The Canadian Guide to Building a Real Estate Empire

Speaker 1:

What's up, everybody? And welcome back to another episode of Loop It In, the DoorLoop Podcast, where we pick the brains of experts in property management, real estate, and investing. Tech? We cover it. Marketing? That too. So whether you want actionable tips or the insider scoop from top performers in their industries, this is one show you won't want to miss. Be sure to subscribe so you won't miss out on any future episode.

David Bitton:

Hey everyone, this is Dave Bitton, co-founder and CMO here at DoorLoop. I'm going to be hosting this podcast today, and I am super excited to welcome Jason Martin from Ziemia Capital onto the show. I actually met Jason through DoorLoop's co-founder and CEO Ori Tamuz. And disclaimer, I have personally invested in a real estate deal with him in Canada that was one of the most successful deals I've ever been involved in actually in my career, and he was by far and away the most professional investment fund manager that I've ever worked with. And I just know that he will provide a ton of value to everyone listening in.

And just a little background about him, so Jason was actually born and raised in Montreal, Canada. By the way, my family's from Montreal, so we'll get into that. Where he still lives today, and he received his bachelor's degree in economics from the very prestigious McGill University in Montreal. If you're from Canada, you know what I'm talking about. And he also got a law degree from the University of Montreal and is currently a licensed attorney in Canada, an entrepreneur, and an active real estate investor and developer. He literally does it all.

Today we're going to talk about how Jason learned how to become a developer, any laws everyone should be aware of in Canada, the changing legal environment in Quebec with French, and attracting and working with US investors, managing properties, and much, much more. So Jason, thank you. Thank you again for joining us remotely all the way from Montreal.

Jason Martin:

Thank you for having me, and thank you for those kind words about how I'm one of the better deals you've done.

David Bitton:

We'll definitely cover that, but I actually wanted to start-

Jason Martin:

We'll talk about all the legal work you had to do, though.

David Bitton:

We'll talk about that also. So first I always wanted to ask you, which we've never really, I don't think, covered is, how did you end up meeting our co-founder and CEO, Ori?

Jason Martin:

So I went to a camp in upstate New York called Walden. Started going there when I was eight years old, and went through all the years, all the way up to staff. And Ori had just finished the Army, came through a program called, I believe it's called Camp Counselor USA, and came to Walden, thought America was the greatest thing he's ever discovered in his life. Was so impressed by the dollar hamburgers at McDonald's and everything. And we hit it off day one. After that summer, he stayed at my house for a couple of weeks with my family, and we just kept in touch and grew a close relationship like that.

David Bitton:

Wow, that's awesome. So you were born and raised and have lived your entire life in Montreal?

Jason Martin:

Yeah.

David Bitton:

Okay. Wow, amazing.

Jason Martin:

I've never left except for travel.

David Bitton:

Okay, awesome. So give us a one or two minute background intro about your career up until today. So it's my understanding you started as a lawyer and went from there. I'm kind of curious, that whole history.

Jason Martin:

So real estate was always the end game for me. That's what I always wanted to do. When I looked around to my friends or my parents' friends or people around in the community, the wealthy ones were always in real estate. And I think it was probably ingrained into me from a very young age. Loved Lego, building things with Lego. Even when my parents would buy me the sets, I'd build them, I'd deconstruct all of them, rebuild and cut them up conceptually. Even last night I was playing with my kids with this magnet set and built this whole little city with it- [inaudible 00:04:08]

David Bitton:

You mean Magna-Tiles? Yeah, we got them also.

Jason Martin:

Well, I think the notion of buildings was always in me. So that was the first thing. Having said that, education was always something that was pushed on me and encouraged. Growing up Jewish, got to go to school, undergrad won't cut it. So at that point, I said to myself, I was looking either MBA or law.

Business, I don't believe is something you can be taught. I think if you're an entrepreneur you either have it or you don't. You can learn all the themes around it and all the skills that come with it, but I truly believe it's something you either have or you don't. I grew up in a family where my father was an entrepreneur, so I didn't feel that an MBA was the right program for me.

I think there's a lot of great value in MBA, if you're in accounting, if you're in finance, you're a consultancy, things of that nature I think there's a value to it. But if you really want to just go out on your own and do your own thing, I didn't see the value.

So I said, "Okay, I'll go to law school." Didn't want to be a practicing lawyer, but there's an element from the education that you get that I didn't get in undergrad. So school was relatively easy for me growing up. When I say easy, it's not like I was an honor roll student, but I would get by with... I was an underachiever. I would get by with my 80s and be very content with it and not have to work very hard.

Whereas you get into law school, you have a really rude awakening. So A, it taught me discipline. [inaudible 00:05:34] B, taught me how to sift through information relatively quickly or quicker. And C, it gives you a level of credibility that when you go out into the real world and you tell people you're a lawyer, they ask what you do and you say you're a lawyer, it's an extra button on you. So that's why I went into law school. [inaudible 00:05:54]

David Bitton:

But let me ask you, before you went into law school, you already knew you were not going to become a lawyer?

Jason Martin:

Yeah, a hundred percent. Never wanted to.

David Bitton:

Ah. So your end game honestly was, "Okay, let me get into law, learn about the legal environment and apply that to business and/or real estate?"

Jason Martin:

Exactly. Work a little bit, build a network, which is effectively what I did. So coming out of law school, having to do my articling, I ended up working for a small law firm. Worked for the small law firm.

David Bitton:

What's an articling, by the way? We don't have that term in the US.

Jason Martin:

Well, articling is when you do your internship.

David Bitton:

Okay. So before you get called to the bar, you have to do six months of internship basically. And then you're what's called in Quebec, a [French 00:06:42] or the head of [French 00:06:45], using [inaudible 00:06:48]. I used to sign off, she has to sign off and then you get called to the bar.

