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- [00:01]
A
Welcome to another exciting episode of Real Estate Without Borders, where we dive deep into the world's most fascinating property markets. So today we are embarking on a data driven journey across continents, comparing investment opportunities from the bustling streets of Manhattan to the tropical shores of beautiful Tulum.
- [00:23]
B
In this groundbreaking analysis, we will uncover the hidden patterns in global real estate, exploring how different markets stack up against each other in terms of returns, risk and potential. Whether you are a seasoned investor or just curious about international property markets, this episode will give you unprecedented insights into the true cost and value of owning property across borders.
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A
Dan's thinking about having a Caesar already. He's got Caesars on the mind. Spicy Caesar. I get it. But let's get ready to discover Canadian.
- [00:54]
B
Drink you can't get anywhere else in the world. Pretty much.
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A
That's right. It's never the same anywhere. I don't have it. It's very.
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B
As soon as you're traveling, you're. Yeah. So you get Bloody Mary with. There's no clamp.
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A
Not the same. You need to put the clam in there, man. I don't want it. I want extra spice.
- [01:07]
B
You didn't ask me if I was. Seafood allergies.
- [01:10]
A
All right, so today we're going to discover which cities offer the best rental year yields, where property taxes can make or break your investment, and how financing costs dramatically across different regions are affected. So let's dive into the numbers here. I know this is Dan's wheelhouse here and find out where the smart money is moving to in today's global real estate landscape. So, yeah, so yeah, go for it.
- [01:34]
B
First Face off we're going to do is New York versus Toronto for a condo. Are these real units that are listed for sale? Okay, cool. So we've got. I'm going to click on this one. That one's sold. Damn. It's gone.
- [01:46]
A
Honestly. On that note, I'll take over here in Toronto. The condo market I know is in shambles. I don't want to get into it on this episode. I don't. But. And I have a. An American buyer looking to buy in Canada. We had four condos to see today in Toronto. Two of four sold over the weekend with less than seven days on market. Keep in mind they have a big budget looking for big space. Sorry.
- [02:12]
B
I believe it. I don't know. I mean, Canadians are not the brightest folks. So like, they would definitely pile it into real estate market when it's a mess.
- [02:22]
A
Or like for them though, you know, like it's more of a. Yeah, it's more. They're, they're like I'm going to be here, I'm going to have a kid in this condo. I'm going to be here for 10 years. That's their.
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B
Yeah.
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A
You know they're not looking at like, like this.
- [02:32]
B
Yeah. I think you're, I think your first time home buyers are. Investors are gone, but your first time home buyers are definitely back and upsizing. Okay, so this, so this unit that has sold in New York. So we're going to compare a condo at 51st street and a condo at 251 Jarvis street in Toronto. Purchase price is around 1.2 million for the Manhattan condo and 980,000 for the Toronto condo. Monthly rent in New York is $4,500. The monthly rent in Toronto is $3,800. Vacancy rate in Manhattan is just shy of 4% whereas the Toronto vacancy rate is about 2%. Although I'd say that's probably 3 or 4 now. Yeah, I think that data, data is just taking its time to catch up. Property taxes in New York, 1825amonth. That's crazy.
- [03:29]
A
Is that real?
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B
And property tax in Toronto is $502 a month.
- [03:33]
A
Let's see that. Hold on. Keep going.
- [03:36]
B
Monthly carrying costs in New York, Manhattan 250. Insurance 1100 HOA 200. Utilities 400. Maintenance for a total NOI of 47,100 USD per year. Carrying costs in Toronto. Insurance 175. Maintenance fees 850 Canadian dollars. That's your HOAs basically. Utilities 150. Maintenance 300 for an NOI of 42,500 per year.
- [04:10]
A
I fact check the, I fact checked the monthly property taxes for a condo in Manhattan. It says it does fall between 1,000 and 3,000 depending on the property's assessed value in the neighborhood. Obviously.
- [04:21]
B
I mean Toronto does have like impeccably low property taxes.
