Broadview Table Talks: Toronto Real Estate Podcast

Podcast Season 2 Episode 7: The Currency of Time

Are you trading time for dollars?

It’s Kenneth Yim, and thanks for tuning in to Boardwalk Talks, the Toronto real estate investing podcast where we walk and talk and go around the board, and play the game of collecting properties. Why? Because we all want to generate enough passive income to fund our life and so that we don’t have to depend on working to earn active income. This show is dedicated to discussing the strategies to help you achieve financial freedom through real estate.

Imagine in exactly 150 years from now, it is the year 2169, and people have been genetically engineered to stop aging after they turn 25, after which a 1 year countdown on their forearm begins. When it hits zero, the person “times out” and they die instantly. Furthermore, people can transfer time between each other with a special mutual twist of the arm, so then time has become the official currency in which people with a lot of years left can exchange their time for goods and services from others. Yes, this is the sci-fi film called “In Time” featuring Justin Timberlake and Amanda Seyfried. If you haven’t watched the film, check it out on Netflix, it’s one of my favourite movies. Not for the acting or actors or anything like that, it’s the concept that time is the universal currency that we trade on.

Maybe it’s that today is a special day, it’s the day that I turn 40 years old. There, I’ve just admitted my age to you all. Anyway, as I hit the peak of the hill, I don’t think I’ve done so bad now that I’m coming down the other side.

It’s not that I’m trying to boast or show off, I just want to express that I am grateful. Grateful for the way that the real estate market has taken off over the past decade, and the abundance it has created for me and for my clients as well.

You see, my story started in September 2006 when I put the deposit down on my very first pre-construction condo that partially came from $25,000 that my grandmother gave me. Since then, I’ve owned several condos and now have had over 18 properties under my name, a lot of which I have kept. On one of the condos that I have owned for 9 years, the mortgage is almost paid off. It’s producing great cashflow, and I’m paying off more principal than I am interest, so it’s only a matter of time before it is completely paid off. That condo really didn’t need much work in to it. I lived in it for about 3 years, rented it out for over 5 years for a wonderful couple that never called me for anything, and they even paid a day early just to be sure that the payments cleared. That’s around $60,000 that they paid off in principle on the mortgage, and during that same time, the condo nearly doubled in value.

During that time, I’ve been fortunate enough to have the foresight to buy other properties, a lot of it started by buying preconstruction condos which afforded me the time to save up for the down payment. I’ve taken some of that equity and have gotten myself in to a freehold triplex, a commercial mixed use multiplex, and some more condos as well. I’ve done some flips, a small assembly, and assignments as well. The flips and assignments produced some good cash, but that cash is useless unless you put it back to use. It’s so easy to spend that large chunk of change on toys or vacations, charities, and those around you that you love.

So enjoy your time, enjoy it with your loved ones, cherish every moment, but please, put it to good use. Like the “In Time” movie that you need to watch, think about time being the real currency in this market. Demand is far greater than supply, and it looks like Toronto will continue on this trend for the next 5 years at least. And what about this government? Each year they keep printing money, devaluing our currency, making hard assets go up in value.

If you’re thinking, is now the right time to get in to the market? Well, the right time is when YOU are ready. Because remember, time on the market is better than timing the market. Which basically means, the more time you own this property, that you’re on this bus, that you’re on the train that’s speeding down the railroad, it’s better than figuring out when to get on. Because what if you bought Microsoft stock 30 years ago? Or if you bought that property 30 years ago? How would that make you feel? So get in early. And what better time to start then now?

Podcast Season 2 Episode 6: Here are the 9 ways to make money in real estate.

Likely they are trade-up buyers. There's no way that this can be someone's first home. Use equity to grow in to more equity. How? Just get started. Start building equity through real estate. Here are 9 ways you can get started.

Podcast Season 2 Episode 5:

How to fast track or catch up to retirement if you haven’t started planning for it yet.

It’s Kenneth Yim, and thanks for tuning in to Boardwalk Talks, the Toronto real estate investing podcast where we walk and talk and go around the board, and play the game of collecting properties. Why? Because we all want to generate enough passive income to fund our life and so that we don’t have to depend on working to earn active income. This show is dedicated to discussing the strategies to help you achieve financial freedom through real estate.

Have you thought about how and when you are going to retire? Statistics Canada says that in 2018, the average age of all retirees is 63.8 years old (1).

And CIBC released a poll last year, where 32% of Canadians between the ages of 45 and 64 have nothing saved for retirement.

53% of Canadians say they don’t actually know if they are saving enough.

And for many people, the amount of money required to fund their lives for approximately 30 years of retirement is a secondary consideration altogether.

Retirement planning is not a one size fits all exercise, and there certainly is not a cookie cutter approach to determining how much money you will need to sustain you throughout your golden years. That’s because the actual dollar amount you need to save will be driven by the lifestyle considerations you choose.

According to the report, the average amount of personal savings Canadians estimate they’ll need to retire comfortably is $756,000. Again, that number may or may not be enough for you, it really depends on you. However, if you’re looking at your bank account and you don’t see nearly 7 figures in there and you don’t think you can ever get there, then don’t worry, there’s still hope. If you think that’s not enough, then it’s all the more reason to start thinking and talking about it.

So, here are a few tips on how you can build your nest egg, courtesy of CIBC:

So how do you actually do all of this? Well, my plan is to buy more properties. I’m not a huge fan of equities, they are too volatile and I want something more stable. So I look to rental properties for my solution.

