This is our December 2020 Mastermind call. Our guests were Todd Sulzinger (mobile home parks), Victor Menasce (development, various asset classes) and Adriana Finnie (single family investing).

Steffany Boldrini (Self Storage, Car Washes)
I have been completely out of touch with everything that is happening in the market and asset classes because I have been dealing with a new asset class that I invested in, and that is carwash. I was put through the wringer right away, within nine days of closing, one of the roofs caved due to snow, money has been already been stolen, and within 20 days of closing, and my maintenance guy quit without giving any notice.

Thankfully, I was able to hire someone within a day, what I did was to put an ad on Craigslist right away and contact a staffing company, I had people interviewing that same day and hired someone the very next day. So all in all, it took two days to get someone started, which was really good. And, as always, these things can be blessings in disguise, because we hired someone that is a lot better, and is taking on a lot more responsibilities. I'll be doing a couple of episodes on why car washes, what did we do to them within this last month, and how we are managing it from far away. What I can tell right now, is that it's a very hands on asset class with a lot of moving parts. I do expect things to get a lot smoother over the next month. But it has been quite a ride so far.

As far as what's happening in my local market in San Francisco, we are in the purple zone, again, closing all indoor dining, all gyms, which is heartbreaking for all the business owners. And even I am moving out of here, that is mainly because I don't feel safe in the city anymore. And it's definitely not because of COVID.

Condos and apartments in my area are of town are now at least 50% vacant, from 40% since our last call. There are multiple retail spaces for lease in every single block. And that is really not only in this business area. It's everywhere in the city, and even in the suburbs of Silicon Valley. In the residential space, there are quite a few residential properties renting at discounted rates, which I was surprised to see. I think that is because quite a few of them were Airbnbs for people traveling here for startups for two weeks at a time, and now that's not happening. The good news is that home sales are not slowing down in any way. And there are still multiple bids happening.

Todd Sulzinger (Mobile Home Parks)
I am also in the San Francisco Bay Area, and one of the interesting things is that in the San Jose market, the median home price just hit another record. Rents have come down, we've seen that in San Francisco and also south of the city in Silicon Valley. Home prices seem to be maintaining their values. And it really just comes down to the supply and demand issue here. I just read about an apartment building in Redwood City where I live that just sold for $816,000 per door, which was a record for Redwood City. I'm not sure if that compared to some of the other areas in San Francisco Bay area but it's an incredible amount of money.

It's a developer's first play into the apartment building space. It's a brand new building in a great location. But even with the rents that they may be able to get at $3,000-$5,000 and maybe even $6,000, that's still an incredible amount of money to pay for an apartment building.

I focus on the mobile home park space. And one of the biggest things that is still impacting us is our inability to process evictions. I have properties in Georgia and Tennessee that are landlord friendly states, and in Georgia in particular, we had the courts closed in March, they opened back up at the end of July. And we had to start the eviction process on several people. We had several people that after a couple months process before we got a court date, they moved out just before their eviction was filed. Other people were still going through the process, we've got a couple of tenants now that have been in the park for almost a year that haven't paid rent. And we really have our hands tied. The court can only move so fast, they're giving tenants the ability to do zoom calls if they don't feel like it's physically safe for them to come down to the courthouse. So if that could be another excuse for them to delay things, they're taking advantage of it. So that has definitely been a challenge for us.

We've been trying to make an extra effort to see if we can work out some payment plan, to potentially discount some of their rent, not charge late fees, and try to work with them as much as we can to get them back paid up to date so we don't have to file an eviction. Another way COVID has impacted us is, in one of my park in Tennessee, one of the residents had a home that they wanted to bring into the park, and we thought we were going be able to get that in within a month of him contacting us. And there were multiple delays with his mobile home mover. The most recent one was when he contacted us, and said that seven of the 10 people on his moving team came down with COVID. This guy is moving mobile homes all over the place, new homes, used homes to different parts of Tennessee. And when he lost 70% of his staff, that just backed up everybody in the queue in terms of getting their homes into place. So that's another example of how the pandemic slowed things down, in terms of just making progress on our projects.