- [04:25]
A
Interesting. I think, I think those numbers other than the rent rents falling in Toronto right now, but I don't think that's too far off reality to be honest. Interesting.
- [04:39]
B
Yeah, no, I would say, I don't know. I mean what's the bedrooms and bathrooms on that thing? I guess for a nine for a million dollar condo, that's fair. Yeah.
- [04:45]
A
Like that's probably a two bed, two bed plus den. Interesting.
- [04:51]
B
So let's look at that from a cap rate perspective to try and compare these side by side. They're not that far off. So in Manhattan you're buying at a 3.93% cap rate and in Toronto you're you're buying at a 4.34% cap rate. These are rough calculations just for our.
- [05:07]
A
Listeners that maybe aren't, aren't a big cap rate. Let's, let's, can you cover cap rate? I know we have in the past, but I think people like this, I know the people that, that, that are, are here because of me are going to be like, I would love to hear Dan explain cap rate.
- [05:24]
B
Sure. Yeah. So cap rates are used to analyze properties side by side. Right. So if you have two properties like the ones that we just looked at and it's, and they're priced differently and the rents are different, it's hard to kind of come to a basis where you can compare them like really create an apples to apples comparison. So we use cap rates to do that. And what it does is it basically tells you what a property is worth relative to its rental income. And so the higher a cap rate, the more rental income you're getting for every dollar of property that you buy basically.
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A
So can you, can you go over how like a very high level house, it's like you knew how it was coming for you. I was going to ask you what's like the calculation. For those that are listening, how would one go ahead and calculate cap rate?
- [06:17]
B
Yeah. So, and this is from the JP Morgan website. It's calculated by dividing a property's net operating income by its asset value or the purchase price or the list price, whatever you're using as your kind of comparison value metric. It is an assessment of the yield of a property for one year. For example, if a property is worth 14 million generating $600,000 of NOI would have a cap rate of 4.3%. That means you can expect a roughly 4.3% annual operating cash flow given the price paid for the property.
- [06:51]
A
Now is there. Sorry, keep going. Is there? I know it obviously vary from market to market. Well, I know it does. But off the top of your head, is there a cap rate percentage that you would be looking for if you were an investor looking to purchase? Again, I know there's no black or white answer here.
- [07:12]
B
Yeah. So roughly, I mean higher is better but really if you want to be able to scale and buy real estate with as little cash as possible, you need to be able to hold the property needs to be able to hold debt in order to do that. Let's say at like a 75 or 80% loan to value or maybe even less like you know in the US some of your DSCR debt service coverage ratio loans which is another metric we can get into. If, you know, if you're at 75 or 70% loan to value or 65% loan to value, the cap rate typically has to be higher than your interest rate on your loan to make sense. Right. So that's usually kind of the best way that I would think about it is what's the interest rate that you're buying a rental property? Yeah, in Canada we have, our mortgages are really low because they're five year loans. And so you take a lot of risk. Long term interest rate risk. You can buy a property with 4% interest rate right now. And so you're seeing in Canada, cap rates in most of our major Cities are like 4.5% in the US during the last couple of years it's been same kind of thing, 4.5%, 5%. But then when the rates went up, cap rate expectations went up. Because now all of a sudden people are buying properties with 7% rates in the US or 6% rates in the US and they need 7 or 8 caps to make the numbers make sense.
- [08:41]
A
Right. Last question I want to ask you, because I actually got asked this on my Instagram does. I mean, obviously we're comparing a property in the US which is getting paid and earning US dollars versus Canada paid in Canadian and earning Canadian dollars. The cap rate obviously isn't going to include that into the equation. Is there a way that, you know, investors should be looking at this? Obviously we can get into this a bit later. But the cap rate's not going to include anything about that, would it?