You can start with something as simple as buying a condo in downtown Toronto, where vacancy rates are one of the lowest in the world. The rental demand is just that strong. Look at our booming tech scene in Toronto, seemingly overnight it has just exploded. Tech works are paid very well as compared to other industries out there, and as they are newcomers to the country, their initial housing strategy would be to rent, not buy. As they move here and trying to figure themselves out, they want to rent first.

So I was just down at a conference in California last week, and had a staggering realization. The US vacancy rate is 6.18% overall, and the California vacancy rate is 3.49%, according to the last US census in 2017. Let’s compare this to the Canadian Housing and Mortgage Corporation’s numbers. Nationally, it was 3.0% in 2017, and that trend has gone down to 2.4% last year. Toronto’s vacancy rate is one of the lowest in the country, at around 1.0%.

One thing I learned from being at that conference and talking to our American friends is that our Toronto rental market is strong, which props up the housing sector and makes this whole thing work. Toronto is an attractive place to live, and properties are getting more and more expensive (they already are expensive, I should say). Furthermore, the mortgage stress test makes it hard to get approved for a loan, and inflation is getting stronger. I mean, you can see this in the price of every day goods, like a cup of coffee or gas or avocado toast. All the while that the average wages are just stagnating. Our children of the future will have a difficult time saving enough for a down payment, let alone affording the mortgages. Never mind the next generation, our generation now is barely scraping by.

If this sounds all fine and dandy to you but an investment property seems out of reach, here’s some things that you can do to get started. Let’s work off of CIBC’s tips. The first two don’t change, which is:

1. Plan your lifestyle and make the future as predictable as possible, and

You should know those numbers. You need to do these steps regardless. I would then add the following comments the next four points:

3. Work with a financial advisor to project your income and expenses. That financial advisor can be someone like our real estate team, it doesn’t have to be a traditional financial advisor playing in the equities market. Or it can be both.

4. Put your savings plan on auto-pilot with regular deposits to a dedicated savings account. Or, you can buy a preconstruction condo which will force you to save for around 20% of the purchase price over a period of 2-4 years, then you can have the tenants pay off the remaining 80% of the purchase price by paying off your mortgage over the next 25 years. Hard assets should be inflation-proof, because housing costs are included in the basket of goods that the government uses to calculate the Consumer Price Index which is the definition of inflation in the first place.

5. Invest for the long term and revisit your investment plan regularly, at least once a year. If you are one of our clients, give us a call and we can give you an update on your real estate holdings at any time.

6. Determine the best time to draw down on public pension benefits or personal savings. I would argue to never draw down on it. Don’t cut down the tree, keep watering that tree and eat the fruit it bears. If you find that there’s not enough fruit and you have time to wait, then take the seeds and plant some more trees and water that tree and eat the fruit that this tree eventually bears. And then, when you have an orchid, you can pass that down to future generations.

Anyway, the moral of the story is to let your tenants do all the heavy lifting to pay down and pay off your mortgage over the next 25 or 30 years. You are doing social justice to society by providing housing for newcomers, young people, students, lifestyle renters, and anyone that chooses to rent instead of buy. In reward for your patience, you will have a good retirement and your next generation will be taken care of, whether you gift them all or part of your portfolio, or you can use it to teach them math and financial management for looking after assets.

A question that I get from a lot of people is, what If your properties don’t cover? In my opinion, if the negative cashflow isn’t an issue for you, then it’s OK because the tenants are still paying off a large portion of your mortgage. As long as they are paying enough rent to cover property taxes, interest, insurance, maintenance and management fees, then everything else just goes to growing your equity. Think about it, the typical mortgage amortization is either 25 or maybe 30 years. If you do nothing but just buy one property, in 25 or 30 years, you will have caught up to the amount needed to retire according to that CIBC poll, which is only $756,000. I say only, because the average price of a property is a little over $806,000 in Toronto. And that’s in today’s dollars, imagine how much it will amount to in 25 years from now.

That my friends, is how you retire.

Thanks for listening, and catch you next week.

(1) Statistics Canada. Table 14-10-0060-01 Retirement age by class of worker, annual. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410006001

(2) BNN Bloomberg. 32% of Canadians are nearing retirement without any savings: Poll: https://www.bnnbloomberg.ca/32-of-canadians-are-nearing-retirement-without-any-savings-poll-1.991680

(3) CIBC Poll on Retirement: http://cibc.mediaroom.com/2018-02-08-Am-I-saving-enough-to-retire-Vast-majority-of-Canadians-just-dont-know-CIBC-poll

(4) Vacancy rates in California and US: https://www.deptofnumbers.com/rent/california/

(5) Vacancy rates in Toronto: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3410012701

Podcast Season 2 Episode 4:

There was a CBC documentary made in 2013 but just got released on YouTube a couple of days ago. It has gone viral, with over 53 thousand views so far and counting. It’s called “Towers of trouble” with a sub caption: “Toronto’s condo market has no rule book”. The documentary is saying that we should be afraid condos (known as HOA’s for those of you listening in the US) because of falling glass and that it’s a scam to buy poorly-built condos.

So today’s podcast topic is: is it a scam to buy a condo or not?

It’s Kenneth Yim, and thanks for tuning in to Boardwalk Talks, the Toronto real estate investing podcast where we walk and talk and go around the board collecting properties.

