Everything’s done through Greybrook because it’s ours and it’s our money. That’s probably the coolest thing about what we’ve built and what we get to do. It’s not like it’s my job and I have another thing. This is ours. It’s our business and everything we do is the same, big or small. It’s done within the business.

Robert Leonard  6:36  

You don’t do any small multifamily or rentals or anything like that on your own?

Peter Politis  6:40  

We do buy that stuff, but we do it like in the business, right? It doesn’t need the infrastructure of the business necessarily but whether we buy a one-off rental apartment or a small multifamily, it’s all done within the platform that we own because it’s ours. That’s the best part of the business.

Robert Leonard  6:58  

Interesting. Let’s dive into Greybrook a little bit more for those listening today that aren’t really super familiar with the world of private equity and investing in real estate through private equity. Give us an overview of how it works.

Peter Politis  7:11  

I think private equity is typically an intimidating word for most people. They think it’s like, “I don’t invest billions of dollars. It’s some version of corporate raiders or whatever.” 

However, it really started off very basic for us. We made a passive investment in real estate development and thought, “This is really cool. I want to do more of this stuff.” We opened it up to friends and family and then it grew from there. Today, we have over 7000 active investors across 32 countries. We’re always taking new investors and we’re looking for more people to join the Greybrook family. 

What it really is though is that we get to pick individual projects. In the case of a lot of stuff that we’re doing in the US is our society platform. That’s a multifamily, partially rented by the bedroom. We might be the biggest developer with our partner, PMG, co-living in the nation. Actually, at least a few articles keep writing about us so I’m going to believe it if people keep writing it. 

Really, it’s about an individual without having to spend a ton of money and not having to be active can participate in these large scale developments. Our minimum investment is $25,000. Not because people just typically only invest $25,000, but you get to create a portfolio for people with many different projects, developers’ locations.

Now they can be part of projects that are several hundred million dollars or bigger as a small piece. They don’t have to worry about getting asked for more money or guaranteeing construction loans. We’ve kind of made it easy for individuals to invest in large scale residential developments, but without having to do all the work and worry about how big the project is.

Robert Leonard  8:41  

You mentioned co-living, what does that mean? Is that just rent by the room?

Peter Politis  8:45  

I think that when most people think of co-living, they think it’s rent by the room and there is, it is rent by the bedroom. However, the difference that we have in our concept in society is we believe that people live in the entire building, not just their units, and we have a heavily amenitized building that in some cases are two or five times the size of amenities of standard other buildings. 

We let people basically rent by the bedroom. We have cleaning services, roommate matching, moving stuff around. We joke around like, “If you don’t match, the roommate will move you. If you don’t match again, we will move you. If you don’t match again, maybe it’s you.”  

But we allow people to basically have the privacy of a bedroom, a lock on their door, a bathroom, a common area that’s cleaned by the building without worrying about other roommates paying the rent. Again, heavily amenitized, co-working spaces and gyms that are like the size of Equinox. We have classes and pools. We also have battle of the bands, cooking classes, whiskey tasting. If I lived in one of these buildings when I was 21, I probably would still be there today and made nothing of myself, I would have had a lot of fun. 

Robert Leonard  9:43  

It’s really interesting to have this conversation with you because just recently on the show, we’ve had two guests, Todd Baldwin and Ryan Chaw. They both do something similar on a much smaller scale. So like on an individual basis, they buy six, seven-bedroom houses and kind of do the same thing. 

Todd even provides a ton of amenities, again, on a much smaller scale, but he provides Netflix accounts for everybody that’s in the house. He provides all these types of game nights and does a lot of roommate matching. Just all these other things. He buys all the toiletries for the whole house, so nobody fights over it. It sounds like you guys have taken what they’re doing, not copied them, but just taken it and completely blown it up and done on a much bigger scale.

Peter Politis  10:20  

Our focus is on major urban cities, because the whole point is we want to be in a triple A location, but we want someone for the cheapest total dollars every month to be able to live in that area. The places that we do it in like Miami are somewhere on Biscayne Bay, right on the water. We’re doing it in Wynwood. We’re doing it in Fort Lauderdale, in Los Altos on the water, and  the Golden Triangle in Denver. We’re doing it in Phoenix. We’re doing it in very many cities in Chicago.

How do you get to the nicest areas of a city, but for the lowest total dollars out of your pocket every month? Again, things like what you just said, we include the internet in the package. There’s some house cleaning. There’s a dog walking park. We have restaurants. We have our pool, a pool is like a resort pool with an open bar. It’s a free bar. There are services available to go there.

We want people to know that as you move around from place to place, as people tend to do, if you see a society branded building, and we’ve seen people who like to start by renting by the bedroom and they go to like a junior one bed. Then they meet somebody and they go into a two bedroom. They move up with the building because they want to stay there. It becomes a community.

We have a lot of tech. None of our doors have locks. Everything’s done through RFID bracelets or your phone. I can send you a key to my room just by having my phone sent to you and you can be my guest for a week. The key is going to be in your phone for a week. After day eight, it evaporates. 

We have restaurants in the building. We also have coffee houses. We really create a community. We kind of joked that we cure loneliness. If you don’t have a boyfriend or girlfriend, you will probably meet one. If you have one, you might break up and meet somebody else.

