"Inspired to Invest" Real Estate Investing Podcast

Insights Into Real Estate Investments. How To Use Data To Make Better Decisions šŸ“ˆ

ā€¢ Serena Holmes ā€¢ Episode 66

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Welcome back to "Inspired To Invest". Nic Green is with us from Parametric Properties for episode 66. To watch rather than listen, click here

Nic shares how his roots in economics at Cornell has lead to his data-driven success in the property market. 

Get ready to explore how Nic revolutionizes property valuation with advanced mathematics and data analytics, similar to the Moneyball methodology, specifically focusing on condominiums. 

Discover the strategic benefits of targeting specific property types to minimize maintenance and maximize value. With his extensive experience at Cushman & Wakefield and a family background in real estate, Nic provides unique insights that can transform your investment approach.

We dive deep into the challenges and opportunities in the real estate data landscape, especially the disparities between Canada and the United States. 

Learn how real-time data and market trend analysis can give you a competitive edge, and why partnering with firms like Parametric Properties can be a game-changer. 

We also discuss the implications of the recent Mississippi lawsuit against real estate boards and its potential market impact. Nicā€™s advice for new investors is invaluable: treat investing as a marathon, focusing on assets with higher cap rates and positive leverage. 

This episode is packed with practical tips and data-driven strategies to help you achieve financial freedom through real estate investing.

To connect with Nic, go to https://parametricproperties.com online.

Thank you to Wealth Share REIT for bringing us this months episodes. For more, go to @wealthshare on social and to learn about their amazing investment opportunities, https://wealthshare.ca online.

Need support underwriting potential property investments? Check out PropertyCast.io - https://propertycast.io?via=serena

ā€œInspired to Investā€ is proud to support the Beyond Success Program, a not-for-profit financial literacy program for students, launched by More To Give & MAK Investments. Find out more at @more2give.ca.

Join us again on Sept. 11 to hear from an investor who has leveraged real estate to retire his wife and completely change his life!

Thanks again for tuning in & remember, "when you invest in yourself, the sky's the limit!"

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Speaker 1:

Welcome to the Inspire to Invest podcast, where we're sharing stories from real estate investors and how investing has changed their lives. This episode of the Inspire to Invest podcast has been brought to you by Wealthshare. Hey everybody, welcome to the Inspire to Invest podcast. I have Nick Green with me today from Parametric Properties and he's joining us from Victoria BC. So thank you's joining us from Victoria BC. So thank you for joining us this morning. Nick is a Cornell graduate with a major in economics and he's a qualitative analyst who is taking the digitization of the real estate market data and applying advanced mathematics to data similar to what you'd see in Moneyball 421. So we're going to dive into some data today and get to know Nick and how he got started in real estate. So thanks again for joining us today. How are you?

Speaker 2:

Great Thanks Yourself.

Speaker 1:

Great, thank you. So obviously you had this background in economics. Can you take?

Speaker 2:

us back to the beginning and how you transitioned over into real estate investing. Well, so my family's always been in real estate. My dad's developed in Arizona and in Denver and in Calgary, and so I kind of fell into it through family and my background in economics. It kind of was a logical transition. So when I graduated from my undergraduate degree I did a bunch of mes, lending, cross border draw management, things like that for construction loans.

Speaker 2:

And over time that evolved and I got headhunted to be the senior financial analyst for Christian Wakefield for Vancouver and then from there went into independent consulting for the last 10 years and this opportunity, related to our algorithmic approach, really kind of got refined about three and a half years ago.

Speaker 1:

Okay, so I guess I'm talking about real estate investing specifically. Can you talk a little bit more about you know how that played a part in your career and, like you know, I guess, where things kind of look like before you were in real estate investing and how you kind of built up your portfolio now?

Speaker 2:

Well, to be honest with you, I mean I've been in and out of real estate now mostly in for the last 16 years, so it's been pretty predominant. I've had a unique kind of opportunity in my 20s because being a senior analyst at Cushman allowed me to be involved in billions and billions of dollars in commercial transactions, including industrial and ALR and you know, high rise towers in Vancouver. That gives kind of a unique perspective.

