Flipping America 585 Investing in Canada

podcast 585 Investing in Canada

Matthew Ablakan

What’s it like to invest in real estate in Canada? Are you tired of government overreach, wary of the “fixes” the government is putting into the economy? Do you avoid investing in rules and restriction-heavy environments like California, New York, and New Jersey? If so, you’ll be interested in hearing just how much WORSE it is in Canada. Today’s show will make you proud to be an American, although that was surely not the point when we recorded it.

Matthew Ablakhan is a young motivated investor, the son of displaced Iraqi Christian parents. He and his brother started investing, then set up a mortgage company, and then a real estate brokerage. Together they lead a growing company in suburban Toronto.

Canadian law rules out all but the wealthiest developers. Mortgage rules essentially require homeowners to make plans based on future interest rates (and who knows what they will be?). These and other issues make it challenging to make money in Canadian real estate. In fact, many Canadian investors choose to put their real estate investing money elsewhere.

But Matthew and his team are sticking it out for now and doing well. We are going to hear all about that in a few minutes. 

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Listener Questions:

Quote of the Day

“God Bless America, but God help Canada to put up with them! “

“Patience is a tree whose root is bitter, but its fruit is very sweet.”

” Walk a mile in my moccasins to learn where they pinch.”

  • Canadian Proverbs

Expected Air Date: Fri 2/3/23        

Guest: Matthew Ablakan


[0:00] What’s it like to invest in real estate in Canada? Are you tired of government overreach, wary of the fixes the government is putting into the economy?

Do you avoid investing in rules and restriction heavy environments like California, New York and New Jersey?

If so, you’ll be interested in hearing just how much worse it is in Canada. Today’s show will make you proud to be an American, although that was surely not the point when we recorded it.

[0:25] Music.

[0:34] It’s time for Flipping America, the show that teaches you how to make money in real estate. Wherever you are, whatever your situation, there is an opportunity for you. And now, here’s that Flipping America guy, Roger Blankenship.

Matthew Ablacan is a young, motivated investor, one of the more interesting fellows we’ve had on the show lately, the son of displaced Iraqi Christian parents.

And his brother were born in Canada and they started investing, then set up a mortgage company, then set up a real estate brokerage and together they lead this growing company in suburban Toronto, an environment that is a difficult place to invest.

Hello America, I am Roger Blanketchip, your host, and this is the show Flipping America where we encourage everyone to consider investing in real estate, but we don’t encourage you to drop what you’re doing and start flipping houses like you see on TV.

Flipping houses is great, but only for some.

There are other things you can do.

[1:35] So let’s dig in here a little bit. Canadian law rules out all but the wealthiest developers because of the fact that you can’t borrow money for land.

Mortgage rules essentially require homeowners to make plans based on future interest rates, and who knows what they will be. These and other issues make it challenging to make money in Canadian real estate.

In fact, many Canadian investors choose to put their real estate investing money elsewhere in other countries.

But Matthew and his team are sticking it out for now and they’re doing well and we’re going to hear all about that in just a few minutes.

Do you have questions about real estate or real estate investing? Send them to questions at FlippingAmerica.net.

However you listen to the show, please be sure to subscribe and if there is a like button or something like that, click that and also would you do me this one favor, please share it with a friend.

Us grow our audience.

[2:34] It’s time to do the news. Zillow is being sued, but it’s not for what you might think they’re being sued. You know, when people think about Zillow and want to sue them, it’s because they, you know,

think about the zestiment and how wrong it can be, and you would think that they would be getting sued about that. But no, it’s not what you think.

Zillow is being sued for alleged wiretapping.

Now, I don’t have time today to get into this entire thing, but if you sell anything online, and if you use some of these trackers that, you know.

[3:19] Are tracking whether people have left a shopping cart or something, you need to read this article.

Now, none of us are as big as Zillow, and none of us are going to do this like Zillow did, but it’s gonna be very interesting to see how this turns out because if the plaintiffs prevail.

