81% Of Canada's Real Estate Investors Are Underwater 🌊 with

[@TomStorey]

Good morning! Happy Grey Cup 🏆 weekend in Canada 🇨🇦 big thanks to Ralph for joining us this week.

[@argeldelacruz9545]

Let’s go Winnipeg! One more time! 🎉

[@SteveKarrasch]

Go Argo-Bombers!

[@RC-fh2lk]

Great discussions today boys!! Next guest needs to be DummMoney from the comments?? Gotta admit I always look for him and enjoy his comments😃

[@tutorknights]

Australia

[@matthew1106]

Imagine being an investor who is willing to be cash flow negative for 3-4 years in hopes of making a little on year 5. This is why sophisticated investors are fleeing Canada is droves.

[@MyYoutube-yb7xc]

It's not about return anymore for investors closing on condos right now. It's minimizing the loss and damage control.

[@frapeyou]

Yup it's pretty stupid

[@DummMoney-rr1fi]

@@frapeyou that's why only SFH's are the investments that make sense

[@MyYoutube-yb7xc]

@DummMoney-rr1fi As long as the rent covers the costs such as mortgage payment, including principal, property taxes. Insurance, repairs, and vacancy loss. If all that is covered and you still make some 5% annual return, then it's a good investment, or else it's speculation.

[@GreenBeanGreenBean]

you have no idea how actual small businesses start up... most of the time they ain't making any money the first few years either especially if they are putting money into marketing and other heavy expenses that barely make a difference.

[@davidbach8711]

5 years and you won't be underwater? I bought 5 years ago and am underwater :D I think it'll be a while before we get to a sellers market. Too many people on the sidelines just waiting to list their condos.. so there's perpetual supply

[@DummMoney-rr1fi]

oops. Your accountant should have some tax offsets for your income. Not all bad.

[@HardKnocks-pi7pc]

This guy is so full of shit and if you have only been in business or especially the real estate business since 08 and on you have no clue what the real world is as all we have since that point is a government sponsored ponzi scheme predicated on cheap money. I do agree that tenants can be a problem but they always have for real landlords and that's the cost of doing business. The mom and pop leveraged to the hill pretend investors should get out of the business.

[@tylerjodeblock1224]

the integrity of the construction quality is also in question. When they built these dog crates with no intention to make them livable by anyone, it was all just a scam for speculation. with people underwater from buying the top, getting punished from rental market going lower, and having no capital to handle the rising variable mortgages over the long term etc. We have yet to see the spike in special assessments because these buildings were also not built to last either. even condo insurance is causing maintence fees to go way too high too fast and this is due to the rise in inflation paired with more condo property management insurance claims. Its not an investment anymore its a liablity and holding for 5 years wont cut it either lol

[@bagel080]

In five years we will be in the first years of a 10 year depression.

[@Kevriyal5654]

Great pod folks. One thing to add, it doesn't matter that 81% of condo investors are cash flow negative. What matters is how many dollars are they putting out of pocket. You can probably sustain $5 a month indefinitely but not $2k per month.

[@DummMoney-rr1fi]

truth

[@butwhytharum]

Let them eat their shirts.

[@RickyLafayette]

I just did a quote for a job the other day from a real estate agent had an investor client who seems in trouble. The hydro is not on in the entire house. The house is turned into a s*** hole. Even though you can tell it's recently renovated. They said they had terrible tenants. There was mold in the basement. I wonder if the tenant stopped paying because of the mold and they eventually volunteered to move out. This guy is obviously desperate and looking for a cheap, easy solution to hide the mold so he can sell his house and get out of the nightmare He's. Forget the market. Look at people. They're suffering everywhere. The Bull run is over

[@checory]

i would never invest in canadian real estate especially in BC and Ontario. the currency is falling, the tenancy boards are failing, and the price is dropping. here in Burnaby, a 2 bedroom unit built in 2005 on Burnaby Mountain bought in 2018 for $530k was listed for $550k. a similar unit across the street is listed for $555k, 101 days on the market

[@DummMoney-rr1fi]

yikes, is it near the bottom?

