0:00I run a construction company and it goes against my own interests to say this, but the truth is, not every multiplex project should be built. We just run a workshop building a performer for a real multiplex incident of Toronto. We spent a bit of time building the model and then we spent a lot of time trying to see what can go wrong, what can break and what can make this project unsuccessful. What came out of this workshop for five key questions that should help you decide if you should build a multiplex project in City of Toronto. If you can answer all these questions with credible resources and confidence, it may have a decent chance of having a successful project to move forward. But quite frankly, if you don't know the answer to go up a couple of these questions and are still a shaky, it's probably a good sign to dig in a little bit more, do more research and get the answers right before you start investing in such an expensive and potentially risky endeavor. Hello everyone and welcome back to another episode of the Real City Development Insights Podcast

1:04where we bring you ideas, experiences and best practices from the Real City Development industry. My name is Paiyang Nursanahi, I'm the president of the Solnik Construction Group, where we help GTA developers plan, build and deliver successful mid-rise and multiplex projects with fewer surprises. As always, you can find all the information about our podcasts and these episodes in particular on our website, RealSightdevelopmentInsights.com, RealStateDevelopmentInsights.com. And please, please, please remember to subscribe to our show and even better, tell others about us and help us go to show together. Thank you and I hope you enjoy listening to this episode. Okay, just before we dive too deep into this thing, I'm going to give you the standard disclaimer. This is not financial advice, tax advice, legal advice, you should talk to your qualified person before making any investment financial or legal decisions. This content is for educational

2:07and entertainment purposes, so make sure to talk to your qualified person before moving forward. If you've been listening to our podcast before, we've covered this quite a bit that as of right now, in the past couple of years, there has been a very interesting appetite developing over citizen developers and new developers, trying to get into the market with this particular type of project called the multiplexes, which became about mostly as a result of planning changes that happened over the past three years in the city of Toronto. And understanding it so, it's a very good potential stepping stone for people who want to start their development journey and get one project under the belt and potentially grow vertically or horizontally. Do multiple of them or do bigger ones afterwards. This has caused many of the property owners and potential investors to ask what is the best use for my property and properties that previously were only able to use single-family dwellings or detach or semi-detach houses were able to be built on them. Now, may qualify for multiple

3:12units, four units, six units, garden streets, laneways streets, there are a variety of combinations that you can define these projects. But one thing that sometimes gets lost in all this excitement and energy to push things forward is that permission is not feasibility. And this is why we said at this workshop because we see a lot of appetite, we see a lot of interest moving toward this segment of the market because it's permitted, not necessarily because it's feasible. And especially if you're a new developer, if this is the first time you're looking at a project and you have not done this before by yourself or as part of a team, you might be prone to risks. This was the reason behind setting up the workshop and now doing this episode just to make sure that if you are starting a project, you have a good chance of making a successful. The last thing we need in this city and for any reason for anyone is to start a project with lower chance of success and becoming a bad investment project for themselves, their community and industry as a whole.

4:13So bottom line is, the zoning permission is an opportunity to investigate and probably deaths about it. From that point onward, the rents, the market absorption, the construction, the defined raising, the financing available and a whole bunch of other things need to be considered before you decide if this is worth your time and energy and money before you move forward into this type of project. So for a while, we've been asking people who are interested in these multiple projects about their challenges. What is their biggest thing preventing them from starting a project? What is their biggest obstacle in their way that if it was resolved, they would be able to start a project and make it successful. And the answers were pretty consistent. They were budgeting, performing analysis, fundraising and equity requirements. In a way, they seem pretty obvious, but at the same time, they kind of have this assumptions behind them that if you have enough money, if you have money, you can deliver a successful project, which in some cases can be

5:20true. But if you've been a listener of this podcast, you have probably heard a lot of developers talking about the fact that money alone is only a part of the puzzle and to know how to experience the team, the process, the risk management, the risk management portion sits almost above all of that. And if we felt those things together, having the money might actually cause you more harm than good. And that is what this episode is dedicated to trying to come up with an overall framework for this type of decision making. I'm going to start the questions by quotation from one of my favorite authors, Stephen Arkovie. And he has a saying in his book, Seven Habits of Highly Effective People, that says, the main thing is to keep the main thing, the main thing. And with that in mind, I want to ask you the first question, what are you trying to actually accomplish by doing a multiplex project? In other words, what does your main thing? I think a lot of people might not