So I did my articling at a boutique law firm. My boss had a decent real estate portfolio, a nice one with some good assets. I ended up probably doing maybe 10% law and 90% real estate. So I got to learn a lot of great things from him, and also things not to do. I learned a lot of the ways he managed his assets and applied certain philosophies to his management style. Things that I didn't necessarily agree with, not that I had the experience to agree or disagree, but having a few years of experience now looking back, I know things that I wouldn't have done.

And in terms of development, he literally threw me to the wolf.. We were sitting in his office one day and he had this building in downtown Montreal on the main commercial artery on St. Catherine Street, but a little further east. It was still off the beaten path at that point, but he wanted to take it, it was, I'm going to call it a C class building, but it was what's called a B class office building. It was run down. And he said, "Okay, what are we going to do?" So I came up with this whole notion. So basically you'd walk into the main entrance and it was a bowling alley basically, it was tight. The far end tenant was on the left side, was leaving. The one in between the entrance and that tenant was on a month to month and the one on the right side had a good frontage.

I said, "Look, you don't have a ton of frontage here. This tenant's leaving. This one's on a month to month. Let's give them a 30-day notice. Let's merge the tenant on the left side with part of the middle tenant and let's eat into that middle tenant for part of the entrance and make a much nicer entrance. Because you can have gorgeous office space upstairs, but it's your first impression." I always tell my managers, the outdoors of the building have to be pristine. The graph has to be cut, the landscaping has to be clean, the hallways have to be nice, all that because it doesn't matter what your apartments look like. If the rest of the building is not up to that level of-

Up to par, yeah.

Jason Martin:

... then we're out. So he said, "Great, go for it." I didn't know a thing about construction at the time. I had no idea what I was doing. I lost sleep over it. I would get text messages in the middle of the night, "Oh, let's do this wood paneling." Okay, I'd run to the buying, go get wood paneling. "Oh no, this is really cheap. What are you doing?" Okay. I'd go back. And I looked, I didn't know what a lights looked like. He told me MR16s, which is a light fixture. I didn't know what the hell that was. Stud? The only thing I knew about studs were it was either when you pierce your ear or girls that are [inaudible 00:09:23] learning about wood studs. So that was my first experience into construction. So he really threw me, but I learned so much, and I have to credit him with a lot of the knowledge that I have today for that.

David Bitton:

Wow, incredible. And then so where'd you go after that?

Jason Martin:

So after that I went to, so again, always with the idea of being in real estate and learning as much as possible. I went to a national retailer, a ladies' retailer. They had about 220 stores across Canada and about 10 or 15 stores in the Middle East. I was in trial as a real estate asset manager. So I was dealing with all the landlords, negotiating all the leases, overseeing the construction, not actually conceptualizing the construction, but the construction team would work in parallel with me.

I would negotiate lease terms, which would include TIs, tenant inducements, understanding how that had to be deployed so they'd be reporting to me. So I got to learn the whole retail aspect of real estate. I was fortunate that I ended up forging a close bond with the executive team. So when they would go on store tours, like out west, out east, wherever across Canada, I would go with them, and I got to understand what went into leasing a store. It wasn't just, "Okay, I like this store." It was, "Hey, what's the depths? What's the width? How could I do the catwalk? So how do I do the collections?" All these things that I never would've thought of, because everything had to do with dimensions.

And then in terms of the leasing, retail leasing in my opinion, is the most complex leasing. Residential is pretty straightforward. At least in, specifically in Quebec, it's template. There's nothing I can do about it. It's a government form. I know in Ontario they can use their own with some language given by the government. So residential is pretty straightforward. "Here's the apartment, pay my rent, heating and electricity included or excluded, hot water." Pretty simple.

Office, probably a little bit similar to retail, but also again, it's a residential lease at the end of the day. You're renting an office space, maybe they're giving you some TI and that's it. But in retail there's percentage rents, there's break clauses, there's all these different elements. So I got to learn a lot there. That was a great experience. Got to meet a lot of great people in the retail space on the leasing side of it. It was awesome experience.

David Bitton:

How much did your legal background help you during those first few years of your career? Were you using it a lot?

Jason Martin:

So when I was at La Chateau, it was called, the Ladies Retailer, that helped me a lot. A, I was reading leases like 60-page leases, which I know for Americans is not so daunting. It's probably 500 pages for you've guys.

David Bitton:

It is.

Jason Martin:

We won't get caught up in that legal work, but it was still daunting at the beginning. Then I learned how to, [inaudible 00:12:11] I knew what was like [inaudible 00:12:13] template, boiler plate language that I didn't even have to, the last three, four pages, don't worry about it. What are the business terms, of the business terms there? Sift through it. Any trickery? Okay, great. Sign off on it. Move to that.

David Bitton:

Got it.

Jason Martin:

So that was important. It was actually interesting, when my legal background did play a role was, when you say you're a lawyer, people think you know everything about the law, which is categorically nuts.

David Bitton:

My wife's a lawyer and people ask her questions all day long about this. She's like, "I'm not a criminal attorney, I'm not a this attorney." "But you're an attorney. You should know everything." Right?

Jason Martin:

So they ended up, the owners, the CEO or the shareholders, they ended up producing a movie. So I got to deal with these people in Hollywood and was negotiating entertainment law contracts, which I knew nothing about. So that was kind of cool to touch on that. So my legal background played a little bit there. I remember, side note, but the lawyer from California or the agent, he wasn't returning my calls or anything, and we have to negotiate all these things.

So I CC'd his client, and he lost it on me and said, "If this how we're going to..." And went nuts, R.E. Gould style, right? Like, "Stick me on a [inaudible 00:13:22] to rot." And then I was like, "I'm so sorry." And I apologized, everything. He's like, "All right, you know what? I like, you apologize. You have balls kid. You have balls." And it was, so side note about- [inaudible 00:13:31]

David Bitton:

Welcome to California. Yeah, literally. So then what happened after, if it was called the Chateau, did you go off on your own or did you work for someone else at that point?

