Are We Going To Have A Soft Landing

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate

[00:00:06] the market and provide the tools and insights to build your real estate portfolio.

[00:00:13] We are back with one of our, I think our most returning guest here, first guest as well,

[00:00:20] first guest ever on the show.

[00:00:21] First guest and now third, gracing us with his presence again, Mr. Sasha Kukuz of Greybrook

[00:00:28] CEO over there doing a lot of great things in both Canada and the United States.

[00:00:34] We've got a whole bunch of great questions for you, Sasha.

[00:00:36] I know you're keeping a close eye to the market and have a lot of great data you're going

[00:00:41] to share with us.

[00:00:42] I think we'd like to start things off with just 30,000 feet.

[00:00:46] What he is, see and rate now obviously volatility in the market consumer sentiment, been all over

[00:00:51] the place rising into straight, cutting interest rates.

[00:00:55] You know, kind of give us your two cents on where we are right now.

[00:01:01] Yeah, so if I had that answer, you know, we'd all be a lot happier.

[00:01:07] I'll give you my, I'll give you my version anyway.

[00:01:10] You know, I think if you really go up to 30,000 feet and take into account the last five years,

[00:01:16] I feel like what we're seeing today is not all together unpredictable, right?

[00:01:20] If you think about what happened in the beginning of the pandemic and interest rates dropping

[00:01:25] to zero, which you know, I mean it was not sustainable even at the time, what that did

[00:01:31] to asset values real estate especially.

[00:01:35] And the influx of buyers into that period of time, you know, whether it were from

[00:01:39] or whether it was, you know, the, the opportunity, regardless, we, we crammed a lot of

[00:01:46] buying activity into a short period of time and part of that was borrowed from the future,

[00:01:51] right?

[00:01:51] People that were probably planning purchases or investments down the road that looked at

[00:01:56] the conditions at the time saying, well, when is it ever going to get better than, you

[00:02:00] know, zero or near zero interest rates and I feel like the market's going to get away

[00:02:05] from me if I don't participate today.

[00:02:08] So I feel like we borrowed some of the usual cadence we'd see in future years and brought

[00:02:14] them forward.

[00:02:14] So today we're, we're dealing with the reverse conditions where, you know, we're,

[00:02:19] we're dealing with a hangover of ultra low interest rates and the means that they've

[00:02:24] increased has, has been record setting.

[00:02:26] People have had to adjust to that not only in, you know, real estate but in their lives

[00:02:31] with, with, with inflation and the cost of living today.

[00:02:36] So the way I kind of look at it is we've largely adjusted pretty well, like not, not

[00:02:41] with standing what people may point to in the market and say, look, it's slow.

[00:02:47] It's in me, make it's not, it's not, you know, functioning the way that it should,

[00:02:51] with the conditions precedent.

[00:02:52] I'd say we're doing okay to be perfectly honest.

[00:02:56] And people have just been kind of hanging on and waiting for a signal that, you know,

[00:03:02] the worst is over and interest rates start to go down.

[00:03:06] I think the Bank of Canada has a pretty decent shot at engineering a soft landing as they

[00:03:12] intend to, I don't know if it'll be as soft as they wanted it to.

[00:03:15] I think it's still going to be a little bit bumpy.

[00:03:18] But I do think, you know, we're seeing the front end of a pretty aggressive campaign

[00:03:23] to gear down interest rates.

[00:03:24] And I think for the real estate market, what that means is that activity should start returning.

[00:03:30] I mean, we're already seeing in the markets that we operate in in Canada on the ground-related

[00:03:36] housing side that is more end-user-driven in free construction.

[00:03:40] We're starting to see activity return.

[00:03:42] That's because the people who need housing, right?

[00:03:46] They're, they're, it's for their own use.

[00:03:48] They are looking at the opportunity.

[00:03:50] They're looking at the messaging of the Bank of Canada and they're starting to get more

[00:03:53] comfortable to get back into the market.

[00:03:55] Investors, on the other hand, you know, on the high-rise market where it's more investor-driven,

[00:03:59] they're still alive.

[00:04:00] And I think they're still going to be alive for a period of time.

[00:04:03] So I think we're starting to see the beginning of a, of a stabilization of the market.

[00:04:09] It's just going to be a little bit longer with high-rise product in my opinion than it is

[00:04:14] with the low-rise product.

[00:04:15] But I think we're 70% through the worst of it, 80% through the worst of it.

[00:04:20] So I'm optimistic to be perfectly honest with you about what we have ahead of us.

