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Real Estate Without Borders
Trump's tariffs hit Mexico & Canada - which country is better to invest in?
00:36:11
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- [00:01]
Dave Hutchinson
All right, welcome to the Real Estate Without Borders podcast with myself, Dave Hutchinson, and Mr. Daniel Fosh. Today I have an exciting episode for you. We're going to be debating the two countries closest to the US that are the best to invest in, potentially. Mexico. Mexico versus Canada. So that's our episode for you today.
- [00:24]
Daniel Fosh
You went with a hybrid there. Mexico.
- [00:26]
Dave Hutchinson
I was going with you.
- [00:27]
Daniel Fosh
Mexicanada is a great restaurant in Bradford, Ontario, actually.
- [00:31]
Dave Hutchinson
Bradford, Ontario. I've never been.
- [00:35]
Daniel Fosh
Yeah. So I guess for context, I'll start off here. Dave, you put this awesome stat in the notes. So over 60% of international investors cite diversification and higher returns as the top motivations for investing abroad. And I think we're in an era where the US Market seems to be ripping, like, running so hot. Right. You can't help but think I might want to manage a little bit of downside risk here. Right. Especially with, like, what just happened with Deep Seek and the AI stuff. I don't even following that. Right. But, like, the US stock market is basically like the Mag7, which is like your seven big tech companies, and they're all super heavily exposed to AI. And then China just came out with this thing called Deep Seek, which they basically said they built it for like, 6 million bucks or something like that. Yet, like, you know, OpenAI spent like, you know, tens of billions. And so everyone's like, oh, man, if China's, like, telling the truth on this, which, who knows, right? Like, that's where it's kind of you. You never know. But then that's probably going to change the AI world a little bit on Monday for the stock market. So this. And we're recording this January 26th, so Monday being probably in the past at this point, but all of this to say, is there, you know, a black swan or something that could pull the US Into a bit more recessionary territory? Yeah, maybe. Do you want to diversify away from that? Yeah, maybe. What's the easiest way to do that? Well, one of the easy ways to do that is to buy into other countries that have already been smoked. Right. Like, the US Just is the only place on earth that hasn't been smoked stoked by the economy yet. Right. So that. That's a big one from my perspective. I don't know. Give me some other. Give me some other thoughts here on why diversification is key. And then. Then we can dive into Mexico versus Canada.
- [02:12]
Dave Hutchinson
I mean, well, let's. You get to own property in warm climates. Let's go with that one, nice and easy.
- [02:18]
Daniel Fosh
Warm climates, like Canada, See I'm just.
- [02:22]
Dave Hutchinson
Trying to pad my stats for, for the Mexico, Mexico, Mexico battle here. I mean this, for me, look, I mean the US Dollar is strong right now versus other currencies. So you have that option which is going to come back to, to just end up getting you discounts wherever you're buying, depending, obviously. Yeah, I mean, look, I can dive into, into Mexico and I've been, I've been here now for a year pretty much straight. Honestly, I came back a little bit in the summer to Canada. But, but to get into, to, to Mexico and why. I think it's a great investment for Americans. Most of my clients that invest here are American. I would say like 95% of my clients are American investors looking to diversify outside of America and they end up landing on Mexico. And I've been selling in Tulum and Playa del Carmen and Cancun specifically. So I can give some examples as to why. I think it's an incredible investment with real case studies, real stories, real numbers and go from there. Do you want me to dive into that there fosh or do you want me to.
- [03:18]
Daniel Fosh
Yeah, why don't you sell me, sell me on Mexico here like and then, and then I'll try and give Canada a pitch. Although I still think, like, I mean, I think both, both countries have come down quite a bit in price, but I think Canada's probably still got a bit more downside risk because we are heading into a recession and Trump tariffs are probably going to be exacerbate that if they take place. So.
- [03:39]
Dave Hutchinson
Right.
- [03:39]
Daniel Fosh
I will caveat with that. But, but yeah, let's, let's go.
- [03:44]
Dave Hutchinson
What's the temperature outside at your place?
- [03:46]
Daniel Fosh
It is minus two. It's actually warm today. That would be warm.
- [03:50]
Dave Hutchinson
That is.
- [03:50]
Daniel Fosh
That's. Yeah. I guess we got to figure out all our, we got to get all our American metrics going too, eh? So what's that? Yeah, yeah.
- [04:01]
Dave Hutchinson
27 in Tulum. Reason one. There we go.
- [04:05]
Daniel Fosh
What's that?
- [04:05]
Dave Hutchinson
Celsius. What's the temperature in Celsius? Oh, no. Fahrenheit. See here? 80 degrees.
