The Canadian Investor - Pay Down Your Mortgage — Or Invest? And a Canadian Stock Few Are Watching

Episode Date: December 15, 2025

In this episode of the Canadian Investor Podcast, we discuss a viral tweet about paying off a low-rate mortgage sparked a familiar debate — invest or kill the mortgage? For Canadians, the answer isn’t nearly as simple. With higher renewal rates, stretched market valuations, and taxes in the mix, the math has quietly shifted. We break down when investing still makes sense, when paying down a mortgage becomes a compelling risk-free return, and why today’s market environment looks very different from the last decade. We also dig into where value can still exist in an expensive market — including a deep dive into a Canadian apartment REIT that’s been hit hard despite strong fundamentals. Is this a classic “blood in the streets” setup, or a value trap? Tickers of stocks discussed: CAR-UN.TO Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Do you keep hearing about these all-on-one ETFs lately? Well, I have some exciting news. BMO ETFs just cut the fees on their flagship all-in-one ETFs to 0.15%, making them one of the lowest cost options in Canada. That's right, more value, same smart diversification, all in a single ETF. Whether you're just starting out or simplifying your portfolio, BMO all-in-one ETFs make it easy to invest with confidence. Just ZED it and forget it.

Considering ETFs like ZEQT, BMO's All Equity ETF, or ZGRO, BMO's growth ETF. Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own sickly, Don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors.

This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian investor podcast. My name is Simone Belange and back with Dan Kent. We're back for a regular episode today. Two fun topics. You'll talk about paying down your mortgage versus not paying it down. resting pretty much what you're going to go over. And then I'll go over some pockets of values in the stock markets. I went down a little bit of rabbit hole, trying to find some sectors and

then kind of zeroed in into a specific company that's really interesting in my perspective in terms of being overlooked by the market right now. It is a Canadian company. So make sure you stay to the second half. It'll be a kind of a medium to deep dive on this company. Some people may know it but it's definitely a smaller cap so stay tuned for that those who like dividend yields make sure you stay tuned could it is a dividend payer but let's get started for investing or paying down your mortgage so what are the considerations here and how did you come about this topic yeah so i got a few requests to go over this primarily because you know i was quite active on x with a particular tweet that a finance account had made in the u.s that had mentioned that they paid down

their 2.6% mortgage. If you don't know how mortgages work in the U.S., you get that rate for 30 years versus, you know, or 15 or whatever you choose to amortize over, but 30 year term is not outside of the, you know, that's the normal there. Whereas here in Canada, it's, you know, you're typically a 3 to 5% rate year range where, you know, you have to renew. So there was a lot of controversy around this tweet because, I mean, obviously, if you're paying off a 2.6% rate mortgage, to your amortization when, you know, inflation typically, you know, inflation's at 3%. It's, you know, it's often not seen as a good move. It kind of, it was kind of engagement bait, to be honest. I mean, they came out a few days later, mentioned that their mortgage was very

small. And then he kind of, you know, said, enjoy your mortgage payment suckers when, when the time came. But it does bring up the question. I think one that people probably haven't had to ask for a very, very long time. Because, I mean, you could call, like a lot of people call, like post financial crisis leading up to, let's say, 2022, the free money era where like rates were ridiculously low. Stock market returns were very high. You know, you could often get, I don't ever remember, I bought my first home in 2011. I don't ever remember having like a 3% over 3% mortgage. So, you know, that era has kind of come to an end. And, you know, if you aren't asking the question, I think you're probably not, you know, considering it enough, especially considering the

run up in the markets, but I'm going to focus on Canadian rates, obviously, because this is the Canadian investor podcast. But, um, you know, there are plenty of Canadians who have pandemic level mortgages still. I know some who are still in the low 2% range in terms of fixed rate mortgages. And, you know, you can still get 3% probably on treasury. So there's, you know, there's, I was just looking up some Canadian ETF bond funds. Yeah. Canadian government if you're looking really strictly Canadian government or provincial governments and you're getting right around 3%. Yeah. So in tax sheltered accounts, this would make sense. Like there's obviously a carry there. I'll get into it in a bit, but after tax returns would kind of, you know,

make it a little more complex than that as well. But, you know, we, there's a lot of clickbait stuff out there as well. For example, we have, you know, Dave Ramsey had mentioned on a podcast, he wouldn't take a $1 billion loan at 0% because it kind of violates his his debt-free mentality. But I mean, if we assume that somebody would act responsibly with that money, when you can get a positive carry, meaning you will earn more on that debt than you pay an interest on that debt, you know, if you're getting a billion dollar loan at 0% and you can throw it in treasuries earning 3%. I mean, as long as you're not a complete idiot with the money, you're going to have, you know, some positive results. So I think a lot of people kind of get, you know, that notion that no debt is good debt.