6:21necessarily think about this, especially the new developers, the citizen developers might not necessarily give this question or thought upfront, which should be the cornerstone of every other decision that they make throughout the development journey. Most people think that they need to start with the property, what price to be by that, how much money do you spend on, get less, get a deal on the construction cost, but quite frankly, having worked with a lot of developers, having interviewed dozens of them on this podcast, I think we need to start with the owner, what they're trying to achieve, what the risk tolerance is, what their situation in life is, and what would the perfect outcome or the ideal outcome look for them at the end of this project? So why are you considering a multiplex project? Are you trying to build something and sell and get out of it in the next three to five years after completion? Are you planning on holding it long-term as a rental asset? Do you want to live in one of the units and maybe rent out the other ones and pay for your retirement? Or are you thinking of creating a multi-generational

7:26opportunity to create wealth for your grandparents, your grandkids, your siblings, your children, you name it? It's a family effect, and you may or may not be able to capture them all in the performer. This is very important to establish what their success looked like to you as the person who's going to lead this project before actually looking at the performer, looking at the site, before trying numbers, because if you don't have that, quite frankly, coming up with a Excel sheet that looks pretty good with a lot of green numbers and a lot of diagrams and charts that are all pointing up to very profitable outcome, that's easier than you think. It's very easy to be accurately wrong on a spreadsheet and that's a very, very dangerous thing to do, so you need to be careful what you're aiming for. One of the questions that came out of the workshop was what is the profit? How do you define profit? If you're looking for profit, you need to be clear on what type of

8:29metric you want to measure. In other words, when you sell something, if you're building a product to sell, it's much easier to define profit. You build a body for X, you build it for or develop it for Y, and you sold it for Z. If the difference of those numbers work that you end up with some money in your hand and the end of the own, that's probably called your profit. It becomes much more complicated, at least in the medium terms, a short term, when you talk about rental properties, which is the name of the game these days, which you talk about holding them or trying to refinancing them or appreciation value, it can get much, much, much more complicated. It's very important for you to understand what it is you're aiming for. At the end of the day, building an asset, owning an asset, and operating an asset are different skill sets. They require different capital structures, partnership structures, legal structures, and personality is quite frankly. So this is one of the outcomes of the step one or the first question. Do you want to own it? Do you want to build it?

9:32Do you want to operate it? Or do you want to just develop it and get rid of it? So try to think about that first, because it very much affects a lot of the decisions you're going to make down the road. If you're thinking about building sell strategy, your whole project will revolve around achievable sales prices, the exit cap rates, absorption rates, the sales per unit, how much you're going to set on the market, timing of the closings versus if you're looking at the long term rental setup, you're looking at effective rent, you're looking at vacancies, you're looking at net operating income, you're looking at refinancing and appreciation in the underlying asset, which is the property in most cases. And the amount of equity your own money or your own skin that's left in the game for different during different stages of the project and the property afterwards. And if you think about being an owner occupied building at least partially, a whole bunch of other criteria will come into the fact which mostly by the utility, comfort, convenience and performance of the

10:34building and may or may not necessarily have to do with being the most cost effective and most viable in a traditional sense of a construction budget. So to wrap this one up, ask yourself, what do I want to own when the project is finished? How long do I intend to own it? How much capital can I commit? This is a very key and big question. How much skin in the game can you keep for extended period of time and still be able to go to bed at night and have a good night's sleep? What role do I want to have after the construction is over? Yes, you can develop something, you can build something, but are you ready to be a landlord for the next 10, 20 years of your life and deal with tenants? I know people who do that for living and enjoy it and they can really find meaning in it and there are other people who cannot think about having a single tenant in their basement. A very key question that can go on notice is also is what will cause me to say no? What is your red line? How do you decide that you need to walk away from this project or any project that has this type of