[@checory]

@DummMoney-rr1fi no not even close. Some of these units were selling for 330k back in 2013

[@BobSmith-bw6so]

The situation today is different than it was in 2012. Back then, yes investors were underwater but condo prices were rapidly appreciating to offset the monthly loss Today, most people bought those pre construction condos at 1500 a sqft and the market rate for resale at 1000 sqft. It's going to take a huge price appreciation to offset the monthly loss and the decrease now Plus the regulatory environment for toronto landlord is vastly different vs it was in 2012 Tenant board delays and Toronto just passed a new law that makes it drastically more difficult to evict tenants The condo market will implode and its going to bring the townhouse and detached market with it

[@colebevans8939]

Yup, and good luck with asset appreciation. Who the target market for condos? Young professionals. 1000 sq foot means a 650 square foot one bedroom is 650k. To get a 600k mortgage at today’s rates means you need to make 150k a year or more. That’s a pretty small percentage of the population. At current prices only the top 2-3% of earners in the country can afford these condos, so your target market is pretty small. Until average wages go up by a significant degree there’s just nobody in this country who either can or wants to buy these things. Investors will be stuck with these boat anchors for years.

[@joelinasia8401]

I'm a career tradesman and it is really easy for me to find work these days, but, my wages have not even remotely kept up with the price of everything during my career. That said, if the lights ever go out, it is pretty reassuring knowing I can stay busy building and fixing things for people.

[@SteveKarrasch]

👍

[@paulshealthfitness7922]

every realtor : just wait 5 years bro your 100% in the green

[@SteveKarrasch]

Every comment: just wait 6 months bro, the market will crash 100%.

[@butwhytharum]

​​@@SteveKarrasch I'll buy a 2 million dollar mansion from ya only one catch... You foot the 20% at zero interest.

[@SteveKarrasch]

Deal. Commission will have to be 21.5% tho.

[@butwhytharum]

@@SteveKarrasch get that from your seller. I got my own buyer realtor.

[@DummMoney-rr1fi]

@@SteveKarrasch lol, what about the income tax portion? at least 13% in your PREC. Maybe throw a tax-deductible party for your favourite youtube commenters after taking them to the Canucks game, that'll cover the income tax owed. Hmmmm

[@kizo172]

Some GTA real estate investors are still underwater since 2017. Check sold below bought section in House Sigma and freak out.

[@GreenBeanGreenBean]

most buyers in Fort McMurray (house buyers) are underwater since 2012.... it always depends when and where you buy.

[@SteveKarrasch]

Ft Mac = GTA

[@butwhytharum]

These underwater "investors" aren't investors... They owe money that they spent on an asset that is now not paying what the realtor said it would. They are commonly called speculators and gamblers.

[@datruth4766]

And their down payment is a HELOC on their home. Lots of people saying, "it's fine, condos are bad, housing's fine". The underwater condo possessions, renewal cliff and recession haven't even happened yet, and it is already pretty bad.

[@butwhytharum]

@datruth4766 a freight train moves slowly. And what I'm seeing is a trainwreck in the beginning stages. The conductors (realtors) abandoning ship.

[@stevenvanderheide6472]

Plumber here 👋. Sure it can be lucrative but it’s f**** hard, dirty, and busy, there’s a reason nobody wants to do it. I would happily take half my income if I could work from home.

[@rolandvencel4256]

Job losses are the next hurdle for people to get through... even though rates are starting to go down.

[@Lifeisapartydresslikeit]

🙌🏾 Ralph is my realtor and he’s the best! Very knowledgeable, professional and is committed to his business and his clients 💜

[@TheTomStoreyShow]

100% - Ralph is one of our favourites.

[@alexhakimi7642]

Great show guys thanks 🙏 I wish you had more conversation with your guest about low rise pre construction in Markham ( or other good area ) stack towns, detached, builder, what watch out for, tips, good area………..

[@TheTomStoreyShow]

Good idea! Thanks for watching.

[@MovingToMarkham-p9p]

That’s a great idea! There’s definitely a lot to look out for when purchasing preconstruction/new builds in low rise. There’s a huge spectrum of quality and details that most consumers aren’t aware of when purchasing new homes.

[@pilotgirl5953]

Great show & guest 🎉

[@TheTomStoreyShow]

Ralph is great!

[@tomaga5856]

Canadian investors are geniuses

[@DummMoney-rr1fi]

that's why they are leaving the rental business. They certainly aren't stupid

[@HardKnocks-pi7pc]

Price of entry is to low for investment properties . If not a principal residence you should need 50 percent down.

[@DummMoney-rr1fi]

@@HardKnocks-pi7pc that's why rents will skyrocket over the next decade. I'm pretty sure Ravi skipped his Econ 101 class in favour of the frat parties and frat boi dodgeball games.