- [09:13]
B
No, and it couldn't really capture that because like it's kind of like a dividend. Right? Like, so if you buy like a stock, if you buy like enbridge in Canada versus the U.S. like the yield is, the dividend yield is the same because if you buy it in US dollars, they're paying you in US dollars, you buy it in Canadian dollars, they're paying you in Canadian dollars. And so if you buy a property in the US you're making the assumption that you're earning the rental income on that property in the USD. And when you're purchasing the property, you're buying it with USD. And so the point in which you realize the currency issue is when you purchase the property or currency like discrepancy is when you purchase the property and you make that conversion and you take the hit on your buying power or get the advantage on your buying power if you're buying in USD elsewhere and then over the entire lifetime of the Property, like let's say you hold it for five or 10 years. Whatever happens to the currency, it doesn't really matter. It could matter like if you're kind of taking those incremental pieces of your. Like if you're taking your rental income and converting it back to Canadian dollars or whatever other currency, then you get the lift back up. But really where it matters is after you've held the property for 10 years and you're realizing a capital gain, or you're selling the property and taking that equity back out, that's where the benefit or the drawback of there being a currency exchange is really realized. That makes sense.
- [10:48]
A
It does. Look at. I'm just taking notes. Don't mind me. I'm actually looking at the next. The next. I was analyzing. Deal.
- [10:56]
B
Give me these two.
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A
Well, they. One sold again. You know, it is what it is, but it's a condo. We're gonna analyze Miami vs. Tulum, which kind of is an unfair side by side here, but. So we have a.
- [11:08]
B
Which one better Bottle. Seriously?
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A
I think Miami, man.
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B
Most. Least Lambos per capita, I think.
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A
Where's that? Stop. Where's the.
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B
Dude, you know what? You know what car? I feel like 80% of the Corvette C8s in the world have to be in Miami.
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A
It's the cheapest, coolest looking sports car there is.
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B
They're all like indifferentiable to like from a Lambo to like the average like. You know what I mean?
- [11:38]
A
Take off the decals.
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B
Yeah, take off the.
- [11:41]
A
You've got. You've got everybody fooled. That's great. This. This condo, it's a. It's a two bedroom. I got it on my page here. For $750,000 in Brickell, Miami. Purchase price, 750,000. Monthly rent, 3,600. Vacancy rate in Miami, 4.2% property tax, 656amonth. Insurance, 350, which I think is maybe low. HOA, 750, which is crazy high. Utilities, 180. Maintenance, 300. Your net operating income, 38,400 per year. Then you have Tulum, which it's also not showing, but I know that project. Luckily you got it up there.
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B
That's Miami three bed.
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A
Yeah. Let's see the pictures. 2 and 5pm when the sun hits just right. Beautiful.
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B
It's all right. It's pretty.
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A
You got the project tulum, which is 4.5 million pesos, which I should know.
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B
They're San Diego Chargers fans.
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A
Pesos to USD calculating. You gonna find it.
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B
What's that like large format, 403 US faux marble tunnel. Yeah, not from here. It's very Miami though. DMP on the floor. They've kind of ocean. Such a real estate broker. I can think I could see it. Man, this guy should be scalping tickets compared to center ice, man.
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A
So that's. There's no traffic as long as the.
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B
Windows are clean on that building. Catch the reflection.
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A
Where's the price? So that's about US$400,000. Okay. Now this project. So it's a villa. How many bedrooms? Four. Four bed, four bath. Monthly rent, 75,000 pesos. Which is actually probably really. Right. I'm gonna. What's that? 75,000 pesos. Pesos. The rent is really high here. Very, very high. Like a long term rent here is crazy, right? It's about 30.
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B
This on your gram?
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A
No.
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B
Emma. Model luxury villa in Aldia Zama. Five rooms.
- [13:52]
A
I think. I think there's. There's not that many really great places to live in Tulum, like neighborhood wise and, and building wise. So I think the really good builds do demand like a high 45 minutes. This is a render, so it's probably not, I don't think. But yeah, like there's honestly not that many like really great buildings or really like well laid out. The problem in Tulum, I'm getting off topic here, but the problem in Tulum is that when they build, the developers are building everything for the thought of an investor purchasing it. So everything is like lots of bedrooms, minimal living space just to maximize Airbnb returns. But if you're living here long term, it can be challenging because you don't want for.
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B
Do you feel like there's like everything.