- [04:14]
Daniel Fosh
Yeah, it's like. And it's like. So it'll be 35.
- [04:17]
Dave Hutchinson
Here, let me, let me sell you a property that I really believe in here because it's a real one. We, we've. We've covered it in the past. You know what? I'm gonna do a different one. I'm gonna do a different one that I'm just gonna free ball here because I like this one. It's actually a Condo that I own. So I'm biased maybe a little bit. I have floating. I could offload. No, I'm not gonna offload it actually I have a tenant who's paying me decent right now. Okay. Oh, that's another good point. Put it in the think tank. So I have a property. It's a one bedroom, it's about 850 square feet. Private pool on the terrace overlooking the jungle. List price US$240,000. I would say average per night US dollar on Airbnb would be 150 with like a 55% occupancy rates. But long term tenants are willing to pay between 15 and 1800 US dollars per month for a one year contract. That's the subject property that I'm going to sell you right now. So let me explain Tulum so why this is a good investment for American investors. One the peso is. Well the US dollar is what one US dollar to. What's the pesos? 20.7 I think USD to peso 20.27. Okay. This property could be sold to you in pesos which is incredible for you, giving you probably like a 30-40k US dollar discount on the price. Next we have and I will add.
- [05:50]
Daniel Fosh
Actually that the peso has been the second most resilient currency against the USD. So I'll give you some extra points.
- [05:57]
Dave Hutchinson
There on the exchange thanks to need it. That's important. Next we have the ability to take full crypto or full cash which is not really easy to do. So we'll stick to the crypto. A lot of the developers down here will take cryptocurrency as a form of payments. Some only 30% but we do have a few that are able to do 100% crypto payments now.
- [06:18]
Daniel Fosh
Been popular for all the. I bet that's good for the.
- [06:21]
Dave Hutchinson
The culture. Yeah, get all the.
- [06:24]
Daniel Fosh
Get all the Miami crypto bros down there.
- [06:26]
Dave Hutchinson
Yeah, there's too spiritual in Tulum and they don't come down here. It's too much then.
- [06:31]
Daniel Fosh
Yeah.
- [06:32]
Dave Hutchinson
So then we gotta take crypto at minimum down payment 30%. Now the cool thing is a lot of developers are pretty flexible down here because although Tulum and Mexico. I'll say Tulum because I keep saying Mexico. Mexico is a massive country. I'm going to specify Tulum in the Quintana Roo state. They're fairly flexible with how you can negotiate your deals. For example, what a recent client of mine just did was put 30% down, took possession of the property, was able to begin earning airbnb money or short term rental money or use the property for their own personal use and pay the remaining 70% back over a year and a half in monthly installments with zero percent interest just to the developer. A lot of the developers that are like offloading remaining inventory, let's call it, are super flexible and willing to give possession without full payments. You don't get title indeed until full payment. But it's still a good way for you to get into a place with 30% down, start earning income right away without having to pay the full 100% which you could use that money to put back into the, you know, pay your own property off essentially, which is really, really cool.
- [07:36]
Daniel Fosh
You mentioned title indeed. Can I interrupt you there?
- [07:38]
Dave Hutchinson
Of course.
- [07:39]
Daniel Fosh
So one of the big concerns I think like people have with buying real estate in Central America, Latin America etc is like, you know, I mean there's been examples like I think in Guatemala like government like stole property from like valet income, you know, so that's like, that's a big, you know, massive.
- [07:56]
Dave Hutchinson
Right, for sure.
- [07:58]
Daniel Fosh
You know what's, yeah. And like I, not that I think this would happen in Mexico, but like what, I won't even make you speculate about whether or not that's like a risk, but what is the structure of like a, of title? What is the structure of like a land registry like in comparison to the US because one of my key points is going to be, you know, you buy a property in Canada, it's very similar process wise to the U.S. right. You bought it with a realtor, you got a lender who registered on title, you've got title, you can go into land registry and see that, etc. Like where are you guys at with that in Mexico?
- [08:30]
Dave Hutchinson
To wet my whistle for this rebuttal.
- [08:32]
Daniel Fosh
Oh yeah, I see, I see you hydrating for this response I'm getting. I'm in trouble here.
