YVR REMO Show Episode 38 - Commercial Real Estate & Building a Successful Team w/ Jamie Schreder
Today we brought on someone who's very well known in the Fraser Valley, at least in the real estate circles. This gentleman has had a ton of success at an early age in a variety of different parts of his career, all related in some way to real estate.
Jamie Schreder is joining us today. He's part owner of a Royal Lepage office here in Langley, British Columbia. He also has been successful in commercial and residential real estate, running a top performing team, and is involved with other in other ventures such as owning a brewery and other forms of real estate. If you are a consumer listening to this show right now, you can learn a lot from just the way that Jamie looks at the way businesses run and commercial Investments as opposed to just residential even though he does both. If you're in the industry, I think you'll learn a ton just from the way that Jamie thinks about the way that he operates these things.
Why real estate and and how'd you get involved?
I wasn't a good student in high school. I liked being there but I didn't like being in class. The real estate program at BCIT was what I eventually ended up doing. I didn't get into it originally. I pestered the program head to let me into the program. I was in class for 30 days before I was actually admitted into the program. He is now actually my business coach. There's a lesson in perseverance. I was living at home at the time, my parents got a phone call that was like, I was getting kicked out at BCIT because I was showing up to the wrong program. I was enrolled in a different one and I wanted to be in his because I just always had an interest in real estate. I saw how many different things you could do in real estate. Real Estate, to me isn't just being a realtor or being a mortgage broker. When I first got into real estate, I was very lucky. I got hired by the fellow that owned the Royal Lepage brokerage in Langley at the time, who was friends with my program head. That was where the connection was made. I got to see that breadth of the real estate industry. So I started working with him. I bought the brokerage from him with my partners, three partners at the time. Then I ended up buying a property management business from them.
You mentioned that you started at 18 years old, which is pretty rare. In itself, I think you mentioned that most of the people that were in the program were probably mid 20s?
Yeah, the majority had degrees of some kind. It was two of us that were out of high school, and the rest of them had degrees. Every single person had a degree in that program.
I created a good friendship or friendship grew with a guy that was seven or eight years older than me. He had a degree and it was like, he couldn't fail. There was no option for him and him and I got along really well. I saw his motivation and he helped me through that processing.
Why do you think people came into this program did so well? And why do you continue to lean heavily on that now?
There's a respect if you get through that program, because it's so difficult. We were doing eight courses a semester to give you an idea of how hard it was. I'll give you a really quick story to how difficult this program was. We did a lot of team projects, and It was always a think on your feet. If you don't know, figure it out fast. We were maybe three or four weeks into the program, we had a group project, it was a feasibility study. I still remember this very vividly. We were given the project on a Monday, he says it's presenting on Friday, he tells us Tuesday afternoon, we're presenting Wednesday morning bumps the project up on us. The same time, nobody has time to get this project done but you figure it out. We go to present it, there's four of us in the group. We don't have time to talk so we split the project up. We get up there and I start and we're in suit and ties presenting and he pulls the plug out on our PowerPoint. I don't know what I'm presenting, like, it was just on the PowerPoint and I was going to read through the slides. I don't know what to do. All my information is on the PowerPoint, he said figure it out. So I start stumbling through it. I started sweating, couldn't figure it out, I'm stumbling through, I get to the end of my section or what could be the end of my section, I say and I'm gonna pass it over to my classmate and he's going talk about the marketing side of this. The teacher says to my classmate, sit down. So He goes and sits down in his chair. He says Jamie, you present marketing now. I just look at him like I don't know what I'm doing. So that that was the program. Great instructors and great knowledge. As a result of that, people that came out of that program tended to be of a higher caliber. We were talking about earlier was just the respect that a lot of the bcit grads have in the commercial real estate world
Talk to us right away about why did you go the commercial route right off the bat instead of residential?
Commercial real estate, the processes are archaic. There is no central system for listings, there's no agreement to cooperate like there is in residential real estate, it's a hard business to navigate through. That's why it's barriers to entry are very significant. Even if you do kind of crack into a certain asset class in commercial real estate, it's hard to get traction because you're dealing with typically some very well established people that aren't willing to share information with you. The reason why I slid towards it, I just had a bit of a background in it. I've done residential real estate, we still do. Our team does quite a bit of residential volume. I'm still on top of that in a very significant way and I enjoy the residential side. I just tended to the more analytical nature of commercial real estate. It was mathematical more than anything. If you could, you could see the boxes that you needed to fit things in. We have an industrial investor that needs a four and a half percent cap rate, they've got 5 million bucks to spend, if I hit those two marks, there's a very good chance they're going to acquire that asset. If you tell me, you and your wife are looking for a million dollar house in Maple Ridge, there's a long process there, it's gonna take a while to figure that out. Residential realtors are the hardest working people that I have ever met in a lot of cases. It's a challenging business. I think a lot of people have a perception that residential realtors make a lot of money and they don't do a lot of work or some do. I should say that some people have that perception. There's so much patience involved with residential real estate. There's a lot of unpaid work that goes on on that side of things.
