Real Estate Flipping Workshop = Bad Idea

I just heard a radio ad advertising for a real estate flipping workshop - which was promising to teach amateurs how to flip real estate using other people's money.

That sounds like a horribly risky idea.

A bit like investing in high risk mortgages using other people's money...

And the workshop is proposing taking amateurs and teaching them how to do this - is a bit like taking people off the street and teaching them how to invest in subprime mortgages.

Great idea (sarcasm).

Amazingly breathtaking idea (more sarcasm).

I can't believe they are doing it (dripping with sarcasm).

It is bad enough that Toronto's real estate market is so "bubbly" that investors are now pulling out of Toronto because it is considered to be too risky, but now companies (which I am guessing are seeking to unload their bad investments on to unwitting fools who will be gambling with other people's money) are seeking to deliberately muck around with Toronto's already over-invested real estate market.

Its like having a giant cream filled balloon that is already close to bursting and selling it to a bunch of baby porcupines and then running away before the porcupines can pop the balloon.

Which means that the suckers who invest in real estate now - while the big real estate investment firms skedaddle out of here - will be the ones left holding the bag when the bubble does burst.

The mere fact that the big real estate firms are now ditching Toronto - while the getting is good - means they are now wary and skittish about the future of Toronto's overblown market.

When the Toronto real estate bubble does burst I am going to be saying "I told you so" again and again.

I am still predicting the bubble to burst sometime in 2015 or 2016.

Although now that some investment companies are looking to dump their properties it makes me wonder if it might happen sooner than I expect.

Mixed signals from Toronto’s real estate market

During May 2013 more than 10,000 properties were sold across the GTA in a real estate market which is down nearly 3.5 per cent from May of 2012.

Sales of single detached homes are up almost 1% and prices in that segment included a 3% year-over-year increase. Toronto Real Estate Board President Ann Hannah describes the market as showing improvement over the past two months.

Ann Hannah believes potential home buyers who had delayed their decisions because of mortgage rule changes by the federal government are now becoming active in the market again.

The average sale price for real-estate across the city in May 2013 was $542,000, up by 5.4% in a year.

However condo sales were extremely weak, down over 9% compared to May 2012, but prices rose slightly.

I believe homebuyers are becoming extremely wary of buying a condo because of fear of when the Toronto Condo Bubble might collapse.

I am predicting condo prices in 2015 - 2016 to drop between 30 to 40% as tens of thousands of new condos come on to the market and flood the market with too much extra supply.

Solving Toronto's Homeless Problem

How many homeless people are living in Toronto?

What would we need to do to permanently solve Toronto's homeless problem?

Homelessness is much more common in large urban cities like Toronto, Vancouver, Edmonton, Calgary, and Montreal. It is a constant presence and a symptom of a city's bloated real estate prices and the people who fall through the cracks of society.

In 2005 federal authorities in Ottawa estimated that Canada has 150,000 homeless people across the country - however homeless advocates say it is closer to 300,000. (And since 1 out of every 6 Canadians live in the GTA we can estimate that there is about 50,000 homeless people in the GTA.)

According to a 2007 report the annual cost of homelessness in Canada is approximately $6 billion in emergency services, community organizations, and non-profits.

Mathematically that means homelessness is costing governments approx. $20,000 per year per homeless person.

Also, contrary to stereotypes, only 6% of homeless people suffer from schizophrenia. Depression and affective disorders affect 20 to 40% of homeless people.

What is also interesting is that some of these homeless people do have jobs - but they sleep on the streets because they cannot afford to rent an apartment. They end up temporarily homeless, sometimes for months at a time, living on the streets until they can find a place they can afford. (There are national statistics for this on the StatsCan website, but I have been unable to find statistics just for Toronto.)

This tells us several things:

#1. Renting an apartment in Toronto is too expensive and there isn't enough low income housing in Toronto.

#2. There is a market for smaller apartments that are priced for people in a lower income bracket.

#3. There needs to a safety net for people who are "temporarily homeless" to help them find a new apartment quickly.

#4. For the 6% of homeless people (approx 3,000 people) who suffer from schizophrenia there needs to be a safety net to help get these people treatment.