Jason Martin:

No. Well, I had one more stop along the way. I was actually, I knew the Chateau wasn't the final stop. Again, always wanted to go on my own. Dabbled in starting a property management business with a couple of guys while I was at La Chateau. It didn't, got, I think two contracts out of it. Nobody was getting rich off of it. And so I was sitting at my desk one day and a recruiter called me, introduced herself. I wasn't even looking for a job. She gives me a whole spiel and says, "There's this new company, do you want to interview?"

"Sure." So I went, I remember it was a freezing cold day, snowstorm. Parked my car, put in money in the parking meter for an hour, hour and a half. Next thing I know, it was a three hour interview. It was a new company moving to Montreal from Sweden. They had at the time about 30 or 40,000 apartments across the world.

David Bitton:

Nice.

Jason Martin:

They had just entered Toronto and New York and they were coming to Montreal. So I was the second hire there. And I stayed there for about, just under three years. I was the VP, built out all the processes. And then I said, "Okay, it's time for the next step. Let's go."

David Bitton:

So it seems like throughout your career you first learned how to manage, handle tenants, leases, renovate. Your second job, you learn how to do construction, ground up development, more negotiating and leases, and then third job, how to really grow scale and operationalize everything. Is that sort of accurate and fair?

Jason Martin:

Exactly. And I said to my wife, I had some savings with [inaudible 00:15:08]. We had just one kid. Said, "Let's try this. Doesn't work, I have good credentials, can always go back into the corporate world." She supported me. Went in the next day and the rest is history.

David Bitton:

Wow. All right. So when you say the rest is history, what exactly happened that next day? What did you open? Did you open a real estate fund? Did you start investing for yourself, buying apartments, renovating ground up? What were you doing? What was your first thing you did? Did you do your own money? Raise money? Let's hear that journey also.

Jason Martin:

I was actually in negotiations to buy a property management company. I was going to buy a management company with this other guy. They had about, I don't know, several hundred thousand square feet under management, but it was all third party for them. So I figured if I'm going to go into real estate, I need a management base. So instead of starting from scratch, let's buy one. We have the credibility. Oftentimes people don't necessarily know it's a manager. It's going to lend itself to some credibility. "Oh, who's this company? Okay, let's bring them a property." Long story short, there was an eternal coup in that company and they said, "If you're selling to a third party-"

David Bitton:

We all quit.

Jason Martin:

"We're all out." And if they all quit, all these management contracts are going to tank. So now I'm like, "Oh god, what am I going to going to do now?" So that was like two, three months in. We were at the finish line. We're [inaudible 00:16:25] a lawyer, we're going to go sign the next day. And the owner at the time came to see me and he is like, "Sorry, this is what happened." So I'm like, I remember I had a pen in my hand. I was just like, I had no idea what I was going to do.

So then I said, "All right, that's it." So I got on the phone. I had a list of, there, I got my hands on. All these property owners, all the properties they own. Started cold calling. "Hey, do you want to sell the building?" No money at this point. I don't know how I'm going to do it, but calling, sending out mailings, "Hey, we're a real estate investment company. We're looking to buy real estate. If you're interested, call us." Obviously jazzed up more than that. But that was the crux of it.

So I'm doing this, and now I'm getting to the point I can, considering going back into the corporate world. I had one or two interviews. And I remember where I was sitting. I was having lunch by myself, having a falafel, and this guy calls me. "Hey Jason, it's Brian. I got your letter, I'd love to meet you."

I'm like, "Okay, cool." So we set up a time. Again, all these crazy things happen to me when it's the coldest day of the winter. Go to his office, park. Snowstorm. There's not a car on the street. And I'm like, "You know what? I'm going to go see what this is about." His office is in his apartment building. So I knock on the door. Cloud of smoke. The guy was chuffing cigarettes one after another. Cloud of smoke, he has frizzy gray hair, looks like, out to here.

I walk in, I'm like, "Nice to meet you. What's for sale?" He goes, "Nothing." Like cloud of smoke, frizzy gray long hair. [inaudible 00:17:48] mass murderer. I'm about to [inaudible 00:17:52]. And I say, "So what am I here for?" He says, "I get these mailings all the time. I typically chuck them in the garbage, but yours was really professional and I wanted to meet you. It reminded me when I started in the business 30 years ago, how I did it. So I wanted to meet you." Okay. So we sit, he tells me his whole life story, blah, blah, blah. We keep in contact. This was end of November, beginning December. [inaudible 00:18:15]

David Bitton:

What year are we talking about here?

Jason Martin:

2017. End of '17. Yeah, December, 2017 because I remember we went on holidays. We kept in contact. And then in mid-January, beginning February, there's this property that comes to market. He calls me, he says, "Hey Jason, it's Brian. This building's for sale. You want to buy it together?" I'm like, "How are we going to buy that? I don't have money." He goes, "Don't worry about it. Just go look." "Well," he goes, "do you like it?" [inaudible 00:18:45]

David Bitton:

Let pause here. You said, "How are we going to buy it? I don't have money." You were trying to buy a property management company before that, using what money? Savings or family investment, friends?

Jason Martin:

Well, I was getting a balance of sale with an earned, vendor was getting it earned out based on-

David Bitton:

Profits.

Jason Martin:

Yeah.

David Bitton:

Okay. Got it.

Jason Martin:

We had to maintain certain levels of [inaudible 00:19:08] or he wasn't going to get paid.

David Bitton:

Got it. Okay. So he sent you to look at the building, you liked it? Yeah.

