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Making It with Jon Davids
151 - “I Built A $40M Portfolio With Zero Investors” | Isaac Olowolafe
00:54:57
Jon () sits down with Isaac Olowolafe, a real estate entrepreneur turned tech investor. Hear Isaac's amazing story of his growth through the industry and how he went from buying apartments to founding a real estate empire, and so much more. And follow...
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- [00:00]
John Davids
What's up guys? JD here. And on today's show, your brain is going to sizzle. I know mine is. I'm talking to Isaac Olofe, who is one of the most impressive entrepreneurs I know. And I don't say that lightly because I know a lot of entrepreneurs. This guy, as a teenager bought his very first apartment for no money down, bought it for free, ended up making a profit of $75,000 on it, plus many years of cash flow, and then did that exact same thing over and over and over again with no money down. And we're gonna get into exactly how he did it. It is a crazy story. This guy is an artist and a scientist when it comes to making money in real estate. Then he built a brokerage, he built an asset management firm, wealth management. And then he put all that aside and started a VC fund. And now he's on his way to his second VC fund with tens of millions of dollars under management, investing into some of the biggest technology companies today. This is a wild story. And we get into the weeds on this. You're gonna wanna sit down and take notes because we get into specifics, into numbers. This is my favorite kind of conversation to have. Under the collar, mud and dirt under the fingernails. Cause we are getting into the weeds. That's coming up in just a second. My name is John Davids. If you like the show, go ahead and smash the subscribe button on Apple, Spotify, YouTube, tell your friends that's how we grow. If you want my best stuff to your inbox, go to john davids.com, get on the newsletter. And now let's get to my conversation with Isaac Olawalafe. You're listening to Making it with Jon Davids. So Isaac, you and I met a few years ago through a mutual friend, the legendary Sunny Mocha. And I got to tell you, when he first introduced you to me, before I met you, like this is how he described you to me. I want you to kind of put yourself in my head. So he was like, there's this guy, he started with real estate, then he went into insurance, then he went into wealth management. Now he's doing super well. And I just had this vision in my head of like, I don't know, like a 67 year old gray haired dude who had been at this for 40 years. And then I met you and I was like, what the hell is going on here? Who are you? So can you just tell for our listeners and viewers here, like give us the one minute nutshell of kind of how you Started and where you are today.
- [02:34]
Isaac Olofe
Excellent. Yeah, no, again, serial entrepreneur. You know, I just clocked 20 years into the business of entrepreneurship. Started when I was 20 years old and really started off as a real estate broker and then wanted more challenges, so became a real estate developer builder. Our first project was a nine story building. And while doing our second project, 23 townhouses, saw the impact of technology in Canada and innovation. So through that launch an angel fund, Dreammaker Ventures, and dabbled into the tech space and then through that, launched the first institutionally backed venture fund for black founders.
- [03:10]
John Davids
It's been crazy through like multibillion dollar ideas and it's so in record time. So let's go to the very beginning here. I think you told me this story, but I can't remember it that well. When you first, first started, like, first of all, were you born into money? Like, do you come from a rich family?
- [03:27]
Isaac Olofe
No, no. You know, my parents, you know, we came here when I was 4 years old, lived in the Jane and Finch area, then moved to Martin Grove in Albion. And then I was, you know, we were fortunate. I was playing soccer at that time. My grade eight coach, you know, convinced my parents, hey, you guys should move to Woodbridge if you want to get scouted, if your son wants to get scouted for soccer. You know, soccer didn't pan out, but, you know, we moved to Woodbridge and really got exposed to the other part of Woodbridge outside of soccer, which is entrepreneurship, construction, real estate development.
- [03:58]
John Davids
Okay, so you, how old were you when you first got exposed to real estate?
- [04:02]
Isaac Olofe
I probably say around 16, 16, 17, you know, both from high school and then my dad was just getting into becoming a real estate broker as well too, so. And you know, they always, always had the entrepreneurship mindset. My mom was a vet doctor and my dad again got into, got into real estate, first studied engineering and then got into real estate.
- [04:23]
John Davids
So he gets into real estate. You're 16 years old. @ some point there, I don't know if it was right away or later on, you started to accumulate apartments and I think you instead of taking cash as commission, you would take apartments as commission. Am I right on that?
- [04:38]
Isaac Olofe
Correct? Yeah. So got my real estate license at 21. So at that time I gone to University of Toronto. Obviously my parents focus on school, school, school. So gone to U of T, was taking economics and then got my real estate license, was working a midnight shift at ups, you know, and then took the capital from ups, whatever I was making, and then just started to structure deals. The first deal was like $125,000 condo at Kipling and Steel's because that's all I could afford at that time. Then another condo in Malvern. And then my first pre construction unit was right at frontispadina 325 Front street and I bought it right after it was built and I saw what it was originally bought for and I'm like oh that's interesting. Only been a year, why am I paying that much more? And that's when the whole pre construction bug got into my head. And then we sort of changed. I changed my sort of strategy on how I was buying real estate and went full forced into the pre construction boom that went on for almost 10 plus years.
- [05:44]
John Davids
So you, you said the first unit you bought was $125,000 and that was not pre construction, that was an apartment that existed. And what did you, so how did you structure that first, first deal? Like where did you get the 125 from?
- [05:57]
Isaac Olofe
Yeah, so that, that one back then there was zero down 40 year amortization and I was a real estate agent. So my commission from the, from the transaction was what I used for the closing cost. So it was a zero down transaction. Gosha Bank 6.75%. Still remember a 40 year amortization needed about 2,500 for closing costs, which is about the same amount that I got for commission. So I was able to get into the real estate game that way.
- [06:25]
John Davids
So when you say commission you were the buyer?
