Category: Weeky Update

This is a picture of my son’s soccer team.

My wife and I coached the team this past summer.

Once upon a time I considered myself a pretty decent soccer player.

As a kid, soccer was my one true passion.

It was the center of my universe.

That’s probably why I can recall almost everything my coaches taught me, and very little of what my school teachers taught me.

The brain has a funny way of turning on and absorbing things when the information is something of interest to us.

One of the most basic, yet effective lessons one of my coaches taught me was at the age of 9.

It was the K.I.S.S principle.

For those of you that don’t know, K.I.S.S stands for Keep It Simple, Stupid!

Could you imagine a coach saying that to a 9 year old today lol.

Nonetheless, although this may not be the most profound teaching of my life, this really did shape me both as a soccer player, and later in life as a coach.

For those that aren’t familiar with the game, like most sports, the game of soccer is a series of many split second decisions.

9 times out of 10, when faced with that decision on the field, I would Keep It Simple, Stupid!

And as a player, it worked for me.

By no means was I blessed with god given natural ability, but I was still able to have a pretty accomplished soccer career given the way I CHOSE to play the game.

Please don’t confuse the simple decision with the easy way of doing things.

Nobody ever gets ahead always choosing easy.

I define the simple decision as the one that has the probability of giving you the best possible outcome given the circumstances you are faced with.

I’ve taken this same approach in business, real estate and personal finances.

Believe it or not, all three of these areas can be very simple.

And they can also be very difficult and complex.

If you oversimplify it, then you often end up just doing what the masses do – I.E. save a portion of your pay cheque and invest in a “diversified” portfolio of stocks, bonds and mutual funds.

This is easy, and remember, easy gets you nowhere.

On the flip side, you can very easily over-complicate investing, and complication usually results in frustration, anxiety and undue risk.

The trick is to create a system for yourself, designed around the K.I.S.S principle.

A simple to follow step-by-step system that allows you the flexibility to make investing decisions that have the probability of giving YOU the best possible outcome given the circumstances you are faced with.

If you need help getting started, I would be happy to share my simple plan with you.

Feel free to reach out, to discuss.

Best,
Vince

I was recently asked to speak at a Real Estate Investing seminar, conducted by a friend and client of mine.

The subject was “Unlocking Financial Freedom Through the Art of Lending.”

Pretty fancy title, eh?

For whatever reason, I went into the seminar thinking it was going to be a lot of novice investors, and we would be talking lending 101.

Boy, was I wrong.

I was blown away by the quality of real estate investors in the room.

Most of them would make darn good mortgage agents, as it was obvious that many had already navigated the complicated mortgage process for investment properties.

One of my biggest takeaways from the evening was the overall sentiment in the room towards Canadian real estate.

It was NEGATIVE!

In fact, numerous times during the event, the conversation became about how to invest and get a mortgage in the United States.

The reason for wanting to look elsewhere to invest, is simple…

…in Ontario, the math just doesn’t work!

At today’s cost to buy or build real estate, it is darn near impossible to rent or sell at a profit.

And unless you are living under a rock… you’ve probably already heard that there is a pretty significant housing shortage in Canada.

In fact, the CMHC, Canada’s national housing agency, recently stated that the country needs at least 3.5 million more new homes by 2030.

With the pace we are going, we won’t even hit a million new homes by 2030!

So let’s put this into perspective… we need way more houses, but those who build/develop the housing are telling us they can’t make money doing it…

…this seem like a problem, a very BIG Problem!

Not surprising, BMO Capital Markets recently issued a statement warning its investors that residential construction investment is plummeting.

They even went as far as commenting that, perhaps the government should try stopping the decline in new construction before promising to double it. Ouch.

Quite simply, Canadian investors are putting a lot less money into building more houses.

The bank notes that this is the worst annual decline since 2011.

So the solution is this… we need housing, badly!

But those who are most effective at adding to the housing supply (builders, developers, investors) are not able/willing as the economics don’t make sense for them.

Essentially, the gap between what it costs a builder/developer/investor, and what an end-user is can afford, is too large.

To us, in the mid-to-short term, this means one of two things…

1. Politicians allow things to play out naturally, and the already politically charged housing problem continues to get worse and worse, or
2. governments will try to deal with the issue in the only way they know how, and that is to try and re-stimulate investor demand by enticing them to add to the housing supply (think… more money printing and lower interest rates).

The BMO folks appear to be more confident that governments are embracing the investor-driven model.