11:39setup? And this is a very personal question. It's very easy, especially for a newer developer or seasoned developer to follow in love with the property, to follow in love with the design or the idea of the dream home with the idea of the dream building and that very beautiful rendering and it's very easy to follow in love. It's very easy to get emotionally attached to it and that can potentially get you into trouble. The seasoned developers, the professional developers that I've had to privilege of working with or learning from, they very rarely develop emotional connections to these projects. They walk away from great sites with great potential many, many, many times just because it's not the right fit for them at that point in time at that stage of their investment process that they're in. So have to have a little bit of a clear framework so that you don't get emotionally tied into a project and you make sure you can move forward if you need to. All this

12:39should get you to a point that you are able to answer is a multiplex project that's right vehicle to get you to that objective because there are options out there. There are no short options. You can buy an existing property and it uses a rental. You can buy stocks, you can invest it in a whole bunch of different things and not be tied to this. And this is an important distinction. Figure out what you want to do, see if this gets you there and can you live with that. So question number two is a little bit of a technical nature. What can you build on that particular property and is that the right product for that market? I'm sure you all have heard that real cities about location, location, location, location. Another part of this equation is yes you have the location, you have the apartment property and what you can develop should fit the market you were developing at four. Can you get the right fit of product on that site? Is much more important

13:44question than what can I build? How many square footage, how many units can I do a garden street, can I do a four place or six place or can I go all the way up to 10 units or 30 units, whatever it might be? That is a secondary question. The first question is can you create product market fit? If you can build a lot of great units, but it's not right fit for the neighborhood from parking perspective, from the storage perspective, from a demographic perspective, from an access perspective, that's about decision, that's about product and you should walk away. So very important question to ask, can you figure out a good way to define and then almost guarantee that you can meet the product market fit? This is where a lot of projects go wrong, especially for newer developers, for citizen developers, that there might be emotionally or financially tied to a particular property and you need to make sure that you get fit right. One of the most common

14:45pitfalls that we see in this type of thinking is what is the maximum number of units I can get? What is the maximum number of rentable areas that I can get? And quite frankly, these questions, they're good to know, don't get me wrong, but at the same time, they're not the only question to be asked. The better question is what can be designed, approved, serviced, built, rented or sold, and also efficiently operate it. So if you can't meet all these, it doesn't matter how big you can make the units, it doesn't matter how many square footes you can get, you're just basically digging a bigger hole for yourself or your financial investments to get into it. So please be clear on those before you go and start maximizing the whole things. We've seen number projects that they've gone ahead and they've maximized too much, they've even gone up in terms of a unit count, they've gone to 10 units or 12 units or 8 units or 16 units, and after two or three years of playing with numbers, they come back and they're like, you know what, this is just too much for that site. Let's dive it back, let's shave some things, let's bring it

15:48to something that yes, it's less than we're able to build or we're permitted to build, but at the same time, it reduces the risk, it reduces the equipment requirements and it actually makes numbers work better. So more is not always better in this particular context. I'm not saying the technical side doesn't matter, trust me, it does. Knowing what your zoning is, knowing your setbacks, your property lines, your tree issues, trees, tree protection zones, how your committee of adjustment in your neighborhood, in that particular neighborhood, looks at such properties, the heights requirements, the water table requirements, so on and so forth, they're all very technical. There are a lot of information you have to have the right team, you have to have to have the right consultant team in place, but none of them by themselves can bring you the right product market fit, which is the most critical. I also want to emphasize something here. If you are in a situation that you've looked at a property and that property for it to, from a technical

16:52perspective, for it to be able to give you the market fit, you need all the stars to line up, you need approvals go to according to plan, you need your timelines to be exactly like you draw, you dreamt it, you need your construction cost to be exactly at the lowest possible margin that you've heard on the street, you need a whole bunch of different things to line up, there's a very good chance you're going to be disappointed and quite frankly at that point, you were probably more leading toward gambling than developing because things tend to have a tendency of not going according to plan, and it's very critical that you build these into your model when you're looking at it in terms of contingencies, in terms of plan A's and plan B's and plan C's potentially to see what would you do if some of these things don't work and that applies for the market fit and also the technical side. So please make sure you keep that in mind. The third question, question number three is, who will pay for this project and can you defend