There is, I think there is particular situations where, you know, debt is good, especially those, those pandemic level mortgages, but a lot of Canadians are up for renewal. Mortgages are likely to be in the 4% range. Like, I think you could probably go to an alternative lender maybe and get a little bit, you know, lower. But, yeah, as you can see here, we're sharing the screen. I mean, they're pretty high. You're going to get north of 4%. Yeah, high threes and, yeah, up to, I would say, mid 4%, depending on the type of loan, loan amount, down payments, whether it's insured or not, it'll kind of range between that.

Yeah, so if you, like, if you're loaned a value of less than 80%, like if the mortgage is not insured, you typically pay a higher rate, unfortunately. But, yeah, it's, if we look to historical returns on the market, that being, you know, 8 to 10% annually, pretty much, you know, anybody who isn't in the highest level. of tax brackets would probably come out ahead investing over paying off a 3.5 to 4.5% mortgage. But there kind of is, you know, another caveat here. Obviously, the market is not a straight line. You know, it's it's a roller coaster. The last three years have provided some pretty strong returns. I can probably lead one to believe we're, we're probably going to see smaller returns moving forward. I mean, we have three straight years of 15 to 20% returns. I mean, if you ask yourself how we get back to that 8 to 10% average. If you believe we're going back there,

I mean, a lot of people believe that there's going to be a lot of stimulus that kind of keeps the markets going at this pace. But, I mean, if you think we're going back to that eight to 10% average, it either has to come through flat returns or, you know, you have a correction or a crash. I mean, there's, there's a fundamental principle of investing. I mean, the higher price you pay today, the lower your future expected returns will be. So when stocks are cheap, you know, expected returns are higher and when they're expensive, you know, expected returns are lower. So you can make the case that we might not see, you know, large scale returns moving forward. So, you know, what is that difference, say, if we see, let's say over the next 10 years

or so, we see, you know, 5% annual returns from the market. And you have that money in a registered account, sorry, a taxable account, which is, it's taxable. I mean, you're all of a sudden earning less than your mortgage. So there is a lot of questions here. I mean, obviously the answer in something like a TFSA is simple. It's tax-free. So any returns you can get over and above your mortgage rate, you tend to benefit. Even if you earn something as small as 4% in your TFSA versus your three and a half percent mortgage, you've come out ahead. But the thing about this is the benefits of a TFSA kind of stop at your contribution room. And I mean, most people, what do we have, $7,000? I mean, most people's annual TFSA room is maybe three to four.

mortgage payments if you're lucky. So they kind of limit that. And I mean, we do have to make a lot of, you have to make a lot of assumptions when you decide, you know, make this decision. And I mean, you know, I'm sure everybody here knows the saying about assuming. But I mean, if we look to a piece of data to help, they have the Schiller P.E. ratio, which is it pretty much takes the share price and divides it by the last 10 years of inflation adjusted earnings. So what this does, it kind of smooths out economic cycles. So they took the Schiller P.E. ratio, the points in history when it's been this high. And there has never been a point in history when the Schiller has been this high that annualized returns in the market over the next

decade have been positive. So what this is saying that at any point in history, if you invest at these valuations, you have realized negative annualized returns for the next decade. Obviously, only difficulty in using this data is the fact that stocks have historically never been this expensive very often. So we have a very small sample size to go off of. It's not like don't take this as like a hundred percent doomsday situation. Like it's a very, very small sample size. So the data is, you know, not all that reliable. Well, even using the Buffett indicator, right, that's looking at the total U.S. market capitalization versus the GDP. I think it's above 200% and yeah he has said historically than anything above let's say like 100% is starting to get

expensive so we're more than double that of course again these are just valuation metrics you can probably find two three other more large scale valuation metrics that show that the markets are overvalued but again it's really hard to say where it's going to go so it's it's always something to keep in mind but i know there's been some big banks and economists in the u.s that are saying their base case for the next five years at least is an average return of about 3%. Yeah. I've seen that more than once just because of where things are at right now. Yeah. And I mean, it makes complete sense because obviously, like I said, you have this large run over the last while. Like, it has to get back to what is normal eventually. I mean,

