New 90% Mortgage For Owner-Occupied Multiplexes

[00:00:00] 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] What if I told you you could own a multiplex with just 10% down?

[00:00:20] I would say you were either wrong or crazy.

[00:00:23] Well, coming to a theater near you January 15th, 2025, we all may be crazy.

[00:00:30] So, I guess it goes without saying that we're going to be seeing some huge changes in Canadian real estate then.

[00:00:36] Yeah, these could be huge changes.

[00:00:40] Could, I guess, being the key word here.

[00:00:42] I think perhaps the biggest potential change that we've seen in Canadian real estate investments since probably MLI Select,

[00:00:51] but only if the market responds and creates the environment for this to be impactful.

[00:00:56] And I think we're going to get into exactly what that would look like in today's episode.

[00:01:00] For sure, Dan.

[00:01:01] And if you listening are wondering what we are talking about,

[00:01:05] the Government of Canada just made an announcement yesterday stating that

[00:01:09] we can expect mortgage insurance rule changes to enable homeowners to add secondary suites.

[00:01:17] Specifically, they've made it so that you can get an insured mortgage on a property that is up to $2 million in value and up to 90% loan to value.

[00:01:26] So, 10% equity left in the deal.

[00:01:29] Because it is a refi, it's not an acquisition loan.

[00:01:31] So, it's technically not 10% down.

[00:01:33] It would be 10% equity left in the deal.

[00:01:35] Okay, so it's not the equivalent to 10% down.

[00:01:39] Yeah, exactly.

[00:01:40] And then that's up to four units total on the property.

[00:01:44] So, if that sounds good to you or something like you might be interested in, stick around because we're going to talk in depth about it.

[00:01:52] And we're actually going to do an interview with one of the trailblazers in this space, Equitable Bank, otherwise known as EQ Bank.

[00:02:00] You probably have heard them as a show sponsor before.

[00:02:02] We talked to them about their Laneway Suite Mortgage Program.

[00:02:06] Yeah, so news for you actually.

[00:02:09] We're going to be pushing that to the next episode because I wrote too much content about this mortgage change.

[00:02:13] So, we will talk to EQ about their program and the refinance process, which I think is important because it's kind of like they've been doing this, right?

[00:02:22] So, it's cool to get a boot.

[00:02:23] It's really good timing that we got to chat with them.

[00:02:25] We actually recorded it the day that this federal program was announced.

[00:02:30] So, talking about the refi process and how as improved appraisals are actually coming in higher than expected because I know one of the big problems.

[00:02:37] Like I actually had somebody when I published info about that.

[00:02:40] Somebody said, oh, you know, another big six bank didn't even look at my garden suite at all, right?

[00:02:45] So, obviously, this is where you're getting the equitables of the world competing in that space because it's so easy for them to compete.

[00:02:50] If bank A, big six bank A is not looking at the garden suite at all, all they have to do to be a competitive lender is just look at the garden suite, right?

[00:02:58] Yeah, exactly, Dan.

[00:02:59] And on that appraisals note, that was pretty groundbreaking news to me.

[00:03:03] And probably my biggest takeaway from that conversation with EQ was the, quote, as improved appraisals for those secondary suites and laneway houses,

[00:03:13] which means that the project is, of course, already completed, are now coming in, not evenly at, but above their construction costs.

[00:03:23] Which means that if you refinance after you add that suite, you can actually realize some equity lift.

[00:03:29] And that still has a lot to do with the conversation we're having today about this huge announcement from the government demand.

[00:03:35] Yeah, what a funny time.

[00:03:37] We recorded that episode and like literally half an hour later, I get a message from you being like, yo, we got to re-record the episode or push it or something like that because the announcement came out.

[00:03:45] So, funny timing for us as usual, I think.

[00:03:48] Yeah, for sure.

[00:03:49] And we're very fortunate in that regard because EQ is really ahead of the curve on this stuff.

[00:03:54] They've had a laneway house mortgage program for a while now.

[00:03:57] And so, in that interview, we got some real-time and on-the-ground feedback as to whether or not these government changes that we're discussing today could even be impactful, right?

[00:04:06] Yeah, exactly.

[00:04:07] So, let's dive into this massive announcement from the Canadian government.

[00:04:11] Dan, start us off.

[00:04:12] Yeah.

[00:04:12] So, before we dive all the way in, actually, I will mention that we have our free webinar coming up on Laneway Suites with Craig Race from lanescape.ca.

[00:04:20] They're one of the bigger laneway house groups in, well, probably Canada, but Toronto.

[00:04:25] On October 24th, you can register at realist.ca slash webinar.

[00:04:29] That'll be in the show notes.

[00:04:30] Okay.

[00:04:30] Now, let's talk about it.

[00:04:32] And let's start by talking about the new and I would call this absolutely huge announcement because it is like basically a doubling of the insured mortgage amount for up to four units.

[00:04:43] Yeah, I feel like if you remember you and Mike Moffitt when we were at OHBA Auto at Centauri Home Builders Association, you guys either spoke about this and maybe even kind of soft predicted this in your interview.

[00:04:57] Yeah, it is interesting and excited.

[00:05:00] We're going to have a couple of other OHBA interviews coming up soon as well because we went to their other most recent conference.

[00:05:05] Actually, Sherwin-Williams was kind enough to send us to their conference in Niagara.

[00:05:11] And Mike and I kind of mentioned how the National Housing Accelerator funds were sort of useless without like a debt policy to make it possible for people to actually finance the construction of multiplexes or the addition of units.

[00:05:22] But now it sounds like that's going to happen.

[00:05:25] Yeah, exactly.

[00:05:25] I mean, the interesting thing was that this program ends at four units and of course, Mli Select starts at five units.

[00:05:34] If you want more information about Mli Select, we just did a full episode on it.

[00:05:39] So go check that.

[00:05:40] It's called The Good and the Bad of Mli Select.

[00:05:43] Yeah, I mean, that part's interesting because it feels like they're kind of trying to leave the small end of the market for small operators and owner occupiers and not really encouraging like large scale investment capital to compete with end users in that space.

[00:05:57] Yeah, which is a really good thing in my opinion.

[00:06:00] So I'm just going to do a quick highlight here again.

[00:06:03] These are the details of the refinancing program.

[00:06:06] So maximum LTV or loan to value, the LTV ratio can be up to 90% of the as improved property value with the total property value capped at $2 million.

[00:06:20] The amortization period, the max and for this refinancing is 30 years.

[00:06:26] That allows borrowers to spread payments over a longer period of time.

[00:06:31] Number of units, homeowners can add up to four units on their property, including the existing one.

[00:06:40] Yeah, so four in total.

[00:06:41] Four in total, right?

[00:06:43] And that's that difference between that zero to four and then the five plus afterwards with Mli.

[00:06:47] Now, each secondary suite must be fully self-contained, a fully self-contained unit, meaning that it has separate living facilities such as things like a private entrance, a kitchen, a bathroom, you know, things that make it a real livable space.

[00:07:03] And of course, this also ensures compliance with municipal zoning and code requirements.

