106: The Realities of Real Estate Development Financing in 2025 with Lakepoint Capital's Caroline Coudreau

00:00:00 Taylor Atkinson

All right. Welcome back to the Colonial Real Estate Podcast. I'm your mortgage broker host, Taylor Atkinson. And I'm your real estate agent host,

00:00:03 Matt Glen

I'm your real estate agent host, Clint. What happened to you, Taylor?

00:00:06 Taylor Atkinson

Well, we just had a great show with Caroline from Lake Point Capital. Yeah. You know, she left the studio, which was cool. We haven't done an in -person one in a few months here with the summer. We were talking about like our question of what advice would you give your 20 -year -old self? I was kind of thinking like, what advice would you give, you know, your son who'd like Julian who's... 20 year old today? Like, cause I think giving yourself 20 year old advice is like kind of skewed. So yeah. What would you tell Julian today? I think you and I were kind of talking a little bit off air of like the real estate market and is this time different? And it's cyclical. And, you know, with, with Caroline, we were really talking about, you know, things will self -regulate and. So yeah, I guess you're talking to Julian over coffee, beer. What advice would you give me?

00:00:49 Matt Glen

So like, I guess the bottom line of the question, is this time different? It feels like there's so much negativity and like, how are we ever going to get out of this? And like, honestly, I don't know the answer to that, but is this time different than every other like slowdown or recession? I don't know if we're in a recession, the answer is going to be, but like, is this time different? And like, I'm not entirely sure it is different. I actually know it's not different. It'll come back. Just, I don't know when, I don't know if it's next month or. next year or whatever. But it feels like a few things have to happen for it to come back. It will come back. So for Julian, what would I invest in real estate? I would still invest in real estate for sure. Definitely an emphasis on cashflow. So buying a property that creates income and whether that's the right property, whether it's commercial, probably you're leaning a little more towards commercial, to be honest. And having more of a down payment, make sure that you're cash flowing. If you're in a situation where you're out of pocket $2 ,000 a month to pay for an investment, I don't think that's a good situation to be in right now. But if you can cash flow, preferably quite a bit more than break even, I think real estate would still be a good investment. And it will come back. It's just obviously we don't know when. We've talked a lot about what has to happen to come back. And it feels like costs have to come down, which they're not coming down. Like land prices, DCCs, generally they're not coming down. Yeah. So I think our economy has to catch up on wages and inflation. The rest of it has to catch up to what it's at. And then when that happens, I think we're just going to be in a good position again.

00:02:16 Taylor Atkinson

Yeah, I agree. Is it different right now? No. It's probably more magnified than it ever has been just with like social media and news and people. Being able to educate themselves with their fingertips on their phone with probably bad education. Really, it comes down to whatever the headlines are going to pull in readers. You think the same thing, though, happened in the booth? Yeah, but I think that worked in the opposite effect of booth. The market's hot. You can't miss on making money. Just buy anything. And then people got that FOMO type of mentality. And now the pendulum swings pretty massively the other way. So yeah, I don't think it's entirely different. I do think it's different in... how difficult the solution now is because it's been compounding year after year after year now. And I do think with the influx of, you know, population growth by mostly immigration that we've had during like really bad years to have that, just like, again, magnified that problem. But I think that will help the solution in five, six, seven years, like having that population growth. They like stopped immigration. They have now. Yeah. Totally. Which is almost also a bad time. Yeah. It should have happened the other way. We should have stopped it three years ago and started it now. Well, we should just have a regular, just even for our social issues, we should just have a regular amount of immigration every year.

00:03:36 Matt Glen

regular amount of immigration every year.

00:03:39 Taylor Atkinson

Yeah. But I think the population we have, although it's difficult to absorb all that, will pay dividends in the future years if we can get through this tough time. My advice to my 20 -year -old son today for real estate, I would say, yeah for sure buy your own owner occupied primary residence place but i would do it with like house hacking in the sense of like you know buy something with a basement suite or buy something where you can add a basement suite you know put a tenant in there get some cash flow out of it or the other option maybe would be if you wanted to roll the dice a little bit i do think some of the like old airbnb allowable condo units will potentially come back yeah and if you're buying that as an owner occupied and if they change that legislation well i mean you can even do that now anyways although getting a new business license is tough but if you can get in there and that bylaw changes in the next few years. Once there's some confidence back, you'll see appreciation, but you can also see, hey, go travel for six months and then rent your place out and you have that ability to make some money. Those would be kind of the two avenues I'd take. I mean, if it was a single family home with a basement suite, I think that's the best because I think that asset class, no one's building those right now that's affordable. So if you can buy something that's a bit run down, get some sweat equity, put a tenant in the basement, awesome. A little bit outside real estate, more in like education. I would say, yeah, go travel. Spend a lot of time traveling. Invest in AI or anything like in a new business that you can kind of match. Invest time or money in AI? Whatever is accessible. If time is accessible, you can do a lot of research on it. Like we've talked about this before. You just ask AI, what should I do to learn about AI? This is my problem with AI.

00:05:16 Matt Glen

my problem with AI. Investing in it is like, spend all this time and I can just be like, how do I do this AI? AI is progressing so fast. It's almost not worth it to learn it because it's just going to know how to use itself. Yeah. You know what I mean? So that was moving so fast that it's hard to say what to do. Definitely have to be involved. Yeah.

00:05:33 Taylor Atkinson

I think as the younger generation, for sure, that's like, yeah, something you have to be educated in. So learn how to like implement that stuff, go travel, get some life experience. But yeah, for real estate, honestly, I don't know if I'd recommend them just to go and buy a rental place. Unless, like you said, there's value add or cash flows. Yeah. I would not be buying a rental based on it's just naturally going to appreciate right now. Yeah.