“Recent moves by the federal governments to lower borrowing costs for developers and reduce sales tax on the construction of rental units are helpful first steps.” – BMO Senior Economist Sal Guartieri

Agree or disagree with this approach, that is up to you.

But we too feel that this is the most likely outcome.

And based on our conversations with the investor community, you can bet that they are ready and eager to get going.

I’m not at all saying that we will see another 2021 run up in real estate prices…

…but what I am saying is that it would have been really beneficial to have known ahead of time the impact that the 2020 pandemic response policies had on real estate values.

Everyone’s situation is different… and how this applies to you may differ to how it applies to me.

But if you already own real estate or desire to own real estate, then one way or another, you are affected by all of this.

Feel free to reach out and have a conversation about how all this stuff may apply to your own situation.

All The Best,
Vince

This is my family just before we broke ground on construction of our new family home — Winter 2022.

Almost two years later (and many more grey hairs to show for it), we are just about completed the build, and gearing up to move in (finally!).

Lots has happened over the last two years… especially in real estate and the financial system. One thing that has not changed — my decision to NOT sell our current family home.

Those that know me, know that I preach about owning and holding good quality hard assets (even better if they are cashflow positive!).

To me, there is still no better hard asset than a single-family home, in a good neighbourhood.

When we purchased this home back in 2011, I told my wife that we will never sell this house.

I would be lying if I said I haven’t been tempted to sell…

..especially during the run up in prices over the last few years…

..and even more so as it became very apparent that my construction budget for the new house was not worth the paper it was written on, lol (this is a story for another day).

So why am I hanging on to it, you ask?

Especially given all of the uncertainty in today’s crazy real estate market — I’ll tell you why..

…in addition to the sentimental reasons at play (this was our first home together and our three kids were all born in this home).

I remain steadfast in my belief that asset prices will continue to increase over the long term, and a good, cashflow positive single family home will be harder and harder to acquire.

And here’s some reasons why I feel this way… check out these charts produced by my friends at Rock Star Real Estate…

Okay, so what are we to look at here, you ask… This is average price of a house in the GTA (between 1968 and 2023) versus the growth in the Canadian M2 Supply.

What is M2? To simplify it, M2 is the amount of ‘new’ money being added to the economy. When you hear people talking about the government ‘printing money’ — this is what they are referring to.

What this chart shows is that, when M2 goes up, so does real estate prices.

Assuming we can agree that increased money supply translates to increased real estate prices, then the next question is… will M2 continue to increase?

Again, looking at this chart… you will see that the M2 supply is always growing.

Our Canadian Central Bankers (the people that watch over our financial system here in Canada), are really only a one trick pony — they can increase or decrease the money supply and/or interest rates.

And when it comes to interest rates, historically, to protect the value of our currency we have always just copied the interest rate policy of the U.S. Federal Reserve (the Central Banker in the United States) — so if they increase/decrease interest rates, then we follow suit.

So on that basis… controlling the money supply is the primary go to tool of our Central Bank.

So what’s happening with the money supply right now?

According to this chart, M2 supply (i.e. ‘new’ money entering the economy) in Canada is going up again as of the last quarter! Despite the higher interest rates!

Our interpretation — the high interest rates are finally starting to show their impact on the Canadian economy… and if they are going to continue to keep pace with the interest rate policy of the US (higher rates for longer), then to try to offset the drag on the economy caused by the high interest rates… they will continue to grow the money supply.

Could this be why we haven’t seen real estate prices plummet, despite record pace interest rate hikes?

What impact does this extra money in circulation have on real estate prices when interest rates inevitably come down at some point?

In my simple mind (and I assure you… it is very simple), the formula is…

Increased M2 = positive for real estate prices
Lower interest rates = positive for real estate prices
Increased M2 + Lower interest rates = real estate prices on steroids (think 2020-2022)

So although everybody is focused on whether the Bank of Canada will hike, pause, or drop rates, in the short term… for those playing the long game… it’s all just noise.

Long term, it’s hard to see a scenario where prices don’t continue to go up… And that’s without even addressing the other simple fundamentals like the supply and demand of houses (a topic for another day).

As I always say… all we can do is try to provide ourselves with an information advantage… and based on the information currently at my disposal…

…I’m betting on real estate prices to continue to go higher in the long term… and that’s why I’m going hang on to my current house, as long as I can.

All the best,
Vince Castagna

Is it already that time of the year?

I’m not talking about Fall… instead about wine making season!

This is one of my father’s absolute favourite family traditions.