[@butwhytharum]

You spelt gamblers wrong

[@tutorknights]

24:06 the point where you realize Steve is in a different business than the other two as he describes every condo in Toronto and they quickly move past that. Tom… costs include interest, condo fees, insurance, tenant screening, repairs and turnover (sometimes prop mgmt and utilities too). And then you are supposed to make 10%. Unlike a speculative bubble. 😢

[@stevenvanderheide6472]

You hear some stories like the rental regulations and difficult evictions. But I’ve also recently seen the other side. My parents are old and dealing with a bully landlord. He forced them to sign a mutual agreement to end tenancy. They were scared, and all they wanted to do was leave even though they were likely owed compensation.

[@TomStorey]

What market did this happen in? Landlord cannot force them to sign anything.

[@kalailam7423]

We know we have to keep the world in hope. All prices are figures or values in people’s mind. People need food and accommodation in all times. However, the first place is that they got a means or savings to get them. When you got less to keep your standard of living, you can hardly go further. All we need to concern now is how we should maintain our living and how the new government will handle the economy.

[@ShehryarKhanNSFW]

Tom filibustering while Steve pours out drinks. 😂

[@rorythomson3439]

Average real estate conversation

[@DummMoney-rr1fi]

Steve's going after the frat boy market and soon-to-be divorced party crowd. Well-thought-out plan, or else Steve is just a lush

[@EricAlHarb]

Steve said YOU ARE GUARANTEED A 6% ROI on RE, DONT BUY A GIC YIELDING 5%. IF YOU LISTENED TO HIM, And want to harass him for that advice - Ill send you the video and content where he said it. Likely not going to see anything out of that process except the pleasure of harassing him for causing you to actually lose money.

[@DummMoney-rr1fi]

I'm sure he was talking about a long-term hold. He would be right if that were the case. I'd like to see that clip, prove it!!

[@EricAlHarb]

@ he was, but the context was I said with a risk free rate on a GIC why would anyone take a 6% return with SIGNIFICANT risk, not to mention high cost of carry. For the record I am a CPA, CFP and TEP. He and other realtors need to stick to selling homes for consumption and STOP SELLING INVESTMENT IDEAS!!! Realtors are unregulated and say completely false and misleading statements with no consequences. No other industry is as unregulated as they are. It’s a shame they can say the most ridiculous things without any consequences. I even say RE should be part of everybody’s investment portfolio. But I was advising clients in 2022 to unload their investment condos. I myself unloaded 3 condos and have 1.6 M sitting in GICs.

[@SteveKarrasch]

Still waiting for the proof.

[@TomStorey]

@@SteveKarrasch The only evidence I see is this commenter openly admitting they want to harass you. Yikes.

[@CanadianRealEstateChannel]

Eye-opening discussion!

[@DummMoney-rr1fi]

Fun CRES usually is an eye-closing discussion

[@timjkinney3472]

@23 minutes No The worst is not yet behind for two groups * Specifically you're talking about investors who own condos and are cash flow negative - a large percentage of homeowners many of them investors need to refinance in the next year or two - despite the bank rate going down Fix mortgage rates have not gone down that much - we can't predict the rate exactly next year but clearly many people will be remortgaging at one or 2% higher than what they paid- if you were already cash flow negative this is an added headwind - The second group are people who are on the sidelines ready to purchase in the next 12 months house prices are still close to all-time highs in GTA and most markets and mortgage rates are nowhere near as low as what they were when the house prices were pushed up to this level - unless mortgage rates come down to 2% for 5-year mortgage current buyers are still paying more (purchase price combined with current interest)

[@blistering]

Tom Storey Show After Dark... going rogue sippin' Scotch. ❤🙌

[@dootdoot1867]

Problem is the new construction quality is horrible. We are going to have a huge leaky condo like cost horizon after 8-12 years. Except it will be nation wide. From structural issues, plumbing material quality, hvac, elevators, roofs, mold from poor airflow, poor quality wood because of cost over runs. It's going to be carnage, leading to further spikes in insurance.

[@Janpandon]

This was a great show. I actually listened to the end which is unusual for any KZbin video I watch

[@TheTomStoreyShow]

Thank you 🙏 We’re glad you enjoy the show!

[@HarshBhalodia]

Awesome. I really enjoyed the conversation. Very transparent and useful 👍🏻

[@SteveKarrasch]

Thanks for watching!

[@jameslittle9482]

Interesting show today. Watched entire show. Good work

[@SteveKarrasch]

Thank you.

[@roadmap999]

The bottom line here is if you want to move real estate quickly, you'll be doing so at a severe discount.