mean, mean, it's, you know, it happens all the time. But yeah, I mean, it's, you can say that it's difficult. These, like, say the Schiller or the Buffett Indicator is very difficult because you have AI, which you don't really know how much profit it's really going to generate in the future. Like, there's very rare circumstances where you have a piece of tech like this that has the potential to drive earnings growth in the future. I mean, obviously we had it in 2000. Turned out to be not that good of a situation. But the, you know, the book isn't out on AI. It could, you know, it could drive returns proving that the markets are cheap right now. But, I mean, I think there's a reasonable justification here for, you know, if you're sitting at a four or four and a half percent mortgage versus investing in a taxable account, I mean, I think there's actual justification towards putting money towards a mortgage because like you had said, many predict three percent growth moving forward. But in a taxable account, I mean, if you're like a middle of the line earner, like four and a half percent return isn't good enough. You have to be earning probably six, seven, seven.

percent annually to kind of offset the tax, the tax impacts on those investments. So it kind of really comes down to your appetite for risk versus certainty. I mean, in a tax-free account, like a TFSA, again, I said the mass still heavily favors investing, but in a taxable account, it's kind of shifted. When you pay down a four and a half percent mortgage, you're effectively locking in a guaranteed risk-free after-tax return of four and a half percent. But, you know, in a market where historical data suggests that future returns could be lower moving forward. It doesn't start to look like all that bad of an option. Yeah. And I mean, at the end of the day, too, it gives you more flexibility, maybe not immediately. But when you do renew your mortgage, it will give you some more flexibility. Most likely some lower payments, especially if interest rates are a bit more elevated, can always have that extra flexibility to tap in the equity should an emergency happen. And there's some definitely, there's a lot. to be made to having four, four and a half, five percent guaranteed returns depending on what your mortgage is.

Like, there's, that's not a bad thing in itself. And I think if you also want to put a little monetary premium on the psychological aspect of not having a mortgage or having a smaller mortgage and not having that extra stress, that has value to how do you quantify it, then of course, that'll be different from person to person, but that has value as well. Yep, I would agree. Yeah, there's the psychological element of just eliminating the debt. And if you want to do that, obviously, the financial numbers would really not impact you all that much. But it's like I said, it's a question that you really haven't had to ask for a very long time. But now, like even I was asking this when I got my mortgage, I believe it was in 2022. I mean, I was four and a half percent. And at that time, I was asking myself whether, you know, I should make that shift. Obviously, it was a good decision not to. But again, we were in, pretty much a bear market then we're we're in a raging bowl market now but yeah it's it's an interesting topic like i don't really i don't really think it's a bad decision and a lot of people

are are kind of wondering i think people are worried about kind of looking like like an idiot i mean obviously you pay down a four and a half percent mortgage and the markets have gone up by like 20 percent plus over the last three years like you look you don't look that you know it looks like a bad move but i really i really don't think it's all that out of an idea. I mean, a lot of things in life can just be explained by fear. Like I've, you know me, like I've said that time and time again. And it's something when I go and play poker in person, like most people's actions are driven by fear. You just have to figure out how fear is driving their action. Are they afraid of looking stupid? Are they afraid of losing

money? Like, what is the fear game that's actually driving them? And I think investing is the same thing where are people fearing losing their job? Well, maybe they would want to lower their mortgage if they think they might lose their job because, you know, it'll give them a little bit more flexibility. That could be a possibility there. But if they're afraid of looking stupid because the last two, three years, the markets have been fantastic and people have recency bias and think that what just happened will continue in the future, then they may not want to pay it down because they want to look good and get that 15, 20 percent return, not realizing that it is like honestly less likely considering the valuations right now. It's not impossible,

but less likely than it was in 2022 when the markets were tanking than it is now. But people are probably more willing to take risks right now. Oh yeah, for sure. I mean, I bet you more people, probably fewer people would have thought about it in 2022 when the markets were at low is because obviously people, you know, they like to buy when stocks are going up and they like to avoid it when stocks are going down. Buy high, sell low. That's how you do it. Buy high sell low. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience too until we switched to the new EQ Bank business account. Now, every dollar

earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up quick and fully online, no branch visits because let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at EQBank.ca slash business. Want to buy a stock but don't want to shell out hundreds or even thousands for a single share? With Questrade's new fractional shares, you can invest any dollar amount and build a diversified portfolio instantly. No delays, no trade fees, no excuses. Want to put