Robert Leonard  11:50  

I love technology and I’ve always felt that the real estate space was behind. I always thought that somebody needed to come around and just implement technology and integrate it in a way. Also, to really utilize it. It sounds like you guys are doing an amazing job at that. I want to go stay at one some of these times.

Peter Politis  12:08  

We have units available. So just go on the website. If you want, we will host you for a week’s vacation on us.

Robert Leonard  12:14  

I’m going to have to take you guys up on that. 

How does it work? If somebody wants a one-bedroom, what is their living situation? Walk us through that a little bit. Are they sharing a living room with other people that also have a one-bedroom that’s like attached to it? How does that work?

Peter Politis  12:28  

Only about 25% of our building is actually co-living. The units that are co-living are typically two, three, and maybe four-bedroom suites that have a giant common area. Then each bedroom will have its own individual lock and bathroom. Now if it’s two bedrooms, you have a smaller common area. There’s two bedrooms, there’s a three bedroom unit, bigger common area in three bedrooms. If it’s four bedroom, it’s bigger in that sense. 

The thing is, if somebody moves out of the unit, you don’t care. You’re responsible for  only your portion of the rent and utilities. That is just individually done. You don’t have to worry about my friends moving. He’s changing jobs or he got married or whatever. I got a whole lease that I got to worry about. 

So you just get your one bedroom. We have cleaning services that typically come at least twice a month and it can be more if you want. We can help clean your common areas. There are glasses, plates and furniture that’s in there. You can get this stuff fully-furnished. You can buy stuff that has no furniture, if you want. You have both options in the building. Literally the answer is like bring your toothbrush, your clothes, and everything else that you need is going to be there for you.

Robert Leonard  13:31  

I’m trying to picture this in my head. I’m envisioning in the middle, maybe like a living room and a kitchen and maybe like one other room and then kind of on the outside of it are a bunch of bedrooms. Then everybody can access that common area and then they have their own space. Is that kind of what it’s like?

Peter Politis  13:46  

Yeah, that’s exactly right. Everything’s done like balconies and outdoor spaces which all of our units have are off the common area space. Obviously all the bedrooms have windows, lights and their bathrooms. Depending on the unit, it can be a split bedroom. Sometimes you’ll have two bedrooms next to each other. with another two on the other side. There’s ample privacy. It’s not like you guys are all just on top of each other. But the people that we talked to, they love the ability for the lowest total dollars to live in an area like that and have that amount of space on top of that, because common areas are very large.

Then go outside the building. We have gym classes every day like yoga, fitness, spinning classes, you name it. There’s so many amenities. We have movie night. We had like a talent show at one of our properties. It’s really awesome. There’s program living and in the co-working areas are like out of this world. All included in the rent. 

So someone sitting there saying, “I can pay the lowest total dollars a month, rent a bedroom and I have unlimited amenities, access to co-working space, I don’t need a gym anymore. I don’t need the internet.” We go through this and say, “Listen, you’re probably saving $1700 a month.” We have events too so a couple times a month you don’t have to go out with your friends drinking or whatever. There’s an event in the place that you’ll enjoy.

Robert Leonard  14:57  

I know it’s going to vary a lot depending whether you’re in Miami, Toronto, or depending where you are in the globe, but what is the single bedroom rent for? What is somebody looking at in comparison to other types of rentals?

Peter Politis  15:10  

If you think about, let’s talk about Miami, Fort Lauderdale, and Denver, because they’re all kind of a little bit in that range with some big cities that you can get in for somewhere between $1200 and $1500 a month, per bedroom. 

What the problem is is that some of these places, if you want to rent a one-bedroom by yourself, you’re probably $300 to $500 bucks a month cheaper than someone just renting a one-bedroom unit by themselves in a regular and less amenitized building. If designed intelligently, the space could feel the same or bigger. 

So for us, you’re sitting there saying, “I can’t go live in this area of the city for $1300 a month. There’s no other place that I can get it, let alone in a brand new class A multifamily with pools and all this stuff.”

We’re not buying old buildings and refurbishing them. These are all ground up, new developments. All have been built in the last one to three years kind of thing. They have the latest technologies and it’s all brand new.

Robert Leonard  16:10  

Are utilities fully included?

Peter Politis  16:13  

Utilities are typically not included but they’re individually sub-metered and written down. But like relative to the rent-by-bedroom, we’re talking about like 15 or 20 bucks a month. It doesn’t really move the needle all that much.

Robert Leonard  16:26  

Are you able to sub-meter it because everybody has their own bathroom? Then how is that common area split? Is that just covered by you guys?

Peter Politis  16:32  

The common areas are just split proportionally. Again, it’s a couple of bucks a month each. It’s not a needle mover in that way. We have LED lighting that’s energy-efficient, and all the appliances that we put in there are energy-efficient appliances, because we’re also operating the building. We want the stuff to be top shelf, but you’re talking about like granite countertops and stainless steel appliances. 

Every one of these units have outdoor spaces in all these cities. Our property that we’re getting into development in Denver has a view of the mountains from most of the units. 

