Why\u00a0didn\u2019t\u00a0<\/em>I think that posting my thoughts on federal politics, Justin Trudeau, and the Liberal party would result in a flood of comments on last week\u2019s blog post?<\/p>\n I don\u2019t know.\u00a0 Maybe I just didn\u2019t think about it?<\/p>\n But I\u2019m thinking now!<\/p>\n I believe I\u2019ve said all that I have to say on the topic and that nothing good can come from more discussion on the matter.<\/p>\n I\u2019ll leave things as they are until they\u00a0need<\/em> to be discussed again, ie. when legislation or policies affecting\u00a0real estate<\/em> are announced or introduced.<\/p>\n Now, let\u2019s pick up things where we left off last week!<\/p>\n \u00a0<\/p>\n \u2013<\/p>\n \u00a0<\/p>\n Just when you thought that maybe, just maybe, we had heard the last of this topic after being inundated by it for the previous three years, it becomes the girlfriend you just can\u2019t break up with.<\/p>\n Well, if it\u2019s any consolation, \u201cinflation\u201d isn\u2019t a topic for today.<\/p>\n What can I say?<\/p>\n Interest rates\u00a0are<\/em> on my mind, and while it\u2019s become a boring topic, it\u2019s still newsworthy and just as important as ever.<\/p>\n When I closed on my first investment condo last February, my monthly payment was just under $2,500 per month.\u00a0 After one more rate cut on January 29th (fingers crossed), the payment will drop below $2,000.<\/p>\n That\u2019s a big difference, whether you\u2019re an investor or an end-user, and keep in mind,\u00a0I\u2019m on a variable rate<\/em>.\u00a0 For those who want to lock into a fixed-rate (which I\u2019ll do at some point this year), the payment would drop even lower.<\/p>\n Having said that,\u00a0are<\/em> we going to see a rate cut on January 29th, as many expected?<\/p>\n It\u2019s amazing how many times the experts, analysts, economists, and onlookers will revise their predictions.<\/p>\n Consider that last fall, we were expecting a fifty-point cut in October a fifty-point cut in December, and then a 25-50 point cut in January.<\/p>\n Fast forward to the new year, and we\u2019re seeing articles like this in the newspaper:<\/p>\n \u201cThe Odds Of A Bank Of Canada Rate Pause Have Now Clearly Increased\u201d<\/a> From the article:<\/p>\n Money markets are pricing in lower odds that the Bank of Canada will cut interest rates again later this month following\u00a0a robust jobs report today<\/a>\u00a0that showed nearly quadruple the number of new jobs created in December than forecasted.<\/p>\n The economy added a net 90,900 jobs last month, largely full-time work, according to Statistics Canada data. The job gains were spread across several industries, the agency said. The unemployment rate ticked down to 6.7%. Analysts polled by Reuters had forecast a net gain of 25,000 jobs and that the unemployment rate would rise to 6.9% from the near eight year high of 6.8% in November.<\/p>\n The robust jobs data show the economy ended the fourth quarter on a high note, easing the pressure on the Bank of Canada to continue rapid rate cuts to spur growth.<\/p>\n<\/blockquote>\n What am I missing here?\u00a0 It seems like the only positive<\/em> going for us is that things aren\u2019t as bad as many had predicted.<\/p>\n Analysts\u00a0thought<\/em> the unemployment rate would rise from 6.8% to 6.9%, and instead, it declined from 6.8% to 6.7%.<\/p>\n And?<\/p>\n Is that\u00a0it<\/em>?<\/p>\n May I remind you that we started 2024 with an unemployment rate of 5.7%.<\/p>\n May I remind you that the unemployment rate steadily increased, almost every month, until it hit 6.8% in November.<\/p>\n So, what, then?\u00a0 We see\u00a0one<\/em> decline by a tenth of a percentage point, from 6.8% to 6.7%, from November to December, and now analysts and economists are celebrating?<\/p>\n I may not be an analyst with a bank title, but I don\u2019t agree with this logic.<\/p>\n Perhaps the following chart, which I keep by my bedside, will shed some light on this:<\/p>\n Increasing unemployment \u2013> need lower interest rates<\/p>\n Decreasing inflation \u2013> need lower interst rates<\/p>\n Do you see the very tail end of the blue line on the chart?\u00a0 Yeah, that\u2019s all the \u201cexcitement\u201d from last month.\u00a0 It\u2019s the decline in the unemployment rate from 6.8% to 6.7%, even though the blue line has been steadily increasing since January of 2023.<\/p>\n I know what\u2019s coming.