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A
Is geared to investors. So is it going to hold long term? Thousand dollar US purchase price, about 3,700 US dollar. Rent, vacancy rate 35%. I think that's. I think that's low because the occupancy rate would probably be closer to 65% property tax per month. That's yeah. Mexican pesos. Let's say property tax per year would probably be about a thousand US dollars. Let's say insurance per month. What's that per year be the same thing. About a thousand US dollars per year. HOA fees about 4. So what's that? $4,000, 200 bucks a month. Hoa fees are really cheap here.
- [15:28]
B
Yeah. So that works out to like a 7 cap for Tulum. 7% cap rate for Tulum. So like 585,000 over 4.5 million Mexican and then 5.12 which is like actually really Good for a Florida condo cap rate, to tell you the truth. But I know, I mean, Florida condos are getting absolutely smoked right now because of the special assessment crisis. What? You just know. I, I'm like, just so excited to jump in. Just anything, just bearish. You're like, this guy's just, oh, there we go. Here we go. No so. Ever remember when that building fell down in, in Florida? You remember there's like a building that fell down. It was built by a Canadian too, which is a crazy part. Like, I mean, dude, there's enough like, old shitty buildings in Miami. So. Yeah, and so what it did was it prompted the government to basically make it so, you know, change the standard so that all these places had to get structural integrity inspections to ensure that maybe no more buildings fall over. And when they all did that, they were like, oh shit, we got to spend a bunch of money to make sure that our building also doesn't fall over. And now they have like huge repair bills. And so there's like tons of buildings where there's like special assessments for the properties that are larger than the value of the condo. And, and all of them are completely illiquid. Have you. Are you looking it up right now? Crazy. Crazy really happened. I'm not faking it. Yeah, yeah. This is like, this is like hundreds of thousands per unit in Florida. Surfside condo collapse. Yeah. Some condo owners have been hit with six figure assessments, including a 79 year old owner who faced a $224,000 special assessment on top of monthly maintenance fees that already doubled from 1500 to 3000 per month, according to Local 10. Yeah, man. Yeah. Well, this is not going to help them in that if they want to keep bubbling, they're going to have maybe some. You got to buy a new bubble machine. You got to buy it. You got to buy some soap and special assessment time. Yeah, no, it's crazy. Yeah, yeah. And yeah, there was like this report that was done after just to kind of like see the impact of it. And it says condos. Listings for condos built more than 30 years ago have surged 56% year over year. So all those old shitty condos that you were saying that it's okay if they fall over, right? Well, apparently not. And Florida has 1.1 million condo units with 58% of them in Miami Dade, Broward, Palm Beach, Pinellas, Collier, Sarasota, Hillsboro and manatee counties. So eight counties, 60, 65% of the condos are in the older category. And, and most of those are located along the Waterfront. There. This is gonna be like. This isn't. This is a 20 year issue, right? Yeah, I believe it kind of. It's in the desert. That's cool. Come. Come visit me. Yeah. So you, you want me to go into this one? So we've got. No, no, I haven't. May and like, you know, Target and stuff like that. I need Target, man. That's my thing. Like so huge. Yeah, we're gonna get them to sponsor the show. You know, just whatever. I got kids, dude. You never know. Like, you like every five minutes you need to go to Target to get something else. Trust me, it's crazy. Just wait till you start spinning kids out. You're gonna be like, I get it. You will? Promise? Yeah. Okay, so you got, you got a house in. In Los Angeles? West Hollywood. Oh, look, Dave, we finally got one that didn't sell. Oh, no, nevermind. It's sold. But we'll pull this up. It's all right. It still at least gives us a Google Street View. 850 grand U.S. monthly rent, 4 grand. Vacancy rate, 3.5%. Property tax, 885amonth. Monthly carrying costs, 200. Insurance, 550 HOA, 150. Utilities, 350. Maintenance NOI. Net operating income is about 41,800 per year. Divide that by the eight hundred and fifty purchase price and we've got a 4.92% cap rate. And we'll compare that to. What's that? This is true? Yeah, no, yeah, it's true. I always forget. Yeah, I always forget about the base knowledge. I can't find the one that you had listed in Los Cabos, but it's a Los Cabos luxury resort condo for 8.5 million Mexican pesos. Monthly rent is 150 grand Mexican pesos. 