[00:03:11] Nick Hill: I’d always go to these events. I’d follow real estate trends closely, but just like a lot of real estate investors, I had the analysis paralysis until several years ago and I decided to, you know, make the jump in, bought the first property. It’s just been a whirlwind since then. I, my goal was to get as involved in real estate in every single capacity that I could.

[00:03:32] Nick Hill: So after buying a couple properties, I realized I wasn’t strong on the finance side of things, became a mortgage. I wanted to grow my network. I’ve always been I’ve been a huge proponent of networking and finding mentors within certain spaces. And that’s actually how Dan and I met. I slid into his DMs probably about four years ago at this point, trying to work on a project with him.

[00:03:53] Nick Hill: Taking a long shot. And now, you know, 4 plus years later, we’re here with the biggest podcast in the country and owned a few dozen properties together. And so basically, my, my story’s pretty simple, just a normal guy that didn’t give up, had a love for business, started several small businesses over course of my life.

[00:04:08] Nick Hill: And it’s kind of all led me to this point in being a full-blown real estate junkie at this point. 

[00:04:15] Patrick Donley: That’s awesome. And so you guys connected on Real Estate Twitter through the DMs there? 

[00:04:19] Nick Hill: Instagram. 

[00:04:20] Patrick Donley: Instagram. Okay. 

[00:04:22] Dan Foch: Instagram, I think like I, so I had a property listed for sale and Nick lives in the area that I had this investment property.

[00:04:28] Dan Foch: I think it was a fourplex listed for sale. And he reached out and he was like, I’m really interested in that property. And I was like, oh, let’s go do a tour. And we did a tour and he was like, how would you like fundraise on a deal like this? And I was like, well, like, why don’t I just show you like, I’m not really having a ton of success selling it, so why don’t we just see if we can fundraise and bring in some equity partners on this deal.

[00:04:45] Dan Foch: We literally just like bonded over trying to do a deal together. And I often find, like a lot of people say, don’t mix business and friendship, but I find if the business portion comes first, it actually ends up working pretty nicely. And it seems to be, you know, we get along well. We make decisions well as business partners in the podcast and on our investments.

[00:05:00] Dan Foch: And so it’s really good. Probably the only good thing in my life to happen out of a DM slide. I’m a real estate broker and an and a real estate investor. Now, I guess I’ve evolved into a little bit of like an analyst in the Canadian housing market and you know, I do a lot of stuff with the media. So like I write for Real Estate magazine and a couple of real estate media groups up here.

[00:05:18] Dan Foch: Just talk about real estate a lot. I’m a director of economic research at a real estate brokerage as well. So really constantly looking at a macro view and the micro view of what’s happening in the data side of real estate in Canada. And I’m really hoping to expand that view into North America and eventually, And that spills over a lot into our podcast.

[00:05:36] Dan Foch: It’s a very data-driven podcast. So that’s kind of where we evolved out to where we are. My inspiration of being a real estate investor is honestly I’m really attracted towards the idea of providing affordable housing to people. I think a lot of investors want to hold luxury properties or sexy properties or Airbnb or self-storage or whatever.

[00:05:51] Dan Foch: For me, it’s like, I want to serve the clients. I don’t know why. Honestly, I mean, I’m not, I don’t really consider myself to be all that altruistic of a person. I just really think it’s a need that’s not being served well. And so that’s really my why or my inspiration in the real estate investing space.

[00:06:05] Patrick Donley: And so, Dan, what was your educational background like? You said you’re very data driven. You’re a numbers data guy. What did you study in University?

[00:06:10] Dan Foch: I did a undergrad at BComm in so Bachelor of Commerce, but majoring in real estate and housing, and then I did a postgraduate certificate in valuation.

[00:06:20] Dan Foch: And I also did actually, I mean, and for the US listeners, if you’re really looking for an exceptionally good continuing education program, m i t has this program called Data Science and Real Estate. So I also did that really to get an understanding for the data science side of things. It wasn’t expensive either.

[00:06:34] Dan Foch: I think it was like 2,500 bucks US, and I learned a ton from. So I definitely have like a little bit more of a technical educational background. Probably underqualified by comparison to a lot of US investors. I think like, you know, you’ve got a lot of people who did a BComm in real estate and then maybe an MBA or some or a JD MBA or something like that.

[00:06:49] Dan Foch: But Canada only has three real estate undergrad programs right now, which is hilarious because most of our business economy is actually from real estate and housing. That’s my background there. 

[00:07:00] Patrick Donley: Cool. And Nick, what about you? What did you study in undergrad?

[00:07:02] Nick Hill: Dan’s the much smarter of the two of us here. I I actually was going to be a a lawyer.

[00:07:09] Nick Hill: I was watching a lot of suits back in the day and I thought, well, that would be a fun job. And then I started speaking to actually the gentleman who’s now my real estate lawyer, and he looked at me, he is like, you don’t want to be a lawyer. So very quickly I finished up, actually, Dan and I went to the same university up here.

[00:07:23] Nick Hill: And I took political science and law courses. Ended up not becoming a lawyer, obviously quickly finished that program and went into construction engineering management and that’s how I kind of started off my real estate career was actually onsite on a construction site. So I, my dad had done a bunch of renovations growing up, so I knew how to get my hands dirty and I liked that side of things.

[00:07:42] Nick Hill: Love the architecture and the design aspect of real estate as well. 

[00:07:49] Patrick Donley: Cool. And so you guys met what, four years ago it sounds like. Do I have my numbers right? 

[00:07:52] Dan Foch: Yeah, about that. Yeah. Or so you’re three years, I think, I want to say three years. Yeah. Okay. 

