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Real Estate Without Borders
"Missing Middle Housing" - can this real estate investment save the world from housing crisis?
00:39:23
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- [00:00]
A
What if the answer to the global housing crisis isn't more skyscrapers or McMansions or urban sprawl, but something in between? I know you love a good McMansion, Dave.
- [00:12]
B
Dude, that was a good one.
- [00:13]
A
It was. In this episode of Real Estate Without Borders, we're going to explore how missing middle housing duplexes, triplexes, townhomes and low rise apartments could be the key to solving housing shortages in places like the United States and beyond, like Canada, the U.S. europe. We're going to unpack a couple of global case studies, zoning reforms that we're seeing around the world, and investment strategies. Because the cool part about missing middle is it's not like massive high rise developments that you have to be a billionaire to do. It's small stuff that you and I and the listeners of the show are capable of executing. So that's what we're going to be talking about today.
- [00:55]
B
Amazing. Well, welcome to Real Estate Without Borders. That was a good intro, man. I think this is big in Paris. No, big in like Europe.
- [01:03]
A
Well, yeah, so it's really interesting if you look at like historic context, most like, you know, cities that would be thousands of years old are mostly missing middle because we really only figured out how to build over. I think Chicago was like the birth of the skyscraper and then like Chicago and New York, like that was very, very American thing. Which you go to, to historic cities like Copenhagen and Denmark would be a good example. Paris is another good example. London's the same thing. You know, I mean when these cities were building up, it was like 17, 1800s. They didn't have the technology to go higher than four stories at a time.
- [01:38]
B
And so that was my next point. I was going to say, does this have a lot to do with that? The like ability to build upwards?
- [01:45]
A
That's it. Yeah, they just didn't know how, like they hadn't figured it out yet. They haven't figured out the engineering of how to, how to build 10 or 20 or 80 story buildings yet. And so you had cities that were equally dense on a population basis that, you know, most people, when they look at like the, the, the idyllic like beautiful European city, they think about this, right? They, whenever you see like this pictures of like these beautiful old historic downtowns, it's all like four to six story or like a three to six story, that kind of like village setting. Right, right.
- [02:18]
B
That's true. No, you're right. And you go to walk around Europe and you're always thinking like, oh wow, wow, you know, and it's not the high, not the glass, high rises, story walk ups.
- [02:27]
A
Yeah, exactly. Yeah, exactly. Yeah. You're not looking at those, those like, you know, rows of glass, identical glass boxes and you know, nobody looks at Toronto and it's like, oh like that glass box is way nicer than the other one over there.
- [02:39]
B
You know, character. I think these like add character.
- [02:42]
A
Yeah.
- [02:43]
B
Okay. Do you think? I know this is, this is not a part of where we're going with this but just off the top of my head, do you think that because it's not the norm in North America that we're going to have a challenge if this were to come and be more prominent in the country like let's say Canada or whatever. Is it going to be challenging to sell these types of properties because we're just not used to it or it's going to be hard to kind of. You know what I mean?
- [03:07]
A
Yeah, it's a good question. I guess it really depends on your perspective. I think it is probably harder to sell than a condo or a detached house. But I mean I think Canada is a pretty good example where we can use some case studies at what we've seen here to see how it scales around the world. You know, stacked townhouses are a missing middle housing concept as an example. Right, right. You know, fair enough. Yeah. Any of these urban towns. Yeah, I'm not a huge stack town fan, but it's basically like a walk up condo unit. Right. You know, back to back towns are a missing middle housing concept. I think that even, even just urban townhouses. Right. Like you see, I think that, you know, you see this successfully. Vancouver's another good example where they have these like little stratified like three unit, like a triplex basically where you can, you can buy a unit within a triplex and they can be, you know, they can be severed either vertically or horizontally. So as like a townhouse format or as like a plex format, they're, they're a little bit harder to buy but they rent better. Like if you're an investor and you put a triplex on the market and next door to you there's a condo. So the location is let's call it the exact same and let's say the unit size is the exact same. Typically you can actually command a premium for the plex like a triplex because it's smaller. People don't have to deal with elevators. Right. They don't have to deal with thousands of other residents. So there are benefits that I think you can command a little bit of A premium. And the last piece I'll add is if you were to make that same comparison, the guy who built the condo building next door to you, because he built it out of concrete, his total creation costs. So if you're thinking like land construction, all these factors, his total construction costs are going to be 30% higher than yours. You know, in USD it'd be 5 to 600 USD. In Canada we're seeing like 800 to a thousand total creation costs per square foot. This is whereas if you're built, you're building your triplex next door out of wood, you know, with whatever type of cladding, maybe brick, you can typically create that. As long as you can buy the land. Well, you can, you can construct that for a lot cheaper than a concrete building.