- [08:36]
Dave Hutchinson
No, it's, it's, it's not as complicated as, as you'd think but there, there's a lot of misinformation about this out there. So when you're buying a property in Mexico within 50 kilometers of the coastline, and I think it's 100 kilometers of the, the, any border. Foreigners can't own property under your own personal name to an extent. So as a foreigner you can't own property within 50km of the coastline. Most foreigners obviously when they're buying in Mexico want to own by the coastline. You want to be by the beach. So you own through a fido camiso, which is a Trust account. And I can get into this in super detail, but honestly it's actually pretty simple. You would own the trust account. The trust account would be the owner of that property and that, that that trust is held at a Mexican bank. It's a Mexican trust, not a, not an American trust. Okay. So you would create the Mexican trust, you would be the sole owner of that trust and that trust would be the owner of that property held at a bank of your choice. Typically the bank varies from whoever is offering the best rates because to own the Fido camiso the trust account there is an annual fee of about 1500-2500 US dollars depending on the bank. And then it's a 50 year in length trust with the option to extend. And it's not a land lease. A lot of people come up with this thing where they think it's a land lease. I've heard information that you need a Mexican citizen on title. It's not the case. You're the sole owner. You can own. A lot of my American clients will do it under their corp. So their American corp will own the Mexican trust which owns the property. Did I answer that okay?
- [10:10]
Daniel Fosh
That's a good answer. Yeah, I guess. So you're, so you're kind of, you have to be putting also a little bit of faith in the banking system and Mexico as well. I guess you would be doing that in any place you're buying because you'd be buying with a mortgage. So you kind of want to make sure that you're the bank is. Yeah, okay, that's fair.
- [10:25]
Dave Hutchinson
I've heard, I've heard of people if the bank because we have credit unions in Mexico too. So let's say for whatever reason you put your trust in a Mexican, you know, B lender type bank and the bank would go under. All they would do is I never had this happen, knock on wood. But I've heard it's not a problem. All you would do is just, you know, change your trust to a different bank. The biggest banks here are like BBVA and Santander Intercam. So some people choose to go with that route off the hop and you pay a little bit more on that annual fee but you have a bit more stability in terms of it's very unlikely that banks and go under.
- [11:01]
Daniel Fosh
And then like if I wanted to, I guess like a lot of the stuff you're selling and like a lot of the product down there in like Tulum specifically is like condo. But if I own a detached house, like can I go on like geo Warehouse and look at my lot lines in. In Mexico. Like, is that a. Like that? Yeah, like, so I get a deed. Like, what do I, what do I own? You know what I mean? Like, how's that all?
- [11:24]
Dave Hutchinson
Yeah, so it depends. Most people, when they're buying it. Most Americans, when they're buying in Mexico, like to own within like gated communities. It's not there. I do sell villas, like a. Freehold villas that are on their own property line with, you know, no HOA fees. It's just you strictly own that land. We actually saw one today as well. When you buy a property, like a free, A freehold standalone house, villa, we like to call them, you would then, yes, own the land and know your landlines and everything because you would be buying that plot of land with the house on it. Okay. However, most of the American clients that I work with, they're. They're not. They're coming here to invest and potentially spending like, you know, maybe a couple weeks here a year or something like that. So because of that, what's appealing is to buy in a gated community. When you're buying in a gated community, you're buying into like an hoa. So it'd be like a condo town type situation where you pay monthly payments that you wouldn't have. You'd be buying the house on the already existing owned property. But you do sign title and deed. You're the owner of that property, you do all the paperwork like that. Same with condos.
- [12:23]
Daniel Fosh
Okay. Okay, cool. Yeah. That's all I needed to know in regards to deed and stuff like that because I was curious. It seems to be one of the big issues with, with like, I mean, investing outside of the US like you got in the US and in Canada. Well, I think anything that sort of came from that European, like, you know, British Imperial or like, you know, whatever. Like they already had these like existing land registry systems, surveys, etc. That seem to have been phased into like all of the colonial places.
- [12:53]
Dave Hutchinson
Right.
- [12:53]
Daniel Fosh
I just don't know if that like most Central American or South American places haven't. Latin American places have. It's. It's a little different. Right. That was my.
- [13:03]
Dave Hutchinson
I think. I don't want to be all positive here. I'll give some, I'll give some. I'll give you some advantages here just in case our. I do lose this battle. I think the one downfall we're seeing in this part of Mexico, which would be like the Quintana Roo, which is a state within Mexico, which is like most Commonly Cancun, Playa del Carmen and Tulum. There. There is no successful MLS system in place. So what can be challenging right now is resale. The reason why it can be somewhat challenging is because it's difficult to get your property known to the public that it's for sale. You know, you're. You're heavily relying on an opportunity. It's the. It's the. I've thought about it forever. It's something that I really want to crack into because the problem is it's hard to get your property known that it's for sale. You're relying heavily on local realtors to put it on their websites. Way to share properties here, honestly, is like WhatsApp groups, right? So it's like how many times.