00:05:53 Matt Glen

So both of your real estate skills were basically added value, whether it's a law change from the Airbnb or forced equity, like building, like renovating. Yeah. Yeah. I think that's solid advice that works in pretty much every market.

00:06:07 Taylor Atkinson

Yeah. And I mean, I think everyone's a little skeptical, nervous right now, but again, like that's probably the indicator that now is the time to like find some opportunities.

00:06:16 Matt Glen

It's not going to be this forever. So probably isn't a good time. There are good deals out there for sure. Like not every place you buy is going to be a good deal. but they do exist. So I feel like there is opportunities to go ahead. It feels like a situation where four or five years from now, we're going to be like, damn, I wish I bought 2025, 2026. Yeah. I just think it's pretty against the grain from people we talk to and just many ideas in the business, but it just feels like it's just ripe for that kind of attitude in a few years.

00:06:41 Taylor Atkinson

Well, hey, and to go back to Caroline, our guest today is like, they're busy. Like they're working with a lot of developers right now. So like, If wealthy, smart individuals that have been doing this for decades are going to secure financing with Lake Point Capital are still doing that and still making money. There's opportunities that common people can't wrap their head around. One other thing for Julian,

00:07:05 Matt Glen

other thing for Julian, you don't know what you don't know. When you walk downtown, all those buildings were at some point in history, someone's dream, someone's passion project for four or five years. Maybe longer than that, maybe less, but like every single place is like that. And you don't know what you don't know. You don't know how to put together a deal or how to build a building or how to structure it to buy it or like all the different things there is to do with this. So I would take some chances for sure.

00:07:30 Taylor Atkinson

That's a superpower. That superpower erodes over time as you get older and like you kind of learn those lessons the hard way. But man, like I made absolutely. terrible decisions. Not all, but a lot of them worked out really well. And it's just like rolling the dice on you don't know what you don't know. I'm like, hey, this seems like a good idea. I've done some research. I've done my due diligence.

00:07:50 Matt Glen

You don't know what you don't know, but in the back of your head is that somebody's doing it. Why can't it be me? Everyone here is probably a 20 -year -old that didn't know anything at one point.

00:07:59 Taylor Atkinson

one point. So why don't you just do that? Yeah, you got to take some chances in your early 20s. I think that's the time to do it. Oh, absolutely. Definitely. And yeah, there will be opportunities to take chances on. Yeah. We'll cut to the show. It's a good one. Caroline Lake Point Capital. If you have any commercial financing needs, reach out to them. They're awesome.

00:08:16 Matt Glen

They are. This episode, like every episode, sponsored by Century 21 Assurance Realty. We're everywhere. We're everywhere you go. We're the best brokerage is going to be. Commercial real estate, residential real estate, leasing, property management. If you're an agent looking for a place to go, or if you're a buyer or seller looking for an agent, Century 21 is in brokerage for you. Enjoy the show.

00:08:36 Taylor Atkinson

Okay, welcome to the show, Carolyn Kudrow from Lake Point Capital. So we've had one of your other... Mesquiteers, yeah. Yeah, Bryan Stevenson on. That was probably like a year ago. Maybe longer than a year ago.

00:08:43 Matt Glen

yeah. Yeah,

00:08:47 Matt Glen

than a year ago.

00:08:48 Taylor Atkinson

Yeah. Yeah. So lots of pressure on you. I mean, that guy can talk. So he's out there talking.

00:08:54 Caroline Coudreau

out there talking.

00:08:55 Taylor Atkinson

Yeah, exactly. I love working with you guys. Like as a residential broker, you know, we kind of like feed clients back and forth, whoever is kind of best suited. Yeah. So we wanted to bring you on today because I mean, Matt and myself have had a lot of clients recently and in the past just ask about development projects on a smaller scale, infill projects, how that looks from like a lending point of view. I think a lot of people just get. land or have you know a house with some land on it and they think like instantly they can just kind of fund a project and make money on it but there's a lot of complexities so yeah we wanted to have you on to kind of discuss that but before we dive into it we just want to start what's kind of your perfect friday look like in terms of yeah what do you do for work and then leading into the weekend for some fun okay so ideal friday and i'll let you

00:09:38 Caroline Coudreau

so ideal friday and i'll let you guys decide which part of this statement is true and which is a sort of projection of what it could be. I wake up Friday, I go into my kitchen, everything's clean, immaculate somehow, and grab my kids. They're ready to go to school, you know, no fussing there. I drop them off, give me a big kiss and off they go, jaunting along, happy to learn. Yeah,

00:10:05 Taylor Atkinson

Yeah, you're in a dream girl.

00:10:08 Caroline Coudreau

I get back to my computer, start that up. Wow, a lender just sent me a commitment letter for one of our clients. It's perfect. It's exactly the way the offer looked originally. No changes in terms there. And so off we go to the races. I call my clients, say you're approved. Oh, and bonus, the rates have come down and that's just automatically cut in. And so, you know, saving you extra money on top of our usual ROI. Then another email comes in from a... another client and all the information is there. Everything that we'd requested is nicely packaged, nicely labeled and yeah, ready to start on a new deal. Right. So I like your Fridays.

00:10:47 Matt Glen

like your Fridays. Yeah.

00:10:50 Caroline Coudreau

And then at 12 o 'clock, like clockwork on Fridays, I go to Muay Thai. And so I do kickboxing Muay Thai at Pacific top team. Yeah. It's really fun.

00:10:57 Matt Glen

Thai at

00:11:02 Matt Glen

Have you been doing that for a while?

