Andrew La Fleur is one of those rare real estate people who bring a ton of value to the table. He’s been investing and working with Toronto condos for over a decade and has a ton of opinions, data, and forecasts to share. On this episode of The Your Life! Your Terms! Show we chat about the current state of the Toronto condo market, what are the “next” markets to expect condos to be popping up in, we discuss government policies and the what the future of Toronto’s condo market may look like. Andrew hosts two of his own podcasts, and you can find out more about him at www.TrueCondos.com.
Tom Karadza: Hey everyone, it’s Tom Karadza and we’ve got another episode for you of the Your Life, Your Terms show. But before we get started, a couple of quick announcements. Over the last few weeks we’ve put a lot of time in discussing the middle class in Canada, the middle class’s future in Canada, property prices, all the way from Toronto out east. We have a recent blog post on property prices going on the east side of city from Toronto along Oshawa, Ajax, Whitby, Pickering and that whole area. And on the West side of the city comparing all the property prices. And the reason we’re doing that is, we’re really seeing families kind of spread out from Toronto too much farther east and much farther west than we ever have before. Part of this is really the destruction of the middle class, where families just cannot afford at all to buy properties where they want to buy them.
It’s driving the condo market which is what we’re going to be talking today with Andrew LaFleur on the podcast here, and it’s driving housing markets in areas where real estate agents from those communities had never seen people from Toronto arrive before. If you want some of the data and some of the charts where we kind of analyze incomes from stats, Canada’s statistics and database against property prices in Toronto, you can go to www.nomoremiddle.com. So again, that’s nomoremiddle.com. And the reason that we feel that’s really important is because there is a shift in Canada. Canada used to have a huge middle class. That shift is happening right underneath our feet at this very moment. The last 10 years, it’s been rather aggressive. The next 10 years, it’ll be even more aggressive. So, if you want some of that data where we were looking at property prices and some charts around incomes against property prices and interest rates and rents and that kind of stuff, you can find that at www.nomoremiddle.com.
And on today’s podcast … We really had a great chat with Andrew LaFleur. We forced him … Well, we didn’t force him, I guess he was kind enough to agree as soon as we asked. We convinced him to drive out to Oakville, and sit down with us and chat about the Toronto condo market specifically. We work with a lot of properties all around the golden horseshoe but we don’t do a ton with condos in Toronto itself. So, it was really an interesting chat where Andrew broke down price per square foot, some of the thresholds that maybe we never thought we’d see in the Toronto area, who’s buying Toronto condos. At the end of the Podcast we talked about university for our children and we gave him a little bit of a hard time because in digging up some research on Andrew before this podcast, I found him with … A picture of him on social media standing next to Phil Kessel, and worst of all, he was wearing a Pittsburgh Penguins jersey. So, we kick off starting with addressing that point and how dare he, as a Toronto boy …
Or actually, I can’t remember if Andrew said he … Was he born in Toronto? I don’t know. I’m forgetting. Maybe we talk about it on the podcast. But anyway, he lives in Toronto now for long enough … That’s right he did talk about not being always a Toronto fan but now he is, I believe. But how he should be a Toronto Maple Leafs fan. And we talk about some raptor stuff in the podcast as well. So anyway, good time. We had a pleasure chatting with him. Let’s kick it off.
Speaker 2: Are you ready to live life on your terms? Is it time to take charge? Real estate. Business building, the economy, health and nutrition and more. It’s the Your Life, Your Terms show with Tom and Nick Karadza. Are you ready? Let’s go.
Tom Karadza: Okay. We are on with Andrew LaFleur. Andrew am I … Is it LaFleur?
Andrew LaFleur: LaFleur.
Tom Karadza: LaFleur. Like, is it the same as Guy LeFleur?
Andrew LaFleur: Don’t over think it. Yeah. Guy. Just Guy.
Tom Karadza: Just like Guy? So you are a Habs fan?
Andrew LaFleur: I was a Haps fan for a period of time-
Tom Karadza: Oh. But now your leaf’s fan.
Andrew LaFleur: -In the early ’90s. I’m not really a hockey guy to be honest. More Raptors guy, so I’m sorry.
Tom Karadza: Oh man. You’re not a Leaf’s fan.
Andrew LaFleur: I apologize.
Tom Karadza: And I’m going to address something right out of the gates here. I went on your Twitter feed to check you out before we had this Podcast, right now. And there’s a picture of you with Phil Kassel, who is an ex Leaf, so that’s positive. But you’re wearing a Pittsburgh jersey.
Andrew LaFleur: I plead ignorance. I plead ignorance. I’m not a hockey guy.
Tom Karadza: Why?
Andrew LaFleur: I’ve been told that this is a cardinal sin to appear with Philip Kassel …
Tom Karadza: Yeah. Why did you put a Pittsburgh … No, no. Phil Kassel’s a good guy. We’re Phil Kassel fans. But the Pittsburgh Jersey on your skin.
Andrew LaFleur: Yeah.
Tom Karadza: That’s tough. That’s tough to get over.
Nick Karadza: On your skin.
Tom Karadza: Yeah…
Nick Karadza: You’re not wearing. On your skin.
Andrew LaFleur: It was …
Tom Karadza: So, what’s the deal with the Pittsburgh jersey? Like how did you meet Phil Kassel?
Andrew LaFleur: Yeah. Funny story. I was in Pittsburgh last week for a special event. One of the developers took myself and a few other guys down to a Pittsburgh game to just wine and dine us so to speak for a new project that’s coming up.
Tom Karadza: It was probably cheaper to fly you to Pittsburgh for Pittsburgh game than to go to a Leaf’s game.
Nick Karadza: No. No. I don’t look at it like that. That was a really nice thing. Andrew’s big time in the condo market.
Tom Karadza: Yeah. I know. I agree.
Nick Karadza: He gets these perks. We don’t get any of these perks.
Tom Karadza: No.
Nick Karadza: They throw us a free t-shirt.
Tom Karadza: Probably because we turn them down when we do. They’ve stopped asking.
Nick Karadza: Andrew, how did you get started … We’re going ask you about the latest condo data and some rent control stuff, but I’ve got to know, how’d you get started in real estate? Was that … did you Segway right out of school into real estate? I don’t even know if I know the story?
Andrew LaFleur: Probably a similar story to a lot of people. That was … I went through the process of buying my own place, which was a condo in downtown Toronto. This was 2006, and in the process of meeting, I knew absolutely nothing about real estate. I was always into business, always into entrepreneurship. I always sort of knew that I would go down the entrepreneurial path at some point, I just didn’t know what that would look like, I didn’t know what that was going to be. I didn’t come from a business family at all, nobody in my family’s in business, so I was always just kind of trying to figure things out on my own, and just going through the process of buying my first condo and meeting a lot of really bad real estate agents-
Nick Karadza: We’re going to take a no comment on that. We don’t know what you’re talking about Andrew.
Andrew LaFleur: It was kind of a light bulb moment where I was like, “You know what? I really enjoy this process of studying and understanding real estate, and figuring out how it works and doing offers, and looking at different properties. Why is this property priced like this? This one’s priced like that. Locations and all the intricacies of real estate, I started to fall in love with it, and the process of buying real estate. And also, I realized there’s a lot of really crappy real estate agents out there, and I couldn’t find a good one. So I said, “Why don’t I just become the real estate agent that I am looking for, and I think there’s probably a lot of other people out there like me who are looking for something like that, and the rest is history.
Tom Karadza: That’s our story. That is so similar, that the same thing, the exact reason why we got into it.
The condo stuff, can you give what’s going on in Toronto. What’s the latest stuff, like price per square foot? What are you seeing in the Toronto condo market right now?
Andrew LaFleur: Well, it’s this tail of two markets, where the condo market is still red hot, and the low rise market around the GTA is kind of suffering. So, it’s the weird, never seen this before.
Tom Karadza: And, how are you defining a low rise?
Andrew LaFleur: Detach, semi-detach, town homes, that type of product. Free hold product is-
Tom Karadza: Town homes are still popular though. The town home market, I don’t know in Toronto specifically, but in other areas, I’ve seen the town home market still being very active. I don’t know in Toronto specifically. I don’t know if you do much in that area. Do you know?
Andrew LaFleur: Well yeah. It’s basically as you move down the price ladder, the market is becoming more and more active.
Nick Karadza: Yeah, that’s a good way to look at it.
Tom Karadza: Yeah, absolutely.
Andrew LaFleur: So, the cheapest product is flying off the shelves, which are condos. And, the most expensive product, which is detached housing, is struggling, as a general statement across the GTA. So, it’s all these mortgage changes and rules and everything that’s come into place over the last year or so, has really benefited unlike anything we’ve ever seen before, the condominium market, and the condominium investor.
