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Financing Investment Condos in 2020 with Mortgage Jake

Financing Investment condos in 2020 with Mortgage Jake

Mortgage Jake returns! 2019 was a year that surprised a lot of people how strong the market was but Jake says 2020 is looking even better. Jake Abramowicz is one of the top mortgage brokers in Canada and he is here to share his insights once again on what investors can do RIGHT NOW to get their properties financed and what to expect in 2020.

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Episode 250 Podcast Transcript:

Andrew la Fleur: Mortgage Jake is back on the podcast. Stay tuned.

Speaker 2: Welcome to the True Condos Podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.

Andrew la Fleur: Hi there. Once again, thanks for tuning in. We have a special treat for you today. Mortgage Jake is back returning once again to the podcast. He’s been a guest on the show many times. Before we get to that, just want to mention if you ever want to get ahold of me or reach me, you can do so. Or you can call me 416-371-2333. I’d love to help you build your investment portfolio in 2020.

Andrew la Fleur: So as I said, we got this great podcast interview here. I just got off the call with Jake, Jake Abramowicz, who’s one of the top mortgage brokers in the country. And it’s always great to hear his insights on what’s happening in the market and what investors specifically need to know about financing their properties this year and beyond. It’s so important with banks always changing their rules, policies. New lenders entering the market, exiting the market. You need to be connected to the mortgage market and be in contact with your mortgage professionals on a frequent basis. Even if you don’t need a mortgage this month or this quarter or even in the next six months. You still need to keep up to date on all this stuff as an investor, especially if you’ve got multiple units in your pipeline closing in the years ahead. You want to have a plan, a strategy in place with your mortgage professional. So you know what you’re going to be looking at when the time comes.

Andrew la Fleur: So with that in mind, won’t hold off any longer here. Enjoy my interview with mortgage Jake. All right, Jake, welcome back to the show. Thanks for being here again.

Mortgage Jake: So happy to be here, Andrew. Thank you so much for your support, and for having me on.

Andrew la Fleur: Yeah, believe it or not. I just did a quick search. It looks like you are on the podcast for the fifth time. A record fifth time.

Mortgage Jake: Amazing. Thank you so much.

Andrew la Fleur: Congratulations on breaking the record or setting the record. And yeah, it’s been a while since we’ve chatted here on the podcast. We talk a lot IRL in real life, but it’s good to also have you get on the show here. Looking forward to hearing your thoughts on what’s happening in the market and mortgages and everything else. First of all, as we’re starting off 2020 here, what surprised you the most would you say? What was the biggest surprise for you of 2019?

Mortgage Jake: One of the biggest surprises that I saw was towards the end of 2018, rates were hitting almost 4%. And I felt like it was finally coming home to roost that rates would ‘normalize.’ And then in 2019, the bond market, which is a great of where rates are headed. If you want to search the government of Canada, five year bond yield. You’ll see a chart and you can map it out anywhere from a day to a decade, etc. Well, the bond market took a wild turn downwards. And we saw our rates as low as around 230 to 250 during 2019. And that really, really caught me by surprise. Because frankly, when you hear it nonstop in the media with your economists that rates are only going to go up from here, you’ve got to start to believe it. And they didn’t.

Mortgage Jake: I also was surprised frankly, by the very robust level of activity both in pre-construction and regular resale markets. I personally speaking, I had a record year, I funded almost 150 million in volume, which was up 40% since theater prior to that. And not to say that I wasn’t surprised by my success, but I was surprised because I tend to track. And the market and the market did really, really well. I think a lot better than many people expected it to do.

Mortgage Jake: And frankly, I was surprised by how much more liquidity is coming to the market. How many more net worth programs are coming out. The reverse mortgage game, how much traction it’s now I guess picking up. How many more lenders are either coming together or consolidating, or coming up with new programs. The CMHC self-employed program was a great success, and it still continues to be. The first time home buyer program, which quite frankly doesn’t help us too much in Toronto, but it doubled it in its value within Toronto. The fact that some companies are coming up with a shared equity program of their own privately. So overall, I call that liquidity and I’m happy to see it. Because when I see more programs, more available solutions to clients that don’t just fit the typical square peg in a round hole type of environment where you have to be full time employed, you have to have this down payment, you have to have this credit. When more people are able to fit outside of that realm, I’m very happy to see. So those are three big trends, big things that I’m surprised about, happy to see, and I definitely expect to continue moving forward.