[00:04:25] Awesome.

[00:04:26] Excellent insights there.

[00:04:27] You, do you have any thoughts on the, the changes that we saw from CMA sheet yesterday?

[00:04:34] I guess with, you know, like, does that give, given a lot of the challenges that you

[00:04:39] outlined in the fact that we're seeing a bit of an organic return to activity.

[00:04:43] As we as prices come down and rates are coming down, you know, affordability's returning

[00:04:47] buyers can re-enter the market.

[00:04:49] One of the big things for me is, is the 30 year amp for all new home buyers.

[00:04:55] You know, first time buyers is obviously a big portion of the market.

[00:04:58] But I think a lot of this was aimed at stimulating construction activity.

[00:05:01] Do you think that, you know, that an element of the policy side is trying to save the housing

[00:05:06] market from falling a little bit or we're propping it up and if so do you think that it'll be

[00:05:10] successful in doing that?

[00:05:12] Yeah, I think so the answer to your question, do I think it'll be successful?

[00:05:15] I think it will have some impact.

[00:05:17] I mean, I don't think it's going to get us all the way there to solving our problems by any stretch.

[00:05:21] I think it's a step in the right direction in the sense that anything that can assist with affordability

[00:05:29] of housing in any market is going to be a positive, right?

[00:05:33] So extending amortizations check.

[00:05:36] It just makes it more achievable for the buyer.

[00:05:39] The second factor that was kind of one of the big changes was the allowance of

[00:05:45] ensured mortgages up to 1.5 million.

[00:05:47] I think that's also in a lot of markets going to help, maybe less so in a Toronto market.

[00:05:52] For example, but around the country I think it should have a positive impact.

[00:05:56] Why I don't think it solves all of our problems is that, you know,

[00:06:00] I think at the end of the day policy is only a piece of it and I don't think that the feds are

[00:06:05] looking at how to save the housing market.

[00:06:09] I don't think that their concern is that I think their concern is the fact that we have finally

[00:06:15] after many years of the industry trying to hammer this home, have identified supply side factors as

[00:06:22] one of the main drivers of the affordability crisis that we live through.

[00:06:26] And unless we address those supply side factors, we're not going to solve the problem.

[00:06:30] Unfortunately, the market conditions are such that it's not really no matter what you do policy

[00:06:37] wise until interest rates start to come down and activity starts to return to the market.

[00:06:42] You're not going to see a lot of construction. So I think if you want to address these supplies

[00:06:46] I factors, you have to stimulate construction and this is one of the ways to try and do it.

[00:06:51] And that's why I think aim the gun specifically at new home buyers because they're trying to

[00:06:58] get the industry back on solid footing. Not so much because they care about the profitability of

[00:07:04] the development industry or what it does to Canadian GDP. I think that's a part of it,

[00:07:09] but they also have to solve their problem and right now we're falling even further behind.

[00:07:13] If you think about it two years ago, was really when the light started to shine on this supply

[00:07:19] side problem. So a bunch of things came in, right? The Ford government and Ontario came in with

[00:07:24] a whole fair housing, not the fair housing plan. That was the prior administration. The housing

[00:07:29] affordability task force which I was one of the contributors to, they came with all these

[00:07:35] policy matters and then the market kind of cropped out. So it's like, you know,

[00:07:40] you guys heard the political tagline of like we're going to build 1.5 million homes in the next

[00:07:44] 10 years. Sure, policy might have started to shift to be able to enable that, but then the market

[00:07:50] turned into a place that really couldn't deliver that. So now they're doing whatever they can to

[00:07:55] try to stimulate it. Yeah. I mean, let's keep talking about that supply side because

[00:08:01] you know, that is exactly where you live and what you're trying to help Canada out with. So

[00:08:09] do you feel that some of the zoning changes across the country and in a lot of the major markets,

[00:08:15] whether it's just increased density or the major roads, major transit hubs, that kind of stuff?

[00:08:21] Do you think that that is going to have a major effect on creating more of that supply?

[00:08:26] Especially for, let's say, you know, obviously gray broke does this huge towers and big

[00:08:33] mid-rise stuff. And I mean, you guys have your hands in a lot of different types of construction

[00:08:36] and development. But for the smaller mid cap investor, do you think that's going to

[00:08:43] make a difference there? Are we still too far off on construction costs and availability of labor

[00:08:49] materials and that kind of stuff? I think it will make an impact. I do think the factors you sort

[00:08:56] of just referenced are real and they are going to cause some drag on the ability for the industry

[00:09:05] as a whole, what bigger small to be able to deliver on that supply side. Again, I'm going to

[00:09:10] be saying this probably a lot but it is a step in the right direction. Like I've been at this

[00:09:14] for 20 plus years and we've lived through a lot of time where people didn't really think it was

[00:09:21] a supply side problem. So I'm encouraged by the fact that now everybody's eyeballs are on the

[00:09:27] actual problem and legislators are looking at different ways to enable supply supply increase.