Victor Menasce (Development, Various)
We've been busy with a number of new projects. And as you probably know, we also get a fair number of requests to consult on new development. For example we're doing a 150 unit apartment building up in Spokane, Washington for our client, we're doing a 60 unit townhouse subdivision just outside of Boise, Idaho, we are doing a boat and RV storage facility up in Austin, Texas. So we decided to formalize the consulting division and officially make it a core part of the business. And that's going to allow us to train the future leadership in the company. We're not going to accept every client by any means, but only those that we would say are intentionally congruent with that which we're already doing.

We have another project that we're working on right now, that's a bit of a passion project. I think it's going to make money, although it's not the main reason why we're doing it. And this is a property that is owned by our federal government here in Canada. We have a quasi governmental body called the National Capital Commission. They are one of the largest landlords in the area. And we have a 25 acre farm in the core of the city, the National Capital Commission put about $1,800,000 of renovation into one of these buildings.

The second building is a historic barn, and it has this stone annex off to the side, without a roof, and our plan is to put a glass roof on it, and turn it into a bit of a greenhouse.

And the concept behind the project is to build an urban farm to table restaurant, in the core of the city, it's a very large property, it's within a few minutes of the hottest neighborhood in the city. And our city has nothing like it. We're in negotiation with the National Capital Commission on the approval for this particular project. And we figured it's going to bring something in the range of between four and 5 million a year in top line revenue, which isn't huge, but for a restaurant, it's pretty damn good. The interesting thing about it is that it's not just a restaurant, it's a multi event space, we have the capacity to hold two weddings simultaneously. And one of our partners is the chair of the National Capital wedding show. So not only does she know everyone in the wedding industry, she also has the list of the 600 brides this year that didn't have their wedding.

Will you lease it to a restaurant operator?
We'll be hiring the staff ourselves. We'll run the restaurant, it'll be captive. And we brought in a consultant to design the restaurant. His name is Eric Weiss out in New York. He his business is called Service Arts, he helps restaurants and hotels all over the world transform. He just did a project in Portugal for Six Senses who just captured the number one spot of luxury hotel property in the world. He's currently doing a project for Belmond in Santa Barbara. He did the Hilton in Union Square, in San Francisco, the New York Hilton, and others. He helped us with this whole concept. And it's going to be called La Commune, which translates both into French and English beautifully. So that's yet another project that we didn't quite have time for.

Part of the reason I wanted to show you this is because we're reasonably impressed with the renderings that were done. Take a guess how much we spent to get all those renderings done?
(Steff) $25,000
(Adriana) No, way more, hundreds of thousands

We paid $750. It's an architecture firm that has been in business for about 30 years, based in New Delhi. They put a team of four guys on it. And that took 12 days. Let's just say we'll be hiring them again.

That was done in three different tools. They did the massing in Revit. So we gave them the CAD file for the pavilion as a starting point. So that gave them a 3D model to start with. And they didn't have the rest so they had to capture that so we gave them some dimensions. But they built a 3D model in Revit. And then once they had the massing right, they added the texturing and then they took it into another tool to do all the grading, the topography for the grounds.

Why did this land remain vacant for so long in the city?
It was a historic farm that was acquired by the National Capital Commission, they had done a deal with another operator, who had done a bit of a country store / restaurant. And they were relying on the agriculture from the property, and then they had a crop failure, and that killed the business. So we'll be bringing in an agricultural partner, whose job will be to cultivate about eight acres of the property. We will source some produce from the local farm, but we'll be largely importing. So it's going to be a little bit of a Disneyland type experience. The greenhouse is intended to be our herb garden, on a year round basis. It's a big property, the pavilion itself is about 6,000 square feet. It can easily seat 200, we're planning on 130, plus another 70 on the patio. It's a large restaurant. We're learning lots and it's kind of fun.

The project that Loe Hornbuckle and I are doing together is progressing. We've finished framing in six buildings after having survived two hurricanes back to back. And now we're hiring interior designers to source about a half million bucks worth of furnitures and fittings. We've got a couple of other projects, we have a 240 unit, Houston project that we're in the capital raise right now. And our downtown Ottawa, Canada condo project, we're negotiating on a bit more on the land assembly right now.