[3:40] In this suit, it is going to change the face of online marketing.

As you know, we are facing a crisis in real estate, but according to KNOP News in North Platte, Nebraska, the crisis is a shortage of inventory.

It’s not a real estate crash.

They still have a shortage of inventory. So you see, buried with all of the big headlines, the splashy headlines, and we talked about some of them on the last show, of impending doom and disaster,

and even some of the major players are buying into this scenario,

the underlying metrics across the country, and this is just an illustration, that we here at Flipping America are looking at everything,

down to the local markets like North Platte, Nebraska, and the Flathead area in Montana near Kalispell.

[4:32] And different places across the country, we’re tracking what’s going on and we know that there is no crisis impending in terms of a crash.

There are going to be falling house prices, there are going to be, there is a market correction underway, we’re experiencing this in the properties we have for sale.

But in North Platte anyway, they have a shortage of properties. A lot more news we don’t have time to get to because we’re about to spend a few minutes now talking with Matthew Ablican from the Toronto area in Canada.

And I know that you’re gonna be inspired as you listen to this young man and as he tells his story.

Here we go.

[5:13] Matthew Ablecan, welcome to the Flipping America show. Thanks for having me, Roger.

I’m a little surprised at how I’ve stumbled over your last name, and I apologize for getting it wrong, but I’m just going to call you Matthew for the rest of our time together, all right?

[5:29] Perfect. Okay. Now, Matthew, as I’ve already told you, those of you that are listening, is he’s an investor. He is a realtor. They have a real estate brokerage. I don’t know if you call him

realtor’s in Canada? That’s a very good question to begin with. The realtor designation is something that belongs to the National Association of Realtors

here in the US. Are you called Realtors there or real estate agents or what are you called? Yeah, Realtors recently became the, they probably adopted it from

NAR and it became synonymous with all Realtors here so you can finally call ourselves Realtors and the agents are the brokerage. Oh, alright, alright. And.

[6:11] And also they have a mortgage company. We’re going to talk about all those things right now, but let’s stay back on this realtor thing for a minute. In the United States, all realtors are,

real estate agents, but not all agents are realtors because realtor, R-E-A-L-T-O-R, is a trademark of the National Association of Realtors. And there’s a special set of ethical guidelines

and some other professional things you have to do to become a realtor. I am not a licensed real estate agent, so I don’t know all of the details. I just know there is that little difference.

But I know also that most Americans, most US citizens use those terms interchangeably. They don’t really even know that there is a difference. And in fact, I was an investor for many years

before I knew there was a difference. And so in the US also, you have maybe a group of real real estate agents working for a brokerage and the person that leads that group is called a broker.

[7:15] Again, different words get tossed around and sometimes regular agents refer to themselves as brokers.

But you’re saying in Canada, they’re all called brokers.

[7:26] So we have two designations, salesperson or broker. And you have to call yourself what you were licensed in, so either salesperson or real estate broker.

But more recently, now everybody could call themselves a realtor.

If you’re a broker of record, you own the brokerage, then you have to go buy broker of record.

So either you choose to identify as the salesperson or broker specifically, or you can just go under the umbrella of realtor. All right. And you have a special extra licensing for the broker?

I mean, just like an extra course. And a test and so forth. Okay. That’s really similar to the US. Okay. All right. So while we’re just highlighting cultural differences, let’s talk a little bit

about the mortgage process. There are some distinctives about applying for and getting a mortgage in Canada. And I also, I can’t remember where I read this, but I read that.

[8:24] A far lower percentage of Canadians even use mortgages on their property than in the US.

Can you speak to that? I think that’s probably just because of our population. I mean, the state of California alone is equivalent to the population of all of Canada. So I think that’s more of a

population thing. But mortgages are very, very common in Canada. I think the biggest difference lies in how we qualify purchasers and borrowers, but also the terms that come with your mortgage.

So I think, correct me if I’m wrong, Roger, you guys can get a mortgage lock in the rate for 30 or 20 years or longer term periods.

