Did you know U.S. subprime lending is back?
Yeah, neither did we.
Did you know the U.S. budget deficit is growing at twice the pace of their economy?
Have you heard of the Repo Market? You should.
How does all this impact the Canadian real estate investment landscape?
We break it all down on this episode of The Your Life! Your Terms! Show, and explore how these monetary and fiscal policy trends may impact house prices right here in Canada and Ontario.
Tune in for some fun!
Hey everyone, it’s Tom Karadza, and with another episode of The your life, your term show, and on this one, we get a little crazy because this is the stuff we love talking about most, which might sound ridiculous, but it’s around interest rates, some of the population growth going on in Canada, what’s happening in the US and how that might affect interest rates here in Canada, and how that ultimately affects property prices here in Canada, and what’s happening to the real estate market here in Canada. So we love diving into this kind of stuff. It’s easy for us to talk about this stuff, we share some of the research that we’ve dug up over the last few months on this particular topic. So it’s myself and Nick, just kind of going through we don’t really have an agenda or a schedule, we have a few points to cover. But I really hope that you are also a monetary policy geek like you enjoy this stuff. I think there’ll be something in there for you. If you are all interested in real estate in the Canadian Real Estate Market. Let’s leave it at that. And listen, if you are listening to this, and you haven’t checked out the Ontario’s population stats yet you absolutely need to if you’re a real estate investor in This particular area of the country especially, you need to check out this stuff. We have this report called Ontario’s population explosion, The Untold Story, how Ontario’s population trends are creating amazing opportunities for savvy real estate investors. And we believe once you see some of this data, your jaw will hit the floor, maybe it’s actually not going to hit the floor. But you know what I mean? Like you’re just going to be in such all when you look at this report, so you can get a copy of this report at rock star inner circle.com forward slash reports. So that’s rock star inner circle, calm forward slash reports. It’s about it looks like it’s about six pages long. We’ve jammed all the stats that we could dig up with a whole bunch of beautiful charts all in color, including some of Ontario’s Green Belt maps and how that’s growing over the last few years, just so you can see how the population component of the real estate game is unfolding here in Ontario. So you can check that out, or get a copy of that at Rockstar inner circle.com forward slash reports and listen as you get into this particular episode, if this is something that you like, Hearing about interest rates, property prices, talking about the economy here in Canada. Feel free to give us feedback in any way shape or form on some of the social media platforms that we’re on. You can always send an email into podcast at Rockstar inner circle calm and give us feedback on this stuff. It helps guide us on what topics you’d like covered on the episodes of this podcast, especially ones where Nick and I just kind of sit down hit record and start going through some of this stuff. With that,
let’s get on with the show. Are you ready to live life on your terms? Is it time did take charge, real estate, business building the economy, health and nutrition and more? It’s the your life your turn show with Tom and Nick Karadza. Are you ready? Let’s go.
Tom, can you hear me? Now? I’m supposed to say it. Hey, I can do it.
No Deal. You’re gonna ruin it. I look when I have to start again. Nick, can you hear me
yet? No, I can’t hear you. I can’t I can’t believe you still ask that.
Oh, listen. Okay, let’s get started into this thing that we have a lot to go over this stuff. I can get way off track and we have a new mic so I can have to lean forward into this mic stand. So if you can’t hear me, you legitimately now if you can’t hear me, tell me if you can hear me. So. Anyway, do you have any opening remarks before I get started on an epic rant of inflation, no interest rates.
We’re just in pure survival mode with everything going on. This is just a miracle is happening.
Yeah, just so everybody’s aware. I guess we’re in the middle of this build for this new office. And we might have messed up our current lease, which means we might be leaving here a little sooner than we had planned and the other office might not be completely right. We actually don’t know. We don’t have any answer answers. We don’t know when we’re moving. I just thought it’d be funny. The whole team showed up at the Starbucks one day. So we did have an office for a couple weeks. And we just had to go to the Starbucks and see the reaction when we should tell everybody listening to this what we, you know, I both five years ago when you know, when you deal with real estate, you always joke about like, well, I guess there could be a crash really, at any time, even though no one really believes there could be we’re always very paranoid that there could be it’s kind of like we’re, you know, short term paranoid, long term optimistic, but we always had this joke that if anyone ever shows up to the Rockstar office, and there’s just big chains around the door, that means the real estate markets collapsed. There are people after us, and we’re all just meeting at the Starbucks down the road. So if you’re listening to this, and you ever come to the Rockstar offices, chains around the door, doesn’t mean we haven’t like paid rent or you know, whatever it means we made a mad dash for the what are the exits? I shouldn’t laugh about the stuff. I am joking about this. We take real estate very seriously. We’re here for the long haul. It’s just without joking about real estate in this manner. It can drive you absolutely insane. So with that We are just on survival mode. And what the last few weeks we haven’t done a lot of podcasts. I think we’ll get back into a regular groove of them now, it’s been totally Nick’s fault that we haven’t done any podcasters is and Nick’s. You just finished blaming right before we started recording you just wait, what did you say to me? It’s your fault that we’re spending money or
no, no, I said, I said anything expensive that we got for the office is definitely your fault.
Because we started we just we did this little vote about the chandelier that we found in this chandelier. I think it looks like something out of Star Wars like a Star Wars spacecraft or something someone else thought it looked like a shark. It’s metal and lights. I don’t know how it looks like a sharp
I agree though. It isn’t like is the nicer one I was just hoping that I was like, let’s send it to a couple other people because I was hoping that out of the two options they were going to choose the cheaper one. Yeah, out of out of this one. So
if you’re listening to this, and you come to our new office, and if we greet you, please make a big deal of the chandelier that you see in the boardroom so that we can feel like we haven’t Well, let’s get
our money that you might not even be available anymore who know with all the We learned about lighting who knows that this movie miracle forget lights in this place.
Okay, so I want to talk about one of my favorite topics, inflation. But the way I want to give some context around this is something that I always seen the papers are the destruction of the middle class, or the middle class is disappearing or people can’t make ends meet. And I just want to talk about this a little bit. Nick, I’ll go on this little rant for a second before we talk about you’re going to do whatever you want anyway, so Okay, perfect.
on the same page.
So here’s what I want to talk about. Whenever Nick and I see stuff in the media, where it says, you know, that people can’t make ends meet. It’s always frustrating to me, because that seems like it’s always talking about the symptom of what’s going on in the world in the the money game, and not the actual problem. And here’s what I mean by that. If any one of us Google’s up the Bank of Canada’s website. And if you go to the inflation control target page, which exists, it’s like one of the primary pages on the bank of Canada’s website. So if you’re in front of Google right now or when you get home if you’re listening to this on the road, on your on your phone, if you google up Bank of Canada inflation control target, you’re going to find this page that basically says that the Bank of Canada has an inflation target of between one and 3%. And ideally, they’re hitting 2%. And they have this little definition that says inflation is a persistent rise over time and the average price of goods and services or the cost of living, and when you put this into a calculator, if you just put like, let’s say, you take $100, and then you multiply 200 times 1.02, and you hit the equal sign. And if you hit that equal sign 35 times, you’re gonna notice that the hundred turns into $200 after 35 times, which means everything in the world is supposed to double in price as per the rules of the game every 35 years. So if you’re going to live to 70 years old, that means everything in your lifetime doubles twice. So if you buy a property, you know if your parents buy a property when you were born for 400,000 dollars by the time you’re 35 properties likely going to be 800,000. And by the time Wow, by 10 or 70, it’s I was gonna say 1.2 million. But no, it doubles from 800. So it goes to 1.6. Holy shit. I’m even astonishing myself at this point.
Anyway, so it goes from 400 to 800. Yeah, that’s right goes from 400 to 800. And then the next 35 years ago, so 1.6 million plus five, you’re seeing crazy valuation stuff. Now. I go back to the price of bread. What was the price of bread? How long ago? Was it? You know, a nickel? Right? It’s not if you actually think about I don’t know if it was a nickel. No, not lifetime. No, no, I’m talking about the math. Yeah. What do you pay now for the alphabet? It’s like five bucks.
Yeah, yeah, I don’t actually, I don’t actually not too much bread anymore. So I didn’t know you happen to pick one analogy that I have no clue. But I’m going to take your
point on that. Is that all my Google but
so yeah, everything is supposed to double twice in our lifetimes. It’s not. This isn’t like a surprise. So when I see people in the media or head Line say, Oh my gosh, things are getting so expensive. It’s really, it shouldn’t be any surprise that this is how the game works in Canada. This is how it works in North America. This is how it works all around the world. So the unfortunate part about what we just explained, is that the Bank of Canada is pretty darn crappy at its job. And the 2% never applies evenly across the board. And not only does it not apply evenly across the board, they never really hit it, right. So for example, sometimes things like real estate go up 6% a year and not 2% a year. And if you just use 6%, and you’d see how long it takes things to double at 6% compounded, you know how long it takes to double 6% compounded 12 years. 12 years. So if you buy that property for $400,000 in 12 years, it’s now $800,000 at 6% compounded everything doubles every 12 years. And I know I’m making major like a special options here saying that you know, it’s 6% compounded every year evenly and there’s no negative in that whole bit. I’m just using this as a way of an example, to show that this whole thing about inflation, people just dismiss it like, Oh, it’s not a big deal. And the reason it’s an absolutely huge deal is because most people’s primary source of income are their salaries or wages from jobs. And from all of our analysis with the stats Canada data, the one thing does that does not seem to keep up with other asset or other things of value, or incomes. So if you’re depending on your income, or your career, or your salary or your wages, to keep your pace of living, you’re absolutely playing the game wrong. And it sucks, because I feel it sucks because that’s all the middle classes thought including myself. I was always taught get good job, have good life. And that’s like, that’s like totally bullshit. Yeah, the thing that got got it messed up is that it’s actually you’re using that stina number and that number, the way they calculate it is very interesting and it changes and GLG at times because it excludes certain goods, and sometimes they’re like, well, because of the volatility in this market, we didn’t take into account. But if you look back, it was the 30s when you could buy local Redis for 10 cents.
And if you do that math, it’s more than gone up for like, you know, it’s changed a lot the rate of inflation for that, why would you even know what’s like a loaf of bread? Do you think right now? I mean, even like, to 50 years, I mean, I guess it depends which type of bread but I mean, you go to carbs, you’re spending five bucks or more, right? Seven $8. You’re never going to know but i just i look at the receipts will die when my wife goes, check. So we got to spend on that breath. verified. No, No, but seriously, but I’m just I’m just even if it’s two bucks, right from 10 cents and had to go to 2242 82 buck 60. So it’s more it’s just it’s it happens faster. They claim the 2% that’s their target, but it’s just it’s like you said they do bad job at it. It’s not working. And then if you look at more kind of other assets It hasn’t worked that way either, right. And a lot of raw materials haven’t worked that way either. Because those things have value when the government prints money. So when you’re taking off the gold standard, everyone that had some money, they’re like, well, let’s put it into something that’s going to hold its value. So those types of things are, you know, increasing in value as the world develops, demand for those types of goods went up as well. So the cost for those one because more money went into them, and there wasn’t a demand for them, like people weren’t buying diapers as a store of their money, right? So just just kind of it just the number of changes a lot.
And were you talking to a developer recently that said, I forget who you were talking to some someone somewhere who was saying that they were building a new building and they were just shocked that or their primary increase of the overall budget for the project was just cost of materials? Like it wasn’t what are we both talking to someone who’s just talking about the prices of like steel knows the one I if,
if I think if I remember what I think you’re talking about is when I was There was a developer that talking about the price of concrete. And I forget the number, I’m going to butcher it, but it was like something in like the last two years, his cost for the price of concrete went from I think it was nine to 14 bucks a foot. I could be wrong, you know, but but it was like that type of jump, which was like a 40 50% jump just in his cost just for the concrete. He’s building, you know, huge condo buildings thinking what concrete they’re using. Right? So yeah, that you know, there. And that’s what he’s saying like their margins, even though the cost who started the price have gone up so much, their margins were actually squeezed. So developers over the last couple years, were making less because the cost of material and Labor has increased so much.
I wonder if that’s why that I wonder if that’s part of the reason why that one in Oakville, those new condos that building to have that one in Oakville district Yeah, they pushed it back. Remember they were going to release it. We actually had some investors who are going to buy some of those condos and they basically canceled building two and said hey, we’re just gonna rerelease it in spring and wonderfully like cost of material Yeah, or like because I just dismissed it to like, Oh, they think they’re going to make more money in the spring. But I wonder if some of their cost somewhere went up and it was squeezing their margin so they just pushed it
could be the last six months I actually don’t know where the number that kind of raw material costs have gone You know, this was kind of May or June but so I don’t really know. So here here’s
what else I wanted to say on this whole inflation thing is the crazy part about all this is that we have been buying with investors right across Toronto. I mean, we have some investors that are buying condos in Toronto proper, but we obviously have a lot of Toronto based investors who are buying all over the GTA and some investors that we’ve been working with for some time. They’re shocked at some of the prices like we used to be buying a world war two style kind of bungalow on either side of the city, Nick either an offshoot on the side of the city up and Barry or in a place like Hamilton for like 200 and when we started with like, hundred 95 tool five tool nine we were doing a lot of 209,000 these were three bedroom houses for 209,000 I don’t know seems like a child seems like a total joke. Why? Yeah. Why we didn’t buy five streets of it. I will never know but But now someone on our team bought this awesome home, I’m just bringing up one of Andrea’s properties, because it’s just one that comes to mind. She bought this awesome home for $557,000. This one’s particular one is in Hamilton, and she’s renting it out the total rent on it’s going to be like 3600 top and bottom kind of duplex situation. And, you know, it’s interesting the response that people have when they hear that number, because some investors who’ve been investing in that area for a long time are like oh my gosh, $550,000 and they can’t believe it because we were buying properties out there for like 230 but that was over 10 years ago. So if you just use our basic inflation compounded every year, it makes sense that this their those properties have doubled. the crazy part is that if this continues, if inflation continues in the real estate asset class as it has, this $557,000 bungalow in the next 10 to 12 years is going to go over $1 million. So houses that when we were buying a $210,000 Doesn’t seem like that long ago. They’re now on the path to be over a million dollars. And there’s no way that can be guaranteed there’s like, absolutely no way what I’m saying can be guaranteed?
Well, like you said, they’re the path that they go on is so inconsistent, right? So, because and why people are. So the counter to that is people are like, well, it’s totally overvalued. And you know, because what’s happened is for a period of time, that property didn’t really move much in value. But over the last 10 years, it moved substantially more, right that so we know that it’s, it’s more than doubled in value in the last 10 years. Right. So then a lot of people are like, well, that’s a bubble. And that bubble is going to burst because of that because of that huge increase. But it hadn’t moved in so long or had minor moves that really over the course of time, and it’s the increasing isn’t that dramatic, right? And, you know, it’s like this slow, slow motion thing that people and we look at those and we look at the numbers based on population incomes and those areas and all that type of stuff, but there’s something that’s really interesting around so I’m going Just change it from inflation for a second just to bring it to housing specifically, when I looked at the numbers of housing starts, I don’t know the exact or it was even around the GTA. And the number that came up here is about 40,000 units and the the long term, the 50 year average was closer to 30,000. But the 10 year average is more because it’s been we’ve been building more homes, and it’s in between about 35 and 40,000. Somewhere is the 10 year average, but that the population growth expected, so sorry, that 10 year average, it is what in the last 10 years, right? So if we say it’s about 35,000, we have about 350,000 new housing units that have come on the market, right this is this is what I don’t want to get into like exact kind of math because we’re going to get a little more complicated. Let’s say we have 350,000 housing units came on the market. In the 10 years prior we grew in population. So from 2011 to 2021. We’re supposed to grow on population from 6.2 million to 7.4 million. So let’s say this trend continues. So the next thing
1.3 million point two 7.4.
Yeah, it’s about 1.2 1.15. Okay, let’s say 1.2 million. So we have this, these. So and that was from 2011. So we’ve already we’ve already gone through a good chunk of this only two years away, right? And we’re saying the trailing 10 years housing starts at about 35,000. So we’re looking at roughly the same time frame. So we have 350,000 housing units created, but we have a population growth of 1.2 million. The average size of Canada. Family sizing, yeah, what is it central? 2.9? Right.
9.0? Really? I thought you were gonna say like, 2.1
No, I took it over. I thought it’d be over three. But when I looked it up, I forget the source. This was a couple weeks ago was 2.9. So let’s say it’s three people. So if we see that this that the housing starts three people is going to go into every housing start and we have housing starts of 350,000 in the last 10 years, that’s enough for 1.05 million, except the population growth is 1.2 or 1.25. So there’s there’s a gap still have a Hundred and 50,000 to 200,000 people that there’s there’s a shortage of housing supply coming on the market. And I looked at, dive into 50,000 or something.
Whatever. Sorry, I’m just trying to find,
yeah, so probably about 40 or 50,000, depending on your three. Yeah, the average family size depending on the actual not the exact number, but that’s the shortage. Right. And then, you know, I’m like us to try to every let’s look at another area. So I looked at, actually, that’s probably how many homes exist in the town of Oakville?
189,000 I bet it’s like 50,000 housing
curious or see the number. Yeah. So can I look I want to look back at Waterloo and the same thing, the Waterloo in the last 10 years, it was about 100,000 increase the the, the housing starts are roughly you know, just over 3000 per, per year, last 10 years. So you’re about 30,000 so if you have about 110,000 increase your 30,000 housing units, three people per that’s 90,000 people are house there’s a gap of 20,001 happened the Waterloo Region last 10 years, big increases in prizes, right? huge increase in demand more people going into the area, that type of thing. So this is these are the gaps that we’ve been seeing in different areas. And it’s like, it’s kind of not something everyone’s talking about, like crazy. So and that’s causes this it causes the inflation you’re talking about that was kind of like subtle for a while it can kind of increase it. And I know this is a little bit different than Jason it’s like a
slow motion train wreck. Like people don’t see it coming. Don’t see it coming. And all of a sudden one looks around like oh, prices double. Yeah.
So that’s this is the type of numbers that we’re looking at. We’re like, holy crap, this is this is kind of crazy. So there’s just a gap in the supply the supply
and remember what Benjamin tell us when we said, when we’re down at that conference downtown, what the immigration panel
was, he says they think the numbers are conservative.
Like for population or sorry, population growth via immigration. Yeah, numbers are conservative. Yeah, yeah. far he said far more conservative. And going forward. He thought they were far too conservative because he was sitting on some committee or something.
Yeah, these are numbers that we’ve already seen. I guess why this is interesting to me is because people like freak out. I freak out to about the last 10 years in property prices. I’m like, This is crazy. Why is why is a property No, I’m happy because I own property. So it’s worked out well and I was joking
but it’s been I mean not in a good positive way.
No but I look at them are like this is kind of nuts. Right? And I hear when I when I met you know, horseback riding with with with Allah that I hear other parents talking they’re like, Oh, you know the prices are these I can’t believe this is crazy. And just in my head I’m like a like the right? It does seem crazy. But when you look at these types of things, we’re seeing what these trends have produced. Right? And you’re seeing that there’s just been a gap. It’s not just it’s not just speculation,
that’s what’s pushing if the Bank of Canada is trying to get 2% but then you layer in what you’re talking about obscene. They can’t keep the 2% and and sometimes I struggle explain to explain to people why real estate always seems to move before other things. And the reason for it is because mortgages are how money is created. So the real estate market gets The new money the fastest. So when you have population growth one of the first things that population growth requires is housing because the need so when people go out and get the housing they create new money. So the money hits real estate first so it drives the prices. So it’s yeah I find the same way when I hear people talking about like, Oh my gosh, property prices are crazy. I feel like Aren’t you just like this is this is actually normal when you have this kind of go but in in and I guess the the defense of the everyday kind of citizen of Ontario is when you’re busy trying to make ends meet trying to make your career work you have a busy family you’re not paying attention to any of this. There’s not too many people on this psychos you are not looking at population growth and stats Canada data on this kind of stuff. So I can find you know, I can relate to people who look like get serious with their careers for 10 years and then look up and are shocked at the way property prices are but if you are listening to this and you haven’t you want the stats Canada income data compared to the house price data, you can go to rock star inner circle. com forward slash reports. And you can get the destruction of the middle class report. That’s where we took the stats Canada data from 1969 and mapped it against house prices from the same time, just to show that on a graph on how different and crazy that looks. So if you don’t have a copy of that report yet, you can get that at Rockstar inner circle. com forward slash reports, because when you see the income and how slowly it grows as compared to real estate prices, it’s absolutely insane. And here’s the crazy part. If incomes don’t really make a jump over the next 10 years, but we already You and I are kind of talking about like my Yeah, maybe with population growth, if there’s no big crisis of any sort. If real estate prices continue to grow at the pace, they’re growing, what happens 10 years from now, because we’ve been talking about the $500,000 home that maybe goes to a million, what about the $1.1 million Mississauga home?
Like are those all going to point to
the, you know, what the heck is happening? And, and the crazy part is that this is this whole inflation thing. It’s it’s part of the rulebook, you know, and What’s also frustrating to me is, you know, every time you read, really when we got into evolved into real estate in a serious way, I was also a point in my life that I was reading a lot of like how to retire books and like savings. And all those books. Like, they kind of mentioned inflation, but they all they basically said, like, if you just save as much money as a cappuccino a day, you’ll retire a millionaire by the time you’re 65. If you start like, by your time,
yeah, but what’s a millionaire isn’t what it used to be either. And they
never really addressed the whole inflation thing. They kind of said, Yeah, well, you have to account for inflation. But if you account for inflation, like 30%, somebody, somebody was doing the historic inflation rate on me a little while ago, like yeah, if you want $200,000 in annual income when you retire, you know, for your family and you want like a nice healthy income of 200 grand, that’s actually like, you know, 30 years from now, you actually have to plan for like 380 or $400,000 in income, you know, and that’s only like a 2% inflation rate. Right, if you’re planning out 35 or 40 years, so that changes how much you have to Absolutely massively.
So I guess I was just talking so sorry, finish your thought,
No, no, I was gonna I was going to transition into like, Can this continue and look at some of the numbers. Okay, so well
this kind of leads into the canvas continue to because it’s one of the reasons I was watching the election multiple reasons, obviously. And what was interesting is that the liberals, their platform was four years ago the platform was we’re going to balance the budget in four years, right? was a four year something like that. Now their platform is that guy, we kind of screwed that up, we’re not going to bounce in four years, and we’re not going to balance it’s going to take us instead of four is going to take us like another 20 you know, so they came out and said until like 2022 or somewhere in the
midst that is that was
somewhere that decade I believe that their projections were like that’s that’s when there’s going to be a balanced budget now. which blows my mind because like, it wasn’t that long ago but balancing the budget even with even with the liberals like remember when Christine was in and Paul Martin was playing I think they were the best tandem at
it, right? Because that was like a unicorn moment for Canada because they they fiscally they manage things really, really well. Right. So so but it’s not a political statement liberal conservative. No, but I think they had to because in the early 90s, I think Canada was close to the IMF coming in because we were so they were all and then the liberals kind of,
but anyways, they did. They did a good job and used to matter, like people used to care about that. This This time, it seemed like, I think I read the different different polls about what people cared about, I know take this with a grain of salt. A budget was like, wait on them, nobody cares and impact
Yeah, so that’s a and what’s interesting is if they’re going to create all this money or printed spend all this money, this deficit spending, they know they can never get it back unless they inflate the debt away. So by the liberals winning it to me, I’m like, Okay, well, inflation is going to go This game is going to continue because they know they’re gonna get it. So like I was wondering, you bring
up an interesting point, because I wonder if the people who don’t care if I wonder if they realized that if they’re having kids right now, and then they don’t care about this, but the only way Not to care is for the liberals or whatever governments and power to just keep spending, right? We don’t care about the deficits. We don’t care, keep spending. But if you have kids right now, that means that when your kids are due to buy a house, you’re going to look around going, what the heck yeah, the homes used to be a million dollars in Mississauga, and now they’re $2 million. And you’re just going to kind of like blame the government. But you were the ones who voted for people who are a government who doesn’t care about deficit. But yet
again, nobody knows about this stuff. No one talks about that, but the farmer care and the free daycare spots and all that stuff, is that’s what’s causing, like, like, there’s some underlying truth to that’s what’s causing it, you know, and I’m not saying get rid of those, like, Look, I’m not saying like, you know, people need those. This isn’t a political statement. You know, have them but I’m, I’m sure there’s a lot of other inefficiencies in the government. Remember, I used to work at the government.
And in my, you know, and I wasn’t high up in the government, I didn’t get a good, good look behind the scenes at all the different books and financials, but from what I could tell on the front line, wow, were there inefficiencies. Yeah, there was money to be saved, that’s for sure. You know. So I’m not saying get rid of that stuff for or anything, I realized the social value of that. But it does. I just think it comes with a cost and at least if everyone’s aware of, Okay, guys, here’s the cut, we’re gonna do this and 10 years down the road, here’s the cost of it. And then it’s a more informed decision, right?
Yeah, here’s the cost, you know, your all your kids are screwed, no one will be able to afford a home. But then I guess the flip side is that the home that you happen to be living in, if you already own a home is going to like double in, quote, unquote, value or price or whatever. So those people are going to be happy. Basically, anyone who owns assets is always going to be happy in this environment,
as long as they’re good ones. But
yeah, you don’t want to own shit ass. But here, but so there’s something I wanted. I wanted to call out here is that we something that we look at all the time is, can this trend continue? Like is it possible for like inflation in this kind of spending to continue and we often look at the US deficit Because basically the Bank of Canada follows what the US does, there’s sometimes a little bit leg. But historically, if you go like last 60 years, and you get a comparison chart between the Bank of Canada’s lending rates and the Federal Reserve’s lending rates, it’s always kind of mimicking each other, they never really go to whack too much. I think there’s a brief period in time maybe in the 80s, or something where they kind of diverge just a tiny bit for a little bit of time. But overall, Bank of Canada, in Canada, we mimic what the US does with this interest rates. So as a result, we spend a lot of time focusing on the US budgets and their deficits, because that’s going to dictate what they do with their interest rates. And the Congressional Budget Office put out this awesome summer report in 2019, this past summer, and it basically said that from 2019 to 2029. So for the next 10 years, they are projecting that the annual deficit is going to be about 5% of the gross domestic product of the US and they have this very flat line saying every year it’s going to be 5% every year it’s going to be 5% and the If you look into that report a little bit more, this is what kind of baffles my brain. If you look, it shows you the actual budget deficit in the US of 823 billion as of the year 2018. And then it shows by 2029, that it is 1.4 trillion. And then if you do the math on that, it’s approximately and I’m rounding here, but it’s approximately a 6% growth rate. So if the budget is going to increase, sorry, the the deficit is going to increase. So the government’s going to spend more than it takes in in tax revenues. And that increase of the deficit is going to increase 6% a year. How can they show a chart that shows the average deficits just going to remain like flat, it would have to assume that the gross domestic product or the economy in the US is going to also grow at 6%. Like unless my math unless my like grade eight level math here and I maybe I’m being confusing when I explain it, but you can’t have something grow at 6% Something else that you’re comparing it to the economy grow at a different rate and show like that they’re in sync together. So for the economy to grow at 6% to match the deficit increase, that would be an astronomical growth rate. So I looked at the forecasted growth rate of the US economy, as per the Congressional Budget Office, and it’s 1.8%. So they’re saying that the US economy is going to grow at 1.8%. And by the way, they always screw that up, like they always screw it up with a change. And every three, he has always changed, but if there is low as 1.8%, and that’s pretty low for a positive spinning congressional budget office, and the budget and the budget deficits going to go at 6%. That’s a delta of like 4.2% or 4%, if I’m kind of rounding it. So if you compound that 4%, the deficits are going to get out of control, even crazier, which is going to add to the $22 trillion in debt that the US already has. And this is why I think they can never raise interest rates. The only possibility of raising interest rates would be Some sort of crisis in the bond market, which would be like a separate conversation altogether, because that’s a legit financial crisis. And again, when you say, I just want to be clear, because when you say raise interest rates, you’re so Matter of fact about it. And I think I agree with you, except they can raise interest rates. But it’s minor, like you mean a match? Because they have seen like a quarter point or half, I don’t even mean a point. I mean, they can’t raise them like 3%.
Yeah, because they have raised them over the last couple years. Now. They’re cutting them again. Yeah, but yeah, so there can be small moves, but to go into what was considered the normal quote, unquote, normal interest rate environment. Yeah.
Five or six. That’s, that’s, I mean,
how they can they know that
in 2007, we were getting mortgages like 4.8 5.2%, like no one and look at it this way. It’s pretty simple. If the US budget, sorry, if the US debt is at 22 trillion, a 1%. Interest Rate move would increase payments on the budget deficit would increase interest payments 220 billion, because 1% of 2.2 trillion is 220 billion.
Okay. So if 210% 10% 2.2 billion
no would be 1% 2.2 trillion is 10% of 22 trillion Oh 2222 trillion Yeah, sorry, 22,000,000,000,002 trillion a 1% increase in interest rates would mean the interest payments increased 22 built to sorry, now are missing it all 220 billion dollars. Now, stick with me here. The annual budget deficit of the US currently is like 800 and some odd billion. So that means if interest rates were to go up, 1% you’re increasing the deficit of the US with a 1% interest rate move by 25% over 2 trillion over a trillion over a trillion but if you raise interest rates 4%
you’re doubling the
annual interest deficit just on interest payments. So this is why when people tell me like Matter of fact, we like economist talk about it. We’ve had bankers and
their tax revenues up or down
the tax revenues I had this stat I think they’re slightly down because of Trump’s tax cuts, which gave a bump to the economy. But it’s kind of lower tax revenues a little bit. Don’t hold me to that exactly, though. But if you speak to an economist and you just say, Well, how are they ever going to raise interest rates because it would a 4% raise would just double their annual deficit. It’s just kind of blank stares. I don’t get it. So the only way they’re going to be able to raise interest rates is if they inflate the economy bigger and faster. So I think this inflation thing is kind of here to stay because it’s the only card they have left to play. Because if they can’t, the only options you have when you have that much debt out in the world is what like you You either paid back through growing the economy like the normal method like let’s grow the economy in a healthy state like pay back our debt, which doesn’t seem to be working because the the debts going faster the economy, but that’s like the normal thing, grow the economy through like actual real growth, or you default, you’re like shit, we can’t pay back this. That’s just too much. They’re never going to default. Because that being Wall Street in the banking sector goes under So the third option, the only third option that can figure out is you inflated away, meaning you grow the economy artificially through pumping more money in and let asset bubbles form all over the place. And if you’re kind of smart, you see this coming, you play the game. It’s like this game of hot potato. But that’s kind of like their only play, because the economy doesn’t seem to be growing naturally faster than the debt, and they’re not going to default. So this inflation, I guess, my, my thinking is that, and I’m just thinking out loud, like, I don’t even know if that any of this makes sense. Listen, if you’re listening to this, we’re not economists. We are just we just like looking at this kind of stuff. But it just it feels to me that they’re just going to inflate their way out of this. You’re right and Sorry, no, just going to answer your point like tax revenue. The US federal debt as a proportion of tax revenue is at its highest all the way back to 19. If I only have the data going back to 1945, when it was 5.6 times tax revenue, and now the debt as a Relation to tax revenues 11 times I think that’s the highest on historical record.
But that means that’s like you earning, you know, let’s say $50,000. But you have a credit card that you know, yeah, interest rates are lower. So let’s say you have like mortgage debt, or just a regular simple line of credit is 550 grand to get to pay off the 550 grand were making 50 grand a year. You don’t like just think of our minimum payments all the way? Well, the Canadian government mismanages 330 billion every year that’s our income. Right? That’s what they kind of fritter away I guess probably IK say 10% of its probably smartly spent,
like, you know, what we need to healthcare and stuff,
but let’s get roads like there is some stuff but I just men like when
really, when I hear just for our police municipal Peel Region must be regional.
Yeah, but it’s okay. It’s regional. Yeah. Okay. But it’s, um, it’s just when I hear about the studies that they, you know, they they commissioned another study for 30 million to like, determine something useless, you know, like, I know, do we need some nice
Think about that like how much money we waste on committee but then I think damn like some of these committees we need because if I was making an important decision I wouldn’t need a freakin committee of some sort. But I know they waste a lot of No, don’t forget, don’t don’t forget the the OCB Ontario cannabis store. Oh yeah, the logo.
Do you remember that? Yeah. What was it? called? I think they spent three or 400 or $650,000 if anyone go if you’re around a computer if you’ve seen that. So they came up with two things for 650 grand, they hired a firm that managed to kind of like brilliantly just kind of named the marijuana sales in Ontario, the Ontario cannabis store because that’s like very, you know, creative like no one thought of that. And then they came up with a logo that was like an OCB. And that was pretty much it. Like it was just crazy for 650 grand it was, it blew my mind is that’s the type of stuff that freaks me out. Like, who what marketing firm got that contract and spent $20,000 in salary? Yeah,
like I’m so two sided on that because I’m like, yeah, that’s an absolute waste of money. But at least the marketing firm was hopefully some private company that earned it and they made some money and hopefully spend some
I know, I know. I know. I’m happy for them to
Yeah. If I was the marketing firm that got that, yeah. Oh my god, but he’s gonna go to fiverr.com and get a logo for five bucks.
Yeah, no, no. What about that $1 billion to cancel like, ask let me get to that right before the election. I mean, it basically came out and then they hate all the file. Remember, they think they delete all
that kind of stuff because it just irritates you. But
it went to court. They deleted hard drives and stuff. He got away with it. Someone else one of the other guys got shot, you know, but it’s just, it’s crazy. Like the amount of waste just blows my mind. Okay, what are you gonna rant on next? I got I got lots of lots of good.
Okay, no, I don’t know, pick something. So
here’s something that this goes back to just the cost of goods that were talking before. Because I was I was curious. I’m like, Look, I wanted to go back just 10 years not too far. And because I want to see the impact of these low rates and where things where things are. So I took the I took about 10 years was about 11 years ago now, that rates when they started coming down, and at the time I don’t think I can just try to use but I think it was about the 5%. Mark somewhere where you said that was like the posted rate, right? Because remember, we were getting mortgages that time. So when I took roughly that rate, and I took today’s rain, it took that the latest mortgage, we renew that or one that were new to a couple months ago was 2.7 9.7.
Someone just got one a 2.590. Yeah, they told me I don’t have first hand knowledge. Yes, I was told that.
Yeah. So when I took those two rates, and I went for 2009. I said, Okay, let’s, let’s take a mortgage amount of $500,000. And I punched it in okay. $500,000 mortgage amount was one of my payments, and it’s 3349 was 10 years later, when I took today’s mortgage rate, okay, how does how does the mortgage rate really impact things? 10 years later, the 3349 the same monthly payment as it carries a mortgage of 724 and what was before carried and 500? So yes, almost 50% 50% just under like 45 and the drop in rates. So how many what percentage in dropping rates might have been cut in half? Probably because 2% for I think was about five So just a half I, you know, somewhere in that range, but I’m like, no wonder that you know, and then the government’s like, Yeah, what’s going on? Well, what do you mean? What’s going on with housing? Look, it’s rockets, you know? So but it was surprising to me that it was that much of a difference. Yeah,
I’d say, go from 2.79. Because we think through our own research, we’ve been doing some research that we recently shared, we don’t have time to go into it here. But one of the your life your terms of its we just shared how through some of our research, we think the central bankers in the US are fully prepared to go from 2.7 or wherever they are now to like zero or even slightly negative or zero with a lot of quantitative easing, to make it negative so that real rates would actually be negative.
So the payment of 3350 in that case, so then it goes way over a million. Yeah, so we might have one more solid run on real estate here over the next few years as they continue to drop rates. I mean, that’s crystal ball speaking, which is just pure guessing. So rates is one thing and then we have to look at supply and demand and economics that are going on here. And right now, that demand favor and the shortages of supply favors property holders, land owners, you know anyone in real estate so so now those trends can change like we’re always kind of, yeah. weekly basis I think we’re looking at different things saying okay, what’s going on now you don’t mean to but but the initial forecasts are nothing’s kind of jumping out saying, oh, here’s a red flag, like it looks like this trends ready to change now, like anything can they can change immigration laws tomorrow, and all of a sudden, immigration goes out 400 down to 150. And that’s going to change things very quickly. Totally, you know, but but nothing’s jumping out like the liberals one, the chances of them doing that probably pretty slim,
or there could be a bond market crisis where people just decided screw it over, give me my money back. I’m not buying any of these bonds out in the market anymore, and then rates just kind of spike up. So we’re totally not talking about any of that stuff. That’s the that’s the kind of Black Swan event that could happen at any time that we’re totally not to Talking about and that would be the way that fixed rates could really got like that would be the event of the bond market just said it on itself, then rates go jumping high, and then all the analysis we’re talking about goes in the reverse. Because if the rates go up now 2% the property prices come down the 50% Holy shit. Yeah, that’s scary shit. And that, you know what, that way for them to fully come down that much. It would have to mean there’s a lot of sellers people are gonna have to live, but that’s a that’s a sketchy environment. Yeah,
the only thing is, I guess 100% that’s sketchy hundred percent with those things like that, that can’t happen. You know? Well, look what happened to us when the mortgage mortgages dried up because of all those crazy mortgages, right? Which I don’t know if you want to share after maybe you did already on a different podcast just about kind of we’re seeing some of those kind of talk just about to share it okay. So, but before you do, the only thing that comes to mind in that type of scenario, I guess for myself, so you know, cash flowing properties, they cover themselves income producing properties. In that scenario, the property prices Come down, the economy is going to be so screwed. Right? Like, it’s not going to be real estate. That’s it so that when real estate hit like that the
focus on real estate is the broader
thing. Yeah, so the car is gonna be totally screwed. Are those properties to me going to be even more valuable from an income and wealth generating place or not? And
I guess maybe why? Because you’re thinking because
yeah, I have these income generating assets that are paying for themselves. So the valley might have one of the valuable assets India, because the economy so screw, like, if we’re talking one of those black swan events where, like, you know, things get really hammered. Nothing happens in a vacuum. You know what I mean? Drag, there’s another number of other things. And I’m not saying I’m right. It’s just a thing that I play my head because I actually fight with myself back and forth. I’m like, Well, yeah, I see the good side, but I’m like, Oh, I see the shitty side too. So I kind of fight back and forth with it. Like, which one is it? You know? Anyway, yeah, these mortgages?
Yes. Okay. So here’s what I wanted to talk about is that you, you know, everyone listening to this might not pay attention to this, but you might have seen A headline about something called the repo market. And here’s what’s happening. banks need to lend to each other overnight happens in Canada, it happens in the US and in the US, when they lend to each other overnight. And by the way, they do that just to kind of balance their books. When they lend to each other overnight, it’s very short term lending. So like if one bank lends to another bank, I don’t know $10 million. The other bank says, okay, you know, what, can you just show me some collateral because I’m just lending this to you overnight, but you know, show me something on your books that makes me feel good that I’m going to get the $10 million back in case you can’t pay it back, you have some other collateral that’s going to act on behalf of that $10 million, and they just kind of lend to each other overnight. It’s a very liquid market. It’s the Federal Reserve’s overnight lending rate is used to dictate the interest on that market. So it’s a very technical thing, but at a high level, just know that banks lend to each other to balance their books overnight. I know someone’s gonna be listening to this and say, Tom, you generalized it way too much. But we can gladly go into a much deeper dive on that at another time. But here’s what’s happened over the last two months. Overnight lending market has started to seize up. And when it first started seizing up, people were freaking out because we’re like that should be a very bank should be able to lend to each other overnight, very easily. And some excuses came up like oh, it’s like, you know, the end of the month is coming up, and there’s some tax payments that needs to be made. And there’s just a shortage of liquidity in the market. And it was supposed to be like two or three weeks. Well, this is going on now. Nick, I think it’s like mid September, I feel like it was mid September. There. Now the Fed is like active in the overnight lending market every night at this point, and there doesn’t seem to be an end in sight and the bank is specifically sorry, the Federal Reserve is specifically saying even though we are printing fresh money and pumping it into the repo market overnight, do not call this quantitative easing. This is not quantitative easing, don’t call this quantitative easing. And I’m like, holy shit, what the hell is happening here. And then on top of this right about the middle of August, we had a friend of ours come up from Florida and he we did a podcast together. Nick, I still can’t remember if it was on the podcast or before after, but he said something like, Hey guys, like subprime is back.
I think it was on the pod was it on the podcast?