$10 into a stock trading at $100, no problem. Questrade has you covered. They're the first broker in Canada to offer real-time commission-free trading for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to questrade.com to open and fund an account. Use code TCI and you get $50 to get you started. Winters in Canada can be pretty cold, but they can also be pretty magical. We're thinking about taking a short trip from Ottawa to Quebec City for the Winter Carnival. My wife and I spent our honeymoon there a few years ago, so it will always have a special meaning for us. And now, with my daughter, she'll also get a chance to appreciate how great Quebec City is.

She'll be able to practice speaking French, and I can already picture her lighting up when she sees the ice sculptures or tries snow tubing for the first. first time. After a full day of activities, I can imagine us heading back to our home away from home on Airbnb, making a warm dinner, maybe picking up some local pastries for dessert, and just winding down playing some board games with a nice glass of red wine. It got me thinking about hosting our own place. While we'd be away, our home could give another family the chance to enjoy winter loot in Ottawa as it will just be sitting empty while we are away. The nice part is, we get to decide when our place is available and it lets us make a little extra

to put towards our next trip instead of having our place just sit empty. Your home might be worth more than you think. Find out how much at Airbnb.ca. For a lot of people who are asking, there was one, it was Spotify comments, I think, or whatever, but somebody was asking like, what is the actual threshold?

There really is no threshold that you could say like on a broad scope like first off it's going to heavily depend on what you think the market's going to return moving forward like if you think they're going to return eight nine percent annually even at a four percent mortgage after tax it really doesn't make sense to pay down that mortgage if you think they're going to not return all that much then you know the mortgage might become you know more attractive and another thing is is tax situation like if you're in a higher income tax bracket you need to earn more on your investments over and above your mortgage Whereas if you're a lower income earner, it might, you know, the situation changes.

So there's no hard, fast answer to if you get this rate, pay down your mortgage. If you get this rate, invest. Yeah. Probably the best way to look at it is look at the next couple of years, two, three, four, five years. And just look at the worst case scenario. Yeah. So worst case scenario, be honest with yourself. Don't be overconfident and say like, oh, worst case scenario, I'll be making 10, 15% per year.

Then, you know, do whatever. go invest. You're clearly not being honest with yourself, but what's the worst case scenario? So in 2022, you know, what did you see in terms of return? Were you down 15, 20 percent? So maybe that's the worst case scenario. Maybe it's a couple of years of negative returns of 10%. Think about what the worst case scenario is. And are you okay investing thinking that is a possibility versus paying down the mortgage and getting that certainty of four, four and a half percent, whatever your mortgages. I think that's probably the best advice I can give people is just think about the worst case scenario and then are you still comfortable with that decision of having invested the money.

If not, then maybe think about paying down or at least hybrid pay down some of your mortgage and then invest the rest. Yeah, there's nothing wrong with doing that like half and a half or three quarter, one quarter, whatever you want to do. No, exactly. So now let's look at how the markets may be overvalued, but how we can still find some values. So we mentioned about the KP ratio, the Buffett indicator. Of course, there's tons of valuation and metrics a lot are showing that the markets are pretty overvalued. But then again, you have to remember that there's a lot of hype around specific areas of market like AI, and don't think it's news to anyone here. And anything AI related tends to have much higher valuation.

Some may be more justifiable. I'm not saying a company like Google is not justifying its earnings right now and its valuation. Some more justifiable than others. I will not disagree with that. But for me, I think at heart, I've always been more of a value investor. I've, you know, I've had some times where I may got a little too excited and, you know, put a bit too much money in things that were high risk.