00:11:03 Caroline Coudreau

It's been about a year and a half. Nice. Good for you. Yeah. And I've stuck with it actually. And so really starting to see some progress there, but it's just a great way to de -stress, decompress. You know, I live in my head and I constantly have deals running in my head. And so, but when somebody is trying to, you know, beat you up, then you can't really think about that. So it's really pushes everything else away and you become ultra focused in the zone. And so that's. Yeah, that's my way to discuss it.

00:11:32 Matt Glen

I thought about it, but I just never pulled the trigger. Maybe this is a... Yeah.

00:11:34 Taylor Atkinson

Maybe this is a...

00:11:37 Taylor Atkinson

Hey man, we got to focus on the hockey team first. We're going to get some W's up there before we join some more time. It could probably be a lot of fighting in hockey,

00:11:43 Caroline Coudreau

It could probably be a lot of fighting in hockey, right? Hopefully not as much kicking.

00:11:47 Taylor Atkinson

much kicking.

00:11:47 Caroline Coudreau

No, no. Yeah. Yeah. With your skates. Good luck. That's ultimate balance. Yeah. Okay.

00:11:53 Taylor Atkinson

Well, maybe we can kind of run through that perfect client that has everything. So obviously we probably both struggle with collecting all the information up front and what we need, but let's say hypothetically somebody has, either purchase or have an existing piece of land. And, you know, it can be say four or five acres, like a big chunk of land. And they want to build like stratified units for resale. That could be a single family house or townhome duplex, whatever. They come knocking on your door, have the land, have it in a corporation, maybe. What are kind of the next steps of that phase? Like we're auditing their financials and, you know, the ability to cashflow and the ability to, you know, resale. Can you kind of walk us through that process?

00:12:35 Caroline Coudreau

Yeah, definitely. So, I mean, I'll caveat this with most of the time when developers come to us to support their financing, they've got, you know, sort of their ducks in a row typically, right? But just walking backwards as to sort of the process. If you have a site and you're looking at what can I do with a site, then you should probably do a bit of your own research in terms of local official community plans. What's the rezoning here? What's the possibility? You may want to engage in architects such as Lime Architecture. They're really great. They can do sort of a site assessment plan and give you sort of the best use of that plan for relatively affordable, you know, preliminary costs before you. get involved with hiring all the consultants and everything like that. So it's a good idea to think about what can the site support, right? And once you have an idea of what your site supports, then you can go to start to build out your project budget, right? And so the project budget is going to look at your hard costs. So that's just, you know, the framing, everything, right? And then the soft costs, which involves your consultants and all the fees that you're going to have to pay, development costs. building permits and all that stuff. And then you also want to factor in an interest reserve. So depending on how much you plan on borrowing and the timeline that's going to take to build out that project, you're going to have some interest costs incurred and then set up fees, financing costs, legal fees, all that stuff, right? So that's part of your project budget. And then lastly, you want to build in a contingency reserve, which is kind of thinking about, okay, where can things go wrong and making sure that I... building a buffer for costs going up right and so once you have your project budget the total cost of what it's going to be to develop this strata you may want to think about also phasing that project and what that looks like right so We can go into those details later, but let's just look at your total project costs. So now you know what it's going to cost you to build it. Well, we need to look at the other side of that, which is what's it going to bring in? What's it going to generate in revenues, right? So for that, you can, again, go back and try and limit your costs. Look at just market comparables. You can talk to a realtor to run some comparables for you, or you can hire an appraisal company as well, too. kind of give you the appraised value as complete. So whatever your project is going to be, they're going to give you an appraised value on that. So the challenge with that is that appraisers are often in one of their approaches looking backwards to see what has been recent sales comparables to sort of derive a value, right? And that's what the lender is ultimately going to rely on as well, right? So you have your appraised value and then you have your project costs. Well... One minus the other is your profitability, right? And that's going to be critical for you to make sure that you want to embark on this journey, right? And then it's also going to be important for the lender to make sure that there's enough of a minimum threshold there to call the project viable,

00:15:24 Taylor Atkinson

right? So what is their general like loan to value or profit margin that they're looking for?

00:15:30 Caroline Coudreau

So profit margin, the lowest threshold I've seen is 10%. And so that's your profit divided by your total cost of your... budget, right? And really what that signals to the lender is that there is a bit of a buffer there. So if the market does take a turn or there's a reduction in the end value, because you have to think when you start planning this project, you may not have a deliverable for another minimum 12 months to 18 months to two years or to some of these bigger projects, it's three years, four years, right? So what the market can support right now, is that going to be the case and by the time it's completed? Right.

00:16:08 Matt Glen

How do you gather all the costs at the start? You talk to like a developer?

00:16:11 Caroline Coudreau

Yeah, you talk to builders. So depending on the scope of your project, there'll be builders that kind of fit that mandate. They have experience. You want to make sure that they have experience building that type of product. Right. And then you want to get a few quotes. And so in the earlier stages, as you're developing the preliminary drawings, they can give you sort of a class C budget, which will be. kind of, you know, not refined, but at least give you a good estimate of what costs are going to look like. And that gets refined as... And would they help with the soft costs as well? They should be able to, yeah, determine to help you with the soft costs.

00:16:44 Matt Glen

help you with the soft costs. So when a vendor's looking at it, do they want to see like the quote that you're getting or is an owner just presenting what they think is going to cost at the end?

