The Good and the Bad of CMHC's MLI Select Program

[00:00:00] [SPEAKER_01]: Welcome to The Canadian Real Estate Investor, where hosts Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio.

[00:00:12] [SPEAKER_00]: You may be one of the many people right now that have a vision and a business plan for creating affordable, sustainable housing that provides you with a good return, but you're confronted with the challenges of securing the right financing.

[00:00:28] [SPEAKER_01]: Well, you are not alone. Aside from analysis paralysis, financing is the biggest challenge that both new and legacy investors face, especially in an interest rate market like the one we have right now.

[00:00:41] [SPEAKER_00]: Now enter CMHCs MLI Select, a program that could be a game changer for you, but is it?

[00:00:50] [SPEAKER_00]: You may have heard about this program on the show before, it's come up a few times.

[00:00:54] [SPEAKER_00]: But hearing about it and understanding it are quite different. This program itself is a moving target, constantly changing in response to market conditions and government regulations.

[00:01:07] [SPEAKER_01]: And although many want in, is the program really right for your project?

[00:01:12] [SPEAKER_00]: How challenging is it to secure deals with MLI Select, a program offering reduced premiums and long dramatizations based on your commitment to things like affordability, accessibility and climate compatibility?

[00:01:28] [SPEAKER_00]: So does it truly deliver on its promises?

[00:01:33] [SPEAKER_01]: Welcome back to the Canadian real estate investor podcast. And today we're going to examine the pros and cons of this innovative points based system that you just described and whether or not it actually can deliver.

[00:01:45] [SPEAKER_00]: Yeah. So we'll talk about who is the ideal candidate. Are you the experienced developer that it targets or are you the investor that is trying to level up from maybe buying and owning multifamily properties into developing your first or second larger project?

[00:02:03] [SPEAKER_01]: We're going to guide you through the program's intricacies from property type requirements to the challenges of maintaining affordability commitments for up to 20 years, what it takes to seize these incentives and whether or not the effort is worthwhile.

[00:02:16] [SPEAKER_00]: So join us as we explore these questions and more unveiling the challenges and opportunities ahead. And can CMHC MLI Select program genuinely revolutionize your approach to real estate investments or are there hidden pitfalls to watch out for?

[00:02:36] [SPEAKER_01]: And stay with us as we aim to uncover the answers and redefine your strategy in the Canadian housing market.

[00:02:42] [SPEAKER_00]: So Dan, let's start off with a high level overview and a bit of a refresher of what this program is.

[00:02:49] [SPEAKER_00]: And we can kind of unpack the a lot more of the technical stuff from there, because obviously this program has come up multiple times on the show, but it's been a while since we've done a full episode on it.

[00:03:01] [SPEAKER_00]: And I'll preface this by saying this is something that Dan and myself both do and both work on projects across the country.

[00:03:09] [SPEAKER_00]: And that'll come up throughout the episode.

[00:03:10] [SPEAKER_00]: Dan, start us off with reading directly from CMHC's website as they introduce the product.

[00:03:18] [SPEAKER_01]: Yeah. So it says MLI Select is an innovative multi-unit mortgage loan insurance product, which is what MLI stands for, mortgage loan insurance, focused on affordability, accessibility, and climate compatibility.

[00:03:31] [SPEAKER_01]: You can access reduced premiums and longer amortization periods based on your level of commitment to affordability, accessibility, and climate compatibility using MLI Select.

[00:03:39] [SPEAKER_01]: It uses a point system to offer incentives based on affordability, energy efficiency, and accessibility.

[00:03:46] [SPEAKER_01]: Incentives are based on and available for new construction and existing properties.

[00:03:52] [SPEAKER_00]: So here's some of the sexy stuff that you may or may not have heard.

[00:03:56] [SPEAKER_00]: And that really is the kind of clickbait for this product.

[00:04:02] [SPEAKER_00]: So it offers up to 95% loan to value.

[00:04:07] [SPEAKER_00]: And if you know real estate investing, that's tough to come by for investment properties, especially in the development space,

[00:04:14] [SPEAKER_00]: whether it be renovating a existing building or building a greenfield.

[00:04:20] [SPEAKER_00]: And you can also get up to 50-year amortizations.

[00:04:24] [SPEAKER_00]: Again, the longest in the market.

[00:04:27] [SPEAKER_00]: Now, Dan, we just had recent announcements.

[00:04:29] [SPEAKER_00]: We did a full episode on 30-year amortizations.

[00:04:31] [SPEAKER_00]: Well, that's not nearly good enough.

[00:04:33] [SPEAKER_00]: I think it goes up to 55 now for MLI.

[00:04:35] [SPEAKER_00]: Yeah. So tack another 20 to 25 years on your amortization schedule.

[00:04:39] [SPEAKER_00]: Now, again, it's designed to address specific housing needs with the affordability and sustainability and accessibility metrics being the highlighted pieces here that CMHC is really focused on.

[00:04:55] [SPEAKER_00]: And that's why they've made it so attractive to developers because they're really pushing for those three things to be a bit more involved in a lot of the new and renovated product

[00:05:08] [SPEAKER_00]: that we're hoping to see on the market.

[00:05:10] [SPEAKER_01]: Yeah.

[00:05:11] [SPEAKER_01]: The product is targeted at approving affordability and accessibility in Canadian housing, particularly in areas with soaring prices and rents like southwestern Ontario.

[00:05:21] [SPEAKER_00]: Exactly.

[00:05:22] [SPEAKER_00]: But we do see these projects starting to work and across the country.

[00:05:26] [SPEAKER_00]: And, you know, we're working on stuff on the East Coast and the prairies right now.

[00:05:29] [SPEAKER_00]: So it can be used for purchasing existing buildings or constructing new ones.

[00:05:35] [SPEAKER_00]: And, of course, overall, with the aim to increase the housing supply to match markets where that demand is very high as well.

[00:05:45] [SPEAKER_00]: Now, one of my personal favorite things about the program is the points system, the way that they've actually designed the program.

[00:05:52] [SPEAKER_00]: They've kind of gamified it a little bit, right?

[00:05:55] [SPEAKER_00]: I mean, achieve these points and get better, right?

[00:05:59] [SPEAKER_00]: Like level up the same way you'd use Duolingo to learn language.

[00:06:03] [SPEAKER_00]: And it gives you that kind of dopamine hit every time you've, you know, say a word.

[00:06:06] [SPEAKER_00]: I don't know if you're actually learning anything or not, but it gives you that hit.

[00:06:10] [SPEAKER_00]: Or Dan, you know, whether you're playing like Mario Kart or Zelda or whatever other video games you're into these days.

[00:06:16] [SPEAKER_00]: I'm not sure.

[00:06:16] [SPEAKER_00]: I'm not a gamer like you.