What do you think helped you the most being young and inexperienced and then going into probably one of the hardest aspects of real estate?
Perseverance and just drive. I think a lot of people, they respect hard work and they respect effort. When they saw that I wouldn't take no for an answer. Like if I called on a listing, and they weren't returning my calls, I call again and call again and call again. Then when we finally were in the process of doing a deal, I'd figure it out. I wouldn't write shitty offers. I think the they recognize that.
What were some of the initial challenges that you had to overcome and getting into into that space and what were you looking for?
Barriers to entry on commercial real estate investment are a lot higher than residential. Typically, the prices are higher. The qualifications and you guys might want to chime in on this, for mortgages, are a lot more difficult. In a lot of commercial financing scenarios, there's guarantees that have to be tied in corporately, there's certain debt ratios that need to be met that are a little bit more complicated. In the residential side, the value of working with a good mortgage professional on that site is imperative to get that figured out. When I first started getting into commercial real estate investing, obviously, I had a bit of a background in it and understanding because I was selling the asset class that I wanted to get into our model today and what it was from day one was just cash flow. So we wouldn't look at anything unless there was a good amount of cash flow and our risk was mitigated on losing that cash flow. One of the things we're working on right now and we haven't really talked too much about this. We touched on it in our conversation before this, though, was one of the things we're working on right now is syndication in commercial real estate. So I've got a lot of clients and friends that are in the real estate investment world and they love the returns and the security that come from a $10 million strip mall but they can't afford a $10 million strip mall, they might be able to afford an 8 or $900,000 strata unit and an industrial warehouse and industrial complex. The returns on those smaller assets are significantly lower than they are on the larger assets just there's a smaller pool of investors at the higher numbers. So what we're working on right now we've got two deals tied up on a syndication. So for those that may not know what a syndication is, it's simply pooling money together to acquire assets. So we've got these deals. There's an expertise that we bring to a deal where we found two very underperforming assets, we've got tenants to put in those underperforming assets, so we can acquire at a lower cost base. But these tenants and we've increased the value on day one. Now we bring these investors in the two we're working on right now would be $100,000 units. So we issue $100,000 investment to Alex or Dean, they're now playing in a category of a $10 million real estate asset, they get the value of that return as well. I saw that as an opportunity or value that we could add to our clients that wanted to play in those circles but just couldn't get up into them.
There's obviously tax advantages and everything else with that type of a play?
So the function is I've got two partners on that, who are very experienced. Ones is very experienced. He's on the fundraising side of things. He does some private commercial mortgage investments, and then another as a developer, and then myself being a commercial mortgage or a commercial broker. We've got very specific talents that we can bring into these deals, identify them and add value to them. Then what we do is we hold half the asset, and then we issue units for the other half of the asset. As an example, the two deals we've got tied up right now, the returns will kick out, our investors are going to be somewhere between 10 and 13%. annualized.
Which is something that an individual commercial real estate investor, unless you've got a million or two cash, you're not going to touch those returns. You have, from an investor's perspective, you kind of feel like you're touching the deal a little bit more than just giving your money to a MIC, for example, you know, the property is real, right?
We should break that down really quickly. So MIC, stands for Mortgage Investment Corporation. You have the ability to provide them with some funds, they can lend it out based on a certain risk criteria that you agree to. I think this would be relatively comparable to joint venture in residential real estate. So how did you even get the process started into the commercial real estate investment game? Aside from your own knowledge, what did you first start investing in yourself?
I was doing residential real estate investing. I bought my first house when I was 20. I borrowed off my parents line of credit on a house in 2008. Going into 2009, I bought a lot off a builder who had a house built. I took a risk and it paid off. That was a good risk to take at 20 years old. We're on our fourth house now that we built ourselves. We've done everything from build single houses, we've done subdivisions, we've done a few different things. It all started with one residential investment initially. Those that are that haven't invested in residential real estate or might only own their principal residence. You have to start very small, you're not going to jump into buying a $10 million strip mall, you need do those slow incremental steps. We've done some some relatively larger ones now and I have the privilege of doing that. That's just a product of being very disciplined in the investing that I've done. It all did start with residential real estate and I still own a little bit of real estate. It performs.
It performs well. Yeah, yeah. So you haven't sold out completely? No, no. No.
The commercial space you you're 100% looking for cash flow all day long. Residential, you just mentioned that you started with building properties. What is your thought process around that? Do you purchase to hold residential real estate?
The four that we've built were for a principal residence and we just rode the market upI built that house or had a builder build that house for me. That purchase was $430,000. We've done that four times now and I don't see the value of our house today but it's significantly more than that. We just kept building and buying good dirt, building good houses. The benefit of principal residence tax exemptions, which you guys have may have touched on, but the only thing you'll ever do tax free in your life is sell your principal residence. I've got a privilege of being in the real estate market every day. If you're not in the real estate market every day, so you're a casual real estate observer, find a good mortgage broker, find a good realtor and buddy up with them and give them criteria to follow. A few realtors in our office, I've mentioned to them, if I'm looking for something specifically, you throw that out to the market, they'll bring you deals. If you have a good realtor, good mortgage broker, good lawyers, they'll do the same thing for you. I've always tried to keep myself in a position to capitalize on opportunities that I'm looking for. Stay cash positive when I'm looking for opportunities, and we've been very successful with that.
