke, had no interest in talking to me. They give me their money. So just giving you an idea of how bad my estimation was and who was going to give me money and who wasn’t going to give me money. So don’t talk to everyone because you don’t know how much money people have. Yeah, for sure. So we mentioned a little bit about the Canadian population. I think, you know, another stat, I don’t know if it’s 85 or 90% of the population lives within something like a hundred miles of the border.

Omar (18m 49s):

One of them. And a lot of people don’t realize that is something like over 90% of our apartment building stock is pre 1970. Like we have a very odd stock. Yeah. So I’m curious for you, because you talked about how you are looking at B class multi-family investments. Can you talk a little bit about how that came to be and, and you know, what is the, the investment philosophy specifically to that? Whether it’s value, add buying, hold Look, it’s a combination of value, add and vinyl. But for me look up like, like I said, I’m a third generation sponsor, right? So what I had observed through my families, the holding period, or holding these three was that all of our assets that were located in the nicer locations and nicer doesn’t necessarily have to mean, look, if you’re in Toronto, it doesn’t mean you’re in Rose gate or forest Hill.

Omar (19m 37s):

Right. What it means is nice for that type of property. So if you’re a retail position, you’re nice means it doesn’t have to be in downtown as long as it has enough square footage for that retail space. Right. That’s what I mean by nice. Right? So it’s nicely located, not premium location, nicely located. So all the properties in our personal family’s portfolio, the ones that are survived, right? Like we never sold them. We always made money on them. That didn’t cause us any grief. We’re all busy. The ones that were nicely located for the property type. And we had the least amount of words with them. And every single time we decided to get cute, we decided to take a shortcut 90% of the time that became to bite us in the ass.

Omar (20m 18s):

Right. So the number one thing for me was to figure out, okay, gotta focus on location, right? Number one. But number two, I also have to have the ability to come do something because it’s no use if something is brand new and I’m not opposed to buying brand new. But when I was starting out, at least it’s no use. If I’m going to buy something brand new, well, what am I going to do? And if I’m not going to do anything, why the hell would somebody pay me money? Because again, I’m starting off at that time. Right? So I have got to show that he had providing you thing when you give me your money. So that’s why the value add component is there. And the bead thing was simply part, man, I got, I got two young kids now, man, there is no way I want to go to a property and get my kidneys stolen.

Omar (20m 59s):

So I do not want to go to the ghetto. I’d had a very safe, sheltered life throughout my entire life. And I plan on getting it back way. So you come into Texas, you, you start doing deals. And at what point do you build, you know, this company, boardwalk wealth, and you know, maybe talk a little bit about, I started doing it at the start just because I knew that look, look, for instance, for me, I was never interested in buying houses. And I got to realize this now when I meet people. Yeah. Because I, I didn’t realize this at the start for instance, my, again, I’m using the example of my family because that’s the best example I knew. I grew up with everybody in my family has houses, a couple of them per whatever per family or whatever.

Omar (21m 39s):

But nobody, I mean, they all have did the bulk of their real estate holdings are commercial in some nature. Yeah. What would he had? 40 houses or 50 houses because nobody, at least nobody I knew was interested in that. I’m not saying it’s good or bad, but that’s just what I grew up with. Right. So for me, I just wasn’t really necessarily into the whole, Hey, I’m going to buy two houses. I’m going to buy four. Then we’re like, Hey, because number one, fuck that. I’m not interested in that. Number two people tell me that I cashflow $300 from my house. And I was like, dude, like, I don’t know where you live, but $300. I’m not going to bust my ass between her and bucks a month. To me, that’s not a good trade for my time.

Omar (22m 19s):

Right. So, and 300 needs I’d look, if I want to get to say 20, 30 grand a year in income, that’s like, whatever, 20, that’s like 60 freaking houses, man. I’m going to go insane demand. But 60 houses a year. I mean, that’s just asking for trouble. Right? So it’s a scale issue, income issue. And then I just couldn’t be bothered for three or $400. Like, so that’s why I had to go commercial within commercial Marquis family is the easiest thing to analyze. I mean, literally, I mean, compared to offices, offices that are, I mean, do you need, you need to be a rocket scientist to start adding licenses, Net, net, net. Yeah. Yeah. And I understand people say it’s very easy, but you got to have a good cash balance because you need to give to Yeah.