Some of these places are literally just brand new class A buildings that happen to be rent-by-bedroom stuff but not cheaply built. When people think rent-by-bedroom, they think  it’s a rundown old, or” I got to share a bathroom with four people or whatever.”

With us, no. Your lock on your bedroom is like an RFID lock. You get a bracelet on your phone and all that stuff. Everything’s run by *inaudible* in all the units. It’s top-notch for what it is. It’s great.

Robert Leonard  17:28  

Who’s responsible for the common area stuff, keeping it clean? Or is it just kind of like if you live with roommates?

Peter Politis  17:35  

It’s a little both. People have to be respectful, a general life rule. Probably a good start to just be respectful, but we clean the common areas at least twice a month for them, regardless. 

If someone throws a party on a Friday and Saturday morning, there are the remnants of a party, treat your roommates with respect. However, we clean it regularly. We haven’t really had a lot of problems.

I’m trying to think of an incident with a tenant that was so horrible and I can’t really think of one. I know a few people that have bounced around a little bit in terms of roommates, and turned out it was just more of them than anything else. But nothing really all that bad. 

Frankly, I think because of the kind of whole spirit of the building.If you don’t want to be social, and you don’t want to do stuff, you don’t want to have amenities filled with people, you just want to be left alone all day, maybe not the building for you.

Robert Leonard  18:23  

Yeah, I mean, it probably goes back to tenant screening as well. As long as you’re bringing in good tenants, you are probably not going to have an issue with them sharing a common space.

Peter Politis  18:31  

It’s also because I think they know going into it that they’re going to be up against the same thing. Like if you’re a bad roommate, you could get a bad roommate. It’s like self-policing. It’s often that sense of, “I don’t want to have the same problem that I’m creating for somebody else and I live with this person.” 

To be honest with you, it’s probably one of the main reasons why we think that it’s good for investing is because people think rent-by-bedroom, it’s the cheapest total dollars. But on a per square foot basis, which is a metric that we look at on development, you actually get a higher rent than a bigger unit, even though you’re getting less total dollars. 

Allowing individual investors to participate in these huge developments in these major urban centers drive great returns, because per square foot price is higher than your average, just because it’s amenitized and whatnot. I think that’s a big driving factor of why we’re being so successful financially for our investors.

Robert Leonard  19:21  

Before we started chatting, I spent some time researching Greybrook. I was looking on the website going through a lot of the properties and for anybody listening that is interested and hasn’t done that already, I highly recommend you do. The properties are amazing looking. I can only imagine they’re not cheap to build. Like you said, you’re doing brand new and ground up construction. You’re putting in all these amenities so I can imagine it’s not cheap. Clearly there must be a lot of demand for this? What is the demand like?

Peter Politis  19:48  

I’ll tell you the buildings that we’ve built and at least up so far, have always met or exceeded our velocity. They’re always kind of outpacing buildings in the area. I mean, it’s all dependent on city to city but I think what we’re seeing is the package that we’re offering for the dollars to get in is driving a lot of people. However, they also don’t have a lot of other options. 

You could live somewhere for $1200 or $1500 bucks a month, but living in that place is not going to be like living in a highly amenitized brand new building. I could get a 1970s garden-style apartment, maybe in a little bit of a worse area and have a little more space, or I could have brand new building technology, fun events, gym, co-working, internet, you name it. 

One of the restaurants in one of our projects in Miami is one of the top restaurants of the year in Miami. It was like in our lobby and it was just jammed. Every night you’d go there, it was a scene. It’s just right at your doorstep.

Robert Leonard  20:41  

We’re recording this mid to late November so everything going on, we couldn’t have this whole conversation about co-living, all the different types of events that you guys throw, all the different amenities that you have without mentioning COVID, of course. And so, how has that impacted the co-living space? 

I asked because I’ve looked into doing some read by the room stuff, not at your scale, but on a more individual basis. I’ve been met with a lot of pushback for people who aren’t family that live together? What if one contracts COVID and the other doesn’t? How does that get handled? 

Then of course, you guys are providing an experience so a lot of that experience that you’re providing can’t happen right now because of COVID. So how are you guys managing that? What does that whole piece look like?

Peter Politis  21:23  

I think whether it’s rent by the bedroom, or you’re living with two or three friends, you have to understand that when you’re living with somebody, you’re not living alone. They’re in your bubble and you’re in their bubble, whether you want them in your bubble or not. 

If you and I go and get a two-bedroom apartment, and we live with a roommate. That’s part of someone who is in your life, like I’m married. My wife’s in my bubble. My one-year-old son’s in my bubble, and whether they like it or not, they’re in my bubble. So I think that’s not that big of a deal. If you want to live alone, then you can afford to live alone.  

I think the amenity stuff we have, we haven’t been able to do all the things in terms of the programming and events that we would have liked. However, I think people understand that, number one. 

Number two, I don’t think people are looking to throw a big party. It’s not like they want to go to these things either. Our pools have been open in some areas. There are less chairs out in the pool and they’re socially distanced. The rooms are using specific fashion. One of our buildings has like a big common kitchen thing that you could have a lot of people doing stuff in at once. Now it can only be the people in the same apartment or in a bubble by themselves booking the room. There’s stuff that makes it a little less fun, but I guess when there’s a global pandemic, life’s going to be a little less fun.