What's your consulting website so people can find you?
We haven't launched it. It has all been word of mouth. People say, Oh, I got a plot of land, what can I do with it? And they just don't know how. And we can go into any city in North America, and within usually 15, 30 minutes, figure out exactly what line in the zoning code, even if it's 1,000 pages, applies to that property. And we show them very clearly what's possible. And we'll show them the minutes from the city council meeting where the neighboring property got denied, and all that stuff.

Adriana Finnie (Single Family Homes)
We're in single family homes in California, Ohio, Michigan, and Alabama. We started in California, but in the last three years, we decided that the rules are getting a little too dumb and that it's time to get out. So we've done it in a very leisurely way. We keep waiting for somebody to move, and then we put the house on the market. And it's been great. It has worked nicely until this year when nobody wanted to move for any particular reason. The biggest challenges, as Todd said is evictions. In California, we weren't as successful. We offer money for keys. In Michigan, that has worked great. In Huntsville, Alabama, rules are completely different. If somebody doesn't behave themselves, you get a notice from the attorney, you get a second notice if you do it again, and then you're out, period. We don't even have to go to court. So that was a bit of a surprise. We're new to the Huntsville market, we've been there for 1.5 years. The rules there are amazing. That market is so hot, if I want to buy anything, it has to be a pocket listing. Everything else gets bid up. In one weekend there's 48 bids over asking.

But what's interesting about Huntsville, though, is that the rents haven't gone up that much, even though there's that much demand with the new plants and all that.
Right. It's a matter of time, though, it has to catch up. I can still get over 1% and the taxes are so cheap. Nothing compares. The first year I have this little house in Montgomery, which is the only one in Montgomery, I prefer Huntsville. I got the tax bill and I call the tax assessor's office and said, Is this only one bill a year? Oh, yes, ma'am. I said is this only a partial bill because I only own the house for a partial year? No, ma'am. I said this is a whole year's tax? Yes, ma'am. They must have thought I was an idiot. The bill was $118.59. But in Huntsville, $300, $600, $800 a year in taxes is plenty. You only pay them once a year. That's the final taxes.

In terms of the rental market. It is so hot, it's incredible. A tenant was leaving after a year, so we put the house on the market while it was still occupied. She was moving out on October 31. We rented it for November 1. Halfway through the month, she changed her mind and wanted to stay. We said I'm sorry, we've already rented your house. They painted the entire house in one day, the new tenant moved in on the second, happy camper. Thank you. Next.

In California things take so much longer and it's so much more expensive. I was just commenting, the one thing we've done successfully except in California is to offer money. In California, we went all the way to $3,000 and did not get the tenant out, we ended up going to court took court, it was all zoom court. So that's working fine in California at least. Evictions are open, but not if it's a COVID related issue. So you can't get them out if it's about money. We happen to have a different reason, they were destroying the house.

In Michigan, the prices are going up, and the rents are going up. Out specialty is B, B- C+, C's and B kind of homes, nice neighborhoods, not the best of anything. But if anybody needs to move down because they can't afford their house anymore, our house is perfect. We keep them really nice. We fix everything. So it's top of the line for that market. So we end up with a lot of tenants staying for a long time. And that's our goal, to get tenants that will stay in the house.

We just had two of them accept our cash incentive, one of them got $350, and the other one got $500, they moved out, we painted it and within a week and a half, all three have been rented now. And the prices there are really going up. We bought a house exactly a year ago, for $32,000, put $30,000 into it, and I was just looking today on Zillow, it says $110,000. Can I sell it for that? Maybe not. But can I can sell it for $99,000? Probably. So those prices are going crazy both in Huntsville and in Michigan. Cleveland, Ohio is a much more stable market, people don't move as much. It doesn't go down, in 2008, the houses only went down five or 10%, which was amazing. But they also don't go up as quickly. Taxes are high, both in Michigan and in Ohio. And in Ohio, they can reassess every three years, so that that could get expensive. But the houses are still pretty cheap.