Nick Karadza: Who are you seeing as the buyers of the Toronto condo market right now? So, who are these people still buying Toronto condos?
Andrew LaFleur: Well right now, it’s everybody because it’s all you can afford.
Nick Karadza: Okay, so that’s what I was going to ask. So, it is really coming down to affordability. I’m just wondering is there this allure to downtown Toronto, like “Oh my gosh, I’m going to live in downtown Toronto,” or is it really an affordability thing. I know there’s pieces of both of that, but is the affordability thing the biggest factor driving people into condos?
Andrew LaFleur: I think it’s the biggest thing, yeah.
Tom Karadza: We do too.
Andrew LaFleur: I think there is a lot of allure to just downtown living. Commuting times are getting worse and worse, people are getting married later and later, people are having kids later and later. So, there’s demographic forces that are driving the condo market as well. But, it does come down to affordability, and a big piece of that is just the stress test, the P 20 stress test, which is reduced everybody’s ability to buy by approximately 20%. So, when you chop off 20% off most people, you’re in a condo.
Tom Karadza: Yeah, and Andrew, you’re referring to everybody having to qualify at the posted rate no matter what your down payments going to be, that kind of stuff, Correct? Which, is effecting who can qualify, and how much you can qualify for?
Andrew LaFleur: Yep.
Tom Karadza: Did I really hear on one … I think I was listening to one of your podcasts, and did I hear you say 500 square foot condo renting out for 2200 a month.
Andrew LaFleur: Yeah, that’s about right, yeah.
Tom Karadza: So, that’s current.
Andrew LaFleur: Yep.
Tom Karadza: Nick, did you know that? 500 square feet condo.
Nick Karadza: No, I don’t follow that closely.
Tom Karadza: I know, we don’t follow the condo market that closely. So, 500 square foot condo renting out for $2200 a month. Is this-
Nick Karadza: The other thing that will blow your mind is the level of condo fees, ’cause I’ve seen some of the level of condo fees on some of these newer places, because they pull at all these nice features and these amenities in the buildings which are cool-
Tom Karadza: …it’s your condo fees.
Nick Karadza: The condo fees, the starting condo fees are high. I’m just curious, it’ll be interesting to see some of these new developments in the future, as those increase typically overtime, and how well their managed. What happens in that-
Andrew LaFleur: Interesting development over the last just very recent couple months. A lot of condo fees are going up in existing buildings, and a lot of developers building pre-construction are increasing their condo fees before the buildings are even done.
Nick Karadza: Oh really, I thought they were going to just have less amenities.
Tom Karadza: I thought they were just going to pull back on all of that as a marketing feature.
Andrew LaFleur: Yeah, no. And the reason why is minimum wage.
Nick Karadza: Oh my gosh, you’re right.
Andrew LaFleur: The minimum wage increase is having a huge impact.
Nick Karadza: Oh wow, so to maintain everything in the building-
Andrew LaFleur: Most of the fees is two things: utility costs and labor costs. That’s most of a condominium fee that you’re paying, is utility costs and labor costs. As we all know, utility costs have soared. Thank you Kathleen Wynne, and-
Tom Karadza: …We’re seven minutes in. It took him a whole seven minutes to get there. Okay, we’re there.
Andrew LaFleur: We’re there. Let’s bust it out. Gloves are off.
Tom Karadza: On that note, my mother and law’s condo here in Oakville, and instead of raising condo fees to pay for the guy at the front door … What do you call that guy at the front door who’s like the security?
Andrew LaFleur: Concierge.
Tom Karadza: Concierge, thank you. That was a really complicated thing that I should know.
Andrew LaFleur: It’s a technical term.
Tom Karadza: It’s a technical term, you know?
Andrew LaFleur: It’s okay.
Tom Karadza: I didn’t get that in university, so I’m learning that on the streets here. The concierge, instead of paying him … they had the budget. Minimum wage went up obviously, I guess they were paying him minimum wage, I don’t know. They just cut his days down. So, they didn’t increase the labor.
Nick Karadza: So now there’s not someone there all the time?
Tom Karadza: There used to be, I believe, four or five days out the week someone was there. Now it’s three days.
Andrew LaFleur: Right. Or, if it’s 24 hours a day, some cut it back to 16 hours or 8 hours.
Tom Karadza: Exactly. And for her, that’s a pretty big deal. I mean that’s a nice feature, an older lady to have the concierge there at the front door when she’s coming and going.
Nick Karadza: Yeah, to give her a hand with stuff if she needs it and stuff.
Tom Karadza: Absolutely, you know?
Nick Karadza: Yeah, for sure.
Tom Karadza: And, I don’t think that’s discussed, these minimum wage changes, the impact some of-
Andrew LaFleur: It’s huge. And again, we’re only three months into this minimum wage thing, so everybody’s still figuring it out. It’s going to be more and more stories like this. But, that’s just one story from our industry and our sector, is how minimum wage is effecting condo rates. One of my units, the condo fees have been pretty much flat, give or take inflation, for four or five years. All of a sudden, last two weeks ago I get a notice they’re going up 8%, just like that.
Nick Karadza: That’s interesting, I never thought about that.
Andrew LaFleur: One of my clients purchased a brand new condo and is moving in now, and the fees were … the developer sets the fees three, four years ago when they start construction. They do the budgets and they estimate the costs of running the building. And now, right at the moment that the building is being finished, they’re sending a notice to all the purchasers and saying, “Because of the minimum wage, and because of some taxes, and regulations, and levies, and things from the city of Toronto, we can’t afford to run the building at the cost that we thought it was going to be. And so, your maintenance fees are going up.” I think in that case, it was around 10%.
Nick Karadza: I’m not opposed to, on this topic for a second, I’m not completely opposed to having a living wage, getting people better wages. That’s all fine. For me, it’s the positioning of it when they announce it from the government. It’s like, “Hey, we’re doing these things because these greedy other people, and these poor people are being taken advantage of, and here. I’m the hero by doing this,” and not explaining to people, look, at the end of the day, where’s the money going to come from? It’s not like the government just borrows money endlessly, and they just keep taxing up to pay up for all that debt. But at the end of the day, the money is going to come from some place, and it ends up coming from our pockets. So, as long as everyone’s on board, so the people that are championing?
Tom Karadza: Championing?
Nick Karadza: I don’t think that’s a word, but …
Tom Karadza: You’re good.
Nick Karadza: The champions of the cause realize that it’s going to come up from all our pockets, and it’s not just this mystical money that appears from somewhere, then it’s fine with me. I just think that’s not the norm.
Tom Karadza: Yeah, you need a leader who sees the big picture, because when you’re the recipient of any of these benefits, it all sounds good. When I was paying day care for my two kids, Carol and I, and it was costing us, I think $1300 a month. Don’t quote me on that, something like that, that was equivalent at that time to our mortgage payment. And, if someone stepped in and said, like the Ontario liberals have just said, I think they’re campaigning on this, right? It’s going to be free day care, and I was the benefit of it. You know what, my life is so busy, and I hear that-
Andrew LaFleur: You’ll vote for that, sure.
Tom Karadza: Yeah, I’m the benefit of it. But now that I’m kind of maybe a little bit older, a little bit wiser, a big picture-
Andrew LaFleur: Paying a little bit higher taxes.
Tom Karadza: Paying a little bit more in taxes, a little bit more absolute dollars going out the door in taxes, and I see the big picture. Now, I kind of can make a different judgment on that kind of thing, and I know there’s no free lunch. So, when someone is telling me something is free-
Nick Karadza: Yeah. If they gave a plan on how they’re going to do it.
Tom Karadza: Yeah, and you know what? I’ll just say something. I just … my lease expired. I’m leasing a new BMW X5.
Nick Karadza: Well, that’s why you have no complaints about the day care.
Tom Karadza: Yeah, well I got green plates on it. The only reason I got it was for the green plates, so that I could drive in the HOV lane. That’s the only reason I got it.
Nick Karadza: I told you the sales rep told me that’s-
Andrew LaFleur: That’s a hybrid?
Tom Karadza: Yeah, it’s a hybrid. Plug in hybrid.
Andrew LaFleur: Plug in hybrid.
Tom Karadza: The sales rep told me that’s the number one reason people will get them, is to drive in the HOV lanes. Which, I don’t blame them. But, the Ontario government has this massive rebate that I barely knew about, that is going to give me thousands of dollars. It’s in between seven and eight thousand depending on why you buy the car and this and that, back to me for that car on a 39-month lease. I don’t understand why the Ontario government … So, I’m going to be the beneficiary of that. I have no concept on why the Ontario government will be paying that on a 39-month lease.