Robert Leonard  22:35  

Are there any legal ramifications of a roommate catching COVID or contracting COVID, and the potential of giving it to someone else? Have you had anybody say, “Oh, my roommate got COVID. I’m not comfortable living here. I’m not paying my rent anymore,” and either leaving, just not paying rent, just being unhappy or anything like that? I know it’s an expectation thing, like you said, totally understand that, but has it happened at all?

Peter Politis  22:57  

Not really. I mean, I can’t think of… It’s bubbled up to the point that it’s gotten to us where there was like, “My roommate got COVID and I’m not paying rent, because that person has COVID”? No, but I mean…

Think about it this way. If someone gives you COVID, you don’t have legal ramifications either today, right? The answer is we hope everyone’s safe. I think that because the building so highly amenitized and programmed, we’re used to having a lot of staff. 

The good thing about having a lot of staff is the diligence in terms of hand sanitizer, and wipes and number of people in the gym or other areas that for a period of time in Toronto, you couldn’t use condo gyms. Right now in Toronto, the gyms are closed. Some of the buildings in the US, there are just different regulations that exist. You just have to be vigilant, because at the end of the day, that’s just how everyone’s going to protect themselves. Unfortunately, it’s a numbers game where you can be as diligent as you want, but you can still get it.

Robert Leonard  23:46  

One of the other pieces that I’ve been wondering as we talk about this, and like I said, I’ve actually looked into this quite a bit lately. I’m actually buying a couple properties right now. So I’ve been looking into it to do myself again, on a much smaller scale. 

One of the things that I’ve… I guess, issues or headwinds that I’ve faced is that there are a lot of local municipality laws or regulations around how many people can live together that aren’t related. How does that work with such a big building? I mean, on a, say I buy a four or five, six-bedroom that’s maybe three, four or five people that are not related living in one building. That’s not a massive deal, but in your situation, you have probably 50 to 100 different people living together that aren’t related. How does that work?

Peter Politis  24:25  

Not an issue from a zoning standpoint of the cities that we’re working in. So there are no limitations on that. I think the limitations are more in some *inaudible* around like what you’re doing on a smaller scale. 

What’s a legal bedroom and how many people can be there appropriately, it’s less so about if they’re the same family or not. For example, Toronto is packed. The vacancy even in COVID is sub 1%. The city’s just jammed with people and finding rental stuff.

When I was in college, we rented a house. I rented a floor and a house and there were five rooms. We put a lock on every one of the five rooms. We had one bedroom, one bathroom, and it was five of us living there, like two legal bedrooms that we just jammed everybody in. That’s not necessarily legal or allowed. But if you do it at the scale that the way that we’re doing it, there’s no issues. 

Let me ask you a question because you said you’re looking into it, why are you looking into rent-by-the-bedroom?

Robert Leonard  25:14  

Before I answer that, I think you made a good point that I think probably answers my question and probably the reason as to why I might have faced some pushback. I think it has to do with the bathrooms, because in your properties, everybody has their own bathroom, as long as I’ve understood that correctly. Whereas when you do this on an individual scale, you have five, six bedrooms, and you’re sharing, I don’t know, maybe two bathrooms, usually, maybe three, but usually two? So that’s very different from everybody having their own bathroom. 

However, the reason I’m looking into it is, I mean, the cash flow is just incredible. I want to get to that because I want to get to those return numbers and kind of talk a little bit about what the financial aspect of this looks like on your scale. For me, the numbers you can get on a rent- by-the-room are just incredible and much higher than you can get on a per property or per unit basis.

Peter Politis  25:58  

What you just described is 100% of the reason we’re in the business and wrapped around major cities in the US that have affordability issues, including Boston that we’ve been looking at. Wrapped around, heavily amenitized building… I will give people a reason to live there and then wrap around it if they’re all relatively brand new.

What your idea is the exact idea that we had on a larger scale. That’s all.

It was easier for us because we came from the building of condos. Our business started building condos. We built thousands and thousands of condo units in our lives. 

Building a rental building is not necessarily all that different for building a condo building, notwithstanding, we’ve turned it a bit different. We thought to ourselves, why would we do a rent-by-the-bedroom part of the building is because we’re driving up rents, and we’re making more money. 

If you wrap around a lifestyle, it could actually be an entire selling feature. Wrap around affordability and you wrap around all that stuff, you can offer a lot of things that other people can’t. I can afford to make bigger, better amenities, because just like you said, we’re charging more on a per square foot basis, which just means that I’m getting more dollars for the space than otherwise I could get.

Robert Leonard  27:02  

Yeah, I’m a very entrepreneurial type guy so this whole conversation, my wheels have been turning. You can probably see smoke coming out of my ears because I’ve just been I love this idea. I really do. I think it’s incredible. I think it’s such a good way to get into real estate. 

I think traditional syndications and things like that are just so oversaturated. Right now I feel like everybody’s doing a syndication. So I’m always looking for different ways to kind of do real estate differently. I really like what you guys are doing. Throughout this conversation, I’ve been wondering if there’s an opportunity to do this in smaller markets, but maybe like a little less amenitized. 