Basically this documentary is talking about Toronto’s condo market and the poor quality of construction, that there is little to no consumer protection, that the condo act reform keeps getting pushed back due to developers with political persuasion, and that the entire industry was a dumping ground for the world’s capital to take advantage of the end user. Here is an excerpt from the beginning part of the documentary:

…

I think you get the point. It was well written and they do have some valid points, especially when they said that consumers believe the condo game is about home ownership when it’s really, it’s as much about global money markets. So yes, I do think condos are becoming commoditized as investments, but I don’t agree with the video where they say it’s not a good housing alternative. It really is. With vacancy rates at single digits, I’m talking about just around 1%, that means 99% of the condos available for lease in downtown Toronto are actually being absorbed and occupied.

The average rent for a one bedroom condo in the second quarter in 2019 in the downtown C01 district is $2,359, which is up 5% from the same quarter the year before, which was up 11% from the year before that. Rents are far outpacing the growth of average incomes, and as a result, tenants have come up with creative ways to make condos affordable. They are getting roommates, and they are getting help from parents to subsidize their rents and act as guarantors.

All this is because of the attractiveness of living downtown. People don’t want to deal with traffic any more, people don’t want the long commutes. People want nice restaurants, entertainment, and amenities. All the jobs are down here, and Toronto is becoming or already is a major player in the tech space. Canada is a safe place to live, if you factor in all of the nasty stuff happening all around the world like the protests in Hong Kong, trade tensions in the US, Brexit and the EU falling apart, wars, human rights, terrorist bombings, and all that crazy stuff. We are lucky to be in Canada. The smart money is coming back to Canada and I believe that there is a lot of up side here in the long term.

So the demand for housing is here. There’s no denying it.

As for the issue with poor workmanship, that’s what the reserve fund is for. If you don’t know what a reserve fund is, it’s a small section of the annual operating budget that is made up of your monthly maintenance fees, typically it’s 10-15% of any annual budget, and it’s money that you sock away for a rainy day. The reserve fund has to be reviewed every 3 years by law, and every other year has to be an on-site visit, so the engineers should be able to give the boards an accurate assessment as to how much they need to budget for repairs.

The documentary goes on to further exaggerate the situation by saying that condo boards are made up of amateurs and volunteers that haven’t got a clue about what they are doing, but I disagree. Sure, there are some rotten apples, you may have heard of some scandals in the news a couple of years ago with condo board members, but for the most part these are capable individuals. They get voted in from the all of the owners, and they are expected to make sound judgement calls from employing experts like lawyers, management companies, engineers, and other trades to keep the building sustainable in the long term. I should know, I have 10 years experience as condo board presidents on a couple of condos. Anyway, the system isn’t perfect, but it’s getting better with condo act reform as the industry matures. In theory, these condos can last forever.

Some of you know that I am a fan of condo investing, I mean, that’s how I got started building my wealth in real estate, but really I’m a fan of investing in anything that you can get your hands on.

The average price of a detached home in Toronto is 1.2 million dollars, whereas the average price of a condo is half of that, just over $600 thousand. In Downtown Toronto, that number is hovering around $1.4 million for detached homes, and $700 thousand for condos in the core. Basically, condos are approximately half the cost of detached homes.

So how do you build wealth through Real Estate Investing? It really all begins with taking that first step. So whatever you can afford, get your hands on it. We are going through a gold rush of real estate in Toronto, and before you know it, we will become the next Manhattan, Hong Kong, Paris, London and other mega cities.

Demand isn’t going anywhere, supply can’t keep up, and we will continue to attract more global wealth, talent, and all sorts of diverse economies and industries here.

If you want to share your thoughts or continue talking about this, visit broadviewavenue.ca, and click on the button to schedule a 15 minute conversation with me and we can go back and forth about investing in Toronto real estate. It’s Ken, and don’t believe the hype. Thanks for listening.

Podcast Season 2 Episode 3: Effective Tenant Management

Here are 3 lessons I learned from almost a decade of real estate investing.

The first investment property I purchased was 13 years ago in 2006, just after I got in to real estate. I bought it pre-construction from $25,000 that my dear grandmother gave me out of the love of her own heart. She taught me many lessons in business and life, and I love her for that. So instead of buying a new car or travelling, which I really wanted to do back then at a young age, I decided I should invest in to real estate. I will always remember my father saying “if only I kept that condo”. That was probably one of the main reasons that I got started in investing in real estate, which I accidentally fell in to. I had no clue what I was doing at the time. You can read about my story in the first chapter of my “Passive Income” book that you can get at our website at www.broadviewavenue.ca.

Today’s podcast is about how to effectively manage tenants. Here are 3 lessons I learned from almost a decade of real estate investing.

It’s Kenneth Yim, and welcome to Boardwalk Talks, the podcast for real estate investing in Toronto.

How To Effectively Manage Tenants

Real estate professionals discuss the financial implications of real estate investing, but they often neglect to discuss the importance of tenant management and how it contributes to the success of financial growth and stability.

To succeed at growing your wealth through real estate investing, you have to have a steady tenant base paying your mortgage. The whole idea behind investment properties is to have someone paying down the mortgage as your asset is growing in value. Keeping your tenants happy is imperative to the success of your landlord/tenant relationship. Landlords who are effective at managing tenants will rarely have a problem, and essentially have a business partner that is footing a large part of the capital to keep the whole operation functional and will help you build your portfolio.

To ensure success, the first step is to choose a property that will is attractive to renters. Such as picking a neighbourhood that has lots of amenities (such as schools, parks, shopping, transit) and also a good walk score. Doing so will keep your property in demand allowing a large pool of tenants to choose from at all times.

Or maybe you choose to invest in a luxury property, and you take your time to curate a really good tenant.

Once you have a coveted tenant in place, build a connection based on respect and appreciation. Treating your tenants with respect will create a harmonious relationship.