[00:07:56] Patrick Donley: And so what came first that deal that you tried to do together where Nick, you were learning from Dan was, what was that like?

[00:08:02] Patrick Donley: How did that end up? What was your learning like Nick, from that experience with Dan?

[00:08:05] Nick Hill: At that point, I wouldn’t call myself a beginner at that point. I had, I think, three duplexes under my belt and a background in this space. Then I teamed up with Dan and realized how ignorant and naive I really was.

[00:08:19] Nick Hill: That deal actually has a really funny story. You know, Dan did entertain me and he was like, yeah, sure. You know, let’s work on it. What did you have in mind? And myself being in the position where I was trying to team up or joint venture, or at least work with in some capacity, a guy much smarter than I am someone that I, you know, admired and respected.

[00:08:39] Nick Hill: I had to figure out a way to add value to him, and that’s my advice for all of the early on investors out there, find people that you want to work with and figure out how to add value to them. So I told Dan, I was like, look, I, you know, my parents live fairly close to that property. I know the area very well.

[00:08:58] Nick Hill: Let me put together a package for it and we’ll try to take it out to, I. I put together a very extensive joint venture partner package, including demographics of the area, zoning, multiple exit strategies, and Dan was impressed with that. We actually ended up taking it to a few different money partners. We had the deal lined up several different times.

[00:09:18] Nick Hill: The owner was kind of playing games. This went on for almost. The better part of a year. Again, just going back to, you know, not giving up. And if you’ve been in real estate long enough, you know that certain transactions can happen in a minute and other transactions take a year or more to get done.

[00:09:33] Nick Hill: Long story short we didn’t get the deal done. We lost it in, you know, the 11th hour after making multiple million dollar plus offers and going back and negoti. Could have been a bit of a blessing in disguise because about eight months ago a tornado came and completely destroyed that building. Bit of a blessing in disguise, but it was that deal and that experience with one another that I think, you know, led Dan and I to now own 30 plus properties together, have the podcast and have our hands in a bunch of other real estate deals as well.

[00:10:07] Patrick Donley: That’s awesome. I want to hear more about the podcast that, talk to me about how that developed, what it’s been like. You said you’re more data driven, but I’ve listened to several episodes and I want to get into a couple ones that I enjoyed that I thought our listeners would love, but talk to me about a little about the podcast and what that’s been like for you guys.

[00:10:24] Nick Hill: Take it away, Dan.

[00:10:26] Dan Foch: Yeah, so I can start on that one. I was podcasting even, you know, before I had met Nick. And that was sort of how he reached out to me. Like he was maybe one of my four listeners. But I was, I basically had a show where I you know, I would just interview people because I would, I said this very much like you, Patrick.

[00:10:40] Dan Foch: I had this thirst for knowledge. I wanted to learn as much as I possibly could. You know, like I actually say like, kind of one of my North stars is like, I would love to eventually be at just like for a moment in time, one of the most knowledgeable people on earth in real estate and. Not for like, you know, ego or to brag or anything, just because like I love it and I love learning about it.

[00:10:56] Dan Foch: And so I would just started documenting my journey of learning about real estate and I was interviewing tons of people. One of my professors actually was from the university in Ohio. She did her, she was a real estate professor there and. And I was a teaching assistant and research assistant for her.

[00:11:10] Dan Foch: So that’s kind of like really where I got that, just that really thirst for wanting to, like realizing that this was like one of those things that doesn’t end in what you can learn. And I got to the point where I had interviewed enough people and had those dialogues and I wasn’t really taking off as a platform, honestly.

[00:11:24] Dan Foch: Like I think. I look at what you’re doing and interviewing a lot of people and having a ton of success with it. There are better voices out there, people with more established platforms that are doing it better, and it wasn’t a space that we could compete in. And so the Canadian Investor Podcast reached out to us and said, do you want to run?

[00:11:40] Dan Foch: We’re going to do a real estate spinoff. It’s the most requested topic that our listeners want from our show. Would you be interested in hosting that? And do you have a co-host? And I said, I have a co-host and I would definitely be interested in doing it. And so I didn’t really know what we were getting into.

[00:11:52] Dan Foch: And then we started listening to their stuff and I was like, Dan, this is going to be a lot of work. Like these are really thorough researched episodes. And it kind of just, Nick and I really just started, like Nick still has, you know, he is, like he mentioned, he approached me a little bit further behind in his investment career.

[00:12:06] Dan Foch: So he has this awesome way of looking at things of creating value, like real, tangible value for I. And mine is kind of like almost thinking about it a little bit too far, but also really trying to uncover that, that more macro look or the more economic or data driven look. And so together you know, the collision of those two world worlds, the really granular deal by deal analysis, like the episodes that I think you mentioned you liked plus like the macro has really created something that was totally missing from, I think from the podcasting space in general.

[00:12:33] Dan Foch: But especially in the Canadian space where it’s a lot of, like, you do get a lot of storytelling, a lot of like really getting to know characters and personal. But not just research, pure research, data-driven, actionable advice, like it’s a really focused on being an educational podcast.

[00:12:50] Patrick Donley: I love it. You talked about the thirst for knowledge and the hunger for just information. Talk to me a little bit about where you follow trends. What’s your main source of information that you’re, I know there’s a variety of things, but talk to us about some of the avenues you’re using.

[00:13:02] Dan Foch: Yeah, so I’m a lot like you Real Estate Twitter.

[00:13:06] Dan Foch: I have Google alerts set up for like every real estate terminology, and I comb through those like every morning. But I also subscribe to like a lot of economists, so I subscribe to like all of the Federal Reserves and I follow. LinkedIn is actually a great platform for interacting with economists.