Yeah, we can’t do that here. So here you would kind of go under a one year, two year, three year, four year, or most commonly the five year mortgage. And it’s kind of like a phone contract. So you get it for five years, that’s the rate that you’re guaranteed.

And then if it’s a fixed rate mortgage, and then every five years it’ll come up for renewal based on whatever the rates are at that time.

If it’s an adjustable rate mortgage, Obviously based on what the central bank does, it’ll go up or it’ll go down.

[9:36] So you guys have that, in my opinion, it’s a little bit better where you can lock in for a longer period of time and you have that peace of mind, you know what your payment is, you know what that rate is.

So we have a big problem in Canada now in 2023, because a lot of those mortgages are coming up for renewal and the rates are significantly higher now than they were five years ago. So we may see some blood in the streets.

Yeah, I can see how that would create a problem. Really, what you’re saying is all Canadian mortgages are, in a sense, adjustable rate mortgages.

[10:08] Pretty much. Again, just for that time period, they’re locked in. But if you do go for an adjustable rate mortgage, then at any time that rate can fluctuate up or down. But yeah,

the fixed rates are locked in just for that given period of time. And we don’t see anything above five years. You could do a seven year or a 10 year, but that is not common because the rate

that the bank offers you is significantly higher in those terms. And so people usually go for like a three or a five-year fixed rate. So yeah, it’s very common that people renew at a higher rate.

So what this is really doing is it’s transferring the risk of interest rate fluctuation from the lender to the borrower. And as a borrower, you have to think, well, I don’t know how it is in Canada,

But among Americans, Americans are, without the distinction, I know that Canada is a part of North America and I get all that, you know. But US citizens in the United States, okay, that’s what,

I’m referring to as Americans here. Is that okay with you? Yes. All right. Americans tend to buy all the house they can afford. And so there are limits, you know, your payment can’t exceed,

a 28% of your household gross income.

[11:30] And in fact, it is so common that Americans do this that at networking meetings, my wife who is a title examiner and a great researcher, she and I would play this game at these meetings that we lead.

I would say, tell me your address and I’ll tell you how much money your household made when you bought the address.

And people say, no way.

[11:53] We get the address, she looks up the title work, which is public record, we know what they paid for the house. We know how much money they borrowed.

I can remember pretty much what the interest rate was at that time.

I work out the payment, I can work out the, from there we can extrapolate that to find out what their household income was.

And it’s right, eight times out of 10.

And people freak out. How can you figure this out from public records? Well, that’s how you do it.

But in Canada, I think…

[12:24] If you’re a borrower, you don’t want to buy all the house you can afford, especially if you’re in a low-rate environment. Am I right? Are people using these kinds of thoughts?

[12:35] So if somebody comes to us and just wants to be pre-approved pretty quickly without us looking into their file, into their credit report and things like that, we usually, the rule of thumb

is what’s your gross income if it’s a salaried position? And we kind of multiply that number by four and that’s what you would be pre-approved for in terms of a mortgage

amount. So for example you earn a hundred thousand dollars multiply that by four you’re qualified for four hundred thousand. Problem is here in Canada

especially Toronto four hundred thousand doesn’t get you anywhere so you need to be significant earning significantly higher income or have a much higher down payment in order to qualify for the loans. It’s very very difficult to to qualify for loans here.

[13:21] I know you guys have the FHA program. I know if you served in the military or if you’re a medical professional, they have different programs in America for those professionals.

There’s really no distinction here. It’s very, very strict. It’s difficult to qualify for.

That’s why because of the recent rate hikes that we’ve seen, a lot of people have been priced out of the market.

Demand has fallen off about by 50% since March of 2022. So we have a big problem right now with mortgages in Canada and it’s slowing down the housing market. The minimum down payment here on a property over a million dollars.