[00:06:18] [SPEAKER_00]: Yeah.

[00:06:19] [SPEAKER_00]: Huge gamer guy over here.

[00:06:21] [SPEAKER_01]: You know, I don't know if I would call any of these gamifications a dopamine hit like Duolingo, to be honest.

[00:06:29] [SPEAKER_01]: A little different, I guess.

[00:06:30] [SPEAKER_00]: Yeah.

[00:06:31] [SPEAKER_01]: Yeah.

[00:06:31] [SPEAKER_01]: There's definitely.

[00:06:33] [SPEAKER_00]: I guess it's a dopamine hit if you hit those metrics and you get 95% in 50 years.

[00:06:39] [SPEAKER_00]: Yeah.

[00:06:39] [SPEAKER_01]: I still don't even know if that would be a dopamine hit because it just takes so long and it's a painful process.

[00:06:44] [SPEAKER_01]: And, again, it's a 50-year am.

[00:06:46] [SPEAKER_01]: So, you're not really getting any hit of anything per se.

[00:06:51] [SPEAKER_01]: Slow release dopamine will go for that.

[00:06:53] [SPEAKER_01]: Yeah.

[00:06:54] [SPEAKER_01]: There you go.

[00:06:55] [SPEAKER_01]: So, yeah.

[00:06:55] [SPEAKER_01]: Let's take a quick look at the points-based system.

[00:06:57] [SPEAKER_01]: The eligibility and competitive rates that they offer.

[00:07:01] [SPEAKER_01]: And when I say competitive, like this is literally the longest amortization, the best interest rates, and the highest loan to value that you're going to get in the market.

[00:07:11] [SPEAKER_01]: There's no better product per se from those three.

[00:07:15] [SPEAKER_01]: Yeah.

[00:07:16] [SPEAKER_01]: It's based on this points-based system across three pillars.

[00:07:19] [SPEAKER_01]: Affordability.

[00:07:20] [SPEAKER_01]: Rent a certain percentage of the units below market rates.

[00:07:23] [SPEAKER_01]: This change is based on location across the country.

[00:07:26] [SPEAKER_01]: It's very market-specific based on the percentage of median renter income in most cases.

[00:07:32] [SPEAKER_01]: Energy efficiency.

[00:07:34] [SPEAKER_01]: Achieve energy savings based on national building code standards.

[00:07:37] [SPEAKER_01]: This used to be kind of the, let's call it a loophole that most people got their points for.

[00:07:42] [SPEAKER_01]: But it has since changed because it was basically Canadian building code was so much lower than Ontario building code.

[00:07:48] [SPEAKER_01]: And so, in Ontario, you would always hit the 100 points.

[00:07:50] [SPEAKER_01]: So, you know, and then they would add in some like green tech, call it like low flush toilets or whatever, low flow shower heads and stuff like that.

[00:07:57] [SPEAKER_01]: So, they've scaled back how much you can get from energy efficiency.

[00:08:01] [SPEAKER_01]: Which we did call, I don't know, eight months before it happened, I think, on the show here.

[00:08:05] [SPEAKER_01]: Yeah.

[00:08:06] [SPEAKER_01]: And then accessibility, you have to ensure that a portion of the property is accessible.

[00:08:10] [SPEAKER_01]: This one is important, obviously, because they want to have a built environment that caters to Canada's aging population, especially.

[00:08:17] [SPEAKER_01]: Totally.

[00:08:17] [SPEAKER_01]: Yeah.

[00:08:18] [SPEAKER_01]: Which, you know, is going to make a lot of sense, to be honest, in the fullness of time.

[00:08:21] [SPEAKER_00]: Yeah.

[00:08:22] [SPEAKER_00]: And as we get through some more of the technical stuff, you'll see that when they're talking about senior homes, the metrics change drastically.

[00:08:30] [SPEAKER_00]: But now, as we touched on, Dan, this program can be applied to both existing buildings and new construction.

[00:08:36] [SPEAKER_00]: And when you're looking at those two different paths, these things change, obviously.

[00:08:41] [SPEAKER_00]: And we'll get more detail as we go through, again, the more technical stuff here.

[00:08:45] [SPEAKER_00]: But high level for existing buildings, you can achieve a loan to value in amortization terms based on points accumulated for median affordability and efficiency criteria.

[00:08:54] [SPEAKER_00]: And for new construction, it's actually a little more flexible, automatic eligibility for 95% loan to value with am schedules also based on those accumulated points.

[00:09:05] [SPEAKER_00]: So new construction tends to be a little easier in some ways to achieve those points.

[00:09:12] [SPEAKER_01]: Yeah.

[00:09:12] [SPEAKER_01]: So I guess that you go through the list and look at each metric, energy efficiency, affordability, and accessibility.

[00:09:20] [SPEAKER_01]: And maybe we'll just kind of go rifle through this list and look at how somebody would actually achieve points based on new construction and existing properties based on those different criteria categories.

[00:09:31] [SPEAKER_00]: Yeah, for sure.

[00:09:32] [SPEAKER_00]: I'll start off with affordability.

[00:09:33] [SPEAKER_00]: Now, this is where it kind of gets a little technical.

[00:09:36] [SPEAKER_00]: And this is, we're going to go through this, but this is, again, where I'd highly recommend if you are interested in doing one of these projects, you cannot do this kind of stuff yourself.

[00:09:43] [SPEAKER_00]: You literally need a power team of people.

[00:09:46] [SPEAKER_00]: You need a broker and a lender that understand this stuff.

[00:09:49] [SPEAKER_00]: Extremely document heavy.

[00:09:51] [SPEAKER_00]: So let's start with affordability.

[00:09:52] [SPEAKER_00]: Now, that is based on the percentage of units with rents at or below 30% of the medium renter income.

[00:10:01] [SPEAKER_00]: Now, Dan, you mentioned this changes drastically across the country, market to market.

[00:10:05] [SPEAKER_00]: So for new construction, level one to achieve 50 points here, a minimum 10% of units and a maximum of 30% of medium renter income.

[00:10:17] [SPEAKER_00]: That's 50 points.

[00:10:18] [SPEAKER_00]: Now, we want 100 points here to achieve the best.

[00:10:22] [SPEAKER_00]: That's how you win the game here.

[00:10:24] [SPEAKER_00]: That's how you win the CMHC MLSElect video game that you're probably playing right now, Dan.

[00:10:28] [SPEAKER_00]: Now, level two, 70 points.

[00:10:30] [SPEAKER_00]: That's 20 more points.

[00:10:32] [SPEAKER_00]: That 10% goes up to 15% of max units at the 30% medium renter income.

[00:10:40] [SPEAKER_00]: Level three, 100 points are given out if that 15% gets up to 25% of the units that are at 30% of medium renter income.