17:58the revenues? When you go through the performance exercise, you're going to see that it doesn't matter which type of project, which scale of project, if it's a condor rental, if it's a mid rise or low rise or high rise, almost always. The revenue lever, the numbers that you put as your sales or rent incomes are one of the most powerful ones, meaning you can very easily turn a very bad performance into a very good one if you assume that you're selling a condo unit for $1,700 a square foot, or if you're collecting $5 per square foot for rentable space. And that's where a lot of mistakes or optimistic estimates happen and you should be able to defend it. Not just defended for the bank who's going to lend you the money. Quite frankly, you need to be able to defend it for yourself for your investors, people who've trusted you with the money. So it's actually interesting. We ran this analysis in our workshop and as part of the workshop, we

19:00work through some sensitivity analysis tables where you can see what happens if your rent goes up by 10%, so it gets better, or your construction cost goes down by 10%. And unanimously, almost all cases, the effect of the revenue is significantly higher on your bottom line regardless of how you define your profit. ROI, return cash on cash, return on equity, equity multiple, whatever you want to call it. The effect that these rents have, the revenue side hat is very significant. So you need to ensure you get it right. Otherwise, you might just be selling yourself and other people a dream that is too optimistic to come true. And also you have to appreciate that this might change through time. You might not be able to get that rent day one. You might not get there that fast in terms of the stabilization. If you're building a fourplex and one of the units stays empty for six months, that's quarter of your revenue and this is significantly higher percentage compared to if you're

20:02building a 60 unit building on a major street and two of the units stay empty for a year. Relatively speaking, there's a much lower impact on the bigger building. So it's very critical that you have the right numbers and also make sure to take into effect the normal vacancy race. People do move throughout time. You have to have some incentives potentially, depending on when you're hitting the market. And if there's competition for your product, there might be incentives that you need to include. So defective rate, the actual might that ends up in your account, especially at the beginning, might be very different from what you're modeling. And if you needed that to be 100% accurate for the profile and to work, then your potential setting up yourself for failure. So very important to get your revenue aside correct. In short, incorrect accuracy can be a deadly cent. You can model your rent to a cent on a square foot. But if the original assumptions are not correct or they're too optimistic, you're just getting false confidence, which actually

21:05will get you in trouble. What are some of the items that you need to think about when you think it about the market fit and how we'll be right back. This episode is brought to you by Solny Construction Group as my company. We help property owners and developers turn the site and idea into a clear, buildable planning. From early stage visibility and pre-construction planning to construction management and owner representation, our role is to identify risks early, coordinate the right team and help the projects move forward with fewer surprises. To learn more about how we support multiplexes and mid-rise builders, instead of Toronto and all over GTA, please go to our website, SolnyConstruction.com, swell and ikconstruction.com. Thank you. The revenues will actually become a reality. You need to know about anything and everything you can about neighborhoods. If you look at the developers and also brokers and realtors,

22:06a lot of them have areas that they work with and they don't necessarily do spray all over the map. The reason is it takes time. It takes effort to know the locals of a neighborhood or an area or a couple of words instead of Toronto. You get a good understanding of that area. If you're trying to start a project but you're looking at the project, one of them in tow because you had a one-scarbrow, one downtown, one in North York, you're not necessarily gaining momentum and you're not necessarily putting the winds and stacking them on top of each other in terms of getting to know the neighborhood. So our suggestion would be to focus on single neighborhood or ward or an area and try to look in that area that fits your criteria. That's another thing. You might be able to make the numbers work in certain places of a city that you might not like one even having investments in. Just because the investment works there and you get a proper rate of return does not necessarily make it good fit

23:07for you. That's another thing you think about. But anyways, North neighborhood, focus your efforts and get as much local knowledge as possible before making these decisions. Unit sizes along with unit mixes are a very key item. There's a saying that if you were playing with performance, if you turn every unit in your building into a studio, small studio and just assume brands for it, you probably will get the highest return possible in that project. If you're not building a studio in housing or senior living experience, having too many small units will hurt you. On the flip side, having too many large units could hurt your performance in the actual, the social regardless of what the numbers say and how you can optimize for numbers. Reality check and common sense is a very good thing to have and look at the units, look at the mixes and see who is going to be the eventual end user who's going to live in this building. Hardly going to fit here and how best to incorporate

