By Scott Street
Like many of you, I had the opportunity to watch some of the world’s best athletes compete this year in the Summer Olympics. I find it is always a great opportunity to watch and enjoy a variety of sports that I don’t generally get to see, and it always amazes me to hear the diverse and inspiring stories of these great athletes and the journeys they have been on in order to be where they are today.
If we were to compare real estate investing to different Olympic sports, buying single family homes could be likened to sprinting; like all great sports there are many important things you need to do in order to train and compete well, but the actual event of sprinting is really quite simple.
Buying multi-family properties, however, may be compared to a triathlon, as there are multiple facets to understand, many disciplines to master, and in the end the actual event is pretty complicated and can take quite a bit longer than, say, a simple sprint.
Now, if I had to choose an event most like development, I would have to say it would be like a decathlon, which consists of a group of athletes competing in ten different track events, with the resulting winner being the person that accumulated the most points throughout all of the events. In order to win a decathlon you can’t just be the best athlete at one event, you have to be great at all of the events.
So, if you undertake the ‘Real Estate Decathlon’, also known as development, one of the key events you will need to participate in is “Navigating City Hall.” Some other events in this decathlon will include civil engineering, financing, subdivision work, joint venture strategies and so on, but we’ll just focus on City Hall for the purpose of this article.
In some cities or municipalities, City Hall can serve as a valuable partner that will make the process easier for you and will help coach you along the way - their systems and ability to see the big picture, instead of a bureaucratic process, will have a very real impact on both your success and also on your profit. Unfortunately, in other cities or municipalities, it can feel as if the Staff are tripping over themselves in order to throw up as many road blocks as they can; it can seem as if their motto is “We’re not happy until you’re not happy”. My business partner, Nick Derksen, and I have accumulated all of our development experience within Chilliwack, BC, which luckily rests in the former category (which is one of many reasons why Chilliwack is a Top Ten Town in BC). However, we have heard enough from our relationships within the building and development world to know that regrettably the latter is more prevalent.
I have listed some tips and tricks (and some stark realities) below to help you on your journey alongside City Hall in order to assist you in being the best real estate decathlete you can be:
- City Staff are not paid to dream with you. This may sound a bit contrary to the attitude of Team that most of us have, but the reality is that it is not their job to dream with you or come up with creative ideas for your project. If the Staff were to do so, it would put them in a compromising position, and I would expect a legally precarious position as well, which isn’t ideal for anyone. Their role is to simply tell you if you can do your ideas within the boundaries of the City bylaws and provincial legislation. They may offer suggestions to help tweak your idea in the best interests of the City, but expecting more from them isn’t fair. I recently forgot this in a meeting with a high level City Staff member, who politely and gently reminded me of this truth.
- Respect City Staff’s time. In Chilliwack you are able to go to City Hall at any time and meet with a Staff member at the Building Department counter for a few minutes; however, it is good to remember that the Staff in most City Halls are quite busy with stacks of work on their desk, so when you go in please make sure that you’re prepared and concise. For building relationships we always chat for a minute or two as we know many of the staff personally (see point #6 below), which means we warmly ask about vacations, kids, or other interests, but then we make sure to head directly into the reasons we dropped by. Also, it is a good general rule of thumb with any professional to stay away from too many theoretical conversations – keep it to your project and what is likely to happen. We know first-hand that treating our professionals well and not wasting their time actually lowers the billable hours we see. Sure, the City doesn’t bill the same way your other professionals may, but you don’t want City Staff rolling their eyes when you walk in because they know they’re about to lose a large swath of their productive time.
- If possible, have a brief meeting with your contacts at City Hall before you write your offer. Often after we do our first brief and high level analysis of a property, we draw up a freehand sketch of what we are wanting to do and we meet with the appropriate people at City Hall to get their input. We ask questions about how the Staff view the proposal, the zoning, and any issues that we may not see in regards to achieving rezoning or the process of subdivision. Items like late-comers fees, offsite servicing costs and other City requirements may influence our offer and analysis. The meeting might be 15-20 minutes but it really helps hone our research. For a more complicated project, or after we have written our offer, we may ask the City Staff to take our proposal to the Design and Review Team (DART) where all of the key City departments can provide input on our idea.
- Expect delays. The reality is there is too much going on for City Staff to see the entire project from the start. If I were to ask you to plan and execute an incredible vacation to somewhere you have never been in 10-15 minutes, you might get lucky and pull it off, but chances are there will be a few (possibly significant) missed items along the way. In the same way, please don’t expect City Staff to foresee all costs, roadblocks, hurdles, and requirements at the beginning. Most development projects over a 5-lot size have unique characteristics that Staff won’t necessarily see at the start nor will they see it until they are actually doing the work about mid-way through your subdivision process. Accept this will likely happen and be prepared for the unknown. Yes, that sounds tough, but we are talking about a mental attitude more than anything. Unfortunately in the development world there are some things you just can’t plan for… which is why it has more risk than buying a single family home.
- Consider using a consultant. Every day the Staff at the City live and work in an environment that has many rules and is driven by legislation and bylaws. Although we develop land, we are not in as many high level discussions every day, regarding multiple projects, as City Staff are. The reality is that we are at a distinct disadvantage and we aren’t prepared to put in the time in order to level that playing field. There is legislation and bylaws to understand, and although City Staff do their best to cover off everything, they do make mistakes or they do not always see something that should be permitted. On most of our projects we have used a consultant that works with many municipalities within the Lower Mainland. He is hired to be our advocate and to make sure we are able to maximize what we want to do in any given development. On occasion, he also acts as an interpreter to help explain why or how something is going to happen. Finally, he helps us with his vast experience to see blind spots or impending challenges that we may not necessarily see or he’ll provide us with questions to ask that we may not have thought to inquire after, making the project go more smoothly.
- Put relationships first. If you have ever heard or read anything by Nick and I before, this has been said many times, but it bears repeating: PUT RELATIONSHIPS FIRST. You are working with professionals who have put significant time into achieving designations, so if you treat them unkindly, you should expect that it will come back to bite you sometime in the near or far future; it’s inevitable. Yes, City Staff will make mistakes, but we have found the City of Chilliwack to be very fair, do their best to correct those mistakes and they go to bat for us when needed. When we have extended grace to others for their mistakes, we have received the same back for ours, which creates a mutual respect that continues to serve us well every day, especially within our great working relationship with the City Staff in Chilliwack.
Scott Street and his business partner Nick Derksen have purchased and developed land and built residential homes in Chilliwack, BC since 2010 with the purpose of literally building their own rental portfolio. They currently have 5 development projects on the go and are actively adding to their rental portfolio. Both Scott and Nick are also Real Estate Investment Advisors with REIN.