- [06:29]
Isaac Olofe
Correct?
- [06:30]
John Davids
Commission. So you were, it was your own commission on your own transaction?
- [06:34]
Isaac Olofe
I was representing myself. Yeah. As a, as a, as a real estate agent. I said, you know, so I'm going to buy real estate. Might as well represent myself on the deals as I was running the numbers myself as well and finding.
- [06:46]
John Davids
So you had this job, you said you're working the midnight shift at ups, but you didn't actually even need that UPS money because the first transaction had, you had no money down, it was all commission.
- [06:56]
Isaac Olofe
Correct, Exactly.
- [06:57]
John Davids
All right, so you do that and let's just stick to that first deal for a second. You seem to know your numbers really well. So how did that pan out? You put 125,000 in. What did that cash flow and what did you make on that?
- [07:08]
Isaac Olofe
Yeah, so we, I held that property for about eight years and then I think by the time it sold, prices started to go up. So it sold around 200,000. So really, you know, a property that was really zero, zero down levered 100% yielded out just under $80,000. So it was a, it was a great transaction, great experience. Also got into the property management through that property, obviously managing a tenant, finding a tenant. At that time, we were using kijiji, throw it on kijiji and then, you know, screen through all the other tenants. At that time, tenants paid. It was easier to manage tenants, unlike, unlike right now. But it was. No, it was a good, it was a good learning process. Like I said, you know, in between, you know, studying for my real estate license and midnight shift at UPS and trying to get over 60% or 70% U of T economics classes was, was a busy period.
- [08:04]
John Davids
Okay, so, so just to close the loop on that, so you bought it for 125,000. You ended up selling it eight years later for 200,000. But you were also getting rent money throughout those eight years. So someone was paying you rent. And were you making a profit every month?
- [08:18]
Isaac Olofe
About making about 200 to 50, 250amonth. Plus the mortgage was being paid down as well too. So really like again, it was the most ideal transaction where making net profit on the cash flow because we were managing, I was managing it myself. Paying down the mortgage. The tenant was paying down the mortgage. And there was appreciation as well too.
- [08:40]
John Davids
All right, so that was transaction number one. And then did the next. You talked about three or four of those. Did they all kind of follow that same formula?
- [08:47]
Isaac Olofe
Yeah, so they all follow that same formula until I got my first property downtown. And that's when the aha moment with the pre construction game started.
- [08:56]
John Davids
So you realize that there was a much better arbitrage to be had on pre construction. So can you talk about what you saw then, what were the unit economics? Like what could you buy and then make on those transactions?
- [09:07]
Isaac Olofe
Yeah, absolutely. So that's when again, using what I was studying at economics, I said, okay, it's all about fundamentals. Like what are the fundamentals of Toronto? So you got to think back, this was 16 years ago now. So I'm like, you know, the fundamentals were, okay, the government is immigration, big topic now. But 16 years ago, saw that boom, immigration, the government's talking about infrastructure that they're going to be investing into the city and to transit. So that was a big indicator as well too. Institutional indicator, all the universities, so that was driving good jobs and all that kind of stuff. And then I started to look at what are the resale price points. So then when I saw resale at that time, condos were hitting now 200, 250. Then I went and saw pre construction launches. But at that time I was only two years in the game, so I didn't really know the developers, the Tridels, the Phantom developments, the Daniels. So I did what most people would do, wait in line until you get a shot. So I remember there's one site I was first in line after waiting almost three nights. Sunny will tell you a story. Guys were going out clubbing and all that. I was just there waiting. We had a lineup, a signup sheet, and more and more people would just come until it was open at night and first walked in secured at that time, maybe six or seven units at an average of, you know, 150 to 175. Because the market value at that time, finished product was 250. So we're almost buying at wholesale and you compare it based on the market retail price, but closing in three to four years and you put down 5% down. Plus I was the real estate agent and you're getting 4% commission as well too. So I'll tell them that, you know what, I don't need no commission still staying at home. So I really don't need, need the money. So let's roll that commission towards my down payment. So really I was putting 1% down per unit. And they were about 50 to 75,000 below the market value based on a finished product. And we got 10 of them.
- [11:13]
John Davids
Okay, pause here. This is like so much gold here. So just just to back up this, the scene you set, you are literally waiting outside an office for three days. You said to get to physically standing in line to sign a sheet that says I want to buy 10 of these units. So each unit you're doing an arbitrage on an arbitrage because not only are you able to buy a unit that's going to be worth, I think you said 250,000. You're buying it for 150 or 175. But also the commission that you make on that as the agent, cause you're representing yourself actually goes to fund the down payment. So these are literally costing you nothing.
- [11:50]
Isaac Olofe
Nothing. Yeah, yeah. Just. Just time. Just time. But the key was really understanding the floor plan, understanding the project and understanding the floor type. So I'll give you an example. So we were securing, you know, 500 square feet, 550 square feet, one plus dens, and making sure the den was big enough to be converted to a junior two bedroom. And then we'll look at what's a junior two bedroom selling for. Because we wanted to get into the lowest product type per category. So a junior one bedroom will be a studio that could convert into a junior one bedroom. So we bought it below the category, but by adding a sliding door, we were now the lowest of the second category. So that's how we were playing out, playing out all our models. So then we'll see a full two bedroom is selling, that 700 square feet is selling, let's say for 300,000. We would buy a one plus den for 200,000 and then insert a full close in door or maybe $10,000. So now once we put in the marketplace, we actually have a two bedroom, two bedroom unit.
- [13:00]
John Davids
Jesus. Okay, okay. That, that third arbitrage that you just mentioned, which is buying the, I think you described it as the high, the highest unit of the second. How did you say it?
- [13:11]
Isaac Olofe
The lowest unit type per category.
