97: Breaking Down the 2024 Goodman Report and What It Means for 2025 with Goodman Commercial's Mark Goodman

Taylor Atkinson: Welcome back to the Kelowna Real Estate podcast. I'm your mortgage broker host, Taylor Atkinson.

Matt Glen: And I'm your real estate agent host, Matt Glen. What's happening, Taylor?

Taylor Atkinson: Well, I got out and voted this week.

Matt Glen: Yeah. You really voted. I'm not.

Taylor Atkinson: I'm going day of you're waiting until yeah. Yeah. Yeah. So we're recording this, but on the twenty fourth of April Yeah. And what, voting's twenty eighth?
Like, are we going to know the results

Matt Glen: that night? I think we'll know the results,

Taylor Atkinson: or at least have an idea. We thought the same thing in the provincial election. And when it took another five days.

Matt Glen: That's true. Yeah. So when we listen to this, everyone might be scratching their heads still, but I think we'll know one answer. Yeah. I actually think the provincial election had

Taylor Atkinson: it seemed like a more technology advance

Matt Glen: voting system. This one, like, I got there. I didn't know if I was coloring in the circle, putting an x, a check mark. I was trying to read instruction. I asked the lady.
She's like, oh, yeah. No. Just a check mark. I'm like, so someone manually has to go through and read all these. It just seems like such a crazy system, but that's crazy.
Yeah. If you're confused, I mean, like, fifty percent of the population is confused, dude.

Taylor Atkinson: I feel like there should be a better system that removes the human error, you know, like, a digital system. Well, it doesn't if you

Matt Glen: have a digital system, isn't it hackable? Don't they like the human here?

Taylor Atkinson: Yeah.

Matt Glen: Okay. At least then you can get a recount. Like, I don't know. I don't know what the best thing to do is, but Clear instructions, obviously. Yeah.

Taylor Atkinson: As we're sitting right now, like, as of today, and who knows, like, really what the polls mean? I don't know how they really am up with this stuff, but Yeah.

Matt Glen: Nobody ever asked me Yeah.

Taylor Atkinson: Do you know how the polls work? So right now, Liberals are at forty two percent and conservatives are at thirty eight percent, but I think it's trending. Slightly. Liberals are coming down slightly, and conservatives are coming up.

Matt Glen: So it's gotta be, like, split. Yeah. Pierre was way ahead, and then Trump got in and has been pissing off Canadians. So then Carney came way back and was ahead, and now they're kinda evening out, I think. So Yeah.
Yeah. We'll see. Yeah. It's interesting. For me, personally,

Taylor Atkinson: I I feel like I'm in an echo chamber because, yeah, I see things one way.

Mark Goodman: Well, in

Matt Glen: the in the real estate industry, I think we are in an echo chamber for sure.

Taylor Atkinson: Yeah. One thing I

Matt Glen: gotta say is I like that. We have, like, a thirty five day election. Like, man, I would not wanna be the on this for eighteen months. I like that. It's just, like, get your point across and get people out.

Taylor Atkinson: You know, that's actually, like, a good positive spin. Because on the final question of the debate when they asked them, you know, what do you like about this election? And they were, like, you know, I wish I could have gone out. And they all said the same I wish I could have met more people

Matt Glen: and I wish the election was longer and I was kinda like, yeah, I guess they haven't really had like

Taylor Atkinson: a fair chance, but really

Matt Glen: God damn politicians go out and make people when there's not an election. Yeah.

Mark Goodman: Have a town hall

Matt Glen: for Christ's sake if you're so worried about that. Yeah.

Taylor Atkinson: Right? And also, I feel like we've been talking about an election for, like, a year now. It's been inevitable, you know.

Matt Glen: Yeah. Honestly, it's nice that it's not everyone's life forever. So, like, it's kinda just here we go, and we just allude with the consequences next week. Well, exciting times. Yeah.
See?

Taylor Atkinson: Yeah. Well, on this show, we had a an awesome guess, Mark Goodman. He has Goodman report. He's based out of lower mainland, based out of Vancouver. He's been in commercial real estate, I think, mostly multifamily for the last twenty years.
And, you know, his dad was an agent prior to him. Really cool origin story. Like, his dad basically did a mailing list, you know, like making envelopes, door knocking, personally handing them out, and and Mark's evolved it to where it is now, where it's semiannually, annually. You know, project, and then does monthly mailouts as well

Matt Glen: and stuff like that. So really good resource,

Taylor Atkinson: has his own podcast, puts out cool LinkedIn stuff. So we wanted to speak to somebody that sees the industry down there because, you know, we're hearing a lot. From, like, Vancouver and Toronto of, like, the trends of certain asset classes. So, yeah, he was a great resource to talk to you.