Omar (23m 6s):

Tenant, allowances and optionality on renewal. Multi-family easy to explain to somebody, right. Because yeah, my other philosophy license, you have to go explain something to somebody you’ve already lost that battle to the average person. Right. Either they get it or they don’t. Right. So multi-family easy to explain, easy to analyze and underwrite there’s enough stock if there’s at least in the us, across the spectrum from like the top, top, top, top, top all the way to the bottom. So there’s so many options all along the spectrum that you will find somewhere in the middle. Right. So, so those were the big compelling reasons. But again, the reason also was that no matter what I did, I had to go raise money for it. So I couldn’t do so complex starting out that the strategy might be great, but I couldn’t even explain it to people.

Omar (23m 50s):

Yeah. And for, you know, for those that aren’t in, in the, the Texas in the state, in terms of the, the regulatory environment for buildings zoning, I know that where we live very difficult can be very, very extremely challenging. I know for some of the people that have been on the show from the, you know, New York state, California, what’s that environment like, and is it part of the reason that, you know, you’re, you’re still there. Yeah. Yeah. I got look up the zoning and all that varies by County and municipality. And nobody has a good story about zoning in the South. But from the other big thing that I forgot to mention, it’s good to bring this up is I have lots of friends in Toronto who, and by the way, on the coast, lots of real estate, condos, houses, whatever.

Omar (24m 33s):

And the one thing I never really understood, and I think it’s just morally wrong is the whole cash for keys concept. That means you’ve got a tenant who doesn’t decide to pay you rent. Then you can’t keep that tenant out. And on top of that, you got to pay this person money to leave your apartment. Yeah. So for those that, for those that don’t know the cash for keys, you’re talking about when you actually, as a landlord, have to pay your tenant to leave your space After they are not paying you, not you’re paying them, Hey, I’m going to inconvenience enough. They stopped paying you rent. You still got to keep paying to the bank and now you got to pay money to do this guy. Yeah. So that was a concept. I never really understood it. I was like, dude, this is just insanity. Yeah. And then our Doppler that I’ve heard horror stories about the landlord and tenancy board in Toronto, like dude, best of luck, trying to get a hearing from them.

Omar (25m 21s):

It’s funny when you mentioned, you said moral and, and I don’t think any landlord, you know, obviously there’s going to be unscrupulous characters in every industry, but I don’t know any landlord that enjoys the, trying to increase the, the rental rates of the properties. And the only thing that they have to them in, in rent control areas say New York state or Ontario, where they have to say, you know, here’s 10 grand, can you leave my Sweet, nobody. Even in rent controlled States, people just stop upgrading their property. They stopped taking care of them and they’re like, screw it. Here’s a building, screw it. I’m not going to burn a diamond. It’s going to fall. And when it falls after 40 years, guess we’ll make a new one. Yeah. So we’re going to improve my property From your point of view, you mentioned, you know, you did a deal in Jacksonville, is the geographically your portfolio, is it all in Texas?

Omar (26m 7s):

And if so, Nope. It’s Texas, Florida, Georgia. Okay. And what, and again, the reason for the South is low taxes, low cost of living, lots of people moving. So there’s you get the whole influx of people moving, right? And then on top of that, relatively, the pricing is still attractive. And lastly, if one of our tenants or residents decides to, well, I’m just not going to pay you any rent anymore. Then we can file eviction on them and get the now to under the reasonable period of time, put somebody new. And at least we don’t get taken to the cleaners. So we’ve seen in a while, all of North America, we’ve seen certain markets get impacted the last year from a rental rate perspective. How has your, how, how 2020 from sorry, from your vantage point in the apartment side.

Omar (26m 52s):

Okay. Marcel, obviously there’s, you know, so many people are dead, so nobody’s discounting that business-wise yeah. I don’t want to curse myself if I was in a game and I didn’t know what was going on. Like no idea what was going on in the world. You will not even know we had a bad year. And is that, I mean, similar to Canada and the U S there, the multi-family has been buttressed by a lot of this, you know, stimulus that’s going directly to the tenant. Yes and no. I think one of the reasons is in our project. Yes. So at the start, yes, I tink rather than terrorizing because nobody knows for sure. But then at least in the U S nothing happened for like three or six months in terms of stimulus. Right. But a lot of people did decide to work from home.