- [13:15]
John Davids
So lowest unit type per category. And where, so where did you even get that idea? Was that something you figured out later or you had that on day one.
- [13:22]
Isaac Olofe
So that went through just trial and error. Right. Because again we, you know, I would buy it first. We're going, what's the lowest price? So then we'll buy the lowest price unit. But that's not always the best valued unit. Which then start to change our philosophy of how we invest. We don't invest based on price, we invest based on value. So regardless of where the location was, if it made sense value wise, what is the closest to transit, the closest to the university, the closest to the mall that's being a multi billion dollar renovation, closest to a luxury condo. Right. So we were looking at what the value was, not necessarily the price. And then what could that unit be utilized for? So that one plus den was more than a one bedroom. But it brought us to another category. If we put in a sliding door.
- [14:09]
John Davids
Right. It makes, makes so much sense. I think you just hit on such an important point, which is it's not about the cheapest, it's the best value. It's, it's the same thing. For example, in the E commerce or online advertising world, which is people say, well, I want to spend the least amount of money to advertise. No, you want to spend the most amount of money to advertise as long as the ROI is there. If you can get 3, 3x whatever you're spending, or 5x whatever you're spending, you should spend a million dollars if you can. As long as the numbers hold up, there's no, there's no cap as long as you keep making money. All right, so, so this is. Okay, so that's Great. So let's fast forward here. So you have this operating model. How, how far do you scale that? This whole let's buy pre construction. How many units did you buy with that philosophy?
- [14:52]
Isaac Olofe
Yeah, so we did over 40 projects, thousands of units and more and more people sort of jumped on board after lining it up for probably five or six sites and being, you know, one of the youngest, I was first in line and just coming with a different style that a lot of the developers didn't see years before. A lot of them reached out and said, okay Isaac, you know what, you don't have to stay outside for this launch. You know, let's, let's sit down and see how we could work with you as a. Back then they used to call the VVIP and the vip. Everyone became a VIP at the end of the day. But really some had relationships. So you know, some of these developers will call us in, call me in on my team and say okay, look, we're about to launch in a month. You obviously have an understand of floor plans and you have an idea of what you're looking for. So here's the grid. Lay out what you want on this floor. So then I'll sort of draw it out and say okay, you know what, give me this one plus den, give me a junior one bedroom there, Give me a couple studios. Give me this two plus den which becomes a three bedroom. And then I say okay, we're going to take 30 units. The best project where we, where we did that was Jade Waterfront. But that one, we just went all out with the one beds. That's right on Lakeshore and Park Lawn. That's where the Lakeshore and Park Lawn boom was just about to happen. South Otobico, Mimico Go is not too far. You know, we knew there were signs the Christie factory was going to shut down. Multi million multibillion dollar developments. Omni is doing their development sites, empires there too. And all their prices, finished products was easily 100 to 200,000 more. So this was an easy one. Right. We sat down at that time with, with Hunter Milborne, great mentor in the game. And then Henry from Phantom sat down, said okay, you know, you guys have about 380 units. How do we move 70 of them? And this is how we want to move it. Right. So we structured the deal and yeah, that was a very successful project for everyone.
- [16:49]
John Davids
Okay, I want to hit on two things. The thing you described at the beginning was a framework for how you buy, how you arbitrage, how you finance through commission. So I get all that. Who are you selling all these to? Because you have, you know, whatever it is, dozens and dozens of apartments. Do you now have a buyer list that's adding up? Do you have others that are doing the sales for you?
- [17:07]
Isaac Olofe
Correct. So by that time, you know, then we launched our real estate brokerage, Dreamaker Realty. Scale is up to about 25, 30 licensed agents. And really we were providing access to those that had no access to this type of model and no access to units. Right. Because like anything else, real estate, especially if you want to get a deal, it's all about relationships, all about getting access. I was fortunate I got access to it and there was a lot of people, whether it be my age, from my community, that didn't have access to those units. So we would package it and everyone got it one for one for whatever we got access to, they got access.
- [17:46]
John Davids
Okay. And you keep saying we and our. Who's actually working in the business on day one. And then as you were scaling like before, you had the 25 agents who, who was doing this.
- [17:55]
Isaac Olofe
A lot of it was me, myself and I.
- [17:57]
John Davids
It was you. I love the royal we because I say we also when I'm referring to myself.
- [18:02]
Isaac Olofe
No, no, but, but you know, I had some close friends that were, that were part of it, that we were balanced a lot of ideas together. Obviously my dad was, was there too, but more so on the resale side. And really, again, it was just sort of a lone soldier going into, going into the space. Again, fortunate to have those that, you know, saw somewhat the vision it was. You know, there's really nothing to replicate. Like when the, when that condo boom started, like right after the 0806 crash, you know, prices were low. I remember in Liberty Village 5 Hannah specifically a site they were giving away two story condo towns for 149 with 5% down. You know, and the problem is there was a lot of gimmicks in marketing in terms of, you know, buy this and get a car and all that kind of stuff. But we were like, okay, how do we not get distracted by all the gimmicks? Let's narrow down to where the fundamental values are.
- [19:03]
John Davids
And the fundamental value, because you're not a retail buyer who cares about getting a free set of AirPods. Like you want to make money on the transaction. Your product is this pre construction which you're going to flip. And by the way, there's a lot of like, it's a flex, obviously. And I'm the same. We say we when I'm referring to myself. In the early days it was just me. But there's actually, I think, even a bigger flex in the fact that you're running this whole thing yourself. The fact like I'm super impressed by someone who runs a hundred million dollar hedge fund with like one person like that, that actually is even more impressive to me than having an army of people. Because it's like, no, dude, I like, I can manage a billion dollars. What's the problem with that? So I love the fact that you're doing this kind of on your own. So what I'm curious about is at what point here. So does this model that you're running break at some point or are you doing the same thing today? Or did this have a lifespan?