Matt Glen: And he is very stoked on the possibility of a Canadian ten thirty one exchange. So that's a

Taylor Atkinson: issue here. I mean, just seems like a no brainer. So if anyone doesn't know what the ten thirty one exchanges in the states basically, it allows you to defer capital gains if you reinvest it, you know, into the economy. So you sell a property or potentially a business. There's capital gains as long as you reinvest that back in.
Great for the Canadian economy. It's great for that business or investor.

Matt Glen: It gets things moving. When you sell these properties, you don't have massive tax bills, you just buy another property and things move. I haven't honestly read up a lot of the Hawaii. We wouldn't want this besides the less government revenue, I guess. But it just seems they had positive to me.

Taylor Atkinson: Yeah. But I think the government revenue will be there at some point, right, when you do stop deferring those at some transaction. But, like, if the economy is doing better and GDP is growing, the government's going to be making more money. So more of a long term plan. Right?
But, honestly, I hope that one was through.

Matt Glen: And the GST on homes just cut that too. Let's get some homes moving here.

Taylor Atkinson: Yeah. There's been some great promises over the last month, so we'll see who holds up their end of the park

Matt Glen: in here. Probably nobody. Yeah. Yeah. Here you go.
The election's over. Here's the host. Everyone's at Dell. Yeah. We're not This is a great episode of FERC.
There's a lot of fun to talk to. Obviously, you can tell me podcasts himself because he's on it. Yeah. This episode, like, every episode is sponsored by Century twenty one assurance Realty. We got our fingers in all the pies around the province.
We're a great brokerage to work with. Kinda like a cooperative environment, obviously, when you're a real estate agent, you're your own person, you're your own business. But we have added a cooperative spin to it and it worked out well for our agents. So if you're an agent looking for a new brokerage or just change things up, give us a call or if you're a buyer or seller looking for an agent, call one of our stellar agents up or just call me. Enjoy the show.

Taylor Atkinson: Okay. Welcome to the Columbia Real Estate podcast. Mark Goodman. How are you doing?

Mark Goodman: I'm great. How are you guys? Great.

Taylor Atkinson: Well, we like to start our show just so our listener can get to know you a little bit is what's your perfect Friday look like.

Mark Goodman: The perfect Friday, that's a great question. Showing up to work with a subject removal, with a bank draft for a deal that's gone firm, from day Friday

Matt Glen: Yeah.

Mark Goodman: And perhaps closing as well, that would be a a great Friday. Coupled with perhaps a nice non stressful lunch, walking distance from my office, and then maybe massage during lunch, if I can carve out some time, that would be good. And then heading home and relax saying and maybe a little socializing that evening, I think would be great.

Matt Glen: I think you nailed it, Mark. Wanna see. That sounds like a great Friday.

Taylor Atkinson: Let me know when you have one of those. Yeah.

Mark Goodman: It's been a while. Normally, it's just grueling intense Slack a mole, you know, solving problems all day, and then wolfing down lunch in ten minutes and dealing with difficult people.

Taylor Atkinson: Yeah. Our listener can't see, but you've got an app of Vancouver on the background there. Where is your office

Mark Goodman: We are located in Vancouver in the south Granville neighborhood. So we're on tenth in Granville. Nice. It's really the center of the city. And we're, you know, five minutes away from downtown Vancouver just over the bridge.
We have perfect access to the west side of Vancouver, east side of Vancouver over to Richmond, so we're very central.

Matt Glen: That is a nice location. That's actually a stellar location. Yeah. I've followed a lot

Taylor Atkinson: of your post on LinkedIn and Goodman report that you put out and you've just finished you're kind of final good room report for the year, I guess. Yeah. I would love to focus on that because Vancouver is such a good indicator for kind of the rest of the province really with trends. So can you break down kind of common trends any changes over the last twelve months? Good or bad?
Sure. I'm just gonna give us the insight.

Mark Goodman: Well, now that you've asked, I happen to have hot off the press our year end report twenty twenty four, which is packed full of stats and commentary and themes for twenty twenty four, and many of which are carrying over to twenty twenty five. So I'm gonna read some of the highlights just because I can't remember them all. There's been a lot.

Matt Glen: That is a comprehensive book. How many pages is that before?

Mark Goodman: You're right. It is. It's twenty pages. Well, it's full of stats and, you know, anybody can download it online goodman report dot com. We put out two a year, the midyear report and the year end, our big seminal reports.
And in between, we published a lot of articles. The hard coffee mailout goes out twice a year.

Taylor Atkinson: Fantastic.

Mark Goodman: Yeah. Started in nineteen eighty three. And when I joined the business in two thousand two, we took it online. So we have quite a large following. So the themes.
Twenty twenty four, I characterized with a few bullet points. Inflation finally under control, but interest rates went up. And then they went down and then they went up. So it's been that kind of roller coaster. Capital gains last year, that looming deadline and everybody freaked out, I think it was June or July, I can't remember.