- [14:02]
Daniel Fosh
It's like your condo assignment or like precon. Yeah, exactly. Like, interesting. How is it challenge? We. Well, we should just create one. We should talk to the guys at Valerie and just create a. You know, that hard.
- [14:15]
Dave Hutchinson
It's. It would be the biggest. I think right now is a. Is a great time for that because you. You have. I'm not sure. I don't remember what. What episode. We spoke about it, but, you know, we. We were at the peak, and now we're kind of stabilized here in Tulum. And a lot of people bought at the peak, you know, and they're trying to. To either offload that property because they've made a little bit of Money now, maybe 50k, 100k, they want to offload and maybe buy more. But it's a challenging process, for sure. Yeah, not impossible, but challenging.
- [14:44]
Daniel Fosh
I feel like that'll improve, though, as the area, like, develops. Right. Like, you're almost buying like, an emerging market.
- [14:50]
Dave Hutchinson
It's a. Tulum's brand new, you know, Tulum. And it's the one thing that's kind of. I've been selling here, I mean, like, super aggressively this year. But the one thing that's challenging is we don't have historical data like we do in. In Canada. You know, we can't go. I can't go online and look at what sold 15 years ago because there was nothing. There still isn't. So it's like all we can do when we're analyzing Tulum is look at other markets like Cancun and Playa del Carmen and analyze certain things like land size, what's happening in the area. I know Tulum just got an international airport, train station, all that kind of stuff. So, you know, we just have to look at, like, telltale signs of where the Market's going, but. Yeah.
- [15:27]
Daniel Fosh
Yeah, interesting. I guess. I don't, I don't know if I have another like that, that many other like, questions in regards to it.
- [15:35]
Dave Hutchinson
Carrying costs are low here. Like, you know, average carrying cost, property tax, depending on lot size is super cheap. Under $1,000 a year. Insurance is. A lot of people think insurance here is expensive because I. They're. They're kind of comparing it to Florida.
- [15:50]
Daniel Fosh
Right.
- [15:50]
Dave Hutchinson
But. But our home insurance here is, is, you know, max. 1500 bucks annually.
- [15:56]
Daniel Fosh
Right. Not like a lot of natural disasters there anyway. Right. Like you get a hurricane or whatever, like Florida every once in a while.
- [16:03]
Dave Hutchinson
We're kind of tucked in. We're tucked in like the, the peninsula a little bit.
- [16:07]
Daniel Fosh
What's the sentiment on like, political stability down there with the government? Plus, like, you know, the, I guess like cartels, like, they're, you know, they seem to be kind of running the place more than the government, probably. Right?
- [16:18]
Dave Hutchinson
Yeah.
- [16:19]
Daniel Fosh
I think, Okay.
- [16:20]
Dave Hutchinson
I think in terms of like safety and the government stability. I can't talk too much on terms of like government stability, truthfully. Yeah, but in terms of like the cartel and what they're doing here, I think, look, they, they only an issue.
- [16:36]
Daniel Fosh
For people who are involved in that probably. Right?
- [16:38]
Dave Hutchinson
Yeah. Like, they, look, they. They own all the restaurants and the clubs and they do their thing down here. There's organized crime all over the world and these guys.
- [16:44]
Daniel Fosh
Canada's got to be like the money laundering capital of the world. So like, you know, just say like, I wouldn't even, like, I'm not it. To art, like to say. Yeah, you know, that it's, it's like a plus or minus versus. I mean, if anything, maybe it's a better thing like, because people, you know, like, they, they're. They're pretty good at like there's, there's an economy that exists there. Right. Like, you know, one of the, one of the cities that we invest in, there's a, like a lot of contraband, like, passes crosses the border in that city. This is in Canada. I'm not going to say it because I don't want to talk too much about it. But. But like the. But. But what? You know, like, I think there's speculation that like the majority of like, contraband that crosses Canada US Border takes place in that, in that city. Basically the town's like GDP or like economic productivity is like, low. Right. Like on paper. But then there's like this whole like, you know, probably like 25% of the economy is like, not on Paper, it's just money that, you know. And I think in Mexico, it's like, kind of comparable, right? It's like, yeah, Mexico does this much like from a GDP perspective. It's like, well, the cartels are probably producing more than the. Than the GDP of Mexico in drug exports right now. It does seem like Trump obviously has taken a little bit of issue with that. So that would be probably my only headwind for political instability when I think about Mexico in that regard. What's the US Going to do when they talk about that whole thing? And who knows? I think Canada is the same. You look at when Trudeau got elected here, foreign capital basically just stopped investing in Canada or it started declining majorly. So when would you say that Political instability?