<\/p>\n \u201cLook at this guy; he wants interest rates to decline so he can sell more real estate!\u201d<\/p>\n Another 25 basis-points makes zero difference to me, the market, or it\u2019s participants.\u00a0 The point I\u2019m trying to make is that I don\u2019t share the positivity about the economic indicators out there, specifically as they translate to a\u00a0pause<\/em> on interest rate cuts.<\/p>\n I don\u2019t want to belabour this, since we\u2019ve been talking about it for two years, and because #8 and #9 on the list of things on my real estate mind are both better reads, but I will say this:<\/p>\n By the end of 2025, the Bank of Canada rate will be, at most, 2.50%.<\/p>\n<\/blockquote>\n And now, we wait for that December inflation number\u2026<\/p>\n \u00a0<\/p>\n \u2013<\/p>\n \u00a0<\/p>\n Are you familiar with an intimate little outfit called \u201cRioCan?\u201d<\/p>\n Probably.<\/p>\n They\u2019ve been around for a while.<\/p>\n And while they\u2019re\u00a0not<\/em> the largest real estate investment trust in Canada, they\u00a0are<\/em> the second-largest.<\/p>\n As per Wikipedia, they own 188 properties with a leasable area of 33,000,000 square feet and as love 2024 are worth approximately $14.3 Billion.<\/p>\n Suffice it to say:\u00a0they probably know what they\u2019re doing<\/em>.<\/p>\n Who\u00a0doesn\u2019t<\/em> know what they\u2019re doing?<\/p>\n Many, many people.<\/p>\n People, groups, companies, start-ups, investors, speculators, and wide-eyed opportunists.\u00a0 If 2024 taught us anything it\u2019s that people\u00a0can<\/em> make mistakes when it comes to real estate investing, and I don\u2019t expect this to change moving forward.<\/p>\n Can we work through an example?<\/p>\n Let\u2019s do that, and I promise that it won\u2019t be the\u00a0only\u00a0<\/em>example we use today\u2026<\/p>\n \u2013<\/p>\n Let\u2019s call this one, \u201cThe Mom & Pop Investors\u201d<\/span><\/p>\n Susan and Bradley live in Barrie.\u00a0 They are both gainfully employed; one works in education and the other works in dentistry.<\/p>\n They have lived in Barrie since 2006 and have two children, aged 12 and 10 respectively.<\/p>\n Their investments are managed by a friend who works for one of the big-five banks, and they consistently perform somewhere around average or slightly less.<\/p>\n In 2019, another friend told them how well his Toronto condominium investments were doing, and their interest was piqued.\u00a0 They started to browse listings online and would email listings of interest every day, eventually keeping a spreadsheet and a folder of what interested them.<\/p>\n Eventually, a sales representative from one of the online lead-farm websites that they frequented reached out and asked if they wanted to see any condos in person, so they took him up on the offer.<\/p>\n A short while later, they bit the bullet and purchased a one-bedroom condo for $585,000.<\/p>\n Their plan was to lease the unit out, long-term, and perhaps in a decade one of their children would live there.<\/p>\n They closed on the condo in February of 2020, secured a rock-bottom interest rate, and put the unit up for lease for $2,200 per month.<\/p>\n Then along came the COVID-19 pandemic and all their plans were thrown into absolute chaos.<\/p>\n The condo sat empty for\u00a0four months<\/em> and they reduced the price multiple times.<\/p>\n Eventually, they wanted to \u201cstop the bleeding\u201d and they secured a tenant at a ridiculously reduced rate of $1,500 per month, which meant that the unit would be cash-flow negative by $1,000 per month, but it was better than losing a full $2,500 per month by having it sit empty!<\/p>\n The tenant they secured was a constant headache.\u00a0 She emailed them incessantly, often complaining about mundane \u201cissues\u201d in the condo, and simply put, drove them\u00a0nuts<\/em>.<\/p>\n But the tenant remained in place \u2013 at $1,500 per month, to make matters worse, and this went on for\u00a0four years<\/em>!<\/p>\n To make matters\u00a0even\u00a0<\/em>worse, Susan and Bradley purchased the condo with a variable rate mortgage back in early 2020, so their monthly carrying costs began to soar in 2022.<\/p>\n They were\u00a0bleeding<\/em> money.<\/p>\n And the tenant was still driving them crazy.<\/p>\n In the fall of 2024, the tenant gave notice to vacate, and their prayers were answered.