Speaker 1:

Yeah, yeah, that sounds really interesting. And then how do you use that skill? Because obviously it's a really unique background that you have. So how would you say that that kind of connects to you know, building up your real estate portfolio and like everything that you do in that respect?

Speaker 2:

Well, if you look at the way that the big four firms or big five firms of commercial real estate work, they're basically black boxes of data. They're able to collect data by trading information and by having their broker's deals transacted and mapped and tracked. And I realized that while this is very much a black box in the commercial real estate game because you only have the information, you're only as good as the information you have for residential. The information is far more abundantly available and there's a variety of approaches you can take to kind of target it in a way that normally people wouldn't. And we're not the first person to think of this. Zillow tried to do this several years ago to epic failure, largely because they asked the wrong questions. But it kind of helped us bring a unique perspective to our approach.

Speaker 1:

Okay, so can you talk a little bit more about that, just in terms of like how you're using it day to day, like are there certain data and metrics that you would look at before you acquire a property? Or like how are you using that data?

Speaker 2:

Well, absolutely so. We run live feeds of data through MLS and use an advanced multiple regression system that takes databases from a variety of sources not just MLS, but school board ratings and walk scores and all sorts of other economic data that comes into effect and we regress it down to one number that we call true value and then from that we're able to apply that to target it against active listings to see what's mispriced. So what most people don't know about the real estate market is the average realtor is trained less than a week or two in valuation and in addition to that there's all sorts of motivations for the sellers that can materially manipulate how motivated they are to sell. It can be debt courses, taxes, things that have nothing to do with the actual value of the asset itself, that can swing values 50, 100, $300,000.

Speaker 1:

Yeah, yeah, I mean, I understand that, just since I do have my real estate license as well. It's just, it's also a game, right? So I think you know people try to manipulate the market just to drive demand and then obviously it pushes prices up and it may not be a realistic interpretation of what that value is. So I think that's important, especially when it comes to appraisals and getting financing and things like that. Now I guess, going back to your actual portfolio, can you talk a little bit more about the kinds of properties that you have invested in or currently have and what your strategy is?

Speaker 2:

Yeah. So we take kind of a portfolio theory when it comes to real estate in our structured vehicle. So what we do is we take a variety of condos and the reason why we choose condos specifically is because they're the most homogenous product. When you get into single family homes you have issues with land and easements and setbacks and topography and trees. In addition to that you have to do actual physical maintenance on a regular basis to the exterior of the building, so by targeting condominiums. Under the BC law specifically, a depreciation report has to be filed every three years on all the respective stratas, and so it allows us to have a great deal of information and with text keyword search functions we're able to target, you know, the probability of a leak or a major deficiency in an elevator system or a roof coming forward, so we're able to build that into the pricing. So this is how we kind of differentiate is that we have three different layers of due diligence that are almost 80 to 90 percent automated.

Speaker 2:

And then we have the manual process in which we go through and actually verify that the data isn't a false positive.

Speaker 1:

Okay, so I guess my question was actually in regards to your real estate portfolio.

Speaker 2:

So in terms of the assets in, the portfolio you have.

Speaker 1:

Yeah, just to avoid any confusion.

Speaker 2:

We mix it up between individual condos and joint venture development opportunities.

Speaker 1:

Okay, yeah, I just wanted to understand so people can see, like, what kind of things you're investing in currently and like what your focus is for your portfolio, based on this access to data and you know how you're kind of understanding things. Now, I guess, when you talk about building up your portfolio and stuff like that, what would you look at as some of the challenges that you have experienced along the way?

Speaker 2:

Well, I mean, surprise, surprise, everyone's scared of the interest rate bump. It certainly pinches the lower cap rate products, so when you're looking at condos and single family homes, it diminishes the rate with which your property is going to depreciate. That's why we also have the retrofit component. The retrofit component often has a cash flowing aspect to it, and so that's where we can mitigate some of the risks associated with interest rates that a lot of the portfolios won't.

Speaker 1:

Yeah, no for sure. Now, when you look back at building up your portfolio, what would you say are some of the obstacles that you've faced, maybe outside of the interest rates increasing in the last couple of years?