- [05:17]
B
Okay, understood. You know, I was just thinking, I think maybe we should bring it back to like let's define what the missing middle is. Because I feel like a lot of people maybe don't know what the missing middle is. But we've kind of discussed that it's not high rises, it's, it's not a detached home. Can you maybe give us some examples of like super simple. What is the missing middle? What, what's, what's a example of a property type of something in the missing middle. And then maybe we can jump into some other stuff around like zoning and financing because I think that's going to be a huge aspect of this as well.
- [05:45]
A
Sure. So the missing middle is anything in the middle of a single family detached house and a high rise condo unit or mid rise condo unit. So basically anything that's, that's denser than a single family home on a, you know, on a, on its own lot. Like that's a single family detached house.
- [06:06]
B
With like upper, lower. Like say for example, someone has a house and they have upper and lower. Is that considered missing middle?
- [06:12]
A
Technically, yeah, technically, because it's a duplex, it would be a middle housing concept because you've gotten now 100% increase in density. Right. There's two houses where there once was one. So yeah, as soon as it's like a plex, like a duplex, triplex, fourplex. Sometimes you'll see these things called cottage clusters, which is like you get like a, you know, a quarter acre lot with like a couple of small houses on it. Townhouses, stack towns.
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B
Right.
- [06:35]
A
Courtyard houses, which is like, basically those were super common and like those are awesome urban living concept where basically you have like the, the building is like U shaped building and then there's a courtyard in the middle of it. So like that courtyard ends up being like a shared like common area for the whole building. Like that's like their like park or backyard walk up apartments. You know anything up to like almost like a four story building would qualify as a, as a missing middle housing concept. Once you get above for four stories you're kind of getting into that mid rise territory and that's where it's no longer in the missing middle.
- [07:07]
B
Cool. I while you were doing that I pulled up some, some stats and some information about middle missing middle housing across North America and some cities that do have missing middle properties that are, that are known for it says saying Portland, Oregon. Yeah, they've had some of this around for, since the 1920s. Kind of popular and making a comeback mainly in from 2022 to 2024, Minneapolis, Minnesota. Minneapolis became the first major US city to eliminate single family zoning citywide allowing duplexes, triplexes and fourplexes in all residential zones. Do you know that?
- [07:42]
A
Yeah, I did. Just because I know a guy on, on Twitter who is a big developer in, in Minneapolis. Dude, I thought I was Sean, Sean Sweeney I think is his name. Yeah, no, no. Minneapolis has been very, very forward thinking on this stuff and they're, they're calling for a lot of conversion and like a lot of these small cap developers have been really successful in that market. It's funny because Minneapolis I think is actually further north than Toronto.
- [08:07]
B
Yeah, it's a big hockey, hockey city. I know that.
- [08:09]
A
Oh yeah, for sure.
- [08:11]
B
Jacksonville, Florida Bungalow courts. It's an example of like a bungalow court like you mentioned, featuring small homes clustered around a central courtyard. So I don't think Chicago is. Chicago, Illinois. The Missing Middle Housing act filed in 2025 aims to legalize duplexes, triplexes and fourplexes in cities with populations over 25,000, potentially expanding such housing. In Chicago, Victoria, BC six unit housing developments. 2023 Victoria passed the Missing Middle Housing initiative. You obviously knew this one if you.
- [08:41]
A
Knew tons of Canadian cities have done it. Yeah.
- [08:43]
B
Madison, Wisconsin, Chattanooga, Tennessee. Name.
- [08:49]
A
That is a great, great.
- [08:50]
B
That's a sick handle. Where you from? Chattanooga? You the 10ple. The 10 Plex development, a 2025 project by Kronberg Urbanists architects featuring affordable temple in a residential neighborhood designed to look like a large single family home while multiple housing units are within. Cool. Now you know Chattanooga baby. All right, let's get into the. Okay. Chattanooga, Tennessee. Wow.
- [09:16]
A
But the crazy part is like you know, a lot of it is what you were saying is like if you Go back to those. Like, they have a picture here of this. This beautiful old building in. In Chattanooga, 1400 Duncan is part of their built heritage. Right. It's, you know, it's an old brick building. Like, a lot of these historic buildings that we think about as, like, really, really iconic, beautiful, like, you know, really nice architecture. A lot of them are like these little nineplexes or whatever. Right. And they were built that way because they just simply didn't have the architectural or engineering ability to build high rises. And because these were cities, they weren't building large manors. All of those large man manors existed in, like, in the. In the suburbs or in the country.