Andrew la Fleur: Was there anything that happened, like in terms of stuff that did happen that you were expecting to happen, things that played out the way you thought it would play out? What would you say those things were over the past year?

Mortgage Jake: I had a bet with a couple of colleagues of mine that work in the industry as well. I did not think Bank of Canada would drop prime rate last year, 2019. Whenever I hear or read their monetary reports and their press releases, they continuously kept stating although we see a little bit of reason to do so, the economy is doing quite well. Unemployment is very low, and we don’t want to spur on any more borrowing. So I was not surprised that that didn’t happen. And I also was not surprised that frankly speaking, the lowest fruit AKA condos, have continued and will most likely continue to do very well moving forward. Just based on the insatiable demand from an investor, end user, second home user prospective. So when it’s the lowest price type of property asset class to get into, it’s the one that attracts the most attention. And again not surprisingly, it did very well in 2019.

Andrew la Fleur: Yeah. That was one of your predictions from a couple episodes back that we did was you called it bang on that with all the new rules that came into place, mortgage rules, Fair Housing Plan, everything else. That you said condos were going to absolutely kill it. And this was coming on the end of some major growth years. You said that condos were going to outperform everything else. And that’s basically exactly what has happened.

Mortgage Jake: It’s happened. And the rental market continues to be, as you know exceptionally tight. Every time someone calls me and wants to get into the market, frankly speaking, a lot of these clients get pushed down in the market in terms of the first rung on the ladder. Whether they’re single investors or single first time buyers. Those are the people that are buying the condos right now. And a couple of years ago when they made it that much more difficult.

Mortgage Jake: Quite frankly, I’ll be honest with you Andrew. I’m very happy at how the market has adjusted. Borrowers adjusted, sellers adjusted, lenders did too. When the stress tests kicked in and there were two of them, one in ’16 and one ’17. But when the lowest price asset class is available to you still at 5% down as an end user or at 20% down as an investor, you get in there. I posted a tweet yesterday. You hear in the media how long it takes on average to save 20% down to get into the market. Well, you don’t have to have 20% down to get into the market. I mean yes, you avoid CMHC by having it. But if it will take you 11 years on average to get in the 20% down. Get something sooner, build that equity, and then grow your portfolio.

Mortgage Jake: How many of our clients, Andrew that I’ve worked with that thankfully that have called me and said, “We bought a condo 2016, 2017, 2018. It’s doubled in value.” And these are investors who are using their home equity lines of credit, using personal savings, combinations, etc. Not only is their primary property growing in value, therefore having more equity to invest continuously in the market. But the investments they’ve made already that are renting for cashflow positive and they’re financing at 20% down on prices of 250, 300. And now are 350, 550, 650 the other day I saw something. So yeah, it’s insane. But it’s great because the market and the city keeps growing so fast.

Andrew la Fleur: Yeah, there’s a lot of of equity in the market right now. A lot of investors. Anybody who bought in the last few years is very happy and is sitting on tons of equity. Looking ahead, what’s the biggest challenge though, facing investors right now? As you’re talking with investors, particularly investors who have multiple properties and they want to continue to grow that portfolio. What would you say is the biggest challenge or the biggest headwinds facing investors as we’re going into 2020 here?

Mortgage Jake: So it continue to be the number of properties you can own as an investor. Most lenders like to cap it out at around five to six maximum properties that either they have on their own book. So if you’re a client of bank X and you have five mortgages with that bank, it tends to be more and more difficult to keep growing that portfolio. And/or five total properties, five number of doors. I mean, certainly there are some lenders that will do alternative financing or will make exceptions if you’re a strong client. So the number of properties is starting to become a challenge and has been.

Mortgage Jake: As is the whole concept of being a ‘professional landlord,’ ‘professional investor.’ The market does not love people who say they worked full time at a publisher, at a telecom, at IT company. And they’ve made so many great investments that now they are able to live full time off of those investments. Well that’s amazing, but it is difficult to position you as a ‘professional landlord investor’ or that’s your only source of income. So what I’ll tell all the investors is listen, continue working full time, continue being self-employed. Keep that regular income stream coming in. And it’ll be a lot easier to use your rental income to qualify you. Because lenders don’t take rental income at face value. They don’t assume if you make 3000 a month, that’s 3,000 coming to you. They assume a vacancy rate. They assume that the insurance, the maintenance fees, the property taxes will increase. They offset some of that rental income.