So really what is needed is the following is...

Special places for the 3,000 schizophrenic homeless people in Toronto. This would require a significant investment in real estate and care services.

A government agency designed to help people who are temporarily homeless to find a new place quickly.

More subsidies for low income housing. Enough for approx. 47,000 people.

More new apartment buildings being designed with a portion of the apartments designed for lower income people. If every new apartment / condo building in Toronto was required to have just 1% of their units designed for lower income people we could solve this problem pretty quickly.

We should also note that the Canadian government USED TO have such measures in place. Back during the 1980s there was abundant support for instutions geared towards helping schizophrenic people, and the building of new structures for low income housing was dramatically higher - in 1986 alone the Canadian government supported the building of 30,000 new units - but over the years the numbers kept dropping, reaching a mere 7,000 in 1999.

So really supporting such measures would really be about going back to the ways things used to be done in the 1980s and earlier.

Now you might think "Hey, doesn't Toronto already have homeless shelters?"

Well, yes, we do. But homeless shelters are not a permanent solution - and their rife with crime, theft, sexual assaults, assaults, drug problems. Most women refuse to stay in homeless shelters because they're not considered safe. Even women-only shelters are dangerous.

Quotes about Homelessness in Toronto by social entrepreneur / activist Edward de Gale

"Canada is the second coldest country on earth and with a climate like Canada’s, energy, like food and housing is a necessity of life." - Edward de Gale.

"It is a little known fact that the inability to pay basic utilities/energy is the second leading economic cause of homelessness in this country." - Edward de Gale.

"Over 50,000 households a year have their power disconnected in Ontario while thousands of others struggle to provide the necessary energy to stay warm and cook meals. That’s one household with their power cut every 10 minutes, every hour, of every day, for a year." - Edward de Gale.

"Many Ontario households must choose between eating and heating, and seniors and those with special needs must choose between medication and heating." - Edward de Gale.

"Families, with minor children, unable to provide basic utilities/energy for their children are vulnerable to child protection orders because they are unable to provide the necessities of life." - Edward de Gale.

Edward de Gale is the executive director of "Share the Warmth", a local Toronto charity dedicated towards helping homeless people and getting them off the street. He founded the charity in 1995 and by 2002 it had grown to help 4 million people in 400 communities across Ontario. 18 years later it is still growing strong. [Source: Edward de Gale wins 2002 City of Toronto Community Service Volunteer Award.]

The Future of Montreal Condos

Regardless of the ups and downs in the condo market, what is really interesting is the long term results of condo developments in metropolitan Canadian cities like Vancouver, Toronto and Montreal.

Montreal in particular because of the city is located on islands in the St Lawrence River, which means people living there can't really expand outwards so much - and opens the door to rampant upwards development.

According to Statistics Canada the population of Montreal will reach 4.541 million by 2031 if population growth is low. But it could reach 5.275 million if population growth is high. (Statistics Canada has 3 working models for predicting population growth in Canada, providing a range of forecasts.)

The current population is 3.9 million in the Greater Montreal Area.

This means StatsCan is predicting growth of approx. 600,000 to 1.4 million in the space of 18 years.

Other Canadian metropolitan cities are expected to experience similar growth, which will result in more expansion of suburbs.

But in Montreal, because the city is an island their ideal direction is not outwards, but upwards. Which means new condo developments need to start thinking how they can accommodate a lot more people... which employs using new architectural technology in order to make buildings stronger, more affordable and more energy efficient.

The energy issue will also be a big thing by 2031. Electricity prices are expected to skyrocket in the next 18 years so having more energy efficient buildings will save on heating and air conditioning.

One way would be to make buildings more like greenhouses, so their internal temperature is regulated by the sun in the winter and during summer months. There are a myriad other advances in energy efficient windows, as demonstrated by the image on the right. Another way is windows that can be electronically tinted to reflect more sunlight to change the refraction rate.

More energy savings can also be gained by using basic geothermal for heating and cooling the building.

Construction costs can be reduced by using new materials, prefabrication in factories (which also raises quality of the construction work), and maintenance costs can be reduced by designing buildings which require very little maintenance.