Maybe not, don’t put as much into it, but still have a similar type situation. Maybe you’re doing it in major metros, but maybe 45 minutes outside of Boston, so people can still get Boston if they want even more affordable, maybe a little less amenities, because you’re not gonna have as much cash flow. However, I wonder if that might work?

Peter Politis  27:51  

I think the answer is, it all depends on what the rents are in the area. One of the big things is I’m not going to rent the bedroom if I can get a one bedroom for the same price. So what can I get a smaller unit for anywhere? 

We’re focusing on major metro areas, mostly because we want to do it on a scale.  Our buildings typically have between 250 and 450 units. That could mean 400 or 700 beds. 25-30% of it is typically co-living.

It works in different areas, as long as you can drive the rents. 

The question is like building ground up is different from retrofitting, right? That’s a totally different side. Sometimes the cost of building new doesn’t make sense in some places, because the rent might have to be charged to make that work is just too much. That’s where we have the trade off. 

The reason we’re focusing on major metro is because I can afford to build it and charge a reasonable rent, just because we’re rent *inaudible*, if I’m somewhere where I can’t, maybe I’d like to retrofit something because I can’t afford to build ground up, new construction.

Robert Leonard  28:50  

The only thing I can say is that as I get further and further along in my real estate journey, this is definitely going to be something that I look into doing myself and probably work with you guys on in the future myself. Definitely looking forward to it. 

You’ve mentioned a couple times that you focus on major metros, why Toronto and South Florida, mainly Miami? I mean, there’s a lot of metro areas, right? Why did you choose those two?

Peter Politis  29:12  

IFor those of you who don’t know, Toronto over the last 15 years, has probably been the best real estate market in the world. Maybe not even close in terms of growth, price, all the metrics that people look for affordability, global price, what you’re selling for what you can get it rent.

There is a land restriction in Toronto that basically does not allow our city to continue sprawling outwards. It’s forcing us to build upwards. Our planning process is very complicated and onerous. Like it just is. 

It doesn’t allow for somebody who’s not local to very easily come in here and develop. There are barriers to entry for developers. There’s a land restriction sort of greenbelt that disallows us to build outwards. Then we have 100,000-200,000 people moving into the city every year. 

We’re actually not meeting any of the supply or the demands that we have in the supply in Toronto every year. I’ll tell you when I started my career, we got super excited when we sold a condo for $290 a square foot. 15 years later that condo is $1400  a foot. 

When we looked into the metro areas, the reason we started in Miami was it was an area that I knew really well. I grew up down there and knew people. We had relationships. 

I see a lot of similarities to Miami and Toronto, 10 years ago. People are coming right into the city. Forget about the beach, people are coming into the city. Jobs are coming here, as well as insurance companies, financial companies. Quality of life is high and the weather is good. No state income taxes. 

The largest population demographic in South Florida is 18 to 35. People think like everybody lives in Miami, play shuffleboard and then live to 100. Well, that’s actually not the case anymore. The city just totally changed. 

When you bring jobs and you bring restaurants, you do all that stuff, you’ve seen a stable rent growth, which is what’s been going on. Then that’s what drove us into Fort Lauderdale. 

When we targeted cities, we said: what cities do we want to be in in the US that are major metro? If I could only pick one city to do this stuff, it’d probably be Denver. I see Denver as the boom that San Francisco went through. I see Denver going through that over the last couple years over the next 5 for 10 years. A lot of smart tech jobs, people moving there and good quality of life, four seasons of fun.

That demographic that is moving there is the exact demographic that will live in some of these buildings. We spend a lot of time looking at cities growth, jobs, demographics, and that at the end of the day, it is what’s going to drive occupancy and drive these things to be successful developments.

Robert Leonard  31:46  

Yeah, Denver and Austin have been taking a lot of tech jobs from the valley. I know a lot of people are moving and companies, a lot of just the population has been moving to Austin and Denver from Southern California and even Northern California. 

I definitely have read a lot about that trend and understand that. Florida has a stigma about being the stairway to heaven for a lot of people, but it’s probably not the major metros like Fort Lauderdale and Miami, but the rest of Florida maybe.

Peter Politis  32:14  

Yeah, maybe other parts. I think that for us, it’s about creating a brand that we want people to recognize what the building is. Society is the name of the company, the name of the brand, but there is Society Denver and Society Miami. There’s different parts of the city. Once you see that… We’ve seen people move from Society Buildings. They come to new towns. I think that’s important for us is to really make sure that people know that if you’re in a Society Building, or you’re investing in Society… what you’re getting at the end of the day,

Robert Leonard  32:45  

Having started in Toronto, how was the transition from investing in Canada to the US? How is the US market just in general, the US markets that you’re in? How are they different from Canada?

Peter Politis  32:58  

We started in Toronto, during development in Toronto, it’s probably one of the top two or three most complicated places to do development. Zoning planning, ambiguous processes, strict rules for building constructability in terms of weather, underground parking. All the things you need to cut your teeth into and make sure you really have lived a long, full development life, you do in Toronto, day in and day out. We did it for a lot of years. 