Mortgage Jake: So these are the biggest headwinds coming to you is if your lender is specific, it’ll be very hard for you to keep growing that portfolio. If your rate is specific, it will be as well. Eventually you may have to be going into the alternative space. Home trust, equitable bank, etc. These guys are providing amazing solutions to you. And as an investor. If it’s your fourth, fifth, sixth property. I know rate is important. But that higher rate means more interest offset against the rental income. It may mean you’re cashflow positive from a taxation perspective. So we got to look at a holistic perspective and see where else we can place your mortgages once you get to the higher number of properties owned.

Mortgage Jake: Otherwise if you’re starting out as an investor, do you have good income? Whether you on your own or you with a spouse, you want a primary residence. It is still very, very, I wouldn’t say easy to qualify. But it is still very achievable for you to start building that portfolio if that’s your plan in 2020. There are still very good many rental programs available you with lots of lenders that have different rules of offsetting that we can definitely find a fit.

Andrew la Fleur: Yeah, that’s very interesting point you make about like the professional investor. Because that is not for everybody. For some investors that is sort of a goal or a dream or a vision that they have. Say wow, wouldn’t it be great if I could one day just quit my job and be this full time investor, and I just manage my properties, and I do it from the beach or wherever. People have that in their heads. Which like you said, is great if you can do it. But it’s not certainly an easy thing to do. I mean, even if you have tons of income coming in from these properties that you own, even if your cashflow is massively positive from all these properties. It’s easier said than done, I guess.

Mortgage Jake: It’s easier said than done. A lot of people look at gross income numbers in terms of saying, “Well, look what I’m making in rent.” The lenders looked at your T1 general. So first of all, be up to date on taxes. Absolutely. Secondly, if you’re going to show a loss on all of your investments. Well I know that you may be making more. I know that you may be showing a loss, but really making a gain. The lender doesn’t see it that way. So it’s a lot more difficult to achieve that goal. And you know what? Maybe get to that goal a little bit later down the road when you don’t need any further financing. When you’re setting your financing, when you’re set with your lenders. Because lenders love equity. Absolutely. But they really love income from income sources that are not business related. I.e., investor related. From condo rents, from housing rentals, etc. So try to keep that regular income stream coming in. At least one of the two parties. Let’s say there are two people buying. Otherwise you’re really limiting yourself to which lenders you go to and then then it just becomes a little bit more difficult.

Andrew la Fleur: Great tips. Any other interesting or creative tactics or solutions that you’re seeing or that you’re recommending, or you’ve come across, just interesting anecdotes that investors might want to be aware of? Or hey, you could try this or you could try that. Or if you’re struggling in this area that here’s a solution that I’ve seen or some of my clients are doing this.

Mortgage Jake: Yeah. Well certainly the net worth programs that have come out in the last few months have helped a few of my investors that otherwise would not have qualified. The way net worth typically tends to work is for every dollar you have in liquid or real estate asset, the lender will be able to lend you another dollar to dollar, 20 in mortgage amount that you’d be getting. Other net worth programs are if you have a certain percentage set aside, whether it’s a three year mortgage and principal tax payment set aside on top of your equity or on top of your down payment. Net worth can push you under the 44% golden rule ratio. And what that ratio is for listeners is typically speaking, across the board with the prime lenders, 44% of your gross income can go towards servicing your mortgage debt, your investment debt, and any other debt that you may have. Alternative lenders can push that as high as 50, even higher in some cases with net worth. But net worth is certainly one really good feature that it’s available.

Mortgage Jake: Another option or another solution that we’ve seen is I’ve seen a lot of investors buy property but don’t own their own property. So they rent or they live with parents. And that typically didn’t happen in the past and it’s happening a lot more now. And yes, we’d definitely need 20% down. Absolutely. But a lot of lenders are opening up the idea to saying, “Hey listen, you don’t have to own in order to own something to invest in.” And part of that is I’m seeing a lot more lenders, a few actually that I’ve introduced the allowance to use a gifted down payment for an investment property. Which I’ve never seen before. So if you’re not able to have your own savings for a down payment, there are some lenders that will still let you use 20% gifted from immediate family to get you through that 20% down.