Omar (27m 33s):

And in our particular case, I, like I said, the location. So typically most of our, excuse me, most of our properties are in very good school districts. So a lot of people, we focus on families. A lot of families do not want to move or want to be let go, because then they leave the school districts that are good and their kids are in, but that’s why they’re more inclined to basically continue paying and being on time and families on the hook don’t want too much vulnerability. Whereas a single person will be like, screw it. I’ll move out of that. No, nothing to lose. Right. So when you have a good, I mean, it’s not like you don’t have any single people. I’m just saying, look at me speaking, what’d you have a lot of families. They weren’t the stability. And they actually like it.

Omar (28m 13s):

When they have a proactive owner, who’s taking care of all the problems. There’s no deferred maintenance, everything works all the time. Any problem gets taken care of within 24 hours. Barcade exchange is very simple. Look, I will provide you all the value that I can to make your life a hundred percent easy. All you got to do is pay your bills off, That’s it? Yeah. And in very simple exchange. So in terms of, you know, your portfolio knock on one is, has done well in 2020 in terms of the actual general economy, rental rates, where do you see this going in 20, 21, Again, in the markets I’m in, I, you know, our markets rental rates are only inching up now in some sub markets, the pace of growth might be less, slightly, less than heck by less.

Omar (28m 58s):

I mean, compared to before, like not less, right compared to before the pace of growth might be less, or they might be more, more in a lot of instances, but they are inching up and they’re going to continue inching up because at least in our markets, Texas, Florida, Georgia, and even, I’m not going to Alabama, there is a lot of influx of people coming in, right. They’re coming in from the coast, they’re coming in from more expensive jurisdictions. And to give you an example, I mean, it’s a joke in Texas that we have a lot of California transplants and they’ll sell their shack in California for like $2 billion. They come to Texas, they buy a $750,000 mansion where they got lost in the freaking mansion and they still got another million dollars left.

Omar (29m 40s):

Yeah. Yeah. And In terms of, sorry, go ahead. So cost of living is basically in these markets still very it’s good enough. It’s competitive enough that you still have some money And in terms of, you know, just also in touch with, with the economy and what w w we think we’re going to see in 2021, I know for us here, interest rates look like they’re at least going to stay, if not potentially in further downwards, which people just keep saying, how much longer can they go a year ago, two years ago. So where do you see that? And how has that, if at all impacted how you, how you deal with the debt side of the equation? Well, I can tell you this a good reason why the prices have gone up on multi-family a good, good, good reason for that is the ultra low interest rates, because now any idiot can get money and it’s so cheap that you don’t even have to be intelligent necessarily speaking, right.

Omar (30m 32s):

To really kind of seek out your returns. I mean, let’s put it this way. You’re not going to get foreclosed on because you’ll, if you can’t pay money back at 3%, then there’s no hope for you. And nobody’s that stupid. Nobody starts stupid, right? So that’s why more and more people are coming in. But what they’re realizing is that they can get in, it’s like hotel, California, you can check in anytime, like what you can never leave. So what happens is they get in with these ultra low rates of interest, but the problem is it paid such a high price for it that they barely pay their lender, but don’t have a lot of money left to pay their investors. So it’s kind of like becoming the zombie deals where they pay enough to stay in the game, but they don’t generate enough to pay their investors, but obviously they don’t want to sell for a loss.

Omar (31m 14s):

So now they’re kind of in a limbo. Yeah. So I know, you know, clearly you don’t have a crystal ball, but you’re a finance guy, so I’m gonna assume you like this kind of stuff. Just, you know, macro economically the 20, 21 year, where do you think the opportunities are going to be in the real estate space? Do you see any trends? Look okay. No, crystal ball I’m personally. Look, I can tell you what I’m personally looking at, right. With anybody can give you whatever they like, but the rubber meets the road. Where are they? Where are they putting their money? Right. So I’m personally looking in retail, again, nothing really pencil out. I’ve been looking at it for about a year, year and a half and nothing really ever penciled out in retail for me. So retail is big one offices.

Omar (31m 54s):

I haven’t really looked at because again, even in good times, it just requires so much brainpower and money. You know, I just, the management is very intensive and hands-on, and all of that sort of stuff. Industrial is something that I talk to my partner a lot back and forth, but some of the opportunities we’re looking at industrial, they might as well be read their right to an industrial asset and you put a triple net lease on it. So it’s just the asset it’s industrial, but really the strategy tripled. So retail mostly, maybe industrial, but the strategy’s probably tripled. Yeah. It’s funny. You can’t get me to do multi-family but again, retail want to look at it, looking at it, but not finding anything interesting. Yeah.