24:09into your development journey. One of our podcast guests said something that I've stuck with me and I think it's very relevant to the journey of becoming a purpose-build rental and multiple success developers, especially if you're doing it for the first time. He said that if you're a condo builder, you're going to only have to sell a unit once. Most of the times, you set off black line drawings in a marketing campaign in a sales office without actually showing the product. Sell as once. But if you're a landlord and you have hundreds of units, you're selling all those units to all of your tenants every single month because every single month, all those tenants have the option of saying, you know what? I don't like this building anymore. Getter Building new building has better amenities. It's more acoustically favorable. In other words, it has less sound transfer. It doesn't smell like mold. It's newer. Whatever you name it. It has better access. Maybe it has a swimming pool.

25:10And they get to change. They get to choose every month and they could move. So when you're thinking about it from that perspective, as a landlord, you need to make sure month after month after month. Your tenants want to stick around. Stay pay you and keep your vacancy rates as well as possible. There's always going to be a certain amount of movement, but you don't not want to make it worse than it needs to be by thinking about it ahead of time, planning for it, designing for it, and essentially building for it. That means decisions like layouts, unit mixes, soundproofing, durability, maintenance, property management, and tenants relationship are key that needs to be done ahead of time. And this will all affect how much money you can get, how much rent you can collect. And again, this is the most important lever. So if you're wrong on this, this is where you get the most damage to your project. Bottom line, the worst outcome is not that your Excel sheets show a little bit lower than expected and you walked away from the project. That's actually not a bad outcome.

26:15The worst outcome possible in these scenarios is you build something that no one wants and says empty on the market and it will take your years, if not decades to recover from that type of project. So to wrap up this section, don't start with the rent that you like to collect and try to prove it on your spreadsheets. Work the other way around. See what the actual rent potential is in that neighborhood with that greater product and see if you with that realistic expectation of income. If you can still make a viable, reasonable estimate and performer work and then move forward. If your performer relies on everything in the sky is to line up, then you're probably not in a good position to move forward. So question number four is probably the most popular question. But as you

27:15can tell, it's on the fourth priority compared to the other questions. And the question is about the cost. How much would the month for this project cost? I would add when will be the money required because this is very key. And what do I mean by that? This is like I said, it's one of the most popular, most common questions that I get on the daily basis. What's your score for the number? How much does it cost to build one? How much should we pay for the land? How much should we construction cost? What's the construction management fee? You name it. There's a lot of question on the cost. And yeah, I don't I'm not saying you shouldn't be asking those questions. But but a complete performer for a multiplex project does has dozens of items into it. One of the interesting facts that I think a lot of people don't think about upfront, especially to newer developers and citizen developers is the financing fees. The financing fees in a project. And I don't mean that the premium, necessarily just the premium that you're paying, the remote gear's broker or whoever gets you the deal. I'm talking about the actual interest on the on the

28:19financing deals that you're getting. Could be such a huge number that's making difference, but in most cases, it goes on notice. So think about cost as a whole summit approach, not just a construction cost. In the bigger scheme of things, yes, you should try to be as efficient as possible with your construction processes, your design processes, do material selection, but don't lose the market fit. And also make sure you get a whole bunch of other things in your in your performance, including the items that we just talked about. I just want to go on a side note rant here because obviously we're a construction company and I I concern myself to be a construction person. Be very careful. Please with the numbers that you hear on the market. These days, we hear very interesting numbers on the market when they when you talk about it, what's your cost per square foot? And some of these numbers are very low, which yes, hopefully they can deliver and they might be able to do it and maybe they are doing it. But it's very important to ask the right question. What's your cost per square foot?