[00:07:09] Here's one caveat that I think didn't really come as a surprise to some and maybe as a bit of surprise to others.

[00:07:16] And, you know, STRs have been vilified enough, but no short-term rentals allowed in here.

[00:07:22] So these additional units must be long-term rentals and can't be used for short-term rental purposes.

[00:07:29] Yeah, and that great summary comes from Canadian Mortgage Trends website, which is written by a guy named Steve Hubel.

[00:07:38] It says, Feds launch a mortgage refinancing program to boost secondary suites and ease the housing crunch.

[00:07:43] And I'm wondering whether or not it'll actually accomplish that, but I guess we're going to talk about it.

[00:07:46] The subtext, you know, I think it explains it pretty well.

[00:07:49] It says, the federal government is rolling out another set of mortgage changes aimed at addressing the housing shortage,

[00:07:54] this time focusing on supporting the construction of secondary suites.

[00:07:59] So, this whole kind of crazy story starts with a tweet, as many crazy stories that we've covered on the show have.

[00:08:08] A lot of times those tweets are from you, Dan.

[00:08:10] But this one is from Chrystia Freeland, who's come up on the show once or twice before.

[00:08:15] I'm quoting her here.

[00:08:17] I'm quoting this tweet.

[00:08:18] We're helping you turn your basement into a rental apartment at an in-law suite or build a laneway home

[00:08:24] so your aging parents can stay at home longer and families can live together.

[00:08:30] Well, isn't that just lovely?

[00:08:32] Yeah.

[00:08:33] You just did a real-life quote tweet.

[00:08:34] It's followed by this kind of interesting image that was looked like,

[00:08:38] it kind of looks like it was made in like Microsoft Paint or something.

[00:08:41] No offense to whoever on the PR team did that.

[00:08:44] I feel like they could have done a better job.

[00:08:45] You got the whole federal government working for you.

[00:08:48] Anyway, it says, yeah, so it basically just says the same thing.

[00:08:52] But it says, this will make it easier to turn your basement into a rental apartment,

[00:08:55] add an in-law suite, or build a laneway home.

[00:08:57] So, it says right there, rental apartment, right?

[00:08:59] So, it's not just for family, although that's an easier policy move.

[00:09:03] Anyway, I thought it was interesting.

[00:09:05] I mean, they're going for it, for sure.

[00:09:07] Yeah, I mean, hey, look, love to see it, right?

[00:09:10] There's been a couple of Hail Marys, and I think we're here for them.

[00:09:15] So, question for you, Dan, do you think that these changes will make a difference?

[00:09:22] Yes, I think there are a few key factors here, right?

[00:09:25] So, they've made it clear that it is aimed at owner-occupiers and the actual construction of extra units.

[00:09:31] So, I'm just going to read this right from the Government of Canada website,

[00:09:34] because it almost presents like a construction loan.

[00:09:39] So, there's a couple of different announcements.

[00:09:41] So, the first one says, Deputy Prime Minister announces new actions to build secondary suites

[00:09:45] and unlock vacant lands to build more homes.

[00:09:49] And you follow that, and it says,

[00:09:51] First, the Deputy Prime Minister announced technical guidance for lenders and insurers.

[00:09:55] And then you click on that, and it takes you to this,

[00:09:58] Mortgage Insurance Rules Change to Enable Homeowners to Add Secondary Suites.

[00:10:02] And it basically says, these mortgage insurance reforms,

[00:10:07] as well as the forthcoming Canada Secondary Suite Loan Program,

[00:10:12] which that's like basically going to be a construction loan by the sounds of it,

[00:10:16] will make it easier for homeowners to convert an unused basement into a rental apartment

[00:10:20] or a garage into a laneway home to increase density in our communities.

[00:10:23] Secondary suites can help homeowners pay their mortgage,

[00:10:26] which honestly, I really think is what this policy is aimed at.

[00:10:28] I think that mortgage renewal wall next, you know, like a lot of people have said to me,

[00:10:32] Oh, like my house is worth 1.5.

[00:10:34] If I put a garden suite on it, I won't qualify.

[00:10:37] I'm like, they don't want you to qualify.

[00:10:38] Like they probably deem you wealthy enough to not need help here, right?

[00:10:42] If your house is worth 2 mil, like, you know, people like,

[00:10:44] if your house is worth 2 mil, like, and you're complaining about it,

[00:10:48] nobody's sitting there, you know, like, you know, like, that's kind of the point.

[00:10:52] So, so they mentioned that it will help homeowners pay their mortgage with the new rental apartment

[00:10:58] and bring families close together.

[00:10:59] So they're kind of going for that multi-generational living thing,

[00:11:02] which, you know, like, I think we're just at that phase in Canada.

[00:11:04] We obviously can't, we haven't figured out a way economically to build houses fast enough

[00:11:08] to keep up with our population growth.

[00:11:09] So here we are just piling into existing dwellings and living together, right?

[00:11:13] So I think a big portion of it is a lot of those people who are going to be renewing

[00:11:18] at 5% rates from 1.5% rates are probably looking at this being like,

[00:11:22] oh, well now I can, you know, get a loan, put a basement apartment in,

[00:11:26] and I'll be able to afford my mortgage for another five years.

[00:11:28] So I think a portion of it's aimed at that.

[00:11:30] So it says more specifically, these changes will allow refinancing of insured mortgages

[00:11:34] for secondary suites to let homeowners, and again, insured mortgages.

[00:11:40] So CMHC insurance, taxpayer backed.

[00:11:43] So to let homeowners access the equity from their homes to finance the construction of secondary suites.

[00:11:48] That'll be up to 90% of the home value, including the value added by the secondary suite

[00:11:54] and amortize the refinance mortgage over the 30 years.

[00:11:58] So this is the first application that we've seen of that new 30 year AM extension

[00:12:01] that they previously added to the insurable loan criteria, let's call it.

[00:12:08] And then they also are going to be increasing the mortgage insurance home price limit

[00:12:12] for 2 million on refis for people building a secondary suite.

[00:12:16] So where they just increased the purchase side to 1.5 and the refi side to 1.5,

[00:12:21] if you're putting a secondary suite in, so if it has two or three or four units,

[00:12:25] you can refi up to 2 mil to ensure homeowners can access this refinancing

[00:12:29] in all housing markets across the country.

[00:12:31] And I've had people say to me, oh, this isn't going to work in Toronto.

[00:12:33] I'm like, it'll probably work for the fringe areas in Toronto.

[00:12:37] If your goal is to get a fourplex 90 LTV in the city of Toronto, yeah, okay, it's not going to work.

[00:12:44] But realistically, I don't think the program is designed to make it so that people can be like

[00:12:49] developers who live in their own house and then, you know what I mean, scale a portfolio that way.

[00:12:53] I think this is a really one-off solution.

[00:12:55] Well, it's also, you know, we can't just completely focus on Toronto, right?

[00:13:02] I mean, yes, fine, downtown Canada, whatever you want to call it, whatever jokes you want to make.

[00:13:06] But there's a crisis across the country.