but for the most part, I get really excited when I do find some good value here. So I decided to look at different areas and it actually led me down, believe it or not. It's none the sexiest space, the space of REITs, a real estate investment trust. And I started looking first at some ETF just to get an idea of how much it had return over the last year, roughly. And looking at the U.S., I was looking at XLREETF, which is the state street real estate sector ETF. That was down. I did my notes yesterday, 7.1%. And then looking at the canadas that are ESO, BMO, equal weight index ETF,

that one was essentially flat year to date compared to the TSX, which is of 21% in the past year. So you're seeing real estate, and I just use here regular returns just because I didn't want to use total returns. I actually wanted to see what was like, you know, what way they were actually trending and just kind of forget about the dividends for a second. And clearly, those are, that's a sector. So I kind of stopped there, then started going down the rabbit hole. And it led me to a company that Dan, I know you've

heard before. So Canadian apartment properties reed. So cap reed is what most people will call it. Now, to be fair, I've had a mixed record myself of reits. The worst of them was Allied Properties Reed, which I lost maybe about 20% on. And of course, I sold before the big drawdown that we saw in the past couple months because they cut the distribution. And clearly, the business was not doing well. I also invested in Granite Reed. That one I made about 20% again, just going on memory. I may be off a little bit. So I do have the Miggs bag record here, but Cap Reed is down 17% over the last year, 18% over the last six months, and 11% last three months alone. So that's a company that's supposed or a type of reed because it's an apartment, a residential apartment

reed. It's supposed to be very stable. It's widely regarded as detop, if not one of the top apartment reits in Canada. There are other ones. But from what I've read in the last three, four, five years, it's typically that name that comes back again as the blue chip in terms of residential reits. And it's essentially to me a good alternative. for those who want passive income or, you know, an income property, this is actually the passive income route because someone else manages this for you. And of course, yeah, people will need places to live. So there tends to be really strong occupancy for these types of reads. Anything you want to add before I get, uh, keep going here? No, I like I know Capri pretty well.

I used to own it from like, probably 2015 until like 2018. I want to say I sold it. I, I did reasonably well on it. I think I think one of the, like, it has a lot of exposure to expensive markets, which I mean makes sense because Canada, I mean, obviously, if you're going to start. And I will address that. Oh, okay. Okay, I'll shut up then. You can go. You can go. No, no, that's okay. Actually, I'm going to start off by looking at what's been in the news, because I think this is a moment where the news are affecting the perception for these kind of investment. So I'll just share my screen here for join TCI subscribers. And you'll see I have a

couple of news articles. So this was published. This one on CTV News, BC rents decline leads Canadian jurisdiction in December. And then another one from city news rents dropped across Canada. BC Sharp is decline with 6.4%. I mean, you don't have to look very far. And it's really starting more on the national media this month, but you could see more specialized website in the last few months, November, October that we're starting to highlight this. And you just have to go to Rentals.ca. They have this annual Canada's rental trend report. And it's not great, right? You're looking here at rentals.ca, which looks at the, I believe it's the average asking rent price. and clearly it's all down year-over-year with the exception of Alifax and Regina.

Those are the two spots. And then if you go down here and they actually have some nice charts, year-over-year change in asking rent. And little people probably know on a year-over-year basis, asking average rents have actually been declining since October of last year, year-year. So it's nothing new. It's just that right now the national news media is starting to pick up. on it pretty much a year later after rents nationally started declining. And of course, I think

that illustrates a little bit of a shift with the immigration policy from the liberal government. Of course, if you have less people coming in the country, there's going to be less demand for housing. It's pretty, pretty logical, right? Yeah. And I think they're also, well, I mean, at least here in Alberta, it seems like they're building faster. I mean, I know Alberta is taking a big hit in terms of rent prices, which I mean, I guess depending on which way you're looking at it, you know, as an investor of a wreath, it's a bad thing. As a consumer, you know, if you're not a homeowner, it's a very good thing. But I mean, we needed some sort of normalization. Like, I remember rent in Alberta was growing. Like, I think it was a double digit pace for like a couple of years there. It was getting absolutely crazy. And now we're trying, we're starting to see some, some settling, which I mean, ultimately is is not a good thing for, for reits, but as you mentioned, it's been happening for a while, but it's just kind of getting the spotlight now. Yeah, yeah, exactly. And the thing is, though, Cap has actually, a Caparita has actually been performing extremely well on all of its important metrics. So occupancy, so occupancy,

obviously you want higher occupancy. It was one of the issues with Allied property reits as the occupancy kept falling, even though they said it would pick back up, never really recovered after the pandemic. Well, it's been pretty steady. So it was. was 97.8% granted it was closer to 99 in 2022, 2023, but 97.8, I don't think it's anything alarming year. They're occupied average monthly rent. So that's a key metric. So essentially, what is being rented out? What is the average here? So this is up 5.7% year to 1709. having cash on hand is essential for any business traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations that was our experience too until we switched to the new EQ bank business account now every dollar earns high interest with no monthly fees and no minimum balance you also get free everyday transactions like eFTs bill payments mobile check deposit and 50 outgoing and 100 incoming free interackey transfers.

