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welcome everybody to condo investing with costas and this week's episode is tackling something that is on the top of everyone's mind for the past year plus covid but i'm not going to get into whether our government's done the right job the wrong job whether we have enough vaccines whether this is even a pandemic or not what i'm going to talk to you about is what i care about more than anything i always want people to be healthy but i want to make sure that we're still making money because quoting gordon gekko money never sleeps and that is more evident than ever now now throughout history during times of crisis some people have made vast fortunes these are the people that go against the herd these are the people that when everybody else is scared they dig in deep find the courage and make a move and that's what we're going to talk about now there's a lot of people that have followed me and invested in the pre-construction world in 2020. we had uncertainty across the globe economic uncertainty health uncertainties we didn't know for the first part whether there was going to be a tomorrow but now when the dust is settled whoever invested laster has done phenomenally well already so let's get started let's recap new year's eve 2019 the world health organization that there was a new virus coming out of wuhan china some governments were quick to hack on the act on this other governments like our own were not i was actually traveling throughout europe and it turns out covid was rampant there in the month of january when i was there i actually got a little sick when i was there and who knows maybe i had kovit maybe i didn't nobody even knew that there were tests back then and the tests that they have now there's a large group of people that saying they're invalid anyways regardless this happened and this was new on the world stage the world did not know how to deal with it because it was the unknown and man traditionally since the start of time is fearful of the unknown now what happens when the unknown blankets the planet hysteria fear and that's what was happening near the end of the first quarter of 2020. so what happened specifically in toronto and in canada well with respect to real estate and pre-construction we were set to have a record year in pre-construction sales for 2020. we were forecasting greater sales more volume than the record year of 2017. we're already the number one market on the planet for pre-construction but we were ready to catapult hurdle into new unforeseen territory and watch our prices skyrocket an example of this was a project by one of my favorite developers who will be on our show later this year they had a project right in the downtown core across from metro hall major tower they signed 400 units in eight days wrap your heads around that we were signing deals for our clients from noon until 1am three days in a row it was chaos it was mass massive people sitting there trying to get in to sign mob mentality but everybody was there for one reason because condo investing in toronto makes you money now shortly thereafter when covet had hit the canadian shores our government decided to lock down and this meant a complete change a complete overhaul to how we do things the pre-construction market essentially froze it was like someone pressed the pause button sales centers were closed no sales were happening projects that were about to launch were put on ice the only people that were still talking condos were a few of us platinum agents that kept our marketing budgets running but for everybody else nobody knew when stores were going to open up nobody knew when the never ending march drake was going to finish nobody knew what tomorrow held in store for us and the last thing on people's minds was real estate and this is what happened to essentially all toronto real estate near the end of the month of march 2020. now what we saw after this is we saw a couple months later starting end of april early may we saw confidence build up and this was seen in the real sale aspect of the industry where limited inventory led to an increase in prices now originally a lot of realtors and i'm not going to say lesser realtors but a lot of people that didn't pay attention to true market fundamentals and were actually doing their forecast based on hysteria and remember you never want to invest when you're emotional don't let someone invest your money when they're emotional either what we saw was an increase in prices now why did this happen this happened because unlike 2017 where we saw a drop in resale which was caused by the media scaring people and bad realtors listing their clients houses on the market when numerous other houses were for sale essentially bad realtor realtors and bad media flooded the market and prices drop but what we saw in 2020 was the reverse people were holding on to their properties and during the times of economic uncertainty it's a time to hold real estate not sell real estate and the canadian market is very educated very mature and very wise and i'm very proud of consumers and fellow realtors that actually handle this properly and helped us with the storm so when we had limited inventory we saw buying still present a demand for it and we saw prices start to increase now the pre-construction world is different but with prices increasing on the resale side what we noticed was when developers were first to launch their project and this started happening in june because as lockdowns were lifted and conditions were eased we started to see pre-construction pick up again the summer of 2020 saw a launch of a few projects not