The intervention we’ve been hoping for starts with this rental question. What happens when the government actually steps in, not with more policy and interest rate hikes but with actual muscle. When we start seeing increase supply of affordable rental housing that is government subsidized, the real issues will start. When construction starts increase to an appropriate rate to match population growth and new builds flood the market, that’s when the real issues will start for current foreign and domestic investors that have purchased in recent years. Hopefully interest rates can decline then but what about taxes? Not to mention, pre-fabricated single family builds are on the table for future development assistance. I say the best thing an investor can do right now is buy something that they can build their own secondary/tertiary units on to benefit from the newest niche market that government has created. We’re not going to be as focused on these private for-profit builders as much in the next 10-15 years to solve our housing crisis. If the rate of project completions does not improve, millennials will be renting and contributing extra dollars to REITs and whatever other private projects we can find for the most part. We should absolutely be campaigning for #1 more sustainable building practices that are cost effective, #2 more AI use in planning and development processes #3 Trades School and Recruiting efforts and I’ll even say #4 incentives for more online work capabilities and whatever else would encourage Canadians to relocate to developing cities.
The problem now is if you have to carry a mortgage on an investment property like a condo and then the tenant decides not to pay you rent. You will seriously be SOL. You will be cash flow negative and will be forced to sell at a loss. This the biggest risk for a small time investor that cannot afford to purchase a condo with cash.
New York, London, San Francisco and other likewise major cities have been cash flow negative for years. Yet prices continue to rise creating a rental population.
Past performance is not an indicator of future performance. We have been in an asset bubble for more than a decade now, thanks to negative real interest rates. Look at longer term trends and cycles and it will be more clear where we are headed.
💡💡 *great,I would make it a nightmare for investors tax wise hahaha... if you want to invest in real estate , 1) go buy or build a purpose built rental apartment building , 2)Go invest in a REIT (Real Estate Investment Trust). Condos & single family homes should only be used as primary residences*
Great video. However, @6:20, Don't you think it's playing in the hands of recency bias? i.e Condos appreciate and make investors more money rather than the cashflow. But question is if it will continue doing so, looking at all the headwinds? Sure lot of positives too, but isn't it an already stretched product?
Agree - Have a lot of videos on my channel covering just that. Markets tend to detach from fundamentals when you critically undersupply them for a long time. If thesis is we dramatically slow immigration, or we somehow double our new home completions, investing in toronto makes no sense. I don't believe either of those to be likely
I read somewhere cost of most construction materials fell 22-32% when will builders wake up to this and discount ? Or they won’t wanna do that and pocket the additional profit margin ! This is why I feel even if govt stops taking their cut of 32% from new build cost , builders will happily eat that too rather passing discount to customers.
The only reason that condos increase in price is because of location premium and supply constraints. Accounting principles dictate that buildings are depreciating asset unless maintained or improved upon. Land maintains value because of it's use. Anything else is speculation. A home other than a place to live has no productive use.
The presenter of this video does imply that rents will increase due to scarcity. Unlike the price of RE which has been detached from incomes for many years now (today, your ability to buy is driven solely by your access to capital - not your income), rental prices HAVE to remain attached to incomes. Rent can NOT sustainably continue to rise faster than the rate of inflation (wage inflation) over the long term. What is happening (which is bad for mom and pop investors) is tenants secretly doubling and tripling up in tiny condos.. imagine four adults living in a one bedroom. Thousands are in breach of their tenancies by taking in paying roommates. Why is this bad...??? Think about maintenance and wear and tear.. Instead of 10-15 toilet flushes a day... think 40 or 50... 10 loads of laundry per week rather than 3... 5-6 showers a day in one bathroom - think mold. Livability in the towers will decline as thousands of extra, secret tenants jam themselves into overloaded elevators - after sometimes waiting 10-15 minutes for the elevator to arrive.. broken elevators are already rampant in the city. This will NOT end well.
@@Precondo I believe i made my point clear... they can't - over the LONG term - We can't magically convert Toronto's inventory of 600 square ft one bedroom condos to 300 square ft condos. Rents rising above inflation long term creates severe unsustainable living arrangement distortions - for which I have given an example. People's paychecks are only so large. Finally - There is no way that rents and home prices can continue to rip higher while the BOC lowers rates... not - going - to happen... If this continues - rates are going even higher from here dampening demand further.