- [18:21]
Dave Hutchinson
Like, when would you say that that holds down? Go for it.
- [18:24]
Daniel Fosh
Yeah, well, there's this chart. I gotta find it. This guy showed me this chart about like, basically it was like. It was. It basically showed like, foreign investment in. Oh, it was from Carney's. I'm gonna find this. This was like, literally from. From Carney's. One of Carney's decks. So for. For context, anybody who's. Who's listening, and because this is kind of relevant to the. The context of political stability in Canada, and I guess we can kind of segue into that. So this guy did this thread. Give me a sec. It's. It's about, like, this deck from Carney. I'm trying to find it because it's like.
- [18:56]
Dave Hutchinson
Anyway, Carney taking over Trudeau.
- [18:59]
Daniel Fosh
Yeah. Mark Carney. Yeah, yeah, sorry. So for. For context, for anybody who's listening while I try and find this, basically, Mark Carney is like. He's a, like, former central banker, so he ran the bank of Canada. He also ran the bank of England, and then he now works in, like, you know, large, like, infrastructure companies as an ex central banker would. Right. So he's like super rich. Like, you know, he's part of, like, the, you know, like, quote, unquote, the global elite, you might say. And he's just going to run Canada. Probably. Like, that's his goal here. Right. I don't. I still don't think he'll win the election. But he's probably the candidate who the Liberal Party is most likely to elect. Yeah. And probably, it seems the Conservative Party is most afraid of.
- [19:36]
Dave Hutchinson
When's the election? When's.
- [19:38]
Daniel Fosh
What are they going to call that? Yeah, still been called it. They're like, as Trudeau's kind of delaying it with this whole thing. Right. I can't find this thread this guy put out. But anyway, I'm going to find it next time you're talking. I'll spend a little bit of more time on it. But yeah, so I don't know, is political stability really a thing? And again, foreign direct investment in Canada kind of dropped when Trudeau got elected because people said like, oh, this is probably a country that isn't going to really respect capital. Right. And that ended up being true. So, you know, and then at the same time, you kind of had a lot of capital controls coming out of China, which is our primary source of foreign direct investment. Like, the most money that comes into Canada actually comes from China, not the US for in. Into real estate. So, yeah, that, like, to me, those factors are probably more like more of a vulnerability than the factors that you and I just discussed in a place like Mexico, you know.
- [20:31]
Dave Hutchinson
Yeah, yeah, I agree. I think, like, you know, it's. What was the question I had? Like, you know, Canada is definitely a stable, you know, safe bet for the, for the American investor. When you're investing in Canada, you know, it's, it's a, it's just, it's, it's a little more stable. Whereas Mexico, high reward. You know, I think the numbers here are amazing. But like you said, political stability with this whole new thing with Trump and tariffs and all this stuff trying to bring businesses back to the U.S. i don't know, but the numbers here right now.
- [21:01]
Daniel Fosh
Yeah, I found the chart.
- [21:03]
Dave Hutchinson
Yeah, you found it.
- [21:04]
Daniel Fosh
This is like, it's so, it's so like this is like the chart just tells the stories. So this is like if you look at 20, like the 2015, basically the Trudeau election. This is real private non residential investment. So this is basically capital being put into things other than housing. And this is from the oecd. And this is from Carney's. Like, this guy did a thread on this document from Carney, Ontario. No, it's a Office of Economic something. It's like a global group of countries that like, put, put their data together for global analysis purposes. We're going to reference them a lot on the show, Dave. You just don't know it yet.
- [21:44]
Dave Hutchinson
Organization for Economic Cooperation and Development.
- [21:48]
Daniel Fosh
There you go.
- [21:49]
Dave Hutchinson
Does that make sense?
- [21:50]
Daniel Fosh
Yeah, that does. Yeah, that's it. That's exactly what it is.
- [21:52]
Dave Hutchinson
Perfect. I knew that.