Mortgage Jake: Now in our world, in the pre-construction world, in your world Andrew, obviously you don’t need to have the 20% down upfront if you’re buying something that’ll close in two to three years. But at the end of the day, if that’s where you got your money, we at least can place your mortgage. Because the lenders will ask you, where did this 20% come from? And you’ll say it’s a gift. No problem. We can place that still.

Mortgage Jake: So those are three things. Net worth primarily. Being an investor, but not being an owner of your own property. And gifted down payments are three things that I’m seeing. And frankly going with the alternative lenders. I mean, they offset rentals by 85% versus the typical 50% rule. That makes a huge difference. When you’re talking only about a 100 basis points spread in rate. It’s not that much more to pay in the long run. So that’s where we are right now. Those are the things that I’m seeing that are still very attractive to borrowers.

Andrew la Fleur: What are some of the mistakes that you’re seeing investors making when it comes to financing lately? Particularly investors who’ve maybe they bought something a few years ago and now they’re looking to close or looking to assign or do different things with the properties that they have purchased in the past. Are you seeing any mistakes that you want to advise people to make sure you don’t do this?

Mortgage Jake: Do you know what, check in with a mortgage person every six months before your closing. So if you bought something, you expect it to close in 2021. Let’s have a conversation today. Let’s see where you’re at today. Let’s see if there’s any job changes on the horizon. If you’re going from, I’ll tell you one very major thing that I’ve seen a few times this year. Someone purchased, they received a preapproval certificate from the builder. And frankly speaking, that’s just a certificate. It’s not an official approval. They come to closing. And since then they’ve gone from being a full time manager at an accounting firm to a self employed manager, or it etc. So they’ve moved positions into the self employed world.

Mortgage Jake: Well that has really taken them by surprise that that preapproval certificate is worthless. So if you’re going to go pre-construction, get a full unconditional approval from one of the big banks. They do issue them, they can hold the rate for you. You have to go directly to them today and you have to qualify today for that mortgage. If your builder doesn’t expect that from you, then check in with a broker every three to six months. “Hey, how are we doing? What if I make this change? What if I change my jobs? What if I go on mat leave?” All of these things will matter. Rather than waiting until you get that letter from the builder that says, “Hey, we’re closing in three weeks. Now let’s get your mortgage.” Because by that point it’s going to be a little bit too late. So regularly check in, be ahead of the situation. And the problem and be very transparent with your broker about everything. Your income, where your down payment came from, where you plan on closing it with, etc. If you’re renting the unit, are you going to use it as a second home? And that thing. So that’s really what I would tell investors today is the biggest mistake is they assume the preapproval is worth a closing. But it isn’t. It’s just a preapproval. A real approval, a real commitment.

Andrew la Fleur: Are you getting a lot more panicked calls at the last minute from people? “My condo is closing next week or whatever and I don’t have a mortgage ready. Or I thought this bank or that broker told me I was going to be fine, but now they’re telling me I’m not. And all these new mortgage rules and everything that happened in the last few years.” Are you getting a lot more of those kinds of calls?

Mortgage Jake: I am not. And I think that the message has definitely gotten through. And as much as I harp on the media, I think they’ve done a good job of positioning the market in the way that it is. Which is hey, you’ve got a couple of closings coming up. Be serious about it, let’s get it done. Because I tell every investor client that when they say, “Well, our closing is on this month or this date.” The builders tend to give you a letter very fast within a three week of registration date. So as soon as you have your interim occupancy, get that mortgage approval started right away. And I haven’t received many of those calls this year because a lot of clients have become more and more prepared and more and more organized, and more ahead of the curve. Which is great because we have a much longer runway to deal with.

Andrew la Fleur: Yeah, that’s good to hear. I am personally getting a lot more of those calls. And I think a lot of people are caught off guard just by the fact that getting a mortgage in general, getting a mortgage approved in general takes longer today than it did five years say. Is that your experience as well?

Mortgage Jake: It’s so funny you say that. Because in my space, I mean when I’m talking to my colleagues and my friends at the banks, etc. We all expect or expected technology to accelerate the process. Automation. You hear about it all the time. The Quicken Loans mortgage in America, the rocket mortgage. And you know what’s funny? It absolutely is taking longer. And part of that for sure has to do with the stress test, the regulators, the lenders being worried about self audits or external audits. Part of it has to do with demand. Part of it has to do with how much our volumes have grown, how much the real estate market is still growing. And lenders can’t keep up with all of that demand because of maybe short staffing, or staff that are just not trained right or what have you. So yes, it definitely takes longer today.