Omar (32m 34s):

Yeah. Well, I think it’s, what is the States now? 26 square foot per person for retail. And I think Canada is the S the next at 13. And then you got like Germany at 13. Wow. That’s yeah, we’re fairly high, but you know, the office, I’m always interested just, just on the brokerage side with the office, because the ownership in a lot of countries, as you know, is, is pension fund ownership. It’s a real estate investment trust. Is that the same in Texas for office? I do it across. So, I mean, well, it depends on the size of the property, obviously. Right. But for the bigger properties. Yeah. Yeah. Because I’m always, it’s always kind of boggles my mind to if, when you have private investors that owned on the office side, unless, you know, they’re entrenched because it just seems like it’s not only does it need deep pockets.

Omar (33m 14s):

There’s a level of management and complexity, That’s management complexity. And, but the deep pockets part, I think a lot of people don’t actually appreciate because unless you don’t have liquidity, always at hand, you can get stuck very badly with annual, with no ability to get out. Because sometimes you got to give da, you got to do this, you gotta do that. And you need to have money to do it. Actually. You always need to have some level of liquidity lying around, which, by the way, if a guy like me has that level of liquidity, my returns are going to go so down because that that’s a drag on my return. So yeah. Very good point. It’s also two in 2019, I guess, 20, yeah, 2019. There was just such an influx of these coworking spaces that just came in, asking for tenant allowances, you know, 50, 60, 70, a hundred dollars per square foot.

Omar (33m 60s):

So you have these millions and millions of dollars of tenant allowances. And you just think from the landlord perspective, you’re like, man, that’s, that’s a lot of money to just be flowing in Because that was one of my questions. So you you’re a broker, right? Yeah. These guys, I mean a certain amount. I understand that’s just business, but what was the thinking behind a lot of these guys giving so much to guy, like, what were they going to do? I know for, well, as you know, and a many, many listeners do T the tenant allowances are often associated or not really, you can’t take them until you actually have work done right. In your act sheet, actually she’ll work orders. So for them, for the, for the coworking groups that we work with, the world of Regis, they were using it for their build-outs and they had very, you know, I think most people have seen them very nice.

Omar (34m 45s):

Build-outs not the high. I been downtown transportable to the next person. Right. It’s not like I take the same route out and the next person comes in and bam. They just have some. Yeah, Exactly. And that’s why a lot of landlords in the States, because like you said earlier, very entrepreneurial, they were doing a lot of these deals. Whereas you came up to Canada, we’re like, no, we don’t do a hundred dollars tic. We’re like, their institutional capital is not that entrepreneurial. So we would give like $50 <inaudible>, but it was still a lot for them compared to, you know, a law firm or something. And then exactly to your point, the indemnification or the security that we would have, we would basically have to have them put it either in deposits or a letter of credit that we could tap on anytime they defaulted.

Omar (35m 26s):

So that was how you kind of made the security, but not the liquidity. Right. You know, liquidity to a certain extent because you would get the deposits, but then you’re paying brokers out of those deposits. Yeah. It’s, it’s, there’s a lot of expenses. So we’re coming close to closer to the end here. I wanted to talk a little bit about just the, the website. And you talked a little bit about how you, you know, you deal with Canadian and us investors. What type of relationship do you have with Canadian investors investing in your products or properties in the mistakes? So what do you mean? Like what kind of relationship, like In terms of like, are you specifically targeting Canadians to invest in us real estate?

Omar (36m 7s):

Is that part of, you know, a large part of the business? My overall company strategy, but like, do I go on a Canadian roadshow? No, but yeah, I had lots of Canadian investors. Again, they’re mostly from my days in Canada and then referrals upon referrals and they all invest in our projects. And I’m curious, just obviously being from Canada, I’m curious, you know, it’s, what’s the return that you guys have the K the one for limited, sorry, Katelyn. Okay. Yeah. The K one return for a Canadian investor that would, that would just invest. Are they typically investing out of a vehicle or are they investing as an idea? Well, look, I can tell you, unless you have very, again, if you take the advice of most lawyers and a calendar, they have to sell you a product.