- [10:02]
B
Cool. Do you want. Let's talk about a little bit before, because I want to ask why. Why did the missing middle maybe disappear? Because clearly it's still around, but. But it seems like maybe it disappeared in, like, a lot of major cities. Maybe you can jump into that. Like, it. Because it seems like it was so prevalent back. Back in the day, you know? Also, I just want to touch on how amazing this conversation is. I'm back in Canada. Is this what it's like to have a conversation with good WI Fi? Because this is incredible, dude. And we can go for. Dude, let's roll this. I got to clear my schedule. Let's get, like, eight episodes.
- [10:32]
A
Yeah.
- [10:33]
B
Usually I can't hear what you're saying.
- [10:34]
A
Cortisol levels are, like, unmanageable.
- [10:38]
B
I can hear every word you say. Just so the listeners know. I. I'm usually filming from Tulum, Mexico, which is not WI Fi Haven. So I'm back in Canada, and this is incredible. I don't have my setup, so I'm feeling a little off right now. I'm feeling a little flustered, but we're getting through it. Okay, why did it disappear? Tell me.
- [10:54]
A
So it disappeared because a lot of municipalities basically got rid of the zoning that allowed for it, and they basically divided their cities into two. Two districts. One was high density and low density, and there was no medium density or there was no middle. And that middle just became missing. Right. So they wanted these suburban areas where people could commute in. We designed a lot of cities in. In the western world around the car. And so, you know, it would be.
- [11:21]
B
Not Toronto.
- [11:22]
A
Yeah. You'd have a high. Well, interestingly, it was designed around the car, and then they kind of just gave up. Like. I mean. Yeah, but, you know, so you had these highways that would come in and out, and they would take people. Those highways would take people to the suburbs and Then they would go live in their McMans, the suburbs. Right. And they would have their, their little lawn and their garden and you know, whatever. And then urbanization was really kind of reserved for people who wanted to be close to the action walkable. And so you started getting these like more densely urban places, New York City, Chicago, where you got like a lot of those high rise residential structures. And in you go to some more of the newer cities, LA would be a good example. It's a big sprawling city, Right. It doesn't really have a huge dense core. It has some tall buildings in the financial district. But for the most part you look out over LA and it's just a bunch of single family homes for miles and miles. And that sprawl and a lot of that is just purely a zoning thing, right?
- [12:19]
B
Yeah, I'm looking here. It says so restrictive zoning. So single family zoning. After the 1916 introduction of zoning in cities like New York, North American cities adopted single family zoning in 1920s, 1930s, prioritizing detached homes over multifamily. By the 20th century, 70 to 90% of the residential land in the cities like Sacramento, Sacramento, Minneapolis were zoned exclusively for single family homes, outlawing duplexes and missing middle types. Clydian zoning. You heard about this?
- [12:48]
A
No.
- [12:50]
B
Get your.
- [12:50]
A
Tell me all about it, my friend.
- [12:52]
B
All right, so the. I probably saying it wrong. Maybe that's why you haven't heard of it. No, I think Euclid Look. U E U C L I D D E A N Euclid Euclidean zoning. This zoning approach separated residential, commercial and industrial uses, discouraging mixed density neighborhoods where missing middle houses thrived. So it prioritized uniformity over diversity.
- [13:15]
A
Bad idea.
- [13:16]
B
Terrible. They're like, this is genius. Euclidean. And now they're like, I don't even know. Whoever this is, they made a huge mistake. Post World War II suburbanization, which I think is exactly what you just talked about. Automotive centric planning. Yeah. Urban planning shift towards a car dependent suburbs, reducing the need for walkable dense housing type. Yeah. Cottage courts, eh?
- [13:38]
A
Man, it's actually interesting like the, they actually have a cottage court here on this, on this. It's weird, I have it up on my screen so I'm just going to put it up on the screen.
- [13:45]
B
Please do.
- [13:45]
A
But this is, this is in the Chattanooga document actually. So they did a really good job at like showing all of them. So see how you've got this basically like this little walking they got. You got parking spots at the front or garages and then you walk down and There's a couple of, there's basically four little, you know, houses, they call them cottages on, on.
- [14:06]
B
So maybe we're getting off topic with this question, but how do, how do you sell this if it's owned. If the, if that parcel of land is owned by one person, how do you sell or is that even possible to sell individual.
- [14:19]
A
Yeah, I mean you could stratify it. You could even put, put lot lines if you really wanted to. And then they would have like a, you know, like a, a parcel of Thai land here or like an hoa, right? Yeah, you could. The walking path to get to them would be like a parcel of tide land or something that was common elements in the hoa. I mean you probably wouldn't do that. And I think the point of a lot of this is that these are good investment type properties. They're maybe not so much well suited for large scale ownership.
