How Infill Development & Net-Zero Buildings Create Massive Long-Term Wealth

Van & Maria Sheppard (00:00)

I was an aerospace engineer.

And I’ve always been interested in how can we build better buildings, more energy efficient buildings, and address the needs of the occupants of the building as effectively as possible. So that started us even with our purchasing existing houses and converting them to make them into multi-unit houses, learned very early on that one of the keys to doing that is to make sure that the tenants aren’t ⁓ disturbed by each other too much. And ⁓ lots of lessons learned on that.

one. ⁓ Using a common furnace for two units is a bad idea. That large metallic duct work that they used to circulate warm and cold air also circulate a lot of noises and smells and things that allow one side to interrupt the quiet enjoyment of the other. So we learned fairly quickly that we wanted to build better buildings. ⁓

Michelle Kesil (02:26)

Hey everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil and today I’m joined by someone I’m looking forward to chatting with, Van and Maria Sheppard who help investors and developers create high performing, future ready buildings. So excited to have you both here on the show today.

Van & Maria Sheppard (02:44)

Thanks for having us. Hi, Michelle. Thank you.

Michelle Kesil (02:46)

Yeah, of course.

I think our listeners are really going to take something away from how you’ve created a client focus and vertically integrated business. So let’s dive in. First off, for those not yet familiar with you and your work, can you share what your main focus is?

Van & Maria Sheppard (03:02)

Absolutely. Our main focus is infill development in the City of Ottawa presently. That’s where we reside. so infill development and also net zero construction. Those are the two main focuses for our business looking forward.

Michelle Kesil (03:22)

Awesome, and how did you guys get started in this industry?

Van & Maria Sheppard (03:27)

That was quite a story, as Vennel has referred to me. He thinks I’m telling this better. So when I arrived to Canada 15 years ago, Vennel was working as an aerospace engineer and I couldn’t transfer my profession to Canada.

I mean, he was a medical doctor, so it’s pretty transferable, the formalities are difficult to overcome. And ⁓ we had four little boys and one of them looked at ⁓ our finances and said, well, you know what? It doesn’t look like we’re going to be as well as I would like us to be in the future if we continue going like we are. And he literally went to open his computer and

Google how to get rich. And ⁓ then we learned that majority of wealth created through real estate and then we started to investigate further. We found a course. We took that course and it gave us a huge kickstart. But it was more focused to a different aspect and not to ⁓ Canadian market where we are. So we had to learn most.

of our journey ourselves started from secondary dwellings. It’s adding units to the existing houses. Yeah, would say buying single family homes and then putting a second unit in the home. So creating density on a small scale, how I would put it. Yeah, so we did quite a few of those.

And then in 2020, we did, we’re kind of forced to do our first build because our next purchase was

supposed to be also to study in a unit but because of different regulations we were about to lose our property if we just pursue is the same ⁓ same approach the same approach yes so we actually ⁓ did what we were hesitating for quite a while we did demolish the building and started new and that that was an eye-opening experience yeah yeah the story behind that one we we purchased a bungalow and

duplex on a main street with the intention of putting a unit in the basement and turning it into a triplex and After we had purchased we did some due diligence prior to purchasing it We made sure the zoning was permitted. We were allowed to do what we wanted to do with the building Shortly after the deal went firm And we were continuing to do due diligence. It was a pretty hot market at the time So we didn’t have the luxury of giving ourselves a long time to do the work Shortly after the deal went firm. We discovered that our building was

not too close to the road for the current zoning, but the city had plans to widen the street and they were going to be expropriating, I think, like eight to 10 feet of land from all the lots along the street. And that meant chopping off a foot of our building. we were going to basically be expropriated. So that caused a fairly quick shift and where we had previously been thinking at some point we’re going to do a new build, some point became now. And we

we planned and did a new build where we set the building that we were building further back on the lot so that when the expropriation takes place, and it still hasn’t, that was six years ago, but when the appropriate expropriation takes place, they’ll just take the eight feet from the front of the lot and the house will remain. So that’s what got us into ⁓ new construction the first time. Yeah, yeah. And then we learned that with not so much more ⁓ capital and effort, our

our asset that we created was ⁓ so much more valuable and so much more profitable that after that we we decided that it will be our way forward forever Yeah, yeah we

a little more capital than we had been investing previously, but not a lot more. And for a similar timeline, we were able to create an asset that valued about triple what we had previously done and our cash flow since we’ve, so we still own several of the assets that we’ve created and this one ⁓ is the most valuable and generates the most cashflow for us. So that was a great forced entry into infill development.

and definitely set us on the path where this is what we’re going to do going forward.

Michelle Kesil (09:07)

Awesome.

What do you feel are some of the main keys that have made the biggest difference in allowing your business to be able to grow and to run smoothly?