- [21:53]
Daniel Fosh
So, yeah, so Carney, then I switched. So this guy did a thread, but Carney basically put together this, this document for the group of 30 G 30. And it says, push pull pipes, sustainable capital flows for a new World order, which is, you know, it's like a dun, dun, dun moment. I thought you're not supposed to talk about that, Mark. Anyway, the guy's obviously like super bright man, Gets money, gets economics, et cetera. But, but yeah, just Canada has not really seen a ton of investment in their country as a result of political shifts, whereas before. And now that I think that the Western world seems to be moving further. Right. You know, you could probably see that. That change. So you have political stability to the downside where if you, you know, if you end up seeing more policy, destructive economic policies, more inflationary policies like the, The Liberals were doing, then maybe you'll see less and less faith in Canada's economy and less money coming into the country. If you, if we see a switch back to more conservative policy, you know, destroying inflation, creating it, right. Then you could see a shift of. Into money being moved into Canada and growth in that regard. So. So I think political stability happens in both countries.
- [23:12]
Dave Hutchinson
So you're up, man. Sell me, tell me Canada as a U.S. investor.
- [23:16]
Daniel Fosh
Yeah, so I mean, the, the big thing that we hear in Canada is that we have a housing shortage, right. And, and so, like, you know, in the US you hear about this a lot too, right? You hear that, you know, oh, we need more houses or like, housing crisis and all this stuff. I want you to just take that, like, and, and add a zero to the end of it. Like, that's, that's what I would say. Honestly, though, like, I mean, every, like, so the, you know, in the US it's like, there's a lot of. There's a, there's a growing negative sentiment towards migration, immigration, population growth, et cetera. In Canada, the same thing took place similar to a lot of European nations that had like, really open immigration policies. Canada had the fastest growing population in the Western world for like the past three years. Okay. Was the fastest growing population for adv. An advanced economy for the last three years. There was a point in time where Canada was literally the third fastest growing place on earth other than like Syria and South Sudan, which are like. Syria was because everybody was moving back after that huge war, and South Sudan was because, well, they have a super high birth rate still because a lot of African nations still do have that. And, and none of our populate, by the way, we have the lowest birth rate that we've ever had in Canada. And so all of a. That's like, I don't know. It's like, I don't know. Honestly, I can't remember. It's like 0.7 or something like that. It's like brutal, dude. Like, Canadians aren't having kids because they can't afford to, right? So, so we're growing our population basically by bringing international students in a lot of cases, bringing temporary foreign workers and bringing people from all over the world to come to Canada who are in search of a better life. And so, so Canada's population is growing. So I would say that, that if you're international real estate investor, you probably would like to get exposed to housing, multifamily housing, especially in Canada, because that's all you can buy as a US Investor buying Canadian state.
- [25:02]
Dave Hutchinson
Because the ban is still in effect. It was supposed to end, right? It was supposed to end the extended.
- [25:07]
Daniel Fosh
It was supposed to, but they renewed it. Yeah. I think it wouldn't surprise me if when Pierre gets in, he gets rid of that. It's a pretty easy way for them to stimulate the economy or the house, sorry, the housing market, let's say. Really from, from my perspective, we have a structural deficiency of houses, of number of houses. And so you, so you know, in the us like you're used to seeing cities that have a vacancy rate of like 6%, 7%, right? In Canada, like our national vacancy rate for, for real estate is like 2%. Okay. There are cities that have 0% vacancy rates. And so your rent rents, rents were growing like 10% year over year. They're now declining and vacancy rates are going up, but they're going up from like 2% to like 4%. Right. So. And eventually we'll get back to what's happening right now in Canada is, is basically the government has pledged to reduce the population of non permanent residents. So you're seeing a lot of people leaving the country.
- [26:00]
Dave Hutchinson
Is that why the, the sor. Off. Is that why you think the vacancy rate is rising from.
- [26:05]
Daniel Fosh
Yeah, 100%, man. 100%. Like they're, you know, and I, I predicted this earlier in the year, right? I said like, as soon as I saw rents rolling over, I was like, people are leaving, people are already leaving. And, and the government's going to go in and take credit for it. And they did like almost instantly, man, they're so predictable. It's hilarious. But anyway, so all of that to say, I don't think, like, I think that the moment that we're in right now in Canada is like that moment where you're almost at that, that really good time to buy. If you got rents falling, prices falling, interest rates falling, like the market is almost in, like it's like despair moment that you see the bottom. It's not, it's not there yet, but it's far closer to, to a bottom and it is like hurtling towards it that compared to the U.S. right? In the U.S. it's like, yeah, we're still kind of thinking about like a top market, still crushing it. You know, nobody's buying and selling so like there's still supply scarcity because nobody wants to sell their houses that they got with like 3% 30 year mortgage rates. Like why would they, right. Rather just do a renovation or something?