- [14:51]
B
Rental units.
- [14:52]
A
Yeah, exactly. I think they're good investments. So they would rent well. I think missing middle really blends well with, with the, you know, the future of like it being becoming more of a renters economy which we're seeing happening. I mean if you look at, sure, you look, look at Europe where again they, they do have a lot more of this middle type housing. And then you look at where. What's happening in North America. Homeownership rates are continuing to decline and I think this is by design by policymakers and they, and people are going to be less and less homeowners and more and more renters. And I don't really know what if that's necessarily a bad thing. Like if you look at Europe, in Europe people invest their money in starting businesses or stocks or whatever rather than just pumping cash into like this old, you know, 1920s house that they own. That's like just a money pit, right. And just paying their mortgage, like that's what people seem to like doing in Canada.
- [15:46]
B
Right.
- [15:46]
A
And the US So it might not actually be a bad thing.
- [15:50]
B
What about this one thing that we haven't talked about yet that I kind of understand both sides of this but like NIMBYism. What is, what is. I know you love that one. So what is NIMBY?
- [16:02]
A
NIMBYism is basically like it stands for not in my backyard. And basically people who are NIMBYs say you can build that but just don't build it in my backyard. Right. So don't build it near, near me. But most people who claim to be like or you know, kind of resonate with the NIMBY thing They're actually more what we would call bananas, which is build stands for build. Absolutely nothing anywhere near any. Yeah. And so that's, that's what it is. And so, you know, the, I don't.
- [16:32]
B
Understand like from a, from a, from a homeowner that's been there maybe like, you know, I'm thinking in Toronto I'm, I'm envisioning like the Danforth. You know, I'm envisioning some, some family that's lived there for like 70 million years and now they're putting something beside them and they're going to be like, I don't like the idea of that. So I, I, from the owner's perspective, I kind of see it a little bit from an economic standpoint. Obviously not, but yeah, I kind of.
- [17:02]
A
I can empathize with NIMBYs for sure. Like, I totally understand where they're coming from. In most cases though, it's like they kind of lack an understanding of urban economics, which is that if your house, if you have a house and then next door to it a 6 unit building gets built or a 10 unit building gets built and some sort of zoning change takes place for that to be, be become possible, that would usually mean that the value of your property has actually gone up. Most people think about it in terms of like, oh, I don't want that thing being built behind me because it's going to devalue my property. People buying a house in a subdivision that backs onto farmland and they're like, oh, what would happen if somebody puts a subdivision in that farmland? And I would say, look, they're putting a brand new subdivision in here. That means that there's a new Walmart going in up the street and there's a transit station, et cetera, et cetera. And so these are all things that improve the value of your property and don't take away from it.
- [17:53]
B
I understand. Let, let's talk about it from the investors side of side here because I think that especially honestly, and I'm only speaking for, for Toronto, I think in Toronto this might be today maybe one of the only investment property types that I would put my own money into for an investment like now, you know.
- [18:12]
A
This is like the, for this is the only asset class in a city like Toronto, which is not really a good example because it's a very broken city from an economics perspective. But in a city like Toronto, this is quite literally the only way you can actually make money in real estate.
- [18:26]
B
Right. What about. Okay, interesting, but why?
- [18:31]
A
Because you can purchase land at a Relatively low rate compared to what a competitor would be buying or the market would be buying it for, for to create some new unit, you get concessions. So in the city of Toronto and you're seeing this same thing happening in a lot of other countries around the world. But actually Toronto's a good example because I know a lot of our audiences, us and US investors looking to invest outside of the US Right. We have a ton of capital coming into the, into Toronto multiplexes and Toronto missing middle from the US A lot of doctors, a lot of lawyers buying into Toronto multiplex. The reason it works is look, you can go get a piece of land at like a million bucks, that's a piece of property with a house on it and then you can bring a new condo or a new apartment to market at like 600 a square foot total, all in land, construction, et cetera. And at the same time you've got all these high rise builders who are building, you know, 20, 30, 80 story buildings and it's costing them $1,000 a square foot. And the rent on your. Even if, let's assume that missing middle doesn't actually command a premium on rent, the rents are the exact same per square foot. You know you're going to rent for four to five bucks a foot.
- [19:45]
B
Right? Okay.
