• Immigration- A.C.T.02024.01.25
    Jan 25 2024
    Canadians have a low birth rate. This should mean population decline over time. You can see it in many families. My mother had eight brothers and sisters. I have three. Between we four siblings who are all in our 30s, we have four children, so the seven of us including our spouses are not replacing ourselves either. The population pyramid is upside down in my family, and in many families. This means unusual family dynamics compared to what has traditionally been true, where grandparents need to alternate Christmas and birthdays with the grandkids because there are more grandparents alive than there are grandkids. An upside down population pyramid creates a lot of pressure for the younger generation. The attention of my wife and I has been pulled toward our ageing parents as well as childless uncle’s and aunts growing needs as they age. Fewer younger people to support a larger, ageing population is a recipe for burnout and economic stagnation. The only reason we do not have a population decline and the extreme hardship associated with it is because of our immigration policies, and on a recent podcast episode I shared how economist Benjamin Tal said the only reason we are not in recession is because of immigration. Newcomers to Canada have been making the news as scapegoats for the housing crisis. I am familiar with immigrants to Canada because half of my staff are applying for permanent residency, and most of the new tenants that I have placed in the last couple years have been new arrivals to Canada, mostly university students and their families. The education pathway is very common for people trying to immigrate. They come for an education and integrate themselves into the community through work. I have found them to be extraordinarily hard-working, motivated and diligent. The brightest and most industrious people from other nations come here for a better life because life at their country of birth is very hard for them. I have heard stories of standing in lines and large crowds, attempting to get some cooking fuel and other basic needs. There is a housing crisis in Canada. We have a shortage because not enough new supply is being built. Most of our rental housing stock is from the 80s earlier. Foreign students have been blamed for the high cost of housing, which is not fair to them. There is new and hasty policies put in place designed to curtail the number of foreign students who come to the country and changing financial requirements on those who can stay. I’ve linked an article in the show notes where the publicly funded colleges of Ontario are complaining about the new requirements and how unfair they are. https://apple.news/AvwEelGqcRvq6ITIA_L9VUQ I have seen this firsthand hand with some of my tenants being forced to leave because they cannot afford the cost of living. They have high expenses, and frequently minimum wage jobs. To remain in Canada and have your visa renewed the rule used to be that they must show a balance of $10,000 in their bank account at all times. That dollar amount has now been doubled to $20,000. One of my good employees was told he would not be able to renew his work visa and his wife was not able to renew her study visa because they did not have the cash in their Canadian bank account. they have money in their foreign bank account, but they come from a country where the infrastructure is so poor it is impossible to withdraw funds without going there in person. This is the same place that has fuel shortages and food shortages at times so it is essentially a banana republic. If my employee was unable to show he had enough money in his bank account then he would not be able to renew his family’s visa. His wife is taking a masters, as well as working as a teacher at an elementary school part time. I believe that he and his wife and his son would be valuable members of our society if allowed to stay, so I loaned him the money he needed. For another staff member, I have hired an immigration lawyer to assist him with the application process for his permanent residency, because he has special skills I have not been able to find in Canada. I get the benefits of loyal, hard-working staff, and they get the benefit of a pathway to citizenship in a country that will give them and their children the opportunity to obtain prosperity that many Canadians take for granted. I hope this episode of the act show has given you a different take on the immigration story, and perhaps will make you think about how you can benefit from the trends. as a housing provider, my industry stands to benefit because population growth leads to GDP growth which leads to jobs which leads to migration which leads to higher prices of real estate and rent. The shortfall of housing we have is indeed a big problem that we are facing, but remember that the larger the problems you solve, the larger your paycheques will be.
    Show more Show less
    7 mins
  • Interest Rates- A.C.T.02024.01.24
    Jan 25 2024
    Today’s headline news in my feed was that the bank of Canada has decided to leave the overnight rate at 5%. There’s speculation that the overnight rates will drop in the spring or summer. What does this mean for you as a business owner or investor? The availability of credit pumps up asset prices. If the cost of servicing debt is very low, there is more willingness to pay more for the fixed amount of goods and services in an economy. If the cost of goods and services increases, this is inflation. The central bank can set the overnight interest rate in an attempt to influence the cost of credit and thus the prevalence of inflation. What do interest rates do in my industry of rental real estate? Higher Interest rates makes it more difficult for people to qualify to purchase a house, this keeps people renting for longer and increases the Tenant pool. Where I have property, it is difficult and expensive to build new property so a larger tenant pool increases the market rent,. Lower interest rates allows for increases of real estate prices values. The interest rate is more of a neutral factor. Overnight interest rates affects Short-term debt servicing like credit card debt and variable rate mortgages. Most of my mortgage debt is in fixed rate mortgages which are priced based on the Canada mortgage bond of various maturities, so changes to the overnight rate does not affect my business much. The overnight rate is a neutral factor.