- [27:03]
Dave Hutchinson
Because we don't. Maybe we can touch on like the mortgage. Because whenever I speak, I spoke at Inman this year in New York and I spoke up with an Australian guy about the differences of, of owning between Canada and, and the U.S. and sorry, in Australia anyways, maybe speak on the mortgage terms because I don't think they'd under maybe like explain simply that's why.
- [27:22]
Daniel Fosh
No one's moving in the U.S. yeah, sure, yeah. So I mean in Canada basically. So it's funny because whenever you explain Canadian mortgages to Americans they're like, are you guys idiots? And we're like, well we don't have a choice. So. So basically in the U.S. i mean the USD is so strong, it's like the best currency in the world. Everybody wants it, right? So in the US the government can issue 30 year mortgage bonds and people will buy them. In Canada they can't do that because nobody wants to buy 30 year exposure to the Canadian dollar. That's basically the nuts and bolts of why we don't have 30 year mortgages in Canada we have tens, we have 15s, but the rates are so high because again, in order to convince an investor to buy a 15 year exposure to Canadian dollar, they want like you know, 6, 7% return on those bonds. So the mortgage rates are high. In Canada we're kind of stuck with five year mortgages. And so in the U.S. if you remember like 2006, 2007, the option ARM mortgage rates, right, were basically people or adjustable rate mortgages. So basically you'd get a mortgage from the bank and then five years would go by and then your mortgage rate would be different or X amount of period of time would go by and then your mortgage rate would be different and it would jump up. In that case, that's Canada's mortgage environment. Like all of our mortgages are basically arms, right? They're all basically adjustable rates. We have variable rates which change whenever the bank of Canada changes their rate. But then we have fixed rates which are fixed for a period of like one to five years and then they change and you don't know what rate you're going to be. It depends on what the interest rate environment in the bond market's doing five years from now. So this is why Canadians are getting smoked. Because a lot of people got mortgages in 2021 when prices were super high, rates were super low, and now they have to renew. And the renewing, you know, they're, they, they're going from a 1% interest rate to a, you know, 5% and you know. Yeah. Based on one and a half percent.
- [29:11]
Dave Hutchinson
Yeah. When I, like when I bought my condo in Toronto, the one that I, I still as my primary, I got in at 1.6 interest rate and then my mortgage was, I think it was like 3200. Ended up going up to like 5500 at one point and now it's kind of hovering around 38. But that's why, that's why Canadians are, are in a bit of a pickle.
- [29:35]
Daniel Fosh
Yeah, it's among the reasons why. Yeah. I mean, and so we've got, in Canada, in Canada we've got unemployment rising, you know, we've got the population falling, rents falling, prices falling, etc. So to me, like, these all sound like bad things, but to me, like, you want to buy when things are bad. Right. Because when they get better and in the US there's no bad metrics like that. Not as mental money. Right. In certain smaller markets.
- [29:55]
Dave Hutchinson
And your dollar is what's the. That's a huge factor.
- [29:58]
Daniel Fosh
Yeah. So the Canadian dollar dropped from basically like, I think it was like peaked during the COVID or like in the last couple of years from. I think it was like 7, 78 cents and now it's at 70 cents right now. But like, let's go back to. Well, let's, let's go back all the way to like 2008. Right. So 2008, the Canadian dollar was above the US dollar. It was like 105 USD. That would be, that's basically from the. It was, it was basically over the US dollar from like 2010 to like 2013 or like almost at parity with the US dollar during that period of time. And then. Well, actually even leading up to 08, it was like, you know, again like 90 cents. So you know, what the Canadian dollar was capable of doing with the right leadership and the right economy and all of these things. Right. Let's fast forward to like Covid, you know, kind of modern economy. 2021, you've got like a 83 cent Canadian dollar. Okay. This is like June of 2021, you know, 2023 you're looking at like 74 cents, 76 cents and now we're at 70 cents. So if you buy right now and then it goes back to 80 cents or whatever you're are, you're get. Not only are you getting exposure to the Canadian, like to the, to the asset, but you're getting huge exposure to potential currency recovery against the USD, which to me is probably one of the best potential trades in Canada. Like give us eight years under a conservative government in Canada where we start diversifying back into oil and gas resources, et cetera. Try and play a more meaningful role as the US's largest trading partner. And I see that as being an 80 cent Canadian dollar environment. So if you hold real estate for that period of time, you buy it today it's 70 cents, I think we'll probably see Canadian dollar like 68, 67 cents honestly within the next couple of quarters you buy it at 67 cents and then you're, you know, you're, you're holding it for 10 years and you're back at 83. Plus the, you know, everything that's happened in the meantime, I think that that's, it's a good trade. Right. Sorry, go ahead.