1. Make your tenants a priority

You need to treat your tenants like customers. Make your tenants complaints, issues, and struggles a priority. You are providing your tenants with a home, a home they will fill with memories and where they want to feel comfortable and safe. If you make them happy in their home, and they can trust you to help when needed, they will only contact you when absolutely necessary. They will respect you and trust that you are providing the very best environment for them to be in. This goes a long way when any issues or problems have to be dealt with.

2. Show your tenants your appreciation

As an example, on move-in day, leave a welcome basket filled with treats like wine and chocolates, or move-in basics like soaps, scents, etc., and include a map of the area. This gesture shows that they are not just dollars to you, but that you are doing your best to make them comfortable in their space. When you have a new customer in your business, you show your appreciation with tokens of thanks. So when you have a new tenant, show your appreciation the exact same way. Send a holiday greeting to continue to show your support through the year.

3. Hire a property management

The fourth most important rule of real estate apart from location, location, and location, is that time is of the essence. You HAVE to respond to your tenants in a quickly to keep them happy as customers.

If you find that your day is already filled with appointments and your schedule is always packed, then hiring a property manager is the best way to ensure all issues will be attended to and resolved in a timely fashion. After all, this is supposed to be a passive investment. A property manager that understands the Landlord and Tenant Act and can advise you on legal issues that pertain to various situations that may arise. Once you hire a property manager, you’ll only have one question - why did I wait so long to do this?!

If you want to learn more, visit broadviewavenue.ca, and click on the button to schedule a 15 minute call with us. We can help you build your wealth as a real estate investor. It’s Kenneth Yim, and thanks for listening.

How can you tell if we are in a buyer's market or a seller's market? Well, stay tuned, I'll tell you how.

That's a really good question, and it depends on numbers you are looking at. So, according to the Canadian Real Estate Association, the national average sale price is up 1.72% year-over-year, from this time last year. But this includes all of the provinces, and all the territories in ALL of Canada. So let’s look at the Toronto market and the resale stats there.

So the number I really like to use to determine between a seller's market and a buyer's market is the Sales-to-New-Listings-Ratio. And it's just that, it's basically takes the number of new listings and the number of past sales, and divide the two numbers and you get a ratio. So if you get 10,000 new listings on the market, 5,000 sales, that leaves you with another 50% of listings for next month to sell.

So in theory, it should be be 50% throughout and that'd be balanced. Well, like to say that if it's 60% or higher, then you are in a seller's market, which basically means that there's more sales versus new listings to replenish those sales next month, right? So everyone is fighting over the same amount of listings.

A 40% ratio or below is a buyer's market, which means there's more new listings that come on to the market than there are sales. Make sense?

Last month in June 2019, there was 8,860 sales in all of the Toronto Real Estate Board, and this got replenished with 15,816 new listings, giving us a Sales to New Listings Ratio of 56%. So remember, anything between 40 and 60% is a balanced market, a 50/50 ratio is a perfectly balanced market, meaning there is enough inventory to replenish the amount of sales going on.

If you look at the detached homes in Toronto, the Sales to New Listing ratio is 50.8%, perfectly balanced.

However, not so good luck for the sellers in York Region. There's a Sales to New Listing Ratio of 39.2%, making it a buyer’s market up there.

For Downtown Toronto condo owners, it’s more of a seller’s market, where the Sales to New Listing Ratio is 58.7%. That trend is slowly edging downwards though, and I think it's going to be more of a balanced market sooner or later, but right now it's still a seller's market.

There’s a lot of other factors that we use to determine the overall health of the Toronto real estate board, such as the average price, number of units sold, average days on market, and etc. But let's dive in to the Toronto numbers for a second.

The average price in the overall Toronto Real Estate Board right now is $832,703.

The average price of a detached home in Toronto is just over $1.3 million, and for York Region it's $1.115 million. The average price of a condo in the core of Downtown Toronto is $706,490. To me that's kind of crazy, it's a little bit high, but it's still a seller's market so... maybe it's a good time to trade up if you're thinking about that?

We had two major government events that happened over the past 2 years, and that was the stress test in January 2018, and the Fair Housing Plan of April 2017. And in the news recently, the Bank of Canada announced a lower benchmark qualifying rate, making the stress test a little lower at 5.14% for a qualifying rate vs 5.34%. So I still think there's more room to grow in the market, and you can see here that the Greater Toronto Area market has bounced back from the January 2018 stress test, but not so much from the April 2017 Fair Housing Act. This is certainly the case for detached homes in Toronto and York Region. However, Downtown Toronto condos don't seem to be affected by either of these two events and the prices just keep going up.

I mean, it kind of makes sense, they are more affordable housing option for all of the housing options out there.

So as you can see, the numbers are open to so much interpretation. To get an accurate analysis of your local area market and your home or investment property, give us a call. Visit us at www.broadviewavenue.ca and click on the button to get a 15 minute call with us.

Talk soon!

[INTRO]

I have this itch that I can't scratch. It's basically buying more properties. And If you already have a few condo or freehold investments and you're wondering what to buy next between the two, either condo or freehold, you want to grow your portfolio or maybe you're just starting out and you want to look in getting into the market. Either way, This podcast is about condo or freehold investing. Which one's better? Join me my most recent conversation with my good friend Charles Messina. Charlie and I have been working together for quite some time now, as our team has helped him grow and maintain his investment portfolio. So In this first episode of season two, we talked about what's better to hold condo or freehold investments.

Welcome to season two of boardwalk talks, your real estate investment show with your host, Kenneth Yim. Excuse the audio quality this conversation or future episodes will be high quality, just like this intro. Anyway, let's get right into it.