[@tronguyet6473]

Tenant and landlord board drove investors away , is not high mortgages interest ,in the ‘80 interest 13% , you don’t want someone come to your condo stay for free and can’t kick them out

[@MyYoutube-yb7xc]

It seems like you have never worked with a realtor before. My realtor stays in touch and has always stayed in touch over the years to maitain the relationship. I often ask him for advice on various property related matters, repairs, renovations, and tenant and market news. I believe this is not uncommon for a realtor to know about what's going on at a property of their client, and even help them sort things out. Property owners should have the right to not renew any tenant at their discretion, and also evict non paying tenants without any court hearing. It's a contract, and the tenant is breaking the contract by not paying. It's not a home owner's responsibility to provide tenants rent-free or low-cost living at their own loss. The government should do it if they so care.

[@HardKnocks-pi7pc]

Lol nobody was talking about a non paying tenant. I work with realtors, developers, trades on a daily basis as well as all sorts of crooks and my point was that if you are legitimately giving an N12 for use of a family member there is no place for a realtor in that transaction. If you plan to get tenant out and list vacant or re list for a higher rent a realtor will be involved but that is against the law unless they sign an N11

[@MyYoutube-yb7xc]

@HardKnocks-pi7pc And if you do that, the tenant can sue you, and you may have to pay a year's worth of rent to the tenant, and possibly a 50K fine on top of that. My point was that a realtor could be involved with his client even if the client had no intention to sell within a year. I think, these days, the tenants are the crooks, who keep paying below market rent and create all kinds of trouble when it comes to disposing of an investment asset. They also expect the home owner to pay them for their move and future expenses. Ask cash for keys, and withhold rent for months or a year, and live rent-free while cursing the home owner who is supporting their weight with her hard earned money. This is not the responsibility of an individual home owner or investor. NDP and Liberals should reimburse all landlords for such losses due ti their ridiculous laws, and conservatives should be on the hook for all the loss due to the delay in the LTB. The LTB should be responsible for the loss caused by their administrative delays.

[@Kelly-r9z]

Buying a condo for you son or daughter for university sounds great but you failed to mention that you are on the hook for major renovations such as window replacements, structural and roof repairs. These costs can be in the tens of thousand of dollars.

[@SteveKarrasch]

Still worth it.

[@DummMoney-rr1fi]

Hey Steve, does Ravi listen to your stories about the tenant situation? Since you chat with him from time to time, I 100% agree with your take on tenant/landlord issues driving landlords out of the business. It's very specific to individual situations, but those individual situations where it makes sense to be a landlord are fewer and farther between. #4moreyearsofNDPsad

[@MyYoutube-yb7xc]

The landlord and tenant board is a joke. Unjust justice.

[@DummMoney-rr1fi]

@@MyKZbin-yb7xc Sad, all it's done is cause my tenants to be given the boot. Most took cash for keys, and believe me, the 10k I paid them was way less than they've paid in additional costs over the past couple of years since leaving. I've made bank since then, and it's way more than the 10k I paid out to get rid of them. Win for me, lose for tenants. Thanks, Ravi

[@MyYoutube-yb7xc]

@DummMoney-rr1fi Absolutely 💯. Alberta is a lot more affordable in rents without any rent controls. Landlords are becoming way more strict with screening because it's extremely expensive to get rid of problematic and non-paying tenants.

[@DummMoney-rr1fi]

@@MyKZbin-yb7xc I see that, too. I don't even consider tenants who aren't going to leave in two years or less or aren't obviously new to town and very capable of buying. Sadly, Ravi's rules have eliminated the tenants that he wants to help from my selection pool. Didn't used to be the case. #mypropertiesarevacanthalftheyear

[@MyYoutube-yb7xc]

@DummMoney-rr1fi Exactly!! Smart way of thinking. I heard this from another investor, too, and these days, I also think the same way. The CPI rent control assumes that all owners are cashflow positive and once they set the rent, they are swimming in cash, and they only need to increase rents by the cost of living, completely ignoring the increase in property taxes, mortgage interest, utilities, repair and maintenance costs and insurance increases which are all increasing well above the cost of living increases. Also, a lot of investors are cashflow negative to begin with. No one would like to rent to anyone with these laws, and the rental supply will shrink. No one wants a long-term tenant who stays there for 10 years with the 2% rent increase.

[@chrisT16161]

GM. Happy Sunday!

[@SteveKarrasch]

Hi!

[@TomStorey]

Hello!

[@goldguilder9554]

Being underwater? That means many are new buyers. It can be an anomaly and it should go up with further rate cuts

[@erickdillmann9558]

The Toronto real estate market is headed into a depression like state that may last 10 years or longer, similar to what occurred in Japan.