And to sign up, quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eQbank.ca slash business. Want to buy a stock but don't want to shell out hundreds of even thousands for a single share? With QuestTrade's new fractional shares,

you can invest any dollar amount and build a diversified portfolio instantly. No delays, no trade fees, no excuses. Want to put $10 into a stock trading at $100. No problem. Quest Trade has you covered. They're the first broker in Canada to offer real-time commission-free trading

for U.S. fractional shares in ETFs. It's simple, powerful, and finally available in Canada. Head to quest trade.com to open and fund an account. Use code TCI and you get $50 to get you started. Winters in Canada can be pretty cold, but they can also be pretty magical. We're thinking about taking a short trip from Ottawa to Quebec City for the winter carnival. My wife and I spent our honeymoon there a few years ago, so it will always have a special meaning for us. And now, with my daughter, she'll also get a chance to appreciate how great Quebec City is.

She'll be able to practice speaking French, and I can already picture her lighting up when she sees the ice sculptures or tries snow tubing for the first time. After a full day of activities, I can imagine us heading back to our home away from home on Airbnb, making a warm dinner, maybe picking up some local pastries for dessert and just winding down playing some board games with a nice glass of red wine. It got me thinking about hosting our own place. While we'd be away, our home could give another family the chance to enjoy winter loot in Ottawa as it will just be sitting empty while we are away. The nice part is we get to decide when our place is available and it lets us make a little

extra to put towards our next trip instead of having our place just sit empty. your home might be worth more than you think find out how much at a Airbnb.ca slash host now let's get back to the national average asking rent from rental.ca a national average asking rent in Canada was 20074 so there's like a you know there's a more than $370 gap in between so that means that cap read is well below the national average but I could see people people saying, but okay, rents are a regional thing. And you'd be very correct because I'm looking rents here. It's close to $2,700 for Vancouver in the current report here. And Regina, it's $1,400. So clearly, you know, $1,709 is expensive. A Regina, it's cheap in Vancouver. So there's going to be

some regional differences. That's totally fair. But let's look at the GTA, which is a third of their units. Ontario as a whole is about close to 50%. rental that CA has it as a 2521 average and Capriot as an occupied average monthly rent of 1838 for the GTA. So they're well below that. So it's the same situation for all of these areas they are in. So yes, asking rents may be down year over year, but Capriot actually has much lower rents than those averages. And that's one of the big reasons why they've been able to increase their rents. by 5.7% year over year. While you're looking at the data here, average asking rent is actually

declining, has been declining for over a year now. And back in 2023, Q3 of 2023, it was actually a 6.2% year over year when rents were actually going through the roof still. It was close to 9, 10% on average in Canada. So you can see that it's actually not that far off. And the reason why and bring that up is because the fact that they're much lower, it will give them flexibility in being able to continue increasing rents, even as the average asking rent may be going down for the various regions that they operate in. Yeah, and I would imagine it's an element of they probably own the properties for longer and, you know, they can probably push out profits at lower rates of rent, I would imagine. Yeah, and rent control and stuff like that too. So and, and of course,

if people want to are looking for a cheaper rent sometimes if you're budget or if you're being squeezed sure maybe you were paying 2,500 and the apartment's a bit nicer than cap reed but if you can save three 400 dollars by going to cap reed i mean you'll probably make the change right so at some point you have to to be realistic for that so that's why i wanted to address that because i think it's a bit of discrepancy between what cap reet's situation is and And the overall rental market, they're in two very different spaces. And I think they were just being thrown out, you know, they're throwing out the baby with the bathwater, bat water essentially there.

Yeah, I mean, I wonder if it's a situation of the, I mean, it's hard to say without, you know, the properties they own exactly. But obviously they have, what do they have, 65% exposure to BC in Ontario. So, I mean, a lot of these reits trade at like a multiple of their net asset value. And I wonder if that's kind of declining as, you know, because I think, I think they expect Toronto properties to fall another four and a half percent in 2026. I mean, again, this would be very specific to like what Caprete owns.