Taylor Atkinson: June. Yeah.

Mark Goodman: It was insane for us. We had five deals close within a week of the deadline, ninety million dollars. Some of our clients in theory would have saved a million bucks just by making sure they didn't get captured by that increase in the inclusionary rate to I think it was sixty six point seven percent instead of fifty. Yep. So and now as you know, both Polyev and Carney have suggested they'll do away with the capital gains tax, which I think is a great idea.

Matt Glen: Capital gains increase. Increase. Yes. Yes.

Taylor Atkinson: Yeah.

Mark Goodman: If we could get rid of the entire tax, that would be good too. Residential tenancy act changes. There were more changes to the act, which further eroded property rights in British Columbia. Big theme, astronomical development cost charges, also known as DCCs, were approved for twenty twenty five. That's been a real problem, particularly in this environment where we have still very high construction costs, soft costs, long entitlement periods.
So that really was the death knell for the development land industry. Which continues today. Another theme court ordered sales. Receiverships continue to grow. Big news last year.
It continues this year. We just signed up our third court ordered sale. Our client is Deloitte. And we are gonna be marketing a condo site in Burnaby that is under receivership. Some of the other themes, new land use policies in flux.
So we have TOA transit oriented area development policies, So there was a deadline that was imposed in twenty twenty four by the province to mandate that all the municipalities within BC comply with their new rules, which is essentially doing away with restrictions or having a minimum height and a minimum density around transit nodes to build. And it basically is the province understanding clearly that the cities aren't building fast enough. They're not building high enough. They're not building enough. And trying to relieve some of the pressure because we have a housing affordability problem.
That caused a lot of confusion because not all municipalities comply with the deadline and also the devil's in the detail So for example, the province came in and said, you know, you have to have a minimum hike in a minimum density and there's certain tiers of density depending on how close you are to a transit station. So they could mandate that, but the city controls the minutia like What are the frontage requirements? Is there inclusionary zoning below market zoning? Is there a pace of change? They may restrict how many developments could go through per year?
Are there a maximum amount of towers per block, which we have seen in the Broadway plant? So Vancouver did okay because Vancouver was able to replicate and really near the work that they did for the Broadway plan and use that program for the TOA, transit oriented area policies. But other cities haven't really been able to comply or have everything flushed out. So there's clarity. So that's still causing a lot of confusion today when a developer wants to look at a piece of land.
They still don't have clarity on how they could go about realizing redevelopment.

Matt Glen: Are there some cities that are, like, standing at worst to deal with in your

Mark Goodman: Yeah. Until recently, Burnaby was real tough. Okay. Basically said they didn't wanna deal with it. So It's always changing in flux, but, yeah, that's been a challenge.

Matt Glen: Yeah. Okay.

Mark Goodman: So what we have in Vancouver for most developments now is twenty percent has to be below market or affordable rental. In a lot of cases, unless you're in the highest density area, which typically is around six and a half FSR or twenty stories, even then it's hard to pencil out because that twenty percent below market is a drag on the pro form a and the rents have to be twenty percent below market or at the same rents that the tenants were paying before they moved out, whichever is lower. The tenants have the right of return to come back at the same rent. But you don't know how many tenants are gonna come back after two or three years of going through the development process. So there's a lot of unknowns, there's a lot of risk.
The other notable factor in twenty twenty four that has continued into twenty twenty five is softening rental rates. It's been really significant. Like, I can't remember the last time that we've had such a pronounced change in rental rates, particularly in the higher rent areas or where rents were pushed pretty high. And so that's causing a lot of havoc in the market because in addition to high construction costs and long entitlement times and all the risk and uncertainty, which comes along with being a developer, now you have to rejig your pro formas because, you know, some developers were banking on six dollars plus per square foot in rents. And that has really come off.
So many opine that it's because there's more supply in the market, perhaps that's one factor. I think it's more to do with just a really tough economy and people losing their jobs. And, you know, fatigue has really set it in the market. Like, not everybody can afford these crazy rents. So there's been a pronounced adjustment there.
And I would say, now going to twenty twenty five, the most interesting or exciting thing that we've heard from our politicians is the idea that we may have rollover, which would allow investors who sell investment properties to reinvest their money and not have to pay capital gains tax, which we refer to as the ten thirty one exchange in Canada. So that would be really interesting. And I think for anybody in the transactional based business, whether you're a mortgage broker, a realtor, otherwise, I think we would see a lot more liquidity and velocity in the market. I think we'd have to hire another couple brokers just to keep up. That would be a good problem.