[14:00] Is 20% minimum. The only time you can qualify for 5% which is the lowest down payment minimum we have is if you buy a property that’s up to half a million dollars. But I’ll put it to you this way,

half a million dollars even an hour and a half away from the city of Toronto which is where we are in gets you maybe a one-bedroom flat apartment condo apartment so you really if you want to be in

a house you’re you’re looking at six seven hundred k up in Toronto you’re looking depending on on where in Toronto you’re looking at like two million bucks minimum so it’s it’s we haven’t seen real

wages grow at the pace of how our housing market has grown. So appreciation is definitely one of those plays here in Canada where people buy and flip and make a lot of money in a

short amount of time because of appreciation over the last 25 years. But now we’re starting to see things level off because of the rate hikes.

All right, Matthew, let’s talk a little bit about your background. You didn’t start out as a broker, a real estate salesperson, or a mortgage lender.

You started out as a humble real estate investor.

Tell us a little bit about that journey.

Yeah, so I was in university. I was working a couple of part-time jobs and I was in two different undergraduate programs. So I did teachers college here and also I was studying law and I had to pay for my own tuition.

[15:27] Tuition is expensive, student debt as we know, even in America is really, really high and it’s a big, big problem that we have. So I had to pay for my own tuition. My parents came to the country in the mid-80s.

They met here, they left the communist regime because they were being persecuted for being Christians.

And so they came here, they met at a church here, got married and they had myself and then they had my younger brother.

So they forced us to go to school, they encouraged us to go to school and I had to pay for it.

[15:56] And one day I just said, I got to figure out how to make some extra money. And the idea of landlords making money while they sleep, I came across that idea.

It intrigued me. I had never really learned the concept of making your money work for you and earning more money.

So I started looking into real estate.

Now it was very difficult to buy something because I had nothing pretty much saved. I had about five grand saved and 10 grand from my student loan that was available to me to use for pretty much anything you want.

That’s how they get you. They throw the money at you and you can do what you want with it. People buy cars, they party, they blow it and they’re in this major debt.

So I had that money at about 15 grand and one unique thing we have here that’s very different from you guys is our pre-construction real estate.

So buying off of floor plans, buying from a reputable developer who’s going to build the houses or the apartments, that’s a very popular thing here because there’s so much red tape with our government.

[16:58] We’re not as free as you guys are. I envy that about people in the US, where in six months you could get your permits, you can be shoveling the ground, you could build this building.

[17:11] In Canada, it doesn’t work that way. It takes about two to four years to even get a building permit and get your project approved and get a building permit and get financing from a lender.

So I could be a purchaser who purchases a pre-construction condo and it’ll be four years, five years before it’s actually constructed and built.

So people could lock in the price today, all they gotta do is pay a deposit, and it’s guaranteed by our government.

It takes a long time for the approval process, it takes a long time for sales to take place and the builder to get financing, and then they construct it.

So that’s how I got started because I didn’t need a mortgage. I was 19 years of age, I bought my first pre-construction condo, and then I became a realtor afterwards, and I earned the money that I needed to earn, and close the deal successfully four years later.

So I bought the condo for 305,000 and then four years later, it was worth a little bit more than that.

I did an equity takeout, equity refinance, and I paid back my student loan.

So I didn’t pay any interest towards my student loan and the property paid for that. So it takes a long time for these things to get constructed and for new supply to enter the market.

And that’s one of the main reasons why we have such a supply issue here.

So it’s gonna be very interesting to see how things play out. But that’s how I got started and I loved it. I loved the idea of it. I got hooked right away. And so I got licensed as a realtor, grew the company and just started teaching my clients what I was doing.


[18:40] Man, I like that. And I’ve got a couple of questions. First of all, what country did your parents come from?

[18:45] They both came from Iraq. Really? Okay. Well, welcome to the Americas.

[18:54] Welcome to the Americas. That’s right. And even as bound up as you are there, I would imagine you’re a lot more free than you would have been in Iraq. 100%.