    Show more Show less
    4 mins
  • Inefficient markets (vehicles fleet management example)- A.C.T.02024.01.23
    17 mins
  • Reporting frequency - A.C.T.02024.01.22
    Jan 25 2024
    How often should reporting be done? Reflection on today’s episode of the accredited Canadian’s toolkit.
    Show more Show less
    2 mins
  • Mortality book review - A.C.T.02024.01.20
    Jan 25 2024
    Horace Mann said “Until you have done something for humanity, you should be ashamed to die” I’ve had the opportunity to reflect on the human condition recently. With ageing family members in and out of hospital and beginning to experience more frequent health problems, and a recent seminar that had many exercises to remind me of my own mortality, It has become a renewed topic of interest for me, and Ive spent some time each day thinking about it of late. Many thoughtful people have commented on this, but a very interesting and fresh perspective for me is that of Christopher Hitchens. He wrote a series of columns in vanity fair, while he was in the process of dying from stage 4 esophageal cancer. his editor compiled them all together into a book. I’ll review the book and add my comments on mortality at the end. Feel free to skip this episode if the topic is not yes of interest to you.
    Show more Show less
    17 mins
  • CIBC Interest Rate Prediction - A.C.T.02024.01.19
    Jan 21 2024
    I read an article today by Jennifer Dowty of the globe and mail. I’ve linked it in the show notes. https://apple.news/AsTqUftr8R3StcKqNGFWjJA It was an interview article of cibc economist Benjamin tal. Of interest he said the only reason we are not in recession is because GDP growth is being propped up by population growth. I found this funny because it’s this very population growth that is making negative headlines right now about how we need to restrict newcomers to Canada. I hope it is apparent that since immigration only thing keeping our economy from contracting, restricting immigration is the wrong approach. Most people would agree that growth of the economy is a good thing, and the fact is we need people to make that happen so rather than curtailing immigration, we should be building infrastructure to support it. Anyway, one of the first things Benjamin Tal talked about was a rally in the bond market, and how he thinks it has come too early. Higher bond prices means lower bond yields. This means lower bond interest rates are expected by the bond market. If Mr Tal is right, interest rates will remain high for the next six months with central bank cuts starting mid 2024. He predicts very low growth to Canada’s economy in the coming year. I thought it was interesting that he mentioned the bond market because I have come to understand that the bond market is the leading indicator of all things in the financial system. If you could decipher what the bond market activity means, you know what’s coming next. I think that is because the sentiment of bond traders eventually becomes a self-fulfilling prophecy. The bond market is the largest market in the world. it dwarfs the stock market, and indeed the economies of most countries. The global bond market is 133 trillion. The size US bond market, the largest economy in the world, is 50 trillion. Compare that to other common financial metrics like US debt of 34 trillion, and the US GDP of 23 trillion and you see that bond markets are the biggest, biggest and most important part of our financial system. Bond markets are a reflection of how we choose to interact with each other, so I find it interesting how little bonds are talked about and how misunderstood and misinterpreted bonds are by many people, including me. I struggle to understand how the bond market actually works but I’ll share my findings below. I welcome any comments on this, so please reach out to me because I’d love to learn more about this. This is a bit of a tangent, but I believe it’s worth saying. I think of the behaviour of the people that make up the bond market as the first mover. Whether there is no bond market activity and no availability of debt, prices and economic activity are low. When people invest in debt, economic activity rises. Similar to how having a positive mindset will generally lead to positive results. If you have hope for the future, then you will take actions today that may cascade into positive results. If you fear a bleak future, you will not take those initial actions. This is a tangent, but I think about how human agriculture was such a turning point in our evolution. The neighbours of those early farmers must’ve thought they were crazy, sacrificing today’s food in the hopes to yield more in the future. In cursory google searching I found some crops are much higher yielding than others. For instance, some US sources site that the average amount of seeds of corn planted per acre is approximately 30,000. 30,000 plants will produce one or two ears each. Each ear of corn has approximately 600 seeds. Ignoring all other inputs This means that nature allows us to turn 30,000 seeds into up to 36 million. 600 to 1200 seeds for each corn seed planted means the return on investment 60,000%. with yields like that it’s no wonder that we have corn in virtually every processed food, and even added to gasoline. Of course, not every seed you plant will germinate, and crops can be ruined by weather and pestilence. There are labour costs and equipment costs and fuel costs. so the return real on investment and time might be much lower. My brother works as a farmer of sorts and he tells me the average yield in agriculture is about 17%. Actively cultivating hope for the future means you will have energy for today. Since the bond market is the leading indicator, the yield curve of the two year to the 10 year bond being inverted tells us that there is a recession coming or underway. In the US every single time the bond deal corrected itself to become positive that is when the recession hit. Some people will be caught by surprise when this happens, so this will create some distressed sellers. Now is the time to prepare to purchase the distressed assets so you are ready to move when opportunities become plentiful. Opportunities are for optimists. Otherwise they would be called pessimitunities.