You don't know if they own, you know, a lot of expensive properties that are seeing declines. I would imagine the condo slash apartment market is one of those. But, um, yeah. Yeah, they have some legacy properties. They have some newer builds as well. But where the real disconnect is is that they view their net asset value. So you mentioned that at $56 per unit.

and it's trading at 36 right now. So that's essentially a 35% discount. So even if you, because Nav is calculated, obviously, there's a lot of art to it, the lack of better words, because obviously it's going to be, there's going to be professional appraisers granted and then there's methods to do it, but because they tend to be larger buildings, sometimes it'll be hard to assess the actual value. But even if you think they're being a bit optimistic with the $56, and you think it should be a bit lower than that, you know, 10, 15% lower. Well, the shares are still trading at discount.

And they seem to be very serious with that because they spent about 866 million in buybacks at an average of $45 share since they started their buyback program. Essentially, they've decided, you know what, we're so undervalued that we'd prefer to sell our non-core or non-core assets or assets that weren't performing as well as the rest of our portfolio and use a lot of those proceeds to buy better performing assets on the one hand, but also just buy back our shares because they're undervalued right now. And they've sold most of their European portfolio in the past year. It was about 10% of all their units and now it's down to 3% of the units that they have.

And again, they bought back at an average of $45 a share. And keep in mind, the shares are currently trading at 36. So, I mean, of course, again, NAV could be, they could be saying it could be a bit high, but when you add in all that negative publicity about rents right now, it does have the sense to me that the market is being overly bearish on a company like this. Yeah, I was just looking up like some other residential reits. The other one I can think of is like Minto, which is, I'm pretty sure they're like a Toronto heavy apartment read.

Like, they haven't been buying back a ton of shares. I mean, Canadian apartment read is definitely buying back shares much more aggressively than any of the other, like, four or five reits that I looked up while you were talking, which is definitely it's a good sign. Obviously, they think the unit value is discount and they probably have a much better idea of the value of these properties over, you know, us. We probably have no idea, whereas they probably have a very, very good idea. No, exactly.

And in terms of the rest of the business, just. just to give some general number, well, not general, but some specific numbers to them, just to wrap this up. One thing you always should be looking at reads is debt, so as a debt sustainable. Their interest coverage ratio is at 3.4 times adjusted EBITA, which is quite strong.

It's slightly up, you over a year, slightly down versus two years ago, but again, pretty solid. And for context here, allied was at 2.1X. So that just kind of shows you that here they have their done very solid footings. Their debt is well layered with about a 9 to 12% of the debt maturing each year over the next nine years. So it's well layered. They have an average interest rate of 3.26%, which has been creeping up a little bit with higher rates compared to what was there during the pandemic.

But again, still very manageable, especially if you consider the interest coverage ratio. And again, the last reason is probably the dividend here. The dividend is very well covered. They have a free cash flow funds from operation payout ratio. That's around 58%. So that's extremely low for a reed. It's been very stable. Their FFO per unit is climbing up a little bit.

So funds from operation, it's a bit of a, it's just a cash flow metric for those not familiar for reits. It's widely used. And again, as reference, reference Allied was in the high 90s. And I know Allied is an office read, but just goes to show how much more sustainable here it is compared to something like Allied. And lastly, their dividend yields is above 4%. So some people may find out a bit low for a reet. Of course, you can find an apartment of reeds that will have a higher yield. You don't have to look very far. But with all

these metrics, it shows that it's still very sustainable. And at 4%, Capriot never almost never gets to 4%. Like that is on the high end for them. It's usually, you're usually getting 2 or 3% in terms of the range for their, their yield. It's pretty rare that gets to 4%. Yeah, I mean, it's pretty rare that it sells off as much as it has as well. I mean, I think another thing in regards to allied is they kind of got in a lot of debt trouble. And obviously, if you think of something like Capri, residential apartments, they're probably a lot more liquid than, you know, big office buildings. So, I mean, there's probably a lot more maneuverability there. Like you said, they're selling off assets and buying back shares. Whereas, you know, Allied really, I know they sold that data center,

you know, portfolio they had. But, but outside of that, like, you know, they got in a lot of trouble. And it's not like you can just, you know, throw an office property up and get fair value in the short term to kind of fix your debt situation where as something like Capri, you know, you know, they probably could. So there's a lot more flexibility there for sure. But yeah, I haven't looked at it for a while. I didn't notice it was down so much in price because like you said, like it very, very rarely this thing breaks 4% yield. Yeah, exactly.