00:16:53 Caroline Coudreau

Yeah. So for smaller projects, you may, you know, get a few quotes from a few different builders. And then, you know, based on that, you can... put together your own pro forma right and builders not likely going to give you all the soft costs or you know because there's like the development management which is running through the rezoning getting the permits and you know managing everything from a holistic perspective and there's a builder actually going to the site or managing all the trades and things like that right and so you have those kind of different responsibilities in the project depending on the scope right it's just a small Project that you're undertaking yourself and you kind of become the development manager, right? And you just hire out for the build, right? And so, yeah, to answer your question, if it's a larger project and lenders looking at it, they definitely want to see your contract. with the builder and there's different types of contracts so you can have a fixed price contract that's preferable because that mitigates the risk of you know the materials and the labor coming in higher because the builder has kind of committed to a cost for that project however it's more expensive because the builder has to also build in a contingency right and so a lot of developers typically go for a cost plus right and in that case you know lenders are going to look at making sure that there's sufficient contingency there as well as The developer having sufficient liquidity to inject into the project should costs come out different than what originally planned, which is what happened after COVID, right? And we saw this huge jump in costs. But, you know, if you're midstream and you haven't really built in a new buffer, then that can be a real challenge because you run out of money. Right now it's a double whammy where people over COVID get huge cost increases and then right when they go to sell right now,

00:18:29 Matt Glen

it's a double whammy where people over COVID get huge cost increases and then right when they go to sell right now, price drops.

00:18:36 Taylor Atkinson

Yeah. With that, like in today's climate, are you seeing lenders be a little more cautious going into this or like reducing the loan amounts they previously were looking at?

00:18:45 Caroline Coudreau

There has been ups and downs in that, that fluctuates all the time in terms of lender appetite, but the costs have sort of stabilized. But as you said, the value may have. you know, eroded somewhat, right? Depending on the product, right? So as just like basic economics, right? A supply comes in and based on all the economic factors, demand has shrunk, right? So then, you know, there's pressure on prices. But the issue is that those projects actually, you know, in some cases, I was looking at listings and I'm saying, you can't even build for that today, right? So that's actually a steal. So it may be a good time if you're sitting on the fence, you know, to pull the trigger and buy because you may not be able to find that. It's funny,

00:19:30 Matt Glen

funny, Taylor and I talk about this, like the cost of bill is not coming down, right? Like it might stop going up. It's definitely not coming down. Yeah,

00:19:37 Taylor Atkinson

Yeah, that's the tough part right now, especially for appraisers. Like in appraisals come in, you know, lower, especially on like refis. But the cost to build that is like far outweighs whatever that appraisal came in. It's tough to communicate that to the client of like... We're talking about recent sales and comparables and like there are no sales that support what you want in the value of the home. Although to build it would be like 20 % more than what the appraisal has come in at. But I guess that's where like on these construction financing, like you guys really have to dig in and be thorough because like lenders can't stick their neck out and then a year goes by and the project doesn't sell.

00:19:48 Matt Glen

in. It's

00:20:14 Taylor Atkinson

They have to protect themselves against markets kind of turning that way, right? Yeah,

00:20:18 Caroline Coudreau

that's exactly the issue right now, right? Is that a lot of projects aren't penciling. So something has to give. But you think about the budget, costs have to come down. So hard costs may not be coming down, but the cities are now talking about DCCs, like lowering DCCs, or at least helping the developers not to have to pay those costs up front and trying to get them to pay at the end of the project. helps with their cash flow, right? Because another part of construction financing is you have to have your equity in, right? And your equity goes in first and is last to come out, right? So all these developers have their equity tied into the projects all the way up until the loan is paid out and then they can finally start to recover those funds, right?

00:21:00 Taylor Atkinson

So to simplify that part of it, let's say... Someone wants to build 10 units and they're going to do it two units at a time. And they're just single family homes. Like when they sell the first two and they're midway through construction on, you know, units three and four, and then they're pouring foundation on units five and six, et cetera. When they sell, they don't see any of the net proceeds. Like that goes to paying the lender back their portion of that mortgage balance. And then does the lender then like redeploy? more capital to start building. So it's kind of like a revolt, not revolving, but like a bit of a, an open line of credit at a portion on that.

00:21:35 Caroline Coudreau

Yeah. So that's where you really have to look at the terms and the conditions of the financing arrangement at the beginning. Right. And so that's why developers have, you know, taken some of these larger projects and build out in phases, right. So that their equity is not tied in. They don't need the full project equity right away because they just need equity for that phase basically. Right. And then they can sell those units and then. take that profit hopefully and move it into the next project, right? So do you guys set that up on a phased project or do you have to like resubmit the application on each phase and say,

00:22:02 Taylor Atkinson

do you guys set that up on a phased project or do you have to like resubmit the application on each phase and say, okay, we've completed phase one. Here's what we're looking for for phase two. Or is it set it and forget it? Like you guys kind of set it up at the beginning and then after that, they just work directly with the lender.

00:22:18 Caroline Coudreau

The financing is set at that point at the initial because you'll have typically like a land draw or a residual land loan balance, right? Because you're not utilizing all the land. So you have some equity tied into what's called a residual lot or land. You can actually move lenders on the next phase. They would just have to make sure that it all makes sense in terms of them being able to take out the residual land. everything would be cleared at that point, like discharge. So that definitely has some more complexities to it to understand that picture. I think that's why developers, they do the phases because taking into account what their equity is and how many units they can pre -sale as well. Like you're not going to release, you know, 500 units all at once and you're not going to build 500 units all at once. Right. So it's better to do it in these sort of phases.

00:23:04 Taylor Atkinson

Yeah. I had that with a client a little while ago. Do you guys see that on smaller scales as well for pre -sales again? We'll just use 10 as a number. Do you get better financing options if you have pre -sales? Like you can show a lender, yeah, we've already sold, you know, two of the first 10. Does that help with it? Or do they force people to do pre -sales? Or what does that look like?

