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My public appeal to property investors

25K views 361 replies 48 participants last post by  MrMatt 
#1 ·
Real estate "investors" (those who buy up multiple properties and rent them out) are -- in my personal opinion -- engaging in an activity that is harmful to the country, and which has been directly harming fellow Canadians. Here I am talking about people who own more than 2 properties when it's not used by their own family.

Yes I know that all of you have become filthy rich off this practice in the last ~ 30 years. It's been a great time for property investors. Extreme leverage into a never ending bull market, in a declining rate environment, will produce riches.

But I ask you to consider the harm you're causing Canadians. All those mortgages you've been getting end up putting artificial buying demand into the market. You are bidding against people like me (and all my friends) who actually need houses to live in.

~ ~ My suggestion ~ ~

You've gotten rich enough. Cash out and walk away.

Sell your properties now. Liquidate them. Even if you've built up a long term portfolio. You have an opportunity here to sell at record high prices. In case you haven't heard, the Bank of Canada is in a rate hiking cycle. It really hasn't even started yet, so you still have an opportunity to sell your properties now. And how many years do you think a RE bull market is going to last? It's already been 30 years. Or do you think it's going to last 50 years?

If you're leveraged in several properties, and if this whole thing goes tits-up, nobody will shed any tears for you. There is VERY little sympathy in this country for property investors who have driven prices sky high.

Again: sell your properties now and walk away. You have a great exit opportunity here, before interest rates really get crazy.
 
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Discussion starter · #3 ·
And if that appeal doesn't work for you, here's a more numerical argument:

Starting from today's market value of your properties (important... today's prices) what do you think your net rental yield will be? How much will you make, net of all the maintenance costs, hassles, unoccupied periods?

Do you realize that if you put that same $ value into risk-free GICs, that you can make close to 4% yield today? That's with no risk, no troublesome tenants, no manual labour.

I'm not talking stocks which fluctuate. I mean a rock solid, guaranteed 3.5% to 4% yield. That's what's available today. Using a discount brokerage, you can spread among enough CDIC issuers to easily cover $1.5 to $2.0 million of these.
 
Discussion starter · #4 ·
Seriously ... you're asking people to walk away from making money?
No, I'm asking them to lock in their riches before it blows up in their faces. Both interest rates and public sentiment is against them.

But if they want to roll the dice, and take their chances being highly leveraged in a real estate bubble, as interest rates rise... go for it!
 
Discussion starter · #7 ·
That's just like asking people to cash out of the stock market because you think it's going to crash.

Their money, their risk but I'm sure they are aware of the numbers change due to interest rates.
But owning stocks doesn't deprive other people of owning a home. There's an ethical side to this as well.

I also think many property investors haven't thought about this yet. People tend to become complacent when things go very well for them, for a long time. We've had 40 years of declining interest rates. People have trouble wrapping their heads around a rising interest rate environment.

Nobody has seen a rising interest rate environment for 40 years!

@Ponderling I have no problem with families who use properties for their own extended family use.
 
Discussion starter · #10 ·
Not that I own 3 homes, but say I do and live in one of them, and rent out the other 2, who is being deprived of a home to live in?
I'm talking about owning. I want to own a home, and I'm not alone.

In this scenario, you're 1 person owning 3 homes. Yes I realize you consider yourself a humanitarian and will generously allow me to rent from you, but if you own 3 homes and I own 0 homes, clearly there's an imbalance.

You have deprived 2 other people of being able to own a home.

The property investors buy up and hoard these homes. In the market, they compete against others who own zero homes.
 
Discussion starter · #14 ·
The people doing this who are leveraged, are just asking for it.

I'm just trying to be helpful and communicating the warning. Mr. Market can educate them better than I can.

Property investors: at least do yourselves a favour and deleverage before higher interest rates arrive.
 
Discussion starter · #16 ·
Can I get everyone to sell their blue chip stocks? Hopefully the price will fall 20% and I can buy more.
Nobody is deprived of home ownership when you buy stocks.

Nobody has to push off their plans of building a family when you buy stocks.

Nobody suffers from housing instability (lack of permanent living arrangements) when you buy stocks.

I want property investors to understand that your RE investment portfolio actually causes some harm to society. No question you are making money... but you ARE harming others.
 
Discussion starter · #27 ·
This thread is too juicy to ignore. Keep them crazy posts coming!
Yeah no kidding eh! lol can you imagine boomer property hoarders actually apologizing?

I've owned investment RE for 30 years. People have been telling me I will lose my shirt for three decades.
Teach us a lesson! Buy MORE! That will show the nay sayers.
 
Discussion starter · #28 ·
This has got to be the most ridiculous thread I’ve seen in a while.
Says the career mortgage underwriter, who doesn't even understand that lenders should actually incur risk for lending. Based on your other post(s), you actually think it's normal that the government should be offloading all the mortgage risk from banks.

Can you believe this guy?