29:20Begs the question. What's what kind of square foot are we talking GCA, which is just gross construction area? Are we talking rentable area? Are we talking gross floor area? Blow great above great with appliances and services without them with the landscaping without them and a whole bunch of different nuances. And it's very, very, very easy to say random numbers, day one and say, yeah, for sure, we'll build it for this much. And then once you go through the process, you end up with a whole bunch of surprises and cost increases and none of this is because people lied because giving a very rough order of magnitude number day one, it could be off by 20, 30%, depending how much information you've provided. So very important to allow for your construction cost to be fine tuned through the time. At some point in time, obviously they need to be fixed, they need to be capped or decided upon, depending on the type of contract that you have. But

30:23just going and asking someone, what's the cost for square foot? It's the wrong question to ask. It will give you potentially misleading information and can get you in trouble. So please be careful about that. You know, you also talk about contingency for a second. Contingency is a real thing. I've seen it and I've heard it that people think, oh, contingency is just part of the profit. And yeah, we won't really need it. We won't really use it. In my experience, construction phase is a very risky part of the process. A lot of unforeseen things can happen that you would have never thought about. And it's really crucial to have proper contingency when you go through the process. So skipping contingency and thinking, okay, we're going to make that contingency our profit. And that's how our numbers are going to work is it very risky move. Make sure you have your contingency and your profit. However, you want to calculate this done separately because there's a good chance that you will need your contingencies to pay for things that you haven't seen or no one could have predicted on the project.

31:33Question number five, can you finance a project? Can you withstand the downsized or potential downsides for the project? And the most important question is that exposure and the risk actually worth it. One of the most critical definitions and items that I think people need to think about, especially people who are in the first time in doing this, is the peak equity required. What does that mean? Almost all projects have an element of debt financing, which is in simple terms means a loan, construction loan, mortgage for your property, take out financing, different names, but they all fall under the category of debt. In other words, someone else's money lending you. Why is that important? Because whatever did lend you, you have to compliment with your own money. That's your equity. And your equity could be stuck in the deal for a long time before you can get it back. Depending on the scale of the project, the way the performance works, it could be from

32:33months to years or even decades, depending on how big the project is. So the key question here is, are you comfortable having that much of your personal net worth or your wealth, setting outside of your control, investing in a project for that period of time? There are a lot of conversations right now in the market that with CMHC Finance saying there's special programs, you're going to go through the process, you're going to get all your money back and potentially some on top of that. While that is true and it could be true and it does happen, it's not the common rule and it should not really bank on it. If that's the only reason you're thinking of doing the project, I would suggest you rethink it. Think again, the project on its own needs to have merit. It needs to work while it's on merit. It needs to work on their own numbers and then the fact that CMHC is helping and subsidizing that type of project is the cherry on top and something that makes it that much more lucrative. But if you're thinking that I'm going to borrow from everyone, I don't want to

33:38have any equity of myself left in the deal or to start with inside the deal just because I can get so much financing, it's not necessarily a good thing. Remember the higher the lending and the borrowing costs in the project, the higher leverage, yes, it could work in your benefit but it could also backfire and mean that if you're in trouble, the trouble is much deeper than you would have anticipated. I also want to make a side note about the current programs and I don't know when you're listening to this but as of right now, which we're in the end of 2026, the most popular program out there from CMHC, the CMHC MLI Select. The very important note that I don't see almost anyone talk about is that this type of program is designed to work for long-term hold strategies. What does that mean? We go through process. You're going to notice that they're giving you very good rates at very high ratios of lending but it comes at the premium they're giving their selling

34:40insurance products. CMHC sells insurance on that loan and that insurance, 5, 6, 7 or maybe 8% premium. It's a huge number. It could be $40 million or more in the actual premium. Why? Because you're paying that to lock in the rate for a very long time, maybe 4 decades, 45 years. And it's worth it if you see it to fruition. If you take that and then in 2 or 3 years you start breaking it, getting out of it, chances are bottom line you've lost money. Because you've paid it for a product that could have worked for 4 decades and you got out of it in 4 years. So be careful about that. I don't want to spend too much time here. It's more a mathematical equation but we went through this. This is one of the outcomes of the workshop that we looked at the numbers and you can very clearly see how this could backfire. So do your math. Go back to the question number one. What do you want to get out of this thing before you decide how you're going to finance? And just because the financing