As we move down into the US, it’s almost they’re not, they’d be just as happy if you did build anything down up here like that’s just the general way the city operates. It’s crazy, because it’s what’s driving the city and what’s keeping it solvent and growing and all those things that they treat you that way. 

Then in South Florida as an example, zoning is pre-determined as of right, in many cases. There can be design review panels, and that can be a three or four or five-month process that is pretty defined. I could buy a condo and it could take 2-4 years to get it approved in Toronto, right? So before I can even start doing something or rental building or not. 

In the US, developing in different cities is a lot easier from a planning standpoint than we’re used to. The constructability, there’s a lot more space down there. Obviously not everyone in the US. There’s space like New York City. There’s not a lot of space to do stuff. It’s hard to build…

The constructibility of the spaces that we have to work with what we’re doing in these major metro cities is not tight. We built a building here, a 50-storey building on 7900 square feet of land. Literally, it’s like someone’s yard. You’re talking about building 50 stories and there’s parking garages, lobbies and entranceways. 

I’m not saying it’s easier, but I’ll tell you that there’s more money and better margins to be made in the US, but it’s not as hard to keep competition out, which is the trade-off. 

It’s easier for a guy like me to come in here and my neighbor can do something quickly to just like I can’t in Toronto. It’s almost like no one’s competing against the other guy because it’s also hard to get to a point that we’re all going to be okay once we get to that point.

Robert Leonard  34:52  

Yeah, that’s pretty incredible that you can build a 50-storey building on just about 8000 square feet. I’m very familiar with that size of land because my yard in the property that I currently live in is 8000 square feet. I know exactly how big that is and I’m just imagining out my window there being a 50-storey building, that’s pretty incredible.

Peter Politis  35:11  

Yeah, engineering is interesting.

Robert Leonard  35:15  

I can only imagine. I know there’s a lot of people listening to the show that actually want to go the opposite way. You came from the international to the US. I know there’s a lot of people that want to go from the US to the international market. What advice would you give someone looking to do this? Maybe they’re from the US they want to invest in Canada, what are the major things they need to look out for?

Peter Politis  35:33  

I think that my general belief is in business, if you really want to invest in a good horse, and make your money work for you. So there’s a difference between going to work for your money every day. I buy a property, or you buy a property, and I’m managing the tenants and I’m doing the work. You’re investing your money, but you’re also investing your time and your energy.

There’s a place for that in life and in someone’s portfolio. There’s also something like letting your money work for you. Letting your money work for you is something that’s totally separate. That’s really why we have so many investors because people want to invest in real estate, but they also don’t always want to invest their time on top of that.  

My advice is, whether you’re investing in Canada or the US some portion of your portfolio, you should find a horse that you trust that you know that they know what they’re doing. You can back that horse because the infrastructure and the execution they can provide you and the scale of what you can do with a good horse is way more than what they can do on their own. 

Sydney, Toronto is a great example. You could have a billionaire who has a gazillion dollars. All the money in the world who come into Toronto and not be successful. I’ve seen it happen. It’s complicated, right? That could go for any international market. It’s not just Toronto, but having a manager that provides you a platform and access that you trust, can report to you, you understand what you need to do and what you’re getting out of them, I think is the best way to get into a new market.

Robert Leonard  36:53  

I want to go back to how you’re focusing on the luxury market and really just the highest end of the luxury market. Is there an increased risk with focusing on this?

Peter Politis  37:04  

I have this conversation a lot. In different areas, people generally think that the luxury market is risky, because there’s not a lot of buyers. First, people say, “Well, how many people can afford it? And how many do you have to sell?” That’s hard.  

I actually have a different view. I think there’s actually a lot of people who can afford it. The reason the luxury market, in my view, is considered riskier by people is because it’s a binary thing. Like if I’m buying my third, fourth, fifth home, it’s going to be because I want it. It’s because it’s a lifestyle. If it doesn’t have what I want, I’m not going to buy because I don’t need to buy it. You have to really hit the nail on the head. 

The word luxury is the most overused word in real estate, like I put a stone countertop in a bathroom, congratulations, you have a luxury unit! I think that’s really been the misnomer that everything has been labeled luxury. If you’re doing at the highest end of the market, you can be very successful and you can have a lot of demand and a lot of velocity, but you have to be able to deliver and understand what it actually means to deliver a luxury product to that buyer. 

If you don’t understand that buyer and you think you know luxury and to you, they’re looking at it like that’s not a luxury, you’re not going to get anywhere with it. So you really have a combination of lifestyle and life experiences that you’re giving these people and you have to make them want it because they don’t need it. 

Robert Leonard  38:18  

I think the other piece that’s a little bit different with what you’re doing is that you are providing a luxury product, but you’re renting by the room, which is affordable. So you’re not renting a $4,000 a month apartment unit, when the average rent is $1000. You’re renting an individual bedroom, which tends to be a little bit more affordable for most people than say a full unit so that I think in and of itself kind of helps hedge the risk that luxury that a lot of people think has.