Wow big surprise, the boomer who made a fortune in the mortgage business sees nothing wrong with a mortgage mania.
 
Discussion starter · #30 ·
1) Individual RE investors hardly contribute in any way to the insane rise of house prices we have experienced.
That's incorrect. They do contribute. Of course they aren't the only reason (low interest rates and easy availability of credit are right up there) but people who buy up more properties than they personally need absolutely are contributing to the national problem.
 
Discussion starter · #31 ·
I tend to agree with James to extent. I have a friend who owns a property management business in town. He’s done very well for himself. Owns a couple properties in Edmonton and rents them out through AirBnB. I’ve given him the same speech as James just did. Went in one ear and out the other.
. . .
Thanks for sharing this kind of concern, I appreciate it @MK7GTI


you got me thinking James when you talk about “harming fellow Canadians”, as I try (though not always succeed) to uphold the concept of non-harming in what i do and say. First, a note that i read some of your CMF posts and appreciate both the depth of the research you often provide in support of the points you make (though i don’t always agree with the conclusions) and more importantly what i perceive to be your intellectual honesty. Kudos for that.

i actually do own three properties, with zero debt, which i bought well before the frenzy of the last several years. In fact, i dislike debt (and not just when the mortgage rate is 19.5%, which i experienced) and endeavoured to burn it down as quickly as i could, though i could have instead held back on that and leverage into buying even more properties. I could easily do that today still. Others have provided above several valid counterpoints to yours and i will not repeat them. Rather, i will mention that your post triggered a familiar self-questioning as to the motivations behind my RE (and other investment) purchases. i am hoping that sharing it adds to the conversation here. I believe that Normally, what drives most investing behaviour (indeed most human behavior) be in RE, stocks, bonds, GIC, etc. is either greed or fear. I bump up against these as well when i think about my situation and whether i should buy more. Awareness and wisdom are necessary to intercept and mitigate these energies. This is no generalized judgement call toward anyone that owns three or more properties or three or more millions in the stock market. It all depends on what motivates those investments, what it the purpose, how is the capital obtained and used. I have a feeling that you do not intend to cast a wide and generic net.
Thanks for the thoughtful reply @Italicum and I appreciate that you held back from leveraging into more properties. It's great to hear you have zero debt on them.

I think you make a good point about the other factors, for example how the capital is obtained and used. Whether someone is exploiting easy credit, whether they are chaining together loans in a highly dubious way. Clearly, you are being very prudent and had the self control to not greedily pursue a whole bunch of debt-financed properties.

I don't think you're part of the problem and I applaud you for fully paying for your properties.

Yes I may have cast an overly wide net, but there clearly are a lot of heavily leveraged property investors in this country. The latest stats from Statistics Canada show that about 30% of the housing in Ontario & BC is held by multiple-property owners (real estate investors). We also know that some people have multiple mortgages, and are even making downpayments using HELOCs... talk about greed!

These are astounding numbers. I'm sorry for casting a wide net, but I absolutely do think property investors deserve some blame for the shortage of affordable housing, when 30% of the homes in these provinces are owned by multiple-property investors!
 
Discussion starter · #53 ·
Well well well... look at all the smug property investors excusing themselves and refusing to acknowledge how they are part of the country's problem.

"Young families can't even afford a single home, but I own three! Screw them!"

All of you should teach me a lesson. Show me how smart you are! Go get another mortgage and buy another property. Have you hoarded enough properties yet? @MrBlackhill think of how some of your coworkers have more rental properties and are getting richer than you. You're going to look poor compared to them. Buy another property or two before others do.

@Letran is your property empire complete yet? I'm sure you have some friends who own more properties than you. Don't let them win... you can do it. Quick, get 3 more mortgages!
 
Discussion starter · #55 ·
My wife and I own 2 properties, one of them is seasonal so it's only used part of the year. We split our time between them.

We also share a cottage rental with a couple family members. So, we own 2 properties outright and part of a 3rd.

And we don't feel guilty in the slightest.
I never blamed you. Look at my first post. I wrote: "Here I am talking about people who own more than 2 properties when it's not used by their own family."
 
Discussion starter · #65 · (Edited)
So, Mr. James. If you want to discuss the parasitic nature of being a landlord, I suggest you operate some houses for a decade or two and get back to us. A good landlord is easy work. We provide one hell of a lot of value to the community.
I did not complain about landlords or say they aren't useful. I really like professional property managers who do this for a living who are conscientious and play by the rules.

My issue is that when so many average Joes buy multiple properties, using tons of leverage, they distort the Canadian real estate market. There are a lot of people in Canada who've bought up multiple properties on leverage and are using them for AirBnBs, VRBOs, and other amateur rentals. That might not be you, but many people in cities do this.

I understand that rental owners think they're humanitarians or something, but I've got news for you: if property investors didn't hoard properties, bid up prices using borrowed money, then others would be able to buy those homes for themselves. Many of us... in fact most of my friends... are forced to rent because we've been priced out. And IMO, greedy property investors are a significant force in pricing out others.