[00:13:08] And yeah, it might be exacerbated by Toronto.

[00:13:10] But, you know, to try to fix Toronto's problems with a, you know, with a single brush stroke is not going to be the case.

[00:13:16] Now, Dan, with that section that you just read from the government website, there's a link in that text, which takes you to this other website, this other page that is titled,

[00:13:28] Adding Additional Suites to Single-Family Homes.

[00:13:30] And it says that many homeowners have extra space that they can convert into rental suites.

[00:13:35] You know, we've talked about this many times over the show, right?

[00:13:37] The amount of square footage that Canadians have, the millions of empty bedrooms.

[00:13:41] So it says such as an unused basement or a garage that could be converted into a laneway home or additional dwelling unit.

[00:13:49] Historically, the cost of renovating combined with municipal red tape has made this both difficult and costly.

[00:13:57] Yeah.

[00:13:58] So they go on to talk about how, you know, the first layer of policy change they already did was to use that housing accelerator fund,

[00:14:07] which we've talked a lot about this on the show.

[00:14:08] A lot of these municipalities upzoning to two, three, four units.

[00:14:11] So a lot of those municipalities have upzoned already.

[00:14:14] Toronto went to four units.

[00:14:15] Calgary went to four.

[00:14:16] Plus, like, I think with suites, you can do like eight or something.

[00:14:20] A lot of BC, Halifax, et cetera.

[00:14:22] And so it is possible already for people to do this from a zoning perspective because you need all the combination of actual things.

[00:14:28] Like, just because they have the loan doesn't mean that people can do it if the municipalities aren't allowing it.

[00:14:34] And so on their website, yeah, I guess before, like, because all those municipalities were zoned, they didn't have the capital, right?

[00:14:40] So that was what was missing.

[00:14:41] So on their website, it says recent municipal zoning reforms in Canada's major cities through the housing accelerator fund made it so that homeowners can add additional suites to their properties in support of densification.

[00:14:51] They would provide more homes for Canadians and, of course, an important source of income for seniors.

[00:14:56] That was a really interesting note from my perspective who might not be able to continue or to afford to continue to age at home.

[00:15:05] That, like, I actually found to be really fascinating just thing that they would highlight in this report because…

[00:15:12] I love it.

[00:15:13] You're trying the nonas and babushkas into landlords.

[00:15:15] Yeah, but, you know, I mean, this is something that we've talked a lot about where I think that big demographic cliff as a lot of these people start to age and want to stay in the houses because, you know, we and I have cold called these people.

[00:15:28] They don't want to move, but a lot of cases they may not be able to afford to because of inflation or whatever.

[00:15:34] So this is an interesting piece of the puzzle there.

[00:15:37] Yeah, for sure.

[00:15:38] So let's think about how big this opportunity could be for you, our listeners.

[00:15:45] The site goes on to say that Budget 2024 proposes to provide $409.6 million over four years starting in 2025 to the Canadian Mortgage and Housing Corporation, CMHC,

[00:16:02] to launch a new Canada secondary suite loan program, enabling homeowners to access up to $40,000 in low-interest loans to add secondary suites to their homes.

[00:16:14] And details of this program are expected to be announced within the coming months.

[00:16:20] Yeah, so actually, like, kind of underwhelming, not really that big of an opportunity, to be fair.

[00:16:26] We're going to need a bigger loan.

[00:16:28] Yeah, yeah, yeah.

[00:16:29] I mean, definitely, actually, if you do the math, right?

[00:16:33] Yeah, so show me the quick maths here, would you?

[00:16:36] Two plus two is four minus one.

[00:16:38] That's three quick maths.

[00:16:41] Shut up, Big Shack.

[00:16:42] I had to.

[00:16:43] Man's Not Hot.

[00:16:44] Can you believe that song came out six years ago?

[00:16:46] I honestly wonder if he's taken off his jacket yet.

[00:16:49] Every time someone's like, can you believe this came out this long ago?

[00:16:52] I'm like, I'm like officially old now.

[00:16:55] Yeah.

[00:16:55] We're like, we're getting old today.

[00:16:57] TechCraw kids probably don't even know that man's not hot.

[00:17:00] Well, I don't think they're listening to the podcast anyways.

[00:17:03] But if you are, go check out Big Shack.

[00:17:06] Anyways, back on track here.

[00:17:08] What is hot?

[00:17:10] This financing program is.

[00:17:12] So let's actually do the maths here, Dan.

[00:17:16] For sure.

[00:17:16] Yeah, done.

[00:17:16] So if you take 409.6 million over four years, assuming it costs 250 grand to build a secondary suite, which I feel like is pretty lenient.

[00:17:25] But, you know, there's a mix between basement apartments and garden suites.

[00:17:27] So that is enough for 1600 secondary suites.

[00:17:34] Hmm.

[00:17:34] Hmm.

[00:17:35] Okay.

[00:17:35] Probably not going to do it, right?

[00:17:37] Yeah.

[00:17:37] I mean, the thing is CMHC has said multiple times that we need to build millions of suites over the next few years.

[00:17:45] Like that's literally less than 1% of the like three and a half plus million we need to build.

[00:17:51] Yeah, I think the folks are calling that a drop in the bucket these days.

[00:17:55] Now, to be fair, it's not like the funds would be tied up the entire time.

[00:17:58] So let's just like actually be realistic here.

[00:18:01] You could maybe assume that it takes three to six months to build a secondary suite, three months for a basement, six months for a garden suite maybe.

[00:18:07] So let's give them the benefit of the doubt and say three months.

[00:18:10] Then every three months, assuming no processing time, like again, being super optimistic here,

[00:18:15] the cost of that suite is being returned to CMHC because the takeout or refinance that the bank is doing is taking place.

[00:18:23] So the capital is turning over four times per year, let's say, right in that scenario.

[00:18:27] Does that make sense?

[00:18:28] Every three months, they're turning over the loan.

[00:18:29] So they're lending the money, they're getting it back every three months.

[00:18:32] So four times per year.

[00:18:33] Yeah, it's kind of a revolving door of capital.

[00:18:36] So I guess in that case, you'd be turning over that 1600 secondary suite loans per quarter,

[00:18:43] which actually would work out to more like 6400 suites per year.

[00:18:49] And, you know, if you take that and spread it out over four years, you'd get like 26,000 secondary suites at it.

[00:18:58] Okay, so maybe we're up to two or three drops in the bucket right now because that would still only be like one to,

[00:19:05] I guess, maybe 2% of the million plus homes that we need per year.

[00:19:10] So somewhat meaningful step in the right direction.

[00:19:14] Yeah, I guess.

[00:19:15] I mean, a lot of stuff has to go right for that to happen.

[00:19:20] I used a lot of really lenient assumptions in that math.

[00:19:25] So I think most of these projects will probably take longer than three months.

[00:19:29] Yeah.

[00:19:30] And I think most of them will probably cost more than 250,000 as well.

[00:19:35] Yeah, I think some might, but some might also cost less.

[00:19:38] You know, for example, like we're doing the two basement apartments right now and they'll likely end up being at like 150K each.