Andrew LaFleur: On a luxury car.
Tom Karadza: On a luxury car.
Nick Karadza: Take those funds and put them else where right?
Tom Karadza: And yeah, I guess I’m talking out of both sides of my mouth here, because an I going to take it? Yeah, it’s there, I’m going to take it. But, I feel like a leader needs to have this picture for all of us, and explain, “Hey look, we’re going to do these things with this in mind. Here’s who’s gonna benefit from it. Here’s how we’re going to suffer a little bit, because our preventive deficit’s going to go up. It’s going to cost the Provence a little bit more to borrow money,” or whatever. I just don’t see those big picture think about-
Nick Karadza: To me, it’s just being open about it. So, if we bring it back to condos, and what’s happened in the condo market, when they brought in the rent controls last year, it was like, “Hey look, I’m riding to the rescue again. Here I am on my big white horse, and I’m riding and saving everyone.” But I mean, the reality is that, there’ve been a number of developments now that were supposed to be purpose built rentals. And they have come out, and they are not going to be-
Andrew LaFleur: Last week, another one. Quietly, nobody even knows about this. It’s not in the media at all.
Nick Karadza: Is that the one that went for sale last week?
Andrew LaFleur: Yeah, there’s one that went for sale. I won’t mention the name because I don’t want to make the developer freak out or anything. But yeah, major downtown condo launched in the past week or so, with about 450 units. It was supposed to be a rental building, and now it’s a condo building.
Nick Karadza: So, walk everyone through the thinking from the developer’s point of view, for those people who don’t know, aren’t familiar with the rent control. So, where’s the developer coming from when they make that decision?
Andrew LaFleur: The developer’s saying, if I can’t increase my rents to offset my increase in costs, then why am I doing this? It’s too risky. So, the developer’s saying, I’m going to get out of the rental apartment game, and just do what I’m used to, which is just selling condos, which is a lower risk. I can just cash out, take the money now, and keep going. As opposed to locking myself into this potential albatross of increasing costs that I can only increase rents by 1.8% a year, whatever ridiculous number.
Nick Karadza: And it goes back to what you were saying, they’re limiting what they can do as far as increasing rents. But then with their energy policies and they’re labor costs, they’re forcing these other costs to increase, so then … you’ve got to be fair on all sides. So, if you’re going to do that, that’s fine, but then you’ve got to be fair on the other side and let people offset the costs, right?
Andrew LaFleur: Right. If they had have said, “Okay, everyone in Ontario, especially all you condominium owners, we’re going to raise minimum wage. Oh and by the way, everyone’s condo fees in the entire Provence are probably going to go up 5-10% because of it,” people would have a very different reaction right?
Nick Karadza: Totally. It’s funny, but that lack of inventory is going to create … for the condo market, it’s going to be not bad. But for the rental market, it’s going to impact them in a great way.
Tom Karadza: I want to break this down a little bit. So, these developers were going to build purpose built rental buildings on their own.
Andrew LaFleur: The buildings are already under construction. It’s been under construction for a couple of years at this point. So, they just flipped the switch. I don’t know when it happened, but they flipped the switch very recently and said, “Okay. This was going to be a rental building, it’s all financed as a rental building. It’s good to go, it’s under construction.” And at some point, they said, “No, we’re going to do condos.” So, they went to their investors, or their investors came to them the developer, and said, “This doesn’t make sense anymore. We don’t want to do this rental thing. Can you just sell these things off as condos, and we’ll just cash out.”
Tom Karadza: Take our money now, ’cause it’s going to take too long, and like you said too much risk with that.
Nick Karadza: And in today’s market, I guess the demands been strong, and you would know that for those types of units.
Andrew LaFleur: Yeah, so it’s very easy to sell condos. Yeah, so let’s do that.
Tom Karadza: So the developer, just for a bigger perspective here, the developer on their own, saw an opportunity to build purpose build rentals, and because there was a lack of housing for … lack of rental offerings in Toronto, is that why they’re coming to market?
Andrew LaFleur: Yeah. I mean the rental market is like you said, five hundred square feet, 2200 a month. The rental market, especially downtown Toronto, is very strong. It’s vacancy rate is zero.
Tom Karadza: So, they see this opportunity. They say they’re going to build more rental housing, which is a provincial government would like, but they’re going to charge fair market rent, whatever the market can sustain, correct?
Andrew LaFleur: Yeah.
Tom Karadza: And then the province comes in and says …
Andrew LaFleur: You can charge fair market rent day one, but after day one, you’re at 1.8% or whatever.
Tom Karadza: Yeah, you’re going to be capped at whatever the rent controls are.
Andrew LaFleur: Yeah, so just to catch everybody up to speed, they got rid of rent control, and they introduced a rule in 1998, that said any building built after 1991 in Ontario is not subject to rent control. So after the term of your tenant’s lease had expired you increase the rent by any amount you wish. The funny thing is, I work with investors in the condo market. So basically, all condominiums were not subject to rent control, so you could increase rents by whatever you wanted up until around this time last year. The funny thing is, probably 80% of investors who owned condos, didn’t even know that was true. They just assumed that rent control applied to them as well to all properties.
Tom Karadza: I never thought about that. We knew that that was the case-
Nick Karadza: Most of the investors we worked with didn’t know.
Tom Karadza: So, there was kind of an artificial cap on rents anyway.
Andrew LaFleur: Yeah. I would tell investors this all the time. One of the great advantages of investing in condos, is you can raise the rents by whatever you want. If the market goes up, you can go up with it at any time. And people were like, “Really?” That was a major best kept secret kind of thing for condos. So, people were not doing this.
Nick Karadza: It just takes a couple of those bad stories, and then from the political point of view-
Andrew LaFleur: It was some not too smart landlord increased the rent, doubled the rent on a CBC journalist, and that’s where the whole thing fell apart. It was one journalist rent doubled, and now the entire province of Ontario, how many millions of people are … the economic impact of this.
Nick Karadza: 12, 13 million in Ontario or something like that.
Andrew LaFleur: The economic impact of this literally from one journalist blowing the whistle or whatever you want to call it.
Tom Karadza: And the economic impact today. What about the next 10 years?
Andrew LaFleur: It’s forever. You’re not going to get rid of rent control. I hate to say it, but they’re not getting rid of it.
Tom Karadza: Who’s the politician that’s going to peel that back.
Andrew LaFleur: It’s not going to happen. They might … hopefully they can adjust it. Hopefully they can say, “Okay, we understand that cost often go up much higher than inflation, so we’re going to have some kind of inflation plus 2%,” or “As long as you can show that your costs went up and prove it, then you can increase your rents to …” something like that. But this whole, only can go up by 1.8%, well at the same time we’re waging minimum wage, and we’re raising energy costs, and we’re … free day care.
Nick Karadza: And we’re paying for Tom’s BMW.
Tom Karadza: Apparently, everyone is contributing to my BMW. So, thank you for anyone out there paying taxes, I really appreciate it.
Andrew LaFleur: It creates this rent control. It’s been proven across the world that it doesn’t work. It’s not like this is just a few of us real estate investors in Ontario who are rallying against it because we’re greedy. It’s a proven concept across the world. Wherever rent control goes in, it completely destroys the market.
Tom Karadza: Well, when you see developers backing out of building purpose built rental properties, it’s accomplishing exactly the opposite of what the government wants.
Nick Karadza: Opposite, yeah, after they’re under construction.
Andrew LaFleur: Exact opposite.
Tom Karadza: It makes no sense. So, anyone listening who isn’t active in the condo market, are families buying? Is it a young couple with a kid buying a condo? Two kids, or by the time they get to two kids, are they moving out?
Nick Karadza: Yeah, ’cause I heard that some of the developers are starting to build larger units as well, to accommodate small families instead of the single guy or the young couple.
Andrew LaFleur: Yeah. In the retail market, the two bedroom units are possibly the hottest segment of the market, which is a new thing we’ve seen in the past year. So, you’re getting multiple offers and way over asking in two bedroom units. Asking 600, selling for 700, asking 800, selling for 950, stuff like that. More and more families are definitely going into condos. But again, it’s more just because that’s all you can afford when your average detach house in Toronto I think is still, it’s come down a bit, but I think it’s still like 1.3. If you can get a condo for 700 thousand-
Tom Karadza: That’s a deal.
Andrew LaFleur: …So the new starter home is the two bedroom condo if you will. If you’re in the core of Toronto.
Tom Karadza: Because in the past, you were seeing the demand was on the one bedroom, bachelors, not the two bedroom.