- [19:51]
Isaac Olofe
Well, the interesting thing is once we did like 30 projects, I went to Bay street and said, look guys, let's launch a fund that strictly buys pre construction. Right. So this was before. Great. Brooks. These were before some of the other funds that entered the equity space, condo space, pre construction space. And what year is this?
- [20:17]
John Davids
Sorry, what year is this?
- [20:19]
Isaac Olofe
So this would have been probably 13, 14 years ago.
- [20:23]
John Davids
Yeah, so we're like 2010, 2011 year.
- [20:26]
Isaac Olofe
Yeah, 2010. 2011. Yeah, yeah, exactly. Right. So it was like people didn't really see the scalability of pre construction. And then the reality is it went on a run for another decade. Right. So it went on a run for a decade. When the fund aspect didn't work, that's when I said, okay, how do I challenge myself more? And then that's when, you know, six years, seven years into doing pre construction, we jumped into the development space and.
- [20:55]
John Davids
Said, let's see, why didn't the fund work? So you went to folks on Bay street and you said, you know, here's what I'm doing, here's my portfolio, here's my returns. And they just said, no, we don't like this asset class.
- [21:06]
Isaac Olofe
Yeah, they don't like the asset class. We don't think condos has any legs. Prices are about to drop. Yeah, like no one believed that the condo boom was going to go for another decade. Right. So. And they didn't believe on the fact that you could buy for 200,000 and by the time it's built it's worth 500,000. And you know, and you raise the deposits and then you assign it in the marketplace, which is what people were doing individually. I just wanted to do it as an institutional scale model.
- [21:33]
John Davids
How big did you get? Like before you tried to raise the fund, how big were you how many units did you have at that point?
- [21:40]
Isaac Olofe
Yeah, so like I said, we probably moved like close to 700 plus units pre construction. We were working with, like I said, close to 30 different development sites. We had a solid six or seven CL close developers that, you know, we will meet with and we had the ability to scale this more. And really. And again, it's just understanding the model. Okay, there was the Liberty Village Growth, then there was the Queen west, then there was the King west, then there was Canary District, right around the time Pan Am Games was about to launch. So we were picking up all these different communities that had their blocks of buildings that they were about to build. And then we'll compare it with the retail price and then see what's that gap, what's the commission, how do we throw that into a model and then put points on the raise. Right. And then convert it into a. Let's say we hold it for five years and it becomes a rental rate. So there was a lot of things that was going through, going through my mind, but I think maybe again at that time it was just not something that was an asset class that was packaged.
- [22:49]
John Davids
Yeah, I get it. So did you ever run into funding problems? I mean, you said you did the 700 times. Was there ever a point where you're like, I'm out of money or were you just constantly doing this with, with leverage so you didn't need more money?
- [23:00]
Isaac Olofe
Yeah, we were always turning it. Like we were always, we were always turning it. We were always selling because there's always demand for units to buy because we didn't have to sell at the market value once it's built, but we had units in different buildings. And then the rental game started to boom as well too. Rental prices started to go up, rates were still low. So this like there is a period for like seven years, eight years. It was just perfect. Rents were going up, prices were going up, rates are low. There wasn't that many people that caught wind of that model. And then even when they caught wind of that model, they didn't have the full understanding of the floor plates. What units works, what units doesn't work, what locations work, what locations don't work.
- [23:48]
John Davids
You were so far ahead on the unfair amount of knowledge that you had. Like, forget about the arbitrage and the business model, the fact that you were an agent, so you were using your commission to pay for this. You also just knew everything about the market. The areas were you spending, like was, were you just spending hours and hours every day studying neighborhoods and Economic trends. Like was this, was this your focus?
- [24:09]
Isaac Olofe
Yeah, that was my focus. And really again looking at really the fundamentals of things. And again, that speaks to how we were able to do the Yorktail, our first development site at a time when people thought, why do you want to launch a condo across a Yorkdale mall?
- [24:24]
John Davids
So tell me about that. That's about the time that I met you. You were building that. So how did that transaction come up and what was it?
- [24:30]
Isaac Olofe
Yeah, so I think some of my development friends, I started to plant the seed. I look guys, my brokerage is still going to be selling pre construction unit, but I want to challenge myself more. I want to see if I could stretch my limits. So at that time I was turning 28, 29, said look, I'm going to jump into the development space, right? And they're like, okay, you know, let us know if you find a site. We'll let you know if we find something. And then one of them reached out and said, look, we have a site. It's way too small for us. It's only 0.7 of an acre, is in an area in North York. It's on a major street near the highway, close to a mall that you probably know, Yorkdale Mall. I'm like, okay, let me see it. I go there, I look around the area, I look at the mall, I research. I see Oxford is about to put in $1 billion or so into expanding the mall. I see the province is about to expand the subway. I see there's going to launch the first Digital Hospital at 401 and KEEL 15 minutes from the airport. I see on Dufferin and Lawrence they already started to do those development sites by another major developer. I said, Look, 88 units, nine stories, three levels underground, four townhouses. What's the worst that could happen? I know from a sales point of view we could sell all 88 units. Now I just have to put together a real solid team from the construction side, engineering side, development side, legal side. And that's what I love doing. I love putting together teams, putting together pieces. And that's what we did. And we did what people thought we weren't able to do and we developed and built a nine story building as my first project in four years.
- [26:13]
John Davids
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- [27:34]
Isaac Olofe
Plan from a first project? Have never renovated even a house. I think it went as perfect as a development site could go.