Mortgage Jake: Now, I’ve gotten mortgages approved in literally 90 minutes. But, that’s not normal. What’s normal is two to four business days. I’ve heard of some banks that offer by far the lowest rate taking three weeks. Well, it’s up to you as an investor. Do you want to wait three weeks, or do you want to wait three days and have a slightly higher rate, but you will get that commitment from a chartered bank for example. So it’s a lot harder today and the automation hasn’t come in yet. And I don’t believe that it’s going to come in for the majority of the market. Because the majority of my clients, and again I tend to track the market. Don’t fit that automation role because they either need one or two exceptions to a file. And an exception is when a lender is willing to go above ratios, or willing to use some of a gifted down payment, or willing to use someone on mat leave but use their income, etc. So those are exceptions to a file.

Mortgage Jake: When you need an exception, a system is not designed to figure out if it’s a yes or no. It’s still a human decision. So it is absolutely taking longer. Appraisals are taking a little bit longer to get done. But overall, if you’re organized and you have everything ready. Financials, documents, pay stubs, mortgage statements, home equity line of credit statements, lease agreements. And most of our clients do. But if you’re in the market and you’re looking at closing in 2020. Get everything ready, put it in a Dropbox, have it handy, have it electronically available, and you’ll be able to act as fast as you possibly need.

Andrew la Fleur: Yeah, absolutely. That’s such a key and simple thing, right? Just get your documents in order, keep them in order, keep them updated. Have them in a folder. You can easily flip them over to your mortgage professional to get stuff done quickly. So much time I find is wasted, or when I speak to clients and it’s been taking weeks or this and that. A lot of it I find, sometimes it’s on the lender side. The lender just keeps asking for more, and more, and more documents. But oftentimes it’s just on the investor, the buyer side, they’re just not organized. And they just don’t have everything ready to go and they’re not taking it seriously, taking a professional approach with their investments. And that’s what you got to do.

Mortgage Jake: Yeah. If you’re going to be an investor, you’re going to play the game, you definitely want to have everything ready. And one of the biggest naivete points amongst the investors is the equity that they have in the current home. “But I have 800,000 in equity.” It doesn’t matter. It certainly helps. But just remember one thing. If you have your primary residence with bank a, Royal Bank let’s say. And you’re getting a mortgage with TD Bank on a condo that you’re investing in, TD Bank can’t cross collateralize that Royal Bank mortgage. They can’t take any of that equity if you don’t have the mortgage done on your investment property. So yes, it helps them. There is a fallback position. But real estate isn’t exactly the most liquid asset. It’s not a stock you can just sell and have your 800,000 available if necessary. It takes a while to sell.

Mortgage Jake: So banks are a little bit more concerned when they don’t see net worth. And frankly, just be up front with your broker. Tell them what you own, tell them what you have coming in the pipe. This is a very major mistake that a lot of individuals are not doing and saying. “Hey, I bought a place and it’s closing in January. Help me out.” Great, cool. If you don’t tell your broker you bought three other condos closing that year and that broker goes back to the first bank, that bank is going to say, “Hey, you never disclosed this was happening. And if you did, it would be a lot easier for us to mitigate the file to understand the path.”

Mortgage Jake: So be upfront, tell them everything. And the broker’s job is to position that deal in the right way to the right bank or banks at the time. And to figure out maybe on the fourth or third property of closing this year, next year, maybe you’ll need to push that off to assignment cause you can only qualify for two or three of them. Who knows? But at least you won’t be surprised and at least that broker will be able to help you out the best they can by full disclosure at that time of applying.

Andrew la Fleur: And yeah, many investors who have multiple properties in the pipeline too. The order in which you as the mortgage professional are placing the mortgages. If you have one property versus if you have five, you’re going to place those properties with different lenders in different orders potentially. Based on those lenders’ policies. How many properties they’ll allow, how they offset rental income or don’t. Self employed. Like you said, you got to see the full picture of what your full pipeline is in order to set you up so that you don’t have any problems later down the road. Closing number four, closing number five, even if it’s a couple of years away still.