    Show more Show less
    8 mins
  • Which bad decision is the best one - A.C.T.02024.01.18 - IBC SL40 399 G3 Boilers
    Jan 21 2024
    After an unseasonably warm winter, this week of January has been a deep freeze. we’ve seen our properties in southern British Columbia experience frozen pipes and heating systems are struggling to keep up. This is the time of year that Contractors can make a lot of money on unprepared property owners. One of the buildings I own is managed by a third-party agency. Things were running pretty well until a key man who worked for a the heating company we use moved cities. The same company continued to service our heating system in this building, but the key employee who knew the building inside and out was now gone. The replacement technicians, this heating company was sent to the building did not have the same familiarity with the heating system. The result was inconsistent maintenance and a failure to address a slump in the exhaust for the boiler system. An anchor had detached from the wall, causing the exhaust to sag, and this sag caused condensation to accumulate. so much water accumulated that it blocked the pipe. The fan motor in the boiler was unable to keep up because it was pushing on water instead of air. We were repeatedly replacing boiler fan motors without addressing the real issue, which was the sag and belly that had formed in the exhaust. on New Year’s Day tenants were calling the property manager complaining that there was no heat. The larger boiler responsible for the heating system is 399,000 BTU and the fan motor had failed again. The property manager called the heating company who were very busy that day., diagnosed the problem as the fan motor, which was still under warranty since it was replaced last winter. They took a day to order the part and were informed that it was on backorder for two weeks. The heating company suggested providing the tenants with electric heaters until the fan motor arrived. When the Property Manager called me about this, I did the math and found out that 49 units requiring electric heaters at a cost of 100 or $200 per unit would buy me a new boiler. The property manager asked the heating company for a quote for a new boiler to be installed right away. The new boiler was a different brand that was in stock and including labour could be installed before the weekend and the quoted price was approximately $19,000. I thought that was quite expensive, so I called one of my partners who has been in plumbing for decades. We found a boiler at the wholesaler for $9000, it was an IBC, the same model as the one that had failed. This is important because it would be a quick removal and replacement with. I need to change the copper supply and recirculating lines which on the last boiler I did added about $3000 in fitting, pumps and valves. I found a willing hard working plumber who had a hole in his schedule and came out for the day to replace the boiler fee for the 12 hours of labour for the plumber and his apprentice was $1500. The parts were approximately $1000, and included the work we conducted rerouting the problematic exhaust and fresh air intake. By spending a day on this problem, I saved the property approximately $8000 on this boiler install and we solved the problem without doing the Band-Aid of purchasing electric heaters which have not have done this sufficient job and present a fire risk. We have now finished troubleshooting the smaller boiler which is 299,000 BTU and it was found to have a cracked heat exchanger. The new larger boiler is on order and we will likely replace it next week, with the same IBC boiler that we installed in the first week of January. It’s important where possible to standardize the equipment so that staff can be familiar with troubleshooting it. It’s the same for the choice of all components in a renovation. Standardization saves time and money in new installs and in maintenance. The moral of this story is that just because it appears to be a desperate situation, try to detach and think about all possibilities. in this case no the crisis I faced was the prospect of no heat for 49 families when it was -6 out with a forecast of -30 in the coming days, and For the American audience that is a swing from 22 Fahrenheit to -22 Fahrenheit. When I was presented the choice between spending 5 or $10,000 on portable electric heaters or $19,000 on a boiler system, I realized that this was a false dichotomy. Those were not my only two choices and by taking the time out of my busy schedule to get more information and not be pressured to make a bad decision we got the best and most cost effective solution. So if you have a problem, the only thing you should rush is to seek help by calling on as many partners and other service providers you know, because sometimes the best of two bad options you’re given is neither of them.