Someone asked me this question very recently, what are you really good at? What's your superpower? It took me a little bit of time to think about it. I know what I'm not good at. I'm very specialized in my ability. I recognize that and I surround myself with people that are incredibly good at what they do. They need to be knowledgeable about what you're getting them to do. Like you guys would be a great example of that, we've got I know a lot of the realtors that work with you guys, obviously, and we touched a lot of the same transactions. You guys are incredibly knowledgeable in the mortgage space. very relevant, you do a lot of deals. That's something that just is now out of sight out of mind for your clients, your realtor clients, and your borrowers that you're dealing with. You need that with your mortgage broker, your realtor, your lawyer, your accountant. It just makes life so much easier. You don't have to know everything just know really good people in different areas.
Do you have a criteria to surrounding yourself with your team?
Yeah, so we, in all of our businesses, I've got this policy that we hire good people, not necessarily the best person for the job. So we can train technical ability, that's no problem. If if you own an electrical company, you can teach somebody how to be an electrician, but you can't teach them good ethics, good morals and effort. That's a hard thing to teach. So in everything we've done, that's just been the focus of bringing good people on board. And and you guys know, a lot of my people that I work with, and they aren't, they're just good dudes. We've just hired really good people and trusted them to do a good job and given them the support and the ability to train and to gain experience in the areas that will allow them to excel.
What are your anticipations for what consumers should be looking for going forward in the real estate market? One of the common things that that we we constantly get asked or hear when it comes to real estate agents in market is obviously about slow adoption to technology. Then we also hear about the almost the opposite. We hear about people finding new and different ways to essentially buy and sell real estate. In the US for example, there's been a lot of technology changes in the last few years in the lending space too. In the future, what kind of feedback are you providing to your agents about how to make sure to stay ahead of the game?
Yeah, so a great question and is very relevant right now and will continue to be moving forward, technology is only going to get more amplified. The communication we have with our realtors is use it as a tool, technology will never take over real estate, it just can't, there's too much value in good realtors. I think as data gets more transparent, that's a big trend in real estate is the consumer has a lot more data, which some real estate professionals will push back against because that was their unique value proposition was they held the data, the consumer had to deal with them to get the data, that's not the case anymore. Good realtors will benefit from that. Because that data needs to be deciphered in some way. How you communicate that data how you interpret that data is where value is derived. So good realtors should benefit from it. I think to a degree, in Canada, we're very different consumers in the US. This is something that we've paid a lot of attention to. So Zillow is a is the big name in US real estate and gets talked about in Canada a lot. Zillow came to Canada a couple years ago and on the record in our brokerage is saying Zillow is a terrible option. It's a terrible opportunity for consumers is a terrible system for realtors, Canadians haven't adopted it. I don't think they will. I think part of the reason for that is our consumer wants to deal with a good professional, they don't want to deal with a technology they don't want. They don't want to buy a house without talking to their their trusted advisor. I just don't see that changing anytime soon. Let's say something could come up tomorrow that we we just don't know about. It's not on our radar right now. I think good professionals in any industry will find a way to capitalize on that opportunity. In most industries, say outside of real estate when a technology enters an industry, it's the good companies that come out, they rise to the top out of it, it's the lower end ones that just can't evolve or can't adapt to what the consumer requires out of them through that technology change.
That was good. That was a great answer. And I couldn't agree more. It's kind of the reason that we do so much, you know, public information education through this podcast, have a chance to talk to someone like yourself, because I think once someone has enough information they can almost recognize Okay, I've got enough you do the thing. It's a little bit it's a little bit much to your point. So that's that's good feedback. Man, I've got a lot today. I
What is your biggest failure and what did you learn from that?
So I made a $2 million mistake, a $2 million cash mistake. Those are one of those that you wake up in the middle of the night if you have a chance to sleep for an hour and think about and it ties actually, this is really good tie into all the are the answers I gave before of knowing good professionals and relying on them. We acquired a building and it needed a significant renovation, I blindly went into with a general contractor, we just didn't do enough homework on it prior to jumping into it. We I trusted their advice, which wasn't thorough enough. We didn't have the right consultants in from the start. And we just got too deep into a rental project. We had a $1.5 million dollar renovation budget, we ended up at 3.6. That hurts like that's a that's a stinger. I learned so much from it. And I wouldn't change it for a second because now moving forward for myself as an investor for my clients that I deal with. I learned so much through that process about construction permitting, the time value of money during a renovation project and obviously of that substance every day counts. That was a big one. So the lesson from that was have great professionals from the start. Do more due diligence on any investment you're doing than you think you need. More due diligence is always a good thing.
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