[00:09:38] What I'd say and having been part of the process to some degree is there's a will and an intent

[00:09:48] but it's still politics at the end of the day. So what starts out with a vast amount of recommendations

[00:09:56] that the industry might give because we know it at a more granular level as to how it

[00:10:01] on lock some of these opportunities gets watered down, right? Because at the end of the day

[00:10:07] it still has the pass. It has to have support from different points of legislation. So

[00:10:12] we got to a point that I think is okay but again, there are other headwinds as you identify Nick

[00:10:19] cost being the most primary. Like if you look at where pre-construction condo is today in Toronto

[00:10:25] to use a reference point, there's a standoff, right? If you look at statistics, the price of

[00:10:33] unsold inventory hasn't really moved to heck of a lot but sales volumes are like at historical

[00:10:39] lows. Well, why is there such a gap? People would think to themselves well it's not rocket science

[00:10:44] one is just lower your price and meet the market or you know it's not that simple, right? Because

[00:10:48] the cost have elevated over time to such a degree that this is where you have to be able to sell

[00:10:55] in order to make it economically feasible and that doesn't come from a sash of trying to preserve

[00:11:00] his return. That comes from how that pout's financed what the banks require in terms of margin

[00:11:05] to blend construction loans. So there's a number of things in the ecosystem and I think the way

[00:11:11] that this manifests over time is, you know, we're in a margin-based business, this production

[00:11:17] of housing business. The good news is we need housing, right? So we're not living in a market where

[00:11:24] there is no need for housing and where our product, nobody wants our widget so to speak, right?

[00:11:29] There's a lot of people who want our widget. So either price with macro economic change is

[00:11:35] going to start responding to that and you'll have the workable margins and you'll be able to

[00:11:40] deliver your widget that being a house in our in my analogy or if every Canadian has spent their

[00:11:47] last marginal dollar on housing, which I don't believe to be the case but let's say it was,

[00:11:52] then you're going to start seeing those cost side factors respond, right? And you're going to

[00:11:56] start seeing some heat come off labor markets and infrastructure, you know, because nobody's

[00:12:02] building anything, right? I think about the last couple years like we've had not a lot of activity

[00:12:06] and we're already starting to see in my world some of the front end trades moderate in terms

[00:12:13] of overall cost. So one way or another you're going to start seeing workable margins and for that

[00:12:19] midcap investor as you sort of alluded to, I do think there's an opportunity here and I do

[00:12:25] think that legislation, while today's macro economic conditions are such that you're not

[00:12:30] able to take advantage of those opportunities, that legislation isn't going to go backward,

[00:12:34] right? So the progress that we made when the macro economic conditions start to settle,

[00:12:40] I do think there's an opportunity for the smaller investor to take advantage of some of these

[00:12:46] rule changes around, you know, missing middle development and intensification on smaller sites

[00:12:53] and things like that. And I think that will be one of the great ways that we can actually

[00:12:56] start solving some of our supply side problem. Yeah. So a little bit more on the supply side, right?

[00:13:03] So you mentioned that there had been a lot of suggestions from industry leaders such as yourself

[00:13:10] to, you know, government organizations and the governing bodies kind of behind this, the, you know,

[00:13:15] the keepers of the red tape we will say, well, what are some of those would you say like the most

[00:13:20] important suggestions that the industry has provided? It may be have or haven't been met or

[00:13:28] or haven't been well enough received or implemented. Well, I, one of the ones that I,

[00:13:35] I've mentioned and, you know, this may be a controversial subject because, you know, but it is what

[00:13:42] it is. I feel that part of the process like you could get policy right, but the problem is is that

[00:13:48] there's different levels of government that all have a hand in this and they're not all that

[00:13:53] well coordinated in my opinion. Right. If you think about some of today's challenges and why,

[00:13:59] you know, there's been a lot of focus and attention on immigration levels, right? Really,

[00:14:05] it's because the infrastructure hasn't kept up with the level of growth and one of these things

[00:14:10] is a federal policy that being immigration and the other thing falls to, I wouldn't even say the

