I tell this story better in this week's podcast, which drops tomorrow, so make sure you subscribe to hear the whole story. Here it is in a nutshell.

It’s a true story.

I had made an offer that was accepted to purchase a small investment property. It was an older, well-kept home, close to a university, with 6 beds. I had spent a great deal of time analyzing the deal before we went to look, and we had an accepted offer that was a great value. The only condition was that it had to pass our inspection in every way, or we could walk.

When I started digging to determine the value, I discovered the home came with an extra lot. It had already been severed and was a separate deeded property being used as part of the driveway. The lot was barely mentioned in the listing, but it was clearly included for free with the asking price.

A cash flow property with a free building lot. What could be the catch?

When my business partner and I walked into the home, it looked amazing. Hardwood floors, well-kept and clean. We then started walking up the stairs when it happened. The hair stood up on our necks and arms, and we had to get out. Our gut was telling us something wasn’t right.

So, on the way out, I told the agent we would buy the building, but the spirits had to go. Without missing a beat, she looked me in the eye and said I have someone who can do that.

It turned out that there were 5 spirits in the house, and the professional we hired was able to have them leave.  She phoned to tell me that 3 were happy to go, but the others were not. She was able to convince them.

Again, it’s a better story to listen to than read, so try to listen to this week's podcast. 

The outcome is that the home is one of the warmest, coziest and inviting buildings we own. It’s a joy to walk into that house and go up the stairs. 

Our gut instincts develop over time. Often, we don’t listen because that feeling is hard to explain. Instead of trying to explain it, I’m trying to just listen to it. When making an investment decision, it can be very helpful.

This week's Apartment REIT at #2 is CAPREIT. Here’s the Hank analysis. What’s your gut say?

CAPREIT Hank Analysis

This information is for Educational Purposes only. Do not make portfolio changes without speaking with your financial advisor. I am not a financial advisor.

1. Core Data & Business Overview
- CAPREIT (Canadian Apartment Properties REIT) is one of Canada’s largest residential REITs with 46,900+ suites and townhomes (as of 2024).
- 2024 FFO per unit growth: +5.8%
- Occupancy: 98%+ in Canada; 91% in the Netherlands.
- Same-property NOI growth: +6.0% year-over-year.
- Payout ratio (FFO basis): ~58%
- Average mortgage term: 7.4 years; average interest rate: 4.33%
- Focused on key urban markets in Canada (Ontario, BC, Quebec).

2. Hank Scoring Summary (0–10 Scale)
1. The Hive Must Come First – 7.5
2. Nature Knows Best – 8.0
3. Recycle – 7.0
4. Focus, Specialize, and Be Efficient – 8.0
5. Live in the Right Place – 8.0
6. Little Things Over Time Become Big Things – 7.5
7. Be Strong, Fight Only When Needed – 7.0
8. Probability of Success – 7.5
9. Constant Feedback – 7.5
10. Listen to the Buzz – 6.5
Average Hank Score: 7.5 / 10

3. Key Metrics
- Price-to-Book (NAV basis): volatile, driven by fair value adjustments.
- FFO yield (Hank Cap Rate): moderate; payout ratio ~58% suggests healthy margin.
- Debt maturity profile: well-staggered; refinancing risk manageable.
- Dividend safety: strong coverage with room for growth.

4. Graham Verdict
Classification: Moderate Value / Hold with Upside Potential.
Reasoning: Strong operational performance and cash flow growth offset by interest rate and valuation risks.

5. Risk Summary
- Rate sensitivity: rising interest rates and cap rate expansion.
- Rent control and regulation risk in Canada.
- FX and regulatory exposure in the Netherlands.

6. AI Disruption Risk
Minimal. Residential REITs face little direct disruption; technology impact limited to efficiency gains.

7. Payback Period
Estimated 10–15 years based on FFO yield and growth trends.

8. Hank Verdict
CAPREIT remains one of Canada’s most reliable residential REITs. Its disciplined management, consistent occupancy, and strong market positioning support long-term compounding potential.

Verdict: “Hold / Value Buy on Pullback.”

This information is for Educational Purposes only. Do not make portfolio changes without speaking with your financial advisor. I am not a financial advisor.