Van & Maria Sheppard (09:17)

Well, you said grow and run smoothly, and I would say grow, and we are running not as smooth as we would like, but we are running. So the keys to our growth, I think we’re more client focused. We’re in a community of investors, and we mystery shop quite a bit to understand what other people are creating, and ⁓ we speak to people about where their focus is. We’re very heavily focused on making sure that we address

the needs of our clients and our clients are our investors in the sense of getting a return but the client that really drives our business is our tenant and we’re very heavily focused on making sure that we’re bringing a product to market that there’s a demand for and we’re differentiating what we build so that it’s I guess we try to separate ourselves from the other infill projects that are coming on the market so that we were making a better offering to our clients that that’s I think our biggest differentiator.

In terms of running smoothly, I would say we are ⁓ working on it and often that it’s not only dependent on us, unfortunately our our city is

Sometimes not not so very cooperative. I would say right So we were working with the city as well on different aspects but sometimes it doesn’t go as smooth as we would like and a lot of frozen that they run over time because of different constraints and often from the city.

Yes, that’s a that’s a very good comment. So Just over Christmas. I was speaking with a fellow investor who also operates in in one of the states in the US and

we were comparing severing a piece of land to create two pieces of land here in Ottawa versus in the state that he owned land in as well. And in the state that he owned land in, he needed a surveyor involved, cost him about $2,500, took paperwork to the equivalent of the land registry office there, and his severance was done. In Ottawa, that’s a two-year process, and it’s usually six figures by the time you finish paying all the consultants you need to have involved. So our regulatory environment

is challenging. Another investor who we also spend time with has a great comment on that. He said, yes, our regulatory environment is challenging and that means that many people choose to do their work in other municipalities. He said, that’s great, less competition for me. So if you’re prepared to push through the red tape and you bring product to market, there’s a great demand for it in Ottawa. Yeah.

Michelle Kesil (12:25)

Awesome. And what are you guys most focused on solving or scaling to next in your business?

Van & Maria Sheppard (12:32)

Sure.

Thank you for the question. Yeah, and we are very excited. Right now we have a few projects just finished, one and it’s 75 % leased. It’s multi-unit project. We are finishing construction on another one and it should be going on market in spring. It’s also 12 units. Coming to market, not going on market. We’re not selling it, we’re And so we also have two projects in…

projects

in development. One is fully funded and we’re capital for 25 unit development and field development projects. We are very excited about this. This is our biggest so far and we anticipate going the same scale in the future. And at the same time we’re running our in-field and action course.

That’s our teaching course for fellow developers. had ⁓ over the years so many people coming to us and asking for advice ⁓ how to get started ⁓ this journey. so we decided to create a course to help other peoples and to share what we learned from our years of doing this. yeah, so that’s our…

most ⁓

Can I add something? Absolutely. So, and when we looked at creating that course, we wanted to differentiate ourself from other people, because there are lots of courses in the market right now that teach you how to do infill development. So the difference between our course and the others that we could find, at least in our area, is ⁓ we include in our course regular visits to our active development sites where we walk people through our buildings at different,

walk our students through our buildings at different stages of the construction process and highlight things that they’re gonna wanna know if they’re gonna start to do this for themselves. So it’s fine to teach the numbers and the theory and the team that you need to have in your corner to get this done. We try to show people the things that differentiate our projects or hopefully their projects in the future from the mass market. Yeah, from the mass market so that they will have

differentiated product. And share our oopses and mistakes and that’s how we learn so unfortunately everybody learn best on their own mistakes. yeah yeah and we we’re pretty open about sharing that.

Michelle Kesil (15:08)

Yeah, absolutely. Would you like to share one of the obstacles or mistakes that you have overcome?

Van & Maria Sheppard (15:55)

Well, I can talk about our ⁓ our excursion with the city this past summer. ⁓ So we ⁓ we one of the products that we bring to market is called a single room occupancy. And that product, it it’s so in our city’s zoning bylaw, that’s called a rooming house. Our version of that rooming house is we put as much amenity as space as we possibly can inside everybody’s unit. So there’s a requirement to have some common space.

and we had ⁓ a debate with the city about, not debate, that’s a generous way, ⁓ a dispute with the city would be more accurate, about how much amenity we could have inside the units versus how much we had to have in the common space. ⁓ That took ⁓ quite a bit of email traffic ⁓ at escalating levels inside the city and when you’re not able to resolve a difference between yourself and the municipality here in Ontario, there’s ⁓ a body called the Building Code Commission

and you and the city will go to the Building Code Commission, present why you feel you have the correct interpretation of the Building Code and they will render a decision and you have to move forward from there. So when I wasn’t able to get resolution with the ⁓ manager at the city that I was trying to resolve the difference with, we made an application to the Building Code Commission at which point we have to send that to our chief building official and he got involved and we didn’t

end up going to the Building Code Commission. We were able to resolve it with him. He shared our view of the interpretation of the Building Code and not his managers. And so we were able to move past that. But that was a couple of months of discussion with the city before we were able to move forward. And our city is supposed to be supportive of what we do. We find that they’re learning. They’re learning too. That’s a fair way to it.