[00:14:15] province, it falls to the municipalities at the end of the day. That's where the rubber hits the

[00:14:19] road in terms of housing production and development. And there's been a misalignment and now we're

[00:14:24] living with the result of that. I would say that coordinating better amongst the different levels of

[00:14:31] government is an important thing and I just don't see enough of that. So I think there's a mis there

[00:14:36] and I think in this is a controversial piece, I think because people don't typically respond well

[00:14:42] and I say things like this but there's too many cooks in the kitchen, right? Like,

[00:14:47] I use this analogy and maybe it's a dom analogy but like if you had a massive sinkhole in the middle

[00:14:53] of a young street in downtown Toronto, you wouldn't have 53 community meetings and ask for 100

[00:15:00] different opinions before you fix the sinkhole because it's critical infrastructure and it cripples

[00:15:05] your city and your infrastructure and your ability to exist and do business. I see housing

[00:15:12] also as critical infrastructure and sometimes it's not the policy, it's how policy gets executed

[00:15:20] and the inertia of that process, whether it's bureaucracy, whether it's involvement with

[00:15:27] other stakeholders like and by the way look I am the first thing from an autocrat like I'm not suggesting

[00:15:32] we should just go and be able to do whatever we want as an industry but there has to be a more efficient

[00:15:37] way and give you an example like one of the things that we or I specifically and others probably with me

[00:15:44] mentioned was around the appeals process and who can file an appeal to a development application

[00:15:50] and under what circumstances and are there any barriers to this appeal? Like as it as it was,

[00:15:56] it was like there's no cost, you can basically file an appeal if you have standing

[00:16:00] if you're in the constituency, if you're a neighbor, if you have any concern or objection,

[00:16:05] that appeal because the whole system is a little bit gummed up. It may be frivolous and may not

[00:16:10] have a lot of merit but it'll still take many months to resolve, right? And you're just adding

[00:16:15] more time and more cost as you go. So we suggest well maybe there's different barriers or consequences

[00:16:21] to an appeal that fails and that might reduce the amount of frivolous appeal or things like that

[00:16:28] and people don't like touching that's a thorny subject right so people don't like kind of going

[00:16:33] down that path but I do think it needs to be addressed and I think the way it has been addressed

[00:16:38] isn't even political. It's the PR around supply side challenges and I think that if I was

[00:16:49] three years ago, four years ago, five years ago at a community meeting you'd get a lot of

[00:16:52] opposition for a number of reasons. Today there's an equal amount of opposition and an equal amount

[00:16:59] support and that support is coming from people who have heard the message that man we're not building

[00:17:05] enough houses. Maybe we're the problem, maybe we need to stop objecting to every development,

[00:17:11] every bit of density that somebody's trying to. The amount of times I've argued over like 10

[00:17:16] meters which is to the eye not even noticeable and has no impact on anything really is insane.

[00:17:23] Yeah. That's starting to kind of like become a less of an issue so I do think we're making progress.

[00:17:29] Yeah. That's great here. I've just before day insurance and I got to say I do love that

[00:17:34] that example, the Canadian housing economy is pretty much feels like a sinkhole at some point

[00:17:40] towards less couple years so yeah I'm right there with you. Yeah it's interesting to see

[00:17:45] then the Nimbee's progressing towards that's had something I probably never thought I didn't have

[00:17:50] that on my bingo card for this year. You mentioned kind of like smaller investors earlier on

[00:17:56] one of the big themes right now is the market seems to be really scary and risky for a lot of

[00:18:02] investors. We've always been saying like as a lot of this risks are to materialize

[00:18:07] when you want to buy when there's blood in the streets, but a lot of people either the blood

[00:18:12] is their own blood which is part of the quote as well and so they're afraid to or I think

[00:18:20] Canadian real estate seems to be it's definitely an unsophisticated buyer at the margin and

[00:18:25] you know you're like a Canadian mutual fund flows right like they perfectly illustrate

[00:18:29] that Canadians will time the top and the bottom perfectly to their disadvantage right so

[00:18:34] though the law buy when the market's about to drop and they'll all sell when the markets

[00:18:38] about to recover with all of that being said like I think people need to healthier approach

[00:18:43] to what risk is and how to create opportunity from bad about investment environment.

[00:18:50] What would you recommend given that I would say you're probably among the most experienced

[00:18:54] people in the real estate space from an investment perspective for people who want who still

[00:18:58] want to invest in real estate but are having a hard time getting a handle on the risk environment.