what we expected in the spring but still a fair bit and every single one of these projects did phenomenally well we had projects that were 10 stories we had projects that were 50 stories but all of them sold well and prices were high and they stayed true but one thing we did see was instead of prices dropping because that'll never happen with demand developers went to their financiers and said let's see what we can do for clients and due to the economic uncertainty of covid we saw extended deposit structures and this really assisted people because canadians for the most part i'd like to think they're knowledgeable and they understood that covet is temporary and covet is temporary temporary in a sense that it's a pandemic because what it really is is endemic and it will be with us for a while because just like the government can't stop climate change with attacks they won't be able to stop a virus with a few masks what we need to do is learn to live with it and our real estate market evolved better than anyone so when we saw the increase first in the resale market and then we saw the street startup of the pre-construction world and we saw both markets were very very healthy and that led us to believe that the fundamentals of our economy when it comes to real estate are strong and true we have a supply and based supply and demand based real estate economy in toronto and this is more important than anything when you're looking to invest because it is not speculation there is no bubble because if it was then the wheels would have fully fallen off and we didn't even get a flat tire that's how strong our real estate market is so what i want everybody to do is take a minute and think if our market can still grow can destroy the disastrous forecasts of major thing tax like cmhc major banks like rbc everyone bet against the market except me and some other realtors and those people that actually have their finger on the pulse listen to the people in the trenches the people that are doing the dirty work the people that live and breathe real estate and we all said that we were going to have a great year so unlike 2017 when the market crashed because we flooded the market 2020 saw extreme and great success because instead of flooding the market with inventory we held back and my hat goes off to the people of toronto that secured and kept their houses at their number one investment of their life and didn't destroy them with some bad decision making so now that we've established that our market weather the covet storm fairly well let's get into some actual numbers what i like to do all the time is i like to bring up points of top of discussion of what you will hear talking to other peoples about real estate and what they will tell you is that the condo market crashed houses are doing really well but the condo market crashed so my response to that is you're an idiot because the condo market didn't crash the rental market dropped but why did it drop and before we get into that let's get back let's go to the original point about the crash of the condo market for a condo market to crash it means the price per square foot has fallen into the toilet essentially but that's not the case because we are up year over year in sale prices so the price of a condo selling in december 2020 was up from the price of a condo selling in december 2019. so it didn't crash what we did see was a drop in rental rates in the city of toronto but in the outskirts in the suburbs in the periphery we saw some regions where the rental rates actually increased and why is that well in a past episode i told you about how many people come to toronto every year and i also told you that's new immigrants i also told you about how many foreign students come to toronto now that number combined is just shy of 200 000 i think we're at about 180. now if you have one-fifth of immigration because i think that's what it was from a hundred thousand i'm sorry 140 in the gta to about 25 just under 30 000 and you lose 40 000 students you're short 110 120 000 people per year now if rental rates drop by 10 15 in some areas 20. i think rental rates fared quite well because remember this is temporary and if you had bought a condo with first access condos and myself the condo would have increased in value so much that you would probably still be able to service your your carrying costs in your monthly debt with the lower rental rate if you had bought a condo with another agent who didn't get you first access then you probably wouldn't be able to do that and that's why in port's most important and paramount that you always use a platinum agent now you don't always have to use me and you can always feel free to call me for advice but you should always get you someone that gets your first taxes now we're going to be going to commercial shortly shortly but i'm just going to recap our market fared really well nothing tanked nothing dropped and we had a drop in rental rates only but not priceless and why was this because we never flooded the market now absorb that our market is fundamentally strong it doesn't crash during a pandemic it doesn't crash with record unemployment it doesn't crash with record decrease drop in immigration essentially our market is bulletproof and that's what i've been telling people and that's what i've been arguing with people and whoever listened to me has done extremely well we have the number one real estate market on the planet the healthiest the strongest the fundamentally most strong and that's why go to firstaccesscondos.com check to see what new projects are coming up and reach out to me info first access dot com but always remember