<\/p>\n They listed the condo for sale and while the tenant made showings extremely difficult, they eventually received a lowball offer one week before Christmas, and they happy accepted.<\/p>\n All told, including land transfer tax, real estate fees, legal fees, monthly losses, and the net loss on the sale of the condo, they were out $150,000.<\/p>\n But they chalked it up to a \u201clearning experience,\u201d and simply vowed never to touch real estate again.<\/p>\n \u2013<\/p>\n How common do you think this example is?<\/p>\n It would never happen to\u00a0you<\/em>, right?<\/p>\n You can deal with a problem tenant.<\/p>\n You wouldn\u2019t have your wife\u2019s tennis friend and part-time Barrie real estate broker work on your downtown Toronto condo investment.<\/p>\n You wouldn\u2019t have taken a variable-rate mortgage in 2020.<\/p>\n And yet how many mom-and-pop investors got burned since the onset of the COVID-19 pandemic?\u00a0 And how many of them wish they\u2019d simply invested in a REIT instead?<\/p>\n RioCan Real Estate Investment Trust is currently trading on the TSX for a little over $18 per share.<\/p>\n The yearly dividend is just over 6.0%<\/strong>.<\/p>\n Right there, without\u00a0any<\/em> appreciation of the stock itself, you\u2019re already looking at a return on investment that would make many pension funds happy.<\/p>\n We can discuss personal finance and market expectations another day, but suffice it to say, this is a very good return.<\/p>\n This then begs the following question:<\/p>\n Why would anybody invest in physical <\/em>real estate in 2025?<\/p>\n<\/blockquote>\n Well, the answer would obviously be, \u201cBecause they\u2019re searching for a higher return.\u201d<\/p>\n But one of the many things on my real estate mind in 2025 is just how much more we\u2019re going to hear about all the fantastic returns that exist in real estate without actually\u00a0buying<\/em> physical real estate.<\/p>\n Again, let\u2019s simply Google \u201creal estate investment trusts in Canada\u201d and see which\u00a0sponsored advertisement<\/em> pops up first.<\/p>\n This one:<\/p>\n Oh, wow!<\/p>\n 12% annualized, you say?<\/p>\n That\u2019s twice what RioCan\u2019s dividend is.\u00a0 Giddy-up!<\/p>\n And if you had the time, desire, or\u00a0both<\/em>, you could find literally hundreds of advertisements that offer huge returns in-and-around the real estate market, without actually having to purchase, own, and manage a downtown condominium or a six-plex in Niagara Falls.<\/p>\n Some of these opportunities are shares in publicly traded companies, some are through private equity vehicles only available to high(er) net worth individuals, and then some are smaller in scale and open to individual investors.<\/p>\n Here\u2019s one that I recently accessed through an old-fashioned\u00a0banner ad<\/em> as I was browsing online:<\/p>\n Equiton \u2013 The Apartment Fund<\/a><\/p>\n They\u2019re \u201conly\u201d targeting an 8-12% return.<\/p>\n Womp Womp.<\/p>\n But what\u2019s their plan?\u00a0 Simple:<\/p>\n I don\u2019t know this company, nor have I looked into exactly what their offering is, so I won\u2019t speak directly to this offering.<\/p>\n But what I\u00a0will\u00a0<\/em>say is that there are all kinds of real estate funds like this one, and many of them are started by folks with slightly more investing experience than \u201cSusan\u201d and \u201cBradley.\u201d<\/p>\n I\u2019m consistently approached by people \u2013 often young men, right out of school, who have an idea.<\/p>\n What\u2019s the idea?<\/p>\n \u201cCollect money from, like, a lot of different investors, then buy real estate, manage it, and provide a return.\u201d<\/p>\n No kidding?<\/p>\n It\u2019s genius!<\/p>\n It\u2019s not unlike this other idea that many people \u2013 often young men, right out of school, have also proposed to me many times over the years:<\/p>\n \u201cBuy a property, fix it up, add some value, then sell it for more money.\u201d<\/p>\n That\u2019s genius too.\u00a0 And as a matter of fact, I\u2019ll cover that in the next section.<\/p>\n But one of my expectations for 2025 is that we will see a\u00a0lot<\/em> of ways that investors can put money into the real estate market, and some of these ideas will be new, but many will be the same-old, same-old.\u00a0 New name, new colour scheme, and better advertising.<\/p>\n I\u2019m not advocating for physical real estate over REITS, funds, and private equity, or vice versa.\u00a0 There is a \u201cright\u201d investment for everybody.