[00:13:20] Dan Foch: I find that they publish really good information on there. Probably so far the only good use case I’ve found for LinkedIn actually maybe for like sliding into the DMs of developers and investors perhaps, but following a lot of economists I like in Canada, we have really a, a very illegal ballistic banking system.

[00:13:36] Dan Foch: So we have six major financial institutions that handle the majority of credit for real estate investment. They have a very vested interest in doing exceptionally good research on the housing market and the real estate market, and they put out really good. Organizations like U L I, urban Land Institute, which you have in the US build Naop.

[00:13:52] Dan Foch: I consume all of their information. All of the major commercial real estate brokerages. I consume all of their information as well. The cap rate reports, the quarterly insights, what has happening in different asset classes. I just really try and read and summarize as much stuff as I possibly can, and I really.

[00:14:08] Dan Foch: I got a lot of followers on social media from sharing charts. Like in Twitter, it was like literally just screenshot, inject my 140 character commentary and then somehow grew two, you know, 24,000 followers from that social media, like TikTok, even similarly now, like just pointing at the same charts. And so that’s really like digesting charts is where I got a lot of it from economists and people smarter than me. That’s really what I do. Just read stuff that people smarter than me I have to say.  

[00:14:36] Patrick Donley: You do a great job  at it, and you can tell like the love of it comes across and like the handful of podcasts I listen to I on your Twitter as well, like, it’s really great stuff to check out. So I encourage people to, to follow you and both in both you and Nick. 

[00:14:48] Patrick Donley: Nick you mentioned the portfolio. I wanted to hear a little bit about your guys’ strategy together, how you’re funding and finding deals a little bit, and talk to us a little bit about just the business partnership, both within real estate and with the podcast.

[00:15:02] Nick Hill: The podcast is a separate entity, separate corp that we actually, any of the money that we get here we either use to reinvest into this business, to grow the podcast, to sponsor the events that we have and host across the country.

[00:15:15] Nick Hill: And then eventually, you know, that money will be allocated to, I’m sure go and buy more property as most of our capital seems to be allocated towards these. I can speak for Dan only so much, but both of us have real estate holdings outside of the buying group that we’re part of. I own some with my parents, we own some with other partners.

[00:15:34] Nick Hill: I think Dan does as well. And then the bulk of our portfolio is made up of of a team of five people. So we have an investment banker, a C P, A C F. A good friend and a mutual friend and partner of both Dan and I, who’s amazing on the private mortgage side of things and kind of access as the c e o of the group.

[00:15:53] Nick Hill: So we’ve got a really great group of people and what we’ve done is been able to identify similar to you, those secondary, tertiary markets that are not sexy. And truth be told, we’re not buying the sexy stuff in the not sexy places. What we’re buying is properties with good cash. Properties that likely to appreciate a bit slower than stuff with a bet with better cash flow.

[00:16:16] Nick Hill: But the market, I think that there’s needs to be an understanding and maybe a precedent set before we dive into why we’re buying that stuff is because the market here in, in Ontario, Canada is so crazy that it actually skews the national data for housing, for prices, for cap rates, for everything.

[00:16:32] Nick Hill: So what we’ve really tried to do is focus on really the, you know, the 2, 3, 4. Within this province that is the most populated in on in Canada, actually one in four Canadians live in the G T A, which is the greater Toronto area. And in the Golden Horseshoe, which is the populated area around the Great Lakes, around Lake Ontario, you have that many people.

[00:16:54] Nick Hill: You’re going to have enormous competition. And Dan and I like to joke that real estate has become an extreme sport. It’s actually Canada’s national. To alleviate as much competition as we could. We’ve done our due diligence and tried to find the markets that most people have overlooked, and I think we’ve done a pretty good job at that so far.

[00:17:12] Nick Hill: And we’ve, what we’ve remained you know, we’ve remained laser focused on those markets and been able to buy, and our strategy is buying anything from one duplex at a time to engaging with larger portfolio acquisitions, you know, in the 25, 35, 40, 50 door kind of thing.

[00:17:26] Dan Foch: I might expand on that a little bit actually myself, just because we’re just getting to that layer of financialization of housing that you’re seeing in the us So where you guys have, you know, your Blackstone putting together large portfolios of single family detached homes.

[00:17:40] Dan Foch: Canada’s really just getting to the forefront of that. We’re, I’d say earlier in our housing or long-term housing cycle. Than where the US stands. And so we have a company here called Core Developments and Blackstone just crossed the border and set up an office in Ontario as well, but have no intentions of purchasing single family detached homes.

[00:17:56] Dan Foch: But there are some groups that are starting to amass large funds. And so a big portion of what we’re hoping to do is be almost an aggregator of deals to put together portfolios that make it economically sensible for these larger institutional players to end up purchasing in the fullness of. And so that means, you know, you get a, you know, you buy assets that you’d be comfortable holding, run a long period of time based on your cap rate or cash on cash return.

[00:18:20] Dan Foch: And then some other fundamentals, like most of the stuff we’re buying frankly, is bought below replacement costs. So we’re buying at a negative land value. So if you had to rebuild the house, you’d have to get the land at negative $250,000 as an example to make it make economic sense. So that’s obviously a great little price floor as well for.

[00:18:38] Dan Foch: The other piece is the cash flow and the cap rates are typically between six to 8% for the stuff. So just for a little bit of an outline of the metrics that we’re targeting for. And we go for, you know, typically duplex up to fourplex, we will go, we are getting into some larger stuff now, but it does become a little bit different because you start getting into commercial financing when you get to larger scale assets.