Andrew LaFleur: The two-bedroom market was lagging, and I’ve been doing this for 10 years, so up until the last 18 months or so, I would generally always tell my investors, “Stick to the smallest units. Stick to the one bedrooms, the studios, one bedrooms plus dens, maybe.” But really, it was stick to the small stuff, and that’s where you’re always going to do well. You’re going to get the best rents, you’re going to get the best cash flow, you’re going to get the best appreciation. The two bedrooms were seen as riskier. You might not be able to rent that out. It might take you longer, it might not appreciate as well. But again, over the last 18 months or so, we’re seeing a major flip on that.
Part of it too, is just supply. So, a lot of small units were built over the last five years, and not very any developers put all the product towards the small stuff, and not too many two bedrooms were built. So, there’s been a shortage of two bedroom units. And so now, we’re seeing that play out in the resale market where two bedrooms are all selling over asking, because we haven’t built enough of them in the past few years.
Tom Karadza: Its’ interesting, because when you look at it, just to your point about the average price of a single family home, if Toronto’s over a million, take 416 and 915 Toronto, and say it’s over a million. Then, if you go drive to the west side of the city … I know we have east prices too, but I’m going to use the west. If you go to Mississauga, which is going to be about a million, then you hit Oakville and it’s going to be about a million dollars for a single family home, then you hit Burlington and it’s going to be about a single family home, and then you hit Hamilton Ontario, and it’s going to be about 550. These are where these communities are really starting to see demand from people that they never saw interest in before, which is really fascinating to watch.
Someone on our team, I think it was Mike on our team, was up in Guelph, and this was a few weeks ago now. One of the real estate agents up there was saying … he was putting an offer on a property, and they said, “Well you know, we’re actually getting 10 offers,” and Mike just casually asked where these people were coming from. And she said, “You’re not going to believe it, but it’s all Toronto people putting offers in Guelph Ontario.
Andrew LaFleur: Is this like a multi family?
Tom Karadza: No, a single family home, for them to live as their family home. Coming from Toronto, looking to buy a home in Guelph Ontario, and this lady is a real estate agent up there in Guelph for 10, 15 years or whatever, and had never seen anything like this. But, people are just going to where they can afford to live. To Andrew’s point, then the commute if you’re working in Toronto, how do you go from Guelph Ontario to Toronto in any reasonable way? You don’t, so you’re looking for some other job. It’s crazy. The dynamics of all this is just fascinating.
Nick Karadza: The other trend we’re seeing is even in the suburbs, you’re seeing smaller units being built as well.
Andrew LaFleur: Yeah, and you’re seeing the four story town homes.
Nick Karadza: Yeah, the stacked towns.
Andrew LaFleur: Those are a tough build as well.
Tom Karadza: Long term, it’ll be interesting to see what happens. That’s happening all over Oakville here, north of Dundas, right against Dundas.
Nick Karadza: I don’t know if we’ve shared this or not. So Milton’s getting his first condo, which is like, even out there, they’re going higher density. So, it’s been approved, and I think it’s going for sale shortly. The Oakville numbers are … Oakville right now is low 60% detached homes. From now until 2014 with the new plan development, the percentage of detached homes is going to be … I believe it’s down to low 20s. And then, things like condo buildings, stacked towns and that type of stuff, are going to jump. Town homes themselves, what they consider town homes, I don’t know if it’s condo town homes or if they’re just considering them … whatever, it’s going up a little bit, but the large majority of the difference is going to be made up from things which they’re calling high rise living, or high rise apartments, that type of stuff.
So, the density in all these different surrounding areas is increasing for the same reason. So, the same trends that happen in Toronto, the other areas are just a little bit further behind.
Andrew LaFleur: Yeah, that’s a great point for investors out there listening. Where is the future of, ’cause you guys deal all across the Golden Horseshoe. Look what happened in Toronto over the last 15 years, and you’re going to see the same thing playing out in Hamilton, in Kitchener, in… wherever these centers are, even in the smaller centers like a Guelph, you’re going to see the same trends play out. So, it’s interesting.
Tom Karadza: It’s like we can use Toronto as a forecasting tool. That’s great, we can just tell Andrew, “Hey Andrew, what are you seeing?” We can take advantage of his knowledge selfishly for ourselves.
Nick Karadza: Well you know what? Just like business trends, we often go down to different conferences in the US, and you see what other business owners are doing down there, and then you see in some local businesses, it’s very rarely seen. Whereas down there, it’s the norm. We’ve often laughed … I mean, how may times did we joke when we go to California that you can basically just go to California, see what the latest trend is, and then start the business back here, if you’re quick to market.
Tom Karadza: Whether it’s clothing, food, whatever it is.
Nick Karadza: Some sort of nutritional, fitness thing. They’re all about that type of stuff, and you just see what’s working there. You bring it back, and there’s your opportunity.
Andrew LaFleur: Yeah, and a lot of people in those local markets, they don’t believe in their hometown as much as people outside their hometown sort of believe in it. You guys probably see this all the time, ’cause you work with investors in the GTA that are investing all over Ontario and stuff, right?
Nick Karadza: Everywhere.
Andrew LaFleur: So, it’s like the locals are like, “Who are these guys coming from Toronto, buying this property?” It doesn’t make any sense.
Tom Karadza: We often see people living in Milton, saying “I heard Durham is the place to invest.” So they’re going from Milton to Durham, instead of going in a community right next to them. Yeah, it’s the forest for the trees kind of thing. But, I think all of us in Toronto as a whole, even Toronto proper, and all of us around the that whole golden horseshoe suffer a little bit around that, especially if you’re born here. You don’t realize what kind of destination place Toronto is. I constantly challenge-
Andrew LaFleur: And the growth. You guys talk about it all the time, but people don’t understand it, they take it for granted. They don’t understand it’s not normal, if you look at North America, it’s not normal for a region to grow by 100,000 people a year. We are extremely abnormal in that sense.
Nick Karadza: Just from immigration. I know what birth rates are and how that plays into it as well, but you’re absolutely right.
Tom Karadza: And, that’s where I can have some sympathy for the provincial government where they are forcing communities like Oakville to do more dense housing. That’s where these four story towns are coming from and that kind of stuff, because the provincial government is saying to places like Oakville, “Hey, you can’t all just have single family homes all over this place. How are we going to do the infrastructure on this thing?” So, I can kind of see where it’s coming from. It’s just the implementation of some of this stuff is a little scare.
Andrew LaFleur: Right. It’s kind of like, from a provincial policy standpoint, we are the leaders. We don’t have another model to follow. It’s not like we can say, “Oh, well what’s Chicago doing? What’s Atlanta doing?” They’re not doing anything, ’cause they’re barely growing. They’re growing a little bit, but if you look at the GTA’s growing.
Nick Karadza: If you’ve driven around the GTA on the QEW or the 401 at two o’clock in the afternoon five years ago compared to today, do you remember when rush hour traffic used to be from 4pm to 6pm? Growing up, that’s what I learned rush hour was. Rush hour traffic now starts at 1:30. It’s crazy.
Tom Karadza: At 2:30, it’s already bumper to bumper on the QEW going.
Nick Karadza: Yeah, so it’s very easy to see just with your own eyes the density of people has changed.
Andrew LaFleur: Yeah. Again, you guys know this because you do tons of work out in Hamilton, Niagara, this part of the world. But for me, a couple of years ago, an eye opening moment for me was I had to catch a flight out of Niagara Falls, or Buffalo or something. I ended up driving for whatever reason, during the rush hour time, from Toronto to Niagara Falls. That was a major eye opening moment for me, because it was like bumper to bumper from Toronto to Grimsby. And I was like, “What is going on?” Because in my head, I was like, “Okay, once I get past Mississauga, I’m good.” I’m thinking that’s what somebody told me in 1998 or something. You’re good, and I’m like, it’s bumper to bumper. It wasn’t bad weather, there’s not accidents or anything.
Tom Karadza: Yeah, just pure traffic.
Andrew LaFleur: Yeah, and it kind of inspired … I recorded a podcast right after that as well, ’cause this is a very interesting thing, what’s happening here. Clearly people are commuting here to Toronto from as far away as Grimsby or beyond. So, if that’s happening today and we’re adding another million people to this region in the next 10 years …
Nick Karadza: And, the increased frequency of the gold train, which is planned. The infrastructure’s in place, they’ve just got to increase the train. So, I think the chances of it happening are pretty good. I always question any public transit announcements, because they’re going to finish the project 10 years down the road. I’m like, this is a 25% chance of actually happening. Once that happens, there’ll likely be more growth. Wherever that happens, I’m not talking about west GTA, wherever that happens and stuff, there’s just going to likely be more growth. Again, back to the affordability issues, right?
