An update on my comments regarding the shared-ownership startup Key.

Apparently, my comments about a former BOC governor backing a company that targets the poorest members of our society didn’t go over very well.

I got a call from their CEO 1/
Rob was friendly and did his best to convince me that my understanding of their business wasn’t accurate

He even offered to share more info including video testimonials of their happy “owner-residents” with the hope I might change my mind and see what they are doing is great 2/
I gave it some thought.

Researching Key’s business model is not a top priority for me right now but I did figure Poloz deserves a fair shake.

So I followed up with them to say I only needed one thing, the contract owner-residents sign with Key. 3/
Glowing testimonials from people who don’t understand real estate is not important to me.

Contracts don’t lie and I was interested to see how their contracts are set up from a consumer perspective.

What hidden costs/fees are associated with their business 4/
And of course, I offered to write a mea culpa if their business was different from what I presented in my original thread.

If it was fair for their owner-residents and if the terms of the contract line up with their promises. 5/
They refused.

Apparently their contracts are top secret and only pulled out of the vault when someone is ready to sign.

My concern is that this company, through their own admission, are targeting people who because of poor credit, low income or low savings can’t qualify for a mortgage.

The poorest members of our society 7/
Do these people have the money to hire a lawyer to review Key’s contract before signing it?

Probably not

Have journalists reviewed this contract to see how they impact consumers before writing glowing articles about them?

Probably not 8/…
So, if you’re considering signing an agreement with Key and don’t have the means to pay for a lawyer to review it, send me a DM.

I’d be happy to pay to have a lawyer I trust review it for you if you’re fine with me sharing their comments online so others can benefit 9/
This business and this community have been good to me.

If I can help someone who can’t afford to do the right due diligence possibly avoid a bad decision or maybe proceed more confidently by investing with Key if their contract is fair, I’m happy to do that. 10/
If you know someone considering signing up with Key, please share this.

What is motivating me to look into Key’s model further?

I really don’t like it when big companies mislead or take advantage of people who are less wealthy or informed. 11/
I’m not saying Key is doing that

I know very little about their business

But I’ve been in this business long enough to have a good sense for what looks right & what doesn’t & my hunch is that Key is not the great social enterprise they claim to be

But I could be wrong 12/
I’m happy to have a lawyer review their agreement and to share their unbiased views.

If I was wrong about them, I have no problem admitting this.

And if I’m not, I’ll make sure to unpack their ownership structure from a consumer perspective. 13/
PS: If you're looking at investing with Key & they ask you to sign an NDA (non-disclosure agreement) before giving you their contract, or if they are not encouraging you to have your own lawyer review it...

Run, don't walk out of the door

You don't need to know anything more/

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More from @JohnPasalis

24 Nov
An investor is someone who buys a residential home and does not use it as their principal residence.

It doesn't matter if the investor rents the home or leaves it empty - they're an investor.

Any measure of investor demand is always going to be just an estimate 1/
because nobody knows for certain how someone is using the home they bought.

I believe Teranet's methodology is based on land title data testing to see if the same person owns more than one property.

The Bank of Canada's methodology is based on credit report data 2/
I believe it's effectively just a test to see if more than one mortgage appears on a credit report.

The methodology I'm using for our brokerage's research is different - but too involved to explain here.

Every methodology has its own limitations. 3/
Read 4 tweets
23 Nov
A short 🧵quoting today's speech from the Bank of Canada.

I think it's important and this should be easier to read than my last post.

Here's a link to the speech 1/…
"our analysis finds that many Canadians are buying homes as investment properties—that is, in addition to their principal residence—and the importance of this phenomenon has grown.

Expectations of a capital gain can make homes a very attractive asset for investors." 2/
"A sudden influx of investors in the housing market likely contributed to the rapid price increases we saw earlier this year.

In such a case, expectations of future price increases can become self-fulfilling, at least for a while." 3/
Read 5 tweets
23 Nov
For those who might think I’m being hard on real estate investors, they’re missing the point.

I am an investor

I’m always looking to buy an investment property

I help a lot of people buy investment properties in areas that I think are high return and lower risk 1/
I'm very pro real estate as an investment

Not just because it's my business today, but because I grew up in a real estate owning family and it's what I know best

That being said, here's what some are missing when I talk about a high number of investors in Toronto's market 2/
There are investors in every market and depending on the market, there is usually some optimal number/share of investors.

I don't know what that number is and as far as I know there's no consensus on what it might be 3/
Read 7 tweets
23 Nov
The biggest lie policy makers are telling us is that the reason people can’t afford a home is because their NIMBY neighbours are preventing homes from being built.

This person has been spamming me with this same nonsense for a week, so let’s explore it 1/
“Investors bet on low supply elasticity”

Indeed, some do bet on this

But one needs to invest only a few minutes to see that this assumption falls apart in the real world

That is, the world where supply constraints are not the single cause of rising home prices everywhere 2/
If we look at statistics published by Teranet, investor demand is not limited to very supply constrained markets like Toronto.

It is a provincial trend including in markets where housing is far more elastic than Toronto. 3/… Image
Read 9 tweets
15 Oct
The duplicitous money hungry realtor is of course an easy target, but I feel @cbcmarketplace didn’t ask any agents what it’s like working with FSBO sellers to get a different perspective.

So I’ll share my experience here in this 🧵1/
Since defending realtors will lead to some trolling, I’ll start with a reminder that I was one of few people in my industry who supported FSBOs being listed on the MLS back in 2010 and fought with the @CompBureau to make sold data public 2/

Now, I’ll offer you my experience dealing with For Sale By Owner (FSBO) sellers from when I was selling more actively.

The first and biggest problem was that it was incredibly hard to schedule an appointment to see FSBO properties. 3/
Read 19 tweets
10 Aug
A 🧵 on how real estate investors impact the housing market and why policy makers should be more concerned.

While there is no single cause for high house prices, real estate investors can have an outsized impact on the way up and down….1/…
Avg home buyers & real estate investors have very different (heterogeneous) beliefs about the future direction of the housing market which affects their behaviours and leads to very different market outcomes

Something economist Alp Simsek discusses ⤵️2/…
When prices are rising, real estate investors are more optimistic that prices will keep rising rapidly in the future which is why investors are typically willing to pay more for a property than an end user. 3/
Read 12 tweets

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