[KEN]

Should I buy a freehold or condos and investment?

[CHARLES]:

Yeah, this is a topic we've talked about before can and people ask us all the time. And I think it's a good idea for us to talk about the pros and cons of each. What do you think?

Yeah, sounds great. I mean, we both hold both properties as investments. I mean, we've gone through that. So I guess we can talk on either side, right?

[CHARLES]:

Yeah, that's right.

[KEN]

Why don’t we do rock, paper, scissors? So winner takes freehold?

[CHARLES]:

Yes!

[KEN]:

123. Tie. 123. Okay, so I took winner, so I'm freehold.

[CHARLES]:

Yes.

[KEN]:

All right, here we go. So I get the freehold side, you get the condo side pros, right. So I'm pro freehold and you’re pro condo. So let's go ahead. What's, what are some pros and cons of buying freehold?

[CHARLES]:

Well, the cons of freeholed, as someone who's lived in a condominium for a long time, it’s great lifestyle, because certainly, everything's taken care of, for you. And as an investment, we both have condos as investment properties, and you're buying management of those condos. You don't get too many phone calls from your tenants simply because a lot of is taken care of through those maintenance fees.

[KEN]:

Right. Right. So I guess the biggest pro for buying a freehold investment is that you get the land, right. So the thing with that, you're right, you do have to maintain it as long as… or maintenance. I would say the upside of that is that? Well, I mean, I guess if you have multi units, multi residents per freehold investment, then you could get economies of scale that way, right? I mean, the maintenance, It's kind of optional, you don't have to do it. If you don't want to, right? You could be a true slumlord not and do nothing really, you know, certainly you do want to maintain your property. And I'm not saying that I'm not advising any of the listeners to to not maintain your properties for your tenants. But you could choose when you want to do your investment, really, you can be a little more hands on with it.

[CHARLES]:

Right. And just On that point can let's talk a little bit about the price per square foot, if you will, that you're getting as an investment on a condo versus a freehold.

[KEN]:

That's a really good point. So let's look at some numbers here. So the average price of a detached home in the entire Toronto Real Estate board is just over a million bucks. So it's 1.018 million. And for condos, it's $590,274. In Toronto, and just 416, south of Steeles, it's a little over 1.3 million for freehold and for condo is $636,000. Specifically, if you look at the downtown core, which is between Dufferin and DVP, we're looking at $706,000 Just south of the Bloor.

[CHARLES]:

Right And that's, that's an interesting point there about the spread can more so lucky and Toronto almost double. So let's talk a little bit about the fees that are associated with condos, and that spread between a condo and freehold. So typically, would you agree that a condo around that $600,000 range would be around for $450-500 a month for condo fees?

[KEN]:

Condo fees and taxes? Yeah, let's call it $500. Let's say you get about $2,400 on an average $600,000 condo, one bedroom.

[CHARLES]:

Right. And for homes, obviously you're paying taxes as well. But as you mentioned earlier, maintenance fees, those are optional things, certainly you're going to have to spend money on all. I would say, of course you have control over when and the timing of when you spend that money. Versus with the condo, you have the peace of mind that you know major things that are going wrong in the building are covered with your condo fees. But something that's come to mind for me lately as owning both a freehold investment and condo investment is, over time, as we're talking about pros and cons, we can argue both sides of it is, that you're paying a lot of money and maintenance fees over a span of 5 to 10 to 15 years. And you know, how would you respond to that?

[KEN]:

Well, that's actually a good point. Because you know, if you if you actually look at your tax bills, depending if you are in the city of Toronto or not, but if you are in the city of Toronto, let's say location is relatively similar. You're looking at a higher tax bill, which would make up the difference really, and what you're paying for the maintenance in condos. Except you also have to maintain the property, depending on the age of it. There's so many variables, it's kind of hard to say, right? So I would say all in all, I think I understand your point, that maintenance is required, whether you have a condo or freehold. It's something that depreciate some value, it's not gonna last forever, It's just a matter of whether you want it professionally property manager, or if you want to take that control on yourself.

[CHARLES]:

Right. And we've always talked about getting in the market and how we encourage our clients to get into the market. And certainly with the prices as they are typically somebody is first purchase is probably going to be a condo these days, especially a young couple. And so when we look at building up equity, then certainly further down the road, They can consider moving up to a freehold as a result of investing in that condo.

[KEN]:

For sure. And I was actually gonna say that for the summary. But you're right, I mean, at the absolute dollar amount of buying a freehold, is almost double, if not more than double, of what a condo would be. And I always find that people that are looking for condos, certainly the rents are going to be higher per door for a condo. They're nicer places, they have amenities that concierge and things like that, right? As generally nice views, right and good locations, better locations than houses generally. So of course people tenants are they're willing to pay more rent for it, The property is going to command more rent per door, But then you don't get the efficiencies that you do in a freehold in a multi unit. Right?

[CHARLES]:

Correct. Because you could have the option of potentially renting out the basement making a two units. Certainly we've heard about what the City of Toronto discussions around allowing people to build in lane ways to expand the number of housing options. That whole also comes into play if you're buying a freehold as an investment.

[KEN]:

Right, Right. You know, actually, there's a lot of other ways to improve value of the rents improve the rents, right? I mean, you could do things like coin laundry or or storage, you can add storage to the property just pop up, You know, like a container bin or some kind of locker system out there and charge a little bit more. Or you can include Wi Fi, you know, for throughout the entire all the units that you have in there. So you have three units can throw in free Wi Fi, and just jack the rents a little bit, which will improve your numbers, there's so many ways you can improve the rent. Right. With a condo, I don't think you can do that typically.