<\/p>\n \u2013<\/p>\n Here\u2019s something funny\u2026<\/p>\n Just to see what would happen, I decided to Google \u201cIs Flipping Dead In Canada?\u201d<\/p>\n Guess what came up as the very\u00a0first<\/em> result?<\/p>\n You probably already know where this is going\u2026<\/p>\n Is \u201cFlipping\u201d Dead?<\/a><\/p>\n Yep, that\u2019s a blog post that I wrote back in 2011!\u00a0 Perhaps my Google results will differ from yours, but I couldn\u2019t help but chuckle when my thoughts and opinions from 14-years-ago were offered up to me.<\/p>\n Looking back with the benefit of hindsight, I can confidently say that flipping was\u00a0not<\/em> dead back in 2011.<\/p>\n That was before the double land-transfer tax.<\/p>\n That was before another five or six increases in both land transfer taxes.<\/p>\n That was before increased CMHC premiums.<\/p>\n That was before the cost of materials absolutely skyrocketed during the pandemic.<\/p>\n And that was before the cost of labour was jacked up as well.<\/p>\n But here we are in the year 2025 asking the question again: \u201cIs property-flipping in Toronto dead?\u201d<\/p>\n Dead in central Toronto?\u00a0 Dead in the GTA?\u00a0 Or dead in the entire country?<\/p>\n There will always be better and worse geographic pockets to try\u00a0anything<\/em> in real estate, but on the whole, I think that the days of property flipping in Toronto and Vancouver are all but gone, save for those who are truly experts in the field.<\/p>\n Sure, once upon a time, two know-nothings could purchase a house, install an IKEA kitchen, throw stick-down linoleum over the putrid bathroom tiles, add a coat of paint, and flip the house in the hotter market later that year.<\/p>\n But we\u2019re coming out of our second year of a\u00a0flat<\/em> market with no automatic 8% appreciation rates that so many folks grew accustomed to.\u00a0 Interest rates are higher.\u00a0 There are more taxes associated with\u00a0flipping and far more barriers to even\u00a0attempting<\/em> a flip, let alone coming out with a successful one.<\/p>\n Propery-flipping wasn\u2019t a topic at the forefront of discussion here on TRB last year, but I believe it will in 2025.<\/p>\n There\u00a0were<\/em> notable articles in the media last year, of course.<\/p>\n Who could forget this one?\u00a0 Becasue I certainly couldn\u2019t\u2026<\/p>\n \u201cAn $845,000 Loss, Forced Home Sales: Is The Era Of The Pandemic Home Flipper Coming To An End?\u201d<\/a> From the article:<\/p>\n Nestled in an East York neighbourhood where single family homes line a suburban-looking street one sticks out like sore thumb. The once small one-bedroom bungalow is gone and in its place a cement foundation and wooden skeletal outline of a first floor that appears abandoned.<\/p>\n According to city and real estate records, the home was bought in August 2021 for $825,000, with the buyer receiving building permits the following year to tear it down and build a modern four-bedroom, five-bathroom property with a finished basement and garage. The buyer then sold the property in the spring of 2023 for almost $1 million, the project unfinished.<\/p>\n The new buyer continued with the project, but last month, it was put up for sale again for $999,000, this time as a power of sale, according to the listing history on property data site HouseSigma. The listing record shows it sold for $1.15 million on Sept. 12, but a week later it was relisted for less money, though that listing was quickly suspended.<\/p>\n<\/blockquote>\n<\/div>\n This is just one example of a home flip gone wrong.<\/p>\n It\u2019s a sexy story!<\/p>\n And whether you\u2019re a real estate lover or hater, bear or bull, the \u201c$845,000 loss\u201d is fantastic click-bait!<\/p>\n But is that\u00a0all\u00a0<\/em>this is?\u00a0 Clickbait?<\/p>\n Because one week after this article about \u201chome flipping coming to an end,\u201d the same newspaper offered this:<\/p>\n6) Interest Rates<\/h3>\n
The Globe & Mail
January 10th, 2025<\/p>\n\n
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<\/p>\n\n
8) Alternative Real Estate Investments<\/h3>\n
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![\"\"](\"https:\/\/torontorealtyblog.com\/wp-content\/uploads\/2024\/12\/Skyline.jpg\")
<\/p>\n![\"\"](\"https:\/\/torontorealtyblog.com\/wp-content\/uploads\/2024\/12\/Equiton.jpg\")
<\/p>\n9) Property \u201cFlipping\u201d<\/h3>\n
The Toronto Star
October 5th, 2024<\/p>\n\n