Matt Glen: Can we just talk about

Taylor Atkinson: the benefits of that program? So, yeah, as the listener knows, I mean, this has been going on in the states. First entry, ten thirty one exchange, you sell, you can defer your gains essentially as long as you reinvest into real estate, which is just a fantastic idea in Canada because if we want more supply, and this allows movements of property. You know, it can be a second house as well, like a vacation cabin, something that you're gonna pay gains on. You can roll that over into something else.
So is this going to be kind of the next catalyst to actually put some more units on the market.

Mark Goodman: It would be huge.

Matt Glen: Yeah.

Mark Goodman: There are so many scenarios. I read an article. I think I don't know if it was in business in Vancouver where they have a case study, a business owner that owns an industrial site somewhere in the Fraser Valley. They want to sell the property because they want to expand their business. But if they sell the property, they're gonna get hit with a massive capital gains and the cost benefit, you know, doesn't work out to sell the property.
Yet they're struggling because they need to expand their business. At the same token, that land, the highest in best use, is actually rental development. And so if they sold their property to a developer, Now we would have much needed rental housing built. So win win for everybody, win win for the community, win win for the renters, more supply, win win for this business owner that they can go on and expand their business and hire more people, yet The government's got their hand out. It doesn't make sense.
So you basically froze in the market. That's just one example. But I think to have a healthy balanced market, we can't penalize people for continually risking their capital and trying to make a profit. And if you keep taxing people to oblivion, we're gonna lose the entrepreneurial spirit here in British Columbia and Canada, and people are gonna take risks and move their money elsewhere. You know, as funny as

Matt Glen: I just dealt with this my own business where I had a a land assembly where there was four houses for sale. Yeah. And then the fifth one, the corner one was kinda like the money property to the whole thing was a rental property. So the four owners, all owner occupied, one to live there. And then the rental property in the corner, I approached them and said, do you wanna sell?
Like, so that we can build an apartment block. And they said, no. Because if I sell, I'm gonna get killed in capital gains.

Mark Goodman: That's right.

Matt Glen: So they just didn't sell. So the corner was still there. The other four cells, and now they're building, like, sixty in town homes when it would have been, like, seventy two unit That's right. Building all because of the one person in. She's right.
She would have effectively not made any money because of the mixed force sensor just keep the properties or, you know, like a duplex rental of two units there.

Taylor Atkinson: And it's not always on the big scale too. Right? Like, a lot of people think this legislation comes down and it's gonna just support developers. But even if somebody has a small condo that they've been renting out for years and years and years, you know, they're better off just to refi and defer those gains and keep it as a rental. But what if a first time home buyer wants to buy an affordable condo?
Well, if they, you know, remove this capital gain or do a rollover, that allows somebody to buy that as a home, a owner occupied home. So, yeah, a huge opportunity with this.

Matt Glen: What's argument against this because, like, when I look at it, it's just, like, positives across the board. Like, why would they not do this? Like, I couldn't think of a real reason.

Mark Goodman: The government is used to extracting their pound of flesh And our whole system in Canadian government is based on a very onerous tax ethos. And things are changing now because now we realize that we have to compete and we have to attract capital and we have to bring back investors. And I think foreign investment would be very healthy for the economy. And Trump's putting on the pressure. Maybe he's doing this a favor in the long term that we can't be reliant on the United States and that we have to grow up and look at alternatives and create a more healthy balanced economy.
Because if we don't, we're in serious trouble.

Taylor Atkinson: Yeah. And the beauty of this program is, you know, if you're reallocating that capital, back into Canada. Like, that's

Mark Goodman: Right.

Taylor Atkinson: The key point. Because right now, there are people, you know, selling assets and going elsewhere, like, the states or Mexico or whatever.

Mark Goodman: You know,

Taylor Atkinson: like, do

Mark Goodman: you know how many BC developers have pens down? They're done with Vancouver? They're moving to Calgary? Like, if that's not a sign of the times. I don't know what is, but they don't wanna have anything to do with taking risks here.
And just to build anything here, it takes years. In Calgary, you can get something done in a year. You know, go through the entitlement process and make some money and provide housing.

Taylor Atkinson: Yeah. I'm sure this is a lot in your report as well as, like, the uncertainty that we've had over the last couple years is killing transactions and killing opportunity. And this is a great program, but to summarize it over but it's just about a year now. Capital gains inclusion announcement came out. It was supposed to be implemented in June, then maybe delayed, and it's going to happen.
It's not going to happen. And now we're talking about wiping it out altogether, larger transactions take a long time. So if somebody put pen to paper, you know, you could crystallize those gains previous. Like, you could, you know, reassign that asset in a different corp and pay those gains, which was just essentially a money grab from the government. Yeah.
But then it didn't happen, and then you still have that transaction that's gonna play out to sell. What if you sell before, you know, this program doesn't get like, it's just it's wild. How much money is left on the table here? Like, absolutely. Yeah.
Well, kind of to stay on topic with your report. Where are we headed in twenty twenty five? What are the trends looking like? And can we talk about, I mean, everything, like, what are cap rates in Vancouver? How many transactions have been happening?
They and see just, yeah, where are we going with everything?