[CHARLES]:

Well, you're limited to one revenue source, of course, right?

[KEN]

Of course. Wait, you’re supposed to be acting for the pro of condo, not acting for the pros of freehold.

[CHARLES]:

Well, I guess what we're saying Ken is I guess I've come to the conclusion that you can argue both sides of the pros and cons because we own both. And I think what we're trying to do here is we're trying to give… We're not trying to be fence sitters. But it occurs to me, it's about timing and where people's people are in the whole investment profile versus It's one thing to buy your own home to live in. And then as you've done so well, with your clients over the years counselling them is when they're ready to move up to a house to live in maintaining that condo as a rental. So we're certainly not saying it's the beyond all end all one versus the other.

[KEN]:

Of course, but that's the point of our topic. We're trying to get some controversy here. But at the end of the day, to all the listeners out there, I think, really, it's just to get started. That's The moral of the story. And I think that's what you're trying to say, Charlie, If you don't get started, you won't have the opportunity to build the equity, like you do in when you're in the market.

[CHARLES]:

Correct. And we're not just talking about this, we've actually seen our clients do this. Yeah, absolutely. So we're not basically talking about anything that we haven't done ourselves or our clients.

[KEN[:

Right, let's say, say you have the means to buy a free hold investment. And say you're actually you already have one or two condos now. And now you're thinking, should I pick up my third condo? Or should I trade them all and get a house?

[CHARLES]:

Yes, that's a great point, something that I've thought about as well. And I think it goes back to having the versatility in a home. Of course, you'd have to buy the right property where you've got the option where you need a separate entrance, for example, that would be ideal if you're going to rent up the basement or an upper level as an example. And then further down the road, assessing a property is, could I build up on this property as well and increase the value of the property? Because as we know, we have many clients and we know contractors that can give us an idea of what it costs to build, in addition, or build out a basement. And then of course you do the god cost benefit analysis of is it worth it for me to spend $50,000 on a basement reno, And what are typically the rents. Very good friend of mine, he bought a bungalow in Etobicoke. And he added the second story, He's renting out his basement. And, for example, he's getting $2,000 a month now for It's a really nice basement apartment. He's done it really, really nicely. It's a two bedroom. And so here's the way he explained it to me, Ken, is because he's getting that income. Now, when we talk about maintenance, so we hire somebody to cut the grass or hire somebody to shovel the snow. Sure. And he hires a cleaning lady. So basically, he's really created his own mini condo Corporation, if you will, through a multiplex at home. So that's another way of doing it,

[KEN]:

For sure. And the downside of doing that is that you have to manage it, though. That's that's the only thing I mean, the upside is that… Well, not even the upside. It's almost a non starter to me if the numbers don't make sense, if you don't incorporate professional property management in there, Right? If your model doesn't, if your model doesn't work, and it forces you to create a job for yourself, then why you invest in the first place, you're doing an active work instead of passive investment. Right. So we should have factored in the price of vacancies and the price of maintenance as well, too.

[CHARLES]:

Correct. So math is really important.

[KEN]:

And it's absolutely so it's really hard for us to I know we're trying to discuss this to try to create some, like a topic to talk about whether we're going to go free all the condo, but at the end of the day, every single opportunity is unique. And it takes warrants further analysis for sure. For sure. And the whole story, again, is to just get started no matter where you are in your in your journey, I guess. Right? So let's switch gears a little bit and do it on the same related note. I guess what kind of quality of tenants do you think you're going to get between the two is going to be the same quality tenants? Or do you think it's gonna be different?

[CHARLES]:

Another great point there, Ken. And certainly, whether it's a condo or freehold, it depends the location, You know, for talking, you know, but a home in Lawrence Park, you know, I'm looking for clients, you know, the rents there for home and Lawrence Park, or 6-7-8 thousand dollars per month. So I think we know who can afford to pay that kind of money is probably a real occasions, From like presidents, to vice presidents of companies. If you look downtown and the financial core, we know there's younger professionals, As a result of all the jobs moving into downtown gentleman from the tech companies, financial legal accounting. And certainly you've got a great pool of tenants to choose from. From there. So the location, I think, would be critical on the type of attendance, whether it's a condo or freehold. What are your

[KEN]:

So I mean, with that example, I think that it's kind of hard to compare them side by side like that, right? I mean, how many families willing to pay $8,000 in Lawrence Park are there? Versus the new grad that's just starting to work or actually gainfully employed and looking for that one bedroom, or one plus den, or two bedroom downtown, right. So there's certainly a wider audience of people downtown looking for that. So if you're looking at apples to apples in terms, call it $2,400. And, you know, that's the purchase price of the condo, and it started the rent of the condo, and then the purchase price a certain amount, Let's say if it's double, for the purchase price of a house, that kind of caliber, and you may or may not get double the rent of that, I certainly think you're going to get lower rents in freehold versus a condo downtown.

[CHARLES]:

So kind of the rule of thumb is a lower price per square foot as a rental and a home versus a condo?

[KEN]

For sure, because of the lower budget of the tenants, I guess generally, it might translate to low quality. I mean, that's not always true. Obviously, we know that. Just because you don't make the income Right now, it doesn't mean you're not worth a lot of assets, or your family's not worth a lot of states to some of the students from overseas or whatever. There are friends with a ton of assets, a lot more than what you and I have combined, times 10. So, but I guess the general rule of thumb is if they're making less money for the average, then you're looking at lower quality of tenant. Really, I guess?