Matthew, imagine this. Just think about this and imagine this for a minute. What if you could just, with one stroke of the brush or the pen,

wipe away a lot of the bureaucracy that delays the building of new housing construction?

What do you think that would do ultimately to home prices in your area, in Canada or just in Toronto?

[19:32] Well, it’s interesting you say that because the province that we’re in, our premier, which is kind of like your governor of your states, has recently moved the bill forward and it’s become legislation where that’s exactly what he did.

He ended up freeing up a lot of the lands that were protected by conservation groups.

He ended up removing a lot of the red tape from local municipalities, reducing our development charges, our development fee.

We have extremely high development charges. On a condominium in Toronto, development charges are close to $100,000.

That’s insane. Whereas you look at Florida, there are no development charges. It’s crazy. Yeah, there’s no government charges.

There’s cost of developing the land.

But yeah, it’s very different. That’s why I’m asking you to imagine it.

[20:25] Oh, yeah. And we have those as well, all the other costs of development. But our municipalities, our local towns, are sitting on billions of dollars.

And sure, they reinvest that back into the cities, but for the most part, they’re sitting on that cash.

So in an effort to incentivize developers, in an effort to kind of bring down the cost of housing, they’ve passed this recent legislation.

So 2023 is gonna be a very, very interesting year to see how that plays out. I think with more supply would satisfy the demand that we have, like to put it in perspective,

February of 2022, before the interest rate hikes that took place, a single property was getting 20, 30, 40 offers. Right. That’s how much of an issue we have. In the cities in the US, that was,

happening as well. But all of that came to kind of a sudden halt over a period of a couple of weeks last fall. I think after the next to last, not the last one, but the previous rate hike activities.

[21:28] Went and the number of showings on my properties out that I’ve got out there right now, they just dropped to almost nothing. And we were selling houses within a couple of days. And you know,

I’ve got one that’s been on the market now for 90 days. And we’ve been aggressively dropping,

the prices and doing all the right things. But yeah. So the reason I ask you that is.

[21:51] Is if you want to get a sense of why the property is so expensive there in Toronto, I think it’s because of limited supply and the built-in costs of development along with the fact that,

in order to be a builder in an environment like that, you can’t have massive debt on,

that land.

While you’re waiting to get all your permits, the interest will eat you up.

You pretty much gotta own the land free and clear while you’re waiting to get approved.

[22:23] We actually don’t even have mortgages for land here. So the only way you can get a mortgage on land is if you put other properties up as collateral,

or if the land is actually site plan approved and ready to go and you have permits in hand.

So you have to be a developer here, you got to buy that land cash. Yeah, and that means that there’s more stability.

You have fewer developers going out of business because of default on their land loans. But on the other hand, it makes it a rich person’s game. You have to have money to even get into that game to begin with. 1000%.

Yeah. And if you suddenly, if you did that broad brush thing and if that law passes, it’s going to impact the market. There’s going to be more inventory and it’s going to actually take

the top off some of the prices because there’ll be more things to buy. And then it’s always a balancing thing. Once there’s more things to buy and the top comes off the prices a little bit,

a lot of people who are on the sidelines will rush in to try to buy and.

[23:27] There’s a balancing act always. You don’t want the prices to go down too far. No, it’s not good for anybody if that happens. It’s not good for the financial system.

It’s not good for sellers, even for buyers. A lot of buyers are discouraged right now because they want to wait and see what happens with the market but really we’ve only seen about a 9% drop in prices from March of 2022 so it’s actually more expensive to purchase today than it was,

in February of 2022 when you were paying top dollar for the property but your mortgage rate was 1.5% or 2% whereas now you’re looking at 5-6% so buyers are just sidelined and I know one of the of the guys we love listening to, Grant Cardone,

and he always was pushing this, you know, renter’s nation thing and renter’s nation in the near future.

And he said something recently, which I agree with, the government’s kind of forcing people into that.

So a lot of people are now moving into rentals and we’re seeing the demand for rents or rental properties just skyrocket.