No one really have a idea how the market will perform in the future. I bought a downtown condo in 2017 and I felt so hopeless to pay $1000/sf because I thought I am definitely the last mouse trapped in the game and overpaying!.... And now it is valued at $1500/sf.
as condos get dumped and prices go down....the rents will follow, condo's are VERY overpriced just like the rest of the market, just not feasible for the average guy to afford fake estate anymore
Implied in this video is the assumption that levels of appreciation going forward will be the same as capital appreciation in the past 10 years. That is akin to buying a stock when it is selling close to its historical highs and assuming that the parabolic upward run will just continue. That is foolish. Imagine your negative cash flow - year after year... with flat or only slowly rising appreciation over the next 10 years. One in four condos are NOT being buying outright,,, large percentage of these buyers are using HELOCs for all or part of the purchase price!!! Not having a mortgage, doesn't mean the purchase is not being financed. This is part of the reason why sales are off 70%... those HELOCs are now very expensive to borrow against. The negative cash flow numbers are actually optimistic... the situation is far worse. This data assumes 100% occupancy rate - year after year... with no interruptions. Highly unrealistic. This data does not take into account renovations and repairs during or post tenancies.. again unrealistic. Most importantly this data does not take into account the small but significant risk of a non-performing tenant. With LTB waits of more than a year... when a tenant stops paying.. its a financial disaster for the "mom and pop" owner.
Canada will allow 500K immigrants/year because we stopped making babies. Real Estate will rise significantly by 2030 as there will not be enough houses for these immigrants.
The condo concept never fails to confound me as to why buyers flock ro them. The winners are developers but with articles like this, even that is precarious right now. Just keep crunching the numbers and getting your doors 🧮
Thank you Jordon...some optimistic news ( or maybe not a news), like for father of two kids
The intervention we’ve been hoping for starts with this rental question. What happens when the government actually steps in, not with more policy and interest rate hikes but with actual muscle. When we start seeing increase supply of affordable rental housing that is government subsidized, the real issues will start. When construction starts increase to an appropriate rate to match population growth and new builds flood the market, that’s when the real issues will start for current foreign and domestic investors that have purchased in recent years. Hopefully interest rates can decline then but what about taxes? Not to mention, pre-fabricated single family builds are on the table for future development assistance. I say the best thing an investor can do right now is buy something that they can build their own secondary/tertiary units on to benefit from the newest niche market that government has created. We’re not going to be as focused on these private for-profit builders as much in the next 10-15 years to solve our housing crisis. If the rate of project completions does not improve, millennials will be renting and contributing extra dollars to REITs and whatever other private projects we can find for the most part. We should absolutely be campaigning for #1 more sustainable building practices that are cost effective, #2 more AI use in planning and development processes #3 Trades School and Recruiting efforts and I’ll even say #4 incentives for more online work capabilities and whatever else would encourage Canadians to relocate to developing cities.
The problem now is if you have to carry a mortgage on an investment property like a condo and then the tenant decides not to pay you rent. You will seriously be SOL. You will be cash flow negative and will be forced to sell at a loss. This the biggest risk for a small time investor that cannot afford to purchase a condo with cash.
New York, London, San Francisco and other likewise major cities have been cash flow negative for years. Yet prices continue to rise creating a rental population.
Past performance is not an indicator of future performance. We have been in an asset bubble for more than a decade now, thanks to negative real interest rates. Look at longer term trends and cycles and it will be more clear where we are headed.
I read that article today! Great video 👏🏾
Thanks for watching !
Thanks for the awesome content. Toronto continues to spiral
This market is going to break at some point and all those highly leveraged playing musical chairs - won't have a seat, when the music stops.
💡💡 *great,I would make it a nightmare for investors tax wise hahaha... if you want to invest in real estate , 1) go buy or build a purpose built rental apartment building , 2)Go invest in a REIT (Real Estate Investment Trust). Condos & single family homes should only be used as primary residences*
Great video. However, @6:20, Don't you think it's playing in the hands of recency bias? i.e Condos appreciate and make investors more money rather than the cashflow. But question is if it will continue doing so, looking at all the headwinds? Sure lot of positives too, but isn't it an already stretched product?
Agree - Have a lot of videos on my channel covering just that. Markets tend to detach from fundamentals when you critically undersupply them for a long time. If thesis is we dramatically slow immigration, or we somehow double our new home completions, investing in toronto makes no sense. I don't believe either of those to be likely
it was a stretched product a long time ago
I read somewhere cost of most construction materials fell 22-32% when will builders wake up to this and discount ? Or they won’t wanna do that and pocket the additional profit margin ! This is why I feel even if govt stops taking their cut of 32% from new build cost , builders will happily eat that too rather passing discount to customers.