[CHARLES]:

Well, you know, I guess it's based on income. And certainly, as we've been talking about, people want to live near where they work. And you know, not everybody works on Bay Street For Big Five accounting firm. So there's different options for different people. And where some of those options could be filled just outside the downtown core. In, for example, in East York, or in Leslieville, for example, or Etobicoke. And even actually, the downtown course a Parkdale there's multiplexes, there were people say in the hospitality industry that are not making the same money, as you know, somebody in legal or in the financial core.

[KEN]:

Or even even the ones that are and choose to rent. Like the big families out in more residential areas North York, and so forth, right? Lawrence Park and all that. That is a luxury rental, and they're paying 6-7-8-10,000 or more, Right? It's a smaller market for sure. But it's up there.

[CHARLES]:

Right. So ultimately, the demand for housing and Toronto, it continues, and there's different different options for different people. And you take that into account. And we get back to the math equation, which is, what am I paying for this investment? What's the type of tenant I'm going to get? What's my return? And versus what I get maybe higher price appreciation with a property that has land. But of course, then you have to look after the place, There's a lot of property management issues, less so than in a condo, where it's just peace of mind. It's being run by the condo Corporation. And there's less fuss about managing that.

[KEN]:

Yeah, exactly. So I don't know, you know, because our recording actually got cut off for the audience out there, we had to do this again, halfway through the thing. So we're not sure where we left off. But I know that we talked about having a one bedroom or sorry, condo is a lot less maintenance versus a house. I mean, although you could budget in, you shouldn't be budgeting the price of property management into it. So that you're factoring that cost into the model doesn't work without property management, it shouldn't work for you at all. Otherwise, you're just creating yourself a job, it’s not an investment.

[CHARLES]:

Right. And some people would say route, kind of a rule of thumb for freehold property is 1% of the value, annually. Would you subsidize it? Yeah. Would you subscribe to that?

[KEN]:

Yeah, I wouldn't subscribe to that because there's so many variables into it. I mean, a new home is not gonna have a lot less maintenance than a new one, right. Right. So It really depends on the components, the specific components as replace and repair and kind of do your due diligence as you're going to buy it, right?

Anyway, I think we also talked about what a one bedroom condo appreciate fashion and a two bedroom condo, and what should you buy? Right? We missed that comment. I think that got cut off. Right?

[CHARLES]:

It did get cut off. And we talked to both you an average of one bedroom downtown was about $2,400. And we talked about how a two bedroom will be about $3,500. But once again, we're back to the math on how if you're a couple, you need a bit more space, You want to go for the two bedroom, and then split down the middle that's $1,750 versus someone going solo and renting that place after $2,400 in a one bedroom?

[KEN]:

Yeah, for sure. So you could get more disposable income, so that the tenants would have more disposable income, which is great. Now there's situations where not everyone's a couple, right? You were talking about right? Joint and severably liable for the for the lease. So that is if you're going there with a roommate and one person decides to leave, Who's in charge of the household taken over?

[CHARLES]:

Right? Well, obviously to protect, you know, our clients, it's about writing the lease properly. So that those two people renting the place tenants understand that if one of them leaves, then the other one is still on the lease and has to pay the rent and full.

[KEN]:

Yeah, I totally agree. And, you know, Funny enough, the landlord tenant board doesn't say, they don't have any legislation against roommates. Right. And I mean, it's it's such a case by case basis, more of a civil basis, that they don't have any jurisdiction over roommates. Anyway, we were talking about how, in New York, it's kind of common to use the vocabulary of saying “roommates”, right, not even just “renting” or even “owning” for that matter. Forget to put that all together. But, you know, a lot of people say in their vocabulary, you know, “my rent is so and so”. But more so they added my roommate is so and so. Right, which is pretty unique, because I pretty interesting story. That's where I think Toronto is heading. And you were mentioning all the employment not suffering tough.

[CHARLES]:

Sure, sure. And we know that all the office space has been built and continues to be built in downtown Toronto. And with these technology, companies like Microsoft relocating from Mississauga to downtown, CNBC, housing 15,000 people in those towers by the Scotiabank Arena, because they know that the people that want to work for them, One of the attractions is to live in downtown Toronto. And certainly that's not only the amenities, but being close to all the great restaurants and events that are happening. And that's what makes it attractive. And what we're finding is, as these new buildings come online, there's a demand for these buildings to be up to be occupied, and the vacancy rates are still low, and the inventory gets sucked up, if you will, as soon as it comes on market.

[KEN]:

Yeah, I agree that. So We also talked about one of the things about the benefits of being in a condo is that you're closer to the action really closer to downtown, because you're not necessarily going to have all those amenities in the suburbs where an affordable houses and affordable rental is, right. Right, right. And we're also talking about the potential of building something as a strategy for investing, right. So you, if you're part of a development place, say that you buy a multi unit that eventually can be gobbled up, or even any kind of free world for that matter. And you can be gobbled up by the neighbouring parcels to kind of join them up together to create a roadmap. But realistically, you have to have that in mind. Because if you're going to buy something in the suburbs, and you're going to acquire two or three of your neighbours, and you try to build, you know, they're not gonna let you the city's not gonna let you build a big giant apartment building in the suburbs. But if you have a main street with you know, me likely commercial downstairs on a main artery, then you might get those approvals. So you kind of have that that with the goal in mind is an exit strategy.

[CHARLES]:

For sure. And, you know, obviously, the complications or the additional duties that are required to manage a property with one or two tenants in a condo versus a multiplex.

