Real Estate Espresso podcast host Victor Menasce spent the first 25 years of his career in the high-tech industry. On his eighteenth trip to Tokyo in a year and a half, Victor realized he was on the wrong path. He felt the way he was working wasn’t right for him nor his family, so he made the conscious decision to move full-time into the world of real estate investment. Victor stops by to share his knowledge about investing in the US from his home in Canada.
I am thrilled to have on this episode, Mr. Victor Menasce. Welcome to the show.
It’s great to be here.
Victor and I met back in the summer of 2018 at a podcast conference. I remember we were in a group in a room talking and nobody seemed to have a real estate podcast. Victor said, “I’ve got a real estate podcast.” I interrupted the lady speaking with us, “Excuse me, I need to go speak with this man.” Here we are, you’re on the show. Thanks for coming on and you have an interesting background for when you started off in the tech field but then like many people, either you grew tired of it or you decided to come over into real estate and here you are now. You’re a developer, you utilize private money. You have a real estate podcast, The Real Estate Espresso. Let’s try to unpack a little bit about that. Tell us a little bit about your journey on how you got to where you are now.
If I go back to 2009, 2010, I was still working in the tech industry. I was managing a microprocessor development team and we’re basically designing chips that we used in mobile phones and data cards. We’re building a new cellular network in Japan and I was literally traveling back and forth to Tokyo every two weeks and it was burning me out. It wasn’t the right thing for me. It wasn’t the right thing for my family. I resigned my position as VP of engineering and decided to take a hard left turn in my career into the world of real estate investing on a full-time basis. If you remember what was happening back then, it was probably the opportunity of a lifetime to invest in real estate, particularly in the United States. I took advantage of that opportunity and decided to jump in with both feet. That’s where I got my start on the journey.
One of the things that I discovered along the way is I had a bunch of skills that were pretty portable. Project management is a very portable skill. It doesn’t matter whether you’re managing software development or microprocessor development or new construction, it’s all the same. The other key skill was the ability to raise capital and I learned how to raise money in the tech industry. It’s much more difficult to go raise $5 million for an idea than it is to raise money for something that’s going to cashflow in six months. Those are vastly different and I was able to transport that skill set over into the world of real estate as well.
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Going to Tokyo every two weeks, how long of a flight was that?
In the summertime, it was a direct flight from Toronto, thirteen hours into Narita Airport. It was pretty good. In the winter time, I had to fly through Vancouver. That added another five-and-a-half-hour flight as an appetizer to the big flight.
I can see why you get burned out at that real quick. You’re in Canada, in fact.
Yes. I live in Ottawa, Canada and I’m halfway between Montreal and Toronto, almost due north of New York City. Even though it’s Central Canada, we still refer to it as East Coast but it is somewhat Central Canada.
That’s still in Ontario if my geography is correct. You are English first and then the Quebec next door to you has the French. You are my first Canadian interview on this show. If anyone knows me, they know that I am an obnoxiously huge Rush fan and Toronto is my second favorite city in the world because of that. Unfortunately, those guys have retired and hung up their axes.
Real Estate: Building wealth in technology is like saying, “I want to win the lottery when I grow up it.” It’s a very difficult road unless you have the depth of pockets of Intel or Samsung.
In fact back in the 1980s, I was a roadie and I did a bunch of shows with Rush. We did some special effects. I setup Neil Peart’s drum kit a few times and they were amazing people to work with.
We’ve established you’re Canadian, you’ve worked on some Rush shows. You have a successful career in tech and you get burned out flying to Japan. Was it the portability of your skills into real estate that made it so attractive or was this something that has always been itching at you all along?