- [27:44]
John Davids
You have no, by the way, you're not a handyman. You don't paint, you don't fix toilets. Like that's not your game at all.
- [27:50]
Isaac Olofe
That's not my game. I'm a big, big dreamer. Put pieces together, put specialists together and literally that's what I did. Whether it was that first presentation to Tarion saying this is what we want to do. All the no's from different lenders that you know, they ask, okay, which family are you from? What you know, what's your first, what project have you done before? And this, that. But what was very good. Again, you know, we speak about the tech ecosystem, the real estate development ecosystem was really having the support from developers that I sold a lot of units for that almost gave like a letter of recommendations. Like yeah, no, this guy's, this guy's good, he understands his stuff. He understands the sales aspect. And if he brings in the right construction team and all that kind of stuff and right guys sort of doing that expertise, we have believed that he'll be able to execute this.
- [28:40]
John Davids
Can you share the numbers from that first Yorkdale project?
- [28:43]
Isaac Olofe
Well, the interesting thing, so like units at that time were selling around 450 to 500,000 for a one plus den to a two bedroom. People were buying it at an average of 300, 350 to 450. So everyone that bought made capital when they sold. We did 88 units we structured in a way where we were able to keep 50% of the building.
- [29:12]
John Davids
Wait a minute. So pause for a second because I just want to make sure I get what you're saying. So it's 88 units. But when you built it, or maybe even before you poured the foundation, you were already selling the units. So you were getting financing from the buyers who were then going to flip the units to somebody else, presumably, or maybe keep them from the sales. That's how this worked, correct?
- [29:32]
Isaac Olofe
Yeah. So for any new developments, you always have to sell 65, 70% pre sold. So we have that done. We didn't have to do any sales center, actually. We leveraged the Joey's restaurant across the street. That became sort of our.
- [29:46]
John Davids
I remember. So it's funny, I remember Sonny would tell me he was at that Joey's all the time because he was just selling your units.
- [29:52]
Isaac Olofe
We were moving a lot of units at Joey's. They liked us there. Right. Because we were again moving a lot of. Moving a lot of units.
- [30:00]
John Davids
And so what was the total amount of money that you needed? Like what did the whole thing cost?
- [30:05]
Isaac Olofe
So I'll say just under 35. So the land was just, I think $35 million. Yeah, the land was just under 6. I'm just under 6 million. Like when you put things in perspective of what that would have cost right now, that's why I like to put. To do a nine story building. Like the infrastructure, the underground is strong enough to do 14, 15 stories. So there's a lot of cost that went into the underground. At that time. I think I was involved in two strikes, I'm trying to remember. Yeah, I think it was one or two strikes. I'm not a guy that loves the winter, but during that period I got to love the winter. We were excavating the underground during the winter. I'll never forget, you know, I had had my hood on and the snow is just falling down and there's a hole and you know, the shoring was being, was being done. It was, it was a wild experience. Like, I think during that period I said I got my PhD in developments.
- [31:03]
John Davids
Right, of course. And you got paid handsomely for it.
- [31:06]
Isaac Olofe
Yeah, it was, it was a. And really the exposure like. And I wanted to do more. Right. And I wanted to build more. And I want to take advantage of sort of the area that I was in, the marketplace that we're in, how we're coming to into the market from. Someone that understood the economics piece, someone that understood the development piece, the sales piece, the marketing piece, the property management piece. So as we were probably halfway into that, we started another site in Pickering. 23 townhouses. We started the 23 townhouses that was under, under construction.
- [31:43]
John Davids
How many of these have you done now? How many developments have you built yourself now?
- [31:46]
Isaac Olofe
Yeah, so we built the nine story building. We built 23 townhouses. We built six townhouses at Bayview and York Mills. That was a special one because I always liked the Bridal Path Bayview area. So that was right at Bayview and York Mills, one Heathcote then. Because we were doing a lot of Airbnb and there's that whole Airbnb boom. And I realized that was not going to be a boom that will last because of the clash with Condo Corps. And we were seeing it firsthand because we actually managed the Condo Corp. On our first one. So we found an old industrial building by the airport. Again, value, it was old industrial building at the end of the road beside a truck parking spot. And we were able to go into the city, develop it, navigate. This was pre Covid when you could go and talk with the city, talk with the planners, talk and build a relationship and show your vision. And we turned this old industrial building into a boutique hotel called Dream Suites at yyz. And we stopped doing Airbnb. And then we, we moved into there. And then all of a sudden we came in, we got into the hotel game.
- [32:51]
John Davids
Okay, what year was that in Dream Suites YYZ?
- [32:54]
Isaac Olofe
So that was. So we finished that literally four months before COVID I still vividly remember. So 2019.
- [33:02]
John Davids
2019.
- [33:03]
Isaac Olofe
We had an event with a few, few artists, entertainers, DJ Envy, Cardi and all that group came, that was December of 2019, excited to launch it, spring of 2020. And then Covid hit.
- [33:15]
John Davids
Yeah. So what did you have a lot of, I'm trying to understand, like the. I understand you had to hire some people. Obviously when you start to do this development stuff, then you need to really have a team. It can't just be you. At what point here, though? Like, just in your own personal financial situation, because you're obviously putting, you know, when you're in real estate, everything you have is in buildings. It's in bricks and foundation. At what point here are you actually financially free or are you, are you still just totally tied up in real estate today?
- [33:45]
Isaac Olofe
Still totally tied up. Because, like, for us, the big, the big goal was to bring on an institutional equity partner. Right. We felt like for us to really scale this and get to a point where we could go from nine story building to doing, you know, 30 story buildings to doing multiple projects. We had to bring in that institutional partner. But to bring that institutional partner, we had to show sort of a track record of what we've done. So that.