Mark Goodman: Well, I'll start with, like, the notable trends in twenty twenty four and how I think it's gonna play out twenty twenty five. So twenty twenty four finally was a recovery year sort of when compared to the previous two years. So we've had two consecutive years. Twenty twenty two and twenty twenty three saw declines in transactions and dollar volume in the Metro Vancouver multifamily market. And in twenty twenty four, we bounced back.
We had an increase in transactions of thirty three percent. So we had ninety seven sales throughout Metro Vancouver compared to seventy three transactions. So that's significant. But dollar volume was major. There was a major change.
We went up seventy one percent from the previous year. So twenty twenty four saw one point seven eight billion dollars in total volume. Compared to just one billion a year earlier. So we've had a thirty three percent change in transactions, but a monumental change in dollar volume. And that's because we had a few major transactions.
We had three deals over one hundred million, which is really big embarrassed. And so major pension funds in institutions came in and bought some newer product in Vancouver, so that really inflated the dollar volume. I would say some other noteworthy trends in terms of buyer profile. For years, it's been very consistent Generally speaking, ten percent of all the transactions in Metro Vancouver were by pension funds and REITs, generally, most of them out of Toronto, some out of Alberta. But for the most part, our markets been you know, about eighty five percent private investors, mom and pop, you know, anything from a ten suite apartment building right up to a fifty, sixty million dollar deal.
About eighty five percent were private and high net worth individuals. The other ten percent institutions and five percent give or take were nonprofit or government entities. And that has changed significantly where government nonprofit represented nineteen percent of all the transactions. Last year. And that's due in part to a provincial initiative called the Rental Protection Fund where they've allocated half a billion dollars to nonprofits in ways of grants and subsidies for them to buy this older rental housing that we see today through a Metro Vancouver.
You know, I've been critical of the program. They're not creating any new rental housing. They're really just shifting the building from one ownership group to another. And if you're one of the lucky few, that's part of a nonprofit, You'll get your rent subsidized or frozen in time, but it's not really adding supply to the market. But in any event, I think it was very politically expedient for our premier and province to roll out this program.
If anything, one could argue that it causes more scarcity and more demand because you've literally removed affordable housing out of the public sphere for regular people into the nonprofit sphere I don't think it's a very elegant and efficient way of helping affordable housing or creating affordable housing. It's kind of a blunt tool where you buy a building and the tenant mucks out. You know, a lot of these tenants didn't need to be saved Many of them make a decent income and they just happen to be living in that building that was purchased by nonprofit and, you know, they'll stay there for years. So in any event that I think really contributed to the dollar volume and the transactions in twenty twenty four, Institutional groups, pension funds and REITs dropped a little bit. They represented seven percent of the transactions and private individuals represented about seventy four percent.
So there was a change there. In terms of value, If we look at Metro Vancouver across the board, so that includes the city itself, neighborhoods like Kittilano, Fairview, MARPOL, the west end of Vancouver, and then of course the suburbs, Burnaby, North Van to Quitlin, you name it. The price per unit was flat. So in twenty twenty four, the average price per unit was four hundred and sixty two thousand, and the previous year was four hundred and fifty nine thousand. So there was a one percent increase across the board in price per unit, but it's not the best way to look at value because there's different pockets and nuances to different areas.
And many of the properties apartment buildings that were acquired were for redevelopment. And so in many cases, developers paid a lot more for the land and that really pushed up the price per unit. So the devil's in the details, in Vancouver, there was a seventeen percent increase in average price per unit. So we were at five hundred and seventy thousand a unit versus four hundred and eighty six the previous year. Again, there's some, you know, sales where the sites were purchased by developers at push the price per unit to over a million dollars per unit.
But it just gives you a general sense of where the market. I do not see any pronounced change in value over the next while. I just think things have stabilized. Interest rates have come down. The one trend that I think is gonna be very noteworthy is the amount of listings on the market.
For the last three years, what I've heard from investors or people considering selling is we're just gonna wait Anytime there's uncertainty, push the pause button. We're gonna wait. We're gonna wait for the market to get better. We're gonna wait. When interest rates go down, prices are gonna go up.
And what I try to communicate to people is that interest rates are only one variable that dictate market value. It is not the hail Mary indicator of how values are gonna manifest based on interest rates. What happened was people waited three years Interest rates finally came down about a hundred basis points. I mean, you would know better than me. And what happened was there's four times as much product on the market.
So, you know, at MARPOL, there is a dozen listings hanging in the market for, you know, between three twenty and three eighty a door. Nothing's been selling. It's been like that for a year. I came up with a few listings at three hundred thousand a door. There was crickets.
We just sold one building for two sixty a door. Wow. And we made the market. And that kind of screwed up things up for everybody else. This is supply and demand.
The market doesn't lie. We just tied up another building around two hundred and sixty dollars a door. Well, three years ago, they were selling close to four hundred a door. So, you know, there's been about a twenty five to thirty percent drop per unit in Vancouver properties. We're seeing less of a pronounced drop in newer purpose built buildings or properties that had a higher yield.
So it's a much more sensitive time today for cap rates. Your going in cap rate is very important. Gone are the days where a buyer is gonna feel comfortable putting down seventy percent and having a thirty percent loan to value, which By the way, I've done some of those deals, you know, at a two and a half cap. But, you know, before two thousand nineteen, cap rates were less important. They were temporary because entrepreneurs, people would go in, they rehabilitate these old inefficient buildings, they would give notice.
Rehab the building and double the rents, also known as renovations. That game is over. And so, you know, you could be stuck with a building and just wait for natural attrition, natural turnover, and then, you know, you would go ahead and update the unit. So cap rates are much more important today than they've ever been. The lending environment is different.
Everything takes longer. They scrutinize the numbers more. Less flexibility. We're still doing deals, but I would say that The cap rates that we're seeing are generally in the very high three percent to low four cap rate range. Of course, there's nuances for every deal.
But generally, we're in the high threes to low fours. We just close on a building in Mount Pleasant. A really nice old nineteen sixties building. It's sold at a three point two cap, which is lower than we typically see. However, the price per unit was three hundred and thirty thousand when generally speaking the market, you know, in that area was trading around three fifty to three seventy.
So in return for a lower price per unit, the buyer accepted a lower yield. But over time, two or three turnovers, you're gonna get those rents up fifty to seventy five percent. That cap rate will change very quickly. So it's not all about cap rate, but I would say it's much more important today than it's ever been.