- [19:45]
A
Regardless of whether it's the one that I just, that you know, it's this four plex that I just built or the high rise. And so my numbers are way better than the high rise builders numbers. We still have about 40,000 high rise units completing in the city of Toronto. But then after that you've gotten how many 40,000 completing this year and then 18,000 in 2026. But once you've got that, once that pipeline's tapered off and there's no new product in the city, you've got a huge gap in supply. But population's still growing, people are still immigrating to Canada. Canada's population's still growing at what I would call a pretty ridiculous pace, but it' growing. And the same thing's happening in the US Why do you think to go back to the whole context of this thing, the U.S. has what is it, 5 or 5 million unit shortfall in housing. Canada has a 2 million house shortfall. I mean, where are you going to build millions of houses easily? Well, if you put four in the same structure where there previously would have been 1, then you just 4x your output. Right. The, the thing that people take issue with this is that they're smaller units and so they're all like, oh, this is the government trying to make 15 minute cities and World Economic Forum and you know what I mean? It's like sure, maybe that's correct. But the economy is pretty good at distributing or rewarding the people who are doing the right thing. Maybe not the right thing, but it's good at distributing and communicating consumer values. And clearly this is what people want. More and more people are living in urban areas. It's not to say that it's some conspiracy of 15 minute cities. It's just that like that's, you know, I think within the next 50 years like 80% of mankind will be living in urban areas.
- [21:34]
B
Right.
- [21:35]
A
Right. So.
- [21:36]
B
Right.
- [21:36]
A
You know, it's, it's, it's not really like. It doesn't have to be some conspiracy. It's just this is what the consumer wants. And so the world is adapting around that. We're. And so we're trying to figure out new and creative ways to deliver supply to them. That works.
- [21:49]
B
Okay, I want, I fair. I wanna, I wanna ask about what needs to change in order to make this a reality. But before I do that, I pulled up the top global cities or regions for the missing middle housing investment in 2025. Number one, Melbourne, Australia. We should have asked Dan about this. What do you call them? What did they call it in Australia again for second. Secondhand home.
- [22:12]
A
Yeah, secondhand homes.
- [22:14]
B
They called.
- [22:16]
A
We'll have to have zoning on to talk missing middle for sure.
- [22:20]
B
That episode was one of my. He's hilarious. But Victoria's plan so promotes medium density housing, established suburbs to address affordability. Recent reforms 2023 streamline approvals for townhomes and low rise apartments in activity centers with reduced parking requirements. Let's see, they have. Number two is Vancouver. Vancouver secured rental policy 2021 in British Columbia's 2023 Bill 44 allow up to six units on a single family law in low dens encouraging houseplexes and townhouses. Secondary suite zoning and laneway houses is already widespread. Interesting. Now I guess you'd want to make the third is Lisbon, Portugal. I guess that you'd want to. You'd as an investor looking to invest outside of the US you'd be looking at. Or you'd ideally be looking at it. Well, a bunch of different factors but obviously one where rental prices are decently reasonable as well with house prices. Obviously.
- [23:15]
A
Yeah. You want like supply constrained markets where you can, you can go buy a, a detached house and convert it into six units or tear it down and build the sixplex or whatever. So where rents are high and house prices maybe aren't super high relative, like Toronto is a good example too. Vancouver obviously makes sense, right?
- [23:33]
B
They have three. Lisbon, Portugal. Medium home price. Median home prices is lower, 350 to 380 like USD. Portugal's 2024 Housing Recovery Program incentivizes urban rehabilitation including including tax breaks for converting older buildings into duplexes or small apartments in walkable areas. Interesting neighborhoods, like I can't even say it. Alcantara or Bido offer underused lots for courtyard apartments or townhouses fitting Lisbon's historic aesthetic. EU Recovery Fund supports sustainable infill projects reducing financial barriers. Cool. For Auckland, New Zealand, they just had some different changes in their housing in 2022. Berlin, Germany, number five. Berlin's population grew 6% from 2018 to 2024. Medium home price around 500,000€ and a 1.5% vacancy rate in 2024. So it's a tight market with rent control policies making smaller units attractive for investors. Cool. Vancouver, Auckland, Melbourne. Enacted or implemented reforms that legalize and incentivize missing middle housing, reducing regulatory hurdles. I think that's a huge part of it and I guess that's probably going to lead us into like what needs to change to make this more of a norm or more of like a reality in some of these cities.
- [24:42]
A
Yeah, I think a big one is zoning and also I think expediting construction. So like making it easy to get permits for this, any type of entitlement. So you should be able to get, you know, get your zoning more easily, get your building permits more easily because, you know, and it's an easy way to think about this is like if you have a high rise, if you have a high rise builder, like, and they're going to put, you know, several hundred units in the market, it makes sense that, you know, there's a lot of review going into that. It's a, it's a risky structure, right? Like it's a big building, it could fall down. You know, there's a lot. But these, right, these small, you know, like a fourplex is like, it's not much different than a house. And so, you know, we've been building these a lot. There's not a ton of engineering that goes into it. Can we make it easy for people to just be able to build those? And so you're seeing programs like, you know, a lot of municipal governments are doing this in the US but also in, in Canada we're seeing the government rolling out basically like pre approved designs around the country.