[00:18:57] Dan Foch: But assembling a portfolio and then being able to say, okay, now we can either hold this and it’s like almost an institutional scale asset now that it’s a whole portfolio of these multiplexes, or it’s compelling enough that we could flip this out to a, you know, a Blackstone, not active in Canada, but maybe some of those other players that are active in the Canadian market at four to 5% cap rate and make a huge return, and then take our cash and scale into the next phase of our real estate investing career.

[00:19:22] Dan Foch: Yo planning so that we’re purchasing assets would be happy. Holding, be totally fine with bag holding, right? Like you, you were mentioning, holding your Bitcoin bag all the way from the top to the bottom. We want to be the same way with the real estate, but also being in a position where we are poised and positioned to sell well if we need to or if the opportunity exists.

[00:19:41] Patrick Donley: Nick, you had mentioned  Land Bank to me prior to the interview starting. Is that what you’re describing? Dan? Is Land Bank, is that the company you guys are doing? 

[00:19:50] Dan Foch: Yeah, so land bank’s actually like a mortgage bank basically in the Canadian space. So we do, I mean, I think in the US commercial real estate space, you see a lot of people doing this, but in Canada, economy just always gets so aligo ballistic.

[00:20:01] Dan Foch: Like it just every, so we have like, you know, you have your Big five commercial real estate shops. You have your big six banks, we have like four telecom companies. Like we don’t really like real capitalism here in Canada. I’ll be completely honest. And just, you know, say it that way. And so the difference I think is there’s this gap now that’s formed in the market where all of the small players in the real estate space, you know, you’re running the mill with real estate brokers or mortgage brokers, don’t have the knowledge base to serve those, let’s call them sub-in institutional investors.

[00:20:27] Dan Foch: You have institutions, you know, your pension funds, all of your large asset holders, let’s say they’re 50 million plus on the asset and land. And then you have people below, let’s say $2 million. And typically you’re Big five banks, big five commercial real estate brokerages, big five mortgage brokerages that are on the commercial debt side only serve that institutional plus category a hundred mil plus.

[00:20:48] Dan Foch: So there’s this missing middle economic, missing middle where nobody, there’s deals that are, we just say very simply, too big for the small guys, too small for the big. And that is Land Bank is really designed to, and you’re seeing a lot of guys in Real Estate Twitter, doing exceptionally good work in this space, in small submarkets across the us We want to do the same thing with the Canadian market.

[00:21:07] Dan Foch: You know, keeping in mind that the Canadian market, GDP wise and population-wise is smaller than California. We take California, you know, you could, if you could specialize in one area of that size and population, that’s basically exactly what we want to do and or what we are doing with Land Bank in the Canadian market.

[00:21:23] Dan Foch: Right. That’s super cool. 

[00:21:25] Patrick Donley: Nick, you guys put out an episode that I really enjoyed listening to. It was 10 lessons to Survive until 2025. Can you go into that, just kind of your overall look at the market and what investors should be doing now to kind of prepare to prosper the next 3, 4, 5 years?

[00:21:42] Nick Hill: Yeah, for sure. I mean, look, the list episodes are always fun to do because I think people just love being able to be like, okay, you know, if I do these five things, this will. We try to title everything, obviously with a certain element of responsible click bait. That’s just the nature of the game we’re in here. I think that episode aside there’s a few things that, that any and all real estate investors should be doing, especially the newer ones, and that’s making sure that you one, have the right power team and that you always have a mentor.

[00:22:12] Nick Hill: You know, one, one of the things we talked about in that episode of many others is people set goals and they think those goals are written in. When they’re not right. It’s a moving target and almost everything in real estate is a moving target, right? Ta looking at a deal five years ago and comparing it to something now doesn’t make sense because you are in a different interest rate environment.

[00:22:31] Nick Hill: You are in a different pricing environment. For instance, in Canada here, we now have a massive housing crisis because our government is allowing 500,000 immigrants to come in every year, which is wonderful, but we don’t have anywhere there to put them. So what can real estate investors do to survive until 2020?

[00:22:48] Nick Hill: That’s really, it’s basically looking at the rate environment that we’re in right now, which is going one way in both America and in Canada. So how do we adapt to that rate environment? Well, one, you start to run your numbers differently. You start to look at deals differently. But you also are able to find more opportunities.

[00:23:09] Nick Hill: So I think it really comes down to, again, like, like you’ve said a number of times, finding your niche and then within that niche, finding the power team to help you execute that exercise more prudence and be more strategic than you were in the last few years where anyone could go in and make money off of real estate.

[00:23:28] Nick Hill: Now we’re back in a time and a place where you need that know. Stay as informed as possible. But at the same time, and this might be a bit of an oxymoron, stay as informed as possible, but block out all of that noise and really only focus on the things that you can control. You can’t control interest rates.

[00:23:45] Nick Hill: You can’t control rising rents. You can’t control fallen home prices. What you can control is where you find deals, how you find deals, and the exit strategies that you build into those deals. 

[00:23:58] Dan Foch: Dan, anything to add? The only thing I would really want to add is, you know, that comes from one of the most famous and reputable, I think it was a summary of a lot of stuff that somebody put together in real estate.

[00:24:07] Dan Foch: Twitter, actually, I think it was Duke of Dirt or Real Estate Ranger Real Estate, Trent, or one of those guys who basically summarized a lot of lessons that came from a very famous. Us real estate investors, Sam Zell. So again, like a lot of the stuff we’re doing is aggregating data, but a lot of it is also aggregating information from people, again, far smarter than us.