Taylor Atkinson: That does seem a bit higher than I thought it would be in Vancouver. Do you feel it's gonna keep going up?

Mark Goodman: I think things are plateaued right now. I think five year money CMHC insured, you're probably around three point five, three point six. It's quite volatile. It's changing all the time. Mhmm.
So, you know, you're gonna need something close to that in order for it to make sense. I don't think cap rates are gonna drop or increase. I think things are gonna be stable right now. Yeah. And we finally have data points.
You know, until recently, we had appraisers calling us all the time, like, how do you value property when the last trade in this neighborhood was eight months ago, and that's ancient history. The way we were pricing properties is we look at what was currently hanging on the market, which was a lot, and then you gotta undercut the price. And finally, we started getting some sales and data points. So you know, I'd say we're in a much healthier environment. It's more balanced now, but it's certainly it's not a seller's market anymore, which traditionally what Vancouver real estate used to be.
Yep. Buyers have a lot more choice and options right now, and they're much more careful.

Taylor Atkinson: You embrace the good point there. I think historically, we've always looked at real estate and said, yeah, there's a value add with the, you know, rent evictions, pre what was that? Twenty twenty two, I guess, something like that. They changed it.

Mark Goodman: I think before twenty nineteen, the legislation was such that allowed you to evict tenants for the purpose of renovation.

Taylor Atkinson: Yeah. So, you know, now you nailed it, you're like transitory, you have a rent or move out, you know, just by attrition, and you can increase rent. But, you know, something you said a few minutes ago, which we've seen in the Okanagan as well, Brents have been decreasing. So are those units that are on the market? Are they still so undervalued that even if that tenant moves out, there will be a rental increase?

Mark Goodman: Yeah. Yeah. For sure. Like, we had a client. This is a bad news story, and it's not typical, but it would be on the extreme range of like, you know, bad investment decision or bad timing.
We had a client come in who purchased a building in the West End in two thousand seventeen, which was really a very strong, it was peak. You know, interest rates are low, you know, prices were escalating very quickly. And they bought this building at a very low cap rate at the time. You know, I figured it was around a two percent cap rate, and I've sold a ton of these properties at two percent. They didn't start the renovation program right away.
And half the building had a rent at six to seven hundred dollars a month. You know, a one bedroom today, you could be around twenty five hundred dollars. Right? So they had these units rented for six hundred, seven hundred, you know, about half the building, and then they spend a million and a half dollars renovating the building, not the suites, but the common areas, the exterior, the roof, the windows, which doesn't increase your rent.

Taylor Atkinson: Yep.