- [25:46]
B
Like housing designs?
- [25:47]
A
Yeah, basically. Like if you build, you can build this building. Well, prefab is one that's like pre made but like pre approved is basically like they, they, they give you the engineering drawings and you just take that to the city. And because it's already done, they just say you can build this anywhere in Canada, you know, because like it's, it's funny because you know, a lot of people are like, oh well then everything's going to look the same. It's like, well go look at Copenhagen. Every building does already look the same. That's why it looks cool. Right? Like they're just the same building but with 50 different claddings on it and different colors and whatever. It's, you know, go tell me. Some Toll Brothers subdivision in the middle of, you know, the suburbs of Arizona is not, you know, all the houses are the same. They're literally. It's the, you copy and paste it. They just flip, they flip the layout. They have three layouts. You know, they flip. They have one bungalow, a three bedroom and a four bedroom. They flip them and they have two, two to three or three different elevations. It's all the same house. So they just change the, change the front, change the materials, et cetera. We're just doing the same thing but with six plexes or fourplexes or whatever and just doing that so that small developers, people who aren't Toll Brothers or these massive home builders can go and, and copy and paste these plexes all over cities all over North America, all over Canada, all over the world, really.
- [27:06]
B
Right. What about like the financing? I know, so right now, right now, I guess that's maybe it's different globally obviously, but if you're financing a property that's multiple, multiplex, multi family, would it be classified as residential or commercial?
- [27:22]
A
In terms of the like, it really depends. Like, I mean the US is a little different because there's all these different regional banks and lenders and so they can kind of like not make their own rules, but there's different categories in which like they can become specialized lenders. In. But in, in, you know, if we're talking like the more regulated side or your mortgage backed securities programs, typically commercial loans start at a certain unit count. So in Canada, typically over four units. Most banks will consider that commercial and so it'd be a different debt program. Canada does have a program for five or more units called cmhc, MLI select or like. And in the US they have HUD Housing and Urban Development where you can do basically your five plus units. But it's kind of that like four to six unit threshold. Some lenders in Canada will do residential credit on below six units.
- [28:08]
B
Depends.
- [28:09]
A
But yeah, so there's. Well, it's just. So I think, you know, kind of what you're alluding to is like, can, can the capital market really improve this? And I would say yes. I think that there's a missing middle in capital markets as well. So I think that, you know, there's one of the big problems like as a real estate investor in the US is you know, you, you go and you want to kind of dip your toes in and try doing a deal in whatever city and you go find a cheap deal one, 200k whatever and you go get a DSCR loan and you find out the lender says, oh my minimum deal size is like 500k. So there's a missing middle in the capital markets where deals are too big for the small guys and too small for the big guys. The same thing, I think in the acquisition markets where we have Realtors, you have your big brokerages, your cbre, Cushman and Wakefield, Marcus and Millichap, whatever. You're kind of your bigger corporate commercial brokerages. And then at the bottom you have like your ReMax and Keller Williams and exp and whatever.
- [29:07]
B
Right.
- [29:09]
A
ReMax probably shouldn't be playing in this space because it's a little bit too sophisticated for the average realtor, but it's too small for a guy like CBRE to want to play in it. And so there's a missing middle there as well where it's too big for the small guys and too small for the big guys. And so I think that a big part of this is, is the private sector really needing to expand into this market where, you know, we need lenders to want to start creating programs for that, we need real estate professionals to want to start serving that market. And that's something that.
- [29:39]
B
That's a really cool point. Yeah, I think you're right, dude. That's really good. That's a really good point. That can be our only clip from this if is Opus clip listening because you can just cut that part. No, that's true, man. Like I would say most realtors don't know how to deal with that or don't understand where. And like it's true, you're not going to get a CBRE guy to come and do that. And I think a lot of average res residential realtors probably avoid that like the plague because it just seems like Maybe it's a bit more of like a, it's more of a mathematical equation than, than an emotional transaction that we're used to, you know. Interesting. I have. What about like again, parking requirements? I'm looking up here some issues on how to kind of get around this. It obviously talks about, you know, restrictive zoning and land use regulations which I think we obviously already covered. Lowing parking requirements is it. I guess this would vary from state to state, but I guess there's some sort of like parking requirements per unit which would maybe discourage people from developing these things.