You wouldn’t know it, because he seems so stressed out throughout the entire process

• from what he paid for the grapes,
• to the quality of the grapes,
• to making sure my brother and I clear our schedules the moment the grapes arrive.

But that’s just how my dad approaches everything…

…and honestly, he enjoys every second of it.

The picture you see here is my dad’s wine press. Pretty cool, eh!

This thing was originally my grandfather’s. 

It has some miles on it, but still does the job!!

There is a reason I bring up my family’s wine making tradition… stick with me, I will explain everything.

My family has been making wine for decades. 

You would think by now we would be world-class vintners (fancy word for somebody who makes wine lol). 

But I assure you that is far from true. 

We have definitely gotten efficient in the various processes of wine making…

…but the wine itself has not gotten much better.

Honestly, from year to year, the final product is a bit of a crap shoot as far as taste and quality goes.

My brother and I often joke that a successful batch of our dad’s homemade wine is one that is “drinkable.”

My brother and I got involved in the process several years ago. 

We don’t love it as much as our father, but we do really enjoy getting to spend that time with him and carry on the family tradition.

We couldn’t believe how “old school” our dad’s approach to winemaking really was. 

There was no recipe, and no end goal for the type of wine he wanted to produce.

This didn’t make sense to us.

If we’re going to invest two days in this, we were at least going to ensure that the end result was a glass of wine that you could drink without cringing.

One year, my brother hit the internet hard and went all in on his research. 

He even got fancy with it and began combining different recipes and techniques.

Speaking of cringing, you could see it in our father’s face every time we strayed from what he had done for years. He was skeptical to say the least.

Low and behold, year one of Mike and I getting involved in the process, produced arguably the best batch of wine to ever come out of our father’s cellar. 

He doesn’t outwardly admit it, but the fact that he laminated the recipe, tells us that he’s pretty thrilled about the new approach to winemaking.

Not trying to beat our drum but I think we’re actually at the point now where people say “not bad”!

My dad’s winemaking “plan,” is not all that different from a lot of people’s financial plans. 

Most people blindly follow an outdated plan that was probably passed down to them, and likely has no real, specific objective.

Here’s the plan that is probably being followed my most…

Go to School >> Study hard >> Get good grades >> Get a job >> Get promoted >> Save 15% of your earnings in your RRSP >> Invest your RRSP in a diversified portfolio >> Retire at 65 and Live Happily Ever After.

Although maybe a bit more detailed than my dad’s wine recipe, still just as vague, if you ask me.

Just like making wine, in life, you get what you put in. 

If you put very little thought and effort into your financial plan, then don’t be surprised if in the end you’re the one left cringing.

More than ever, it’s important that you take an active role in your own financial situation.

I urge you not to rely solely on your bank advisor’s one-dimensional approach to investing.   

There’s a whole world of investing opportunities out there outside of the stocks, bonds and GICs.

Just like with wine, first determine your desired outcome, and then find/create a detailed recipe that meets your specific desired outcome.

I may be biased, but real estate investing and mortgages, in my opinion, are key ingredients to any good financial plan.

Real estate protects the value of your hard earned money and mortgages help you to achieve the real estate portfolio you need in order to achieve the bigger financial goals.

I don’t say this out of theory, I’ve taken a personal active role in our financial plans and real estate investing has been a very strong pillar to get me and my family closer to our financial goals.

I hope you take this as a friendly reminder to look deeper into your own financial goals and start or modify to achieve them.

All the best,
Vince Castagna

P.S. If you ever cross paths with my father, please don’t mention to him that he used to make really bad wine. This is still something that does not really get talked about in our family…

P.P.S. If you need to discuss anything about your financial goals and need help, please hit reply and reach out to us with your story.

[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]We just converted our conference room into a viewing party of the Great Canadian Real Estate Conference held last week in Toronto.

On the left you have Adrian and on the right that’s me — Vince.

Thanks to technology, we were able to live stream the entire event from the comfort of our office here in Windsor.

Although it would have been nice to be there in-person, having this option is super convenient!

Some of the smartest and most experienced real estate minds in Canada spoke at the event. I’ll make a point to attend in person next year.

Now I’ve always loved the idea of learning…

…especially when I feel like it’s providing me with an information advantage.

Being a very Canadian real estate focused event, the value that we got was priceless.

The consistent message and sentiment from the majority that spoke at the event was — “Canadian real estate affordability, is screwed”

I’m glad we were all able to agree on that… unfortunately, nobody was able to agree on the solution to this mess.