For us, what has happened with COVID is, except for the fact that if you haven't paid, with the amount of houses that we have, there's very few that haven't paid. We've got a couple of long term tenants that have been in those houses that we inherited the tenant, good tenants, but now they're unemployed. So they're paying very little, how they will catch up, I don't know. But the one thing that we're finding is that there's a lot of help out there if that tenant is resourceful and if we help them. Today, we just applied for somebody, we told them that by Friday, you are going to be evicted. But there's this program in Detroit that you should apply for. We filled out all the paperwork, helped them, they're saying that we'll have a check to us by Friday, if that's the case, that saves their eviction, gets money in my hand, I'm happy.

We also found out that there's a lot of churches helping. If people need a bridge amount of money, they're handing it out. So a lot of it, for us, has been just working with tenants, talking to them being being nice to them, as opposed to just saying you've to go. That's not our goal. It doesn't help us. It doesn't help the tenants. So we've done a lot of what can we do to help but you've got to pay your rent. And you've to keep up your utilities and things like that. But in terms of COVID, our rental market has improved because too many people want out of apartment buildings. They don't want to be in close quarters, they don't want to be in the cities. We're in a lot of neighborhoods, we're not necessarily downtown in any of our cities. So that for us has been very helpful. People really want to be a little more separated than in the big cities.

In Huntsville, the last time I looked at it rents were running about $1.10/$1.15 a square foot, are they still in that space? Are they higher than that?
They're not higher than that. It depends on the area. So in the B and C markets, they're not even $1, however, they're 1%, so I can buy a house for $100,000 that's probably 1,500-1,800 square feet. I get $1,000/month. I'm a happy camper. In Detroit, have houses that were built in the 30's and 40's. They're beautiful little brick Art Deco. They keep that, nobody wants the big modern home. So you fix everything that's wrong with it. We make it pretty you clean it up.

In Huntsville, all the houses are old, from the 60's, so you have to completely rehab everything: granite countertops, new flooring, new everything. But still, if you're at 1% or better rent, I can't complain. In Ohio and Michigan, we ended up getting almost 2% in rent. And again, it's not $1 square foot either. But in Detroit, the houses are so small, we don't buy anything under 1,000 square feet, but there's plenty, seven, 800 square feet and they're three bedrooms. It's crazy. We normally don't buy anything under 950 or 1,050 square feet. But we can still buy, including renovations, for $50,000. And we're getting $1,000 a month.

But your ratio on a sustained basis are wonky. For example, when your water heater dies, your maintenance reserves as a percentage of rent, end up being very high, water heater is $1,000 bucks to replace I don't care whether you collect $500 a month or $3,000 a month, that's still the same.
But the interesting part is that I don't collect anything under $875, so those are decent rents. Some of those we bought for ridiculous prices, obviously. But the prices of the houses are so cheap, and we stopped buying right now because my guess is that we're going to have a lot of foreclosures. It's going to be in six months to a year. But once they start foreclosing on mortgages, what are the investors going to do?

I have not invested in Detroit. And it's very deliberate. But there's a lot of tax sales, tons and tons and tons.
And yet, I just bid on a house a week ago, and it went $5,000 or $8,000 over asking. It's crazy. In winter, things died down a bit. People don't want to go out in the snow. January, February, is normally is a much better place and time to buy. And often we make offers and say that offer stands, you let me know when that one falls through. And we've had many come back and say we take it now. Sometimes I lower the price after that. But yes, there still are tax sales. And yet the neighborhoods are really coming up. It's pretty amazing to see what was there two years ago when we were there. And what's there now, it's pretty stunning. The other thing that both Ohio and Michigan do that the cities are really enforcing is if you don't mow your lawn, you get a notice, don't mow it in three days. They mow it for you $160 later for a little piece of front yard, and next time you mow it. So it keeps the neighborhoods looking a lot better, that they don't put up with any garbage on the street. You get a citation immediately. So that's the good news for us, it keeps the neighborhoods better.

Todd Sulzinger
Victor Menasce
Adriana Finnie: