For years we had no idea that “private markets” existed or that they could offer some interesting investment opportunities. On this episode of The Your Life! Your Terms! Show Clifford Fraser, COO of Equiton, stops by to discuss what to look for in the private markets, the importance of offering memorandums and what to look for in them. We also discuss apartment buildings as real estate investments, rental rates and some of our own stock choices and results over the years. You can learn more about Cliff and Equiton at: www.equiton.com
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Transcript
00:00:00 Hey everyone, it’s Tom Karadza and on today’s episode of the your life, your term show, we are discussing the difference between the public markets and the private markets. A lot of people don’t know this stuff, so we brought in Cliff from Ecuador to break it all out for us. He’s the coo there. And look, I want to explain something and why we’re sharing all this different kinds of information and why this isn’t just about real estate. We’re sharing topics and you’re gonna. See over the next couple of weeks we’re going to bring back Greg and Brian. I’m talking about Amazon. Um, we’re going to bring on some guys from our own team that have traveled the world for a little while to share their story is what we’re doing with Rockstar and rental properties, is trying to give us options and different sources of income and equity in our lives that allow us to live life on our terms.
00:00:42 So the reason on this particular podcast, we’re talking about public and private markets as we want everyone to know as much as possible on what the on what the investing options on what you can invest in, in what you can invest in them. Stumbling over my words here, but we want to know. We want everyone to know the difference between what the private markets are and what the public markets are and we talk about apartment buildings. We just wish we had access to this information. I mean when nick and I, before we quit our corporate jobs and went down this journey, we couldn’t get this information. It wasn’t available to us. So using this podcast as a way to distribute some of this information really kind of puts us in our happy place. And that’s why over the next few weeks you’re going to hear us talk about all sorts of different topics.
00:01:23 Some of them are going to be real estate related, some of them are going to be non real estate related. Sometimes we’ll go on economic and middle class destruction rants and sometimes we won’t. In general, you should know we are very optimistic people and we believe that you can craft your life and build your life in any way you want and sometimes having access to information is the best way for you to make decisions for the next step of your own life. And that’s what we’re trying to do here. So if you are listening to this and you are thinking that maybe you want to get into real estate, but you’re not sure exactly, um, if now’s the right time for you, you can check out a bunch of stuff from us and specifically what report we put together on mapping out the cost of university versus the cost of buying a rental property and mapping those two things against each other.
00:02:08 Like if you took the money to put one of your kids through university instead, buy bought a rental property who’s further ahead? Now? It’s a little bit of a ridiculous little riddle we were trying to solve because the value of education is obviously prices giving, priceless. Giving somebody the ability to, to, uh, to think and research and write and communicate and are. Those are all skills you get from school. We’re not trying to replace that, but we did want to see what is the financial cost of going to university and if we just took that and bought a rental property instead, who would be further ahead if we compare future income and that kind of stuff. You can get a copy of that report at Rockstarinnercircle.com/university. That’s at rockstarinnercircle.com/university to get a copy of that report. And so with this you’ll hear cliff and I, Nick jumps in onto this episode as well. Break down some of the differences between the markets of public and private markets. We talk about apartment buildings. We get into some other stuff. Enjoy the show.
00:03:00 Are you ready to live life on your terms? Is it time to take charge? The real estate business, building the economy, health and nutrition and more. It’s like your life, your term show with Tom and Nick Karadza, are you ready? Let’s go. Okay. Okay,
00:03:26 cliff. So, uh, tell us why doesn’t it feel like you had two weeks off? What have you been up to? Just how does someone gets it to be? Because we just had the holidays where you’re not relaxed enough in the holidays. Fair. Relaxing. Did you drink enough wine and drank too many alcoholic beverages or probably ate too many carbs. Okay, got it. And now you think you’re suffering? No, no, I just want to go back to that. Back to my house. I know it’s nice and email. You’re not always on email? No. I’d prefer text message now. I purposely stayed away from that. So. Nice. Yes. I did neglect my family for part of it because I was re-watching game of thrones because that’s where I don’t blame me for chemo. I’m not even a huge TV series kind of do, but game of thrones is over the like when I meet someone who hasn’t watched game of thrones, I’m like, really?
00:04:12 You’re not my people. Yeah, like you’ve really. So you’re one of those people who everyone’s going to tell you it’s like the best show ever and you’re purposely breaking bad. Was pretty good to see. Now I will take issue with that if you don’t like breaking bulk, there’s a lift. Sorry, there’s an episode is over now. There’s a few. There’s a few shows that kind of hit that, that third series, that third season there were the writers just run out of stuff. Yes. And so I think breaking bad did that for me. I’m going to really sell myself out. Breaking bad. Did that for me. What makes us the same? Walking dead, I never watch walking dead. So I’m one of the guys here. Everyone’s told me to watch that. So I’m doing what I’ve told others. Not today at Dexter did that as well.
00:04:50 So it was, I just feel like the writers, they get a good premise for like a season than the show takes off and then they’re like, oh shit, what do we do? This show took off and we have nothing else to say, but game of thrones just got. Just went quieter, easier and crazier. And then I’ve tried to, because I was late to game of thrones as well. It was, uh, I, I kind of think it was sort of three or four years in and I’m like, oh, okay. Finally. Okay, okay. I’ll give it a try because I remember trying the first few episodes, it’s not dragon dragon’s eggs and okay, I can suspend my disbelief only so much, but then I’m like, okay, everybody’s going on about it. I’ll give it another shot. And I think it was one of those series where you have to at least the first season anyway, you gotta you know, gotta give it four or five.
00:05:30 I think it was better that I binge-watched the first few seasons like that. So now you have to go back because I picked up so many things that I missed. If you’re hardcore, I feel like you should be wearing a game of thrones tee shirt. I should’ve tattoo maybe even attach. You should’ve come on my cosplay. What’s it caused? Play the name of it, I guess. I’m not sure where you dress up like you know, like a storm trooper and go to comic con. I kept. I’m boring life man. Give me a little bit of wine. Put my Toronto leafs or raptors on TV creation moonshine. Yeah, the Christian. We, I’ve had my fair share of creation moonshine over the years that, the funny part is is uh, we owe someone, some of our fathers wine. So our father makes wine every year. Yes. Because I know you grew up in Stony Creek, circled by Italians in Croatia.
00:06:16 Correct. And, uh, so you’re familiar with this. We just helped our father this fall. Make his next batch of wine. I mean, he’s 79 now. We’re still drinking wine. Good for all his buddies. Come over. He hasn’t heard of, you know, LCBO and Vintages cliff. He’s worried he wants his product so much better citizens. Cliff, if you open up a bottle of wine from the LCBO in front of my father, that’s insulting, right? Understand the Croatian culture. That’s, that’s, that’s cheap. That’s, that’s, that’s poor you. You had to go to the store, you know, it’s a matter with the UK. What’s the matter with your own hands? You don’t know. You don’t know. And uh, I mentioned this in some, uh, some investors that we work with dropped off some bottles. I’m at one of our classes and I either sitting behind me here in this bag, so now I have to wash them out and at this next event, second I’ll have these bottles of wine for these members that dropped off the bottle so we can’t afford to give up that much of know we can actually afford to do it.
00:07:11 It’s just my father would destroy us if we gave away all his wine. Yes. So if you don’t have your bottles in yet. No, but cliff, if you wanted a bottle of our fathers wine, it’s the best homemade wine and all of eastern Mississauga, eastern, mid-east of highway 10 all the way to a very specific demographic and we know that because all our fathers friends come and they tell him that because apparently another buddy on the other side of highway tend to miss soccer. Makes pretty good wine too. Our father doesn’t think so by the United States, like do they not all show up at the creation of technique and they’ll share their wine and they talk about how great their wine is there. No judging involved. Does anybody have like a contest to see who makes the best? They just comment on each other’s wines behind their backs of each other.
00:07:53 Right. You know, if they’re drunk enough then they just say to their face, they don’t put it on social media. Oh No, they don’t have Instagram now and I’ll tell you, our mother grew up, grew up. Our father played a guess. The Italian word would be like botchy ball bowling. Yep. It’s like a bottle of wine and incorporation and Mississauga. There’s a park on the eastern side of Mississauga, near Burnhamthorpe Road there. Fleetwood Fleetwood park. I do know a. The county and the mayor of soccer used to come and sit with our father and his friends. This is why she’s such a great mayor, was for so many years. She would sit with these old guys for. I guess she was probably older than them, but anyway. Yeah, she would. She would have been like 90. She’s two years older than God. Parents for the government in Ontario here just have Pfizer or something, something like that. One hundred thousand a year. So making like 100 grand for, she’s like, are they giving her a driver? Because I heard that there was, I drove behind her warm some issues. There were some issues with the slowest. I’m like, who is this girl? She was into the. I know, I know, I know. We won’t share what hand signals.
00:08:55 But uh, anyway, she sat with our father and stuff and they were complaining for like one summer. There was no washrooms at this park that next summer. Doesn’t she have washrooms built there? I think the baseball Dave’s. No, not quite there. But listen, that’s not why I quite brought you here. I do want to ask you a coffee question is certainly in a second, but I know you are. Um, you know, before we talk about equity specifically and stuff, if first of all, what’s your role at Equiton? Let me just, for someone listening to this, just so they understand, what do you do at Equiton on it? So I kind of did everything that no one else wants it. No one else wants to do. So I make sure the dishwasher is full at the end of the day. I’ll take a little bit of everything. Um, so I help out with marketing, product development, retail sales, wholesale sales to, you know, everything, everything.
00:09:47 Got It. Okay. And Equiton is a, uh, I was going to say it’s like access to like private equity markets and stuff, but is that the right way? Equity Investment, an investment company. It’s an investment company. We, you know, we, we like to focus specifically on, on private investments and those that are real estate based. Um, we do offer some, you know, wealth management services too, but by and large our, you know, our claim to fame is access to private equity real estate. Okay. So this is what I wanted you to explain for anyone listening to this because I didn’t understand this when I was younger. What is the difference between the public markets and the private markets? I know for you that might sound like a very basic question, but for, for me, I remember hearing that and for years I was like, I don’t get it.
00:10:29 What is the difference between the public market and the private market yet? Can you explain that just so we can go back and don’t even worry about not knowing about it. I spent 15 years in financial services before coming to this and I didn’t know what it was either. So for, you know, for many people when it comes to investing, whether it’s for their retirement or their day trading or whatever they want to do, they’re investing in the stock market in some form or fashion. So whether that’s, you know, stocks, bonds, mutual funds, etfs, Nick is joining, hello. And um, you know, stocks, bonds, mutual funds, etfs, that kind of thing. Or they’re trading bitcoin and pot stocks and whatever. And that’s what most people use to, you know, build up their investment portfolio. But up until very recently, um, you know, most people, that’s all they had access to.
00:11:16 And so the private markets have been around for a number of years, but by and large it was the playground of the rich and famous kind of thing. You had to be, you know, a high net worth or accredited investor or you had to be an institution and so if we pick on institutions for a minute, whether that be, you know, banks are the pension funds or endowment funds, they recognized a long time ago that they could add private markets as part of their investment portfolio. So what are the private markets, you know, I like to tell people if you drive up and down the four, one of the four or three and you look on either side of the highway, there’s all kinds of companies, many of them aren’t listed on the Stock Exchange, right? But they need money for their, you know, their widget manufacturing line or whatever it is.
00:11:59 And so how do they, how do they raise money, how do they raise capital? So they used the private markets. So it’s, it’s an investment in a company or in a fund just like you would on the stock market, except it’s not traded on the stock market. So we know what are the benefits of that are, what are the disadvantages of that? You know, one of the things that people have had drummed into their head when it comes to investing is that, you know, the stock market has instant liquidity. You can get in, you can get out whenever you want. You call up your broker and say, buy, sell, hold, whatever. Which always made me lose money because it’s so liquid. I could just make emotional decisions. And many people don’t actually action it, right? They have that liquidity, but they never actually, they never use it, right?
00:12:40 They, they liked the fact that they have it, but they don’t execute. So one of the things with the private market is that it’s not as liquid. You can’t get in and out at a moment’s notice. You know, some are very, very restrictive and other others have a little bit more leeway. So it’s an investment in a company or incent investment in real estate, but it’s not traded on the stock exchange. So in, you know, what ends up happening is you don’t have the emotion of the stock exchange or the or the stock market driving the value of your investment. So you know when it comes to real estate, when you buy a commercial building or when you buy a flip home, your investment is tied directly to that asset. That’s what it’s worth, right? You paid $500,000 for that house. You have a $500,000 investment in the stock market.
00:13:24 If you invest $500,000 and something and the stock market crashes, your investment will drop, but that asset that you invested in, whether it’s Google or whatever, still has value and that value is there, but you as the investor only get what the emotion of the stock market dictates. And so that’s the, that’s really the difference between the public and the private. Very similar, but you don’t have the liquidity. You tend to get higher returns on an apples to apples basis. And the private markets are available to not all the Canadians or the are available to all Canadians are available to all Canadians. Ontario was a little bit behind the times up until 2016. It was very restrictive in Ontario. The rest of the country had figured it out. But the, uh, the Ontario regulator had had been a little bit reticent to know to include these new investor categories, but now it’s available to just about everybody and depending on your qualification, really income or an asset test that will determine how much you can invest in a 12 month program. So a firm like yours or anyone representing the private markets has to ask the investor, uh, you know, there has to be like an application, like a know your client, a Kyc, there’s a qualification process that you have to go through. Um, yeah. So it’s, it’s very had to be an accredited investor status. Is it eligible eligibility, which is a bit of a lower bar that you have to meet. Yes, that’s right. But I guess that’s Ontario protecting investors and that kind
00:14:51 of stuff’s correct because the bar has been lowered you more people have access to the private markets and access to or, or to to access the private markets. They would go to firms like an Ecuadorian or others or I’m not trying to say run to equity. Um, and those companies are, have investments in some of these companies, like you said, that exists up and down the hall. A highways need some cash and they’re investing in different companies or into buildings and stuff like you guys are. Okay. My next question for you then is what do you wish people knew about the private markets that are they always get wrong? Like, or is there something where. Because for me, something you said when I met you was, it was around offering memorandums. Like, you know, hey, I get so many offering memorandums and stuff like that.
00:15:33 Is there a one thing that you just wish everybody knew about the private markets that just drives you insane? They don’t. Sure. Well, I think I wouldn’t even take it. I would go a step back. I would just like people to know about the private markets because that’s one of the things in Ontario people don’t know that there is an, you have an opportunity here. They just don’t know that it exists because the banks and wealth simple or trade or whoever it is, but that, you know, what most people have access to when it comes to investing, they don’t necessarily offer these kinds of investments so they don’t tell you about them profiting off it. So yeah, they don’t talk and you know, something interesting to me about the private markets whenever I’ve now learned about them and think about, uh, think about them. It reminds me of the days where the stock market was winter.
00:16:15 It was easier to get an information advantage like pre-internet. Oh, you could get an information advantage because not everybody had the information on like my only information advantage and I like to call it insider trading even though it hasn’t, but it just. My own little insider trading story is after university I went to a school that was a take accepting Postgrad students to teach them it skills. Okay. I went there. They opened up on Bay Street in Toronto. I was the first student in Toronto to go. Very first one. I signed up. I get my 13,000, $600. I almost cry, cry to our parents, helped me out a do it. All my friends just kind of rolled their eyes that I was doing this thing. It was the best move I ever made by the way, but it was a lot. But I remember when I signed on and looking at how much money and then I saw the lineup of other people that were getting ready to hand over money.
00:17:01 Then I saw that they were going to start trading on the Toronto Stock Exchange and I thought, oh my gosh. I like, I knew nothing about stocks, but I just saw what I thought looked like an opportunity. So I quickly took whatever little money I had, which might have been a thousand dollars left to my name and I put it all in this company and it did. I think it doubled on me. So I turned my thousand dollars into 2000 and I quickly cashed out yet. And it went up a little further and then I think then it came down because your thousand went to 2000 was probably the thousand bucks that I put in when it came down. Not only didn’t nick then put in some money after he heard I made somebody, but I think our mom put in some money to and it came down afterwards and I just felt so badly.
00:17:43 Did you give it? Give it back to her. The airline. I gave nothing back. I gave me a thousand bucks. I just think about it. Yeah. So that’s my plus the vague on that. Right? That’s a number of years. And I charge high interest rates. So there is my, that’s my insider trading. But you know, to me that’s where the stock mart has lost some of its allure is that now with algorithms trading and stuff like that, the, the ability to get an information advantage on the public markets, like just just even with the Internet, if it was only humans trading, just the Internet alone has kind of reduced the information advantage because whenever there’s something going on with a currency change in Brazil or of course we all know about it instantly, but now with the algorithms to. So the private markets give some of us if you want to do the research, the ability to get an information advantage and why this is such a big thing for Nick and myself as nick will always say this too, is that the reason we like real estate so much, it’s one of the few assets that a we can control.
00:18:37 Correct? Because even if we like a company on the public markets that we’re gonna invest in, you can’t. They don’t know the board of directors. We don’t know the CEO. We can’t control them. Whereas with our little rental property as crazy and scary as real estate can be, we can put our hands on it. You got to troll it to the best of our ability. There’s obviously risk factors, interest rates, the economy, like it’s not a bulletproof investment by any means. Nothing. We can control it ourselves directly, so a that’s a and b. We can get an information advantage if we know the area and we know what’s going on on this particular street in Toronto. Mississauga has Asha Hamilton, Barry, there’s information there that maybe someone else around the corner doesn’t know and we can actually put that to our own advantage and to me the private markets are kind of a little bit like introducing some of that to people where if you do some research, you find an asset class that you like.
00:19:26 You find a company that’s offering it on the private markets. Correct. You can put some information advantage to your benefit. I don’t know if you think of. It sounds like I totally agree and you have to do the research. One of the things that people forget is that in the public markets and the stock market, there’s a prospectus available, but many people don’t pick that up and it’s not, you know, it’s made available prospectuses. That thing that’s like the most boring pages. Yeah, it’s riveting, riveting information. Care for instance, the mutual funds have them as a mutual mutual funds. I remember pouring through those trying to dissect my management fees and I couldn’t figure it out and that’s when I realized I was getting ripped off. You sound like if I can’t figure this out, something is ripping me off somewhere. And, and the same thing, right?
00:20:08 So with, with an offering memorandum, it’s kind of a, it’s probably not the correct way to, to, to, to sort of describe it, but it’s kind of like prospectus light in that it, it still has all of the same, you know, risk rewards, here’s what the business is, here’s what the strategy is, here are the assets that were getting involved in, here’s what we can do from a loan to value or, or whatever. So it lays all those things out. Um, but as a private investment, you know, we have to make sure you get it and that, you know, it’s available to you. Offering memorandum is something filed with the Ontario security. Correct. So this is something, if you want to put something on the private markets, you have to put this thing together and then it’s approved by someone or no, it just
00:20:47 goes on files, on files. The OSC doesn’t approve anything but it goes on file. So you know, you work with securities lawyers to, to put these things together because you want to make sure that they’re, you know, they’re airtight for the investor as, as well as the, you know, the company creating these securities. So it is a security, um, it’s not, you know, approved and stamped and blessed by the osc as good to go. Um, but not, you know, perspectives aren’t either, right. It’s really, you know, the investors, the investors job to make sure they understand what they’re, what they’re getting into and what the risks are. But the documents are this, you know, they’re, they’re by and large the same. The public markets have a little bit different when it a different standards when it comes to sort of reporting and things like that. That’s where there are some differences. And then, you know, the biggest difference is the whole liquidity thing, right?
00:21:34 Yeah. So how does it compare when you, if you may be able to answer this question, maybe not yet, but you know, the, the local mortgage broker that works with some small time developer that’s buying that bought a little loud, it’s going to build eight townhomes on it, onto this mortgage broker and this mortgage broker now sends out an email saying, hey, we’re raising funds for this development project with this guy that’s never developed property before. Who knows if he’s going to go bankrupt. Correct. Um, but anyway, uh, raising funds from anyways, right? So why don’t they like, how come they don’t need this type of documentation when they, when they send stuff like that. Okay.
00:22:05 Yeah. So that’s a great question. So it depends on a couple of things. It depends on what, what form that capital raise takes. So what I mean by that is, are they raising equity or are they, is it a, a mortgage syndicate, is it alone? Right? So those fall under different regulators, right? So mortgages and any kind of lending fall under fisco and any kind of equity, um, will fall under the Ontario Securities Commission. Now, having said that, if you’re not in the business, and I’m using air quotes here, you can’t see it. You see my quotes, if you’re not in the business of raising capital, um, so this is a one-off thing that you’re doing to help your buddy or, or whatever. You know, there is an exemption that you kind of, that you can avail yourself of. And that’s why if you have more than if you.
00:22:51 Pardon me, if you have less than 50 individual investors in that particular scenario that you’ve described, then it doesn’t fall under, you know, you don’t need to have an oem and spend hundreds of thousands of dollars to put together this document and, and have auditors and a board and all that kind of stuff. You know, the. But you know, the OSC could always say, well, you’ve done, you know, one little project with 25 investors and now you’ve done another project with 15 investors and now you’ve done the third project with 10 investors making. You’re kind of in the business of raising capital. You should get them registered with the OSC, you should be creating an offering document, Yada, Yada Yada. And that has happened before where people get caught out on, on those rules. So it’s very important if you’re going to be in the business of raising money for these kinds of investments, you need to make sure that you’ve got the right registration and that you’ve, you know, that you’re providing this with the right documentation.
00:23:42 And then what would someone, uh, is there anything in these memorandums
00:23:46 that someone should kind of look for? I don’t know, something that made it raise an alarm bell or just give them peace of mind that you know, if they’re going to invest in the private markets and they ask. I’m assuming some people might ask you for your. Do people ask or is that no, people don’t ask for offering memorandums. Oh No, it’s, it’s, it’s, it’s part of the documentation and part of reads them. No one reads them. No, but I. But, but let’s say you were going to read them. Is there something that just is like, oh that’s a red flag or there is something that is like, that really gives me peace of mind. Yes. So I think there’s a few things that people should really pay attention to is one is first of all, you know, what’s the asset class that you’re getting involved in?
00:24:24 So if it happens to be real estate, great, it’s real estate or if you’re doing um, you know, receivables factoring or, or, or whatever you need, you need to be comfortable with the asset class. Firstly. Secondly, I think the people that are running this investment, the people that are creating the investment, that people that are making the strategy decisions and also the tactical decisions on what to buy, it’s important that they have experienced in that space because unfortunately in the, you know, the private space, there have been some blow-ups over the last few years and you know, by and large when you, you know, that discussion we had about, I went through, I went through all these [inaudible], one of the things that kind of jumps out as well, the person that’s created this fund has never done this before. They’ve never built storage units or, or, or whatever.
00:25:11 So in my mind, why, why do I want to get in bed with someone who is going to be learning on the job using my money? Right. So I think it’s important to me or having to deduce that you figure that out yourself just by reading. You know. Usually what happens is the, you know, the decision makers or the executive committee for that fund, their bios going to look at that or if you, you know, there, there are red flags, you see, you know, they’ve got their head office is in someone stop light town in northern Saskatchewan and then they have another head office in Miami. What are we doing here? Right? Like what, what Hayman islands is the eternity. So those are kind of red flags, right? Or so people that aren’t necessarily from the, from the asset class and have it run, those kinds of things are going to say from the hood.
00:25:59 I don’t know why this year we’re going to snow. I’m from the hood. That’s fine. Okay. Right. Okay. So got it. So the bio is an important one. The bios and looking for history and experience, history, history and experience, you know, it’s also important that there is really sort of rigorous compliance and oversight and what. Yeah, what would I look for that you should look for a board of directors on, on a lot of these because just like a public company has a board of directors, a lot of these offering memorandums, you should look for that as well to give you comfort and it needs to be, you know, a true board of directors that it’s not, you know, cousin, cousin, friend, the guy across the street, you know, my mother’s on it kind of thing. You really want you to see a board just like you would with a public company is some buddy on that board that has experience or some kind of complimentary skill.
00:26:47 Again, to the asset class. The responsibility of the board is to uh, they’re approving decisions. They can. I mean it depends on how much c, again, because it’s the private space there, you know, there’s not that many hard and fast rules around what you need to have in place for the board and what the responsibilities. So let me ask you this way, does Equiton have a board? We do. Okay. And how do you guys use your board? Maybe that’ll help us. So what we’ve done is, you know, for some of the solutions that we offer, we have a five-member board only to our insiders and three are independent and they are independent real estate experts in their own right. So they bring complementary skills and so we have empowered the board to, you know, we have to get unanimous approval when we do things.
00:27:27 So whether we’re buying a building, selling a building, you know, changing the, you know, the distribution, increasing the unit price, whatever it is, or the history of the whole board, the whole independent board has to approve. And the two insiders, you mean they’re part of equity? They have some connections. That’s my, my, my CFO and my CEO are the two insiders. Okay. Yeah, makes sense. And the other three people are not any correct stakeholders and Ecuador completely incorrect. And what we did was we, we didn’t know any of these people prior to setting up any of our funds. We did a Canada wide search with institute of corporate directors of Canada or something like that. And we did an interview process. I didn’t, nick and I didn’t get a call for that. We didn’t do your are your. I guess your criteria was just a little bit maybe beyond us.
00:28:11 Is that why our phones didn’t ring? No, we didn’t. No, we didn’t really think about our board of directors. Yeah. It’s like whatever little figurines that we have on the shelf or they a bobblehead blah blah. Yeah, they call me that. That’s a bubble head of me. I think about me that for my birthday, that’s what you get for your birthday from your brother. A bobblehead exomes up because I’m trying to bring back the thumbs up into giving. Given you more hair in that though, right? He really is. He’s generous. He’s a good brother. But the thumbs up is really something I’m trying to bring back. Like when you see somebody you don’t say hi, you just kind of given them the old thumbs up. I’m trying to bring that back into our culture and a leather jacket. I’ve been working about that for 10 years.
00:28:48 Not really trying to try it, but uh, okay. So that’s the role in equity. So how would, and I guess you have to figure it out yourself then if they’re independent from any of the other ones, again, it’ll be, there’ll be biased, they’re biased and you know, but if their cousin frank with a different last name Hart to figure it out, it’s, it can be. You’ve got to then you ask, right? He just asked this question. You just asked and role do they serve and who are they? Okay. And anything else in the offering memorandum. So the bio. So to see the history and experience of the people involved and how the board is being used and who is who, if there is one is it doesn’t mean it doesn’t have to be one. Oh God, it doesn’t have to be one. So it’s valuable to have a board just to show that there’s some kind of independent objective almost third.
00:29:33 I’m using air quotes now. It’s not quite a third party, but it’s governance and oversight. You want to see that? Okay. Anything else? Um, I think you want to be very clear about the asset class and what the particular investment will is allowed to do. So for instance, if, you know, all you want is exposure to commercial real estate. So you know, I, I want to buy a fund that invests in malls and offices and you know, strip plazas and things like that and that’s all I want access to. You need to make sure that that’s all that particular investment can do. Again, it can be something. Whereas, Oh yeah, you know, we like to invest in, in malls, in Canada, but you know, in sort of small, small print it says, you know, we can also invest in car loans in the US kind of thing, or the or the board has discretion to invest in.
00:30:21 What I’ve seen this, we’ve seen that we’ve seen that in the past were all of a sudden it’s surprise, we’re doing something that you didn’t think that you, we could do and you didn’t sign up for it. And so it’s very important to kind of, you gotta dig through the weeds, you know, just like when you’re, when you’re buying, you know, when you’re buying real estate, you want to make sure you get your environmental is. You want to make sure that you get a building inspection, you want to do all that stuff, that due diligence, you need to do the same thing to make sure that you’re comfortable with what you’re getting into. Okay. Okay, so those are really good tips. Anything else then on the offering memorandum specifically or does that kind of cover it? I think that really the rest of it is a scribe.
00:30:58 The rest of it is kind of boilerplate, like you know, what provinces are these available and those kinds of things you need. You will see they’ll there should be audited financial statements. I’m attached to that as well. So offering memorandums only get updated usually once a year. So you want to make sure that you’ve got that. You’ve got current financials in there, they should be audited. I mean nuts kind of standard practice as well and it’s important to make sure that it’s a name brand auditor, not joe’s auditor and Lasik shop in a strip plaza somewhere. I know you’re saying that joking, but I guess you’ve seen this kind of scene. That’s why you’re joking about seen it. I’ve seen, I’ve also seen offering memorandums, not that was not written by securities lawyer, so it’s kind of, again, you know, a guy in a strip plaza who does wills and all of a sudden he can, he can write a note and then on the financial statements, anything that would stand out specifically, I know financial statements, I mean all of us can pick them apart in different ways I guess, but is there anything that you would want to look at?
00:31:54 I think you want to make sure that, you know, they’re audited and that they’re audited to first standards and you know, you want to, you want to understand again, if it’s, if you’re investing in income-producing assets, well you want to see that there’s income there, right? You want to, what is the Erfs first is the international something, something, something so, but that’s kind of the top, top, top of the food chain when it comes to accounting standards. So those are international accounting standards and most audited statements tend to fall under that anyway. Okay. Okay. Um, and then for you, for private equity, what type of asset classes have you seen as just cover, I mean, you, you mentioned some kind of receivables there. I know you guys are, I want to talk about apartment buildings in a second, but what kind of things have you seen in this, in this area?
00:32:39 That’s it. Anything and everything. So the private market really started in the West and, and our, our western friends were quite far ahead compared to other provinces. It really kind of started in the oil and gas 15, 20 years ago because they needed, they needed to raise money for drilling, you know, early stage drilling and mining and that kind of thing. It’s very expensive, like Alberta’s laws also probably just made it easier to access certainly the cowboy aspect of it. Yeah, absolutely. So that’s where the private market started way back when. Um, so, you know, you see everything sometimes you just see um, you know, it’s a, it’s a small one-off project that’s got a fixed term, I need to raise money for this drilling opportunity and, and that’s it. So it’s not a, you know, it’s not a fund that is continuing to grow over time.
00:33:29 We’re more assets are being added kind of thing. So there’s lots of, one-off, there’s receivables factoring A. I’ve seen um, consolidation of different types of companies. So, uh, I know there’s one where they are, you know, buying up car washes in the US. There are some that are building storage facilities, there are those that are consolidating dental offices. It kind of runs the gamut covering pretty much everything. Yeah. And is there a place in Canada to go to check out different ones? You know, like residential real estate? Obviously you go to mls.ca or realtor.ca and you can kind of get access to every commercial. Real estate in Canada is very different. There’s no centralized website really to get access to commercial. Is it the same for private equity? It really is. Yeah. For private markets you, you, for the most part you have to use your google skills.
00:34:15 Yeah, I mean you can go and crawl through offering memorandums that are posted on, on, you know, the Ontario Securities Commission website. But okay, so that could be very interesting. Yeah, that would be very laborious because it’s, you know, it goes by name and you can’t really tell by the name of the offering what it exactly does. Um, so that’s, you know, but getting involved in, in, in, in real estate groups like yours that gives you access, just networking and yeah. So why did. So now let’s talk about your apart. I think the first thing that got us chatting is there were some, um, some clients of ours, um, some investors that we work with, um, we’re investing with you and I guess it’s set up, it got a conversation going between us and I think the first one that we were talking about was your apartment. I didn’t want to say the name incorrectly, but it was your apartment building.
00:35:04 Fun. Yeah, that’s the best way to describe it. It’s got a terrible marketing name. Okay. But yeah, but it’s got a good. Well it’s got apartment buildings behind it which kind of got us interested in this. Right. Um, can you describe that one? Like why did you guys choose apartment buildings and how’s that particular one setup? So, you know, the Nice thing about apartment buildings and you know, pardon the cheesy real estate plan, but it’s probably the best foundation for real estate investing and, and you know, the reason that I believe that it is that, you know, apartments are a product of necessity. Simple as that. So there’s always going to be demand for apartments and certainly, you know, in Ontario and in the greater golden horseshoe, there is no shortage of new people coming, you know, coming to the province and it’s not only just, you know, new immigration but it’s migration as well.
00:35:51 Right. You know, we’ve got a lot of people coming back from Calgary, you know, they’re not making $90,000 a year at Tim Horton’s in Fort Macmurray anymore. And then they remember that they’re coming back. Right. We’re joking about it. But it’s almost like, it’s like a sad story because you had, you know, he had people leaving the east coast because they were just going to drive a drive, a dump truck and, and make 200 grand a year kind of thing. And, and you know, unfortunately those, those days are, had tenants in Hamilton that we’re flying out. The husband was flying out to Alberta making like 102 weeks at a time or something. Right? And then coming back making big money. And so we’ve just got a ton of people coming back and you know, because of the way Ontario is situated where with, you know, you’ve got the green belt on one side and you’ve got Lake Ontario and the other.
00:36:36 We’re, we’re landlocked, right? We’re kind of an island. And so there’s not a lot of places to go. There’s not a lot of new development when it comes to multifamily. And so it’s the best place to start. It’s the best place to get your feet wet because on the sort of risk spectrum, when you look at all real estate assets and, and this is one of the things that I find that, you know, when I, when I talk to people, they say, oh, I want to get involved in real estate. I’m like, great, what kind of real estate, real estate, they’re not all the same, right? I mean a car is a car, but a Ferrari. He’s not a Honda. Right? So w what, what do you want to get involved in this? They’re like, well, how’s the market? And I like, well, like what city, what city, what type of family condos, right?
00:37:22 And they all behave differently. They have different risk-reward profiles, their cash flow differently. They’ve got different tenant, the vacancy issues. So it’s important to, to understand all that. And I think, you know, apartments are easy for people to understand because many people, I know I did started off living in an apartment, so I know, you mean pay your rent and you got a landlord and this, that and the other. Um, but it’s a great place to start and there’s a lot of opportunity to buy underperforming, underperforming apartment. So in, you know, in Canada, 60 percent of the apartment ownership is privately held, so we’re talking mom and pops that own one or it makes sense, one or one or two buildings, you know, most of that inventory is in Ontario and Quebec and you know, they’re just run inefficiently. You know, we’ve, we, every, almost every deal that we’ve come across, it’s a husband and wife, they’ve owned it for 30 years.
00:38:13 They live five hours away from the property. It’s the last property in their portfolio is they’re not paying, they’re not paying attention to it. Most of the inventories that Ontario, Quebec, like, what’s, what’s most like, I’m just curious. I didn’t know. I know like I know the Montreal area, there’s a large rental properties, I think per capita they have the largest rental population in Canada and they have a higher propensity to even, you know, red went homes too, right? It’s much more European in that way. Uh, I don’t have the, I don’t have the numbers. I just know that when we know, for instance, where we’re right now, where we’re kind of paying attention to the [inaudible] corridor, so call it, we haven’t got to Ottawa yet, so we’re kind of sort of Windsor to Kingston. Okay. And when we look at privately held apartments, we’re tracking about 2,500 buildings, 140,000 doors.
00:39:03 Well that’s, and that’s privately owned. How are you tracking that? So you’re going collecting data. You’re, you’re basically data mining, old schoolyard. We are so google earth, um, you know, we go through the city plans, um, we look at the city zoning because some are really, really good about identifying, you know, what parts of the city are, you know, high density residential, what are commercial, what are industrial? And so you use Google maps. We also drive, um, we use a real estate investing, you know, the resident, the average residential investor has gotten away from that. But that’s what I always used to be going into a land registry offers, trying to pull title. You got that type of stuff. That’s what it always was, right? Yeah. So we have the, you know, the name and address and phone number for these buildings. I used to write letters to people who look like they want to sell.
00:39:50 We would write letters and you don’t know me, but if you’re looking to sell this, this is very timely because my wife and I had been talking about moving and you know this is a crappy time for to either list than a crappy time to buy because there’s not a lot of inventory to take a look at it. And so I said, this is what we’re going to do. I said, we’re gonna. We’ve got a real estate agent that we, that we a friend of the family that that is going to keep an eye out for us. But I said to her, I said, look, you pick the areas that you want to live in. I said, we’re going to use google earth and we’re going to drive around. And then I said, we’re going to come up with a canned letter and it’s going to say, I like your house.
00:40:24 You don’t know who I am. If you’re ready to sell, give us a call. And I said that’s how we’re going to do that enough. Even repeatedly in the same area, you’re going to get some something. Yeah. So that’s. So that’s what you’ve done with the apartment building. That’s what we’ve done with the apartment building. So you know, what does that. That’s a lot of work. And you know for, for example, the first, I believe the first four buildings that we purchased, it was through two transactions. We made a 1400 phone calls. Wow. And had 100 different meetings with property owners, building owners. One hundred, 100. We put up 10, 10 offers to do two deals. Yeah. Actually those numbers kind of makes sense. And offers to day meetings are just, I’ve just dreading the hunt that the investment of time for the hundred meters and they’re not all good meetings.
00:41:12 A lot of them are, you know, get the property. Never darken my door again. And then you know, like yeah, we’ll come back. We’ll come back when you’re ready when you’re ready. Ready over here. Yeah. So there’s a lot of leg work. And how long have you guys, how long has that been around? So equity has been around since 2014. The apartment fund’s been around since 2016. Okay. And so the, the, this was a lot of legwork by you and the CEO now we have an acquisition team so they do a lot of the fence hopping and, and you know, being chased by dogs and you’re getting kind of thing for them. But you know, we, we walk every building that we buy, so I go through the units and take pictures of the units and check out the risers in the staircase and check off the park and they’re building a fund off of that so people can invest in those buildings that you’re buying.
00:41:58 The payout of the fund is a return on cash flow from the rents? Correct. Yet there’s this whole buildings cashflow that, that pays a monthly distribution and as well as, you know, the sort of the unit price going up, like the share price going up over time. Right. Of the funding. Okay. It’s, it’s, it’s kind of, you know, if you were. The best analogy would be it’s kind of like a mutual fund, a mutual fund is a basket or a pool of other companies in there and this is what, you know, an apartment fund like this is, it’s a, it’s a pool of a apartment, you know, large scale apartments that most people, you know, they either don’t have the time, money or the interest in owning and managing. So we do all the heavy lifting and worried about the broken toilets and making sure the units are turned over and we’re getting market rent, all that kind of stuff.
00:42:43 So passively, um, they don’t have to do any of the hard work because you guys are property managing them yourself, correct? Yeah. Okay. So you’re buying property. Managing the investor invests into this thing, gets a shear of the monthly cash flow paid out probably quarterly, semi-annually, monthly, monthly, monthly. The share prices go up because the value as you buy more buildings, the value of the shares are worth more. Is that driving the price of the share of the value of the buildings themselves going up over time, over time? Because the cash flow is improving because you know, we’re buying these underperforming assets so the, you know, the buildings will improve in terms of cash flow, the tenants are paying your mortgage, so the equity is increasing and you know, you hold real estate over time. That tends to go up in value calculation on the share price.
00:43:31 Then you know, how has that share price, some algorithm that you’re taking equity and joy. It’s, it’s again, it’s based on the audited statements, what the was just a flat determination. Here’s what everything is worth. So the share prices are worth this based on the number of shares are outstanding. Yes. Divided by this number and there’s some, you know, small adjustments for mortgages on the building kind of thing because some mortgage would be below market or under market. So it’s a little bit that’s a little bit complicated. But essentially it’s the value of the property. So you know, going back to the original part of our conversation where we said, you know, if you’re investing in real estate through the public market, your investment is the value of the stocks. But the stocks don’t always translate to the value of the buildings because think about it in 2008, you know, the Toronto Stock Exchange was down 33 percent. Everybody was losing their shirt, public real estate investments, those that traded on the stock market went down 38 percent. So they fell even further than the stock market. But think about it, if you own a building that was worth $10,000,000 and the stock market crashed, what’s your building worth?
00:44:32 If you’re a private owner? Yeah, it’s still with the same change on the building. That’s right. Unless rents collapsed, but we haven’t seen that type of environment. Rents so states already. And so if you owned a real estate investment in the stock market that invested in a $10,000,000 building, what’s your investment worth when the stock market crashes? Thirty eight percent last year. But that building still worth $10,000,000. So there’s always been this disconnect when it comes to the value of the asset versus the value of your investment as an investor. That is, it’s kind of disconnected when it comes to investing in real estate. And the upside has been obviously always kind of advertised as the liquidity. I know we can kind of debate and argue if it doesn’t exist or doesn’t incorrect. But I guess in a private thing like yourself, how liquid would your, the apartment building fund, how liquid is that?
00:45:20 So there’s monthly liquidity. Okay. You guys are able to do that, correct? Must be some shut down where a peo, which is a positive. Yes. I mean, you, you want to make sure that there isn’t, you know, run on the fund. Yes. Um, which you know, again has happened in, in the past and you know, not just in, in privates but in public as well. But what, you know, what you want out of that is there’s, there’s additional stability because you know, that, you know, people are investing with the same mindset. You know, we, we tell investors, if you’re, if you’re, you know, wanting to take a flyer on this for six months or 12 months or whatever, it’s not the right thing for you going go and get something on the stock market that you can jump in and out of and make some quick money.
00:46:01 If you, if you think you can time it right, this is a longterm kind of set it, set it and forget it. Sometimes I think when you choose the right asset class or if you feel comfortable with the asset class, because I know everyone’s going to argue about what the right asset classes, but if you feel you’re choosing an asset classes that are right, that is right for you. A lack of liquidity can be actually a benefit in a weird way because I know Nick and I have wanted to sell rental properties before when we’ve had a vacancy at a time where we didn’t have time to deal with it, which is always yes, and you’re just an instantly then sell that piece of crap property. Nick just sell. We’ve both been on the other side of that conversation where the other one of us has been in a better state of mind that day.
00:46:37 Are we talking to the other one off? Let’s just kind of get it through this and hold it. And thankfully looking back, we’ve always held yes, and it’s paid out handsomely for us. If it was just where you could like log an APP and click a button to get myself out of that property, it would have been really not a, not a good investment for us. So, uh, the illiquid, if you’re in a good asset class, the lack of liquidity can actually be a positive to fight your negative emotions that we all have. That’s right. And for many people, you know, they’re investing through registered funds, so their RSPS TFS has got it. People don’t access that. Of course there are hardship cases where people need to get access to that and they’re willing to pay the tax or whatever. But for most people it’s, yeah, I’m going to worry about that 10, 15, 20 years from now.
00:47:21 Totally. Especially, you’re right, if it’s in something like an RSP. I was at the bank the other day and the guy, I guess I didn’t even realize it’s our species and coming up and the guy’s like, hey, you know, can I offer you an Rrsp? And, and I’m like, actually I don’t own any. And the look on his face, just pure devastation and despair. He was worried for me and I said, don’t worry. It’s gonna be okay. And, and let me tell you something. I think you’re a young guy. You have RSPS. I think taxes are going to be a lot higher when you pull yours out. Probably just sell yours right now. Look on his face. He was not impressed. No. And then he went up to the tfs and I’m like, okay, the tax free savings account. That makes a bit more sense.
00:47:58 I can put some stuff in there and get a tax free. But uh, anyway, I wish that just the sheer raw, the should’ve recorded it. I wish I could have got this guy’s response that you don’t own any. Her speed was just mystified by me and I just love that the fact that I don’t, but someone who does, you are limited in some of your investments and that’s what we didn’t talk about some of this private market stuff. Is Rsp eligible or is it all RSP eligible or do you have to apply to make an RSP eligible? How does that work? So the way it works is, you know, to get into the complicated legal structure, what ends up happening is you have to have a trust in place for your offering memorandum on it. So it has to be held separately. Yeah. So if the, if there is a well you know, for, for, for, you know, for your audience, they probably understand this, that really what happens is you’ve got to, you’ve got an lp limited partnership and a general partnership and that’s, you know, that’s what does the work. And around that LPGP structure, you put this trust wrapper. So it’s called a mutual fund trust actually. Okay. And the only reason that you have this mutual fund trust around the LPGP is so that the trust is able to accept registered funds. Okay. Got It. So not everybody does that because there’s an additional layer of complexity and additional layer of costs and there’s more reporting and Yada, Yada, Yada. But if you want to make these kinds of investments available to as wide an audience as possible, you got. Because a lot of people don’t have jingle jingle cash sitting around, but they’ve got, you know, rsp money that’s not doing well for them or they’re, you know, as you were looking at the fees and thing.
00:49:32 Oh my God, I’m getting ripped off here. I need to do something else with this. Yeah. It’s available for those kinds of investments. So our RSP, Tfa Lira, our esp. Got It. Yeah. And so how do you explain when it’s real? Estate’s a tough thing for me sometimes to discuss because some, someone will say, well, I’m going to get into real estate as a point of diversification and nick and I always think the real estate market is, as we were alluding to earlier in itself is, so there’s apartment buildings, there’s condos as Eric Development, land development. Just in that, you can’t just kind of go into real estate thinking you’re going to be diversified. Where do you think you guys. I, I, apartment buildings. Every time I’ve talked to Canadian banks, Canadian banks. Think of them as some of the most stable real estate in the country of Canada. They love them. Yeah. Because rents stay stable, um, and they feel like it’s a very, it, they basically feel like it’s the safest real estate type investment in Canada is,
00:50:28 is there an answer you give to people and where does this fit in your real estate diversification play? Um, I guess it’s just that it’s, we’ve already answered the question that it’s safe and stable. I think it’s, you know, it’s not a, it shouldn’t be the entire portion of anybody’s portfolio, but it is, it should be a slice and you know, really depending on how, how far you want to diversify, you know, we, we do have clients and people that we’ve talked to that I don’t like development, you know, because I got to give the money today and I don’t see any cash flow for three, five, seven years and I don’t like the risk or I don’t like the complexity or whatever and you know, so that, you know, so developments not for them. Um, you know, some people don’t like the, you know, the really with commercial property.
00:51:10 So true commercial properties, I know that sometimes the banks will consider apartments and commercial property because of their lending. They considered commercial. That’s right. You know, so for commercial you got to worry about vacancies a lot more than you do with apartments because they can, they can run longer or you’ve got, you know, a building that now has to be, you know, refit because you’ve got a different tenant profile going in. So. But those are all things that, you know, as part of due diligence when you’re looking at these kinds of assets that you want to make sure you, you understand and you and you plan for those things. Um, but real estate is his apartments per specifically are set it and forget it. Yeah. Every data that we’ve looked at as far as rents, um, whenever there’s been any sort of economic correction, crisis, whatever you want to talk about, rents seem to stay very stable and they and they outpace inflation.
00:51:59 Last statistics we had, it’s like two to one and I’m sure I’m sure lately they’re outpacing inflation. You’re right. I don’t know historically though, I’ve never seen that data. I’ve got really a to two to one, almost two to one point eight times I’m going to bug you for that data. Yeah, yeah, for sure. For sure. Provided they were like, you know, in a, especially if they want to have a rent-controlled environment. Because if you look at what’s happened in Alberta after the oil sands, very important truths were hammered there. You know, there’s some factors that are. But for the most part, big city with demand, you know, those are some smaller areas, stuff like that. You know, one of the things that we found that as I guess it’s not surprising to us anymore, but as we were as we were ramping up, is that.
00:52:37 And again it’s the, it’s the mom and pop owners, the kind of hands off. I’ve had it for 30 years, it’s cash flowing. I’m not really paying that much attention to it. You would be surprised, you know, almost to an owner, they don’t know what market rent is. Yeah. So events probably paid off. There’s just got this cash flow. Can you imagine having a building like however many units paid off, right? Yeah. And, and it’s so. Well, what do we, what did this guy pay last month? Oh, thousand bucks. Okay. Ask a thousand and five. Meanwhile the building two doors down is charging 100. So they don’t even ask. Yeah, we have a, we know someone in a, in Kitchener who’s just going through a bit of a changeover in a building and they’re changing some rents. I want to say from like 800 900 to $1,200, which obviously changes the value of the building greatly. Yep. Right. Yeah. If we, we’ve had that happen too, where we’ve gone from, you know, a one bedroom
00:53:26 was 600 a month. We put in some rentals. Um, and when we turned it over, we were, we were charging three, $400 more a month. We see some developers and are in Ontario discussing, and Nick, we’ve talked about this before, it’s discussing how that’s actually a development opportunity now. It’s about 100 performing apartment buildings and instead of building the building and going through the regulations that exist in this province to build, forget it by an underperforming apartment building, renovated all over time, sell it, refinance, do whatever they want with it. And they’re looking at it as actually a development project for stable development because they’re able to generate revenues throughout the cycle of this project. Right? Yeah, absolutely. That, that’s certainly a strategy as well. What’s the cost of where everything’s going? It’s, you know, there’s more and more demand for those that, that um, size of space, right?
00:54:12 Like, look, you know, we’re in the markets that we’re in where, you know, call it 110,000, hundred and $15,000 a door is kind of the pricing that we’re seeing on some of these buildings. But I know if I was to go and try and build brand new at today’s land prices at today’s construction costs at today’s development costs, I’m probably closer to $300,000 a unit. So the, like the barriers to entry, it’s you, you buy rather than build new, it seems like there’s a crazy opportunity right now for those of us in this space because you can kind of see where the immigration and population growth stats look to be pointing, like increasing or steady and lack of supply already. Um, there’s a little bit of an arbitrage situation where you’re like, I can see the data, like I see what’s going on here. Um, I just came from one talk.
00:55:02 It was an RBC economists talking about, and I don’t have the number in front of me, but the number of houses being built today or new units are being built today is less than two years ago, but our populate both our population growth, growth growth in the province and immigration is up. Yes. So we’re. We’re supplying less but demand is up and that’s part of the reason we’re just seeing rents and all the markets we’re in. Cliff and I’m sure you’re seeing it as well, just strong demand for rent and I’ve, I’ve heard, I don’t know, this is not super timely information, but at some point last year I remember talking to a millennial as you do and you know there were bidding wars for rental units in trouble. Yeah. I mean maybe, I don’t know if it’s happened in June. I haven’t heard of a January story, but I’ve heard of the December, November heard of someone just at a 90 minutes ago.
00:55:49 Someone in our office with dealing with someone who was renting out a three nick, you know, them rented a three bedroom townhome in north Oakville here. Feel lucky that they got it because there was multiple offers on saying so it’s, it’s still kind of going crazy. So there’s less bidding up. Definitely multiple offers on the rental property and you know what they’re, you know, there, there is um, new rental coming online. It doesn’t even put a, you know, it doesn’t even come close to supporting the demand that’s there, but a lot of times it’s when the, when the building has had been sitting on the land for a number of years so they can attribute a zero cost to that land. Right. So in, in Toronto, if you look at some of the high rise buildings, they’re, they’ve, they’ve, they’ve got a little park at, right that they can now they can pop the approximate getting millions they can make, they can make a ton of money on it or, or advert where they used to build buildings with, with a little part and magic grass around the bullets.
00:56:44 Crazy. Why would they do that? We don’t waste those two buildings. Where we grew up in Mississauga, we were just talking with them. Rental buildings. These are two rental buildings, east side of Ms Dot Vega. Burnum Thorpe on a board of a topic open. Yep. Huge green space walkaways parks around these apartment buildings like stereo, going to build another, I think two or four. I can’t remember. Rental Gentlemen, rental property buildings on that land. I’m like, who is someone is cashing in here huge on this thing. And so that’s where the numbers can work, right? Because now and you don’t, you don’t have land cost there because you’ve been sitting on 30 years and develop it. And I just heard this stat also from this RBC economist this morning that was talking about how first time home buyers use to make up for years. We’re making more than 50 percent of all activity and now it’s under 40.
00:57:32 So that’s a big chunk and it’s after the stress test where it’s harder to get mortgages last year and all that domain is being pushed into the rental space. Correct. And so, you know, sometimes governments, we make these changes and everyone’s kind of going around patting themselves on the back saying we cooled the market down, but you’re just, you’re kind of like one problem, you’re, you’re squashing down one problem, but at the same time as you push down to one another, one up somewhere else, right? So it’s, it’s, it’s fascinating to see that. So see it. CMHC is latest stats are the average age for someone in Canada. So there’s going to be some regionality, right? But the average age of someone in Canada, um, when they are going to be able to afford to buy their first home. So condo, townhouse, I mean, whatever it is, 37.
00:58:15 Yeah. Wow. How things work. Change, man, that’s a big shift. There are 37. So if you know, if you’re having to do the math, if you get a 25 year mortgage, which is still the most common term. Oh yeah, right. You’re 63 going to Japan, generational mortgages, man, you’re going to have kids and when they’re born you’re going to say thank you there you go to your kids. But is why in Europe, uh, there’s no, like the regular sales of property that property, like where you were talking about it stays in the family, you know, your wife’s family had a property in Florence for from generation to generation because who owns multiple buildings in Florence as rentals and they also knew family units. They are very used to living in smaller spaces. No one goes around in different pockets of developed Europe thinking I’m going to buy a house with a law and put in a swimming pool in the back.
00:59:04 Like that’s just not, that’s a very good. The Canadian North American kind of concept. And we’ve been spoiled because we’ve got, you know, comparatively so much land, right? This whole country is built on the car kind of thing. Right. You can, you know, Burlington, Oakville, you can’t, can’t get around on the bus though. It’s because all the jobs are being concentrated in these huge urban centers and now people are living further away. You don’t have the transit hub anymore. It’s like these transit hubs are becoming where you want to live because the jobs are there, the economy is booming there, but you go into the rural parts of the, of the country. There’s less mining, there’s less jobs going out there. We’re talking about the oil and stuff. Those jobs, the new jobs don’t need space. Right? Because of manufacturing, you know, there’s no. You don’t need to build a plant like you take away the Amazon warehouses and who’s building anything like that.
00:59:50 Those are just all the faculty being closed and all the factories lifted off the ground and flew to China, so we don’t. Exactly. Yeah. That was amazing how that happened. They all got up and then just flew over and they landed in China. That’s how that works. So yeah, she’s so nice of us to sell them all our natural resource companies, so they take our natural resources, take them over there, out of our country and then sell them back to us that these increased costs. It’s like such a good government policy that we’ve had. We’re very smart Canadians and apologize for it. Hey, we give you a good enough to you on that number. You know, you want a little more oil at a cheaper price. We have clean water to who doesn’t have one that, you know, someone was telling me that someone’s cyphing up.
01:00:30 I heard this the other day. This is obviously just bs. I, I have no data around it that some Chinese company is saving off water of Lake Erie and I’m like, you’ve got to get me data on this. If this is actually happening, don’t just tell me something like that without giving these. I’ve seen some of that. I wanted to see. I’m like, what are you talking about? Siphoning off water. I’ve seen some of the remote, I want the water from Lake, but I’ve seen some of the reports of what the water companies like the drilling kind of rates that they’ve paid for the land to these wells, these bottled water companies and it’s like they pay like, like fractions of a cent, you know, and then they sell it us. Like it’s just crazy bottled waters at gray there. There can be your next step, bottled water, your website.
01:01:11 Also is www.equiton.com correct. Correct. See, I did that right after I was going to mess it up. You were staring at me. There we go. And where the pressure was on her. On Facebook as well. Facebook or on Instagram investment company on facebook. I’m not yet. The company is your official title for equitable is Chief Operating Officer? Yeah. Thank you. Yeah. Thanks for doing this. We’ll bring you back again and talk a lot more. Good stuff. Awesome. Thanks cliff. Thank you. Hey everyone. Is Tom Crowds against. Hopefully you’re enjoying that. That was cliff from www.equiton.com. You can check out more about them there. Um, and if you’re listening to this and you want to come out to one of our classes to learn about real estate investing, you can sign up for the next class that Canadian real estate training.com.
01:02:00 That’s www.Canadianrealestatetraining.com. That’s where both nick and I are there. We do a free introductory training class where we break down some of the investing strategies we’re using right here with members and investors right across the Ontario and specifically, I guess mostly around the Golden Horseshoe area. Um, you can come to our OAKVILLE offices. We stick around afterwards and answer any questions. We do have a limited capacity in our training class, so if you want to grab a seat, you can go to Canadian real estate training.com to grab a seat there. I think that’s everything for today. Hopefully you’re having a good week everyone. Until next time. Your life, your terms.