[00:10:53] [SPEAKER_00]: Okay, that's all for new construction.

[00:10:54] [SPEAKER_00]: Now, let's talk about renovating existing properties and trying to achieve these points.

[00:10:59] [SPEAKER_00]: Things get a little different.

[00:11:01] [SPEAKER_00]: That's what I'm saying.

[00:11:02] [SPEAKER_00]: Sometimes it's easier to do new construction, right?

[00:11:04] [SPEAKER_00]: Level one to achieve 50 points.

[00:11:06] [SPEAKER_00]: That minimum goes up to 40% of units at a maximum of 30% of median renter income.

[00:11:15] [SPEAKER_00]: Level two, 70 points.

[00:11:18] [SPEAKER_00]: 60% and level three to achieve the 100 points.

[00:11:20] [SPEAKER_00]: 80% of units need to be maxed out at 30% of median renter income.

[00:11:29] [SPEAKER_00]: And not only that, but just like with the 50-year AMS, Dan, you got to be in this for a long time.

[00:11:36] [SPEAKER_00]: This is, these are long-term commitments that CMHC is asking for because you got to commit to maintain affordability for a minimum of 10 years from the date of first occupancy on that project.

[00:11:48] [SPEAKER_00]: And affordability commitments of 20 or more years will be awarded for an additional 30 points.

[00:11:54] [SPEAKER_00]: So, again, you're in this for the long haul.

[00:11:57] [SPEAKER_00]: Now, Dan, again, that was affordability for new and existing properties.

[00:12:01] [SPEAKER_00]: Why don't you talk to me about the closed loophole energy efficiency?

[00:12:06] [SPEAKER_01]: Yeah.

[00:12:07] [SPEAKER_01]: Yeah, well, they do.

[00:12:08] [SPEAKER_01]: You can just Google CMHC median renter income, by the way.

[00:12:12] [SPEAKER_01]: And they have a table on their website that you can download that shows that.

[00:12:16] [SPEAKER_01]: And then you just basically calculate the 30% based on that.

[00:12:21] [SPEAKER_01]: So, energy efficiency, which was previously assessed by improvement.

[00:12:26] [SPEAKER_01]: It's still assessed by improvement over building codes.

[00:12:29] [SPEAKER_01]: You just don't get the same amount of points now.

[00:12:30] [SPEAKER_01]: There are two acronyms to introduce here.

[00:12:32] [SPEAKER_01]: The NECB, the National Energy Code.

[00:12:36] [SPEAKER_01]: Yeah.

[00:12:37] [SPEAKER_01]: NECB.

[00:12:39] [SPEAKER_01]: For that.

[00:12:41] [SPEAKER_01]: And that's a national energy code for buildings.

[00:12:43] [SPEAKER_01]: And the NBC, which is the National Building Code.

[00:12:45] [SPEAKER_01]: So, for new construction, level one is 20% better than those two acronyms.

[00:12:51] [SPEAKER_01]: Level two is 35 points, which gives you 25% better.

[00:12:55] [SPEAKER_01]: And then level three is 50 points, which was previously 100 points, which was 40% better than the NECB or NBC, which Ontario's building code was already at that standard, which is why Ontario buildings were already getting that major points.

[00:13:11] [SPEAKER_00]: Yeah.

[00:13:12] [SPEAKER_00]: And as you just said, Dan, right, this used to go up to 100 points.

[00:13:15] [SPEAKER_00]: But now within this section of the game, you can only achieve 50 points.

[00:13:21] [SPEAKER_01]: Yeah, exactly.

[00:13:22] [SPEAKER_01]: And then you move that over to existing properties.

[00:13:24] [SPEAKER_01]: So, with existing properties, it's a little bit different because you're not comparing to the building code.

[00:13:29] [SPEAKER_01]: What you're comparing to is the existing energy consumption of the building.

[00:13:34] [SPEAKER_01]: So, if you get a building and you want to improve the energy efficiency of that building by 15%, you'll get to level one, which is 20 points.

[00:13:44] [SPEAKER_01]: If you improve the energy efficiency of that building.

[00:13:46] [SPEAKER_01]: So, again, you'll have to typically have an energy modeler who models how much energy this building is consuming.

[00:13:52] [SPEAKER_01]: And you can also do it just using like the utilities, etc.

[00:13:55] [SPEAKER_01]: And then you say, oh, if I decrease, you know, if I make the showers low flow, if I switch to this type of toilets, if I swap from an oil burning furnace to a heat pump or, you know, gas burning furnace to a heat pump.

[00:14:09] [SPEAKER_01]: If I put in R60 insulation in the hipped roof, as an example, those are all things that will improve the existing, the energy efficiency of the existing building, you know, new windows, etc.

[00:14:22] [SPEAKER_01]: So, you know, this is a lot of things where you're actually getting value or getting greater leverage, greater debt for improvements that you probably would already make to a property because you want to be an efficient operator.

[00:14:34] [SPEAKER_00]: For sure.

[00:14:35] [SPEAKER_00]: And we just did an episode where there's actually a ton of government grants for that kind of stuff, right?

[00:14:40] [SPEAKER_00]: So, you know, go take advantage of those as well.

[00:14:43] [SPEAKER_01]: Yeah, 100%.

[00:14:44] [SPEAKER_01]: So, level three, finally, which would get you to your 50 points would be a 40% improvement in current baseline energy consumption levels.

[00:14:54] [SPEAKER_01]: So, pretty substantial, right?

[00:14:55] [SPEAKER_01]: You need to cut your energy consumption of that building by more than a third.

[00:14:59] [SPEAKER_00]: Yeah.

[00:15:00] [SPEAKER_00]: Okay.

[00:15:00] [SPEAKER_00]: So, so far, it really looks like the government here, because again, CMHC is a government entity.

[00:15:05] [SPEAKER_00]: It looks like they're really pushing affordability as they should.

[00:15:08] [SPEAKER_00]: You still get some good points for energy efficiency.

[00:15:12] [SPEAKER_00]: And the final one, accessibility.

[00:15:14] [SPEAKER_00]: Now, this is assessed by building design and meeting certain standards and certifications.

[00:15:19] [SPEAKER_00]: And again, this is an effort to have these buildings that are going to be hopefully around for the next 50 to 100 years serve Canada's aging population.

[00:15:26] [SPEAKER_00]: So, for level one, you can get 20 points.

[00:15:28] [SPEAKER_00]: And that has to hit a minimum of 15% units are considered accessible in accordance with Canadian safety standards.

[00:15:35] [SPEAKER_00]: Minimum 50% units are universal design.

[00:15:40] [SPEAKER_00]: Or the building receives the Rick Hansen Foundation accessibility.