35:40is available doesn't mean you should take it. I want to go back to the peak equity requirement. If you run your performance and the performance tells you that you need somewhere between half a million or a million bucks in peak equity stage or skin in the game at peak in the deal and you don't feel comfortable doing that. That's a sign to think about partnerships with the right structure. Obviously talk to your lawyer. Talk about fundraising and basically diversifying the amount of risk you're taking in your portfolio. Same for the other people who might lend you money to work in this project. Think about that. That's a critical topic, especially your fearsome developer and trying to do this for the very first time. Okay. So we went through the five questions and I think you get a sense of what I'm trying to get at. Yes, it's a doable project. It's a great type of project type of a G. I think a lot of people should be doing it. But you should also do your homework. Optimism alone will actually get you in trouble.

36:44Just because it's a small or project doesn't mean that's easier. Actually, in many cases, it becomes harder because you have less margin or less meat on the bone in these projects to be able to absorb the hits, the mistakes, the unfortunate risks that come with it. And you have to be that much more diligent. This is one of the common mistakes that I see because it's smaller. It doesn't mean it's easier. And it actually means it's riskier. Potentially can be riskier than a larger project. Let's say a midrise. But that being said, it's a great product to start with. Get your feet wet. Get the right team beside you and try to figure out at least hypothetically these the answers to these questions before you start looking at the actual number. If you buy the site for a million or a million 50 or 1.1 million, it's far less impactful on your success in your project than making sure that you have the answer to the right five questions, which are,

37:46what are you actually trying to accomplish? What is your main thing? What can you build on that site? And does that fit the market you're trying to serve? This is one question, very key question. Third one was, who will pay for the product? What's your equid structure? Can you defend the revenue? How much will it cost? What happens if the cost goes a little bit not according to plan? How much equid, do you need to have in the deal? And can you finance it? Can you survive the downturns? Can you survive the exposure that will bring you? And is it worth it for you and your investors and whoever you're representing and you're raising money from? These are the key questions you should be asking. If you have a good solid foundation, you can answer all these questions, then you're probably in a good situation to start. If not, probably not the best choice to go forward, regroup, partner, create other structures, do more to the diligence, wait for the right time. We don't want to have

38:48failed projects and wasted money, ingenuity and creativity in industry. It is much better to not do a project than to do the wrong project. It's much better if you walk away, if you don't feel comfortable and trust me, a lot of these seasoned developers that I work with, they look at dozens of sites, they spend money, they do do the diligence, they do the massing, they talk to the planner, they talk to an architect, they have the stats down, they spend weeks running their performance and they walk away. If it's not comfortable, it's not the right fit, if they don't feel good enough about it, by default they can walk away. I appreciate that this might, this will become much harder if you're a new developer, if you're a citizen developer, it's not something that you would intuitively want to do, but it's really good to think about these questions and try to make sure you have all those answers before you move forward. Your job, if you may, in this process, is not to present something and make sure it looks good,

39:51it actually is the other way, is to try and see if does it work? Does it work? Ask the question, challenge the question, and that's what we did in that workshop and I think we're going to continue doing these workshops every so often. If you're evaluating multiple business, you'll try now if you want to see if these numbers make sense, if you need to back up to answer these questions and you need help with your project, by all means, please go to our workshop website and sign up for the next iteration of the workshop that is going to come up. You can find that multiplexworkshop.com, multiplexworkshop.com and I wish you all the best. As always, if you have any questions, comments, please let us know. I hope that you have found this episode useful. Hopefully I didn't scare you too much this up a way, but I'm a big believer that we need prepared people to start developing. Thank you very much. I hope you enjoyed listening. Just one last thing before you leave. Please make sure to visit our website. We have put together a whole bunch of different

40:55resources that you can download for free from our website. These include checklists, manuals, and also access to previous webinars. If you, in case you have missed or haven't any of our previous webinars, you can go there and get the replay link, download the slides, and benefit from all these free resources that we've gathered on the website. Please make sure to visit. Thank you.