Andrew LaFleur: Yep.
Tom Karadza: Where do you see the Toronto condo market going in the next 10 years? Are we reaching capacity in the land available to build on in the downtown core?
Nick Karadza: You mush have seen that announcement, right? Because recently the city of Toronto came out and put hold on one project, or recommended holding off on it on Yonge and Eglinton. It was in the star, because they said the sewer and water infrastructure, they were concerned didn’t have enough capacity for two more high rises.
Andrew LaFleur: Right. I’m not sure the specific one, but yeah, I mean infrastructure, sewage, all that stuff, water, it’s definitely a major issue. But in terms of where do I see things going? I only see it intensifying even more. But, the cost of building is getting higher and higher. As the city becomes more dense, just the sheer construction costs of building. You’re not building any more on just empty parking lots with nothing beneath them, where you just rip out the asphalt and dirt, and you’re good to go. The sights are becoming more and more challenging for developers to build on. You’re wrapping around the buildings, you’re going in back corners and it’s a weird shape. There’s shutting down one lane of the street for all your construction equipment and stuff, and the city’s charging you astronomical fees for things like that. There’s a lot of inflationary pressures on pricing.
I chatted with Brad Lamb recently, and he was breaking down, if you’re a developer and you’re buying a prime site in downtown Toronto today to build a high ride condominium on it, you’re looking at – he broke down the costs – you’re looking at about $1000 per square foot, is just your cost to build. When you include the land and all the bits and pieces, you’re at about $1000 a square foot. So, you have to charge about $1,200 a square foot just to have a healthy enough margin to get financing from a bank, to allow you to build it. So, $1,200 dollars a square foot is the floor right now for prime downtown Toronto, new projects moving forward. City of Toronto announcing in the past few weeks that they’re basically doubling development levies as well. Again, that’s more added costs to building these things.
Nick Karadza: so when you do the math on a 500 square foot unit at $1,200 dollars, that’s $600,000, right?
Andrew LaFleur: Yep.
Nick Karadza: Wow. That’s a big shift. I remember going downtown when City Place first started being built, because I remember walking by, looking at the big holes in the ground.
Andrew LaFleur: Remember the golf course?
Nick Karadza: That’s right, I did forget about the golf course.
Andrew LaFleur: There was a golf course for a while. There was a golf course in downtown Toronto 20 years ago.
Nick Karadza: I had friends that were living there and used to go-
Tom Karadza: I didn’t understand why people started living there. I’m like, “Why are you living here?” I have to admit, I was late to figuring that out. I’m like, “I don’t understand. What are you doing here.”
Nick Karadza: At that time when we were investing, I didn’t-
Andrew LaFleur: Guys, there’s detached houses over here in Oakville. They’re like 200,000.
Tom Karadza: Yeah, at that time we were like, “On Hamilton, you can buy this thing for $195,000.
Nick Karadza: Because at that time, we didn’t understand the economic trends and the population trends. We didn’t understand to look at all those different factors, so we just really didn’t have the information available to make what we felt was an educated decision. We never looked into it, and knowing the pieces of information that we have now, if I saw the data set, ’cause I look back now at the same data set we look at now for certain things, and I look back at kind of what it was then, and I was like, “Holy cow, I really missed the boat on that one,” because of where all the numbers were, it was screaming like this was a real possibility.
Andrew LaFleur: Yeah. To give an idea, I think the first building, this was before my time, but the first building in City Place I believe were selling around 2002-ish, and I think they were around just under $200 a square foot.
Nick Karadza: Yeah, we don’t really need to talk about that with anyone.
Tom Karadza: That’s very insulting.
Andrew LaFleur: And now it’s 1200. City Place, they just released their last buildings a few months ago, 1200, 13000 a square foot, across the street from the ones that were 200 bucks a square foot.
Tom Karadza: And to your point, there’s been no precedent for this, so that’s part of the reason why we couldn’t figure this out. There’s been no city kind of like this. I mean, New York kind of had their build up moment how many years ago, so we couldn’t really use that as a very good template. So, we had no template to say, “Oh my gosh, look at all this immigration. Look what’s happening to this city,” and to use Toronto Andrew, to your point earlier, is kind of setting the bar now on how a city builds out.
Andrew LaFleur: In the western world. Because in Asia and stuff, this is very common, but it’s completely … you can’t compare. You can pay people six bucks an hour in Asia, and they don’t have a million rules and building code things, and all this red tape.
Tom Karadza: And I think the toughest thing for an investor to get over right now, especially if you’ve been in the market for five years, or you were one of the early City Place buyers and you want to expand your portfolio, you can’t get over where the prices are today. Where we challenge everyone is, map out the next 10 years. I don’t see immigration stopping in Canada. I don’t see us not being a continued good destination.
Andrew LaFleur: Well, they just announced it’s going to increase. That’s another big thing, everybody’s got to wake up. People are ringing their hands like it’s so expensive. What’s going on? If you just take one factor of immigration alone, and how much they’re going to increase it.
Nick Karadza: But in 2002, people were ringing their hands thinking that it was so expensive, too. The hard thing, and it’s hard because it’s emotional, but you have to have the foresight to have to hindsight. You’ve got to be able to-
Andrew LaFleur: Wait, say that again. I’ve got to write that down.
Nick Karadza: You’ve got to be able to look forward, right? And it’s tough because everything to me seems expensive now. And to be clear, we’ll say this all the time because I don’t want people to misinterpret what we’re all saying, is it’s not going to be a straight line. There will be fluctuations in the market. It’s not going to be … but if you look at those trends. I’m curious of what you think about this. What do you think about what people will call the Manhattanization of Toronto? So, what we mean by that for everyone, I know you understand this, is that the green belt wraps around Toronto on the north side, on the south side is the lake. We already have development on the east and west. So, a lot of people look like, “Look, there’s limited places you can develop because of this greenbelt stuff.” I don’t know in your world and the developers you’ve spoken with and stuff like that. What are your thoughts on that?
Andrew LaFleur: I mean, I think it’s a real thing. The problem is, people when they hear that, they think we are Manhattan, or we’re the same as Manhattan. We’re not, but the same forces apply. Like you said, the greenbelt and the lake, but I think the bigger thing is just he policy, like you said. Developers if they could, they would just keep building single family homes. They’re very cheap and easy to build.
Nick Karadza: Sure, cookie cutter.
Andrew LaFleur: They’re very easy to sell, but it’s more so like you said, the mandates from the provinces saying, “We don’t want you to do that anymore.” They’re kind of slowly more and more getting rid of detached housing, and forcing developers to build up, and forcing them to build four story town homes. We’ll probably see a five story town home eventually, believe it or not. Some kind of elevator technology that hasn’t been invented yet.
Tom Karadza: There are some town homes here in Oakville with elevators, but they’re just really expensive town homes with elevators.
Nick Karadza: It’s an expensive, unnecessary toy.
Andrew LaFleur: Yeah, but I mean, it’s happening. It’s real. We busted through the $1000 a square foot. That was always, condos in New York are a $1000 a square foot, that was when I was starting. $1000 per square foot was this mythical number that we could never actually achieve. But it was just out there as cities like New York had that number, and we just went from $800 a square foot, to $1200 a square foot in a blink of an eye it seems.
Tom Karadza: Do you see any of the Toronto developers, I know Brad Lamb is doing one in Hamilton, anyone doing condos? Are you seeing some of them start to spread out a little bit, or still concentrated mostly in Toronto?
Andrew LaFleur: Big time. I think that’s another major trend that’s coming. Definitely a big part of what I’m doing right now is doing my due diligence on other markets such as Hamilton, such as Kitchener, because like we talked about. The trend that we saw in downtown Toronto, I think, is going to replicate itself over the next decade in cities like that. So yeah, talk about Hamilton specifically, big developers from Toronto are very actively looking at sites in Hamilton right now. They’re quietly picking up sites in Hamilton under the radar, and sort of land banking those and getting them ready for coming to the market in the next couple of years. Have you guys heard of the Pier 8 thing in Hamilton?
Nick Karadza: Is that the waterfront project?
Andrew LaFleur: Waterfront Hamilton.
Nick Karadza: Yeah, I have. I don’t know much about it though.
Andrew LaFleur: It’s a major piece of the waterfront. They’re going to do a revitalization, so they’re talking about-
Tom Karadza: I feel like they’ve been doing that in Hamilton forever, but yes, tell us about this.
Andrew LaFleur: Yeah, they’re getting closer there. They’ve gotten a shortlist of developers. There’s four or five of them who are on the shortlist who are potentially going to get the rights to build this thing. We’re talking around 10, 11 condo buildings, around 1600 units or so, so kind of a low rise mid rise type of community, but like a small city really.