@@Lj22 Development charges went up 49% in the same period of time (last year)
The only reason that condos increase in price is because of location premium and supply constraints. Accounting principles dictate that buildings are depreciating asset unless maintained or improved upon. Land maintains value because of it's use. Anything else is speculation. A home other than a place to live has no productive use.
You suggest it will put upward pressure on rentals. What impact will it have on appreciation?
The presenter of this video does imply that rents will increase due to scarcity. Unlike the price of RE which has been detached from incomes for many years now (today, your ability to buy is driven solely by your access to capital - not your income), rental prices HAVE to remain attached to incomes. Rent can NOT sustainably continue to rise faster than the rate of inflation (wage inflation) over the long term. What is happening (which is bad for mom and pop investors) is tenants secretly doubling and tripling up in tiny condos.. imagine four adults living in a one bedroom. Thousands are in breach of their tenancies by taking in paying roommates. Why is this bad...??? Think about maintenance and wear and tear.. Instead of 10-15 toilet flushes a day... think 40 or 50... 10 loads of laundry per week rather than 3... 5-6 showers a day in one bathroom - think mold. Livability in the towers will decline as thousands of extra, secret tenants jam themselves into overloaded elevators - after sometimes waiting 10-15 minutes for the elevator to arrive.. broken elevators are already rampant in the city. This will NOT end well.
@@rdefacendis Rents cant sustainably rise faster than inflation? Tell that to Hong Kong, NYC, etc etc etc
@@Precondo I believe i made my point clear... they can't - over the LONG term - We can't magically convert Toronto's inventory of 600 square ft one bedroom condos to 300 square ft condos. Rents rising above inflation long term creates severe unsustainable living arrangement distortions - for which I have given an example. People's paychecks are only so large. Finally - There is no way that rents and home prices can continue to rip higher while the BOC lowers rates... not - going - to happen... If this continues - rates are going even higher from here dampening demand further.
Always great content
Not convinced positive cash flow means one isn’t speculating. What if the place is 2k/yr positive but its value drops by 50k?
No one really have a idea how the market will perform in the future. I bought a downtown condo in 2017 and I felt so hopeless to pay $1000/sf because I thought I am definitely the last mouse trapped in the game and overpaying!.... And now it is valued at $1500/sf.
Super Informative 🚀🚀🚀🚀
as condos get dumped and prices go down....the rents will follow, condo's are VERY overpriced just like the rest of the market, just not feasible for the average guy to afford fake estate anymore
Implied in this video is the assumption that levels of appreciation going forward will be the same as capital appreciation in the past 10 years. That is akin to buying a stock when it is selling close to its historical highs and assuming that the parabolic upward run will just continue. That is foolish. Imagine your negative cash flow - year after year... with flat or only slowly rising appreciation over the next 10 years.
One in four condos are NOT being buying outright,,, large percentage of these buyers are using HELOCs for all or part of the purchase price!!! Not having a mortgage, doesn't mean the purchase is not being financed. This is part of the reason why sales are off 70%... those HELOCs are now very expensive to borrow against.
The negative cash flow numbers are actually optimistic... the situation is far worse. This data assumes 100% occupancy rate - year after year... with no interruptions. Highly unrealistic. This data does not take into account renovations and repairs during or post tenancies.. again unrealistic. Most importantly this data does not take into account the small but significant risk of a non-performing tenant. With LTB waits of more than a year... when a tenant stops paying.. its a financial disaster for the "mom and pop" owner.
Buy low, sell high. 🐰🐇
I’m disliking and commenting - subbed a year ago. Appreciate the updates.
Hahah appreciate it 🙏🏼
I am sorry that I did not dislike and leave a nasty comment.
theres always next time!
still making money hand over fist for yourself and clients I see
I dislike and subscribe😂😂😂
Lol
🤣 I’ll take it
Canada will allow 500K immigrants/year because we stopped making babies. Real Estate will rise significantly by 2030 as there will not be enough houses for these immigrants.
That's assuming immigrants will want to stay. Immigrants are starting to leave Canada
The condo concept never fails to confound me as to why buyers flock ro them. The winners are developers but with articles like this, even that is precarious right now. Just keep crunching the numbers and getting your doors 🧮
Hgy