Jason Martin:

He goes "Okay, underwrite it's fine. Underwrite, numbers make sense." He goes, "Make an offer." So I'm still in this position, "Okay, we make the offer, Bri, but how are we going to buy this building?" "Don't worry, don't worry." I don't know what the deal's like, I could be setting myself up that he's going to the- [inaudible 00:19:27]

David Bitton:

You're working for free at the moment.

Jason Martin:

Exactly. And so we lock up the deal. So now he shows his cards. I go, "Great, Brian, we have the deal locked up. How are we doing this?"

He goes, "You're going to do all the work. I'm going to post the money. You're going to do all the work. And when my money's back in my pocket, we're 50 50 partners."

I said, "Great." So we went, this is my first experience of negotiating a deal on my own. I would negotiate when I was with the company, but it was different. It was more corporate. He calls a meeting with the vendors and the broker. We're sitting around a boardroom table. He says, the building was for a million four. He looks at him and goes, "I'm going to give you 200. I want to bounce a sale for $1.2 million."

"What? What's about that?" And they did. And they said, "Okay." And so we bought the building, he put down 200. I did a bunch of work. We were able to increase the value in the rents. After about eight months, all this cash was returned. And that's how it started. And from there, I [inaudible 00:20:28]. People would always tell me, "Yeah, if there's a deal, bring me the deal, blah, blah, blah. I don't believe you're underwriting. Not the right time. The cash is not available." There's always an excuse. But then once you start building your track record, money becomes a lot easier to get. And that's how I started.

David Bitton:

Wow, okay. I love how in life everyone has a few, very few, maybe three defining moments in their life where they can make the right or wrong decision. And you just happened to choose the right decision. You left a job at the right time, you hustled it out, you didn't get another job. This guy happened to call you. You happened to go even in a storm, and everything was probably telling you don't go. It's a waste. And look where it led you today. It's unreal. If you didn't meet this guy who knows where you'd be today. I'm sure you'd still be successful, but who knows? So I love that.

So you were doing a lot of stuff for other people. They were bringing you deals. And then talk to me about your transition into doing your own deals now and raising money from outside investors.

Jason Martin:

Yeah. So I've always, I think to my credit, but maybe to my detriment also, I've never tied up a deal and I've always had this mentality that I don't want to tie up a deal that I'm not confident I can close. In other words, when I started, I never went for that $20 million deal right away because I wasn't necessarily confident that I can raise 5 million dollars right away. So I started baby steps and kept growing.

Now I'm a lot more confident. I've got, broker's call me. "What's your capacity?" I'm confident I can say I can close a deal of this size, no problem. But back then I was always going a little slower. So raising money was... One guy came to me and said, "Hey, we're interested." Brought in the deal. Called back and forth. Boom. Closed the deal. Performed.

Second deal came, "Hey, do you want to do another deal?" "Okay." "Well you delivered pretty well on that deal. Sure, no problem." Boom. Negotiated a little bit back and forth. Done. I've never done it as a syndicator. Only one time I syndicated a deal. I can't tell you that it was the most enjoyable because everyone's all gung ho at the beginning. But then when it comes time to pen to paper, signing guarantees, "Oh, I don't want that one. I don't want one, blah, blah, blah." It was a headache. Ended up having to buy some people out just to be able to refinance the property, which was a blessing in disguise.

David Bitton:

This was the deal that I was on, I'm assuming? Yep. Okay, got it.

Jason Martin:

So you guys, didn't [inaudible 00:22:51], you're Americans. Banks can't go after you.

David Bitton:

We had other documents to sign, which also was a headache for everyone I'm assuming. But, so it seems like you were doing one-off deals with one person, one investor, and then you tried syndication once and there was a whole host of reasons why you're probably not going to do it again?

Jason Martin:

Yeah, I mean I don't want to have 15 people at the table.

David Bitton:

Exactly.

Jason Martin:

I'd rather do fewer deals, fewer people to deal with. It's more of a headache gathering paperwork. Canada, the anti-money laundering laws are quite stiff, so there's a lot of paperwork that goes with it and guarantees getting them to limit guarantees, I guess getting them to limit guarantees with certain investors and not others. I just went to again on another deal where there was one investor, but he wanted to limit to his corporate. We were successful in getting it done because obviously as I've grown the weight of my guarantee is a lot longer.

David Bitton:

But basically every single investor has a different story and different issues and it's just you're dealing with so many people, it just gets very frustrating for the smaller amount of extra incremental investment you're going to make off that deal.

Jason Martin:

Exactly. So we've tried to keep it, and now, we've also done deals now on our own. Obviously we've done well. We have our own capital. But larger deals we still need to bring in people every now and then because we don't want to put all of our, we're hedging it. I've had a pretty good batting average. You have deals that don't go as well as expected. At the end of the day, it's real estate. You typically should come out ahead as long as you just ride out that wave. And I'm confident even the deals that have been a little bit less profitable, that we'll do that. So that's why I like to hedge, if I'm going to invest my money, not to put it all into one deal. So as I was saying, that's part of the growth buy was always making sure we can close the deal. Our integrity is important. Our word is important.

David Bitton:

Reputation. So what's your bread and butter today? Half your time is spent investing on your own deals with your own capital and the other half is spent with high net worth individuals?

Jason Martin:

Right now, I mean we're in an interesting time now. As difficult as it is and unenjoyable as it is, I know it's not going to be the first time I go through it. It's a cycle. I am relatively, I don't want to use the word happy, but it's a good time to go through it because I'm relatively young, so I'm going to learn a lot from it. And because I was able to put good debt on all my properties before interest rates skyrocketed. So my first deal coming due is end of 2025. And someone once told me, make your money when you buy your real estate, not when you sell it. So now I'm seeing that firsthand, because we bought our deals pretty well, that even with the interest rate heights, the value we were able to create over time, we'll be safe. So we know that.