click that you saw us on tv because we have special incentives just for our viewers now we're going to code a commercial and come back shortly thank you this was costas cavalis considering purchasing a pre-construction property you're going to need an experienced lawyer on your team david young a sobriet law has a knowledge to address your legal needs if you're buying selling investing or signing a pre-construction property contact d young at sobrala.com or 365-509-2039 extension 106. [Music] [Music] welcome back everyone i hope you had a nice break i hope you got a chance to absorb all my insight and my comments on my thoughts on our real estate market and covet um and why we weather the storm fantastic phenomenally well now what i'm going to do is i'm going to go back and i'm going to recap and talk a little bit about our rental drops and actually tell you what happened to our rental markets and why it dropped and i'm going to go into detail so if you think of covid in respect to a rental pool in toronto as a trident remember that three-prong spear okay so there's three points of attack and we got hit by three different it's like a three punch combo usually those are good enough to knock anybody even the most seasoned fighter out but not a real estate market we weathered it fight well we did stumble a little hence the drop of 15 to 20 percent of our rental rates but in the reality reality of the matter we fit extremely well so let's see what first happened when our city went into lockdown and when international travel became more difficult because it was never banned okay what happened was we had a drop in immigration numbers so we're used to seeing about 140 000 people a year coming to the gta 100 000 to toronto proper now what happened was i think the final number was we received only about 20 of that so we had between 20 and 25 000 new immigrants as opposed to 100 140. that's a substantial drop what else we saw in a second point was we also saw a drop freeze complete closing of tourism so what does how does that really affect our rental market well over 10 years ago airbnbs and short-term rentals started and everybody has heard of them and the vast majority of us have stayed at one or another in a course of our travel history now toronto has a lot of tourism over a million people here come to the city little known fact they're great for the economy they also came to the rise up of airbnbs now when the tourism got suspended and we didn't have any tourists these airbnb units the vast majority of their owners took these units and inserted them into the rental pool they wanted to rent out their units so we flooded our rental market with airbnb units approximately 5 000 plus at a time when our immigration numbers were cut to a fifth so imagine that we have one-fifth immigration flooding the market with five thousand additional units hence a drop in our rental rates the shortage that we had decreased a third blow and the third prong on the kovid trident was foreign students it is little known but uft alone has over 24 000 foreign students a year coming to the city of toronto when you add ryerson and other colleges downtown we're between 40 and 50 000 university college age students coming into our city every year these people rent over 95 percent of them rent college university campuses are quite small so the vast majority of this 40 to 50 000 pool of individuals go into the rental market now what does that do we have 40 000 eliminated we have 110 120 eliminated we've basically lost close to a hundred and fifty thousand hundred and fifty thousand renters we've added five thousand new units and lost that many renters from the pool so the fact that our market dropped by 10 15 even 20 in some areas is a testament to how strong our fundamentals are it's a testament to how much of a shortage we have it's a testament to cmhc and rbc saying that we need 32 000 for cmhc 24 000 from rbc new units every year back in 2019 this validates those statements made by those two institutions and validates what we at first access condos have been telling our clients and why we've been investing our money now for toronto to sell the most pre-construction units across the globe year over year there's a reason behind it remember i'm a real estate investment consultant because over 75 to 80 percent of my business is investing your money now the reason we're so successful in volume of sales is because there's a demand for the product and there's a demand because one capital appreciation the value goes up two there's a large healthy rental pool for your unit so your unit rents out and even though prices dropped for rental units sales prices stayed true these are important fundamentals behind this so now that we've hacked we've talked about what happened to the rental pool let's talk about what's going to happen this year 2021 and our forecast back in my spring webinar and it can be found on first access condos youtube in 2020 into april 3rd i spoke abo t my forecast and the effects of coven and so far i have been fairly accurate a lot of the things i said were echoed by economists like benjamin tal so what i predict is once foreign students come back in the start of the third quarter late second quarter of this year we're going to see 40 000 students coming back when vaccines are starting to get rolled out and the government figures out where they're getting them from we're going to see more restrictions lifted and we're going to get back to our lives sooner than later tourism will be the third factor to this and then airbnbs will go back to being airbnbs and most importantly the liberal government announced late last year