- [30:36]
A
Yeah, I think this is a really interesting one especially as like you know, have you been in a Waymo before?
- [30:42]
B
The one that drives itself?
- [30:44]
A
Yeah, they're like these Jaguars with like it's in Vegas and San Francisco. So like sure, parking requirements are a thing but I think like parking, like parking being a problem for real estate development is a very short term problem. Like if we're thinking real estate assets are like 25 year assets, it's like how far away are we from really? If we're thinking about the up and coming, you know, tenant who's already struggling with affordability, who's going to be living in a plex like this because they, you know, they want to. This is the closest they're ever going to get to being in a detached house where they can still be near work or whatever. Are they going to own a car? I don't know. Like maybe. But I feel like, like sometimes like I have kids and sometimes I wonder if they're ever even going to drive. Like in 10 years are we not going to just have self driving cars that are going to take everyone everywhere? And so while I acknowledge that parking requirements can be prohibitive because missing middle kind of threads the needle between like this sprawly detached and then this like dense urban where you need to walk like you know, where you live in a walkable city and you can walk to everything. That 15min city kind of thing that people, people go on about it could. You could also solve that problem by saying like look, there's two spots on site for six units if you want them. You can pay 250 bucks a month or whatever, some price. But as part of your rent there's also a communal Tesla or Waymo or whatever that's just like there these are the concepts that you're starting to see succeed in a lot of these concepts where it's like hey look, as part of your rent there's a, I guess Tesla might not work anymore because People are too busy setting them on fire. But you get the point.
- [32:21]
B
No, I would take that option all day, honestly.
- [32:24]
A
Not. Not have to own a car. And it's built into your. Your rent and it's just on site and there's like some sort of calendar system where you, you know, like, you know, Commune Auto or like, there's tons of other different things. Right.
- [32:34]
B
I would take that all day. I think that's where it's heading. I almost don't even. It's. Well, I can only speak for. For Toronto, but I know there's a lot of major cities that think about how much stuff you can get done when you're in the back of the car versus sitting in traffic. I'd take that all day, dude.
- [32:46]
A
It's so funny. Like, I put a tweet out about this. It was mostly just like a rage baiting tweet. Like, I. I've been. Do you know who Nick Huber is? Just says, like, the dumbest shit to, like, get engagement going. Anyway, He's. He's hilarious. But anyway, the. I put out this thing because I was. I was in Miami and I was walking from, like, from, like, this Grant Cardone event. I walked from, like, I don't know, it was like, maybe 3K, 3K. And I was walking along this road and there was this Ferrari, this, like, beautiful Ferrari 500K. He saw this tweet. Yeah. And it was like. And it. And. But I literally outpaced this Ferrari for 2k on foot. And I'm sitting there and I'm like, like, if I'm rich enough to own a, you know, 500k Ferrari, I. I just would get a driver because, like, I like working so much that I would just prefer to be working. And I. And like, look, I get. Dude, like, I used to love cars. I get. I understand the appeal. I'm not that stupid. But the point is, like, if you're super. If you're super rich, where you can afford. I'm not talking, like, people who, you know, like, want to drive, like, an old porsche they paid 100k for, like, whatever. I get it. Like, if you like driving, that's cool. I understand. But, like, you know, I'm talking, like, suit the super rich where. And you're just gonna end up sitting in traffic anyway. It's like, why not just have a driver? And so I agree with you what you. What you're saying. It's like I would Uber everywhere if I lived closer to this, the city, to be honest with you. I mean, I, I, there was a period of time where I had a driver taking me down to the city every day anyway. And I would literally just work in backseat, do my emails. It's like that's an extra hour and a half that I don't have that I know I longer have to worry about. Right.
- [34:17]
B
So you don't got to pay for parking. You don't got to worry about parking. You just like, you don't even know. Actually for a while there I was doing the same thing. I had this driver who, there's a few realtors that like shared this guy and you could like, or it was nice if you had, let's say a super high end client who had three showings at, you know, Shangri La, Ritz Carlton, St. Regis where you gotta pay 20 bucks every time to park.
- [34:39]
A
Yeah.
- [34:40]
B
Or I can just hire this guy. He drops me off right out front, a nice Tesla. The clients feel cool. I get to do a little bit of work in between. It's like, well, what a win. But yeah. Anyways, that's interesting.
- [34:50]
A
I, Dude, I completely agree. Like I, I think that it's, I think it's a way of the future. I think like you think about a lot of young people and like, I don't know, I mean like, I think we're just way less materialistic too.
- [35:00]
B
Like, I don't know, big time.