So having said that, in light of the new economy and the new realities and the new rates, we're not as busy on the acquisition front as we were. So it gives us time to, A, we stabilized all of our in-house management. In October, we made a decision to give out the management. We said, "We don't want to be in a management business anymore. It's not the highest and best use of our time." So we gave it to a third party management company, and in January we took it all back because we saw very quickly, nobody's going to manage our buildings better than we are. And they were spending money relatively loosely, and we always want to cut our costs. So we took it all back. It was a mess. Our AR skyrocketed. It was very messy. We ended up hiring a full-time controller, beefing up our management staff.

And so since June, things have been relatively stable. Still day-to-day, normal headaches, but relatively stable. So now we're looking at ways of how to cut costs, like true asset management. We haven't been able to really be asset managers the way we'd like to for the last couple of months because of that. So now we've cut our administrative costs, we've cut our repairs and maintenance costs. We've hired in-house concierges now. So instead of outsourcing, getting the guys at 25, $30 an hour, being able to control all of our costs. So that's made our buildings a lot healthier.

And now we're getting back to basics. So hitting the phones, not calling for money. Money's available at this point for us. We can make a couple calls and raise our money now if we need to. But it's more about getting those good deals. And the best deals I've ever closed on are the deals that I sourced myself. Not that they came from a broker, it was a cold call, it was a meeting, like the first deal I ever did and how that worked out. Not that that was an actual property, but all the most success I've ever had has always been through the personal sourcing.

David Bitton:

Got it. And when you're taking on new investments today, are you looking for ground up development, renovation, refinancing? What's sort of your go-to strategy today?

Jason Martin:

So we're opportunistic. At the core, we're multi res guys. I have some development projects about an hour and a half north of Montreal that I'm working on that, it's where a lot of people have their weekend homes. It's on a lake, it's a beautiful area. I myself have a house there. But the downtown core of it has just been neglected for years. It used to be a vibrant area, but there's no, like food and beverage, there's nothing there. There's one good restaurant, the rest of it is crap or non-existent. Beautiful views of the lakes.

So we're in talks with a group now to maybe do a ground up, the boutique hotel and bring in a bunch of restaurants. They're in the restaurant business as well. So they bring in the five, six of their brand and do a master lease with them and build that. So that's one project.

But like I said, at the core, we're multi-res guys. And we're also going to go back to basics when it comes to real estate. So everyone benefited from this huge low interest rate, huge spikes in rents over the last seven to 10 years to go in, get the rents out, take the building back to the bank, take that money, buy the next deal, et cetera.

But we went back to basics. Now we want to buy larger deals. And so we're looking at, historically we didn't, but now we're looking at cap rates, we're looking at our price per foot, our price per door. We're really taking all the metrics and looking at it from a macro level and going to work the building slowly. Put good debt in place, no more bridge loans like we used to do, and work the buildings. When I look back at all the guys that I was talking about earlier on in the podcast that I wanted to be like, I aspired to be like the way they did real estate, old school.

David Bitton:

Got it. I mean you're thinking smarter now and also protecting your downside in the event of a recession. I mean you've already probably been through maybe three, 2000, 2009, 2020. So you've learned along the way it sounds like. And now with the rising interest rates. So I'm just kind of curious, how is the real estate market in general in Montreal after COVID. Rents went up, I'm assuming also?

Jason Martin:

Yeah, so we have a housing shortage. Developers are not building new housing stock. Interest rates are too high, construction costs are too high. There's no return left. And dealing with the bureaucracy at the city level to get permits and everything, it takes forever. They introduced a bunch of laws that make it unappealing or unattractive for developers to want to build. I myself am not a developer. It's a very different science. I'm a redeveloper in the sense that we take an undervalued asset and create all kinds of value, renovate the apartments, renovate the common areas, redo the mechanical systems of the building, et cetera. So rents have skyrocketed, but with that construction cost have also skyrocketed. So it makes it a lot more difficult to do the same types of projects. And so yeah, we're a lot more cautious.

David Bitton:

And you mentioned the housing market and the shortages. So it was my understanding, and I could be totally wrong on this, so correct me, that I believe Canada or Quebec passed a law that foreign real estate investors like myself cannot come in anymore and just purchase real estate as an investment property. Is that right? Because we're all raising the price of everything? [inaudible 00:31:17]

Jason Martin:

No, so that's more on the condo side. So it really happened more on the west coast and in BC. A lot of Chinese investors especially would come in, buy condos [inaudible 00:31:31] and fake it. And that was driving up the value. So that's what they wanted to avoid. But if I have another deal, figure out the paperwork, and I bring it to you, you're more than welcome to participate. There's no issues there.

David Bitton:

Got it. So speaking on the topic of law and legal changes in Quebec especially, it's my understanding that a very big law has passed recently. I'm not sure how recent, where, correct me if I'm wrong, they want all major businesses, I believe over a certain size of employees, maybe 50, to do business completely in French. Can you get into that?

Jason Martin:

So basically there was always a rule, it was Bill 101. It happened in the '70s, I want to say, late '70s, early '80s. Before my time, before I was alive. But basically it was a lot to protect the French language. Now French is, it's part of the core and the culture and the fabric of Quebec. It's awesome to be able to speak multiple languages and hear it, but it becomes political. And they're trying to protect it, but we won't get into the politics of it.

So they decided to enhance that law now and beef it up. And so historically it was any business 50 and over, basically all their computers have to be in French, all their material has to be in French, et cetera. They've since reduced that to 25 employees or greater. So that's one [inaudible 00:32:56] of it. All kinds of legal documentation has to be in French, notarial work, your deeds of sale, your mortgage deeds, all that stuff now has to be in French. Or you could have it in English, but you have to have it in French also. So that's the default. I mean there's always a loophole of how you get around it, but they'll tighten that up obviously as well. But it hasn't really changed business since, I haven't felt it at all. I mean- [inaudible 00:33:20]

David Bitton:

Have you had to change anything to French in your business or no?