Speaker 2:

Well, I mean, the biggest one is obviously just getting your name out there. We're a relatively small operation still and we're not able to syndicate at the public market level yet, but we are under BC Securities, we're audited by M&P, so what we do is we make sure that we get our name out there as much as we can to try and make sure that people are aware of this as an option.

Speaker 1:

Yeah, great In terms of what you're most proud of, what would you say is one of your biggest successes as you've been growing this company.

Speaker 2:

Well, we've had a great deal of very profitable flip outs on the condo side and now we're in the process of preparing to do an integrated office play opposite the new Royal Roads campus in Langford.

Speaker 1:

Yeah.

Speaker 2:

And it's a small format Regis type model where we're going to have a high cash flow rate out of it and it should have a really strong ROI.

Speaker 1:

Yeah, yeah, I think that's obviously something that a lot of people are after these days, especially when you look at the unpredictability of the market. With, you know, the single family residential homes going down a little bit, interest rates going up, you know everyone's looking for something that they can use to at least balance their portfolio if they are in a situation where their cash flow negative even in some situations. What would you say when you look at all the different acquisitions you may have had? What would be some of the biggest lessons that you've learned along the way?

Speaker 2:

Well, I would say definitely don't overreach. You know a lot of people surrounding us right now are getting severely hurt A lot of developers, a lot of retrofitters. They overreached, they got too leveraged at the peak of a 10 year cycle and you can just see the damage, the carnage around you. You know the number of development sites with a DP already approved that just aren't going to go is actually pretty alarming.

Speaker 1:

Yeah, yeah, I can completely appreciate that. I'm part of a couple of really active real estate investing communities and there's been, you know, a lot of issues of bankruptcy, insolvency protection, receivership, like all kinds of different things happening right now. So I think you know this is the first time we've really experienced a downturn like this in the last 15 years. So for someone that got in five years ago, you know everything looks good and then we're moving ahead with certain models and stuff like that. But then you know life happens and you know they don't really have a plan B or plan C to bounce back from right. So, on that note, we're just going to take a really brief, go ahead.

Speaker 1:

Sorry, I didn't mean to cut you off.

Speaker 2:

Sorry, from an economist perspective, there was a correction in 08 in Canada. Um, uh, there was a correction in 08 in Canada, but it was very short and very weak. Um, but if you look at the um, the quantitative easing factor, and how much quantitative easing affected that, uh, that's why we were able to drag our typical business cycle from seven to 10 years, uh is because of this quantitative easing, and so, uh, it's. It's really tricky because, um, you don't want to overinvest, you don't want to over leverage at the peak of hype.

Speaker 1:

Yeah, but that was the question right. Nobody really knew when we were going to hit that ceiling. So I think there's a lot of people that maybe have some regret they could have sold if they'd known at the peak of 2021, if you could have that crystal ball and stuff like that, right. But I think it is really important when you are a real estate investor, especially if you're using other people's capital, that you have to be very, very conservative and really kind of plan for the unexpected. I mean, nobody expected 10 interest rate hikes in a year. But at the same time, I think you always have to be looking forward and try to be cautious, especially when you are working with other people's money. But on that note, we're just going to take a really brief break for a word from our sponsors and we'll be right back.

Speaker 1:

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Speaker 1:

I value transparency, integrity and trust. If you choose to work with me, you can be assured that business will be conducted honestly and openly. Time is of the essence in this industry, so you can expect nothing short of quick, clear communication from me. I'll keep you informed every step of the. So you can expect nothing short of quick, clear communication from me. I'll keep you informed every step of the way so you feel comfortable throughout this entire process. Our homes are where we eat, sleep, relax and play. My clients' best interests are at the heart of everything I do and, with this said, my service to you doesn't end when the transaction does. As your realtor, I'll not only help you buy and sell your property, I'll also educate and support you along the way. I want to help you fulfill your goal of home ownership and become your trusted real estate resource for life. I can't wait to share my passion for real estate with you. More importantly, find you the perfect house to turn into your home. Looking to buy, sell or invest in Durham Region or Toronto? Let's chat.