[00:19:45] So it really depends on the type of suite, I suppose.

[00:19:48] Yeah, for sure.

[00:19:49] I mean, if we're talking laneway homes, you're closer.

[00:19:51] I think that the benchmark for a laneway, you know, garden suite is probably closer.

[00:19:56] Your starting cost is 250 to 300.

[00:19:59] And again, good friend of the show and a business partner of ours, Joey.

[00:20:03] He'll actually be on the upcoming webinar to chat about costs of laneway homes.

[00:20:07] But Dan, and I don't want to give away too much for that upcoming episode with EQ, but, you know, they were saying that those suites can, you know, those small structures can get up over half a million dollars.

[00:20:17] Yeah, they were saying like three to 500K.

[00:20:20] Yeah.

[00:20:20] Okay, so let's run through the parameters here.

[00:20:23] So according to the government of Canada, this is what you would need to qualify for up to 90% loan to value refinance to add a suite or suites to your property.

[00:20:37] So number one, this measure will apply to all borrowers seeking to access mortgage insurance in Canada to add more units, secondary suites.

[00:20:46] These borrowers must satisfy the, so, and they said all borrowers because I guess they don't want to exclude, like it's similar to the other ones.

[00:20:57] They don't want to exclude, like it's not just for friends or sorry, for family members or whatever, but you have to already own the property.

[00:21:05] And this is funny because there's this criticism that I've seen.

[00:21:08] We're going to get to some of the criticisms that people are like, oh, like, well, it does nothing because people already have to own the property.

[00:21:13] It's like, if only there was a way that people could own properties, like we should come up with a system like where they could buy them so that they could own them after.

[00:21:20] So it's because it's a construction loan and a refi, you have to own it.

[00:21:24] You can't get a construction loan on somebody else's house, right?

[00:21:27] Anyway, the borrower close relative has to be occupying one of the current units.

[00:21:32] Another criticism there perhaps that people will suddenly find a lot of close relatives perhaps.

[00:21:39] It is intended to construct additional units and the additional units must not be used as a short-term rental.

[00:21:45] So again, like, so no Airbnb, et cetera.

[00:21:47] It's for long-term rentals only.

[00:21:48] It doesn't say anything about medium-term rental, which somebody asked me, has already asked me, which is interesting.

[00:21:55] Refinancing, insured refinancing will be allowed for the purpose of building additional units.

[00:21:59] So I guess that would be the takeout.

[00:22:01] I guess you're getting a top-up, like a construction loan, and then you're getting a takeout or a term debt at the end.

[00:22:06] The units must be legal.

[00:22:08] It's a maximum of four units.

[00:22:10] The maximum property value is $2 million.

[00:22:13] The maximum loan-to-value limit is up to 90% of the property value, including the value added by the secondary suites,

[00:22:19] in combination with any outstanding or other outstanding loans secured by the property.

[00:22:23] So if you have like a capital stack going on.

[00:22:25] Maximum amortization, 30 years, and additional financing must not exceed project costs.

[00:22:32] There's an effective date starting January 15th, 2025.

[00:22:39] And all the other eligibility criteria for government-guaranteed mortgage insurance will continue to apply.

[00:22:44] That one's interesting to me because right now, CMHC has a comparable program.

[00:22:48] We're going to talk about it a little bit.

[00:22:49] But they only used 50% of rents for that existing program, which is why nobody uses it and why nobody's even heard of it.

[00:22:58] People are out on Twitter complaining like, oh, the government shouldn't be insuring investment properties.

[00:23:04] It's like they've been doing that since 2019.

[00:23:06] It's a little late to complain.

[00:23:08] So anyway.

[00:23:09] But that's what people do on Twitter, right?

[00:23:11] Yeah.

[00:23:12] That's exactly what it was designed to do.

[00:23:16] Now, I want to zoom in on one piece that you mentioned there, Dan.

[00:23:20] That as improved piece, I think is really important.

[00:23:24] And I guess we'll touch more and more on that in our next episode, which is, I guess, kind of a part two to this one.

[00:23:31] That's our discussion with EQ Bank.

[00:23:33] But Dan, this to me feels like a huge opportunity for house hackers, right?

[00:23:39] Which is something that, you know, I think a lot of early on investors should consider.

[00:23:45] Now, here's a quick refresher.

[00:23:46] Nictionary definition, if you will.

[00:23:48] A house hacking simply put is a strategy that involves becoming a landlord and renting out portions of your primary residence to generate income.

[00:23:56] So, for instance, you buy a property, you live upstairs, someone else lives downstairs, they pay your mortgage.

[00:24:02] Or maybe you want to sacrifice a little bit more.

[00:24:05] You live downstairs, they live upstairs.

[00:24:06] Now, not only is your mortgage paid, but you're making money to live there.

[00:24:09] You're living for free and making a couple bucks on top.

[00:24:13] Yeah.

[00:24:13] I think that this would kind of be like the super hacking version, though.

[00:24:17] Like if there's like hacking, like I'm just using computer hacking now.

[00:24:20] Like Satoshi Nakamoto would be like this version of, you know, like that's how the best hacker ever.

[00:24:25] Who was recently falsely revealed to be Mr. Something Todd, Peter Todd, who was, wasn't he an OCAD student?

[00:24:33] Anyway.

[00:24:35] Seriously, I'm pretty sure that's the story.

[00:24:37] Anyway.

[00:24:37] That's wild.

[00:24:38] Yeah.

[00:24:39] The fascinating part, though, is it's taxpayer insured, which kind of obviously carries a little bit of moral hazard and concern that people have had.

[00:24:48] So, on that note, let's do a quick run through and some examples, and then we'll get to those criticisms.

[00:24:55] So, I'm a first-time home buyer trying to buy a house in a major metro area somewhere in Canada.

[00:25:04] Probably not Toronto based on the value.

[00:25:06] Maybe like Oshawa.

[00:25:07] No, I don't even think you'd get an Oshawa.

[00:25:09] Not Oshawa.

[00:25:09] Hey, what about Ottawa or Edmonton?

[00:25:13] Sure.

[00:25:13] Something like that, you know?

[00:25:14] Okay.

[00:25:14] So, I'm buying my raised bungalow for $500,000.

[00:25:17] I am using a CMHC insured mortgage with just 5% down.

[00:25:22] I now own the house.

[00:25:24] I get the permits and the drawings and the construction budget showing that I want to put a basement apartment in there for $150,000.

[00:25:32] And when that's all done, the house will actually be worth $750,000.

[00:25:39] Now, I'm assuming I would get an as-is as complete appraisal done to substantiate that value.

[00:25:47] They would give me the financing for up to 90% of that new value, the ARV, which is the after repair value.

[00:25:55] So, 90% of $750,000 is $675,000.

[00:26:01] But my total cost for the project and buying the house and putting the basement in, $500,000 for the house, $150,000 for the renovation was $650,000.

[00:26:09] So, I'd actually net $25,000.