Here’s the Canadian real estate dilemma in a nutshell…

• Demand for houses exceeds supply.

• Record number of people are immigrating to Canada every year but new construction is below average.

• Inflation is sticking around, and interest rates need to remain high, therefore developers and builders cannot justify building housing, because they can’t build them cheap enough for anybody to be able to afford them at these interest rates.

• General approach by the various levels of government has been the BANANA strategy — Build Absolutely Nothing Anywhere Near Anybody.

There are so many competing forces at play here, that I guess it makes sense that even the smartest real estate folks can’t agree on the best way out of this mess.

With that said, a view that most speakers were consistent with…

…is that they can’t see any scenario where Canadian real estate prices don’t continue to increase in the long term.

We share this view. 😊

And what that means is that it is going to continue to get increasingly more difficult to own a piece of Canadian real estate.

I know it might sound crazy, but think about it…

…years from now, could trying to own a single-family home in Southwestern Ontario be as out of reach for most folks as it is in places like New York or London, England?

Sounds nuts, but I am not so sure it is that far fetched…

…something to think about for sure.

We love geeking out about this stuff.

So, if you ever want to chat about real estate, business, money etc… don’t hesitate to reach out.

We don’t have all the answers, but we are always seeking that “information advantage,” and are more than happy to share that information with anybody that’s interested.

All the best,

Vince Castagna

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This picture is special…

…my 4-year-old steps on to the ice for his first official hockey practice.

Growing up in Canada, I’ve always loved ice hockey (die-hard Detroit Red Wings fan here),

but I’ve never really played the sport so I had a bit of preparation to do.

I spent a lot of time last week researching and purchasing the equipment we needed.

Followed by countless YouTube videos on how to dress up my son.

After a few practice rounds I was confident that day 1 was going to be a breeze.

But boy was I in for a rude shock

The dressing room experience for kids hockey is no joke!

It is one thing to dress your kid in the comfort of your own home…

…it is a totally different experience when trying to do so in a jam-packed room of over-stimulated children and anxious parents, while sitting in a squat position and racing against the clock.

We managed to get it done,

but from now on, I am bringing my son to the rink fully dressed…

…he will be “that kid”… and I will be “that dad”

…I have no shame, lol.

Here’s the thing, I grew up in a low-middle class, blue collar immigrant family.

Hockey was just not an option for me.

Don’t get me wrong, I was very fortunate growing up, as my parents allowed me to play lots of other sports… just not hockey…

…that was for “the rich families.”

Fast forward to now, my son is playing hockey, so we must be one of those “rich families.”

I don’t use the quotation marks lightly, because we are definitely not a RICH family.

That said, we are fortunate enough that I can register my kid in hockey, without “breaking the bank.”

However, I am very aware that not everybody is as fortunate…

..and very aware that hockey really is an expensive sport.

In fact, have you noticed how most kids’ activities these days are pretty darn expensive?

This got me thinking…

…the dressing room was packed this year

but if the price of everything continues to rise at the pace that it is currently at…

Will the dressing rooms continue to be as packed?

Will families need to cut off kids’ activities if their income is not keeping up with increase in inflation?

Unfortunately, the answer is, yes!

I don’t gamble but I am willing to go all in on the fact that the cost of living in Canada is going to keep going up… and here’s why…

While all the headlines are about rising interest rates and how it is necessary to “tame inflation”, our own government continues to increase the M2 money supply.

In fact, they have increased the money supply by 33% since January 2020 (this means that government has printed more money and injected it into the economy).

That’s why everything feels so much more expensive…

…because quite simply, there are just more dollars in the system to go around, making everybody feel richer, and “able to pay higher prices”.

In reality though, if your income did not go up 33% since January 2020, then your purchasing power has actually deteriorated.

Here’s the hard fact.. there aren’t many Canadians who have seen a 33% wage increase over this period… so most of us are experiencing our purchasing power deteriorating.

But not everyone has been a victim to this situation.

Hard asset owners are the ones that have benefited from all the excess money that our government has injected into the system.

And as the cost of almost everything continues to rise, so will those asset prices.

So in a way, you’re protecting the value of your hard earned money.

For me and my family, the focus over the last several years has been on acquiring income producing hard assets – particularly real estate and businesses.

This has helped us to always be ahead of the game.

And with this business, we’re hoping to help people leverage knowledge and money to acquire more hard assets that will not only allow them to protect their money but to also live the life that they always wanted!

That’s it for this week.

Enjoy the long weekend and Happy Thanksgiving

– Vince