Speaker 1:

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Speaker 1:

Hey everybody, welcome back to Inspire to Invest. I have Nick Green here with me today from Parametric Properties and he is an economist based on his background in education. He's using a lot of data, analytics and market research to basically help to understand the real estate market and find hidden opportunities and also value properties properly. So I guess one of the things that I want to know is what would you say is one of the craziest things that you've experienced as a real estate investor so far?

Speaker 2:

Well, I mean, it's actually crazy that we don't have this data as abundantly available as we should. You look at the states they're five or 10 years ahead of us and the quality of the data is becoming better and better. I mean, you look at the gross rent pattern and tracking in the United States and Arizona and New York, they're able to actually project a year in advance what the NOI stabilizes going to be based on gross revenue patterns and Freddie May and Freddie Mac underwriting. But that information is siloed in Canada and, yes, the 2016 lawsuit against the Toronto Real Estate Board kind of loosened that a little bit, but it didn't blow the doors open, and so things like trend analysis and fundamental analysis stuff that has been used in the stock market for 30, 40, 50 years is just starting to become prevalent in the real estate market.

Speaker 1:

Yeah. So now for the average real estate investor, for someone that's just getting started, where would you suggest that they access information like this so that they can make sure they're doing the right research and understanding the landscape before they make an investment?

Speaker 2:

Well, that's the tricky thing is is that any data that's released by a real estate board is usually 60 to 90 days out of date.

Speaker 1:

Yeah.

Speaker 2:

Because what's happened is is that the real estate board doesn't post pending transactions, they only set up closed transactions. And even then, if you did it at the start of the month and set up closed transactions and even then if you did it at the start of the month it could be another 30 days till that's published, and for that reason there actually isn't a really great source for that, whereas if you start looking at trend analysis from the perspective of a real-time feed, you can see definitive patterns here of ups and downs on a daily basis that have significant value changes, and this can correlate often to bumps in interest rates. It can correlate to, you know, just seasonal changes. Days of the week You'd be shocked to see that transaction sales values drop off a cliff Wednesday and Thursday relative to Monday and Tuesday.

Speaker 1:

Yeah, so for someone that wants to access like that kind of data like you're just showing us, would they just connect with your business, like, is that something?

Speaker 2:

Yeah, that's what I recommend.

Speaker 1:

Yeah, yeah. And in terms of how you differentiate yourself, obviously you've got this really tremendous background in economics and stuff like that Would you say that's really the main key differentiator in your business compared to maybe others that are in the market right now?

Speaker 2:

Yeah, very much. So I mean, you're only as good as the intelligence that you have.

Speaker 1:

Yeah, yeah, I mean, that kind of leads into my next question, which was what's some of the best advice you've received since you've been investing in real estate?

Speaker 2:

received since you've been investing in real estate. It's a marathon, not a sprint, making sure that you are both taking the right risks, but calculated risks at the same time.

Speaker 1:

Yeah, yeah, no. That makes perfect sense Now, I guess, in terms of what's next for you. Obviously, you have access to all of this data. What would you say is a trend that maybe people aren't paying a lot of attention to right now, or something that would pique your interest, based on the data analytics that you've been looking at?

Speaker 2:

I would say the Mississippi lawsuit. So not a lot of people know about this right now in Canada, but there was a massive settlement in the United States against the real estate board, and now there have been copycat lawsuits filed against many other US boards and just recently against the Toronto and the Victoria board. So what's so interesting about this is that the arguments are kind of three major levels to it. The first is that because you basically have to offer a buyer's agent a commission, there is kind of a cartel pricing issue. That one I can't do much about, can't really affect, but the other two are about blind bidding and incomplete information, asymmetric information, and so what we'd be looking at is how to apply this to track money laundering, to potentially use it for statistical deviation tracking, to go after it for the purposes of supporting realtors and having better quality intelligence. So there's a bunch of aspects to this that we're just starting to develop.