And for me, I think it's one I will likely start a position in. It just, I have a portfolio, right? I have a decent exposure in Bitcoin. I have some more stable names. I have precious metals to, of course, I do have some tech, but nothing too crazy. but I think this just gives my portfolio a little bit of more stability and going forward

because things are so frothy especially in the AI space I think this can provide actually some really good returns compared to the overall market like I know people might be like oh 4% yield and what are you going to get about

like maybe if you're lucky 2 to 3% share appreciation per year so if you're lucky you get like 5, 6 maybe 7% total returns. But if you think the market has pulled forward so much of the returns, six, five, six, seven percent returns over the next five years on an annual basis could be extremely solid. It could actually be market beating. Like as weird as it sounds, and people tell me I'm crazy because of what we've been almost used to for the last three years. But as weird as it

sounds like six, seven percent could be market beating for the next five years. So, So that's what I'm kind of betting on. I wouldn't be make it a massive position, but I think it'll be probably a 2% to 1⁄2% position in my portfolio and just give it a little bit more stability and something that should do well compared to the other stuff if it starts going down. Yeah, I think we've been spoiled, I guess you could say,

over the last three, four years. I mean, if you started investing during COVID, like say 2020, which I imagine quite a few people who listen to this have, like it's been crazy the last five years in terms of in terms of overall returns it's it's not the normal for sure i mean we've had a very good run over the last 15 plus years like you would think eventually it's got to slow down yeah exactly so and if it doesn't then i still have some exposure to the other stuff but again i think you know we never we've been pretty cool critical of dividend only investing and clearly at least probably half of the returns if not more of a company

like cap reed will come from the dividend so don't get me wrong and i like a dividend income as much as the next person but my my idea here is that the total returns will probably perform quite well compared to the rest of the market maybe i'll be wrong but i don't see any red flags the only red flag are the headlines and when you start looking at the business you're actually like oh i like you know what they've actually increased their the rents over the last year when the rest of canada is is actually declining in terms of the overall stats. And then when people start seeing those news articles, that's when they get bearish on this,

yeah, you know, on companies whether it's warranted or not. And I don't think it's warranted in this case. Yeah. I mean, people are pretty bearish on Canadian real estate right now. I mean,

it's not just cap reed, like every reet. I mean, even the highest quality reits are just getting hammered over the last three, four years. No, exactly. So I might be wrong, but I guess the last.

thing too is I just don't have a side from my house. I don't have a lot of real estate exposure. And clearly I have a big amount with my house specifically. But this diversifies it geographically to the rest of Canada. So I guess that's it. Probably will mention it on a coming up podcast that I've started a position. So like, stay tuned. Nice. Yeah. I mean, what are what are we at? Are we going to wrap it up here or what? Yeah, I think it's a good point to wrap it up. I keep it a bit short. order. So anything else you wanted to add or just wrap it up? No, I think that's it. Have I convinced you then? Not yet? Yeah, I mean, I haven't looked. I'm going to dig into it a bit more. I mean, I don't really own much real estate anymore. I used to rent my my condo for many years until it got absolutely trashed with my last renter. So I've exited that space. But I mean, if I were to enter the residential real estate market again, it would be through a wreath and not through actually renting out the property because I mean, I only had to live that nightmare for a very short. a period of time to never want to go back.

But I mean, it seems... Let's someone else deal with that. Yeah, exactly. It seems attractively priced. The only hesitancy I have is those hotbed real estate markets, like how much more are properties going to come down? No, that's fair. That's definitely fair.

At the end of the day, for me, it's just the fact that their rent, their average rent for in those areas is so much lower. Even if the value of the properties does come down a little bit, the fact that they can, the business will still do. Well, I think that's the way I see it, is the business will still do well regardless. So we'll see. I guess time will tell whether I look stupid like Allied or it's a better move like Magna. We'll have to see.

But thanks everyone for listening. We really appreciate the support. If you haven't done so, if you can give us a review, five star on Spotify or Apple Podcast, it does help your listeners to discover us and grow the podcast. So we really appreciate it. We also have Joan TCI for those who wants to support us that way. it's $15 a month, you get the full videos, you get the podcast feed ad free that you can add to your favorite podcast player, our monthly updates, and the updates that I do for my parents'

retirement portfolio. So again, we really appreciate the sport. Thanks a lot for listening. We will be back next Thursday with a regular episode. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets. that's discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.