[00:26:14] So, I would say it's a little bit more nuanced than that because you also have the land transfer tax, which is $6,500 on that if it's in Ontario.

[00:26:21] $2,500 if you're a first-time homebuyer because you get a $4,000 rebate plus a CMHC premium, which is important because they mentioned that it's the same thing carries of all of the other ones.

[00:26:32] So, if the premium carries from other CMHC loans, you'd pay 3.1% premium on a 90% mortgage with a 10% down payment.

[00:26:40] So, you'd have to add $15,500 to the principal amount.

[00:26:44] So, after that, you'd be pretty close to breaking even depending on how much land transfer tax you pay.

[00:26:48] So, the numbers are pretty tight.

[00:26:49] Now, the bigger question is would a debt service than mortgage, right?

[00:26:52] And so, we need to see because I can't see them lending if all of a sudden you just qualified for that $500,000 house and then you're adding income and you're trying to get a bigger mortgage.

[00:27:05] The income has to substantiate that increase in the mortgage, right?

[00:27:09] Yeah, for sure.

[00:27:10] So, let's start with that example.

[00:27:12] So, $500,000, that's your price of your home with a 95% mortgage.

[00:27:18] So, your mortgage amount is $475,000.

[00:27:22] That's 95% of $500,000.

[00:27:24] Your mortgage rate, let's just assume a 5% rate with a 25-year M.

[00:27:30] The estimated monthly mortgage payment for a $475,000 mortgage at 5% interest over 25 years is approximately $2,777 a month.

[00:27:42] Now, if we are using the GDS ratio at 39%, that's your monthly housing costs.

[00:27:49] Again, it should not exceed 39% of your gross monthly income.

[00:27:53] This means that your gross monthly income should be at least $86,000 to qualify for that.

[00:27:59] So, you would need to add that to the rental income for that property.

[00:28:04] Yeah, so, let's assume that that unit, I don't know, basement apartment in like, I guess like Edmonton or fringe GTA would rent for like $1,800 a month.

[00:28:14] So, if you're looking to qualify for a $750,000 mortgage, again, with the example at a 90 LTV with the added income from the rental unit,

[00:28:22] the down payment would be or your equity left in it would be 10%, leaving a mortgage amount of $675,000.

[00:28:29] CMHC typically allows 50% to 80% of rental income depending on the lender's policies.

[00:28:33] So, this is where you're probably going to run into challenges as it stands.

[00:28:37] I'm imagining they're going to have to make some changes here.

[00:28:40] Again, that 5% interest rate.

[00:28:42] So, your mortgage payment jumps up to $3,900, let's say.

[00:28:47] So, assuming they count 100% of the rental income, it would work because I think you were making,

[00:28:52] I don't remember what the monthly income was before,

[00:28:54] but the $1,800 is less than the difference between your mortgage payment before and your mortgage payment now.

[00:29:03] Or sorry, more than the difference.

[00:29:04] Actually, in that example, it isn't even because it's $2,700, $2,800 before and it's $3,900 now.

[00:29:10] So, even then, it's pretty tight, right?

[00:29:12] And that's not accounting for the fact that you would have to hit a debt service coverage ratio.

[00:29:16] So, this honestly just leaves me with more questions.

[00:29:19] And obviously, like a lot of this is going to come to light as they refine the policy

[00:29:23] and actually release the policy and we start to see lenders iterations of it.

[00:29:26] And we're going to obviously update the audience as that stuff comes out.

[00:29:31] But, you know, because I think that like, and I want our audience to be aware and to be paying attention

[00:29:36] to look for those answers, right?

[00:29:38] What is the DSCR?

[00:29:39] What is, you know, because these requirements are what's going to define it.

[00:29:42] Because like CMHC already has this rental property program where you could already get,

[00:29:47] I think, 90% LTV on an owner occupied duplex on acquisition, but they also have one for like two to four units.

[00:29:54] So, are they going to include the rents?

[00:29:56] And if so, which percentage of the rents are they going to include?

[00:29:59] And how much are they going to be giving for the construction loan?

[00:30:02] And what format is the construction loan?

[00:30:04] Like the thing is called so far, this is like this arbitrary thing that we have right now,

[00:30:07] the secondary suite loan program or whatever.

[00:30:11] Yeah, like what does that even mean?

[00:30:14] No one knows what it means, but it's provocative.

[00:30:16] It gets the people going.

[00:30:19] Well, you're on fire today.

[00:30:21] I hope people can get that reference as well.

[00:30:24] But it's all kind of, you know, a nothing burger, right?

[00:30:28] Like if you Google CMHC income property, you'll see this result from February 22nd of 2019.

[00:30:35] CMHC income property is a mortgage loan insurance program that gives investors more financing options

[00:30:42] when purchasing a rental property.

[00:30:44] And the page goes on to say that loan to value ratios for homeowner loans, which are owner

[00:30:50] occupied properties, loan to value ratio for one to two units is up to 95%.

[00:30:56] For three to four units, the ratio drops to 90%.

[00:31:01] And for smaller rental loans, which are non owner occupied.

[00:31:06] So let's say your traditional rental property that you don't live in loan to value for two to four units.

[00:31:12] So duplexes to four plexes drops down to 80%.

[00:31:17] Yeah.

[00:31:17] There's this interesting little flow chart that they linked on the site.

[00:31:20] We're going to screen share it for those who watch the video versions of our podcast.

[00:31:24] There are like five people who do that.

[00:31:25] But it shows me that like this is why nobody is using the existing program.

[00:31:32] And again, it's because they only allow up to 50% of gross rental income, right?

[00:31:38] Or they use a net rental income approach.

[00:31:41] So what I'm kind of getting is that this doesn't really change anything?

[00:31:47] I mean, it increases the size of that program, I guess, from I think that that capped at a million

[00:31:53] before and now it's at 2 million from what I'm getting.

[00:31:56] And it makes sense.

[00:31:57] So that makes it more scalable for owner occupiers, you know, people who are going to do the house hack like you described.

[00:32:03] But it's not really new per se.

[00:32:05] This government is really good at repackaging stuff that already exists.

[00:32:09] Yeah.

[00:32:10] Yeah.

[00:32:10] Not the first time we've seen that old trick.

[00:32:14] Question for you, Dan.

[00:32:16] Do you think people will buy it?

[00:32:18] Do you think people will actually use it?

[00:32:21] I do.

[00:32:22] And I know you do too.

[00:32:24] Like you're a big house hacking guy for sure.

[00:32:27] But I think, you know, we will get to that when we discuss the criticisms because one of the big ones is that people don't think people will use it.

[00:32:34] I think it'll be impactful for larger house hacks and multiplexes.

[00:32:38] Like where that's what it's going to take for the numbers to work.

[00:32:40] For example, if you buy an old big mansion and cut it up into three or four units and you increase the value from 1 million up to 2 million and you can cash flow it,

[00:32:51] that didn't exist before, right?

[00:32:53] Like there was no way to make that happen before.

[00:32:56] So there's definitely merit to the well-executed versions where people can pull up to 90% LTV because now that person pulled a bunch of cash out and then they can go scale another real estate portfolio.