[00:24:24] Dan Foch: How do we condense that information and just create value for the listeners? So that was a very fun episode. Do you 

[00:24:30] Patrick Donley: guys have an, I’m curious, do you have any real estate heroes? You mentioned Sam Zell, do you have any others that are I’m a huge Sam Ze fan. I read the subtle, what is it? Am I being too subtle  I think it’s called.

[00:24:40] Dan Foch: am I being Too Subtle? I really like Zeckendorf. I’m not sure if you’ve read that book, but if you’re looking for an exceptionally good real estate read, Zeckendorf is probably my favorite real estate book. Yeah. 

[00:24:50 ] Patrick Donley: And Nick, what about you? 

[00:24:52] Nick Hill: I got a lot of my early inspiration and I kind of, you know, years and years ago was flirting with this idea that now we’re bringing to fruition is from the bigger pockets community.

[00:25:03] Nick Hill: Right? I mean, those guys have such an immense amount of information. They’re over 700 episodes deep in their podcast. I think so guys like the Brandon Turners of the World was. He was always someone I really admired and one of the reasons I think that Dan and I took this approach with the podcast up here is we really wanted to build out a community.

[00:25:22] Nick Hill: And one of the things we’re trying to do is to train and build a community of the next generation of real estate investors in this country. And I think we’re actually in the early stages of doing that, and that’s through building a community and providing that educat. Which, you know, we took from podcasts such as yourself, but bigger pockets was a major inspiration.

[00:25:42] Nick Hill: And I think there was a lot of Canadians that did listen to bigger pockets that were looking for something like that in the Canadian space that didn’t exist. We’re more than happy to, to fill that nation and be the bigger pockets of Canada or as Dan Lly put at the smaller pockets. 

[00:25:57] Patrick Donley: Dan, I wanted to talk kind of more of a macro look and you’re into data and trends.

[00:26:02] Patrick Donley: Talk to us about just kind of what you’re look looking at, what you’re seeing. What’s unfolding in whether the Canadian market or US market? What is keeping you up at night? Talk to us a little bit about what data that you’re seeing that’s of interest 

[00:26:14] Dan Foch: to you right now. Yeah, so I’ll talk US market because I think it very, it spills over into the Canadian market very much for our listeners as well.

[00:26:22] Dan Foch: I mean, in the US market, rents are falling. I think wall Street Journal put out a report a couple of weeks ago, or sorry, a couple of days ago that into January, the data points is the first time in five years that rents have fallen for six months in a row. So that is definitely going to be a challenge.

[00:26:38] Dan Foch: I think our headwind against, you know, if we look at the way real estate investors purchase, They purchased in a lot of cases based on yield and the income portion of the yield is falling right now. So we can’t have the expectation that prices are going to materially go up. I don’t know if they’re going to materially go down.

[00:26:54] Dan Foch: I think we’ve seen a lot of the market trying to, let’s call it price in interest rate increases or rate hikes from the Fed. And so the market was very responsive. We have a very sophisticated market right now. The retail traders are exceptionally well informed as a result of things like this podcast in Wall Street.

[00:27:10] Dan Foch: Whatever it is, Reddit, Twitter, there’s a such a wealth of knowledge and so the real estate market almost behaved the same way. It really, it almost overcorrected at the beginning. It priced in the future rate hikes that we were expecting from the Fed. So now that we’re like a year later from when prices probably peaked in most markets in, in, in the US and in Canada, so February, Q1 of 2022, prices likely peaked.

[00:27:29] Dan Foch: Now we’re looking at, okay, is inflation under control? No. So do we expect interest rates to come down anytime soon? No. Okay. So we know what the pricing environment looks like, the buying power environment looks like with this new normal of interest rates, and that’s a reduced buying power. So prices aren’t going to go up anytime soon unless rates come down and rates aren’t going to come down unless inflation comes down.

[00:27:49] Dan Foch: So we know that piece of the macro is set. We also have the headwind of rents coming down, but with the biggest headwind, from my perspective, when you talk about housing, which is the most accessible real estate investment for entry level real estate investors as we’re going to [00:28:00] buy houses, is affordability and affordability.

[00:28:03] Dan Foch: If you go on the Fed website, I think it’s this, the St. Louis Fed or the Atlanta Fed has the housing affordability chart. It’s called, I think it’s just H O A M, housing Affordability Monitor, something like that. And it’s a metric that basically shows the affordability on the average salary for somebody to purchase a home, and that’s the lowest.

[00:28:21] Dan Foch: So housing affordability is the worst it’s been since the great financial crisis or the run up to the great financial crisis, global financial crisis of 2000. So 2007 was the last time that it hit that. Seeing that and being in that perspective tells me that’s the major headwind. That’s like a lot of people think investors are going to floor the market, but we just said, okay, investors price expectations are going to be going down as income and yields climb.

[00:28:45] Dan Foch: So who’s going to create the price floor in the market? It’s ultimately going to be, the expectation would be put on the end user to floor the housing market. And the reality is they are battling record low affordability or deadly low affordability. And so those are, from my perspective, the major headwinds for the real estate space.

[00:29:04] Dan Foch: And if, and I would just encourage people to take, we cover this in the very first episode on our podcast, The Canadian Real Estate Investor Podcast, and most credit cycles very similar in Canada and the. And so I would look at that. I would look at Ray Dalio’s, how the economic machine works, and think about, okay, let’s assume that this is the unwinding of a credit cycle right now, and let’s just make our decisions.