[00:19:04] You make a great point and you know first of all I unfortunately it's not only Canadians that

[00:19:10] have that psychology I think it's just human nature right I mean people are emotional

[00:19:16] beings and when it comes to finances and risk it's a very emotional thing right so when you're

[00:19:22] hearing and reading and seeing and you know yeah of course it's nerve wracking. It's hard to divorce

[00:19:27] your logic from your emotion in any market. The way I would you know is there blood in the streets

[00:19:35] today like yeah but it's honestly it's not as bad as you might be hearing and reading like a market

[00:19:44] that is just not buoyant like today we have a very slow market nobody's buying

[00:19:53] resale nobody's buying pre construction condo construction costs are high the market is jammed

[00:20:01] but we all know why right so it's not like like out of the world of problems you can have as an

[00:20:06] investor. The worst is I don't know why nobody wants to buy what I'm selling. That's the worst problem

[00:20:14] and that's not a problem we have and to me the way I distill that is the fundamentals are still very

[00:20:19] very strong. We have a scarcity of housing that's not going away that's gonna continue. That's

[00:20:26] that's a great backdrop now from here it's trying to kind of understand how to participate in

[00:20:33] this growth and what we're ultimately going to see which is better markets in the future.

[00:20:37] I would say that the last thing somebody should do is DIY and the reason look I invest in

[00:20:45] equities obviously outside of my my own I mean predominantly obviously my wealth is tied up

[00:20:49] in my business and real estate or whatever but to diversify you have some money and other things

[00:20:54] and I don't I don't manage my own equity portfolio because what the hell do I know about equity

[00:20:59] right like I'm not sitting there crushing charts all day and like following company news

[00:21:04] but there's people to do that and do it well and I find out who those people are and I

[00:21:08] give them my money. So I feel like very similarly if you're looking for exposure in today's market

[00:21:14] whether you're sophisticated or unsophisticated it is not the relevant point. The point is

[00:21:21] is that if you are like take up take us for example as a firm we are plugged into all the banks

[00:21:30] different trades we have 110 projects going on at once there's a lot that goes on in terms of

[00:21:36] you know you have to have a balance sheet you have to be like why aren't we bleeding in the streets

[00:21:40] because we have a reforching it to be properly capitalized and we have the liquidity to be able

[00:21:46] to deal with issues not everybody has that luxury so it becomes very important to work with people

[00:21:54] believe our capable and trustworthy and know how to navigate this and whether you do it directly

[00:22:00] or not like people like us are passive investment if somebody just wants to like not even think

[00:22:05] about it and just give us their money and that's us. However you can still invest directly right

[00:22:10] be a hands-on real estate investor right by a foreplex by a you know home to renovate or value out

[00:22:17] you can do all those things you still should have expert advice right like people should be listening

[00:22:23] this podcast they should be trying to get a hold of you guys and saying look what do you think I

[00:22:28] should do can you help me can you put me in touch with the right specialist in my market that's what

[00:22:33] I'm a big believer in that and you know I don't feel that I'm a hypocrite when I say it because

[00:22:39] in real estate yeah we do it ourselves because we're in this business but in every other thing I invested

[00:22:44] I don't try to do it all my in fact I've tried to do it on my own and failed miserably right

[00:22:49] which is why it's like everybody hears that oh yeah should I be buying and video right now like

[00:22:54] what do I know right like at the end of the day you know who knows like Scotia or who

[00:22:59] whoever right and so I'm a big believer that people today if they're inclined to invest which I believe

[00:23:06] they should they should be given the time and the fact like I said I think we're 70 75% of the

[00:23:12] through this thing and there's going to be a lot of opportunity but they should just find the right

[00:23:16] people to do it with yeah I mean it's funny sash I every time I've tried to go and and get creative

[00:23:23] in the stock market and like oh here's this mining company that I heard something about you know

[00:23:28] how to make a couple thousand dollars disappeared in the thin air take my stock investing advice

[00:23:32] um you know I think it really goes back to to to the principle of of who not how right

[00:23:39] it's that simple principle of find people that are doing it better that live and breathe that right

[00:23:46] like I don't want to do my own accounting because there's I can pay someone who I can bring

[00:23:51] on my team and they're going to do a substantially better job and figure out new ones is that

[00:23:56] I could spend years trying to do and save a couple bucks but if I can dish it out to a professional

[00:24:01] then I get to go back and spend more time on what I'm really good at. Yeah and let me give you

[00:24:07] real example and I won't use any names but I met a year and a half ago with a very small group