00:23:26 Caroline Coudreau

Yeah, pre -sales are a wait for lenders to de -risk the credit facility. So basically, depending on the scope of the project. So for smaller projects of fourplex, you might get away with not requiring a pre -sale. Right. But for anything larger than that, that's going to be one of the conditions to being able to access the funds. So you can go to a lender and actually get approved subject to meeting these conditions. And then you can go and market and try to achieve those pre -sales. Right. But that's why some of these projects are getting shelved right now is because they had the construction facility in place approved, but they weren't able to meet that condition of pre -sales. So that's definitely something you really need to think about.

00:24:07 Matt Glen

about. How many do you need to pre -sale?

00:24:09 Caroline Coudreau

So it's going to vary from lender to lender. And you're also going to have to look at the residual loan value and your liquidity as well. Right. So generally one for every four units is a good rule of thumb, but that really depends on the project metrics. So if you're building like Taylor's tent,

00:24:28 Matt Glen

if you're building like Taylor's tent, do you have to sell two or three of those before any shovels in the ground right away? Before you can access a part of the construction loan.

00:24:38 Caroline Coudreau

access a part of the construction loan. So you might get an advance based on the land value. Okay. Yeah. And that will allow you to pay out the previous lender or to acquire the property. Right. But then any subsequent draws will be conditional upon achieving those pre -sales. Interesting.

00:24:57 Taylor Atkinson

Yeah. Is there anything, and I mean, we've talked about this a couple of times on the show, but. So MLI Select, super hot over the past three years. Pre -sales, right? Yeah. It's like a great tool or was a great tool. I think it has its limitations now with some of the premiums coming up and stuff. But is there anything on this side, like what we're talking about financing today? Like are there grants, government programs, lender programs? Like where is the incentive for developers to take on this type of risk and build single family homes? I don't know. Are there not programs and should there not be programs to help with that? Because to go knock off. 20 pre -sales more than that yeah it could be unrealistic and if it doesn't happen then what we're just stuck in this market where homes are not affordable like that's the whole point of this is a major discussion happening right now and the developers have come out to try to explain to the population who don't understand

00:25:43 Caroline Coudreau

is a major discussion happening right now and the developers have come out to try to explain to the population who don't understand what they're working with right aside from that they're talking about you know when the data comes in as to construction starts that project was actually penciling like three four years ago data is coming out on construction start looks optimistic looks like you know things are great but the reality is you know what's happening right now is not conducive to more construction happening in the next few years to meet that demand that they're projecting right so In most municipalities, like in the Okanagan, they're projecting a minimum of 1 % growth per year, right? So on a population of 150 ,000, that's 15 ,000 units per year that you need just to support that growth, right? But if you look at the development starts right now, or the construction starts right now, or the permits that are being issued right now, that's nowhere near. So what's that going to mean for the future? It means that we're not going to have the supply that we need to mean that demand. What's going to happen too? price at that point, right? And so that's why there's a push to help people understand that, hey, the developer is not a bad guy. Investors are not bad. They actually help to get these projects going because they're the ones who are providing the equity and, you know, de -risking the projects with lenders, right? So they're actually... People buying the pre -sales. Yeah. I mean,

00:27:03 Taylor Atkinson

mean, I guess it's kind of self -regulating there. The value is going to go up so much. It's going to be hard for people to purchase. Well, that's exactly when developers are going to start to build more when they have a better profit. But like, why would the government not foresee that now? Because it's reactionary and, you know,

00:27:05 Matt Glen

The value

00:27:17 Caroline Coudreau

it's reactionary and, you know, and because it has to come from an understanding of the people have to demand those changes. Right. So first you need to understand what the issues are, which I think. You know, a lot of people don't because it's not part of their daily life. And they just see that values have gone up like crazy. And they think that, you know, the investor and the developer are to blame, right? So until that paradigm shifts, then we're going to continue to see these, you know, ups and downs versus a more controlled growth, right? And the issue is back in 2018 to 2020, labor was so tight. You know, you have to train all these skilled workers to build. Right. And so, you know, it takes time for that. And now you have, you know, I was talking to the Okanagan Community College and they were saying, yeah, a lot of the skilled workers are retiring and, you know, the new workforce coming in takes time for them to get that experience. Right. So it's not something that you can just turn off and turn on again. Right. It's kind of funny when you have like during.

00:28:23 Matt Glen

kind of funny when you have like during. 2021, 2022, like Taylor and I, every single week on the show, we're talking about a new regulation coming in and we knew this and knew that. But things are just cooking up. The government's just pulling all these levers, everyone they can. And then when this happens, it's like, oh, no, what happened? I was like, well, kind of got to write it up and write it down. It just seems like it's not very far -sighted to those changes.

00:28:45 Caroline Coudreau

Well, their mandates are, what, four years in time or something, right? So, yeah.

00:28:50 Matt Glen

Yeah. Well, and something like resales kind of got a bad day when people were... buying them and then signing them and making a lot of money. So then the capital gains tax on pre -sales came in. But now we kind of need them back. So before we were beating with the stick and now it's like, come on, please come back. We need you. We need you to fund all these projects. But if you look at,

00:29:07 Caroline Coudreau

if you look at, okay, for an investor to tie up their equity and if prices are not going to go up the way that they have been, you know, what's the incentive there from a return perspective, right? So it's going to be challenging to bring back the investors to the market. And so really developers have to think about the end user and appeal to the end user. But the issue is that when you make the decision to buy something, it's usually like, I need something now, right? Or in six months. It's not in three years, all of, you know. Totally. Right?