[00:33:05] Again, like they're not going to let you just pull 90 LTV.

[00:33:07] They'll let you pull up to 90 LTV wherever it cash flows.

[00:33:12] Again, like they're not just going to be like, oh yeah, because it's a multiplex, you can just have whatever mortgage payment you want, right?

[00:33:19] They'll say, here's what the rents are.

[00:33:21] Here's what your income is.

[00:33:23] But I also think it's important to like really think about the idea of like almost stacking these big announcements that we've seen from the government since they started taking the housing crisis seriously, finally.

[00:33:35] Because there are now a ton of programs you can take advantage of, which is pretty meaningful from my opinion.

[00:33:40] Yeah, it's just, it's been crazy the last, I don't know what, three months, maybe three to six months with like, it seems there's like a big new announcement.

[00:33:49] Like every, every week it's been, I mean, luckily there's a podcast that covers all this stuff.

[00:33:54] It's hard to keep up with it all out there.

[00:33:56] It's okay.

[00:33:57] So we're in the era of government funded financial hacking to get to home ownership.

[00:34:03] You know, you can save money in your tax free first home savings account, your FHSA.

[00:34:10] And you can max that out to then save money in your RRSP and use up to 35,000 per person for the down payment.

[00:34:17] Then you can deploy that on a house.

[00:34:18] You can convert that house to a multiplex and take out a 90% loan to value.

[00:34:24] So, you know, if you can do what you just said, Dan, and stack these programs, we might actually be onto something.

[00:34:31] Yeah.

[00:34:31] I mean, it's cool because we have a pretty cool partnership coming up with a big provider of those registered products as well.

[00:34:37] So I'm going to be doing some crossover episodes with Simul from the Canadian Investor Podcast about how to use like those and then get into this kind of thing.

[00:34:45] But, you know, you really like hear people talk about the financialization of housing and what they often mean is that they hate landlords.

[00:34:51] But this is like the – this is kind of one of those things where it's like, well, what if the landlord is also the homeowner, right?

[00:34:57] So I do get why people are critical of a lot of this even though I'm personally kind of excited about these policies.

[00:35:03] Yeah, I'm excited too because I think the change in policy just – I mean, I think we were just in desperate need of change overall.

[00:35:11] So to see some of these changes in policies and the way that people are going to react and the creative solutions that are going to come from it, you know, I think that it is all a good thing.

[00:35:19] But it isn't all good because there are obviously concerns and criticisms from the general public and from housing commentators and from much smarter people than you and I out there, Dan.

[00:35:32] And so let's go a few – let's go over a list of a few of these concerns and we can just discuss them afterwards.

[00:35:37] First one, mortgage fraud.

[00:35:39] Now that is and has been going on for quite some time, baby.

[00:35:43] That is nothing to me.

[00:35:44] Canadians wouldn't possibly do that.

[00:35:46] Well, it's soft fraud, okay?

[00:35:48] It's soft fraud.

[00:35:49] It's not the hard stuff you hear about in the States.

[00:35:52] Now for primary use only, you know, the concern and criticism is that not many people or nobody will use it.

[00:35:59] Again, I don't know if I agree with that one.

[00:36:02] Here's one that's controversial.

[00:36:04] The government shouldn't be insuring investors.

[00:36:06] Yeah, they should because investors and small cap developers and citizen developers are going to be probably the main way that we claw our way out of this housing crisis.

[00:36:15] Capital gains, another one.

[00:36:19] The potential to push up property values.

[00:36:22] And then speaking of pushing up and piling up just more and more debt.

[00:36:28] That is a bit of concern for me.

[00:36:30] It just seems like every solution is just like, hey, we'll just throw more debt at it.

[00:36:35] Yeah.

[00:36:36] Yeah.

[00:36:36] Let's start with the mortgage fraud one.

[00:36:37] So the policy on the site says that the borrower or close relative occupying one of the units, I'm assuming it has to be a family member, similar to like Ontario Landlord and Tenant Board or like most Landlord and Tenant Boards.

[00:36:49] If you want to do an eviction for personal use, it has to be you or a close family member.

[00:36:53] So I think that like, you know, a lot of the people who like to do the mortgage soft fraud stuff are going to find a lot of close relatives occupying one of said units very soon.

[00:37:05] Very good to have a big family these days.

[00:37:07] Yeah.

[00:37:07] Yeah.

[00:37:08] So I think that that criticism is fair.

[00:37:11] And I think that this is an opportunity for the government to see or to prove if they're serious about the fraud stuff.

[00:37:20] Like that is, you know, I mean, look, you've got probably the most common type of mortgage fraud from my perspective.

[00:37:27] I think a lot of people think it's like people faking income, but I honestly think that it's people taking the typical CMHC owner occupied financing, pretending that they're going to live in a house and then actually turning it into a rental or an Airbnb or something like that.

[00:37:39] I honestly would, my guess would be that that's probably the most common mortgage fraud.

[00:37:42] That's going to be a big risk to mitigate because you just, you just took the incentive of that and made it, you took the incentive from a net cash flow negative single family house to a cash flowing $2 million multiplex.

[00:37:54] Right?

[00:37:55] Yeah, exactly.

[00:37:55] If you think that primary residence soft mortgage fraud is bad now, just wait until you've literally made the incentive a multiplex.

[00:38:05] So agreed.

[00:38:06] Very fair concern.

[00:38:07] Yeah.

[00:38:08] I mean, people have been doing the CMHC insured mortgage fraud for a while saying they're going to live in the property or whatever.

[00:38:13] So I think that one's good.

[00:38:15] Yeah.

[00:38:15] Like, I don't know.

[00:38:16] It's concern.

[00:38:17] Yeah.

[00:38:17] Okay.

[00:38:17] So let's move on here, Dan.

[00:38:18] What's the next piece?

[00:38:20] Yeah.

[00:38:21] I mean, again, I'll just finalize that with this would be a very good opportunity for the government.

[00:38:25] To make it important or make it clear that they are serious about mortgage fraud.

[00:38:31] They did mention in the housing plan that they would be cracking down on mortgage fraud.

[00:38:34] But it's like this super loosey-goosey language.

[00:38:38] I'm just going to read it and then you can get to the next piece.

[00:38:41] All right.

[00:38:41] Budget 24 will propose the government's intention to consult.

[00:38:46] Propose the intention to consult.

[00:38:50] Propose the intention to consult.

[00:38:51] Yeah.

[00:38:51] With the mortgage industry on making a tool available through the Canadian Revenue or Canada Revenue Agency to verify borrower income on mortgages.

[00:38:58] You know, that was definitely written by those very high-paid consultants that they're really good at stringing sentences together that you read and you're kind of like, I don't get it.

[00:39:09] I'm more confused than I was before.

[00:39:11] So it doesn't sound like they're too convinced of the importance of combating mortgage fraud.

[00:39:15] I mean, honestly, reading that, it's, you know, as you said, very technical term, loosey-goosey.

[00:39:20] Almost like our economy depends on a little bit of mortgage fraud just to keep going.