But how lucky we are, that people like you allow us to rent from you. One million thank-yous, Tom!

Well-run rentals are one thing, but the crappy rentals are not providing a valuable service to anyone. The landlords don't play by the rules, skirt the laws, sometimes force people out of rentals, violate condo regulations that ban AirBnBs, or run amateur hotel operations. I've seen buildings where tourists and undesirables come into perfectly nice condos, because some a*hole is running an amateur hotel.

In Toronto and Vancouver, AirBnB operators sometimes send instructions to the tourist on keeping quiet and not mentioning the AirBnB as they enter a building.

My parents live in a condo, and have suffered for YEARS because some a*hole in their building has bought up 2 units and is renting them out like hotels and for short term rentals. With endless side effects for neighbours. This is the kind of crap that has come from greedy, amateur property investors. We've got way too many amateur landlords and AirBnB operators in this country.

Cut off their mortgages and that insanity would stop.
 
Discussion starter · #68 ·
if you feel so inclined to increase housing supply perhaps reach out to your township and see how long they sit on building permits before theyre actually approved
I think you have the wrong idea about this. It's not a supply issue, though that's of course what the property development and RE lobbyists will tell you.

Beware, that line you're saying is really just the messaging of the developer lobbyists who are trying to influence the public to approve their new constructions. It won't solve our problem.

Property hoarders just buy any new properties that come online. It's really unlimited demand because it's artificially stimulated thanks to the CMHC & generous mortgage lending.

This is the danger of so much leverage in the system. There's a very low bar to someone buying yet another property. The mortgages are handed out like candy. If you build new buildings, current property hoarders will just add to their portfolios (using existing property as collateral).
 
Discussion starter · #70 ·
It is market driven, at the moment. When governments step in and regulate
Hilarious. You're the beneficiary of 20 years of incredible government stimulus and support of real estate, via the CMHC & relaxed mortgage lending. This was amped up further during the pandemic.

You've been riding a wave of government stimulus and support. All property owners have been.

Freeloading off the back of taxpayers like me, by the way. You're welcome! I think it's a bit insulting when I (the public) provide you CMHC stimulus, and then get priced out of home ownership myself.
 
Discussion starter · #73 · (Edited)
Freeloading would be more if I were to go onto a public forum and implore people to sell their properties so I can get one at a better price.
Freeloading is when you benefit handsomely from government stimulus (funded by the taxpayer), also boosted by historically low interest rates.

Lots and lots of government support for you. Aren't you lucky!

@KaeJS @Letran @Mortgage u/w and several others around here have benefited tremendously from the freebies and stimulus generously handed to them by the Government of Canada. Our government has been very generous to you.

You're welcome guys! Could you have done it "on your own" though? We'll never know.
 
Discussion starter · #74 · (Edited)
Let's try an exercise. I think this will be healthy for you property investors out there. Let's take turns acknowledging and thanking the government for the ways it's helped us with subsidies and handouts.

My turn first. "Thanks, government, for subsidizing schools and universities, and handing out extra money for educational pursuits, so that I had an opportunity to get a good education and improve my life. I really appreciate it, and I couldn't have done it without the government's help."


Any of you property investors want to try it? I think you should thank the government for back-stopping mortgages and providing stimulus to banks and lenders, making it possible for you to get a mortgage. You should thank the federal government and Bank of Canada for (repeatedly) assisting the mortgage and credit markets, to support the prices of your real estate even through turbulent markets like 2008 and the pandemic. You should thank the government and central bank for engineering a liquid and functional mortgage market, so that credit in Canada kept functioning smoothly even when market forces (free market capitalism) would have caused severe disruptions.

... you should thank the central bank for providing rock bottom interest rates, well below the rate of inflation, effectively providing you free money to borrow and buy properties. You should also thank the government for allowing you to use absolutely insane levels of leverage (borrow against collateral) which are not permitted for ANY other assets. These are the loosest lending rules imaginable, given exclusively to you --- property buyers and investors!

And you appreciate it, right? At least tell me that you appreciate everything we (and I as a taxpayer) have done for you.
 
Discussion starter · #76 ·
But half of my home can be rented. Which is definitely helpful, because I can leverage more
...thanks to the government's generous stimulus programs (CMHC), you are offered a kind of leverage that cannot be found with any other asset class.

You can buy a home for as little as 5% down, borrowing 95% of the value! The leverage is extraordinary.

Even though we make above $200k as a household, all the money goes into the mortgage, stocks,
... and that's with a heavily subsidized mortgage, where the government assumes risk to provide much lower borrowing rates. It's additional subsidized (tremendously) by the Bank of Canada, which engineers the cost of money so that you don't have to pay the rates of a free market.

Isn't it amazing what Canada does for the real estate market? Wow I sure wish the country was as generous with my small business. If I had half the freebies and subsidies showered on me as property owners and investors do, I'd be... rich like a property investor!
 
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