It was a couple of things. The idea of building wealth in technology is like saying, “I want to win the lottery when I grow up.” It’s a very difficult road and unless you have the depth of pockets of an Intel or a Samsung, it’s very difficult to be successful, especially on the hardware side. If I told you that to design a new microprocessor chip, the minimum investment is $50 million to $60 million. Maybe in four years, I’ll make you your money back and maybe by year five I’ll give you a profit. Are you lining up for that investment? Probably not. That’s, unfortunately, the reality of that business. That makes it challenging. One of the things that I look for is opportunities where you can do things where there’s leverage, where it’s not consolidated down to three players, where it’s a wide-open market. Real estate kept coming up over and over again as having those characteristics. There’s the opportunity for leverage. If you look at where a lot of the wealth in the world has been created, it’s been in real estate or in oil and gas, but first and foremost in real estate. It kept coming up over and over again. It’s given me the opportunity to exercise a creative side. My mother was an architect and if I hadn’t gone into engineering, I probably would have gone into architecture. I’m loving the new development these days. The fact that we get to exercise a creative muscle here and build a new product that fits a particular need and is aesthetically pleasing and is functional. That to me is so much fun. I love that.
You do mostly ground-up developments, is that correct?
Now, yes. If you go back to 2009, 2010, you could buy things far below construction costs. It didn’t make sense to develop. Now, prices have come up sufficiently that we can build for a substantial discount compared with buying things on the open market. Now, if you have a 200-unit apartment complex come on the market, most brokers treat that as an auction. There will be twenty offers and people pay too much and all that craziness. I don’t want to be the winning bidder with nineteen other offers behind me. That’s crazy. Whereas if we can build a product where there are excess demand and a shortage of supply, then we can create something out of nothing. There is no competition. We can build it at a discount to the market and then have an opportunity to refinance out of that polar chips off the table and go do it again.
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That’s a rinse and repeat. What’s your average size? We’re not talking single-family residences here. What’s your average or what’s the threshold that you look for to get into a project?
Whether a project is a ten-unit building, a twenty-unit building or 200-unit building, it’s almost all the same. It’s just another zero. The steps you have to go through are basically the same. We’ll do ten-unit buildings. I’ve got a few of them under construction right now in Philadelphia. They’re fairly straightforward that I call it a base single. They’re a bunt these days, it’s not a homerun. The numbers are great, but they’re small projects. We have several projects that are $30 million to $40 million sized projects that ground-up development that we’re undertaking. That’s our focus these days.
Is that mostly multifamily or commercial?
It’s a bit of both. We’re doing multifamily, we’re doing senior assisted living, medical office and workforce housing.
My oilfield background, you’re not making man camps, are you?
Real Estate: The average listener who subscribes to podcasts subscribes to six and listens to five because that’s all they have time for.
A little bit. If you go to Southwestern Louisiana, what you’ll find is there’s an area there where there are literally hundreds of billions of natural gas, petrochemical and seaport expansions underway over the next decade. A lot of the construction workers that come into these towns are working for companies like Chicago Bridge & Iron, Fluor Corporation that are usually the construction contractors for the major oil companies like Sasol and British Gas, now part of Royal Dutch. They’re working on these mega plants and they get a housing allowance because there’s a shortage of housing. Some will go into a man camp but it’s not that desirable. Many of them will prefer to use their housing allowance to go buy an RV. I put it on a payment plan and at the end of each month, they’ve got a few extra dollars in their pocket and at the end of their contract, they have an RV that they own outright as opposed to wasting that money on a hotel night. It’s a better deal for them. We’ve built an RV Park specifically servicing that sector of the economy and in fact, that’s going to be opening soon.
I liked that model as well. I used to stay in some hotel. When I was on the rigs, they had a trailer houses for us mostly, but we would occasionally have to go get what I call a shoddy hotel room. When you won’t even sleep on the bed, you’ve got to put your sleeping bag down first and then put everything on top. That’s quite an interesting mix that you have with the whole man camp. In Southern Louisiana, we’re seeing a lot of construction in my normal day job with insurance and risks. It’s great to mention that you’re finding needs where there’s a little supply and a big demand. You fill that need to answer that question to solve that problem and it becomes profitable for you. Did you start off doing the typical single-family rentals, fix and flips or did you just jumped into larger projects?