- [35:01]
A
Any, I don't know any like people that are like super impressed by like some like nice, like really nice douche mobile. Like, you know what I mean? Like, I don't, like, I don't really know. I don't. And like, and you think about like the people who are, who are like leaders to the young generation. Like you know, hormozy or like right. Like are they these guys talking about Lambos and like not, not really.
- [35:23]
B
I think it changed, man. I honestly think it changed a lot recently where it's like it used to be. I think that's like a new, this is whatever. It's like a new money thing. You know when you start making money. When I was a realtor, I used to. Right?
- [35:35]
A
Because dude, your old money. Nobody like, what does Drake say? Don't want sign. He's like, or, or they already know. Like you don't need anybody to know because like your work speaks for itself. People are like, that dude's rich. Like because I, because I have like the Canadian real estate investor podcast. Like people assume I'm rich. I' like, yo, I'm not rich. Like, you know, but you're always Talking about investing, it's like, yeah, well, that's. That's because I plan on being rich. That's how I'm gonna get there. But like, I think you know people who are like, what was it? The. There is a Drake line on this. It's like, there's always a Drake line for something. It's like rich enough that I don't. Rich enough that I don't have to tell them that I'm rich. That's what it is. But. And I feel like it is. It's like a. It is a new money thing. Whereas a lot of old money people, they don't need to tell people they're rich.
- [36:19]
B
You know, actually, this is a story. My buddy. Have you heard of Laurel Piana, obviously, Clothing line?
- [36:24]
A
Yeah.
- [36:24]
B
Okay, he's gonna listen to this, but whatever. My buddy. I won't say, I won't give any hints. My buddy took a girl to go shopping. Okay. He was telling me the story. We're golfing. Took a girl to go shopping in an expensive area in Toronto and walked into Laura Piana and was like, oh, cool. Like this. First of all, I didn't know this, but Laura Piano, you go there and like, you get like a. Say you try a sweater on. You just try it on and then they. You buy it and then they come to your house after to like, tailor it perfectly to you. I didn't know that. Not there yet. Wealth. W. But anyways, so he's. He gets a long sleeve T shirt and a sweater. Okay. He's like, it's probably gonna be what, like 5, 6K? That sucks. But, like, it's okay. The sweater was $16,000. And he's like, you mean 1600? She's like, 16,000. All right, well, this was fun. I have a good day. That's crazy. Crazy.
- [37:10]
A
Yeah.
- [37:11]
B
Yeah. The line from Drake is rich enough that I don't have to tell him I'm rich. And it's from the song Toucan leather from his 2013.
- [37:23]
A
It's a great song.
- [37:24]
B
I'm thinking about birds in Mexico, man. I'm sitting here.
- [37:30]
A
Bird skins and the Toucan leather shoes over here from Laurel Piano.
- [37:35]
B
Today. Today is April 30th. Just so everybody knows in Toronto is negative 100. It is freezing outside. I don't. I don't. I actually don't own. The reason I'm late today is because I don't own winter clothes. No joke. I. I had none. That's the only sweater I have. And I have one pair of pants.
- [37:49]
A
And I wanted to run to the office so that you could stay warm.
- [37:53]
B
I joined a run club and we ran to the office. No, I, I found some, I dug some out for you, but that's it man.
- [38:00]
A
Great. That was good. Yeah. I feel like, I think we're gonna like, nice to introduce this topic because I feel like it's gonna come up a lot. Like Missing middle is definitely a huge opportunity for people who want to invest in real estate around the world to time because you know there's a lot of capital that wants to build stuff too. You get a pretty good return. And if you want to build like, you know, if you're a regular person. Yeah. Maybe taking on a hundred million dollar condo, like tall, tall condo project isn't super compelling or, or accessible. And maybe you don't want to just give your money as a limited partner to a condo developer. Right. That's another avenue. But like if you, if you want to be a developer yourself, these smaller kind of like, I don't know, I mean your project size is like 1 to 6 million bucks. These smaller projects are like super accessible. I mean I've done a handful of them in Toronto and other places in Canada. I've done a bunch in the US as a limited partner. I think that this is realistically with the way that the economy is right now and the cost of constructing high rise and the fact that people can't afford low rise like detached houses, this is quite literally the only type of housing that's going to make money until something changes in the economy. And that could happen within a year. But with our current economic circumstances around the world right now, this is honestly the only, only type of real estate investment and development that works. Cool.
- [39:17]
B
I just want to make sure we get two two can Arizona playing in the background when open.
- [39:21]
A
Toucan leather shoes.
- [39:22]
B
Amazing. Okay, great. Appreciate.