- [31:55]
Dave Hutchinson
Is there a city specific you would like in Canada for the, for the American listeners? Is it, is it city specific that you would, you would be put. I know that's.
- [32:04]
Daniel Fosh
Yeah, it's tough right now, right. Like you know, if it was a little while ago I would have said probably like Alberta but I think Alberta's rolled over. Like you're seeing, you know, but like a lot of people are piling into these like Edmonton multiplexes. So like here's a crazy thing. So you can buy a multi, you can buy like a pre built six plex brand new. Okay. Like builder will build you a row of townhouses with basement apartments brand new. And you can buy that with 5% down or you could. Now it's changing because like, because CMH is tightening on that, on that policy. Yeah, exactly. But you knew as soon as, like as soon as the Toronto pre con crowd was getting into that program, it was done. It was, the opportunity was over. Right. Like really it was for sure. It's. And you could see them doing it in Calgary last year and Calgary vacancies jump for like brand new products. So for like, for ML like new MLI product jumped from like 2% to 7% right. So you're. Wow, all those investors are underwater and it's going to happen to all the people doing it in fricking Edmonton now too. So don't buy there. I think a lot of like people in the US get this, right? They get buying real estate to get exposure to economic activity. So I would say buy in like the Prairies where there's new mining projects in Quebec where there's new mining projects, timber projects going in. Right. There's so much. And if the government wants to do well and if Pierre wants to run a growth scenario for Canada, the government's gonna have to do so much spending on infrastructure. So I would say like, you know, there are places in like rural Saskatchewan that you can buy where it's like the only town near a mine that just hired like thousands of people. Right. And, and like I think it's BHP or bnp. Like the, the huge mining company from Australia is like running this project. Like so they, and they've put billions of dollars into this. So if, if some massive multinational corporation is willing to put billions of dollars into this place. And Kirkland Lake's a good example in northern Ontario, like Kirkland Lake Gold doubled their workforce. House prices in that town went from like 30 grand to like a hundred grand.
- [34:00]
Dave Hutchinson
And crazy.
- [34:01]
Daniel Fosh
You could. Yeah, so. So I like all those markets. Right.
- [34:04]
Dave Hutchinson
Hold on, I'm going to interrupt you only because is that a CMA location or. No, no.
- [34:09]
Daniel Fosh
So like that exactly. Like that's an, that's a place where you could buy it because it's not. It's in a rural area. Like the town is foreign buyer ban people.
- [34:16]
Dave Hutchinson
Yeah. So the foreign buyer ban for Americans would not be in place.
- [34:19]
Daniel Fosh
Right.
- [34:19]
Dave Hutchinson
Would be able to buy there.
- [34:20]
Daniel Fosh
Correct. Yeah.
- [34:21]
Dave Hutchinson
Huge.
- [34:21]
Daniel Fosh
Yeah. Yeah. So. So to me, like those are the good opportunities for us people. They've actually been forced into the only good opportunities in Canada, which is buildings over four units and rural properties like you know, around. And so that's what I would be doing, to be honest. And you can find that province pretty much Northern Ontario has it. Quebec, rural Quebec, Manitoba has it. B.C. has it in a lot of their areas up north. And beautiful communities too. Alberta, same thing. They're in rural Alberta. Even Red Deer is like decent. Like, like you look at Edmonton and Calgary are absolutely flying right now and everybody's forgotten about Red Deer. Right. And if oil, if like, look, we know Pierre, who's going to get prime minister likely this year. Pierre loves oil and gas, so he's going to send it for places Like Red Deer. Right. So that could be the one bull case for Alberta to avoid rece recession into Canada. I like a lot too. And oil and gas is huge in, in like Newfoundland. A lot of Americans like Montreal and Quebec City just because like they're, they're awesome tourist cities. There's a decent strategy there. I would say pretty much you're safe if you're buying anywhere other than like Toronto and Vancouver. And even those markets I think will be pretty good buys eventually, but they just need to settle a little bit. Yeah, 100%. Yeah. I don't think. Yeah. I don't have much to add to Canada so we can just wrap it up there, I don't think. We'll let the listeners decide, man. Yeah, yeah, we'll call it a tie. We'll let the listeners decide. Where would you rather invest? Leave us a review or slide into Dave's DMs, not mine. I can't find my messages as it stands. Send David dm, say whether or not and he can sell you properties in both countries. You know, tell him which one you think is better or if you think there's another country on earth that is a better place to invest. As an American, I would love to hear about it because we would want to do an interview with somebody from that place to learn more about why it's such a good place to invest. So thanks for listening.