Lessons From Canada's Last Real Estate Crash: The 90's
Your hosts Daniel Foch and Nick Hill are joined by Vince Gaetano as they dive into Canada’s history, discussing the eerily similar 1990s recession. Several lessons have been learned since then, as younger people begin to realize what they should be doing in this economy, whether it be with multiplexing in Toronto or learning how MICs operate and what returns they yield.
Key Takeaways:
Mortgage Investment Corporations (MICs) are investment entities that pool money from investors to lend out as mortgages, focusing on Canadian real estate. They provide regular income streams to investors from the interest collected on these loans and are structured to avoid corporate tax by being flow-through entities.
MICs are regulated by provincial regulators and must adhere to specific rules, including having at least 20 investors and ensuring no single investor controls more than 20% of the MIC. They can only lend on Canadian real estate and cannot own property except temporarily during enforcement proceedings.
The MIC primarily lends to builders and individuals needing temporary financing solutions, such as construction loans and bridge loans. This is advantageous due to the speed and flexibility of MIC loans compared to traditional bank loans, which can be slow and cumbersome.
Multiple opportunities in repurposing existing properties, especially in expensive areas like Toronto. Recent bylaw changes allowing homeowners to build up to four units on a property create significant investment opportunities.
There is a possibility of being bearish on the housing market while still actively investing. This approach requires understanding the market intricacies and risks to navigate investments wisely.
Many incomplete projects end up as power of sales due to poor budgeting, cash flow issues, and rising construction costs. DIY investors often struggle due to outdated knowledge and underestimating modern building code complexities.
The current housing market struggles are compared to past recessions, emphasizing the long recovery periods and significant price corrections seen in the 1990s. High interest rates and unemployment rates further complicate the market.
Patience, proper financial habits, and leveraging savings tools are essential for young investors. Exploring options like house hacking and setting realistic goals can help navigate the high entry barriers in the current housing market.
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Great Show as always!!!