[00:15:44] [SPEAKER_00]: And that gives you a pretty good score right there.

[00:15:47] [SPEAKER_00]: For level two, to get 30 points, minimum 15% of units have to be accessible.

[00:15:52] [SPEAKER_00]: 85% of the units have to have universal design.

[00:15:56] [SPEAKER_00]: And 100% of the units are either universal design or 100% of the units are accessible in accordance with, again, Canadian safety standards.

[00:16:04] [SPEAKER_00]: Or the building has received a Rick Hansen Foundation accessibility certification of gold, which gives you a score of 80% or better.

[00:16:15] [SPEAKER_01]: Yeah.

[00:16:16] [SPEAKER_01]: So, obviously, some pretty big hoops to jump through.

[00:16:19] [SPEAKER_01]: And reasonably so, because you're getting, like, you know, again, the best credit product in the market.

[00:16:24] [SPEAKER_01]: And we also know this process takes time.

[00:16:26] [SPEAKER_01]: And, in fact, that is likely one of the biggest pitfalls of the CMHC MLI Select process, I've heard.

[00:16:32] [SPEAKER_01]: But just how long does it take and what documents need to be collected and at what stage, Nick?

[00:16:37] [SPEAKER_00]: Yeah, great question.

[00:16:39] [SPEAKER_00]: So, let's examine timelines here.

[00:16:40] [SPEAKER_00]: Securing approvals for MLI Select typically takes, and I'm going to get in trouble for saying this, but six months.

[00:16:47] [SPEAKER_00]: Because I've seen it take a lot less, and I've seen it take more, and we've seen it take six months, and something's wrong in the file, and boom, you're back down at the back of the stack.

[00:16:55] [SPEAKER_00]: So, that six months also, you know, does not include the time needed for design and drawings before that application, right?

[00:17:03] [SPEAKER_00]: So, as you said, Dan, this is document heavy, and it just, the whole thing takes a while because, again, to win the game here, they're going to make you work for it.

[00:17:10] [SPEAKER_00]: Now, during this process, investors and would-be builders must obtain a standard residential mortgage or some other types of debt for that property purchase.

[00:17:22] [SPEAKER_00]: So, when you think 95% loan-to-value, I can do this thing for almost no money.

[00:17:25] [SPEAKER_00]: That's not really the case, okay?

[00:17:27] [SPEAKER_00]: You've got to own the property or, you know, you have to have some money as well, and we'll get into more of the borrow requirements in a minute here.

[00:17:37] [SPEAKER_01]: Yeah, I think that's interesting that the residential mortgage piece that you just mentioned, because in a lot of cases, that's almost been killed now too, because you have to actually fully demolish the building in order to get the new build, like to be in the new build stream, right?

[00:17:50] [SPEAKER_00]: Which actually kind of goes and destroys your capital, right?

[00:17:53] [SPEAKER_00]: Because if you go buy a building and then tear it down, well, now you just have a land investment versus the old building that used to be on it.

[00:17:59] [SPEAKER_00]: So, it actually increases the risk for that person as well.

[00:18:02] [SPEAKER_01]: Yeah, for sure.

[00:18:03] [SPEAKER_01]: And the lender is not going to be like, yeah, sure, just knock the building down and I'll keep a residential mortgage on it, right?

[00:18:09] [SPEAKER_01]: Yeah, exactly.

[00:18:41] [SPEAKER_01]: So, that part's where it's kind of become a little bit more.

[00:18:43] [SPEAKER_00]: Yeah, just so you and Miley Cyrus can take a wrecking ball to it.

[00:18:47] [SPEAKER_00]: Now, again, Dan, going back to this, right?

[00:18:49] [SPEAKER_00]: This gets a little complicated.

[00:18:51] [SPEAKER_00]: You either need that residential mortgage for, I'd say, like a minimum requiring at least 20% down depending on what type of property it is.

[00:18:57] [SPEAKER_00]: We see a lot of people, this is where people are using things like bridge loans.

[00:19:01] [SPEAKER_00]: And then, of course, then in the background here, you're simultaneously working on that MLI select application.

[00:19:08] [SPEAKER_00]: But as you said, let's remember, this is a very document-heavy process.

[00:19:13] [SPEAKER_00]: Yeah.

[00:19:14] [SPEAKER_01]: So, for documents with affordability, all of your compliance must be documented throughout the affordability period, starting from the first occupancy for new constructions or the interest adjustment date for existing buildings.

[00:19:28] [SPEAKER_01]: So, like that's where you get your new rate from CMHC.

[00:19:30] [SPEAKER_00]: Yeah, exactly.

[00:19:31] [SPEAKER_00]: And again, those are, again, a moving target, right?

[00:19:34] [SPEAKER_00]: And that's affordability, Dan, whereas efficiency and accessibility documentation is actually required within a set timeframe depending on the completion of the build or the improvements.

[00:19:45] [SPEAKER_00]: So, completed before the loan request within 12 months of the application.

[00:19:50] [SPEAKER_00]: If you're using insured financing, it's got to be within 60 days of that last advance.

[00:19:57] [SPEAKER_00]: And then it's got to be completed with the borrower's own resources within two years or 24 months after completion of that project.

[00:20:06] [SPEAKER_01]: But the next part is where the CMHC MLI select program can really shine.

[00:20:13] [SPEAKER_01]: So, let's talk a little bit about the loan-to-value side of things.

[00:20:18] [SPEAKER_00]: Yeah, LTVs.

[00:20:19] [SPEAKER_00]: Okay.

[00:20:19] [SPEAKER_00]: So, let's talk maximum loan-to-value ratios here.

[00:20:22] [SPEAKER_00]: Again, for new construction, this is, again, just kind of crazy, right?

[00:20:26] [SPEAKER_00]: This is, I think, the only other time we've seen something like this, Dan, was the MERB program, which we've, again, covered on the show here.

[00:20:33] [SPEAKER_00]: Because new construction for something like this, which ideally could be a heavily cash-flowing investment, you can get up to 95% for those residential components.

[00:20:44] [SPEAKER_00]: Here's the caveat, 75% for non-res components, and we'll get to what that means later in the show here.

[00:20:50] [SPEAKER_00]: That's new construction for existing properties that you're retrofitting.

[00:20:54] [SPEAKER_00]: Same thing, you can get up to that 95%, a lot harder to achieve, but you can get up to that 95% for the res components.

[00:21:01] [SPEAKER_00]: Again, a lot harder to achieve, but you can, and then 75% for non-res components.

[00:21:06] [SPEAKER_00]: So, if there's mixed use, right?

[00:21:08] [SPEAKER_00]: If there's a couple storefronts or some commercial or retail on the ground floor or something.

[00:21:15] [SPEAKER_01]: Yeah.