Mark Goodman: Then they had holding costs, and their mortgage just matured. So it went up you know, quite significantly. So they're in a negative cash flow situation right now, and they're bleeding. And, you know, what do you do? It's been professionally managed.
I looked at the rent roll. And even in the last two years, the property has been rented out at two point three zero dollars a square foot when it should be around three fifty or more. So their manager has been doing them a disservice as well over the last two years. So it's really a bad luck situation. So they're into it for about fifteen and a half million.
All in, you know, renovation costs, holding costs, brokerage fees and so forth. They're into it for about fifteen and a half million. Well, their property is worth probably around three hundred and eighty five thousand a unit, which is in the higher three cap range. And, you know, it pencils out to about eight million dollars. So we're talking about a seven and a half million dollar loss, geez, since two thousand seventeen.
A lot of investors think, well, we're only seeing that craziness in the land market. You know, we are having these massive swings downwards. Well, it's happening in some cases in the multifamily market as well. You know, the perfect storm. Your mortgage matures, your interest rates tripled, your softening rents, you're not getting the turnover that you thought.
This is not an easy game. You have to manage the manager, and you're running a business. And so unfortunately, there's a few people getting stuck right now.

Taylor Atkinson: Do you have the stats for what you guys are using for expense ratios right now? Because I imagine that's increased, like, substantially.

Mark Goodman: We don't use expense ratios. I find it a flawed system. I don't think it's a very elegant way to look at expenses and compare apples to apples, and I'll tell you why. When I started in the business in two thousand and two or two thousand and three, expense ratios were more common and they were about thirty three percent pretty consistently. The market was stagnant.
It was flat. One bedroom units were seven hundred and fifty dollars a month. Price per unit in the west side was eighty thousand dollars a door and cap rates were six percent. That was, you know, for about a year when I started. And what happened was rents just started increasing exponentially.
And so your expense ratios logically dropped. Expenses didn't increase at the same rate. And then we had this renaissance of new purpose built buildings where now you weren't being stuck with legacy tenants. You were renting at market. And market is not the c m a c average.
That's a snapshot of rents frozen time. Market was, like, way higher. And so expense ratios started dropping to about sixteen, seventeen percent on new build because the rents were quite high. Or you can have an underperforming building where the rents are really low and so your expense ratio is gonna be over fifty percent. So what we use is price per unit.
Price per unit is a much better way of looking at buildings. And I would say, like, for an older building, you know, fifty six year old building, you're gonna range anywhere from fifty five to sixty five hundred dollars a unit right now, and maybe a little higher for newer purpose built buildings. It depends, you know, if there's underground parking and an elevator and, you know, the type of staff you have managing the property, but we rarely look at expense ratios.

Taylor Atkinson: How many clients are you seeing high level that are using MLI Select compared to just conventional financing.

Mark Goodman: I would say my gut right now is about probably seventy percent are going for CMHC insured money.

Matt Glen: Wow.

Mark Goodman: It's a much better interest rate and longer amortization periods, and it tends to work. However, for buildings that are underperforming significantly, buyers are not going through CMHC. They're getting conventional loan, and they're trying to add value, turnover the building. In some cases, our clients will offer money to tenants to move out, so the soft approach. So it's a win win for the tenant, win win for the landlord.
And then when they get their rent rolls, start looking better, they'll go through the CMAC process. So that's what we're seeing. I've noticed that the timelines for getting CMHC insured financing right now are quite long, a little longer. We don't like to have buildings under contract for more than thirty days. We try to keep it under thirty days.
Which is really not enough time to get, you know, the rubber stamp from CMHC. Basically, we're seeing a lot of bridge loans right now where mortgage brokers are assisting our clients with conventional financing. They'll close with CMHC approved lender, and then they'll roll it into CMHC a few months later. So there's an additional cost to it. But, you know, it seems to be the route that buyers are going today so that we're not stuck waiting for six months under contract

Taylor Atkinson: that's interesting. I mean, we're seeing a lot of purpose built rentals in Kelowna as well. We did an episode recently. We have about five thousand units coming on the market over the next few years, and, you know, it's about a three percent add to our current inventory. And I believe most of those would be MLI Select as well.
Yeah. You know, it's a great program, but is it kinda holding up that side of the industry right now, like artificially if things aren't penciling at these cap rates? It works. But I guess if we were to compare m y select compared to the rollover, the ten thirty one exchange, what would you prefer if you had to pick one?

Matt Glen: Yeah. Oh,

Mark Goodman: okay. All over all day long. Yeah. Absolutely. I mean, look, c m a c's in vogue right now.
It wasn't always in vogue, but they've got some decent programs and it makes sense. But, you know, if they're not around anymore, there'll be another mortgage product that will fill the market quite quickly.

Taylor Atkinson: Yeah. I do wanna ask one more question before we kinda wrap up here. I know we gotta be cautious of time, but how did the Goodman Report start?

Mark Goodman: That's a great question. Let's start with my father back in nineteen eighty two. Before that, he was a residential realtor for ten years at a national company called the NRS Block Brothers. It was the big company in Canada, and he was doing residential sales. I was just a kid.
He became the number one realtor in all of Canada. He won an award and he was working a lot Back then, there was no cell phones. There was no pager. There was no email. There was no Internet.
How the how did you do a deal? It was couriers and rotary phones. That's crazy.