Jason Martin:

No. We're under 25 employees in the office.

David Bitton:

You don't qualify, luckily. Okay.

Jason Martin:

But it hasn't really changed business. I haven't felt an impact on it. I think people were a lot more scared of it when they were announcing it. Political, they get on the TV, rah, rah, rah. But the effects of it, we haven't really, nobody's felt it, in my opinion, so badly yet.

David Bitton:

Have you felt or seen any companies, international companies, US companies that are leaving Quebec because of this new law?

Jason Martin:

No. Any company, Montreal was the epicenter of Canada once upon a time. Toronto is Toronto solely because of all these laws in Quebec. We had all the financial institutions, all the head offices were here. When Bill 101 came into effect, that's when there was mass exodus. And over the years, you had the referendum in the '80s, you had the other one in the '90s. So anyone who wanted to leave has by and large left already. Doesn't mean that there's still not migration out of Quebec from the locals. But I haven't seen or heard of any companies closing up shop here because of it.

David Bitton:

Got it, got it. Yeah, I know that we are, DoorLoop, our software, property manager software, we're looking to get into Canada right now because we're now, landlords and property managers are able to collect rent from tenants in Canada using DoorLoop now. And one of the things we're looking into is, "Hey, can we even advertise in Quebec," because we have over 25 employees, we're over a hundred now. And I think we're looking into translating our website to French, doing everything in French. The ads need to be in French. So we're sort of investigating that right now in our company.

Jason Martin:

You should speak to my wife. She could quarterback that for you. That's what she does.

David Bitton:

You know what? Yes, please. Because we are completely lost. We have no idea. And all the information online is, who knows if it's right or not?

Jason Martin:

No. You need local counsel, both lawyers, accountants, marketing, someone who can quarterback that for you.

David Bitton:

Right. Got it. So speaking on the same topic, how different is Quebec from the rest of Canada for us people that don't live in Canada? Is it just the language or is there anything else major? Any other major differences or legal differences or cultural differences or real estate differences?

Jason Martin:

So cultural differences for sure. I mean we're very European in culture. We are the largest rental market on a per capita basis in North America. In terms of laws, I mean every province has its own set of laws. There's federal laws, but provincial laws. And when it comes to real estate, it really boils down to the provincial.

In terms of rental, the way it works, every province is different. Quebec is probably the most rigid... Not probably, it is the most rigid. So we have the rental board. It used to be called the [French 00:36:22]. It has since been renamed the [foreign language 00:36:27]. Basically it's a very tenant oriented organism. It's an administrative tribunal, just not, so we don't clog the courts with late rents and things of that nature.

So our rent is all controlled. I mean there's a bit of a misconception about rent control in Quebec. Technically you can jack your rent as much as you want, but the technique, the way that it works is on renewal, it's minimum three months, maximum six months. You send the notice out, you say your rent is a thousand bucks, it's going up to 1200. They can either accept, refuse, move out obviously, or stay silent. They stay silent, it's an automatic renewal after 30 days of receipt.

They decline, it's now on the landlord to make proof by either negotiate with the tenant or to make an application with the rental board for them to justify your rental increase. And then the rental board will sign off or not. So they have forms you can fill out now and it shows, "Okay, last year your insurance, your taxes, your heating, blah blah, was this, increase to this. Does a whole calculation for you." And it says, "Okay, you can increase it by whatever."

David Bitton:

Interesting. So you can't just do whatever you want and double rent. You have to justify it also.

Jason Martin:

You could in theory, but you'd have to get it approved. If they challenge you, you have to get it approved. So what we do is to avoid headaches, we do the calculation and if it spits out 6.7%, and guess what? We're sending you a renewal at 6.7. It says 2.3 or do we have 2.3? Why? Because if and when it has to go to the rental board, I don't want a headache, I'm just going to, here's my backup, here's the proof, and they'll sign off. It doesn't mean that the judge... It's not a judge. It's called the [French 00:38:15]. [French 00:38:15] can't disagree on what. If they say okay, it shouldn't be 6.7, it should be five and it is what it is. But that's one law that's a little stricter here.

David Bitton:

Do you show the tenant like, "Hey, it's going to be 6.7% because of X, Y, and Z?"

Jason Martin:

So we don't send them the form, like the background, in the banks. If they want us to justify it, we are happy to share it. If it comes down to negotiation, I'll be like, because sometimes I'm making up a number. 6.7%. They come back and they say five. Is it worth my time and effort and money to go to the rental board to get that extra 1.7?

David Bitton:

Who knows.

Jason Martin:

Different arguments, right? Because it's all [inaudible 00:38:57] increases year over year. But if you can just get it in, and time is money also, right? So there's that. So we don't show it to them unless it's going to negotiation.

David Bitton:

Got it. And are you using software to manage all your properties? Something like DoorLoop to collect rent, manage leases, e-signing, stuff like that?

Jason Martin:

We were on something similar to DoorLoop up until July. We were using Buildium. We since migrated over to Holpum, which is, it's a little more sophisticated, more Quebec focused, which is important for us. Buildium also had limitations for us, so it didn't have the tax calculations. Although we're mainly residential, we do have some commercial tenants, so taxes we had to manually enter, which is a little bit of a pain. I don't think we used it to its full capacity, but Holpum, there's forms we have to send during income tax season that Holpum can spit out right away, calculates the taxes right away for us. The software, like the interface is a little bit dated in my opinion. I'm not the most user friendly, but once you've learned how to use it, the information that it spits out is excellent.

David Bitton:

Amazing. Okay, cool. And you're running criminal history, background checks, credit background checks, eviction background checks for the tenants or does Canada have all that? Do they let you do all that?

Jason Martin:

So I can't do a criminal background check.