Speaker 1:

Yeah, I mean, I think that's one thing I find really interesting, even just with the Trezza updates that we had here in Ontario. Yeah, I mean, I think that's one thing I find really interesting, even just with the Trezza updates that we had here in Ontario, like basically saying the seller can disclose the offer prices but they're not required to. And I just find that really interesting because I do think that there would be a lot of value to showing that, just so you know that you're not overpaying for a home. There was one property I was involved in an offer presentation with and it was only listed about $850. It wasn't the nicest home, not in the nicest neighborhood, and it went for 1.3 million and the highest bid was about 150,000, behind the next bid, like 30 offers.

Speaker 1:

But I think you know, from a homebuyer's perspective, I would want to know, like is it just going to be $10,000 to overtake the next person, not 150,000? And then, of course, issue could come down to a house not appraising for that and you run into issues with financing and stuff like that. So from my personal perspective, I really think that it should be definitely more open compared to how it has been. But I do understand from the seller's perspective, of course they're trying to maximize what they can net for it. But perspective, of course they're trying to maximize what they can get for it. But begs the question like where is a happy medium on that Right?

Speaker 2:

Absolutely.

Speaker 1:

So I guess, in terms of real estate investing and how it's changed your life, obviously the purpose of this podcast is inspiring people to invest, so can you talk a little bit about how real estate investing has had an impact on your life and what your financial freedom number is?

Speaker 2:

Well, okay, so I guess first off, financial freedom number. I don't think there is such a thing for me, and the reason why I say that is because I think that having a stable cash flow is more important than having an absolute number. So having a comfortable cash flow to be able to live a comfortable lifestyle is more important to me than anything else. Sorry, can you repeat the question?

Speaker 1:

a little bit. Yeah, just how real estate investing has impacted your life.

Speaker 2:

Oh well, I mean honestly, it's an obsession for me. You know, I drive around Vancouver, victoria, and I point to this tower and that tower and go. Oh, I did this and this and I I did that on that, and my wife, uh, honestly, just just bored of it at this point in time.

Speaker 1:

But you know, it's, it's a passion of mine. I obsess over it. Yeah, what would you say? You would um want to tell someone that is starting out as a real estate investor right now, like, would you say that there's somewhere that, um, you think is a great place for people to be looking at, or a particular asset class that they should be focusing on.

Speaker 2:

Anything with a higher cap rate or cash flow integration right now is probably your safest bet, and the simple reason is is if you're running negative debt relative to the cap rate that you're buying at, you're probably going to underperform, and so if you can find a niche that has a good cash on cash that's going to outperform your debt, so you actually get positive leverage on your debt. That's what you want to be.

Speaker 1:

Yeah, no, that makes perfect sense. Now, in terms of quotes, again, I'd like to see what inspires my guests, so is there anything in particular that motivates or inspires you when it comes to favorite quotes?

Speaker 2:

There's a really amazing book that I read when I was 22, called the Saint, the Surfer and the CEO, and I won't quote it directly, but I'll say that the premise was is to learn how to find balance between spirit, between motivation and between genuine, like hardcore hard work, success, and finding that balance is absolutely key.

Speaker 1:

Yeah, yeah, and I think that's why a lot of people do start investing in real estate that eventually, they want that lifestyle freedom and they want that balance. So I think that's a great quote to leave everybody with. Now, for anyone that does want to get in touch and wants to understand more about your unique data analytics, what's the best way for them to get in touch with you?

Speaker 2:

If you could reach out at wwwparametricpropertiescom, that would probably be the best.

Speaker 1:

Okay, great, so we'll leave that in the show notes below. Thank you for your time today and for anyone that is tuning in. Thank you for your time today and for anyone that is tuning in. Thank you for your time. If you have enjoyed this episode, make sure that you have subscribed below and you're following along at Inspired to Invest podcast on social. And, of course, remember, when you invest in yourself, the sky's the limit. Thanks again. Thank you to WellShare for bringing you this episode of Inspired to Invest. The views represented on this podcast are for general information only and does not constitute investment or other professional advice or an offering of securities. The host and guests featured on Inspired to Invest make no representations as to the performance of any particular investment. Should you decide to make an investment, you are responsible for conducting your own review and analysis. It is recommended that you obtain independent legal accounting and tax advice from licensed professionals.