[00:21:17] [SPEAKER_01]: There is a minimum percentage, though, that has to be residential.

[00:21:21] [SPEAKER_00]: Yeah, and that's 30%.

[00:21:23] [SPEAKER_00]: We've got that somewhere in here and the other considerations, because there's a lot of considerations here.

[00:21:28] [SPEAKER_01]: Yeah.

[00:21:29] [SPEAKER_01]: The next piece is loan advancing.

[00:21:30] [SPEAKER_01]: So, on new construction, loans can be advanced up to 95% of construction costs.

[00:21:34] [SPEAKER_01]: I think pretty rare that they would actually just give you 95%.

[00:21:38] [SPEAKER_01]: Like, it's usually, I think it's usually drawn out, right?

[00:21:40] [SPEAKER_01]: Like, a construction loan, yeah.

[00:21:41] [SPEAKER_00]: Yeah.

[00:21:42] [SPEAKER_00]: And let's also be clear here, sorry, before we keep going.

[00:21:44] [SPEAKER_00]: The 95%, you know, I've spoken, you know, we do these kind of deals, spoken to other brokers across the country.

[00:21:50] [SPEAKER_00]: I have heard people achieving 95% very, very rarely.

[00:21:55] [SPEAKER_00]: Okay?

[00:21:55] [SPEAKER_00]: This is kind of the clickbait aspect of this whole thing.

[00:21:58] [SPEAKER_00]: Now, again, if you're achieving 90% or 80% or 85% or 75%, that's still pretty damn good.

[00:22:04] [SPEAKER_00]: It's better than most other product you're going to get in the market, especially with the longer AMs and the lower rates.

[00:22:09] [SPEAKER_00]: But please don't think that every project and every builder out here is getting that 95%.

[00:22:15] [SPEAKER_00]: It's simply not the case.

[00:22:17] [SPEAKER_00]: It's actually quite the opposite.

[00:22:19] [SPEAKER_01]: Yeah.

[00:22:19] [SPEAKER_01]: Same thing, 95% for existing properties.

[00:22:22] [SPEAKER_01]: And the full loan amount is available on completion of construction or improvements.

[00:22:27] [SPEAKER_00]: Yeah, exactly, Dan.

[00:22:28] [SPEAKER_00]: Okay.

[00:22:28] [SPEAKER_00]: So, we've gotten a bunch of the technical stuff out of the way.

[00:22:32] [SPEAKER_00]: We've gone over a whole bunch of numbers.

[00:22:34] [SPEAKER_00]: We've done a deep dive into the point system, how to get them.

[00:22:39] [SPEAKER_00]: Now, let's talk about who can get them.

[00:22:42] [SPEAKER_01]: Yeah.

[00:22:43] [SPEAKER_01]: So, that conversation usually starts with that who's net worth statement, right?

[00:22:51] [SPEAKER_00]: Personal net worth statement.

[00:22:52] [SPEAKER_00]: Yeah, exactly.

[00:22:53] [SPEAKER_00]: You got to demonstrate significant financial resources or assets that are equivalent to at least 25% of your loan request.

[00:23:02] [SPEAKER_00]: For instance, if you're seeking a $1 million loan, basic math here,

[00:23:08] [SPEAKER_00]: you're going to need $250,000 in liquid assets or easily marketable properties.

[00:23:13] [SPEAKER_00]: Okay.

[00:23:14] [SPEAKER_00]: This isn't just a verbal claim.

[00:23:17] [SPEAKER_00]: You must actually provide concrete evidence.

[00:23:19] [SPEAKER_00]: Again, this goes back to the document heavy aspect of this.

[00:23:23] [SPEAKER_00]: This has got to be through bank statements and documentation dealing that your assets and the documentation of your assets and their current market value.

[00:23:30] [SPEAKER_00]: Okay.

[00:23:30] [SPEAKER_00]: So, for instance, for real estate, you got to ensure that you have up-to-date appraisals.

[00:23:34] [SPEAKER_00]: They can't be more than a year old and they've got to reflect the current market conditions.

[00:23:40] [SPEAKER_01]: That all sounds good, but there is a kicker, obviously.

[00:23:44] [SPEAKER_01]: Having deep pockets isn't enough alone to seal the deal.

[00:23:48] [SPEAKER_01]: So, you've got to show that you know what you're doing when it comes to managing properties like the one that you're looking at.

[00:23:56] [SPEAKER_01]: Either you or your company or potentially like maybe a partner in the deal would need to have some degree of experience in the game for at least five years running similar multi-unit buildings.

[00:24:08] [SPEAKER_01]: If you don't have experience, you would probably have to partner up with a seasoned property management company to handle the day-to-day details to give CMHC enough comfort that you aren't going to run this thing into the ground and default on the loan.

[00:24:21] [SPEAKER_00]: Yeah.

[00:24:21] [SPEAKER_00]: And I mean, you know, when we're talking to people, this unfortunately becomes a disqualifier for a lot of people, right?

[00:24:29] [SPEAKER_00]: Some people either have the net worth and they can get away with that.

[00:24:32] [SPEAKER_00]: And for some, it's vice versa.

[00:24:34] [SPEAKER_00]: They've, you know, they don't have the experience or they do have the experience and they don't have the net worth.

[00:24:39] [SPEAKER_00]: So, again, a lot of boxes to check here.

[00:24:42] [SPEAKER_00]: Now, let's talk about guarantee requirements for construction or completion takeout financing because there's two ways to do CMHC.

[00:24:49] [SPEAKER_00]: There's either on the way in or on the way out.

[00:24:51] [SPEAKER_00]: Now, the borrower and the guarantor must provide a covenant and a guarantee for 100% of the outstanding loan amount.

[00:25:00] [SPEAKER_00]: This guarantee remains in full effect until the project's rents have been achieved and stabilized for 12 consecutive months.

[00:25:09] [SPEAKER_00]: After this period, the additional guarantee required may be reduced up to 40% for the outstanding loan amount.

[00:25:17] [SPEAKER_01]: Man, I think there was a period of time when they were doing no personal guarantees for if you were below, if you're at 65, I think, or below loan to value, which is kind of crazy.

[00:25:29] [SPEAKER_01]: Yeah.

[00:25:30] [SPEAKER_01]: I guess they're still doing that or it says limited recourse lending where borrowers can't provide standard guarantees.

[00:25:39] [SPEAKER_01]: I guess this would be like more design.

[00:25:42] [SPEAKER_01]: It's less designed for like rich people who just don't want to show up on their books and more for like, you know, they say this, that it's more for nonprofits, community organizations, social driven borrowers, or those achieving more than 100 points.

[00:25:57] [SPEAKER_01]: Which, you know, like, so all your projects really compelling.