00:29:41 Matt Glen

Well, it's like, so we were talking about pre -sales before, like the 10 unit or the four unit. I'm thinking as a practical realtor, if I see three. four plexus for sale like my clients are going to buy the one that where they can walk through it and like because you see all those like there's different levels of quality that you just don't see from a rendering you know and like there's a lot of factors there and uh they're obviously just kind of off for the one that's built so i think it'd be pretty hard especially now when there's a bit of a glut in the market to sell pre -sale when there's

00:30:11 Taylor Atkinson

What does it look like if somebody wants to buy raw land and build? Is that most of the equity? People are sinking their equity in the land and then the financing comes after that? Or are you guys financing the land as well up front?

00:30:25 Caroline Coudreau

Yeah. So typically, if you're acquiring a piece of land, then you can get land financing or land and servicing and subdivision. There's a process before you get to construction and that can be financed based on. the value of that, right? So yeah, a lot of equity will be tied into the land, but depending on what you're building on that, you know, will it be sufficient to carry you throughout the whole project? Probably not, right? Our example with the client that we shared that you referred to us, he had bought the land about an acre back in 2021 and he had done all the servicing. site servicing and subdivided it into five bare land plots. He finished all that just at the time that the market was shifting, but he had tied up all his equity in that land, right? Because it required quite a bit of servicing. And so he was kind of land rich, but he wasn't sure how to move forward. He tried to sell the lots, but nobody was buying at that time. It was a bad time to sell the lots, right?

00:31:21 Caroline Coudreau

at that time.

00:31:24 Caroline Coudreau

And so he thought, what can I do with this property? At that time, the municipalities were also pushing for higher density. And he thought, okay, well, I can take this project and build 10 units, right? So five duplexes. So the project would be 10 units total. But that city at that time had not automatically zoned single lots for duplexes. So he actually had to cancel the subdivision and start over with a development permit for a phase. Close. Yeah. And I think they ended up fixing that later on, but for his timing didn't work out. So he was very hesitant to go and cancel, you know, the subdivision and take that leap of faith before having the construction financing in place. And so that's when Taylor introduced him to us and I got him comfortable enough with our ability after working through the numbers and looking at the pro forma and the praise values and everything that we could get the construction financing. So he. went ahead and did that and canceled the titles and we were able to get him in phases. So with that example, we were able to secure a land loan and a construction loan for the first phase, which would be just one duplex, so two units. And then once that was paid out, then he could activate the next construction facility. But that might change. So if he's really successful and he can sell those right away, then he might accelerate that project a bit, right? But at least we were able to get him a solution then. that worked but that's the crazy thing about that example is like the government's implementing things like every week i mean it seems like it's been a bit sleepy over the summer which has been nice but like density boom that totally changes somebody's plan and like they just spent all this soft costs for developing or even hard costs for like setting up utilities and stuff and now it's

00:32:58 Taylor Atkinson

that's the crazy thing about that example is like the government's implementing things like every week i mean it seems like it's been a bit sleepy over the summer which has been nice but like density boom that totally changes somebody's plan and like they just spent all this soft costs for developing or even hard costs for like setting up utilities and stuff and now it's Like, it's just such a waste of money because it's just like, how do you keep up with a developer trying to keep up with the government? And like, hey, we have a three year plan. And then by the end of that three years, it's like, well, this isn't profitable anymore because like the land use is wasted.

00:33:33 Caroline Coudreau

Yeah. And, you know, just because they say that this land is now good for 10 stories, that developer may not have the experience to develop 10 stories. The landowner thinks, oh, the value of my land just, you know. quadrupled actuality and they go to sell it and they can't sell it. These are numbers that you really have to work through the actual.

00:33:56 Taylor Atkinson

I actually read an article a couple of weeks ago, and this is a bit off topic, but I think it's pretty interesting. In the article, they wrote that the densification on the legislation that they've come out with recently, provincially, is not actually helping with affordability because now it's instantly made the land more valuable. currently the most like expensive thing, you know, not the most expensive, driving prices up. So now, okay, great. You can build four units on this piece of land. Well, technically now that land is worth more. So it's driving the price of the land up. So it's not creating affordability in those four units.

00:34:31 Caroline Coudreau

That was self -correct, you know, in time, right? Because the developers are running the numbers, right? And so if it doesn't make sense, it doesn't make sense. I'm not going to buy. that land. And then you're going to have accumulation of land on the market and not selling. Right. And so what do you tell your client at that point? Hey, if you want to sell, something has to get it. It's way longer.

00:34:50 Caroline Coudreau

It's way longer.

00:34:52 Caroline Coudreau

Yeah.

00:34:54 Taylor Atkinson

Six years. Maybe we should do a thousand dollar decrease in the price.

00:34:58 Caroline Coudreau

Finding that's, you know, an easier conversation now to have.

00:35:04 Matt Glen

No, not really. Well, because it makes sense, but nobody wants to see their neighbor's house go for X, and then yours is X minus 10%, or 20%, or 30%. It's just not a psychological game that people will play.

00:35:19 Taylor Atkinson

play. It's funny. It's very easy to accept it when it goes up by 10%. It's like instantly, oh, absolutely. And it's in stone. It goes down by 10%. That's it.

00:35:25 Matt Glen

10%. That's it. And they were going down. It makes sense when you think about it, but like... Yeah, the reality is not always like that.

00:35:32 Caroline Coudreau

So I moved here two years ago. Yeah.