[@GumballGarage]

So Steve is exploring moving up in the world from Surrey to Brampton?

[@SteveKarrasch]

Sister Cities.

[@Toddington444]

I hope that water dries up in 5 years. "Its call me now for a free readin"

[@Bill-r9z]

Good

[@hvirk]

Australia

[@TheTomStoreyShow]

No. but good guess!

[@pashabarazandeh8840]

Iceland

[@TheTomStoreyShow]

🥇

[@tutorknights]

25:03 Peter Schiff 2006 “nobody stopped to ask Why should an asset that loses money every month appreciate? “

[@GreenBeanGreenBean]

Peter talking about gold even tho he pumps it yup!.... most of the time gold is losing money, sometimes it goes up.

[@rorythomson3439]

Costa rica is more expensive than Canada

[@DummMoney-rr1fi]

less BS rules I'm sure

[@SteveKarrasch]

Security is expensive.

[@rorythomson3439]

@SteveKarrasch you don't need security in costa rica lol cmon Steve downtown Toronto is more dangerous.

[@rally_chronicles]

Investing in stocks is superior to houses and condos. Businesses produce more value than a single condo or house. canadians are brain dead

[@SteveKarrasch]

Can’t live in your stock.

[@parkerbohnn]

The falling Yuan will tank Canadian real estate starting in Vancouver. The under/over on the Yuan seems to be a 50 percent decline due to Trump's 60 percent tariffs and higher longer term interest rates in America. See youtube video: China’s Nightmare Begins Yuan May Devalue 50%, Trump Could Impose 60% Tariffs Next

[@johnf321]

So much you can be underwater before you sync.

[@adama9032]

Nice click bait but real estate agents always going to try to push the market

[@TheTomStoreyShow]

Welcome to KZbin!

[@HardKnocks-pi7pc]

Explain why your guest a realtor is involved in an LTB situation with a client who has given an N12 for their daughter to move back in. If their daughter is moving back in . What do they need a realtor for? Something stinks with this one. Sounds like LTB rescheduled the hearing cuz the smelled the shit. What do you need a realtor for to have your daughter move into a unit you own? No realtor needed whatsoever. Looks like trying to get tenant out to sell vacant. Not smart to implicate yourself in assisting with a fraudulent N12. Lol too much. Why would I need a realtor to get a tenant out for my daughter to move in.? You only need the realtor if re listing for a rent increase or trying to sell vacant. What the address on that property lol?

[@Matt-YT]

If she was 2 in 2012, she is 14/15 now...

[@HardKnocks-pi7pc]

Not his daughter the client he said gave proper notice to have their daughter move in to a property they owned which is allowed and should be rightfully so but my point is why would he be involved unless they are planning to try and sell or re rent it. He brings nothing to the party

[@DummMoney-rr1fi]

deadbeat tenants are the worst. I believe this story and what a joke the RTB in BC is, lol

[@HardKnocks-pi7pc]

He wasn't talking about a deadbeat tenant with respect to the N12 he wasn't even talking about a dead beat tenant when he was referring to the squatter that was damaging the place as the rent was being paid but regardless that tenant should be out. He is Toronto not BC

[@butwhytharum]

​@@DummMoney-rr1fideadbeat "landlords" are even worse

[@HHH78709]

Study Bitcoin

[@jameslittle9482]

I warched Canadian Real Estate Show first because 1 - Trump in the thumbnail and 2 - the moustaches. Yuuuge

[@TheTomStoreyShow]

Fake news 😉

[@SteveKarrasch]

We’ll go all Trump next week.

[@dootdoot1867]

27:30 communism

[@GreenBeanGreenBean]

The guy is literally using old/stale numbers when he says 81% are cashflow negative.....with the lowering interest rates new buyers with 20% down are already flipping back to positive cashflow.......with further rate cuts people with variable will be printing money. The cashflow chart is already showing new buyers already back to break even...ramping up fast into making money as rates drop. Negative cashflow is NOT losing money. Putting money into your RRSP, buying a gold coin, buying Tesla stock (any stock with no dividend), heck paying off your credit card is negative cashflow..... but your net asset value is going up as your cash pile is going down..... you are not losing money, only converting cash into assets (or reducing debt, increasing your net asset value). When your expenses exceeds your rent, only then are you losing money. Making principal payments to reduce your mortgage is not an expense, your net asset value is going up as your cash pile goes down.

[@SteveKarrasch]

Please stop making sense in the comments.