[KEN]:

Yeah, that's a, that's a big thing. I mean, I guess, one thing I should say is that, when you have a small multifamily property, you're a little bit more limited, and who you're going to sell it to, you're going to sell to sophisticated investor, or a family that wants a living there, Assuming the tenants in the basement or and you have to get all the tenants out, whether it's the purchaser doing it with the seller doing it, Somebody's going to get all the tenants out to you know, to stage it, to clean it up, to show it well to have access for showings and all that kind of stuff. So you can get on the market properly. Right. So that's also a consideration, you might be waiting a long time for the remaining tenants to leave and be vacant.

[CHARLES]:

Right? And I just want to point out, Ken, just the concept of buying a property and living in and renting out a basement or an apartment or what have you in the home. That's not a new concept. And It's not I know that my family when they immigrated to to Canada, Their first house who included an extra apartment, and they would live in one part of the house and rented out and we know that that's what people aren't doing as well. So it's not a new concept.

[KEN]:

No, you're right. Yeah, certainly isn't a new concept. But different though, is that the Toronto see they've changed it sorry, not trying to Ontario, for that matter, because of the need for affordable housing and second suites. They allowed zoning for all to have second suites as long as it needs building code and fire code. So the stock of housing supply has increased, potentially by double, but still not enough for the the pace of growth that we're growing in the city. That being said, Yes, I think having a basement suite for those deciding to supplement their income or have some tenant pay a portion of the mortgage off is great way to invest.

[CHARLES]:

Right. And I know of a person who's done that, and they couldn't be happier because they move out from a condo, They need extra space, they're having children. And of course, I think we know that, you know, larger condos, can get up there and price. And as well, the maintenance fees. So they look at the option of moving into a home with income potential to help them bridge that gap.

[KEN]:

For sure. And that's that makes the house definitely more valuable. So On that note, so the good thing about investing into a freedom is that the the potential of increasing the value of to create more income for the investment, I think is a good benefit.

[CHARLES]:

Yeah, it definitely provides more options. Now those options will could cost money, and more time to make those changes. But it definitely have more options than you would within a condo. But there's nothing wrong with owning an investment condo and having passive income. It's managed. You don't you don't have to look after it. And you move on.

[KEN]:

For sure. For sure. That's that's definitely a good attraction for condos. And why most people buy condos is because of the price point the the ease of it they the bigger market size, I guess it's a lower price point. So they're easier to be more commoditized, I guess you could say.

[CHARLES]:

Right. And thank God for condo investors in Toronto. Otherwise, all this stock would not have been built.

[KEN]:

Correct. And the city would have grown. Yeah, for sure. For Sure. That's that's actually a really good point. That being said, If you know we own several condos, ourselves, and I don't think there's anything wrong with condiment, I love controversy, it's a great way to build equity. Can I ask you, would you rather trade up? Two condos for three condos for a freehold?

[CHARLES]:

Well, that's that topic of today. I guess it kind of dovetails to what we've been talking about this afternoon can which is you'd have to, we have to do the math and figure out over time, price appreciation. We know for sure, It's going to take more time of your resources. So if you really value your time, I think getting into a multiplex means bigger, a bigger issue more problems and money required to manage those. Not that I would dissuade anybody from doing it. So I think it's always about being well informed about the pros and cons, this we've been talking about, for sure.

[KEN]:

And I know we've been interrupted number times, so I apologize for that. But I guess we also talked about building in the price of a property manager. So if you have a good property manager, they are able to take those headaches away from you for a fee, obviously. But of course, if you build it into your cost, then it's possible. So it can still be passive, and you still can get the other ways to exit the the investment or other kind of benefits of owning property, not just increased rents. It'll be through other avenues.

[CHARLES]:

Right. So and we're getting back to the whole location. You wants three condos in downtown Toronto, and a multiplex say in the suburbs? I think goes that's a different equation.

[KEN]:

Yeah. I don't know about the summers but multiplies downtown or closer to the city, maybe jumping up one tier of, I guess from A, B, C to D, I guess joined down one rank would be okay, but not going down to rank. So that makes sense. But from A to B to C, right. From A to B? Yeah, that's okay. I wouldn't mind. I'd probably do that. And I guess it's every every property is case by case every situation is different.

So I think the summary at the end of day is just get started.

[CHARLES]:

No question about it.

[KEN]:

The only way to do it. I think if you have a small condo, that's more commoditized, you can start If you don't own anything now, buy one of those things, buy two of them, buy three of them, let it grow and let it like plant that seed and let it grow like a little flower.

[CHARLES]:

Right. And then it provides you with options Above multiplexes as a result of taking that initial step.

[KEN]:

You can take those budding things of the flower and trade into turn into a tree and all that kind of stuff. That's it. I guess. Just get started.

[CHARLES]:

Get Started.

[KEN]:

All right, Charlie, good talking to you today. Thanks. Thanks for joining me on this podcast. And I guess we'll talk soon. Thank you.

[OUTRO]:

Well, I really hope you enjoyed that episode, and we've given you some food for thought. If you're interested in learning more, please visit www.BroadviewAvenue.ca and click for an appointment for a quick 15 minute phone call. We look forward to talking to you about your real estate investment journey. And thanks for listening.

Episode 010: Join us as we talk with Jonathan Mahan of Bomb Bomb for tips on using video to tell your story and for communicating effectively.

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Episode 009: Join your hosts Kenneth Yim and Donny Mangos as we talk about the ins and outs of condo vs triplex investing.

Boardwalk Talks Episode 008: Join your hosts Kenneth Yim and Jonathan Wong as we talk about whether this is the right time for you to jump in to a real estate investment.