And we’re like what time we talking about subprime lending is back. So prime lending is what almost destroyed the US. And he’s like no subprime lending is back. And we’re, you know, after the podcast, Nick and I did some research into this, and we find that there is this kind of subprime loan. And I’m going to read you this one paragraph because it’s it’s, it’s from this real estate news. It’s an August 21 2019 article, the headline is this mortgage market reopens too risky borrowers. And if you read this paragraph, listen to this, it says largely gone are the moniker subprime and alt A, which are type of mortgage that earned the nickname liar loan, because so many borrowers faked their income assets. Now, they are called non qualified or non qm because they don’t comply with post crisis standards set by the Consumer Financial Protection Bureau for preventive borrowers from getting loans that can’t afford. So basically, they’re not called subprime anymore. They’re called non qualified or non qm. And then Nick and I did a little bit more research and we dug up the level of these types of loans. And in 2008, there was a boat’s Russell right before the kind of crisis hit. There was about 65 some odd billion dollars of these things. And then in 2009, it dropped to 10. So it literally like the market just almost evaporated, dropped away, back down. But then if you look in 2010, it got less it actually went from 10 to went right down till about eight. But then in 2011, it starts increasing again. And every year it starts crawling itself back up, it’s a little uneven, but the last three or four years, it’s gone on fire, and 2018 there was 45 billion, almost back to the 60 billion that was the year before the crisis. So even though they’re called non qualifying or some people are calling The unconventional loans, all the subprime lending or bad kind of mortgages are back in the market. And so much so that the US Senate, the banking and the banking Housing and Urban Affairs Committee in the US said Senate in September 2019, they actually had a committee to talk about the stuff that got hardly any press. And there’s this one Federal Housing director, Mark Calabria has this quote, it says, I will tell you as a safety and soundness regulator, when I look at $3 trillion institution, and he’s referred, he’s referring to Fannie Mae and Freddie Mac, who kind of like guarantee these kinds of mortgages, a three or sorry, have they not all of them, but they do a bunch of them at a $3 trillion institution that is leveraged 1000 to one It keeps me up at night. He’s saying that they’re less equipped for a downturn today than they were in 2008. So like, it’s kind of creepy to know that like, not only do I think we’re rates are low, and they can’t go high because of the deficit. There’s in the background, the repo market is kind of like, you know, showing signs of like something’s not right. Like some banks don’t like the collateral. And then it got me thinking, Oh, my gosh, is the collateral in the repo market that some banks are using some of this funky, unconventional mortgage is what caused all the time, which is what caused the problems last time. So I’m like, Oh, my gosh, are we like, on the verge of another one? And then I’m like, Oh, well, how long can they keep it together? Because if you think we’re on the verge of another one, who knows, it could be five years before anything happens. And they can keep lowering interest rates for another two percentage points before they hit zero. So all of this mash together makes it like very complicated and very crazy. But the bottom line to me is, let’s say there is some weird lending crisis going on between the banks, what’s the move by the Central Bank in the US, they’re just gonna print more money. There’s going to keep rates low, and even if the bond market starts to like, just Rate a little crazy, they’re going to step in and buy the bonds because they can’t afford interest rates to go higher. So inflation over the next 10 years, maybe it’s not going to be 2%. Three, there’s
potential that it could potentially. Totally there’s potential if you go
either way, I just mean, the kind of kindling is there for inflation not to be five or 6% over the next 10 years. That’s the Kindle things there that it might be much higher. So like maybe our projections, like maybe our projections of like, you know, that $500,000 house, maybe in 10 years, it’ll go to like 1 million and we’re like, holy crap, wouldn’t that be crazy? That’d be five 6% a year company. Maybe we’re wrong. And maybe we’re like under shooting because of inflation comes in higher. That’s going to be too low. And I know anyone who’s listening to this who was anti Real Estate’s going to think I’m a pro real estate person and like real estate can do no wrong. No, I’m not saying that at all. You have to buy smart you have to make your real estate portfolio recession proof. You have to buy what Nick was saying income producing properties have pay for themselves. You can’t get carried away. Just buy anything. I’m just like, brainstorming out loud On this episode, just thinking like, holy crap is the kindling there for inflation to go, like, even higher than even what we’re suggesting it could. Because a lot of people think we’re crazy with some of our projections. We have a property by by McMaster one of the properties like master that, you know, used to call like, it’s gonna be it’s the million dollar student property, it’s going to be the million dollar student student rental. And I laugh,
I remember sitting in the back boardroom at our old office, and it only held like, what six people and you kind of said that he mentioned it, and everyone kind of laughed about it, and it was bought at 250 and we overpaid for an A to 50 we made a mistake at that time, but that was what 20 years ago now or so that we bought that property it’s now tripled in value. Yeah, right that property has tripled and and we’ve done outside of routine makes it so we’ve done updates to keep it keep it on a a standard last year fair bit. No, no, we have done a fair bit but we’ve done nothing. That’s that’s Robin Sharon nothing is increased the value of the property we haven’t added more rooms you know additions known we’ve we renovated some kitchens and stuff just to just to keep them on par with just normal kind of wear and tear stuff, you know. So like we haven’t forced appreciation of that property in any other way by adding a floor that type of stuff, right? So just like typical standard standard appreciation what’s happened last 20 years I properties tripled in value. So it’s just it’s a you know, some of the things that it when you split when you set it at the time, it seemed insane. And looking back you’re like no, I kind of see it makes sense. Right? So So somebody it can be very hard to kind of look forward sometimes and understand it. Yeah. But again, it’s not a straight line. And this has been a good run and we’re very you know, we understand that like things don’t go straight like that. Now,
both of us roll our eyes when we give up the disclaimers.
Well, you know what, people are like, Well, did you think well this, this and this and, and we have like we we try to counter our own arguments all the time. Do you like on a regular Right.
Yeah, yeah. And and and people do criticize sometimes saying, I think one of the Rockstar minutes I put out I said, you know, there’s been no correction and someone’s like, no, there’s been a correction in 2010 and there was 2012 and 2017. And to be fair, yeah, prices are like there was Oakfield townhomes going for a million dollars in 2017 that are now going for like 895. Like, I’m not talking about that,
but that’s not but so yes, you’re right. But that was pocket specific. Like Yeah, and, and, and property type specific, specific, because in some areas, those starter townhomes didn’t move at all. They actually kept increasing the entire time. They didn’t come down and pricing at all told so. So yeah, and you’re talking correction I’m talking correctly.
Or where there’s a massive freeze of the real estate market where basically real estate transactions like the volume, get cut in half for over a year, like a year or two years. I’m just counting some kind of serious stuff. And anyway, so just kind of circling back to that told us common because the us in the state it’s in, it makes me just then think the Bank of Canada is also not going to be able to raise interest rates because of the state of the US and their fiscal situation in the US. We’re kind of similar up here. And we can’t afford to make our interest rates much different than what the US does, because we don’t want our dollar to be really high in relation to the US because we’re basically export driven economy, with the US being our number one customer. So we’re locked into these low rates as much as the US is locked into these low rates. So going forward, to me, it’s just like, Damn, if you if you don’t get your income, or your money you make from wages or a career into some sort of asset ownership, the next 10 years is going to be scary. And not only that next, something your last 10 years have been scary.
The last 10 years have been only based on income over the last 10 years. You’ve missed out on a big chunk out on a big chunk and
it hasn’t really been your fault or anything. It’s just kind of happened.
Yeah. So if the next 10 years were to be like the last 10 years, yeah, it looks like there could be the gap can widen even further.