David Bitton:

Right. I didn't think so.

Jason Martin:

We can't discriminate just because they were a convict of some sort if they want to rent. What we do is our leasing team runs a full credit check. The credit check does give you everything. So it says delinquencies, bankruptcies. If they had bad tendencies with other landlords, we also make them fill out an application form where it shows the last places they've lived over the last two, three, four years, whatever. We can call the landlords. I think it's a waste of time. Myself, I'm a landlord. If I want to get rid of a tenant, I'm giving them the best referral possible.

We ask for their payslips, their job, letters of employment to ensure that they can cover it, because sometimes we'll get applications. Let's say we're charging, I don't know, $1,500. I see they're making $2,500 a month after taxes, and you've got to feed yourself, and I don't want to put you in a situation that I know I'm going to have to evict you anyways. So we're pretty strict on that. Then we've brought in better over the years.

Doesn't mean we bat a hundred percent. We had a dental hygienist that was making $65,000 a year who, her rent I think was 1250. She ended up racking up four months of bad debt and she checked all the boxes. Sometimes you get bad tenants. I had one tenant in another building, knew how to play the system. He lived rent free for 13 months, because that's where the rental board is a bit of a nuisance. But he knew how to play it.

David Bitton:

Oh gosh. Yeah. I mean we have the same issues in the US so it doesn't surprise me. So just to wrap up the last few minutes here, I have a few questions for you about investing in stuff specifically. Any advice? So for people listening that are looking to kind of follow your path and grow just like you have, what's probably your one or two top pieces of advice for someone trying to grow their own rental portfolio?

Jason Martin:

So if you're looking to raise money, I would say you have to sell yourself. You're not selling a building. Building tells a picture, it tells a story. Your performa, it's a storybook. You're never going to hit a hundred percent on it. You're either going to overachieve, underachieve or everything in between. But your performa is just there to tell a story.

But really the person that's investing money is investing in the person, not the building. The building will always be there. They're secure by it. They're investing in you. Are you an honest person? Are you going to treat their money as if it's your own? Are you going to try to maximize the returns? Do you know what you're doing or are you just a really good storyteller? So that's important. So make sure that the people that you're talking to know who they're investing in and not what they're investing in as much. That'd be one thing.

Don't have an ego. I sat around tables with some real estate guys and they're like, "How many doors do you have?" And the guy's like, "I have 300." And, "I'm 1500, 2000, 600." Whatever. It doesn't matter. It's about the value. You can have 3000 apartments that can be worth a hundred million and you can have a thousand apartments that are worth 300 million. Well I'm talking large numbers here, but you get the idea or the theme that I'm trying to convey, is that don't have any ego, it doesn't matter. And there's always going to be someone that's ahead of you. There's going to be someone below you, there's someone moving at your own pace. Just compete with yourself. Don't compete with other people.

A good friend of mine who's been in the business now for about 30 years, not Brian but somebody else, he's a bit, he's kind of like a mentor to me. He has 2,500 doors, but he's been doing it for 30 years. And he always uses the expression. "So Mount Royal is a mountain in Montreal, beautiful views of the city." He says, "Go to the top of Mount Royal and look up at the skyline. There's enough for everybody, and you can't own every single building."

David Bitton:

So true.

Jason Martin:

So it's important to work together, share information. If you're working on dealing with a tied up, I'm not saying have to disclose what you're working on, but if you want to know rents in an area, it only benefits you if you are honest of what you're achieving. Because if I'm telling, if you come to me and say, "Hey Jason, what are you getting at Cartier?" And I tell you, "I think I'm getting between 1200 and 1500," it leaves you open ended. I want you to get rents that I'm getting or higher so I can move my rents. So share information, be collaborative, not combative, and work together.

David Bitton:

Awesome. Love it. And I'll tell you as an investor on the other side of the equation, one of the reasons that we initially invested with you is the trust, the reputation. Obviously I listened to Ori a lot and if he has that trust in you and he recommended you, okay great, that was a big thing for me. But then actually I think even before we made the investment, you were so professional, everything was so organized. And then as we actually were in the middle of the investment, you would send such great updates.

I don't know if, they were like probably even more than quarterly. And there was so much transparency. You were sending pictures of the renovations, this is the progress. And I remember sending you an email like, "Wow, you're amazing. No one's ever done this. No one's ever sent this many updates and pictures. This is so cool." And you were almost like dumbfounded. You're like, "What do you mean, no one else does this?" I was like, "No." And to you it was like, "Oh, this is normal. This is just part of business." But you were so professional. So yes.

Jason Martin:

That's the way its supposed to be. It's during that phase now, if I don't send so many updates it's because collecting rent, it's not so exciting. You'll see it on the financial statements. Getting empty where there's major construction and you want to see, okay, the building looked like this, now it looks like this, and you want to see that story throughout the, while it's happening.

David Bitton:

I got to say I was blown away. And I was on another podcast, even before we spoke, maybe a month ago, and someone asked me what's my best investment to date? And I said, the one in Canada with you actually was one of my best investments to date percentage wise, but also professionally wise. So the fund manager, you just made it such a pleasant experience. And we had some hiccups with US, Canada, whatever, but you just pushed through and crushed it all the way through and were so helpful. I remember I needed tax documents within 24 hours. You're like, "Oh, I'll go to the office and I'll get it for you." I was like, "Wow, this guy is awesome." So just thank you for everything that you've done for me personally and for my family. I appreciate that. And with that I have maybe two last questions. If you can do it all again, what would you do differently if anything?