[00:24:14] of people in our industry with the major Canadian bank and their leadership and one of the

[00:24:20] questions that came up was okay we all know what's about to happen right we got to start gearing

[00:24:25] up interest rates we you know how are you guys seeing this differently than oh wait don't know

[00:24:31] right that the global financial crisis there were two key takeaways that I got out of that

[00:24:36] one of them was unlike oh eight oh nine which was a liquidity crisis like you actually had

[00:24:44] banks and institutions hoarding liquidity to shore up their own balance sheets that's not the

[00:24:51] problem we have a very stable banking system the US has a very stable back banking system there's

[00:24:56] no systemic risk to the banking system there's a lot of liquidity just waiting on the sidelines

[00:25:02] because the conditions are such that it's not ripe for investment just yet but when those

[00:25:08] conditions start to change there's going to be a lot of liquidity piling back into the market so

[00:25:11] that was one of the biggest things the second was they said you know we learned a lesson in coming

[00:25:17] out of a way don't I what happened in a way don't nine is we changed all the parameters for everybody

[00:25:22] we said okay here's our we're we're changing ratios on loans we're changing criteria we're

[00:25:29] doing everything to be able to protect ourselves and whether you're nick the

[00:25:34] gigantic industry player or Dan the very small player he's getting the same

[00:25:45] treatment and and what they learned coming out of it was they ended up just pissing off their

[00:25:51] their biggest and most experienced customers because they ended up obviously surviving and thriving

[00:25:56] only they were pissed because they went back to their lender saying well you you basically

[00:26:00] changed the rules of the game on me halfway through and that's not cool so I went to your your competitor

[00:26:06] and the ones that were very small fringe players they ended up dying anyway right like and and so

[00:26:13] what they said that they would do differently is that they would look at the landscape in a very

[00:26:19] different way and try to work with the biggest and best in almost as consistent away as they could

[00:26:26] to try and get through this together and then you know that's where relationships matter a lot so

[00:26:31] to the point that you guys were making in terms of finding the the biggest and best around it's

[00:26:36] markets like this that that matters a lot right like it matters a lot because there's a lot of

[00:26:42] you know when you're when you're working with a bank for example and you have three billion

[00:26:46] dollars of outstanding construction loans with them you're probably gonna try to reach you know

[00:26:52] compromise on certain things and you're gonna have a a different seed at the table so

[00:26:56] I think for investors bigger small you know getting the right partners around the table whether

[00:27:02] again whether they want to do it passively by just you know using their R's piece and putting it

[00:27:07] with people like us or whether they want to do it actively and work with people like yourselves

[00:27:12] and figure out how to make great investments either way you need experts. Yeah excellent insight

[00:27:19] I think it's one of the big things we talk about too is like building that team and whether it's like

[00:27:25] investments to someone like yourself or creating the team around you to make it so that you can

[00:27:30] successfully go out and buy your own stuff. On that note and maybe just like a quick answer here

[00:27:37] because I know Nick has some curiosity around you know we're getting a lot of Canadian starting

[00:27:41] to to be interested in the U.S. and and I know you have some some insight and and

[00:27:47] experience in that market but if you were a new investor today I know you guys are dealing in them

[00:27:52] millions tens of millions if you were not in that position and somebody just said hey

[00:27:59] you have a budget of a million dollars maybe got you know 300k equity cash to put out right

[00:28:04] and plus debt what would what would you your move be what would you be buying today given the

[00:28:09] circumstances in Canada in Canada I mean like we we're talking a little bit before we we started

[00:28:16] the formal podcast Nick and Nick and I as you were putting your makeup on Dan and we were talking

[00:28:23] about you know Saskatoon and and some of the opportunities that exist in a smaller market like

[00:28:28] Saskatoon I think that you know oftentimes the Canadian market is so focused on the Toronto's

[00:28:35] and Vancouver's and now more recently kind of Calgary and Montreal but like generally speaking there's

[00:28:41] some markets that are ignored that also are growing also require housing also have different economics

[00:28:48] that I think are are even today work work reasonably well right so I think that if I were an investor

[00:28:54] today at a smaller scale well a million bucks isn't that small scale but I start looking at some

[00:29:00] of those again I wouldn't do myself I try to figure out how to how to get in touch with people

[00:29:05] that can help me navigate those markets because they have coverage there have knowledge there so

[00:29:10] that's one one way and then the second way I think you know this is gonna sound ridiculous but

[00:29:16] I buy a pre construction condo you know somewhere in the peripheral Toronto area and I don't mean