[00:25:59] [SPEAKER_01]: We obviously want this to be done.

[00:26:01] [SPEAKER_01]: We're going to give you a bit of a exemption on the recourse.

[00:26:05] [SPEAKER_01]: But I know there was a period of time like where a lot of people were just buying at 65 LTV.

[00:26:09] [SPEAKER_01]: And if valuations blew out a little bit and that loan to value got higher, those projects would be at risk.

[00:26:15] [SPEAKER_00]: Yeah.

[00:26:16] [SPEAKER_00]: Yeah, for sure.

[00:26:16] [SPEAKER_00]: Now, again, I just want to touch on something there, Dan, the projects achieving more than 100 points, right?

[00:26:21] [SPEAKER_00]: Well, you've beaten the game.

[00:26:22] [SPEAKER_00]: You've beaten the final boss.

[00:26:23] [SPEAKER_00]: Why would someone achieve more than 100 points?

[00:26:25] [SPEAKER_00]: Well, that goes back to those things like the old age homes and whatnot, right?

[00:26:29] [SPEAKER_00]: Which are hitting accessibility, likely hitting affordability metrics, and being built to the energy efficient standard.

[00:26:36] [SPEAKER_00]: And when you do all of those things and you've got that kind of, you know, community organization or social driven borer, you can see projects that far exceed that 100 points level.

[00:26:47] [SPEAKER_01]: Yeah, I would also say that like there's a case to be made for rents being better and like in certain products, like, you know, especially thinking about the seniors where they're going to be one of the big driving forces and they're probably the biggest market of renters in the future.

[00:27:06] [SPEAKER_01]: And so those who get that accessibility or get a better quality project, right?

[00:27:13] [SPEAKER_01]: They might actually end up getting higher rents, which means that, you know, the portion of your building that isn't affordable, as an example, might actually do a lot better, grow a lot better on your pro forma, etc.

[00:27:24] [SPEAKER_01]: And so there are, you know, beyond just people who are socially driven, there are also probably long-term financial incentives to building a certain way.

[00:27:33] [SPEAKER_01]: Yeah.

[00:27:34] [SPEAKER_01]: You know, you're even seeing socially conscious tenants, right?

[00:27:37] [SPEAKER_01]: Where people, this is a huge theme in the US even, right?

[00:27:40] [SPEAKER_01]: Like, and this is why, you know, there was like lead standards for office buildings, etc.

[00:27:44] [SPEAKER_01]: It seems like the ESG stuff's kind of gone away a little bit, but it's not to say that it's completely gone, especially again, if you're thinking more about what's the younger generation thinking about today.

[00:27:53] [SPEAKER_01]: You know, this is why we're like spending a lot of time on YouTube as an example.

[00:27:57] [SPEAKER_01]: We see all the kids are like, they don't watch TV, they watch YouTube.

[00:28:00] [SPEAKER_01]: And so what are the young kids today going to be like as tenants in 10 years or 20 years while they seem to care a lot about ESG and the environment and, you know, social stuff.

[00:28:11] [SPEAKER_01]: And so building properties that are resilient or can capitalize on that and have a degree of sustainability of growing into your next tenant pool, always going to be a good business decision.

[00:28:23] [SPEAKER_01]: Yeah.

[00:28:24] [SPEAKER_00]: Great point.

[00:28:24] [SPEAKER_00]: Yeah.

[00:28:25] [SPEAKER_01]: Yeah.

[00:28:25] [SPEAKER_01]: So, yeah, I mean, the approach that CMHC takes to all of this, they claim it helps them support diverse housing initiatives while managing the risk associated with doing that.

[00:28:37] [SPEAKER_01]: Yeah.

[00:28:37] [SPEAKER_00]: And that makes sense.

[00:28:38] [SPEAKER_00]: Okay.

[00:28:38] [SPEAKER_00]: So now we're going to talk about a very important metric that has definitely come up in the show before.

[00:28:44] [SPEAKER_00]: It's also a star.

[00:28:46] [SPEAKER_00]: It's one of full, it's a full day and one of the, in our five day challenge, which you can do on realist.ca for free.

[00:28:54] [SPEAKER_00]: That is the DSCR.

[00:28:57] [SPEAKER_00]: And yes, another acronym, but hopefully you are familiar with this one.

[00:29:00] [SPEAKER_00]: That is the debt service coverage ratio.

[00:29:03] [SPEAKER_00]: Love that.

[00:29:04] [SPEAKER_00]: The, the disc or as I call it.

[00:29:06] [SPEAKER_00]: The disc or yeah, exactly.

[00:29:08] [SPEAKER_00]: I know you love a good disc or Dan.

[00:29:10] [SPEAKER_00]: So the debt service coverage ratio of your entire property portfolio will also be assessed.

[00:29:16] [SPEAKER_00]: Now, ideally this should be at least 1.1.

[00:29:19] [SPEAKER_00]: Properties with a ratio lower than this must have a clear explanation such as being under renovation and, you know, having vacancy and not being able to hit that, that, that, that, that service coverage ratio that's required.

[00:29:32] [SPEAKER_00]: Of course, you know, a vacant property or one under renovation would, would have a temporary effect on that property's income.

[00:29:38] [SPEAKER_00]: Now borrows with large existing debts might have to demonstrate an even higher debt service coverage ratio up to a 1.4 metric, especially if you're looking at larger loans.

[00:29:50] [SPEAKER_00]: And when I say larger, that threshold is about a $70 million mark.

[00:29:53] [SPEAKER_00]: Now, Dan, we've got a little table here.

[00:29:55] [SPEAKER_00]: Do you want to just quickly rifle through some of the minimum DSCRs that CMHC wants to see here?

[00:30:01] [SPEAKER_01]: Yeah.

[00:30:02] [SPEAKER_01]: So they have this table on their website that shows minimum debt coverage ratio requirements.

[00:30:10] [SPEAKER_01]: And for residential space with rental, with standard rental housing, so five or more units, you would need a minimum debt service coverage ratio of 1.1, which is like very lenient, to be honest with you.

[00:30:23] [SPEAKER_01]: If you, if you've ever tried to borrow on a, you know, a typical rental loan, I mean, it's a little bit different because in Ontario or sorry, in Canada, you're, you're often using your own income to qualify as well.

[00:30:37] [SPEAKER_01]: But if you weren't using your own income to qualify, you, you're, I think lenders are typically going to want to see like a 1.2 or greater.

[00:30:46] [SPEAKER_01]: And CMHC is looking for a 1.1 on residential space.

[00:30:52] [SPEAKER_01]: On other shelter models.

[00:30:54] [SPEAKER_01]: So, you know, we're hearing a lot about co-living, right?

[00:30:56] [SPEAKER_01]: Single room occupancy.