Tom Karadza: Yeah, so hundreds of millions. We’re talking a mega project here.
Andrew LaFleur: It’s gotta be over a billion of investment. What’s most interesting to me is all the people on the shortlist are major Toronto developers. Big brand names like Tridel, Great Golf, Daniel’s, the big boys of Toronto … there’s no Hamilton developer, there’s no … it’s all the big boys of Toronto.
Tom Karadza: Well, they probably see more of a margin, more opportunity, and they might see less red tape. There might even be some incentives to … and I don’t know what’s going on, to get it going.
Andrew LaFleur: I think it’s that, but it’s also where we are in the market cycle, where the market maturity of Hamilton has got to that point. Another interesting point about Hamilton is, you guys know Skyline REIT?
Tom Karadza: Yep.
Andrew LaFleur: You’ve heard of Skyline REIT, I don’t know who they are, I just know they’re this big reet. They buy apartment buildings in that right. So about six months ago, they sold off their whole Hamilton Portfolio. I don’t know if you caught that.
Tom Karadza: No, I didn’t catch that. We had them at one of our events a few years ago, but I didn’t catch that.
Andrew LaFleur: 200 million, and why did they sell if off? They say because they focus on B markets, and Hamilton is not one anymore.
Tom Karadza: Oh wow.
Andrew LaFleur: Very interesting. So, they’re taking their money out of Hamilton, and putting it in smaller, less mature markets, because they feel like Hamilton has…
Tom Karadza: It’s peaked out on what they’re specifically doing. I kind of feel happy for Hamilton. I’m not from Hamilton. I kind of feel like Hamilton’s been kicked around a lot. This is good news for Hamilton.
Andrew LaFleur: That’s great news for Hamilton, and Hamilton’s an amazing city.
Tom Karadza: Yeah, especially if you’re from Toronto and you’ve never been up there, because remember when we first went up there?
Nick Karadza: Yeah, you’re right. But, a lot of people from Toronto, they drive along QEW, and they see when they cross the bridge, all they see-
Andrew LaFleur: Smoke stacks.
Tom Karadza: Yeah, smoke stacks.
Nick Karadza: And I can see why you would be like, “I’m never living there-”
Tom Karadza: My son’s like, “Why is that thing on fire over there?”
Nick Karadza: Well it reminds me of, do you know Lord of the rings? …Yeah, that’s what it reminds me of, yeah.
Tom Karadza: They should get massive billboards and just try to cover that up. 500 ft high, put the magic kingdom on their like Disney World images or something, and just try to hide that whole scene from everyone driving from Toronto.
Nick Karadza: Listen, when I started investing, the very first student property I bought was theirs, one of my early properties. When I was going out there, the guy that I bought it with, we were doing a lot of renovations, we were going out there every week. Grew up on the east side of Mississauga. So, from there, my friends were like, “Why are you going to Hamilton? What is in Hamilton that you’re going to there?”
Andrew LaFleur: Something was wrong with you.
Nick Karadza: Yeah, and to me I was like, I don’t know. We bought this place for really cheap, I’m going to be able to rent it out for a lot, so that’s all I understood.
Tom Karadza: But when we started doing the student rental stuff out there, we kind of accepted Hamilton for the McMaster student rental element. But then when we started doing regular rentals, and at one point Andrew, Nick and I were talking to each other and we thought, “Oh my gosh, we can’t really find anything around Mississauga, Oakville. We’ve got to try to go out.” And one day, Nick said “Okay, I’ll go to Burlington. There’s this place called Burlington,” which we had never really explored.
Andrew LaFleur: It’s farms.
Tom Karadza: Yeah, I’ll check out Burlington, and I said, “Okay, I’ll check out this thing called the Hamilton Mountain.” I go, “Nick, is there a … is that that thing behind the student rentals that we see, it’s like a little escarpment,” and yeah that’s the mountain. I said, “Okay, I’ll go out there.” And, I remember calling Nick, remember?
Andrew LaFleur: Yeah,
Tom Karadza: -about half an hour in thinking, “Oh my gosh, there’s really nice houses up here, and there’s parks, and theirs shopping malls. It’s actually a really beautiful area. But, it was kind of like an eye opener for two brothers from Mississauga. We grew up on the Mississauga border, so we always went to Toronto for rates.
Andrew LaFleur: Yeah, you always go east, you never go west.
Tom Karadza: So when we found the Hamilton mountain, it was like 30 minutes away, and it was like a wonderland of investment opportunities.
Nick Karadza: I went to school in Mississauga and college in Oakville. I literally thought that was the edge of the earth. I’m like, who would live out in Oakville, that is so far. It’s a farm country-
Andrew LaFleur: Yeah, well I grew up on the east side of the city. I grew in Whitby mostly… So for me, Hamilton is like Vancouver, it’s way west.
Nick Karadza: But, you’ve seen in on the other side, right? Because you would always go Toronto, and look at that whole strip along the 401 of what’s happened since you were a kid. I mean, it’s exploding. And not even there along the 401, what’s happening north of there, because I had someone a number of years ago, a fried that said they moved to Brooklyn. I was like, “You’re moving to Brooklyn?” And they said, “No, Brooklyn Ontario.” There’s a Brooklyn Ontario? I had no idea. But now, with the 407 extension and it was happening before that, but just if you seen what’s happening north of that stretch on the 401, north of the Pickering and stuff like that, all those areas are growing too. Because, they’re turning into on the east side of the city, they were the bedroom communities…
Tom Karadza: -Started exploding in population for years. Same thing out there. We know investors who were buying out there, and now they’re going to Peter Borrow.
Andrew LaFleur: What’s different though, what makes Hamilton unique, is its own city. It is a real city, it has its own economy, it has a history of bones. That’s why the artists and the chefs, and the cool kids are going from Toronto to Hamilton.
Tom Karadza: And that’ll be interesting to your development project that you were just discussing. When you bring that much new housing right into a Hamilton core like that, it’ll be interesting to see over the next few years, the economic impact of that in Hamilton, because it does have the infrastructure of a city. So, what’s going to happen? Hamilton’s likely going to get even more jobs. You’re going to have more people, more jobs out there. Now, you’re going to see people living in St. Catherine’s, commuting to Hamilton, which is because of affordability, right? We’re already seeing that today, but that’s going to be like a norm, where someone’s living in Niagara, commuting to Hamilton.
Andrew LaFleur: Yeah, well I just look at … I zoom out on Ontario, and I look at the go train map and the future expansion of the go train down to Niagara, and I make a very quick observation that Hamilton is now the center of the line. Hamilton used to be the end of the line, soon it will be the center of the line.
Nick Karadza: I never looked at it that way.
Tom Karadza: That’s a good way to look at it, yeah.
Andrew LaFleur: So, people can come from two different directions into Hamilton. It makes perfect sense for that downtown court to benefit.
Tom Karadza: And when you think of it that way too, even if you look at Kitchener, Cambridge, and Waterloo…
Nick Karadza: And Brantford, those three make this nice triangle, because Brantford’s got some industry as well. Waterloohas a lot, and they have another University. At one point, University of water loo spent more money on research than any University in Canada. I don’t know if that still holds true today, but it’s a very healthy university that’s doing that stuff in attraction. So, if you take the three of those, and all of them combined, it creates a little epicenter.
Andrew LaFleur: This western Ontario economy.
Tom Karadza: Do you know price per square footage on brand new … there’s not a lot of inventory in Hamilton, but do you know what stuff’s selling for in Hamilton right now?
Nick Karadza: I knew that last one, but I forget it.
Tom Karadza: Andrew.
Andrew LaFleur: It’s about half price. That’s the beauty of it, it’s half the price of Toronto. Toronto is $1200 a square foot, it’s $600 or less.
Nick Karadza: But rent’s probably not half.
Andrew LaFleur: But the rents are not have, exactly.
Nick Karadza: The rents are what, 2/3, 75% do you thing? 2/3s maybe?
Andrew LaFleur: I think from what I’ve seen, they’re about 70% roughly.
Tom Karadza: Yeah, that’s sounds right. I think that’s the opportunity. So, what we just discussed right here is the opportunity that a lot of people will miss. They’ll look at Hamilton from that area and say, “Oh, opportunity’s done,” and they won’t see the next wave of opportunity. I think you need to be very aware of an investor, that you don’t blind yourself to current opportunity based on your past bias of, “Oh my god, I’m not going to buy a condo in Hamilton for $225,000, because I used to buy a full detached house for that much.” I think people will just miss yet the next opportunity.
Andrew LaFleur: Exactly.