[00:39:26] I think that, but people call me too cynical, so.

[00:39:29] Okay.

[00:39:29] So let's move on to the next criticism here.

[00:39:32] A good friend of the show, Steve Saretsky, in a Twitter thread, was skeptical about how people and that people even use this loan.

[00:39:44] Yeah.

[00:39:44] So my tweet says, this is huge.

[00:39:46] CMHC is now insuring up to $2 million, blah, blah, blah, blah.

[00:39:49] Everything we just described, this could completely change the Canadian real estate landscape.

[00:39:52] That might have been a little bit hyperbolic, but that's what you have to do on Twitter to get engagement.

[00:39:55] That's what they call it, rage farming.

[00:39:57] Steve responded, for primary use only, I'm skeptical the average homeowner is eager to add a rental suite in their home,

[00:40:02] particularly given the shit show at the provincial tenancy boards.

[00:40:06] What do you think, Nick?

[00:40:07] I mean, I, you know, I don't know.

[00:40:10] I think people will use it.

[00:40:12] People want a house hack, and this makes a house hack plus a BRRRR, the first time home BRRRR, if you will, right?

[00:40:22] And, you know, Dane, when we talk to people, especially younger investors across the country,

[00:40:26] and we look at the statistics that one in four Canadians want to invest in real estate,

[00:40:31] you know, it comes back to that simple fact.

[00:40:33] Everyone wants to invest in real estate, but there's not enough existing real estate to invest in.

[00:40:38] So this is why you and I have been talking about it.

[00:40:40] And so bullish on adding units and multiplexing properties.

[00:40:44] And, you know, if you can do a good job and you can live in a four-unit house, right?

[00:40:50] One of those McMansions that has been torn down and you can rebuild it and it's beautiful.

[00:40:55] You know, again, I think that's a really great alternative for a lot of people that really,

[00:40:59] other than that, are either stuck in a condo or moving way outside of the city.

[00:41:04] So, you know, I'm going to be the optimist here and think that I do think people use it.

[00:41:08] I think there's an education process that needs to happen for people to use it.

[00:41:11] But I think if we, you know, can cross that threshold, I think it will be adopted.

[00:41:16] Well, like, I agree with Steve.

[00:41:18] There are a lot of people who don't want to share their house with a tenant or be a landlord or, you know,

[00:41:24] like because of the landlord and tenant boards or whatever.

[00:41:26] There are also a lot of people who don't care whether or not they're a landlord or how bad the landlord and tenant boards are.

[00:41:35] And they maybe need the income or they need the 90% leverage to take cash out to give to their kids or solve some other financial stress.

[00:41:43] And so I think that, like, will they lend out that $400 million?

[00:41:50] Again, like it's really not that much, right?

[00:41:52] So I honestly think that this program will be oversubscribed.

[00:41:55] That's my guess.

[00:41:56] I don't think it will be like their shared equity program that fell flat on its face.

[00:41:59] I think that this program will be oversubscribed.

[00:42:01] I'm calling that one now.

[00:42:03] And they'll probably have to top it up or the next government will have to top it up.

[00:42:06] Agreed.

[00:42:07] I mean, if you just to add something there, you know, if we think $400 million, okay, it sounds like a lot when, you know, for your everyday person.

[00:42:14] But don't forget what they did with the MLI select program with, you know, that was $20 billion, $40 billion added to that, right?

[00:42:23] And that got oversubscribed like that, right?

[00:42:25] Yeah, 100%.

[00:42:26] So, you know, $400 is pennies in the sands of time.

[00:42:29] I think a lot of, I think like these, like Steve and John Posales, like the guys I obviously have differing opinions with on Instagram or Twitter, sorry.

[00:42:39] I think that they probably underestimate how much Canadians are just eager to financialize their houses, right?

[00:42:44] So the other pieces people are saying like, you already have to own the house, right?

[00:42:47] So, I mean, they're like, oh, it won't impact demand.

[00:42:49] I'm like, this will impact demand because people have to own, because people have to own their house to get it, right?

[00:42:55] Like, because now all of a sudden, if you want to do this, you have to buy the house first.

[00:42:59] So hear me out.

[00:43:00] This is groundbreaking stuff.

[00:43:01] One way to own a home is to buy a home.

[00:43:05] What?

[00:43:05] Yeah.

[00:43:06] Rocket science, man.

[00:43:07] Yeah.

[00:43:07] So if you buy a home, you own it.

[00:43:10] Then you can apply for the construction loan and then you can add the units and you can get to cash flow and you can refinance it to 90%.

[00:43:17] That's tough stuff.

[00:43:18] That is, that's groundbreaking as you said.

[00:43:20] And you know what, that will probably and hopefully have an impact on demand because more and more people will be looking to buy with this new first time home BRRRR underwriting method that you've coined here, Dan.

[00:43:32] Meaning that they're going to be willing to spend more if they think they're going to be adding units, right?

[00:43:38] Because that's just a win-win for them.

[00:43:40] Now, on that note, what do you have to say to those people who think that this will push property values up?

[00:43:45] Obviously something that I think most Canadians, at least trying to enter the housing market, are trying to avoid at this point.

[00:43:50] Yeah.

[00:43:51] I mean, it could in the way that you just described, like, you know, create more demand for houses because people are like now all of a sudden like, oh, I can buy and I can go get a loan and I can add a unit.

[00:44:00] And, you know, then in a couple of years at the end of my mortgage term, I can move out, which is like, honestly, that's what's going to happen.

[00:44:04] Like, and I don't know how they plan on mitigating that, but like people are going to do the first time home BRRRR, like for sure.

[00:44:10] They're going to do owner occupied.

[00:44:11] They're going to add three units to an owner occupied.

[00:44:14] Then they're going to move out and buy their own house and leave that to cash flow.

[00:44:17] I don't know how they're going to figure that one out, but that's not my problem.

[00:44:19] But if I was a policymaker, I'd be watching that one closely.

[00:44:21] So that's piece number one.

[00:44:23] The other piece is like, if they're only doing 1500 units based on what we said or 1600 units, or even on the high end of our calculations, 36,000 units, it's a pretty scarce program and it won't impact supply meaningfully.

[00:44:35] Like it's not going to create so much demand because it's not like the MLI, like it's not billions of dollars.

[00:44:42] It can't move the needle on the market completely.

[00:44:43] But if it was, you know, and it was scaled nicely, it could have a big impact by putting tons of units in the market.

[00:44:51] And then all of a sudden we wouldn't have a supply shortage.

[00:44:54] And then we'd start to see rent settle and value settle a little bit.

[00:44:58] But we would literally need millions of these to take place according to those CMHC calculations.

[00:45:02] You, yeah.

[00:45:04] So let's go to the capital gains one because that one I think is kind of interesting.

[00:45:07] Yeah.

[00:45:08] So I guess technically there are no capital gains on your primary residence, right?

[00:45:13] But if a portion of your primary residence becomes an income property, that portion is now subject to capital gains.

[00:45:22] So if it's two units, you'll have to pay capital gains on half of it, for example, because only half of the house was your primary.