believe that they want to be better at this and they look

So they also made a declaration that they are going to be more friendly and we are excited about how they’re going to implement it. More developer friendly, more housing friendly even. Yeah. One of the things we tell our students in our course and actually anybody who we talk to is if you’re going to be a real estate developer, you have to be able to deal with adversity, adapt and adjust your plan ⁓ according to the people you have to interact with to get things done.

is also another big thing. I’m sure everybody who’s in real estate know what is this. means nothing now.

and we had also two projects. One was significantly delayed by not approving by committee because of our neighbors’ opposition and we had to go to the land tribunal to get approval. To put a little more context around that one. The 12 units that’s actually renting now, when we applied for our building permit there, we also applied for

variance to increase density and our city was supportive as supportive as they can be they had no objections to our request to increase density our neighbors came out in force like 275 people and no sorry 75 people ⁓ in a petition against allowing the increase in density and a number of neighbors came to speak at the Committee of Adjustment which is where we get our requests for minor variances approved they were successful in persuading the committee that we shouldn’t be allowed to have the density

We actually had to appeal it to a provincial body called the Ontario Land Tribunal and have them overturn the decision. So we were able to move forward and do what we planned. But yeah, that put a wrench in the spokes for our timeline for sure. That delayed our project by many months.

Michelle Kesil (19:50)

Yeah, absolutely. There’s so many pivots that you have to make in this industry.

Van & Maria Sheppard (19:54)

There are.

But there’s always opportunity there, right? Yes. There’s always opportunity. It seems like every time we get thrown one of those ⁓ one of those wrenches in the spokes, we’re able to turn around and find some opportunity there to at least in Ontario. Our provincial government has been quite proactive in changing regulations to ⁓ to support developing new housing. And so it seems like almost every time the city throws ⁓ a delay into our plans, the province steps in and says, well, since

weren’t able to do what you wanted to do then we’re going to let you do more now. So when we come back to the city we’ve often come back with more density than we were originally turned down for. So almost every every bump has turned into a you know some roses down the path. it’s ⁓ again that that need to be versatile and adaptable and stay aware of your environment so that when things change you can take advantage of it.

Michelle Kesil (20:48)

So you mentioned that your projects are sustainably focused. Can you expand on what that looks like?

Van & Maria Sheppard (20:53)

I guess I can. It’s a near and dear thing. So Maria said at the start of the podcast that before we got involved in real estate,

I was an aerospace engineer.

And I’ve always been interested in how can we build better buildings, more energy efficient buildings, and address the needs of the occupants of the building as effectively as possible. So that started us even with our purchasing existing houses and converting them to make them into multi-unit houses, learned very early on that one of the keys to doing that is to make sure that the tenants aren’t ⁓ disturbed by each other too much. And ⁓ lots of lessons learned on that.

one. ⁓ Using a common furnace for two units is a bad idea. That large metallic duct work that they used to circulate warm and cold air also circulate a lot of noises and smells and things that allow one side to interrupt the quiet enjoyment of the other. So we learned fairly quickly that we wanted to build better buildings. ⁓

just because it improved the life of the tenants there and if the tenants are happy, our property manager is happy. So that started us down the path as we got into infill development, particularly in Ontario, there are, ⁓ well across Canada to be honest, because it’s a federal program, there are programs that give you access to

to construction loans and permanent financing at really fantastic rates if your building meets certain energy efficiency criteria. So we have a combination of me as an engineer wanting to build better buildings, build them quieter, build them more energy efficient, and government programs that ⁓ subsidize or give you ⁓ improved financial…

perks I guess, ⁓ better financing, higher loan to value, better interest rates, longer amortizations, if your buildings are energy efficient. So the combination of the two things make it fairly, it’s a strong incentive to want to build sustainable buildings. And they’re cool.

Michelle Kesil (22:58)

Yeah, absolutely. That’s amazing that you’re having that niche and also helping in that sustainable way.

Van & Maria Sheppard (22:59)

Thank you.

Thank you.

Michelle Kesil (23:06)

Absolutely. So before we wrap up here, if somebody wants to reach out, connect, learn more about what you’re up to, where can people find you and connect with you?

Van & Maria Sheppard (23:15)

We have a website ⁓ Shepparddevelopment.ca and we also have Instagram ⁓ at Sheppard Development and we have also Facebook page. I’m not sure what Facebook page is called either to be honest. We created it so long time ago. If you Google Sheppard Development Facebook I’m pretty sure it will come up.

happy to connect with anyone who would like to and chat. Yes.

Michelle Kesil (23:49)

Perfect. Well, appreciate your time and your story. Thank you for being here.

Van & Maria Sheppard (23:54)

Alright, thank you very much for having us, Michelle. Thank you very much.

Michelle Kesil (23:57)

⁓ Of course, and for the listeners tuning into the show, if you got value, make sure that you have subscribed. We’ve got more conversations with operators who are building real businesses. We will see you on the next episode.