30 – The Marshall Report – Episode 30

Today is Thursday August 11th 2016 and this is the 30th episode of the Marshall Report. Welcome to the podcast.

In this weeks episode:
1. Dog days of summer
2. Townhouse or detached for investment?
3. Capturing the ATM bandits
4. Year to date statistics
5. The Donald
6. The Banana
7. Vancouver’s tax
8. Reading the Olympics
9. Barking dogs
10. The truth
Let’s get on with the show.

Dog days
The dog days of summer, according to dictionary.com are the sultry part of the summer, which is supposed to occur during the period that Sirius, the Dog Star, rises at the same time as the sun: now often reckoned from July 3 to August 11. It is a period marked by lifelessness, listlessness and laziness.
Sure is hot.
I love it.
We went to the market and bought some corn. A baker’s dozen for four dollars. That’s a deal. It doesn’t get any better. There was a story in the news last week by our most famous local food blogger – Andrew Coppolino, yep a whole story about corn.
Here are some highlight:
After wheat and rice, corn is the crop that humans grow more than any other
It has helped sustain entire ancient cultures – Incan, Mayan, Aztec.
There are many different kinds of corns. Some for feed, some for fuel, some for flour, and some for food.
Corn is Canada’s third most valuable crop behind canola and wheat. It is worth more than $2 billion a year.

Question of the week — townhouse or detached for investment
Most investors, I think it is safe to say, want to buy the cheapest rentable property that they can find. They tend to be interested in positive cash flow first and everything else second. The everything else may or may not include the quality of tenants willing to rent, the potential appreciation value and amount of work needed to prepare the place for rent and to maintain it in a relatable condition. This week’s question touches on all of these issues:

Good morning Keith,
I have one question regarding investment property. I am looking to purchase an investment property at the end of this year, and I am hoping to get your insight about which type of investment property would give me the better return in KW area (i.e. single detached house vs freehold townhouse, assuming I have the financial capabilities.)
I understand that single-detached houses (say like a 2200 sq.ft. house, with a price of approximately 500K right now) always beat freehold townhouse and semi-detached in terms of value growth/equity gain per year; however, I am concerned about the chances of renting it out. Based on my research, it appears that there are not many people looking to rent a 2000+ sq.ft single detached house for a high monthly rental fee ($2000/month?). Is it common for people in KW to rent a house of that size? My fear is, the equity gain per year will not be able to cover loss in rental income, due to the difficulty of getting a tenant for such a property and the monthly rent I received. On the other hand, a freehold townhouse appears to be much more popular in rental market, though the equity gain is much less than a single-detached house.
Can you shed some light on this? Thanks again.

Ok, so that is more than one question. It is two. I will answer them in the order that they came.
1) Which type of property will give better return, a townhouse or a detached?
In terms of straight appreciation, single detached houses appreciate at a better rate than townhouse or semi-detached homes. In terms of rent received I believe that you will receive marginally more for a single detached home, but not enough more to offset the price difference. So, a better rental investment is a townhouse.
2) Are there a lot of people looking to rent a 2000+ square foot home?
I think there is. Again most investors buy mostly the same thing (the cheapest thing they can find). I’ve always thought that if everybody is doing a certain thing then it is better to do something else. That is why I have never advertised in glossy real estate magazines. That is why I don’t rely on Open Houses to find new clients. That is why I don’t work for Remax, Royal LePage or Century 21. But that’s all an aside. With so many families moving to Waterloo Region and with so few listing available to buy I know that there is a high demand for nice family homes in good school zones and know that supply of these homes is very very low.
If it was me, I’d buy the house.

Capturing the ATM bandits
Remember last winter when we had all of those ATM thefts? They started in Kitchener Waterloo and then they hit some outlying areas: Elora, Elmira and Guelph. And then they just stopped. I was supposing that they would hit Stratford next. But they just stopped as suddenly as they started. It was weird.
Well, last week the police announced that they had arrested seven people, all from Kitchener. They are all in their early 20s and all have been charged with break and enter, motor vehicle theft, possession of stolen property, dangerous driving, theft under $5,000, obstructing police and mischief over $5,000.
At the time, I was fascinated by the brazenness of the crimes. It seemed so hollywood. They would steal a vehicle from a dealership or a repair shop and then they would rip an ATM out of a business foyer. Then they would ditch the stole truck.
Police say the losses from the thefts included $870,000 in stolen vehicles, $72,490 in cash stolen from ATMs, $114,300 in cash and property stolen during break-ins, and $387,120 in damage to commercial businesses.

Real estate statistics
July sales, in terms of the number of homes sold, were about the same as last year. 588 homes sold in July
The year to date sales at the end of July show a 15.2% increase over 2015 and a 21.7% increase over the five year average.
The number of listings is still more than a third below where they were last year. Single detached homes are selling for an average of more than $450,000 now. That’s 14% higher than last year.
If you like statistics, and I know you do, here is a link. But suffice to say that things remain as they have been all year with not end in sight.