[00:30:57] [SPEAKER_01]: And they also have supporting supportive housing here.

[00:31:00] [SPEAKER_01]: 1.2 minimum debt service coverage ratio.

[00:31:03] [SPEAKER_01]: And then for retirement homes over 50 units, they want to see a 1.2 minimum debt service coverage ratio.

[00:31:08] [SPEAKER_01]: So that, again, this is basically the, if you were to take your, your net operating income and divide it by your mortgage payment, that is your debt service coverage ratio.

[00:31:19] [SPEAKER_01]: Then finally, cause Nick, you mentioned that they will lend a portion of the loan on non-residential space.

[00:31:25] [SPEAKER_01]: If it's, if it's balanced correctly, according to their criteria, they will expect to see a 1.4 minimum debt coverage ratio.

[00:31:35] [SPEAKER_00]: Yeah, exactly.

[00:31:36] [SPEAKER_00]: Okay. So let's get to a few more important notes and kind of takeaways that you should be aware of if you plan on executing a project of this nature.

[00:31:48] [SPEAKER_00]: And then Dan, we'll finish off the episode kind of summarizing everything and some of the big, basic, important takeaways from both of us.

[00:31:56] [SPEAKER_00]: So why don't you start me off with what appraisals have to look like for some of these projects?

[00:32:03] [SPEAKER_01]: Yeah. So for 24 units or less, owners must commission their own appraisals for larger buildings.

[00:32:08] [SPEAKER_01]: CMHC conducts an internal evaluation.

[00:32:11] [SPEAKER_01]: Market rents listed in appraisals must align with the local norms as CMHC will adjust valuations based on realistic rental income projections.

[00:32:18] [SPEAKER_01]: So overstating rents can lead to lower loan offers than you might expect.

[00:32:23] [SPEAKER_01]: So they're always going to try and bring that back to real life.

[00:32:26] [SPEAKER_00]: Yeah, as they should, right?

[00:32:28] [SPEAKER_00]: I think-

[00:32:29] [SPEAKER_00]: That's pretty fair.

[00:32:30] [SPEAKER_00]: Yeah. As real estate investors, I think we're always like, what do you mean it's only worth that much?

[00:32:35] [SPEAKER_00]: Bring that value up, right?

[00:32:37] [SPEAKER_00]: We all have that little bit of Donald Trump in us where he massively overvalues his portfolio, but that's not the right thing to do.

[00:32:44] [SPEAKER_00]: Okay. Now the next piece here I want to chat about is the economic life and that relationship with amortization.

[00:32:51] [SPEAKER_00]: So CMHC uses the concept of the remaining economic life of a building to determine the loan amortization lengths.

[00:33:00] [SPEAKER_00]: And that makes a lot of sense because for existing buildings, the amortization period is typically five years less than the economic life of that property.

[00:33:10] [SPEAKER_00]: And for new buildings, you get longer amortization, potentially up to that 50 to 55 years we were talking about.

[00:33:16] [SPEAKER_00]: But older buildings generally get shorter periods and less extensively renovated.

[00:33:19] [SPEAKER_00]: And the reason being is you can't have an amortization schedule longer than they think that building is going to last because that just doesn't make sense, right?

[00:33:30] [SPEAKER_00]: So the economic life of a building, and then we actually have an episode in the works on how long do buildings last.

[00:33:38] [SPEAKER_00]: And this is a really important piece of not only the economic, but the physical life of a building.

[00:33:43] [SPEAKER_00]: And CMHC looks at that relationship directly correlated to how long they will lend you that money for based on that amortization schedule.

[00:33:53] [SPEAKER_01]: Yeah. They'll also require environmental reports for properties with seven or more units and all required reports must be less than 12 months old.

[00:34:00] [SPEAKER_01]: You need quantity surveyors or QSs to ensure construction costs aligned with expectations.

[00:34:05] [SPEAKER_01]: So this is super common whenever you have a construction loan, typically over a certain valuation, you'll have a quantity surveyor who's making sure that nobody's like,

[00:34:13] [SPEAKER_01]: scraping money out of the construction loan or that it's actually on track or the money's being spent.

[00:34:21] [SPEAKER_01]: Well, they'll go and say, oh, this person advanced $100,000.

[00:34:24] [SPEAKER_01]: It looks like they did $100,000 worth of work on the site.

[00:34:28] [SPEAKER_00]: Or they showed up in a Lamborghini.

[00:34:30] [SPEAKER_01]: Yeah.

[00:34:31] [SPEAKER_01]: I don't know what Lambo you're getting with a hundred grand, but-

[00:34:34] [SPEAKER_01]: Obviously a very used distress deal.

[00:34:36] [SPEAKER_01]: Guys, I use Gallardo vibes over here.

[00:34:40] [SPEAKER_01]: Upcoming changes to the CMHC guidelines, especially around energy efficiency and affordability criteria are anticipated to make compliance easier, which is good.

[00:34:50] [SPEAKER_00]: Yeah. Okay.

[00:34:51] [SPEAKER_00]: Now, Dan, you had brought up vacancy rates earlier on in the episode.

[00:34:54] [SPEAKER_00]: So CMHC considers vacancy rates specific to geographical areas, right?

[00:35:00] [SPEAKER_00]: This is, again, Canada, as we talk about a lot, is very, very market specific.

[00:35:06] [SPEAKER_00]: You're going to be looking at very different things like from affordability metrics to vacancy metrics from like downtown Toronto to Regina to St. John's to Edmonton, right?

[00:35:16] [SPEAKER_00]: Things change drastically.

[00:35:18] [SPEAKER_00]: So CMHC considers these vacancy rates specific to these different geographical areas.

[00:35:22] [SPEAKER_00]: And those differ from overall regional rates as well.

[00:35:28] [SPEAKER_00]: Now, understanding these can influence the kind of financing that you're going to get approved for with multi-year historical data providing as much of an accurate picture as they can for the underwriting process.

[00:35:41] [SPEAKER_01]: And then for mixed use buildings with non-residential components, there are specific limitations.

[00:35:45] [SPEAKER_01]: I think you mentioned this, but the non-residential portion cannot exceed 30% of the GFA gross floor area or 30% of the total lending value.

[00:35:53] [SPEAKER_01]: And that's the important piece.

[00:35:55] [SPEAKER_01]: Yeah.

[00:35:55] [SPEAKER_01]: Yeah.

[00:35:55] [SPEAKER_01]: And it's capped at 75% of its lending value.

[00:35:58] [SPEAKER_01]: So I think that's it.

[00:35:59] [SPEAKER_01]: That was a lot.

[00:36:00] [SPEAKER_01]: There was a lot of information.

[00:36:01] [SPEAKER_01]: There's one of those data dumps.

[00:36:03] [SPEAKER_01]: Actually, you know, it's kind of exciting.