Peter Politis  38:49  

Also, you are buying experience for the last total dollars. I think that today, everyone I think is looking for an experience they’re looking for like things to do and find things they want. Having the ability to have that kind of experience where you live every day… 

Just the people that we talk to, COVID aside for a second, but if I’m bored, I can go downstairs and see 30 different people… I can go to the TV room. I can go to like a movie room with outdoor screen, grassy *inaudible* by the pool. I can go by the bar and have a drink and see my friends. There’s co-working spaces. I could take a cooking class. There’s always stuff to do. 

You can also just shut down in your room and do nothing. That’s great.  

But if you want stuff to do, there are lots. I think that’s the coolest thing is that if you sit there and I’ve sat in the lobbies and people are coming by. It’s kind of like out of that show Cheers. I walk out the door and everyone knows everyone. It becomes a community because everyone’s living outside their units as much as they’re living inside their units.

Robert Leonard  39:48  

Reminds me a lot of things like suites from colleges really. It’s very similar to at least where I went to college. I actually commuted so I didn’t live in these but I had a lot of friends that lived on campus and some of them had suites. It was essentially what we’ve been talking about it, is they had these common areas. They had bedrooms. They didn’t all have their own bedrooms or bathrooms, but they’re all very similar to what you’re talking about. It sounds like you’ve taken that model, if you will, and kind of expanded it and made it accessible for professionals.

Peter Politis  40:17  

I think that’s the biggest thing. People think like people who can’t afford something… You’d be surprised how many people who have great jobs who rent by the bedroom, or they want to stay in the building because of how amenitized it is and the community that it creates. I think that’s what we look to do for our investors. How do I access something like this on this scale, without me having to do much? 

Your wheels are turning, “Okay, I’m going to buy this unit and turn it into 12 bedrooms.” You can go down that scale but also, there’s a group of people who obviously don’t have the same experience, or maybe financial capacity that you do. They want to invest in something like this and they need to do it through a group or a platform. 

That’s part of why we started with a handful of friends and family investors. It’s not like I woke up one morning, I knew 7000 people around the world. All the expansion of the investors was word of mouth. I used to joke, it was like leather power, a lot of kitchen tables and couches and somehow over the years, it became what it became.

Robert Leonard  41:12  

I know that there’s going to be so many variables that are going to play into this next question so it’s going to be hard to give a straight answer. But I’m curious, just in general, give us some general guidelines, if you can on what types of returns do investors see, investing in these types of products?

Peter Politis  41:28  

I think from our perspective, without meeting a specific return threshold, we just won’t go into a development. If we’re going to go to the trouble of buying a piece of land, taking it through design, constructing it and leasing it, and selling it, because ultimately, we actually lease it up and typically sell these things. That’s how we make our money. We don’t keep them forever.

We try to make at least double our money every four to five years. So somebody invests $1, I want to know that over a four or five year span, which is about how long these things take, depending on the size of the building of the location, I’d say like anywhere from as little as three and a half or four years, as much as five or six years, depending on the size of the development and where it is, and all that stuff. 

So people have to understand they’re kind of three and a half to six and a half year terms, typically, and we’ll buy these buildings we’ll sell them and lease them up. If it’s six years, we want to do better than a double. If it’s three and a half years, a little less than a double our money. That’s how we try to look for a 20% simple annualized return on our money.

Robert Leonard  42:24  

Yeah, I was going to say using the rule of 72. It sounds like it’s about a 14-18% annual return, somewhere in that ballpark?

Peter Politis  42:31  

Yeah, from an IRR standpoint.

Robert Leonard  42:32  

Yeah, exactly. I’m an accountant and finance person by trade. So I would absolutely love to see a financial model that goes into how you guys are analyzing one of these deals. I can only imagine what it must look like.

Peter Politis  42:45  

Yeah, I am happy to share it. You got to have a powerful computer. These models are crazy.

Robert Leonard  42:52  

In my day job, I’m a corporate finance manager. Some of the spreadsheets that I’ve created are like 50 to 60 tabs long with the longest Excel formats or formulas that you’ve ever seen. It crashes my computer all the time. So I totally understand.

Peter Politis  43:04  

So there you go, we’ll send it over. That way we can crash your computer.

Robert Leonard  43:09  

I would love that. I’d love to dive into it. I want to talk about you a little bit and learn about what you’ve been learning through this pandemic. I think it’s putting a lot of stress on a lot of people, from entrepreneurs, to real estate investors to even just individual people, everyday people. What have you learned during this time and what are you doing to better yourself?

Peter Politis  43:28  

I think I’ve just given where we are in terms of what we do every day, which is development. It’s not every day, there’s something going on. I always feel like we’re dealing with one issue every other day, like blocking and tackling every day. You have a good day and you go to the next one, it’s bad. 

I think it kind of sets me up pretty good to deal with the pandemic. If you try to think a day, a week, a month, six months in advance and try to plan everything out when there’s uncertainty, it’s just hard to do that, right? So I think you have to accept that you’re dealing with something on a shorter term basis. 

You control what you can control. You control yourself, and you control your family and you try to make sure that you’re doing safe things. In the business, you have to do your best to deal with the cards that you’re dealt with. If you can’t wrap your head around that it’s a pandemic, and it’s going to be hard, and it may not be as good as it was yesterday. We don’t necessarily know exactly what tomorrow is going to go, you’re going to drive yourself crazy. 