We started as everyone else does. I got my start in the Ottawa market specifically servicing a segment of the market that I saw there was a need. Ottawa, being the nation’s capital, we have a parliamentary staff, embassy staff, military officers and government contractors that are coming into town on a medium-term basis. This was before the days of Airbnb. I basically started building a portfolio in the downtown core within walking distance to parliament specifically servicing that market. It’s medium-term fully furnished executive rentals. I knew what their monthly housing allowance was. I simply priced the product to meet that and said, “For that price point, what product can I deliver that’s going to be the right product and built a very good business with that?” It wasn’t a great business, but it was a good business.
Now, you’re into the big developments. For a lot of fledgling real estate investors, that’s always so far down the road. Within less than ten years, you’ve gone from creating your own Airbnb, mid-term rentals into this portfolio of projects. You have your own real estate podcast daily. That is a commitment. I do a weekly podcast and to come up with content and to produce it and get it out there every day is a feat that is worthy of applause. I commend you on that.
It’s been a lot of fun. It’s The Real Estate Espresso Podcast. It’s your daily shot of what’s new in the world of real estate investing and it’s seven days a week. During the weekdays, it’s five minutes. On the weekends, it is a little bit longer interview style with notable people from the world of real estate investing. The idea behind the podcast is there are a lot of great shows out there, very established shows. You and I talked about this at the Podcast Movement Conference. The average listener who subscribes to a podcast subscribes to six and listens to five because that’s all they have time for. If I’m going to attract a listener over to my show, who am I going to kick out? Am I going to kick out Tim Ferriss? Am I going to kick out you? Am I going to kick out The Real Estate Guys? Who am I going to displace? It’s not obvious. I designed a show that was five minutes so that I didn’t have to kick anybody out. I would slip in below the radar and the feedback that I’ve been getting from listeners is that it’s working. Many listeners say to me that they will listen to my show first, ahead of more established shows because they know they can commit to five minutes. They can’t necessarily commit to one hour.
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I’ve literally digested your episodes at a stop light, while commuting. Everything is succinct and it’s right there. It’s a complete opposite of my long-winded shenanigans here. How do we listen to them? How can my audience find you?
I’m on fourteen different platforms. Whatever is your favorite podcast platform, whether it’s iTunes or Google Podcast, CastBox, Podbean, the list goes on and on. Amazon Alexa, anywhere you search for podcasts, you’ll find it.
Google search Real Estate Espresso, it should pull you right up into Victor’s homepage there. When you go raise money, are you raising it mostly from accredited investors or people that are “wealthy” enough to make decisions? The American government thinks they’re wealthy enough and sophisticated enough to make their own investing decisions. Are you dealing with that or are you pulling from Joe the Plumber type people? Who’s your target? Who are you going for?
Increasingly, it’s the higher net worth individuals because the projects are larger and one of the things that I’ve always believed is that you’ve got to have a fit. You’ve got to have that perfect alignment between the goals for your project and the goals for the money. If you don’t have that perfect fit, it’s not going to work. The analogy that I sometimes use is it’s like buying a pair of shoes. If you see the most beautiful pair of shoes and it’s your lucky day, they’re on sale. It doesn’t matter how beautiful they are or how deeply discounted they are. If they don’t fit, you’re not a buyer. It’s the same with money. We talk about shoes and everyone gets it instantly. When you talk about money, all of a sudden people get weird about it. It’s exactly the same.
If you’re dealing with a high net worth family, the more sophisticated investors are much clearer about what their investment criteria are. The unsophisticated investor typically says, “My goal is to make money and not lose money,” and that’s about it. A sophisticated investor has a much more precise definition of what they’re looking for. They might say, “I’m only looking for medical office buildings at an 8% cap rate where my minimum investment is $5 million and it’s a five-year term.” This control structure, that tax consequence, all of...