These cost savings will be more important for people looking to buy a Montreal condo because the overall higher costs of living in the future will cause people to be more frugal with their money. People will want to buy a place that will save them money over the long term and get them great value for their investment.

Montreal also benefits from the fact that at its lowest point it is currently about 100 feet above sea level. When arctic and antarctic ice caps melt within the next 12 years Montreal will be UNAFFECTED by the rise in sea level because the resulting rise in sea level will only be 28 meters (92 feet), which will leave Montreal high and dry by a good 8 feet while Halifax, St John's and many coastal towns in the Maritimes will be flooded.

Which means there will be even greater stress on housing availability as Montreal and similar cities will be swamped by people looking for new places to live as their own homes have been flooded. The result will be people looking for new accommodations and an abundance of cheap labour.

This means that long term investment in Montreal's real estate is a really wise decision. Its guaranteed to go up thanks to the constant population growth, but there is also the chance of prices skyrocketing when the Maritimes is flooded before 2025.

Ignoring doom and gloom predictions for the Maritimes, in contrast Montreal's future is very sunny. It has a stable economy, is always hiring new graduates from its many universities, it is a tourism destination, and it has a well rounded transportation system.

It makes me wish I lived in Montreal instead of Toronto.

Update

My wife and I went for our honeymoon in Montreal in 2016. Love the subway system there. Do rather wish we lived there instead.

Land in Western Australia / the Outback

Australia is one of those countries I don't really long to see.

Asia, love it there and have already been there twice. South America - I can't wait to visit Bolivia and Brazil. Africa... Egypt, Morocco, Tunisia, Zimbabwe... all fascinating places. And Europe of course, lots of things to do there.

But Australia?

I guess I am just not a fan of kangaroos, crocodiles, and Australia's landscape.

However I do like a bargain when it comes to real estate - and Australia has a lot of bargains when compared to the real estate prices in Canada.

And I also enjoy looking at the real estate prices of obscure parts of the world... eg. You can get a plot of land on the side of volcano in Hawaii for $5,000 USD. True, its on the side of an inactive volcano... which means no local water... but it is in Hawaii!

Western Australia (WA) on the other hand has vasts regions of desert and scrub brush for sale. Some of it is former farmland that has gone belly up due to extreme droughts.

Its the kind of place where you can buy 680 square miles of land for $360,000 Australian dollars, according to the website Satterley.com.au provide land for sale in WA.

There are homes in more habitable regions too, like in Perth, Beaumaris Beach, Brighton, Catalina, Eglinton, Erindale Grove, Jindalee Beachside and Princeton... but I really need to post a map of Western Australia so you know where these places are.

I went browsing on various Australian real estate websites and found some interesting deals.

#1. A plot of residential land in Perth for $8,500. Nothing built on it yet, waiting for a developer.

#2. 2032 square meters of land in Doodlakine for only $19,500. (Australian towns have such funny names.)

#3. $114,000 for abandoned farmland near Perth. 206 acres worth. See photo below.

I think my point here is that if the prices are low enough there is a certain romanticism to the idea of suddenly picking up and moving to a different country and trying something new.

Even more so if you're already independently wealthy - or have enough that you don't really worry about food any more.

However I must admit Hawaii is more enticing than Australia. I am sorry to the good people of Australia for saying this... but its freaking HAWAII! Its one of the most desirable places to live in the world.

And if you love sailing you could always just buy a ship and then sail from place to place... something I have frequently dreamed of doing, if I could find a way of doing it financially.

OFF TOPIC - Where does one look for used ships online? I tried Googling it and found on Kijiji an used 29 foot Westerly sailboat in Nova Scotia for $20,000.

So I guess my point here is that depending on what your real estate / career / travel aspirations are you can find cheap land in many strange parts of the world - and failing that, buy an used sailboat and then just sail to many strange parts of the world. Assuming of course that you have the financial means to get food and other things you might need along the way.

So if you're living in Toronto - or Perth - or wherever you happen to live, and have saved up a tidy nest egg... absolutely, why not follow your dreams and move somewhere interesting (or sail there)?

You only live once.