- [34:12]
John Davids
Have you done that yet? Are you still looking for an institutional partner?
- [34:15]
Isaac Olofe
So while we pivoted, right, because, you know, once Covid hit, all institutional partners, all institutional capital sort of paused for about 12 months until the market went back up for about 18 months during COVID or two years.
- [34:31]
John Davids
Were you worried? So when Covid hits and you're like in the prime here, what happens to you? Describe March 2020 for me. NBA shuts down. World shuts down. What happened in your brain?
- [34:43]
Isaac Olofe
Oh, it was crazy. It was survival mode. It was like, how do you, what do you do with your development sites? And as we know, and you know, the province talks about it all the time, the red tape of developments, of approvals, getting approvals. So like, for us, we're a mom and pop development company, right? We're not a third generation development company, second generation development company. So we're a mom and pop development company that to develop a site takes time. So if something should take four years, ends up taking six years to develop, and you're burning a lot of cash, that, that could bankrupt a development company or any company, really. Then to add in the layer of COVID at the same time, we're about to launch our hotel, which was supposed to be the cash flow to fund our development sites. It was like two hits at one point, right? So that's when really it's okay, figuring out, okay, what do we keep, what do we sell, how do we position?
- [35:37]
John Davids
Did you have to liquidate a lot at that point or were you able to make it?
- [35:40]
Isaac Olofe
And it was the worst part, worst time to liquidate, right, because it was Covid, right? And. Or you had tenants. And, you know, at that time there was, you know, you can't sort of kick out tenants. So tenants didn't really have the, the incentive to pay their rent during that period. So we were dealing with units where tenants weren't being, the rents weren't being paid. We had development sites that were just being held because now I couldn't go to the city, talk about my project, talk about what we want to do, couldn't present it. So now it's over the phone, and if you don't cash them at the right time, then you got to wait another week.
- [36:20]
John Davids
How bad did it get? So in the height of COVID what was the lowest point and Then how did you move up from there?
- [36:28]
Isaac Olofe
It was scary. Like, it got to a point where, like, we had to sell units. We had to figure out to restructure sites, sell sites. We literally had to figure out how to survive that whole period. And then at the same time, you know, we started to do our luxury custom homes, right? So it was weird. Like, we started to dispose of our luxury custom homes right at like, fall of 2020, because we're like, look, people are, don't want to buy condo units. Like, why would they want to buy custom homes? So we're disposing of our custom homes. And then literally 10 months later, there's a massive custom home boom. So we had a few custom lots that we were still, we were still doing. So it was just a weird period. And then all of a sudden, like, we were getting more calls on our custom home side because we, a year prior to that, started to dabble in on sort of the luxury custom homes. Because of what we did at Bayview and York Mills, we got some, some exposure on the luxury side than what we were doing in Kleinberg. And then it led to King City and then Nobleton. So we were so, like, we accidentally got into the luxury custom homes and we were building nice custom homes at a very affordable price for families. And again, we were sort of a turnkey, turnkey model. So we sort of pivoted to the, to the custom homes. 18 months into it, the hotel started to go up and running. So that's going well. We found another opportunity to do another hotel. So while all of this has happened in 20, 20, 21, obviously, we know that's when a lot of the institutions now start to talk about diversity, inclusion, and all these different things. And that's where our shoulders were being tapped because of what we've been doing in the marketplace and sort of the mission that we had about, you know, affordable housing, giving back inclusiveness within different spaces where it lacks. And through that, it allowed us to really pivot into the affordable housing side, which we're now working with a few developers on that side, and then sort of pivoted to some of the VC space too.
- [38:40]
John Davids
Okay, I want to talk about affordable housing. I want to talk about vc. Before we get there, though, I just have one question. How many. Because I started the talk talking about the fact that you kind of built layer upon layer upon layer. How many revenue stream companies did you have at this point? Because it feels like you had, obviously, real estate development. You're, you're buying, you had an asset Management firm. You also had a brokerage. Like how many streams of revenue did you have coming in?
- [39:05]
Isaac Olofe
Yeah. So again the real estate brokerage was in the, in the peak of. It was doing very well. So that was one. Then property management, we're managing between units and building probably close to 400 plus plus units. Then we were doing a bunch of buying and selling. So through assignment, assignment deals. Then we were doing a little bit of consultant work. That's when we just started doing some consulting work for those that were trying to get into the space and really want to get our wealth of information. Because I believe 20 years was really like 40 years of experience built in. Right. Because very hands on, on all of it. Right. Which is, which is good and bad. The good thing is that like anything from end to end for real estate totally understand it, the processes. So now when we go into joint ventures, you know, we're able to work with larger developers that are looking for a partner that could execute on smaller jobs that they may not want to execute on. On the construction. Yeah.
- [40:06]
John Davids
So even though you like developing real estate is a cash intensive business, you still had other lines of revenue coming in that were adjacent, that are actually paying the bills, cash flows coming. So you're not cash strapped even though you're in a cash intensive space.
- [40:21]
Isaac Olofe
Correct. And that was the reason why we started to dabble into sort of the boutique hotel and really want to build that portfolio. Just like a lot of developers that got in, came in through, you know, they were the contractors. So they had the business of doing the contractor work. Then they became a developer or they had multiple apartment buildings. Then they became a developer or they have multiple hotels and now they're redeveloping their hotels and they're now developer builders.
- [40:45]
John Davids
Why did you get into affordable housing? What was that about?