Matt Glen: They're reminds me of that meme. It's like, what do people do before Google Maps? It's like, they use maps. Map.

Mark Goodman: Yeah. I don't even know how to use a map. No. So, you know, back then, you were doing deals with carbon paper contracts on the hood of a car. Yep.
And you were sending couriers for documents. There was no fact. There was nothing.

Matt Glen: And the MLS was literally a book.

Mark Goodman: There was a book. Yes. So, you know, that was ten years. He would focus cigar in his office. He had twenty typist secretaries, and it was a different time.
Yep. And after that, you know, he wanted his weekends back. He wanted some a little bit more cerebral. He started doing business with the mobile Nelson Scalbania. He sold a few buildings to him.
Many of your audience may not know who he is, but he was the most prominent flipper real estate Calboy in the history of the world. Google Nelson Scalbina, he was amazing. Soul Wayne Gretzky to the Oilers, but he was buying and selling. He was doing about six hundred transactions a year on a napkin. He couldn't keep track of his deals, making twenty million dollars a week on flips.
In any event, that propelled him to move more to commercial real estate. He decided that there was a vacuum of information in the apartment market. Nobody had information, so he decided to start the apartment building newsletter. Which got rebranded to the Guma report. And as a kid, it was truly a family business.
So he would write the newsletter on a pad of paper, send it to someone to type up, to go to a printing press, and then the whole family would get around the dining room table and we would have to stuff the envelopes. So you can imagine I was, you know, how old was I in nineteen eighty two? Well, I was five years old. We were stuffing envelopes, folding them, licking stamps, and my father would write a note to every owner handwritten there's about two thousand three hundred apartment owners, so you can imagine it took a long time, but, you know, we had my grandparents come over, the cleaning lady came in, my brother, you were folding, and before you knew it, he was the number one guy in the apartment business, and that continued for many years. I started back in two thousand and two, joined the business, and the rest is history.
My father retired six years ago, but we took it online. And I said, you know, dad, we should really have a website He goes, what do I need a website for everybody who knows who I am? I'm like, you should also get a computer on your desk. He goes, what do I need? I got my secretary to do the faxes.
Yeah. But when we started gathering emails, I remember our first email blast, Like, right now, we have, you know, a hundred and fifty thousand followers through our email distribution list and on LinkedIn and Facebook and Twitter and Instagram and but back then, I said, you know, we're gonna take the Goomer portal online and we should get emails I remember getting a thousand emails through calling owners, mailing them, asking for their email. They would say, what's an email? And I was like, well, you can get one on the AOL and remember those days, and I would walk them through to subscribe. So I did that for a few years.
I remember I got a thousand emails and now I had to send them. And there was no bulk email programs back then. It was old school. But you couldn't send out a thousand emails through Shaw or tell us whatever we use, the ISP, because they thought you were a spammer. So I had to go meet with the IT person at Shaw and ask them to whitelist our ISP for twenty four hours, so I could send out one thousand emails, which by the way was huge.
So our first listing, sending out by email, twenty three years ago, was a building in Chilliwock. And I didn't even know where the hell Chilliwock was. I just remember it was a really long drive. And my father said, we don't typically do stuff in Chilliwock. It's too long of a drive, but you know, it's a nice building.
And my dad wasn't very enthusiastic, but we took a picture. I wrote a description. The IT department was on standby. They white listed our IP. And I sent out a thousand emails for this Chilliwack listing.
And the phone blew up. It rang off the hook. We got multiple offers. And, you know, my father had been the business for twenty five, twenty six years. Came running down the hall and he goes, this is fucking incredible.
I've never seen anything like this before. This email thing is amazing. This future is amazing. This is a good idea. This is the future and the rest

Matt Glen: of this.

Taylor Atkinson: That that is awesome. Well, I mean, huge takeaway there is there's a massive amount of work ethic in your blood. So I appreciate that.

Mark Goodman: We have fun every day.

Matt Glen: That's great.

Taylor Atkinson: Yeah. I hope this was fun. It was good for us. And I yeah. I really appreciate you coming on.
Keep the forthcoming and, yeah, appreciate all the information you provided to us.

Mark Goodman: Great. Well, it's a pleasure to meet you guys and be on your show. I go to Kelowna once a year. It's a beautiful place. Time slows down.
It's hot. It's beautiful. I love the Lake Country. And I'll come visit you guys the next time I'm up there. Sounds great.
For your audience and listeners, if you're interested, you could subscribe to goodmanreport dot com online. We send you news, views, listings, And I also have a podcast, the Goodman Report podcast. So we've had a few people on, and you could listen to that on all your favorite platforms. So thank you guys.

Taylor Atkinson: That sounds great. Thanks, Mark. Appreciate it.