[00:29:23] like Milton I mean like the Queensway or you know these these like just off the

[00:29:30] core grid but on transit there's a big step down in the Persquire Foot Price compared to like

[00:29:37] let's say buy by Ryerson University or whatever the case is but at the end of the day there's

[00:29:43] I believe more upside there and I think we're at a low point in the market and I think from here you know

[00:29:47] we're gonna regain our stability we're gonna see rank growth we're gonna see all the things that we

[00:29:52] used to see because there's that need and that need isn't going away so I think it's a good time

[00:29:57] to be doing that so those are the two things I focus on if I'm gonna stay in big markets like Toronto

[00:30:02] I think it's a construction condo if I if I'm agnostic to markets I had started looking at

[00:30:08] some of these smaller markets. Yeah I think the condo one is such a contrarian taken today's market but

[00:30:14] I think it is like one of the things that people are sleeping on and for me like prices would

[00:30:19] have to be pretty compelling for me to get into that but I think that on the one-off cases like a

[00:30:23] lot of people don't think about a market that's falling like the blood in the streets thing

[00:30:28] in the way that they should there they're all thinking I'm gonna wait for prices to hit their

[00:30:32] bottom like any divisibly see it on a chart that okay we're at the bottom and then it starts

[00:30:36] returning and now all of a sudden I'm buying you know at the bottom they don't think about

[00:30:40] the people who are you know getting these distress assignments or getting these power of sales

[00:30:45] or you know negotiating those those deals so that the sellers are coming down 10% or 20%

[00:30:51] from their asking price and that ends up being the data point that you know it is the

[00:30:56] home that creates the bottom that is what you know and I think the people who are aggressive with

[00:31:01] their acquisition strategy on the way down are gonna be the ones who benefit the most on the way back

[00:31:06] up. Totally really. Nick I know you had some thoughts on the US here and we'll finish up with that so

[00:31:11] I mean I'm curious to know as well because I think like one of the big things that we see a lot of

[00:31:15] his Canadians thinking like oh opportunities gone in Canada we did a full analysis on it I think

[00:31:19] like the like especially your fringe markets and Canada versus the US I think fundamentals are

[00:31:24] actually maybe more compelling here than kind of like fly over country in the US but uh but

[00:31:29] go ahead Nick and then I'm very curious to hear the thoughts. Yeah I mean not much more to add to it

[00:31:34] I guess just you know again there's there's the Canadian sentiment that you know that makes it into

[00:31:41] some some mainstream media that you can't invest in real estate here anymore in Canada which is just

[00:31:46] highly not true and that you know that markets and and tax structure and availability of labor

[00:31:56] and materials and all these things are just so much more ample in the states and you know again

[00:32:02] as Dan was just saying you know we've done a lot of research on that to essentially prove that wrong

[00:32:06] to a certain extent and you know I know you've got your hands in a bunch of markets in both sides

[00:32:11] of the border right downtown south and in the the USA as well as as across Canada here and I'm

[00:32:17] I'm just wondering can you maybe shed some light on some of the challenges and the and the

[00:32:23] opportunities and maybe the similarities and the differences that that you're seeing kind of

[00:32:28] not just the markets but even just with the two countries I know that's a tough one because it's

[00:32:33] such a big question but any kind of insights on that I think would be would be really valuable

[00:32:38] for not only Dan and I but for our listeners yeah I tend to agree with you guys that you know

[00:32:44] anybody who thinks Canada's over and you should be investing like us as garbage like I like

[00:32:48] I mean it's like when I was having you know podcasts back in at the beginning of COVID being like okay

[00:32:53] so now that cities are done what do we do yeah really I'm gonna be looking backwards being like oh

[00:32:59] I really did I think that so here's how I would characterize it kind of super high level just to make

[00:33:05] everything we love about the US or we think we love about the US right the quicker approval

[00:33:11] timelines more availability of labor and infrastructure in some cases the growth of cities you know

[00:33:21] places like Miami were active in Miami were active in Atlanta big big sort of corporate centers

[00:33:27] they are a double edged sword and and what I'll tell you is that notwithstanding the volatility

[00:33:31] of the macro economy today we have a forever imbalance of demand versus supply in Canada

[00:33:40] I cannot stress how important of all the factors that is the most important factor period what you

[00:33:48] see in America is that timing becomes a lot more important because migration patterns are very

[00:33:55] different immigration patterns are very different. First of all Canada on an absolute

[00:33:59] you know relative to our population based way higher level of immigration the bigger factor though