The Donald
I remember an old Hill Street Blues episode where there was a stand-up comedian trying to break into the business. He was having trouble because his name was Hitler – Vic Hitler, if I remember correctly. I mention it because of the story I read about the 5,000 people in the US of A named Trump.
Back in the 80’s, in the office or at cocktail parties, these people would be teased about being rich. They claimed to be treated better by some once their name was known. It was an instant and favourable icebreaker.
Then, about ten years ago with the popularity of the apprentice, “you’re fired” jokes were fun and maybe a little stupid. It got old fast but it was all in fun. The Donald was still bigger than life, maybe a bit of a caricature of himself, but harmless.
Now it is a different story. People with the Trump surname are getting scolded and ridiculed and sometimes drawn into political arguments they really don’t want to have – especially since half of them are likely democrats.

Most every time I go grocery shopping, I buy bananas. They always seem to be in season, not here in Ontario, sadly, but somewhere, South America, Southeast Asia. I bought some the other day at Walmart. They were cheap. I can’t remember how cheap, I always buy a bunch, but I remember thinking ‘wow those are cheap bananas’ and I bought two bunches.
They always get eaten. Everyone in my family eats bananas. I’ve never thrown away a rotten banana. The same can’t be said for peaches or avocados. Bananas are a solid purchase.
And bananas are truly a unique fruit too, with a unique history. It’s the world’s most consumed fruit and spans generations as food for both toothless babies and the toothless geriatric. It’s soft, sweet, and easy to digest. It crosses historical eras, has been responsible for entire governments rising and falling, and has propped up beleaguered economies. If fruits were countries, the banana would be the world’s superpower. If fruits were pop stars, the banana would be Beyoncé.
That is from the recent three part series on the banana at national geographic magazine. There is a link in the show notes.
So, bananas are actually a berry, which is a weird and random fact but they have been modified and tampered with over the years. Most fruit have. I wouldn’t worry about it. There is a bit of a banana crisis and there has been for a great many years. We used to eat the ‘big mike’ banana but a fungus wiped that one out back in the 1950s. Now the same fungus is attacking the Cavendish banana, the one we’ve been eating since.
I talked about bananas before in this podcast. Most people peel them from the wrong end.
And back to Walmart, where I bought two bunches the other day. Bananas are the single-most sold item at Walmart and the fourth-most valuable food crop in the world, behind only wheat, rice, and milk.

Vancouver’s tax, one week later
It has been less than two weeks since the new tax for foreign buyers of Vancouver homes took effect. Chaos has ensued. Although 90% of BC residents are all for the tax, real estate agents, investors and the cluster of real estate related businesses and political types are vocally against it.
There is a bit of a domino effect first of all as often in real estate one sale is connected to another. It is hard to estimate how many deals fell apart and are gone forever, but it is estimated to be in the billions of dollars.
There is talk that the investment money that was pouring into Vancouver will change directions and join the investment river running into Toronto. That means more overflow here.
There is the uncertainty and slowdown that is created anytime a major event happens. We had that here in Waterloo Region a few years ago when Blackberry’s star fell out of the sky. Most everyone took a wait and see attitude for a while, and then things continued as normal.

Reading the olympics
I haven’t been watching the olympics, but I’ve been watching the internet watch the olympics and that is interesting on its own.
You get a two-sided view if you only read what comes up on your news and social media feeds of what is happening. You get all the bad news. The poverty and crime in Rio. The unfinished dorms, the swimming pool that turns green. You get the sensational – a cringe-worthy broken leg with likely millions of views – not mine I could not click on that link.
And you get the good news, the Canadian medal in woman’s rugby, our women’s soccer team beat another team in an upset, but I already can’t remember who that was. Micheal Phelps breaking more swimming records and winning more medals.
And then, finally you also get the editorial stuff, why Beijing’s Olympic opening ceremonies were so great. What it might mean that a South Korean gymnast took a selfie with a North Korean gymnast…But that is typical for the olympics. That is just politics, fluff and window dressings.
The olympics is all a lot of action and a lot of talk, mostly unrelated and unimportant. It is a roadside attraction, an every four year spectacle, a meaningless diversion from other things online and in life.
It is mostly forgettable, sometime prideful. If the Olympics were a holiday it would be Thanksgiving, if it were a fruit, it would be a kiwi, not a banana and if the Olympics were Beyonce I’d pay a lot more attention. We all need a diversion from life and American politics, don’t we?

Call to action
Winston Churchill once said ‘you will never reach your destination if you stop and throw stones at every dog that barks’. This week’s call to action is to focus. Don’t worry about what is going on around you. Now is the time. If you are going to buy a house this year, the autumn market is ramping up. Forget about all those barking dogs.

I will leave you with this parting thought
The truth will set you free. But not until it is finished with you.

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