that they're increasing their immigration targets from three hundred thousand a year to four hundred thousand a year to make up for the loss of immigration for twenty twenty what that means is of those four hundred thousand sixty percent of them or two hundred and forty thousand a year will be coming in through the investment economic stream these people will be bringing money and the vast majority will want to come to the center of the canadian universe which is toronto when we factor all those things together we are ready to see a huge increase in the demand for our toronto real estate and especially for demand in the core if you ask anyone across the globe where they want to live i'm sorry but they're not going to say i'm coming to canada to live to mississauga or i'm coming to canada to live to brampton or my dream is to fly to canada to live in whitby they're coming to live in toronto and these people will move to the core of the city and our condos are mostly in the core of the city now i'm not saying that you shouldn't buy condos in the periphery or in the suburbs because where there's money to be made you'll find first access condos but what i'm saying is for the downtown core that has taken the major brunt of the hit from covid when it comes to rental rates this is temporary by the third quarter of this year in september when these factors that i spoke of come into play and rejuvenate re-energize and start rebuilding the temporary loss in the market what you will see is you will see us revert back to 10 12 even 15 increases in rental rates year over year mark my words take a stat from september of this year and then take a stat of september 2022 of rental rates for one bedrooms and watch the increase you hear it here first this is my forecast the rental rate of late august early september 2021 in comparison to the rental rate of early september 2022 you will see an increase in the cost of renting a one bedroom in the city of toronto of 10 to 15 minimum i wouldn't be surprised in some areas if it's not larger so what this means for you the investor watching me is that you should take key to this next thing i'm gonna tell you this is a golden opportunity to invest your money in our real estate market and especially in pre-construction condos remember buying a condo today your condo won't be ready for four to five years we're gonna bounce out of covid in the next 18 to 24 months fully this virus is not going anywhere we will learn as a world how to deal with it better and it will become endemic instead of pandemic and it's going to be something that's just there and we live with and once we figure this out whether it's through vaccination education or whatever the people that are smarter than us decide okay we're going to learn to live with it and what this means is by the time your investment is built we'll have close to 500 000 more people moved into the city a city whose infrastructure couldn't handle the population 10 years ago this is a golden opportunity to buy don't delay go to www.firstaccesscondos.com and find out what projects are coming first before anybody else and call me it'll be the best investment move of your life now we spent a lot of time this episode on me giving you my opinion on the state of our condo nation in the gta and the effects of covet on our real estate market but why we're really here and why you're watching my show is to know how much money you can make because we are here to make money so what i want to do now is take the time and go over a purchase where myself and a lot of my clients followed me in the young and eglinton area of toronto we made a purchase back in november of 2015 and usually these condos take from anywhere to four to five years to build so we're going to use an example of a oneplus den which is around 600 square feet at a project known as 150 red path now this 600 square foot condo had a purchase price of 372 000 that works out at a price per square foot you're going to hear the term psf a lot the abbreviation of 620 that means 20 down initial down payment which is what you need for condos worked out to 74 400 fast forward to 2020 and 2021 that price per square foot in the area has skyrocketed to over ten over a thousand and fifty dollars a square foot and that's beans conservative some units are selling for eleven hundred now if we take our 600 square foot one plus den and recalculate its value when we take the new price per square foot and multiply it by the 600 square feet we're at 630 000 conservative so if you subtract the old purchase price from the new selling price market value price we're left with 258 000 in gross profit now when it comes to every investment we need to talk percentage and the percentage return was 347 gross return on an initial investment of 74 400. now this is a gross return what you would have met because remember at the end of every condo project when you're registering there are closing costs in addition to the land transfer tax and your legal fees you're going to end up netting anywhere from about 260 to 265 percent that means that every year you had an annualized return appreciation on your investment of 50 to 60 percent now take those numbers and compare them against any other investment and i believe we not only fairly well but we beat most of them thank you everybody for watching don't forget to tune in every sunday 10 a.m we're here waiting for you in the meantime if you want to get the most up-to-date information on upcoming condo launches and get in first firstaccesscondos.com don't forget to click that you saw us on tv we have excellent incentives just for you thank you [Music] [Music] [Music] you