Omar (36m 48s):

Okay? So they, their job is to make simple things, extremely complicated. So then you pay them topics dollars, unless you have a very specific estate management issue, right? Like, I don’t know, you have some portfolio thing you want to do or whatever. Most people don’t, but most people think they need it. Most people don’t. Right. Yeah. If you’re a limited Barker in most deals, honestly, you don’t need an entity. You don’t need to make it complicated. Just invest under it. Only because you are limited partner, it says in the name you’re limited. So your liability is limited, right? When you are a general partner, like I am, your liability is general. I E it could be unlimited. So why is a limited partner? Stop listening to stupid advice on podcasts for people who want to take all your money, unless you have very specific issues, which trust me, you’ve dumped there.

Omar (37m 36s):

Most lawyers are going to bail. You have them because somebody is going to come after your money. And people are telling me that I’m like, dude, you’re worth like $2 million. Nobody gives a shit. Okay. So most people don’t. So most people I tell them, look, you want to do it and go for it. I don’t really give a shit, but invest in your own, out of your own counter liabilities. That’s the only big reason. But Hey, if you’re going to get a divorce and you want to hide shit from your wife or husband. Yeah. Put it in an asset entity. I don’t really care. You heard it here first. Okay. Well, before I get to where you just do four questions, we ask everybody, I just want to quickly ask you 2021. We’ve talked about it a little bit here. Any plans from the real estate side, you know, are you guys still in acquisition?

Omar (38m 19s):

Yeah, we’re always AquaGuard and look on all. Look, my old business and stock new brokers, visiting sites, doing site tours, running our deals, all of that stuff. So good market, bad market. There’s always opportunities. So we’re always, we’re always acquired. Okay. Omar, I’m going to hit you with four questions here. Let me know if you’re ready to go. Sure. I hope I’m ready. All right, man. Something that you know now in your career that you wish you knew when you started Just focus on marketing, nobody gives a shit about anything else. Your view on mentors. I think mentors are really important. They’re very good, but most people, no. Let me scratch that. All the people on the internet who call themselves paid mentors, you should run the hell away from them.

Omar (39m 1s):

But mentors in life are very important because role models in life are very important. So, you know, if you have a mentorship diet situation with somebody’s order, or it doesn’t have to be ordered, or somebody just more experienced than you. Yeah. Go for that. But all these paid mentors, 99.9, nine, 9% of these guys are scam artists. One of your favorite educational resources, whether it’s a book podcasts, it doesn’t have to be about real estate Google. I like, That’s a great freaking thing on the planet is a Great answer. It seems so obvious. No, it is. I want to learn about something. I just literally Google it. And or you do have actually, because a lot of teams, you just have to see them and then you just get it in one minute.

Omar (39m 41s):

Yeah. You do have in Google combined, which is, I guess the same company, greatest freaking thing ever, You know, reminds me. Cause I listened just kind of how I prefer shows us. I’ll listen to a couple of podcasts and you were on one and somebody said, you know, you’re talking about like the CFA. And I went to school, you know, longer probably than I should have, but they was like, you know, in real life you got your phone. The test should be figured out the answer to this. Here’s your phone. Yeah. Yeah. No. I mean, the answer is how do you figure out the answer? Exactly. Hey, have you memorized this answer? All right. My favorite question. First car, make and model First God. Oh dude. Probably like a Toyota or something. I don’t even remember a lot of big car person yet. Oh, there you go. I’m also Asian. So probably, yeah, it has to be a taker, obviously.

Omar (40m 23s):

Omar. Where can people, if they want to hear more or research a bit more about your company, where can they find you a site? Well, I guess just Google. Yeah. Well, yeah. Look, look me up. Our website is boardwalk B O a R D walk. Well too dark gone or right on the front page. Scroll a little down on the right. You have a little box. Enter your name, email address. And how you find out about me, click on the button and say, I don’t know what it says. Just get access or whatever. It’s basically click on the button. We’ll get an email click on the link. It verify your email. You’ll be added to our distribution list. My guest today, It has been Omar Kahn. Omar, thanks for being a part of working capital. Hey, thank you very much, Jesse. I really please You for listening to the working capital podcast.

Omar (41m 8s):

My goal is to help individuals break into real estate investing as well as educate experience investors. If you enjoyed the show, please share with a friend, subscribe and give us a rating on iTunes. It really helps us. If you have any questions, want to learn more or likely to cover a specific topic on the show. Please reach out to me via instagram@jforgalsorheadtowwwdotjesseforgalley.com. My name is Jessica galley and I’ll see you back here for the next episode of the working capital real estate podcast.