00:35:32 Matt Glen

I moved

00:35:34 Caroline Coudreau

And I'm really sad I moved, you know, six years ago. I could have sold at the peak in Vancouver and bought before everybody else here. Right. But yeah, it's funny how in five years, I think it doubled like the value in Kelowna. real estate doubled in five years, right? Those are enormous, you know, jumps, right? And yeah, but nobody remembers five years ago.

00:35:56 Taylor Atkinson

ago. Crystal Wall, do you think the trajectory is going to go up? And I mean, we talked about this with supply and demand, like, how much more can it go up?

00:36:04 Caroline Coudreau

So I definitely think about this a lot. And, you know, all the municipalities had to put out these housing needs reports, right? And I urge people to look at that and really think about. where those numbers are coming from, right? And so what drives housing needs? Like population growth. Population growth, right? So it really depends because they are projecting 1%, but what just happened recently? Well, population growth has actually slightly declined. In BC? Yeah, in BC. Which is wild. Which is crazy, right? So are people even going to want to migrate here? That's a big question, right? Because if unemployment is creeping up and they can't find jobs, are they going to want to come? and live here, right? And if they don't, then are we going to need that new housing projected? So it's all related.

00:36:52 Matt Glen

So it's hard to say. Well, I guess too, like as inflation goes up, I've talked about like building costs, like wages are not going to come down. Materials are not going to come down. Land prices probably will come down. DCCs maybe, maybe we'll come down. Well,

00:37:06 Caroline Coudreau

I mean, they've been saying whatever $300 ,000 is zero. So yeah, you can keep your DCCs the way they are. and not get any or you can make some concessions and totally yeah yeah and then you also have active taxes like property taxes and people you know buying services and like you know there's revenue to the city in other ways than just dccs yeah but a lot of what we see has been supported by dccs right happening so

00:37:18 Taylor Atkinson

and then you also have active taxes like property taxes and people you know buying services and like you know there's revenue to the city in other ways than just dccs yeah

00:37:28 Caroline Coudreau

but a lot of what we see has been supported by dccs right happening so

00:37:35 Matt Glen

Yeah. But I guess, so like everything being equal, like, so as inflation grows and the costs stay the same and the values come down, like housing will get affordable again. It's going to go up again, but our dollars are going far or no. Sorry. The opposite.

00:37:50 Caroline Coudreau

Yeah. Yeah. Our dollars worth less. Yeah. Yeah. I heard some crazy stats and don't quote me on this, but it stuck with me. Something about if you look at the value of housing. in Canada versus gold, you peg it to gold. It actually hasn't really increased for a long time, apparently. So that'd be interesting to dive into.

00:38:16 Matt Glen

Yeah. When you look at it over a long period of time within like exponential growth and inflation, like it does get muddies and waters a little bit, but yeah, definitely population driven for sure.

00:38:26 Caroline Coudreau

I mean, Kelowna is great. I think more people are going to want to come and live here, just like myself, leaving the city and, you know,

00:38:31 Caroline Coudreau

leaving the

00:38:33 Caroline Coudreau

know, wanting all the amenities of the city without, I mean, as much as the locals complain about the traffic here, it's relatively easy going for someone coming from a bigger city. Yeah. So it's a great place. So I'm very optimistic about growth here. Yeah.

00:38:52 Matt Glen

I guess people are going to move somewhere else because it's getting better jobs or it's more affordable. We just have to be better compared to where they're going. So where are they going to go from here? Is Alberta? I don't think they're going to be as much down south like going to the U .S. and stuff. It's going to be competitive in Canada. And are we worse off than other places in Canada? Probably Alberta right now. We're not as good as jobs and also more expensive. But I think as it levels out, that will also level up.

00:39:18 Taylor Atkinson

I think geographically, Canada has been a very difficult place to manage as a country, right? A small population, so small revenue on taxes, massive piece of land. How do you build infrastructure to support that? I think the catalyst to really throw our housing just completely in the shitter, sorry, but I guess just the last couple of years have been tough. It's like we had a massive population growth, like the most we've ever seen immigration at a time that like... We did not need it. And like, yeah, we need immigration, but like it was just such poor timing of that. So, yeah, I don't know. Like, I think it will self -regulate a bit. Actually, I really do think it will self -regulate. I think what we need is less government intervention. Just let things balance out. Exactly.

00:40:01 Matt Glen

What we were saying before is like less everything at once. If you're going to tweak a lever, just tweak it and let it go for it. couple of years or a few years and then yeah don't yank on it like all everything at the same time yeah it's crazy like the building code changes the environmental all the cities needed step codes so that's great environmental is great accessibility is great but like at what cost you know like for people not to be able to ever afford their home well then it's not it's not practical no but that's also self -regulating right people are leaving if you can't find a job and you can't afford a place to live you're gonna leave

00:40:12 Caroline Coudreau

it's crazy like the building code changes the environmental all the cities needed step codes

00:40:19 Taylor Atkinson

so that's great environmental is great accessibility is great but like at what cost you know like for people not to be able to ever afford their home well then it's not it's not practical no

00:40:29 Caroline Coudreau

but that's also self -regulating right people are leaving if you can't find a job and you can't afford a place to live you're gonna leave So that is self -regulating. It just takes time to work its way through the market. Yeah. We're not that patient. Come on.

00:40:45 Taylor Atkinson

Well, to kind of segue into like our wrap up questions, and we might spend a little bit of time on this one. Two -part question. If you were to buy one property in the next 12 months in Kelowna, what would it be? But also maybe you can answer this one first is like, where are the opportunities for? smaller time developers and the value add that like Lake Point Capital brings of like reviewing someone's land and project and saying, I know you're not advising on like the best use of land, but hey, here's something creative we can do financially or here's like a really cool lender that has a product that's like pushing this direction. Where are you seeing developers build right now and make money?