[00:36:05] [SPEAKER_01]: On the small cap side of this, one of the things we've been talking about and one of the friends of the show, one of our earliest listeners who we've had many a coffee with is doing these at a really small cap side of things, like five units at a time, four plus one, which is the famous thing in Toronto where you can build a fourplex with a garden suite.

[00:36:23] [SPEAKER_01]: So we're going to have him on at some point.

[00:36:24] [SPEAKER_01]: We're still just trying to coordinate it, but he's been basically building some really, really cool stuff in that space that we're excited to work with him on.

[00:36:31] [SPEAKER_01]: And he's actually an energy modeler.

[00:36:33] [SPEAKER_01]: So I'm happy to, if anybody needs, if wants to do those kinds of smaller projects, wants to do the bigger projects, make sure you connect with us.

[00:36:40] [SPEAKER_01]: Anyway, that was a lot.

[00:36:41] [SPEAKER_01]: So we'll leave you with that.

[00:36:42] [SPEAKER_01]: I think we're going to wrap up.

[00:36:44] [SPEAKER_01]: Yeah.

[00:36:44] [SPEAKER_00]: Yeah.

[00:36:44] [SPEAKER_00]: It was a lot.

[00:36:45] [SPEAKER_00]: And honestly, Dan, the crazy thing is that that wasn't even all of it.

[00:36:49] [SPEAKER_00]: It was most of it, however.

[00:36:51] [SPEAKER_01]: Yeah.

[00:36:52] [SPEAKER_00]: What's your biggest takeaway from that?

[00:36:53] [SPEAKER_00]: Yeah.

[00:36:54] [SPEAKER_00]: I think for me, you know, I think the program really does present an amazing opportunity for something like this.

[00:37:00] [SPEAKER_00]: I cannot stress the need to use professionals and to lean on people like that you're mentioning for people listening to lean on people like us.

[00:37:09] [SPEAKER_00]: And then for us to go lean on the professional and power teams that we've built out, because you're not going to do this stuff by yourself.

[00:37:17] [SPEAKER_00]: It's just too complicated.

[00:37:19] [SPEAKER_00]: And that is by design.

[00:37:21] [SPEAKER_01]: Yeah.

[00:37:22] [SPEAKER_01]: Yeah.

[00:37:22] [SPEAKER_01]: I mean, they don't want you to like, it does not look good if the federal government is lending money to people who are failing on projects and disappearing with capital.

[00:37:30] [SPEAKER_01]: Yeah.

[00:37:30] [SPEAKER_01]: So not a good look.

[00:37:32] [SPEAKER_01]: And like as a taxpayer, I appreciate that they're thorough.

[00:37:35] [SPEAKER_01]: So it really does become a who, not how kind of thing.

[00:37:39] [SPEAKER_01]: Right.

[00:37:39] [SPEAKER_01]: Do you have a good team?

[00:37:40] [SPEAKER_01]: Do you have a property manager?

[00:37:41] [SPEAKER_01]: Are you going to meet all the qualifications and criteria that they're asking you to?

[00:37:45] [SPEAKER_01]: For sure.

[00:37:46] [SPEAKER_00]: And I think, you know, this ideally can have a huge impact and empower a lot of those small and mid-cap developers that are, you know, that are trying to get to that next level.

[00:37:58] [SPEAKER_00]: And as we said, you might not be able to do it to yourself.

[00:38:00] [SPEAKER_00]: But if you can build that power team around you, right, you might have, you might be the money person, but you might need the project or property management person with that experience.

[00:38:09] [SPEAKER_00]: So that's what we've seen a lot of as well as teams coming together.

[00:38:12] [SPEAKER_00]: And I will leave everybody with this last point, Dan, that you've brought up and that we've talked about in other episodes, right?

[00:38:18] [SPEAKER_00]: We want to look at what the government is doing.

[00:38:21] [SPEAKER_00]: You know, at the end of the day, they do run the country.

[00:38:23] [SPEAKER_00]: So we've done a lot of other episodes on this and we've actually referenced Elon Musk and how he's able to use government incentives to really boost his businesses, whether you're like Elon Musk or not irrelevant.

[00:38:35] [SPEAKER_00]: This is the practice of looking at policy and legislation and new rules, emerging trends that you as an investor can go and capitalize on.

[00:38:46] [SPEAKER_00]: So what is the government doing?

[00:38:48] [SPEAKER_00]: Where are they taking us?

[00:38:50] [SPEAKER_00]: And if we look at that and we can figure out unique ways to work within that sphere, that's how you can make a ton of money, right?

[00:38:58] [SPEAKER_00]: We saw people capitalizing on the MERB program back in the 70s.

[00:39:02] [SPEAKER_00]: That was the last time we saw a lot of CMHC type of building, right?

[00:39:07] [SPEAKER_00]: Mid multifamily, mid-rise stuff being built and owned.

[00:39:10] [SPEAKER_00]: And, you know, all these years later, 50, 40, 50 years later, we're seeing it again.

[00:39:15] [SPEAKER_00]: So massive opportunity here for those that can figure out how to do it.

[00:39:20] [SPEAKER_00]: I'd recommend just going and finding the right people on your team to execute it.

[00:39:25] [SPEAKER_00]: 100%.

[00:39:25] [SPEAKER_00]: Awesome.

[00:39:26] [SPEAKER_00]: Should we leave it at that?

[00:39:27] [SPEAKER_00]: Probably, eh?

[00:39:28] [SPEAKER_00]: Yeah.

[00:39:28] [SPEAKER_00]: Getting a little long.

[00:39:29] [SPEAKER_00]: Thanks so much for listening, everybody.

[00:39:31] [SPEAKER_00]: Hope that was a huge help.

[00:39:33] [SPEAKER_00]: I know it was complicated, but people will help make that easier.

[00:39:37] [SPEAKER_00]: If you need to know any more or have any questions or want to work with anyone doing these kind of projects across the country, reach out and let us know.

[00:39:44] [SPEAKER_00]: Thanks again.

[00:39:45] [SPEAKER_00]: We'll see you soon.

[00:39:47] [SPEAKER_00]: The Canadian Real Estate Investor Podcast is for entertainment purposes only, and it is not financial advice.

[00:39:53] [SPEAKER_00]: Nick Hill is a mortgage agent with Premier Mortgage Center and a partner in the G&H Mortgage Group.

[00:40:00] [SPEAKER_00]: License number 10317.

[00:40:03] [SPEAKER_00]: Agent license M21004037.

[00:40:09] [SPEAKER_01]: Daniel Foch is a real estate broker licensed with Rare Real Estate, a member of the Canadian Real Estate Association, the Toronto Real Estate Board, and the Ontario Real Estate Association.