40% seasonal vacancy. So it's, you know, again, who knows? Because most of them are Airbnb. Property tax, about 1,400 Mexican a month. Monthly carrying costs. Insurance, 4,000 HOA, 8,000. Utilities, 3,500. Maintenance, 5,000. For a total NOI of 1. What is that? 1.08 million? Yeah, Mexican pesos. Divide that by the 8.5 million. Can already tell this is going to be good. 6.85% cap rate. Well, look what you're competing with. Like, I tried to find the listing and it's like the enclaves of Ritz Carlton. Reserve residence starting at 5.1 mil USD. So I mean, if you're competing in the hospitality space with the Ritz Carltons of the world, you're Going to have a bad time. Yeah, 100%. Let's do it. Yeah. Yeah, it is. Didn't I send you one from Austin or. That was one I sent you from Dallas, right? Yeah, I'm looking for it. Yeah. This is homes for sale versus Airbnbs in Austin. There are 3,300 homes for sale in Austin, and there are 12,000. 127 Airbnbs in Austin. Interesting. Apparently you can get a condo in. In. In Austin right now for like, under 200k to live downtown. Yeah. Yeah. Crazy. Yeah. Like, look at the. Look at the resale. Inventory jumped up from like, what is that, 3,3000 in 2021 to over 11,000 homes for sale. Probably overbuilding. Probably speculation. Right. Like, a lot of people. Probably like a lot of people leaving colder climates when work from home started to, like, go to warmer climates like Texas, Florida, etc. It's the same thing that's happening in Florida. And then now all of a sudden their. Their employer says, oh, hey, you have to be in the office three days a week. And they're like, shit, I guess I'm moving back to, like, whatever New York or Boston or what, you know, California. Right. A lot of people went from California to Texas. Yeah. It's always tough to say exactly what it is, but what's that? Austin was 5.35%, so 29 grand a year divided by 550,000. Lisbon's worse, 4.5%, 21,000 divided by 480,000. Again, this is where it's easy. You don't have to convert the currencies over because you're just taking the noi noi and dividing it by the purchase. Spain, that was supposed to be in, but Portugal, they. They got rid of their golden visa like, system, or they've scaled it back because that was what was really creating problems. Yeah, let's. Yeah, we'll leave that. We'll. We'll just make this like a. Like a. We can do this on a quarterly basis as, like, rents and prices begin to change. Right? Yeah, I think I can pull that up. Yeah, for sure, man. I was just trying to find those, like, the per square foot values, but I. I can't find it on the site quickly enough. So it's all good. But I gotta give you my login for the site because it's sick. I just bought it when we were on the last episode. Yeah, for sure, for sure. Okay, man. Well, yeah, I mean, I feel like this was good. This is like a. And I think we just do this on a. Maybe like, you know, every quarter. And if you're, look, if you're a listener and you're. You want us to like, kind of take a look at a deal, I think eventually, as we grow our audience and have kind of more guests on and more, More listeners from around the world, we might even just do like a deal of the day segment. Like before we, before we do it, you know, an episode will basically just like post a deal that, you know, real estate professional has given us, maybe paid us to, to, to pump their deal. Right. Better be a good one because we're going to tell people what the cap rate is. But, but yeah, I think that that would be sick just to kind of get people again, get the reps in of like looking at, oh, what the cap. What's the cap rate in Australia? What's cap rate in. You know what I mean? So. Yeah, cool. Unreal. Okay, man. Yeah, well, I guess, yeah, we are. Everybody else, if you're, if you're listening, Dave's checking to make sure we're still recording. Please leave us a review and send this podcast to your mom, send it to your friends in the countries that we post it on Reddit, post it on Twitter, I don't know, whatever, just let us know. Post it on Craigslist for all I care. We'll talk to you later.