Year over year, we’re seeing over 20% increases in the cost of rental properties. So that trend is probably gonna continue in the short term.

[24:39] Yep, we’ve gone a little long in this segment. We’ve got to take a quick break. We’ll be right back. Are you looking for the perfect Valentine’s gift for that certain someone?

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One of my favorites is the skeleton of a girl lying there and she’s saying, I’m just waiting for the perfect man to come along.

I also like the coffee mug that reads, I’m sorry for what I said before I had coffee. There are some others that you’ll just have to read at sight because this is a family-oriented show.

Blackbeachgifts.com. Use the promo code Roger at checkout and save 10% on your first order, blackbeachgifts.com. All right, we’re back. I’m Roger. He’s Matthew. We’re talking about

some of the differences between real estate in Canada versus the United States and interesting conversation so far. Matthew, when you were a little kid and you were thinking about what you were going to be when you grew up, what was it?

[25:43] You know, when I was in grade three, I believe, I was told, you know, politician would be my career path and didn’t think much of it.

But I was learning a lot of different kinds of concepts from my parents because when they came here, their credentials didn’t transfer over.

They were both teachers in Iraq and that didn’t happen when they came over here. So they did what any kind of immigrant does.

They got into business for themselves out of pure necessity, not because it was a cool thing to do and I started learning you know the concept of buying low selling high when I would see what my parents were doing at their coffee shops their their convenience stores and things like that. So I never really had anything in mind I know I was pushed towards,

going to teachers college I was pushed towards going to law school and things like that I didn’t end up going to law school. I just knew right away like in high school I had

two lockers I was selling different items out of the lockers and I was just always getting my hands on something and selling it for a higher price. So I was very entrepreneurial

very early on. And when I started learning about the real estate business, like I didn’t know what a real estate agent was at, you know, 17 years old, 18 years old. And I started learning about that. And I said, wow, this is something I could really build a career off of and a business off of. So I always knew it was going to be something entrepreneurial.

I just didn’t know exactly what it would have been.

[27:05] All right. Now I’m going to ask you a few more personal questions, but you got to keep the answer is real brief because we’re over time already.

Okay, question number one, what business trends do you pay most attention to reading the news and so forth.

[27:18] Well, inflation is the biggest thing that we’re paying attention to right now. What’s the cost of it?

What’s happening with the cost of goods and services? And it’s very important for me to keep my overhead low, especially with difficult times ahead.

You just got to be open-minded to that and understand that markets have cycles and there’s ups and downs and you got to know where you’re in.

All right. If you could have a meal with any person from history, who would it be?

Jesus Christ. Okay. Good answer. Next question, how do you define true wealth?

[27:56] Freedom, time freedom. So if I can have all my bills paid, everything is done, and I could spend time with my family, with my loved ones, or doing whatever it is that you wanna do, for me, you’re wealthy.

All right, last question. How can people reach you, Matthew?

[28:14] So you can follow me on my Instagram account. I manage it myself. So it’s at Matthew Aplican.

We also co-authored a book recently with a fellow American, Robert G. Allen and Kevin Harrington, the original Shark Tank.

So if you’d like a free ebook version of that, just visit financialfreedomclub.ca forward slash ebook and you can get yourself a copy of that. All right. Financialfreedomclub.ca slash, what?

[28:42] Ebook. Ebook. Financialfreedomclub.ca slash ebook and get a free copy of this book. Matthew, thank you so much for joining us today on the show. We appreciate it.

Thanks, Roger. I always try to find some kind of quote or relevant saying or something. So this time I just went looking for Canadian proverbs and quotes and I actually found a website and I have a couple of favorites. These are Canadian proverbs.

Patience is a tree whose root is bitter, but its fruit is very sweet.

Also, walk a mile in my moccasins to learn where they pinch. And lastly, God bless America, but God help Canada to put up with them.

[29:21] All right, everybody, that’s it for today. You know what I always say at the end of the show, keep your eyes open.

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