[00:29:26] Dan Foch: Doesn’t mean you don’t have to invest, doesn’t mean you have to take a bearish mentality or be cynical about it. It just means that you have to invest responsibly, because that can create a lot of downside risk, but it can also create a lot of opportunity. And then the other thing that I would think about is also these debt and political cycle.

[00:29:41] Dan Foch: There’s a political economic cycles. They also happen based on socioeconomic cycles or social cycles. And another book that I might suggest reading is the fourth Turning, which they’re actually updating. He’s doing his new update of the fourth turning. I think it’s coming out in the summer of this year.

[00:29:55] Dan Foch: Definitely the very interesting time to be alive. From my perspective, if somebody is interested in economics, credit cycles and all of those kind of. Yeah, I totally 

[00:30:06] Patrick Donley: agree. The couple things that stood out, the Ray Dalio video of understanding the economic cycle, I think it’s about a half hour. You can watch it on YouTube.

[00:30:13] Patrick Donley: Definitely people should check that out. And the fourth turning, like you mentioned too, I did not realize he’s coming out with a, it’s a second edition or an updated version of the book, is that what you said? 

[00:30:23] Dan Foch: Yeah. So basically in the fourth turning, which is like, I remember reading chapter six like today because he wrote that book in 94 or some.

[00:30:29] Dan Foch: Some of them in the late 90. And it’s like, so it’s chilling because he like nails. A couple of things that happened, like the current conflict with Russia, like literally states, Russia, and an adjacent neighbor, these are things that would happen in the, during a fourth turning period, he talks about a global pandemic.

[00:30:44] Dan Foch: Like it’s really eerie to read this. But I guess The Fourth Turningis to, based on his forecast, is to have happened or be happening right now and should be ending and sort of, you should be getting into that rebuilding phase of first, turning within the near future. Which makes me feel hopeful because some, sometimes things do feel a little bit grim right now.

[00:31:01] Dan Foch: And so he’s, I guess he’s releasing an updated book of sort of what that first turning would look like and I’m really interested to read it. He’s been doing a bit of a PR circle now and stuff like, Yeah, if you probably, now that we’re having this conversation, it’ll start showing up in your reticular activation system and you’ll start seeing it everywhere.

[00:31:16] Dan Foch: So, but I’m really looking forward to that book. Yeah. That’s cool. So the 

[00:31:20] Patrick Donley: fourth turning just to, so for people that don’t know, that’s kind of the end of a political and economic cycle. Correct. In the, we’re in that right now and the first turning would be like the start of a new, something new and fresh and creative.

[00:31:33] Patrick Donley: Is that right? Do you say that’s a decent way to. 

[00:31:37] Dan Foch: Yeah. And basically the way that it’s structured. Totally. Yeah. You nailed it. And so the way that they kind of structure it based on, like what he describes is it’s basically the result of whatever generation is ruling, kind of like ruling the world at this time.

[00:31:49] Dan Foch: So right now the most elder generation would be baby boomers. And so the world is sort of a function of the values that they hold based on the way that they were raised. And then as they start to die off, [00:32:00] Just based on natural causes or old age, then the new generation starts to take over. So I guess it would be your Gen Xs.

[00:32:05] Dan Foch: And they hold a different set of values and the way that the whole thing cycles, the turnings are based on what the, you know, the culmination of society is doing as a result of these different, they call ’em AUMs, I think, which is a quarter of a hundred years or 20 year cycle. And it’s just really interesting to think about.

[00:32:21] Dan Foch: I mean, there’s really no way to verify whether or not this is true, but it all really resonates when you’re reading the book. Like, I just remember like nodding my head, I’m like, holy, this is all very true. So yeah, I mean right now it’s handing over from one generation to another and seeing this new, you know, faith in institutions.

[00:32:34] Dan Foch: because the end of a, The Fourth Turningis people start to lose faith in institutions, which you can see. You start to see a lot of widening of socioeconomic. Wealth disparity, political extremes starting to evolve and all of these things, like all of the boxes that he mentions and he mentioned these 20 years ago, really get checked.

[00:32:51] Dan Foch: And so I’m interested to see what he thinks is next as well. 

[00:32:56] Patrick Donley: That is, it’s fascinating stuff, like the whole demographics and all of the movements and changes that come from that is fascinating. I’m really going to keep an eye out for that next book and I’ll look forward. Do you guys see this kind of current market we’re in?

[00:33:09] Patrick Donley: Do you feel like there’s a lot of opportunities coming up for, let’s say, like the millennial? You mentioned the millennial generation, gen X a little bit. Do you feel like baby boomers have had, you know, they’ve lived through a great time era. Do you feel like those opportunities are going to come around  for millennials?

[00:33:25] Dan Foch: Yeah, I do. Absolutely. So I would say, you know, I mean, baby boomers had a relatively easy, like if you even just look at, I’m not trying to by any means, say like certain things that they went through were easy, but economically there’s evidence that it was simpler for them to succeed financially than it was for subsequent generations.

[00:33:43] Dan Foch: And then at the end of all of that, you know, they kind of created this world in which interest rates have basically been on a steady decline for the past 20 years. You know, say for the global financial crisis and then thereafter, basically on a downtrend since then. And so we’ve really created this extremely credit dependent world, and now they’re kind of exiting that world.

[00:34:01] Dan Foch: They were allowed, they were able to amass a ton of. Have a ton of equity as a result of this declining interest rate environment and now all of a sudden they hand off the economy to the younger generations in this kind of really messed up state where you have far too much money in circulation. You know, M two money supply is like really.

[00:34:19] Dan Foch: It’s creating a, I guess, a challenging world for the financial system, but also, you know, you have all of these new, very sophisticated financial instruments in a very credit dependent. You have a high household indebtedness. At least in Canada, US isn’t so bad. You guys kinda solved your problem. You learned your lesson after the global financial crisis.