    Show more Show less
    7 mins
  • Strata witch hunts & why democracy doesn’t mix with business - A.C.T.02024.01.17
    Jan 18 2024
    I had a run in with one of my family’s strata council recently. Before I tell the story, I’ll share with those unfamiliar that a strata is an ownership structure, where an apartment building or condo building is owned by a large group of people who typically live in the building. This living arrangement is typically more affordable than a single-family home but there are ownership decisions that need to be made such as Maintenance of common areas and building components, services like trash collection and the arbitration of disputes between neighbors. These decisions are made by a group of representatives of the owners who are voted in by the owners every year. These people are called the Strata council. When a building or community is running adequately well most people take little interest in its governance, because they are busy leading their lives. Voter turnout is notoriously low in all sorts of elections and Strata annual general meetings also called AGM’s are no different. Low turnout is the norm. Serving on a strata council can present an opportunity to experience governance firsthand, and for many Strata councils many members who are elected have no prior expertise with governance or prior experience in business. They volunteer their time, and the position comes with a modest amount of power, so, naturally, this will attract some bad actors whose motivation is the Lord over their neighbors,. From my American listeners, this form of governance is similar to the homeowners association that you may have heard about in the news. One article that I have linked in the show notes, accurately describes this type of ownership as been controlled by “neighbourhood governments that have brought abuse, acrimony--and seemingly absurd litigation.” http://www.ccfj.net/HOAgenLoathe.html In the case of my family member’s dispute, there were some minor alterations done to the inside of the unit which included flooring, paint, and countertops. The Strata president is a rather sensitive person to noise and when returning from vacation noticed the downstairs neighbour, my family member, had workers making noise associated to the upgrade. It was alleged that the noise was happening outside of working hours, after 5 PM. One such incident happened during daylight savings clock adjustments and the Strata president strolled downstairs to tell the worker to be quiet because it was after hours, however, because the clock had fallen behind by one hour, it was in fact, not 530, but instead 430. The Strata presidents’ error was not caught and my family member received $100 fine for Noise. No evidence was presented, so a fine was issued without any due process. Furthermore, the strata corporation demanded that a permission form be filled out for repairs to common property. Since there was no alteration being done to the common property and only to my family members property inside the Strata lot, permission was not required. My family member asked for detail about the noise violation and stated that permission to make changes to her Property was not required. My family member was given a response that another fine this time for $200 would be issued for failure to fill out this permission form, and for more alleged bylaw violations for noise. My family member asked for a meeting as is her right to be heard by the Strata council. At the meeting the Strata president was very aggressive yelled at her “I don’t like you period” so the real motive for the fines became apparent. Despite his conduct, Strata decided to rescind the $100 fine for noise, because there was no evidence of noise caused contrary to the Bylaws. The Strata council decided to insist that the permission form be filled out retroactively for the alterations that had been completed, with the promise that a $200 per week fine would be issued if this form was not filled out. The basis for this was a very thin case, and that is a provision in the bylaw That permission is required to alter anything The strata corporation was required to carry insurance coverage on. I helped my family Member draft a letter detailing why there is no need to ask for permission, and that this position directly contradicts another section of the bylaws that explicitly states altered property within the Strata lot, that was not originally installed upon construction, is not the responsibility of the strata corporation to insure. Since there were prior owners before my family member, there was no way for Strata to know if the alterations were done to Original fixtures. Given the age of this building, it is unlikely that my family members modifications were the first time floors or paint or the kitchen was upgraded. The requirement for this permission form by Strata and the threat to find my family member $200 a week If they did not comply is plainly a power move motivated by a personal vendetta of the Strata president against my family member. The most expedient way to deal...
    Show more Show less
    9 mins