Tom Karadza: Alright Andrew. So, I think we covered most of our bases that I had for you here. I see my little note about Phil Kassel, and you’re going to have to start cheering for …
Nick Karadza: No, we can talk about the Raptors.
Tom Karadza: The Raptors are a big deal. Toronto sees it as a big deal.
Nick Karadza: … had a big night.
Andrew LaFleur: Can they get past LeBron.
Nick Karadza: That’s what it is. It’s not even Cleveland, it’s Lebron.
Andrew LaFleur: Can they get past LeBron, can they exercise the demon.
Nick Karadza: Because they are the real deal.
Tom Karadza: Are the Cavalier’s going to end up in fourth? Are we facing Cleveland in the second round possibly?
Nick Karadza: It looks like they still may not, but they’re about a half game behind third, so it could definitely happen.
Andrew LaFleur: I hope we get them in the conference final, I hope we don’t get them in the second round. It would be funny if they beat Cleveland in the second round, and then they lost in the third round to somebody else.
Tom Karadza: Not funny. The euphoria of beating Cleveland, and they just can’t close?
Andrew LaFleur: That might just be the success that we need just to feel good. Okay, we beat LeBron, it doesn’t matter if we lose.
Tom Karadza: Well, that guy just takes teams to the finals. You give him a half decent surrounding cast, and they’re going to the finals.
Andrew LaFleur: It’s insane. The guy has never been injured his whole life. It’s insane.
Tom Karadza: He’s build like a truck.
Nick Karadza: He is built like a truck.
Tom Karadza: If you look at his build, I would just drive to the net every single time.
Andrew LaFleur: It’s insane. I mean, when he was in high school and he was 16, he looked like he was 29 at the peak of his powers.
Nick Karadza: If he wasn’t such a crybaby, I’d definitely have more respect for him, compared to some of the other great players. To me, he just seems to wine a lot more, but maybe it’s just my bias.
Andrew LaFleur: You’re old school.
Nick Karadza: Yeah, such it up. But he gets calls, so it works. No comment on that one.
Tom Karadza: I heard some of the people in condos living in liberty village area are really pissed off right now with TFC, ’cause TFC, all the partying that goes on and stuff. I saw an article recently that they’re upset with that, and I thought the only way to solve that is for those people to move, because we need TFC to be doing what it’s doing. We needed a championship in Toronto, and they brought one.
Andrew LaFleur: Yeah, congrats. I know you guys have been fans for a long time.
Tom Karadza: I’ll never forget taking-
Andrew LaFleur: How was that?
Tom Karadza: Taking my son to-
Andrew LaFleur: Were you at … was it in Toronto, the game?
Tom Karadza: It was here.
Nick Karadza: It was, yeah. And they lost in Toronto the year before.
Tom Karadza: Were we there?
Nick Karadza: Of course we were there. We live and die. It was a lot of fun.
Andrew LaFleur: Did you weep tears of joy?
Nick Karadza: We hung out there for a long time afterwards, because we’re like, we don’t know if Toronto will ever see another Championship, so we have to take every last moment.
Tom Karadza: Literally shaking my 15-year-old son, “This is history, you’re watching history. You might be telling your children about this day.”
Nick Karadza: So, it’s been a long time for Toronto to see something like that.
Tom Karadza: It was a great game, and now-
Andrew LaFleur: 93 J’s.
Tom Karadza: Yeah, that was pretty epic.
Nick Karadza: That was fun, I remember when they won.
Tom Karadza: Were you too young to remember that?
Andrew LaFleur: No, I was there.
Tom Karadza: I was at young and getting crushed by the crowds.
Nick Karadza: I went down there too, I was too young to be down there, but I went down there, and I probably shouldn’t have been because the same thing happened to me, and I was just-
Andrew LaFleur: You guys weren’t together?
Nick Karadza: No.
Andrew LaFleur: You went separately?
Nick Karadza: Yeah.
Tom Karadza: We’re five years apart. At that point, how old would I have been?
Nick Karadza: Tom, he wouldn’t hang out with me and his friends.
Tom Karadza: At the time, I was probably 20, you were 15.
Nick Karadza: Yeah, I was 15.
Tom Karadza: Different worlds. I was a really nice person. But there’s something, before we do wrap up, I want to talk just a little bit about what we’re talking about earlier. You have four, is it all four boys did you say?
Andrew LaFleur: I have four kids, a girl and three boys.
Tom Karadza: A girl and three boys. Do you know how much University is going to cost for you?
Andrew LaFleur: It’ll cost me like three condos.
Tom Karadza: Yeah, when you price it like that, you’re good. When you put it in that perspective, it’s good. They’re young, but what to do you think, ’cause my son’s turning 16 now. So, next year in grade 11, technically that’s when you start applying. What do you think you’re going to tell your children about what will they take away from college or university?
Andrew LaFleur: Yeah, we were talking about this earlier. I think the world is changing, and I think the case for going to university is starting to fall apart at the edges at least. Many factors for that, and obviously we’re biased being entrepreneurs that we are and knowing how to generate value and build businesses without needing formal education. I think the world is changing. I think you can learn just a simple point … you can learn anything on line. You can go to YouTube, and anything you want to learn about any subject in the history of the world is there, and you can learn it. So, if you have …
Tom Karadza: Well, we had Chris, my buddy on there, who’s teaching full MBA’s on a course, I forget what you buy it for, but this is a guy with a ton of experience. He’s not just talking theory, he’s run a hedge fund. He’s been in a Goldman Sachs. So, he’s been through kind of the belly of the beast, and now he’s teaching a course on what you need to know on business for a couple hundred bucks.
Andrew LaFleur: Yeah, an entire MBA for a couple hundred bucks, and it’s hours and hours of lessons, just amazing learnings from real life and business.
Tom Karadza: It’ll be interesting to see what happens at yours, ’cause I know with my son at 16, the stigma is still there. The stigma is still to go to college and university. I’m trying to disassociate for my son the value of, his ability to make money is independent from what he takes away from university. Because, I was always thought or sold the bill of goods, or I incorrectly assumed this, that you go to university and your life is set. You will know how to make money. So, I want him to know there is going to be some value, absolutely. Communication, written communication, oral, critical thinking, research. They will pull some value. I don’t know if the value he’s going to pull is going to be correlated to the cost, but there is going to be some value. But, his ability to make money is completely independent of that.
Andrew LaFleur: Well, it’s like your life, your terms. This is your whole thing. It’s like, there’s more to life than money, and for some people there’s a lot of value in just going to university, and going through that experience, and accomplishing that thing and checking off the list if that’s something that you want to do. But yeah, you’ve got to peel back the onion a bit, and ask yourself why do you … I mean, it’s hard because you’re a kid and we’re not kids anymore, we’re looking back. But, why do you want to go to university, what is it that you … why do you feel like you need to go to university? What are you passionate about?
For a lot of kids, I think they don’t know what they’re passionate about, so in that sense, maybe does help to go there and be in that world to sort of figure that part out.
Tom Karadza: I just wouldn’t want to saddle any of them with a lot of debt.
Andrew LaFleur: Well, just pay for it yourself.
Nick Karadza: You walked into that one.
Tom Karadza: This is the challenge. This is what you’ve got to figure out.
Andrew LaFleur: No, the cost is insane. 20, 30 years ago the cost versus today. I don’t even know, how much is the cost now? I graduated in 2004, and it was like, we used to say it was $10,000 a year. What is it now?
Tom Karadza: Don’t quote me on this, but tuition for some of my friends who have some kids staring to go into a university, tuition at somewhere like a western something, if they’re in a specialty program, it’s going to be in between 10 and 15 thousand, just tuition. So then, if you’re going to be in residence, you’re looking at another 10 or 15 thousand dollars. So we’re up to 30 thousand, if I’m taking 15 and 15, we’re at like 30 thousand dollars. Then, you’re going to buy some books, and then you’re going to buy maybe a laptop or something like that, so you’re 30-40, you’re in the 30-40-thousand-dollar range.
Andrew LaFleur: After tax dollars.
Tom Karadza: Yeah.
Andrew LaFleur: If you think about it, how much money do you have to earn to pay for a degree?
Nick Karadza: Yeah, if it’s 120, you got to do a quarter of a million bucks.
Tom Karadza: And that’s why we’ve been … we haven’t released this yet, but I think nick was showing, we’ve done some analysis on what is more valuable: getting a university education, or buying investment property? And, where’s that correlation. Who wins? If you go to a university, just purely on the financial. I’m not talking about the emotional stuff that you earn.
Nick Karadza: The argument was made in a vacuum, there’s all sorts of other things, but it was just to take a look at it from a different angle.