00:41:18 Caroline Coudreau

Yeah, so I think for that middle housing, I think it's going to be an opportunity. For sure. Even though some of that product has been sitting, I think that there is pent up demand. Just need to, you know, get a little bit more optimistic about the next couple of years before people pull that trigger. But like townhome type stuff.

00:41:35 Taylor Atkinson

type stuff.

00:41:35 Caroline Coudreau

type stuff. Yeah. But townhouses that are.

00:41:36 Taylor Atkinson

Yeah.

00:41:38 Caroline Coudreau

sizable enough that, you know, a family can live in comfortably because yeah, some of the product that was developed in the last few years, very small. And if you think about a family of three and Canadians, we're kind of accustomed to a bit more space. And so, you know, you're just not going to have necessary demand for a 1100 square foot. Even I've seen like 800, 900 square foot, in my opinion. I could be wrong. I think you're right. Yeah. As a realtor, I think you're right about that. Yeah. So I worked with a lady and she's got a project coming up soon, which I think is great because it's townhouses. And they're about 2000 square foot, each townhouse with four bedrooms. And the layout is very functional for a family, as well as maybe even having a room. For an office that's attached to the garage, right? So people working from home have a bit of separation. So yeah, I think that layout's very functional. And the price point was about $800 ,000. So yeah, I think that's a good product, right? You have to think about, okay, what does a young family earn? And what kind of space? If you can make that work, then I think you have a good product, in my opinion.

00:42:49 Taylor Atkinson

Yeah. And then like putting on your investor hat or dreamer hat, now that you're a dreamer, you know, your kids go to school without crying. We get it. But so do mine. Yeah.

00:43:01 Caroline Coudreau

Yeah.

00:43:04 Taylor Atkinson

What excites you in the next 12 months? Where would you buy? What would you look for?

00:43:09 Caroline Coudreau

So a side of me is, you know, I like nature. I have a huge respect for farming farmers. And so having an acreage up in Southeast Kelowna would be great. Right. And having a vegetable farm, maybe an orchard or something. That's cool. Yeah. I love Southeast Kelowna.

00:43:26 Taylor Atkinson

Yeah. I love Southeast Kelowna.

00:43:27 Caroline Coudreau

Yeah. I'm close. I'm in Hall Road. So yeah. Yeah.

00:43:31 Matt Glen

Yeah. You're on the edge.

00:43:32 Caroline Coudreau

Yeah. Yeah. I don't have the acreage though. So that would be my next step.

00:43:35 Taylor Atkinson

step. Yeah, I just suck at gardening, so I'm not with you on the farming side, but yeah.

00:43:42 Caroline Coudreau

I know, that's why I say my dream, like my alter ego, not my real self.

00:43:47 Matt Glen

Yeah, okay. If you give your 20 -year -old self any advice, what are you saying? So going back, I would say buy real estate.

00:43:55 Caroline Coudreau

Yeah, I don't know if I would say that now, but I would say 20 -year -old self.

00:43:58 Caroline Coudreau

would say 20

00:44:01 Caroline Coudreau

I don't think we're going to see these enormous... you know, jumps. At some point, the equation has to break, right? And wages are not keeping up with the rising costs in housing. And at some point, you know, you just can't afford it. Like you can't afford it, right? There's no market for it. So, and then there's a lot of rental product that has come on. line which is like a lot a lot which is nice right so it just depends it depends on what you're looking for but as an investment unless there's real value add that you can you know convert this land into 10 stories and really take that project through or just a rental property i'm not sure i would that would be my investment at this time

00:44:28 Matt Glen

a lot a

00:44:28 Caroline Coudreau

lot which is nice right so it just depends it depends on what you're looking for but as an investment unless there's real value add that you can you know convert this land into 10 stories and really take that project through or just a rental property i'm not sure i would that would be my investment at this time Because of the numbers right now.

00:44:50 Taylor Atkinson

So I can relate to the lack of investors at the moment.

00:44:50 Caroline Coudreau

can relate to the lack of investors at the moment. Yeah,

00:44:53 Taylor Atkinson

totally. What's your favorite charity or how do you get back?

00:44:57 Caroline Coudreau

Oh, raising my kids in the moment. That takes a lot of time and energy. So I haven't been as active with volunteering my time. But one organization that I think is amazing is Mamas to Mamas. Mamas for Mamas. Yeah. So I really love them because, yeah, they're just really close to the community. It's a grassroots movement and it's really about being a mom and giving back. And so I'm a monthly donor there and I donate, you know, the kids stuff and things like that. But I love to get more, more active than that.

00:45:29 Matt Glen

Yeah. Yeah. Yeah. They're awesome. All right. How can Taylor or I or our listeners help you? What can we do for you?

00:45:35 Caroline Coudreau

Well, come and visit our website at lakepointcapital.ca. So we work with business owners, developers, and commercial property investors. And so there you can see a list of, you know, our success stories and why we exist in the market and how we're helping our clients to, you know, save money, get more flexibility on their terms. and greater leverage. That's a priority for them. So yeah, for you to go and visit, get some traffic onto our website. You guys have been awesome to work with.

00:46:05 Taylor Atkinson

guys have been awesome to work with. So yeah, I appreciate the partnership and I'll stay away from the Muay Thai.

00:46:11 Caroline Coudreau

Hockey. Yeah.

00:46:13 Taylor Atkinson

Yeah. Matt and I are going down the hockey route. Well, thank you so much for coming on. Yeah. I really appreciated your insight and we'll keep sending clients your way.

00:46:20 Caroline Coudreau

Yeah. It's been great. Thanks for having me.