[00:45:31] Now the other half is an income property generating new income.

[00:45:35] So I think that's a little nuance there that people are going to have to pay.

[00:45:39] And you'd have to like strip out the land value as well because there's only half the house that's being used.

[00:45:43] Right, right, right.

[00:45:44] Yeah.

[00:45:45] That part is interesting from my perspective.

[00:45:46] I've talked a lot about like how the capital gains tax is very much like modern monetary theory or MMT from my perspective and how they're kind of trying to pull that all that cash that they pumped into the market.

[00:45:55] They're trying to tax it back out from my perspective.

[00:45:57] So I think you're kind of opening the door for many more primary residences to become involved in the discussion about capital gains, which a lot of Canadians are a bit fearful of.

[00:46:09] Yikes.

[00:46:10] Yeah.

[00:46:10] And, you know, a convenient timing right after they increased the capital gains inclusion rate to 66% up from 50%.

[00:46:18] Awfully convenient timing for sure.

[00:46:21] Okay.

[00:46:21] So last but not least, we're almost out of here.

[00:46:24] What about this more debt criticism, which would probably be my main criticism now?

[00:46:30] Friend of the show, Dan, friend of yours on Twitter.

[00:46:34] John Pasalas, very smart.

[00:46:35] We're frenemies, I think.

[00:46:37] Yeah.

[00:46:39] He probably doesn't listen.

[00:46:40] So, John, if you are listening, frenemies.

[00:46:43] There we go.

[00:46:44] So, John wrote, so we agree that this is a terrible program if one wants to build a fourplex, yet this program allows for the construction of fourplexes.

[00:46:56] Now, I don't think our government should be handing out 90% loan-to-value mortgages on $2 million homes because someone added a basement apartment or a garden suite.

[00:47:06] Yeah.

[00:47:06] So, I mean, I quickly go through.

[00:47:07] Actually, yeah.

[00:47:08] I responded, I don't think our government should be handing out 90% loan-to-value mortgages to anyone.

[00:47:14] Honestly, I truly feel that way.

[00:47:16] We have too much debt in this country, and that is the core problem behind everything that they are trying to solve with this policy and all of these policies right now.

[00:47:25] And that would be the easiest way to fix the problem.

[00:47:27] But given the choice, I would actually prefer they give these mortgages to people who have four units in their house as a taxpayer because the loan is being serviced by four incomes, not one.

[00:47:40] Boom.

[00:47:41] Mic drop.

[00:47:42] Yeah.

[00:47:42] I can't drop this mic.

[00:47:45] It's attached to a mic stand.

[00:47:46] But should I just throw mine on the ground for you or something?

[00:47:49] Yeah, sure.

[00:47:50] Do it.

[00:47:51] The one other thing like that, he was, because he was kind of mentioning how it's not a good program for people to build fourplexes and fourplexes don't pencil.

[00:47:59] Anyone who's doing a fourplex, at least in Toronto, which is where he was referencing, is just going to go four plus one, right?

[00:48:05] And they're going to go MLI select.

[00:48:08] And it's not, it doesn't qualify for ground up.

[00:48:12] Like he's saying, build a fourplex.

[00:48:13] It literally says adding units to an existing property up to four units.

[00:48:17] So this is all existing square footage by the way the policy is written or the announcements are written.

[00:48:23] It's not my house, tear it down, you know, build it from ground up because that would never, you'd never be able to do that for a 2 million valuation in most jurisdictions anyway.

[00:48:34] So, yeah.

[00:48:35] Okay.

[00:48:36] Finish us up with a sweet review.

[00:48:38] Yeah, this is, this is just too funny.

[00:48:41] So we had to, we had to throw this one in.

[00:48:42] Okay.

[00:48:42] So this is from, and I'm assuming this is probably their government name here.

[00:48:48] How's he McCashflow?

[00:48:50] Great.

[00:48:51] Parents did a great job with that.

[00:48:52] The Mr.

[00:48:53] And Mrs.

[00:48:53] McCashflow.

[00:48:54] So this is left on Apple podcast, five stars.

[00:48:58] It says the best Canadian economic show, even if you hate real estate.

[00:49:04] Okay.

[00:49:05] Okay.

[00:49:05] So I came for the Canadian real estate knowledge, but I am, but I'm disinterested in the asset class now because I think Canada is doomed.

[00:49:13] I still keep coming back.

[00:49:16] What a wild ride this is.

[00:49:17] I still keep coming back for the commentary on Canadian economics and policy because it's really good listening to Nick and Dan is like when you're at a party and two slightly qualified guys are debating the economy through the lens of an approachable career real estate.

[00:49:32] But actually, but they actually know their stuff.

[00:49:35] There's probably better stuff to do at the party, but for some reason you can't stop listening to this discussion.

[00:49:40] That's a good review.

[00:49:41] Wow.

[00:49:41] Dan, look at two slightly qualified guys, Mr.

[00:49:44] And Mr.

[00:49:46] McCashflow.

[00:49:46] Howzie, if you will.

[00:49:48] Thank you so much for leaving the review and for finishing off this serious episode with a, with a big smile on both of our faces.

[00:49:55] We love and appreciate anytime someone leaves us a review.

[00:49:59] And if you can come up with hilarious monikers, like how is he McCashflow?

[00:50:04] Please do that as well.

[00:50:05] For sure.

[00:50:06] Yeah.

[00:50:06] Please leave us a review.

[00:50:07] And if you're interested in learning more about these changes, obviously follow the show, subscribe, send this episode to your friends.

[00:50:14] Cause I feel like we put a lot of time and energy into really, really unpacking this one for you.

[00:50:18] So sign up for our webinar, get out to a meetup and give Nick a shout because he's going to be doing, I think like you and I both are going to be doing a lot of research and, and kind of trailblazing on what lenders are doing in this space and where the opportunities are in this space.

[00:50:34] So as this evolves, I think like we want to be the, the, the two guys that, that know everything about it.

[00:50:39] So if this is the kind of deal that you want to do, make sure you give us a shout so that you're in our CRM so that when some development does happen and there is a loan available after January 15th and there is an opportunity available after January 15th, we know who you are.

[00:50:54] Cause if you're just listening to us right now, we don't know who you are.

[00:50:57] Unfortunately, I wish I did.

[00:50:57] I love all of you.

[00:50:58] Honestly, I would love to.

[00:50:59] I want to, I want to meet Jose McCashflow.

[00:51:01] Yeah.

[00:51:01] But you got to give us a shout so that we, we know who you are.

[00:51:04] We need your email, your, your phone number, all that stuff.

[00:51:07] So in the show notes, drop us a line and yeah, that's it.

[00:51:14] The Canadian real estate investor podcast is for entertainment purposes only, and it is not financial advice.

[00:51:21] Nick Hill is a mortgage agent with premier mortgage center and a partner in the G and H mortgage group.

[00:51:28] License number one zero three one seven agent license M two one zero zero four zero three seven.

[00:51:36] 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.

[00:51:47] Thank you.