I think that that’s something that when I wake up every morning, I’m like, “Okay, we’re going to deal with whatever’s coming up with us today and it’s going to be fine. We’ll figure out a way around it.”

We know that the end game is going to be it’s all going to go away through a vaccine or through other stuff, whether that’s a day, a week, a month or a year, we don’t know. But we’re still also investing in long periods of time. I live my life like four to seven years at a time just because every time we buy a project, it’s not like week to week or whatever. That’s just not how development works. It’s almost like we were built for this.

My wife had a little boy and I cheered her on while she was doing it and he just turned one year old. I had this mixed blessing of being able to spend a lot more time at home. I was the kind of guy at the office and now it’s a little bit different. I very rarely left work. I came back from work the same day that I left it, which means that I’m getting home at 12, one, two in the morning, day in and day out, putting in 40 hours by midday Wednesday. That was the life that was leading it.

It allowed me to slow down a little bit and spend some time with my son. We’re back in the office now. We have been for a while but making an effort to go home, see the little guy, come back to work, or work from home because it got a little easier. 

I think it just allows everyone to put things into perspective on what matters. Yeah, there could be some stuff in business that’s difficult or whatever, but you’ll deal with it. You have to have that attitude, and then you’ll figure it out. 

Frankly, there’s some things that are out of your control. So if you really try to make sure that there’s a certain outcome, it’s just not possible all the time. 

Robert Leonard  45:48  

First off, congratulations on the baby boy.

Peter Politis  45:52  

Thank you. 

Robert Leonard  45:53  

I can relate to what you said very closely because I’ve been a workaholic my whole life. I mean, I’m young. I’m only 25 but I’ve been workaholic my whole life. I’m always that guy that works 70-90 hours a week, whether it’s on my corporate job, my side hustle, my own businesses, my own real estate, whatever it is. I’m working close to 100, if not more hours a week. 

Similar to you, I actually have a two-year-old son at home as well. So this pandemic has allowed me to like you to spend more time with him at home and do things with him. It’s been an unexpected benefit, or the silver lining, if you will, to a rather poor situation.

Peter Politis  46:28  

Listen, the driving out of interest rates, there’s going to be unintended consequences, in my view like real estate price inflation, because of the low interest rates that are going to be around for a long time. I didn’t tell you in Toronto, our housing market since this started, has just been going gangbusters. You wouldn’t believe me. We line up for houses because there’s such a shortage of houses in Toronto that people can afford it a little easier. Everyone’s trying to get into the market, which is unbelievable when you think about it.

Robert Leonard  46:55  

It’s pretty crazy. Like I mentioned at the beginning of the show, but I’m still pretty active in the markets, buying and selling on my own individual scale. I just locked in an interest rate of 2.2% on 30-year fixed debt. I mean, that’s just crazy. A couple years ago, you’re getting paid on a high yield savings account and now I’m locking in a 30 year fixed debt at 2.2%. I mean, that just blows my mind when my mortgage broker told me that, I was shocked. 

What’s even more crazy is I’m selling a property and it’s about a $200,000 property, say $210,000. So it’s not super expensive. But we listed the property on Tuesday and we chose to not have any showings until Saturday to allow a couple days for MLS to catch up and get it listed and build some demand. 

Within 12 hours, we had 16 scheduled showings and we had three offers. All three over asking and it ended up going about 15-20% over asking. By the weekend, we ended up having 30 showings that weekend. It’s crazy. I mean, we’re in the middle of a global pandemic and that’s the demand you’re seeing on not that fancy of a property.

Peter Politis  47:55  

I think that people know that this is like a temporary shock to the system. That doesn’t mean they’re not going to have repercussions. People unfortunately lost their jobs, who may not be there. I mean, I feel for all my fellow Greeks in the restaurant business… There’s nothing you can do to help some of these guys. It’s hard.

On the other hand, the people that are fortunate keep their job so they’re saying that what you just said, I can afford more house than I could ever afford before. It’s going to cost at least *inaudible* cost me. I better do it now, because these are historically low-interest rates and I can do it now. 

Robert Leonard  48:25  

Peter, I’ve really enjoyed our conversation, both just from us and also from the strategy that you guys are doing. I find it fascinating. I really think what you guys are doing is awesome. I really highly recommend anybody listening to the show today goes and checks out what you guys are doing. The properties are amazing. The strategy is super cool. I know it’s something that I’m going to keep in the back of my mind as I scale up and look for opportunities to deploy my own capital into funds to invest with trusted third parties. 

Peter, to those looking to learn about you, learn about the strategy, learn about Greybrook, where’s the best place for them to go?

Peter Politis  48:59  

You can reach us by emailing us at invest@graybrook.com or you can go to our website https://realty.greybrook.com/ 

Robert Leonard  49:11  

I’ll be sure to put a link to those resources in the show notes. I’ll put a link to a couple of my favorite properties that they have in the show notes as well so you guys can go check those out. Peter, thanks so much. 

Peter Politis  49:21  

Cool. Awesome.

Robert Leonard  49:23  

All right, guys. That’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week.

Outro  49:29  

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