[00:34:34] Dan Foch: But yeah, I think it’s going to create a lot of opportunity for us, but it also comes with learning a new way of thinking because we are entering a real, like a new, a tide changer. You know, like this is, or almost like a sea change, like this is really a new. You have to be willing to enter into a new way of thinking around interest rates, around stress testing properties around how to make money.

[00:34:55] Dan Foch: We have to think cash flow first. Can we rely on capital appreciation the way we were able to for the past 20 years? And I think the, whoever is leading the thought experiment or the thought leadership in that way of what this new investment real estate investment world ends up looking like.

[00:35:10] Dan Foch: I think if they make the right decision. And if you format the correct market thesis on kind of how the macro’s going to play out over the next 20 year cycle, which is really the timeline that you should be trying to hold real estate assets, there’s a ton of opportunity, probably equal opportunity to what baby boomers who bought at the onset of this 20 year interest rate decline had.

[00:35:28] Dan Foch: So I would say, yeah, absolutely. I’m expecting probably the next two to three years will be literally once in a lifetime investment opportunities for our generat. I’d just like to add to that quickly. 

[00:35:39] Nick Hill: There’s that quote in M, the hard times create strong men. Strong men create good times. Good times create weak men.

[00:35:44] Nick Hill: Weak men create hard times. I think, you know, based off of the cycle conversations that you two just had, which I agree and that are fascinating, the long wave stuff, we’re at a point where we have created hard times, but through that we can become better people, right? I mean, if you look at the last recession, you look at guys like Sam Zell or even Grant Cardone, that’s really where they made their fortune.

[00:36:07] Nick Hill: And you know, if things had continued on the trajectory that they were on over the last few, The millennial investor would have an extraordinarily hard time getting in and likely in some markets never be able to. I completely agree. I think that we’re going into a whole new world here where the game is going to be, you know, the rules have changed we’re playing a new game.

[00:36:29] Nick Hill: The millennial investor nowadays is also more equipped from a knowledge standpoint than any other generation before. So utilize that knowledge, figure out how to apply it. 

[00:36:40] Patrick Donley: Do you guys have any just kind of broad strategies that you’re doing to prepare for this or things you would recommend for younger investors to get ready for these opportunities? Anything that come to mind real quick?

[00:36:48] Dan Foch: Big thing is just like being liquid, de-leveraging, like trying to, you know, I mean it’s all just regular personal finance stuff I think, but it’s really easy to think you’re a rocket surgeon in a 20 year bull run. Right? Maybe there’s an interruption for you in the States, but like, you know, I mean, think about the lead up to the global financial crisis where everybody thought they were a genius and could make money buying and buying real estate, because the equity was increasing by 10, 20, 30% a year.

[00:37:15] Dan Foch: It’s been like that in the equity space and in the real estate investing space on a slower pace or scale, smaller magnitude, but for the last, since the global financial crisis basically. And so I think the big thing I would say is like start thinking smart. Stop thinking that the economy’s just going to grow infinitely.

[00:37:32] Dan Foch: because we are really entering a very weird time for the global financial system. We’re seeing on  shoring, we’re seeing conflict, we’re seeing changes in the interest rate environment. We’re seeing changes in fiscal and monetary policy. I mean, again, I would really liken real estate in almost anything in the world right now to very much being a stock pickers market.

[00:37:51] Dan Foch: Right now, the market might be in a bull runner. It might be sideways, but if you pick the right racehorse, if you bet on the right racehorse, you’re going to win. And you can win big. If you bet on the wrong one, you can lose big. And so if you pick the right real estate asset, if you have the right investment thesis and really formulate that, I can’t tell you what it is.

[00:38:06] Dan Foch: Like mine might be, I might be, I might just outperform the average, and that might be okay for me. But somebody listening to this might be like, I think that you. This certain asset in this certain location is going to be the perfect investment for this exact reason. And they nail it and they will completely outperform anything that anybody on this show could do.

[00:38:23] Dan Foch: And right now we actually have the opportunity to do that. Whereas the past little while it was like everything did well, but it all kind of perf. There was no like really huge outlier returns. There was no anomalies, there was no life changing money really available other than basically through leverage or taking excessive risk.

[00:38:38] Dan Foch: And a lot of that, and I’ll wrap this one up cause I’m rambling a little bit, but a lot of that came from my perspective, the disparity that we saw as a result of this gap between wealth and or the upper and lower middle class and the erasure of the middle class. And people started to feel this feeling of desperation.

[00:38:53] Dan Foch: They had to take big risks, they had to make those, you know, those YOLOs, the Wall street bets moves in order to get from the lower to the upper class. And so this financial desperation. And I think that hopefully we’re seeing a normalization, a healing of the market, a healthier market where people can actually get rewarded for being smart, making good responsible decision investment decisions. 

[00:39:13] Patrick Donley: Yeah, it’s fascinating times we’re living in. Nick, did you have a little bit to add to that?

[00:39:16] Nick Hill: You know, obviously I completely agree with Dan. I’d say the most important thing you can do right now is exercise patience. Be more strategic than ever before. Add a couple points to every one of your numbers.

[00:39:28] Nick Hill: Add another month for your construction schedule. Under promise and over-deliver to yourself and remain hyper-focused, right? Don’t get stuck in that analysis paralysis. You say it yourself, Patrick. You can spend a decade learning, but you will never get that practical knowledge that you do on your first deal, whether it goes good or bad, and it will go good if you have the right people around you and if you’ve done your due diligence.