- [40:48]
Isaac Olofe
So I saw again where the market was going. Like, like, like we're always studying the market, studying what the government is doing, studying what, where their incentives are. And we saw that with, and then when the mayor changed, we saw sort of the push from the mayor, the push from the federal side was all around affordable housing, all around affordable, affordable rentals. So our first dabble into affordable housing was through our foundation in partnership with Habitat, partnership with Black north. And we launched a homeownership bridge program. Right. So that was our first one, Dablin. And when we launched that, we saw the massive demand because we were control, we were doing all the data outreach. So we did all the outreach to the community for it. So we saw 1500 people sign up for 200 homes. Right. So right off the bat we were seeing the gaps on that, on that side. Then we started to talk with different municipalities and all, all of them said we're looking for ways to provide more affordable rental. And then we saw CMHC pumping more dollars into it. So now we're putting together sort of model with different partners. This one, we're structuring it a little bit different on how do we tackle it. And everyone bring in their, each of their expertise. We're bringing in the outreach expertise. The relationship Covid has gone. City is back open. I could do what I do best, go present, explain the vision, what we're trying to do. Figure out the site, bring in the site and then bring in our construction partners and now bring in our lending partners and execute on it.
- [42:22]
John Davids
And is that the biggest focus you have now, the affordable housing side?
- [42:25]
Isaac Olofe
No, actually, no. So like the big, the biggest focus now is on the venture side. Right. So, so really unlocking that, that venture side, we have a partner.
- [42:34]
John Davids
All right, we got to, I got to do a set up here. So for the listeners, everything we're talking about here is real estate. Isaac is also an active VC investor, so tech vc. So let's go there now. How, what was your intro to the world of venture capital?
- [42:49]
Isaac Olofe
Yeah, again, it was so, so just to cut off on the, on the real estate side. So a partner runs it day to day now. And, and I'm more so there on the advisory side and all the years of experience. And then yeah, the VC side, you know, the, the VC bug hit me probably about seven, eight, close to 10 years ago again as we were building the condos, always giving back, speaking at different universities and then, you know, speaking at Ryerson now TMU a gift there, the Isaac Orolafe Digital Media Lab, the student Learning Center. So we gave the gift there and you know, was there to speak with some students. And then I saw right beside it, the launchpad, like, oh, this is nice. Interesting. Founders pitching, pitching their company. And then a few of them came to me, told me what they were doing and how they were raising capital and if I knew anything about raising capital, this is about 10 years ago. Like, like you're raising capital for your business. Like, yeah, we're doing like a pre seed and a seed. Would he be interested? I'm like, in doing what?
- [43:49]
John Davids
This is totally foreign to you.
- [43:52]
Isaac Olofe
So what do I do when I don't understand something? Read up on it. So read up on it. Did some research on it. I'm like oh, wow. Okay. This is another fundamental factor that I actually was now using within the real estate. Said that another fundamental arm was that Toronto is becoming. Come in Silicon Valley North. Right. Which is another indirect impact for real estate, why it's going to grow, which it did help with the. With the growth of it, especially in Toronto and Waterloo, et cetera. Right. So started. Started with that, then did a little angel investing, and then, you know, really saw the gap within the marketplace for underrepresented founders. Right. So at that time, then I went to the dmz, which already had a great incubator at that time. I think they were like four, five years into it. They just celebrated their tenure a couple years ago.
- [44:44]
John Davids
And the DMZ is an incubator associated with Ryerson tmu.
- [44:49]
Isaac Olofe
Yeah. And they're the number one tech incubator out of any university in Canada. So I went there, met with President Muhammad and Abdullah, and said, look, let's. Let's structure a deal where we'll create more opportunity for. For black founders. And we created the first black tech incubator called the Black Innovation Fellowship, was only really to impact 10 founders a year. Now it's grown to impact thousands of founders online and in present, and it's grown to probably the largest black tech incubator in the country and become a model for other universities to launch. U of T and other different universities have launched it. But the benefit of doing that was it caught the eyes of other institutions. And see it like now you've created an incubator where you're able to mentor, collaborate with black founders that are trying to scale their business, but they can't scale without access to capital. Especially.
- [45:45]
John Davids
Were you actually putting. So this partnership that you had, were you actually putting your own capital? Was that the start of your fund, or did your fund not start until later?
- [45:53]
Isaac Olofe
Yeah, the fund didn't start yet. We raised capital. We were. We're fortunate to collaborate with BMO, Shopify, the Canadian Women's Foundation. And we raised $1 million and kicked that off, and it showed great success right off the bat. And then around 2021 was when the whole aspect of, okay, let's launch a venture fund, there seems to be a demand for it, but how big is the demand? So again, that's where it's telling the story, showing that, look, we know where the access is. We see the founders every day. So originally it was supposed to be a $10 million fund. It got oversubscribed. It ended up being $25 million.
- [46:33]
John Davids
And was that you going out to institutions. Just telling the story, correct?
- [46:37]
Isaac Olofe
Yeah. So it was me and that at that time brought on a business partner, Liz, who was originally based from Montreal and really was me pitching bdc, edc, Scotia bank, rbc, Vancity, cdpq and telling them, look, this is an untapped market and that everyone is pouring capital over here and there are thousands of entrepreneurs over here. The stats are there. Pre Covid was less than 1% going to black founders. During COVID it went up to about one to one and a half. Now it's less than what it was pre Covid. I see that as an opportunity and I think institutions that's been backing us see that as an opportunity. And we were fortunate to get Vicky funded, fortunate to get pension money. And we've invested now in 14 companies. But what's been interesting is we've been able to invest in companies that first no one saw, then introduce them to the greater, to the larger tech ecosystem. And we've now gotten follow on investments from the larger tech ecosystem. Right. And now we're sort of being positioned as, oh, you know, Isaac, have you seen this company? They'll pass it to us. Or we're now sharing, sharing portfolio companies and really changing the narrative when it comes to the tech, to the, to the tech space. So just to put things in perspective, we've seen close to 1300 companies in less than three years invested in 14. And easily 20 to 25% of those companies were VC backable. So that just shows the demand.