Jason Martin:

I mean they always say hindsight's 2020. There's deals I probably would've done maybe by myself and borrowed money at a higher rate and back filled it and held more of the equity. But it's easy to say that after the projects come to fruition and you saw the result. So if I can go back, maybe do that, but that also worked in a time where you had low rates, you had a market that was just going like this, like this, like this. Today I don't think that approach would necessarily work. And probably start younger, maybe take the plunge a little bit younger and added three more years to the progression and had X number of doors more in the portfolio, which goes against what I was saying before, but been able to accelerate that growth a little bit faster. But everything happens for a reason and it all comes in due course. And I'm in for the marathon run, not for the sprint.

David Bitton:

Exactly. Awesome. Love it. And I think the last question, we'll end on this and I love this question now. If you can go back in time to when you just graduated from McGill, what would you tell yourself?

Jason Martin:

[inaudible 00:48:00]

David Bitton:

I know. Don't go to law school. I'm kidding.

Jason Martin:

I say that, but at the same token, I think that law school gave, allowed me to be where I am today. The truth that be told. Because like I said, it gave me that level of credibility with people. They're like, "Oh, well forget that he's a lawyer. But he went to university for six years. Undergrad, whether it was easy or not irrelevant, but he went to university, he's an educated person. Then he went to law school." Law school is hard. It's not medical school, but it's difficult. You've got to sit there, you've got to study, you've got to learn, you've got to be practical, you've got to memorize, you've got to problem solve. You've got to be confident in your answers.

So then you get the professional designation, which is another four months. I mean I did it. There's four months or the eight months track. I did it in the four months. That was miserable. That was three years of law school and four months that I had to study for and then be ready for an exam. So I don't know, it's easy to say, yeah, forget law school and just fast track everything and who cares. But I can't confidently say that I'd be sitting here today if I didn't take all those steps.

David Bitton:

So what would you tell yourself then? Go to law school. Follow the path.

Jason Martin:

Follow the path. Exactly.

David Bitton:

Follow the path. And if anyone wants to that's listening in is like, "Wow, this guy is actually pretty smart. Can I invest with him?" Can they invest with you? Are you accepting any new investors?

Jason Martin:

We are always open to new investors. We're always open to conversations. As much as someone's investing in us though, we're starting a partnership with that person. So we like to know, we want easy investors. When I say easy, ask as many questions as you want. It's your investments, you're entitled to. But we want, it's a relationship based thing. [inaudible 00:49:52]

David Bitton:

Trust, you want, basically. Trust you.

Jason Martin:

Trust good people, trust us. But we have to trust them also. We're not people that look to get an angle on someone and vice versa. We don't want, the rule of cash is king. We don't believe in that philosophy. We're more of a philosophy that a partnership is a puzzle. Yes, we need cash, we need the building, we need expertise, we need this, that, and it all has to work well together. And so whether it's an investor from the US, Europe, Asia, Canada, doesn't matter, we're open to meet with people, to talk with people. Networking, for sure. We're always looking to grow, even outside the Quebec market, especially now that we have that level of comfort, that experience, that track record. So we're looking to grow and to bring on more investors for sure.

David Bitton:

Awesome. And I don't know if you have this terminology there, but in the US we call them accredited investors. Any investor that I think has a net worth of over a million dollars. Do you have that similarity there? Do you accept any investors or do they have to be accredited?

Jason Martin:

No, so they have to be accredited if we're doing a large fund and it hits a certain thresholding of certain number of investors in that fund. But we're not looking to do a fund where we're what I call the Sharma effect, charging fee after fee after fee. And before you know it, there's no money left for anybody.

It's very simple. We're in this for the equity. Yeah, we need to make money along the way, but we're not charging fees to get rich. We're charging some nominal fees to keep the lights on in the office, to pay the staff. So we can eat a little bit, Sharma. But we don't charge at, we're really there to... So yeah, it doesn't have to be an accredited investor. Having said that, we don't want the guy who has $250,000 in his checking account. Then that's all he has and wants to sign a check to us, because deals could go bad. And if it goes bad, I don't want take all the money you have in your bank account,

David Bitton:

Diversified.

Jason Martin:

I want you to, you've better balance it. But we're not looking for the $20,000 guy and the $50,000 guy because that's not going to move the needle at this point- [inaudible 00:51:59]

David Bitton:

... like a minimum, a million dollar minimum?

Jason Martin:

I'd say half a million to a million starting. If you're coming from the US, 500,000, no problem. It translates to 750, we're good. But no, I would say half a million would be the starting point. But for what want to do, our minimum down payments for the deals we're looking at now are 2 million plus.

David Bitton:

Got it.

Jason Martin:

So that's what we're looking.

David Bitton:

Got it. Okay. Amazing. Is there anything else I am forgetting to ask or anything else you want to talk about?

Jason Martin:

No, I think that sums it up. First of all, thank you so much for thinking of me, for reaching out, for having me, and thinking that I'm interesting.

David Bitton:

Of course.

Jason Martin:

And also for that nice vote of confidence that it's going to go out online to the masses. So appreciate that as well. Thank you guys for everything.

David Bitton:

Thank you as well.

Jason Martin:

Looking forward to seeing you guys continue with growing and the Canadian growth as well.

David Bitton:

Amen. Amen.

Jason Martin:

If I can assist you guys [inaudible 00:53:01].

David Bitton:

Thank you. Thank you. And for everyone listening, if they want to follow you online or get in touch with you, what's the best way, to just contact you on LinkedIn?

Jason Martin:

LinkedIn. I have no other social media. I like to fly under the radar.

David Bitton:

Awesome. All right, well thank you again, Jason. For everyone tuning in, this podcast was also recorded by video, so if you want to go watch the video version, you can go to DoorLoop.com/podcast and watch the video version. We also have webinars, DoorLoop.com/webinars. And stay tuned, we'll have another episode coming soon.

Speaker 1:

Thanks for listening all the way to the end. Don't forget to give us a good rating on whatever platform you're tuning in from and we'll be back soon with another new episode. We hope to see you there. And until next time, this has been [inaudible 00:53:49].

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