[00:39:50] Nick Hill: So front load as much of that work as. And my number one thing in everything, in every business I’ve ever started is go find a mentor. Find people that are doing what you want to do. And this does, this could be for the person that’s buying their first house, their 10th house, or their apartment building.

[00:40:05] Nick Hill: Go find someone that has five apartment buildings and start asking them how they did it. 

[00:40:10] Patrick Donley: There’s a great value investor, Mohnish Pabrai. I’m not sure if you guys are familiar with him, but he wrote a book called The Dhandho Investor and one of his main things is he calls it just cloning. And same thing that you just mentioned, Nick, just like find somebody that’s doing what you’re doing.

[00:40:23] Patrick Donley: You don’t need to be a rocket scientist in any of this stuff. Find somebody that’s already done it and just replicate it. You know, it’s not always as simple as that, but it certainly. So I wanted to wrap up here, guys. I really appreciate you guys being on the show and sharing what you’re up to. For our listeners that want to learn more about you, your podcast, what’s the best way for them to do that?

[00:40:43] Dan Foch: For anybody who’s looking for, you know, exposure to the Canadian real estate market and likes the kind of stuff that we’re saying, we have a show called The Canadian Real Estate Investor Podcast. It’s twice a week, Tuesdays and Friday. And really data driven approach to investing in real estate and honestly in the Canadian market.

[00:40:58] Dan Foch: So a lot of the principle stuff that we do, the fundamental stuff is probably very similar to the US and it’s harder actually to do well in Canada because our real estate is so overpriced. So if you can succeed in our market, you probably can succeed exceptionally well in the US market. So that’s called The Canadian Real Estate Investor Podcast is available on all platforms.

[00:41:14] Dan Foch: I’m pretty active on real estate, Twitter, Instagram, TikTok. I’m trying to pick up as. YouTube. I haven’t really done exceptionally well, but I have a very unique last name. It’s actually a famous French name in the most expensive real estate in the world that’s actually on this street, Foch Avenue in Paris, the main street in Paris, but Daniel Foch.

[00:41:29] Dan Foch: So if you just Google it, F o c h, you should be able to find me. It’ll probably just, Google will give you the platform that it thinks you’re most likely to click on. So that’s probably the easiest place to start for me. Great. And how about you? 

[00:41:40] Nick Hill: Same thing for me, you know, try to be as active as I can, not as activist, Dan, because he is a machine when it comes to content.

[00:41:47] Nick Hill: But yeah, you can find me at my buddy. You know, you add me and we’re automatically friends. That’s Instagram, Twitter, and I’d be on the same YouTube channel as Dan. And then, yeah, go check out the podcast that’s available wherever you listen to pause. And a lot of the, I know you know a lot of your audiences, obviously in America what we do is Canadian focused, but we do talk a lot about fundamentals and strategies and real estate principles that are kind of evergreen and that could be applied whether you’re buying real estate in Switzerland, Costa Rica, Ohio,  or Toronto. 

[00:42:18] Dan Foch: Also we have a central bank in Canada, but it just follows what your central bank does because the Fed rules the world right now. We basically talk about Powell and the Fed more than we talk about what’s actually going on in Canada. So we touch on US macro and global macro a lot too. 

[00:42:33] Patrick Donley: Yeah, and I was just saying that I really would encourage our listeners to check it out.

[00:42:36] Patrick Donley: You’ve got a lot of great episodes that I enjoyed and it’s like you said, there’s a lot of applicability both in Canada and the US that apply. Guys, I really wanted to thank you for your time and appreciate you guys being on the show and also for having me and doing the interview.

[00:42:50] Dan Foch: Yeah, likewise. Really appreciate it. This was an awesome convers. Hey everybody. I just 

[00:42:53] Patrick Donley: wanted to make a quick postscript here in regard to a comment that Dan made about a real estate hero of his book that he mentioned called Zeckendorf. The book is called Zeckendorf, Z E C K E N D O R F. It’s subtitle is the autobiography of the man who played a real life game of Monopoly and won.

[00:43:12] Patrick Donley: This is a book that Sam Zell said any real estate investor needs to read. He implores investors to read the Zeckendorf book. I picked it up after Dan mentioned it. I’d never heard of it. It’s a fascinating read. It’s a page turner. I hadn’t come across a book like this in terms of a biography since Titan, that John d Rockefeller story that Ron Schau wrote.

[00:43:34] Patrick Donley: Really a great book. I highly recommend it for anyone that is just interested in need of a good. The book starts with William Zend, DO’S Early Life, his start in the real estate business. Moving on to a bunch of his notable projects and successes. His first development in New York’s Upper East Side, the construction of Century City Complex in Los Angeles.

[00:43:55] Patrick Donley: The guy just had amazing perseverance, vision, and was an incredible innovator in the real estate space, but also just talks about how he strategized about things, how he thought about things, how he dealt with setbacks, financially, legal battles, et cetera. It’s just an incredible story about his approach to real estate development.

[00:44:14] Patrick Donley: The guy wasn’t content simply to just build buildings. He really sought to create entire communities and thought about the quality of life for everybody that lived in an area. Incredible master at assembling the right team of architects and contractors and engineers to bring his vision to life, really paints a picture on how to do that, that I found readily interesting and applicable to some of the my very small projects.

[00:44:37] Patrick Donley: Highly encourage all of you guys just to check out the book Zeckendorf that Dan recommended in the interview. 

[00:44:43] Patrick Donley: Okay folks, that’s all I had for today’s episode. I hope you enjoyed the show and I’ll see you back here real soon. 

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