- [48:15]
John Davids
Okay, and so you have this fund now, Is it fund one still or do you have a second fund?
- [48:20]
Isaac Olofe
Yeah. So fund one is done. We're about to launch fund two, $50 million size. And now we're going to go from pre seed to series A and we're going to focus on larger check sizes and larger ownership.
- [48:32]
John Davids
A lot of people who have a background in real estate investing and real estate development, and I know because my father in does just that, they don't, they can't wrap their head around venture investing because it is so different. You're not talking about I'll put 25%, I'll put, I'll put a million dollars in for 25%. You're talking, I'll put $1 million in for 0.5% and I'm going to be diluted down and the fundamentals are different. You're also not playing a game where there's a likelihood of success. The successes here are the outliers and the successes here are not the averages. How do you Mesh your brain around these two concepts.
- [49:08]
Isaac Olofe
Yeah. I think the biggest thing is there's just a love for entrepreneurship. Right? There's a love for entrepreneurship and the love for make, for having an impact and chasing value. So this goes back to the whole aspect of chasing value. And right now we're chasing valued companies at reasonably priced investment opportunity because of the lack of capital going to it. And we've seen it with some of the companies that we invested into that remove sort of the spectrum of who is leading it. It would have been at a much higher valuation. But this is where the growth opportunity is like anything else until it becomes sort of mainstream, people don't put massive value on it. But we're changing that. We've collaborated with institutions on the incubator side, we've collaborated with institutions on the fundraising side. So they're seeing firsthand where their capital is going and the faces of the founders that are growing these great companies from cybersecurity to proptech to fintech to health tech to consumers to art CRM system. Also, I think the biggest piece is when you tie in what's happening from an immigration point of view and your time where there's a lot of entrepreneurs coming in from other parts of the world that are migrating here and we now have provided them a soft landing through our incubator. And then for those that are scaling, the ability to get first access to our fund just puts us in a very unique opportunity.
- [50:43]
John Davids
Where do you see yourself? How old are you today?
- [50:45]
Isaac Olofe
41.
- [50:46]
John Davids
41. Okay. Where do you see yourself? I mean, you're so, so young for the game you're playing. People don't achieve your level of success until their 50s, 60s. How long do you see yourself doing this for? Do you have a third chapter in your head already or could you see yourself doing this for the next 30 years?
- [51:03]
Isaac Olofe
No, I love, I love this, I think really is to, is to scale multiple funds on the BKR side. I think probably, you know, scale it as much until the mainstream really see the opportunity that we're, we believe we're fully taken advantage of and first mover advantage. But we don't only want to be the first mover advantage, but the biggest in that thesis. Right. We believe it's a big, like we're investing and sometimes it's hard to say, you know, what's the size of the market? You know, when companies come and speak about, you know, invest in my company because it's the size of the market. So when you're raising a fund and this Is your thesis, your specific thesis, it may seem small, but then it's large. When you look at, you know, the fact that we're invested in companies that are doing the same type of companies across the board from other communities, but they just lack access to capital. Right. And really. Right. That is the opportunity. So we've sort of helped to de risk an industry a space that is very risky. As you said, you know, you invest in 10 companies, maybe one thrive, but if you're invested in 10 companies out of 14, 1500 companies that you've seen, and these are companies at a lower valuation just because of the narrative of where the background is from and they're building the companies in a city that is thriving and has access to capital and they're scaling to the states and they're scale into Africa, they're scaling to other parts of the world.
- [52:35]
John Davids
There's upside there, There's a ton of upside. And as you were talking, I actually realized such a theme, which is that what you were doing in the earliest days, buying those units, figuring out how to buy the highest tier of the second category and then add a door so you can make an extra 20,000, you're doing the same thing here. You're finding these founders who are just undervalued, but they're just as valuable. The upside is the same, but you get in at a better place to.
- [53:02]
Isaac Olofe
Put them to the next category.
- [53:03]
John Davids
That's it.
- [53:04]
Isaac Olofe
Right. And the biggest difference is we couldn't scale our preconstruction. Why institutional capital didn't see as a value at that point. We're fortunate right from day one we got some strategic institutional capital that saw the value and that's why we're already seeing these results, which is not typical in the VC world. Right. Where you see those results right away in terms of the positioning of the brand and what we're doing, we have our fellowship, we're in our third fellowship now where we're doing six to nine month cohorts for individuals that want to get into investment management. Right. So we're changing the whole landscape when it comes to the VC space. And we're not doing it in silo, we're doing it with the ecosystem.
- [53:51]
John Davids
Isaac so inspiring. And every time I talk to you, my mind is just like sizzling because I got so many ideas and it's a great pleasure, man. Where can people find more about you and the companies?
- [54:03]
Isaac Olofe
Yeah. So BKR Capital is where to find me. Isaac bkrcapital CA and again, we're just excited for fun too. We're excited about the impact that we're going to have and you're going to see these companies there. You're going to see them. If you need cybersecurity, there's Protexa co working space, there's Loft, Fintech space, there's Volvo. You know, in the health tech space. Yeah, we're in the art. If you love art, you gotta take take a look at Arterno, based out of la but Canadian founder. Right. So we're a lot of great entrepreneurs and we're shedding light on them.
- [54:38]
John Davids
Awesome, man. Thanks so much.
- [54:40]
Isaac Olofe
Thank you very much.
- [54:40]
John Davids
Thanks for listening. If you enjoy this podcast, make sure to follow or subscribe wherever you listen to podcasts and leave a rating or review that'll help other folks find the podcast and it lets us know we're doing something right. We'll talk to you guys next time.