[00:34:05] is the fact that you know you have 40 metros in America that have over 2 million people

[00:34:09] so you can live a pretty urban lifestyle in 40 different cities you simply do not have that

[00:34:15] opportunity in Canada so people that come in immigrate to Canada they're concentrated in certain

[00:34:19] cities primarily which compounds that supply demand imbalance. The amount of times US markets

[00:34:26] can turn on a dime in terms of people coming in versus out like you to use Toronto as an example

[00:34:32] like you're never going to have negative population growth in southern Ontario never is a long

[00:34:39] time but you know what I mean right like you that is not something that we're going to see

[00:34:43] in the near term one election and you could see a total reversal of migration trends in the US

[00:34:49] Americans tend to be more transient they the you know corporate culture is different people are

[00:34:55] the amount of Americans I know of friends and relatives that are like I was born in Chicago I

[00:34:59] went to school in L.A. and I work in New York like in Canada it's like I was born in Toronto I

[00:35:06] went to Western which is super exotic and now I look at the stocket right like in America you have

[00:35:12] a different what we're looking at quite a little differently so why that matters is that markets get

[00:35:18] a bit overbuilt sometimes in the US there's not a lot of pre-construction markets so they're

[00:35:23] mainly spec built right mean they're built and then these units are sold that's why during

[00:35:28] 0809 you saw a whole bunch of buildings that that were empty because they weren't able to sell them

[00:35:33] after they built them and that was a different issue but what tends to happen is in times of euphoria

[00:35:38] and times of growth liquidity is plenty full you know there's exuberance and abundance on the

[00:35:46] development side and a lot of stuff gets built and then if there's some macroeconomic shock that

[00:35:51] changes migration trends or you know it's an election or taxes or whatever it is now you're left with

[00:35:57] all this inventory that you can't clear out and that can take a long time to clear out right like

[00:36:03] a market like Phoenix for example the global financial crisis disrupted the growth that was

[00:36:08] happening in Phoenix and it took a full eight years for prices to get back back to where they were

[00:36:15] pre-global financial crisis that's just not something we're going to deal with in Canada so

[00:36:19] I don't want to sound bearish on the US I'm saying that you have to be very careful and you have to

[00:36:26] be better with your timing and that's where I think professional

[00:36:30] professional should be doing it whether it's you know you're investing in a reet

[00:36:33] then as you as your exposure you're you're investing you know alongside guys like yourselves

[00:36:37] that have studied these markets or people like us don't do it yourself can't it out on the other

[00:36:42] hand I think has just much more intact the ones they pedestrian fundamentals like they're just

[00:36:47] they're much more pronounced and they're not easy to disrupt yeah I love that I think that's it for

[00:36:54] me I got I got a lot of this you we've been searching you all add the questions for it like so

[00:36:58] so now that the three of us have figured it all out yeah we need to get out there and and

[00:37:05] part or was that any any final thoughts or anything you want to leave us with Sasha the only thing

[00:37:12] I want to you know I've said it every opportunity I've had is that you know this is a moment in time

[00:37:17] and I think that the the luxury I get out of this period of time is the fact that the conditions

[00:37:24] precedent are such that what's happening is we can see exactly why it's happening and the fact

[00:37:31] again I keep stressing the fact that we have this fundamental scarcity which is of all the factors

[00:37:36] the most important so I think we just got to be patient as an industry we have to be patient as investors

[00:37:41] and just sort of be smart surround yourself with pros and and just be patient sound advice from a

[00:37:50] very wise man Sasha thank you so much for gracious a third time third time yes yeah you know I

[00:37:58] guess I guess is going to be your first annual reoccurring guest here so we'll put the links to to

[00:38:05] Sasha and to Gray Brook if anyone's interested in investing alongside them they are complete

[00:38:11] professionals in the industry and have a wide array of investing opportunities for people to get involved

[00:38:17] and so Sasha since here thank you from from both Dana myself and again every time we talk to you

[00:38:23] what I definitely learn I think are too as well so thank you and we'll chat with you soon

[00:38:29] appreciate it guys thank you thanks the Canadian real estate investor podcast is for entertainment purposes

[00:38:36] only and it is not financial advice Nick Hill is a mortgage agent with premier mortgage center

[00:38:43] and a partner in the G and H mortgage group licensed number 10317 agent licensed m21004037

[00:38:54] Dana photos are real estate broker licensed with rare real estate a member of the Canadian real estate

[00:39:01] the Toronto real estate board and the Ontario real estate association