Tom Karadza: We won’t reveal the secret answer just yet.
Nick Karadza: But, I think the challenge with it to me is the cost has gone up, but I think as the cost has gone up, the value might have decreased. In the past, you would go to a university, and your opportunity to get a job and maybe a little bit of a higher paying job, was much greater than it is today. We will post an entry level position, and we will get hundreds of university grads applying for that role that isn’t even in their field. So, as costs have gone up, value has gone down, and that’s the challenge of it. When I went to … and then there’s this stigma with college, and I’m not saying college is any better. But, I just remember when I went to college, I always felt a little bit like I was one level lower because I went to college and not university.
Tom Karadza: That always carried a little bit of that pedigree, yeah.
Nick Karadza: I came out of school at that time, which was whatever, 15, 16, 17, I’m old now, 100 years ago, and I was making more that the average university grad makes today. So, there’s just no correlation with the increase of price, right?
Tom Karadza: Well, that was something else that I wanted to discuss. You were making that because you went into IT at that time, and that was a trendy market, just like the Toronto market for real estate is a trending market. You went into an industry niche that was trending. And I tell everybody this, that if you’re going to leave school now and you’re not sure what you want to do, at least go into a market inside the economy that’s trending upwards, because there’s going to be more money sloshing around, the businesses will be growing. So, within the business that you join, there will be new divisions launching, which means new opportunity for you. Don’t just go into something because you took a degree in accounting, so you’re going to have to be an accountant. Or, you took a degree in engineering, so you have to be an engineer. Look around the world, and what do you think is going to be the future. That’s something we talk about with all the automation stuff, the AI stuff coming out. Pharmaceutical stuff looks like it’ll never go away, but pick one of industries that’s going to trend, and at least go in there, ’cause you’re going to get paid more money, and you’re going to get more opportunity to advance, which in it of itself doesn’t matter, but you’ll learn more because the company’s growing.
I feel very fortunate that I stumbled into the software industry, because these companies were growing. I was making good money which allowed me to buy rental properties, but I was also able to learn a lot, because they were growing, adding people, new divisions were launching, there was opportunity, and they paid you a lot. So, don’t go into a dying industry unless it’s your absolute passion, something you love. But, if you don’t know your passion, at least go with the trends. I don’t know if that makes sense.
Andrew LaFleur: Follow the money, right? Follow the money. Same in real estate. Where to invest next, follow the money. Look where the investments are going. Follow the money. If big investments are going into pharmaceuticals or other industries, then jobs will follow.
Nick Karadza: Yeah, and like you said, there’s always more than money, but in our society today, there is a level of money that’s needed to be able to kind of…
Andrew LaFleur: What do you hope for your kids? Do you secretly hope that your kid skips university and becomes an entrepreneur, or works in the business or something like that?
Nick Karadza: That’s a good question.
Tom Karadza: I don’t have that plan, I just want him to do what is in his heart. If anything, I just want to listen to what you …
Andrew LaFleur: But it’s hard to know when you’re a kid.
Tom Karadza: Absolutely. So then, if his heart is telling him, “Dad, I think I should go down this university …” I’m going to support it. But ultimately, I want him-
Andrew LaFleur: Do you talk to him about … does he show interest in the entrepreneurial world?
Tom Karadza: Totally, because he makes me understand everything to do with sneakers, and buy sneakers for one price, and then he’ll go list them on-
Andrew LaFleur: He’s flipping sneakers?
Tom Karadza: He’s flipping sneakers.
Andrew LaFleur: That’s awesome.
Tom Karadza: So, we went to square one outside foot locker, and he was holding this box of sneakers. The first time he went to sale one, and this was a couple of years ago, so I’m not going to let him take the bus and go by himself. That’s Oakville dad speaking I guess. Anyway …
Speaker 2: No, I have friends that have had laptops stolen from them, giving fake boxes and all sorts of stuff.
Tom Karadza: So I’m like, if someone’s reaching out on Kijiji, I don’t know who this person is, so I go with him to square one, and I let him do all the things.
Andrew LaFleur: Oh, you mean to do the deal.
Tom Karadza: To do the deal.
Nick Karadza: So, he did it and you just stayed in the background.
Tom Karadza: Right, so some guy texted him, and they’d been going back and forth for a week.
Andrew LaFleur: With your arms crossed.
Tom Karadza: Totally, I’m standing behind-
Nick Karadza: Chest puffed out.
Andrew LaFleur: Just got out of cross fit.
Tom Karadza: And then he goes, “Dad, the guy just told me I have to meet him the parking garage.” I’m like, “absolutely not.” He said foot locker, we’re meeting him outside foot locker. So he text him back, this guy with a back pack shows up, and I’m like, Aiden, I’m not going to touch anything, you do the deal.” So, Aden gave him the shoes, and then he gives him some money, but he only gave him half the money. So the guy was like, “You wanted this much right?” And my son was like, “Yeah, it was that much.” He pulls out a bit more. He kind of nervously counts it. They part ways, and you can see he was shaking, but I was just so proud that he had done that kind of thing.
Now, he’s gone on to do it several times, and he’s meeting people at Dixie mall…
Andrew LaFleur: Your first deal, the first transaction, that first moment where you created some value in the universe, and you get paid for it.
Tom Karadza: Absolutely.
Andrew LaFleur: If you can get that spark-
Tom Karadza: Totally. So, he’s read rich dad poor dad and cash flow. He’s reading the cash flow quadrant right now. So, I at least want to present that type of information to him, but ultimately let him decide. But, I’m secretly guiding him and using my secret manipulation techniques by putting rich dad poor dad stuff down in front of him. The fatherly manipulation.
Andrew LaFleur: Just having your pod cast playing at home in the background.
Nick Karadza: I still get that. When I sign a new lease with a tenant or something, I still get that feel. I’m driving home, and I just feel like the deal got done, and just kind of putting the pieces together, I still get that thing. It’s never really subsided for me. I like it. It’s become more normal, but there’s still some sort of elevation of emotion, some sort of elation that I get with it.
Tom Karadza: I’m sure you see that when you’re working with new investors who rent out a condo, and they must report back to you.
Andrew LaFleur: It’s that moment when it goes from fear to elation. Like, “I don’t know if I can do this, I don’t know if I can be an investor, I don’t know if this makes sense,” to, “I’m so glad I did this.”
Nick Karadza: Can you get me another 10 condos right now.
Andrew LaFleur: “Why didn’t you tell me to buy two?” “I did!”
Tom Karadza: Just back to the point on why it’s important for our kids to make money, because you have people like Andrew charging $1200 a square foot for condos in Toronto. So, we’ve got to … but cool. Thank you for doing this Andrew, we really appreciate it. We drag you down, we’ll have to do this again. Can you let everyone know the name of your podcast and where they can find it?
Andrew LaFleur: Yeah, I’ve got a couple podcasts.
Tom Karadza: You have a couple podcasts?
Andrew LaFleur: Yeah, I’m on my second one now.
Tom Karadza: I’m out of touch.
Nick Karadza: How to take care for four kids and not lose your mind. Is that the second one?
Andrew LaFleur: That one’s coming. Truecondos.com. You can find everything about me and my podcasts and everything there.
Tom Karadza: Cool, and you do a great job on that website. Everything’s broken down brilliantly.
Andrew LaFleur: Thank you.
Tom Karadza: Awesome, thanks Andrew.
Hey everyone. So, hopefully you enjoyed that podcast. We ended the conversation talking about university and the value of it. There’s something that we have happening where a bunch of members of rock star are going to bring their kids to, it’s the rock start entrepreneur summit that we’re doing on June 7th and 8th. If you want to get some of the leading edge marketing and stuff, and you’ve never been exposed to this kind of information before, and you have a bit of an entrepreneurial spirit in you, we want to invite you to check that out. You can find the details for that even that we’re hosting in June at rockstartinnercircle.com/summit. So, rockstarinnercircle.com/summit. We’re really pumped to be doing this in Toronto. Nick and I have had to travel all around north America to pull this information over the last decade. Can’t tell you how much time and money we’ve spent to do that. And now, we’re sharing the exact stuff that we’ve used to build this business so that hopefully you can use it yourself to build your own business as well.
We believe the combination of real estate and business equity together is magical, and really allows us to live life on your terms. So, you can check all of that out at www.rockstarinnercircle.com/summit. Want to thank Andrew again for coming on the podcast. That was a great chat, and upcoming in the next couple weeks, we have a bunch of legal stuff we’re going to be covering. So, we have booked those. We have some legal second suite coming your way as well, some second suite information on how investors are doing that. So, stay tuned. A lot of good information coming on the your life, your terms show. Until next time, your life, your terms.