Totally, and it’s kind of why, you know, I talked to I know your kids are a little younger, but Aiden’s my son’s now finishing high school and I’ve talked to him now regularly he has an account that he’s saving for his first rental property always asked when you bought your first one, by the way he wants to because he’s quietly competitive. So I think he wants to beach. But he’s been No, no, I think he’s openly told me that he does so yeah. So yeah, so he’s working and saving up his money to buy his first asset, but I just mean, it. I just feel like there’s one thing we can introduce into our education system here, it would be like, hey, choose a career that you love, do things that you love, you know, go into healthcare field, if that’s your thing, go into whatever it is, but take some form of your income and save it so that you can buy assets. And the reason that this kind of also bothers me a little bit, Nick, is that I feel 10 years from now. Look, you and I are middle class Mississauga kids born to immigrant parents just basically trying to survive our parents basically I would consider poor of The poorest of the poor to people who came in their childhood.
coming into our fathers born in the bush. Yeah, right. Like our mom did not have the best upbringing by any means. So they both came here with basically nothing. And, you know, we kind of, they got us kind of what I would call into the middle class in in Canada. And then here we are saying, Hey, you know what, I think it’s probably a good idea for us to buy some properties for ourselves and our families. But I feel you know, what’s coming our way and anyone who wants property, if you’re listening to this, I feel like in 10 years, we’re going to be accused of being the rich, because you’re like, oh, you’re you’re one of those people who has property that’s worth this much. And you’ve done. It’s not like any of us have set up set out on this journey. For that reason. It’s just been more survival, and how can we play the money game to win it? But I feel like that’s something if you own property, you’re listening to this and you have two or three income properties. Now be prepared for that. Because I strongly believe in 1015 years, people are going to Look at you and say, Oh, you’re one of the lucky ones. You have like three rental properties worth however much money. Oh, wouldn’t it be nice to be in your position? And and the real impact is no one will know the sacrifices that you went through to get those. And it’ll be dismissed. And I know I’m getting on a different topic. But this is unfortunately, where when I talk about the destruction of the middle class, this is what happens between classes as the divergence increases, but this is not happening is what’s happening now. Like you said comedies exist in the same comments exist, I guess, I just mean, it’s happening in slow motion right now. And I feel like 10 years it’ll have just compounded compounded. Yeah. And those conversations will be just more prevalent everywhere.
Well, we run some ads on Facebook. Right. So and some of our Facebook ads, the comments that you’re getting now, I mean, I know this is social media, which isn’t. I mean, I generally don’t spend much time worrying about what comments on social media are saying, but we do see them and some of the when you talk about the disruption when we see some of them we where we map the properties to the income to the incomes right and then you We share some of that and the comments are like Yeah, well, you guys are the reason why, you know, like, it’s like people like you winning like real estate investors, you know, you’re hogging all these properties. You know, people are really people like you greedy people, some people comment on the immigration, they’re like, you know, if you look at that, but I’m just people are always like pointing the finger like, they’re already like, well, this is the reason this is the reason and not really kind of taking responsibility for themselves and looking at other people as the cause and it’s like they’re holding them back. Right? So it’s already there. And it’s going to amplify which is a good chance going to Yeah, you gotta be something be prepared for
it. We’re not gonna have time on this episode, but I wanted to talk to you about the population. I want to ask you a Canada’s population growth specifics and some of your research into just students and what they’re doing as around the population here in Canada. So we’ll do that at another another time. But something I did want to mention is that if you’re listening to this one of the most often question, common questions that we get about real estate would be what? Well guys, if there is a correction, what happens to rent because That’s our ultimate concern. Like if we can lock in interest rates and protect ourselves from any interest rate moves, what happens to the actual income side of the equation, if we can control some of the expense side of the equation, and from all our research in the US when they had the kind of the big downfall, rent states pretty stable, and very shortly afterwards, they started drifting upwards because the demand for good properties and rent in rental properties increased, it didn’t decrease and it increased because banks weren’t lending. There was no access to credit, but people still needed a place to live. So although in places like, you know, Ohio, and some places in Florida, they had these massive downturns in property prices, there was no correlation with a massive downturn in rents for starter homes. I want to be clear, we’ve been seeing 10 to 20% rent increases of the last number of years, like each year annually.
I think it’s been that much I haven’t really put a percentage depending on the area. That’s what has been.
They’ve been very, very wrong,
but in a downturn, I guess is what I’m suggesting is that
what I’m saying is if there’s that song now the reason that that strongest supply and demand so that’s strong now there’s a downturn and people can afford and they have to oh god no access to credit, yeah, the demands likely going to increase you know, so even if it’s not what so let’s say doesn’t even keep this trend today because that trend can continue forever, like you just can’t right. So let’s say that trend doesn’t continue and it’s just a fraction of that trend well, even if that trend is cut in in four so a quarter of it is still a very kind of healthy you know, number that you can you can work with totally, that’s a good point. And it may be the trends you got wiped out and it goes to no rent increases and it just stays stable. But what has to happen for it to be wiped out is a big shift so that because of what’s what’s going on with supply demand right now it can the market can handle that big shift and not have the rents really changed much and that’s part of the big reason is because we’re in a very controlled environment, which in any downturn will provide more stability because their artists the rents are artificially low and Always, right?
Yeah, crazy times, man crazy. It’s kind of fun to be in real estate at this time with all the interest rate stuff. Well,
there’s a lot of stuff to look at.
You said that you had a big siloed. I don’t know. Is it really it
is it is. It’s just there’s just a lot of stuff. So I think what I like about it is is it’s a big puzzle. And you just trying to figure out the puzzle? Totally. Yeah, that’s what it is. Yeah,
I always call it like a game. But yeah, how’s the best way? Like, how did the pieces fit all together? And
hey, you just try this because like any investors, like investors invest in the stock, they’re looking at the market, they’re looking at moving averages and this and that, like they’re in the stock in the stock market or in stocks. I just realized what I said, but they’re there. They’re trying to figure out their own puzzle. And in real estate, it’s trying to figure out that puzzle as well. It’s a little bit different, and it’s a little bit more straightforward. Once you can control more pieces. Once you have the property, you actually have something physical, you can rent out, you know, so it’s a little bit different, but, but you’re just trying to understand it right. So and the more you understand and the more you can kind of make your decisions based on more information and give yourself a little bit of an edge or probably both does matter. Control Freak since why we like real estate? No, I think we’re just nerds. And we’re like, Look, I’m a nerd. I like looking at these numbers and definitely a geek with this stuff. But uh,
anyway, so that anything else I think that’s good. Well, I think it’s a good population.
Yeah, we can we can cover that stuff. Oh, sure.
So that’s it, everyone. Thanks, Nick. Hey, everyone, it’s Tom crowds against hopefully you enjoyed that. On one of the future episodes, we will dive into the population growth number specifically and some of the student or non permanent residents, resident status students that come into the country and how it’s affecting demand for real estate. I was recently traveling in New York and something was, it was somebody in New York told me on how they have some friends and how they’re entering the country here in Canada just kind of blew me away. So we’ll share some of that stuff on like a population increase or demand or population trend kind of episode for the your life your term show shortly. But in the meantime, if you want some of the actual data that’s coming out from this country, we have a report called Ontario’s population The Untold Story, you can get a copy of that report and all the other reports that we’ve put together at Rockstar inner circle. com forward slash reports. That’s Rockstar inner circle.com. forward slash reports. And listen, if you enjoyed this episode and you haven’t given us a rating yet on iTunes, we would be forever grateful. If you think we’ve earned deserve that. Thank you very much. If you’ve done it already, if you haven’t, and you could do so, we will be forever grateful. That sounds like totally over promising but I guess we would be very grateful for that. That’s it for this episode. Until next time,
your life your terms