Mortgage Jake: That is one of the biggest challenges with banks today is not knowing what’s happening in the future and not knowing how to position a deal moving forward. And frankly, you yourself as an investor, as a borrower. If you don’t have that roadmap planned out, then it’s going to difficult for you upon property two, three, four, five, etc.

Mortgage Jake: So it’s nice to have a high level conversation at the time of applying, just to figure out where you’re going to get your financing for the next places. Because then you’ll put that into your models, into your numbers. And say okay, if I have to go alternative, then that’s what I’ll do on my third and fourth property. This is the rate I’ll pay. This is the rent I need to make in order to help me offset the property costs. Right?

Mortgage Jake: So I’ll tell you one thing, appraisals are not a concern whatsoever with any of these pre-construction properties. Every single thing is hitting way above purchase price. So that’s amazing. But an appraisal is still a major part. And unfortunately, most lenders. There are a couple and they’re not awesome to deal with, but there are a couple that will finance your property at the new value, at the new appraisal value. But you’re going to pay for that. So if you absolutely need that, you can do it. But you will pay a higher rate, higher fees for it. Most banks will only finance you at the original purchase price.

Mortgage Jake: But one thing that a lot of investors have done is just an idea. Is they’ve bought the property in cash using their home equity line of credit. And within six months, they can refinance the property to 80% of the new market value or 75%. As a way of pulling out that equity a sooner than later. So that’s one thing that some of my investors have chosen to do. They have the equity to do it and then they simply refinance it down the road. And then they keep investing more in the market.

Andrew la Fleur: That’s a common question too. So what’s your advice on somebody who they bought it several years ago, the property’s doubled in value. They’ve got hundreds of thousands of dollars of equity, that they want to reinvest. Is your advice usually to, if they are able to, to close cash as you say and refinance later? Or are there certain lenders will allow you to close with that lender and then immediately the next day, refinance it under the new appraised value? What are the pros and cons of the different approaches of if your goal is to refinance that property that you bought years ago, to reinvest that equity into more. What’s your advice to most investors today?

Mortgage Jake: So refinancing it right away when you pay for it in cash is a massive exception. I’ve seen it done. It requires a very strong file. What I would say to most clients is take at least a six month closed mortgage and then do a refinance with another lender or even with the same lender. The typical rule of thumb is one year from the time that you close something that you can’t refinance it. Six months has been done. The day after has also been done. I’ve seen it. But again, it depends on how strong your file is. If you’re maxed out on ratios, if you’re maxed out on personal credit, obviously it becomes a lot more difficult.

Andrew la Fleur: So yeah, this is again a case of you got to disclose everything to your broker, to your mortgage professional upfront. And you’ve got to say this is what I have, this is what I want to do. And you’ve got to make a plan together. Because it’s going to be different for every person. And there’s exceptions left, right, and center. Some lenders will take those exceptions, other lenders won’t. There’s so many factors.

Mortgage Jake: And typically, a lender likes to do maximum two exceptions on a file. That’s it. Once they do two, because say, I had a client who was working self-employed and full time, then she took mat leave. So the self employment income kept coming in but the full time didn’t. And then she went back from mat leave. Well that’s an exception to use a three year average versus a two year average. In her line of work, it worked out. She was a professional. So it helped. But typically speaking, you get two exceptions. And then after that it’s like look man, there’s nothing more I can do at this point. We’ve already exceeded that exception rule.

Mortgage Jake: The last exceptions you ask for, the better the rate’s going to be. The less pushback you’ll have, the faster your approval will be. And that all comes down to how good your file is and how organized you will be when a broker, when I ask you for your documentation.

Andrew la Fleur: Predictions for 2020. I don’t know if you’re wanting to go on record with anything. You’ve made some great predictions in the past, but where do you see things going 2020? 416 vs 905 markets. Low rise versus high rise, rental market. Where are you at with stuff right now? What are you seeing as you’re looking ahead to this year? You feeling optimistic?

Mortgage Jake: I think 2020 will be, and I’m not drinking the Kool-Aid. A ridiculously great year for real estate in general. I think the 905 was hurt a lot, but I’m seeing a lot of infrastructure projects that are coming, that have been announced, that are starting to be built, that are helping. Not just transportation by public transit, but also obviously the highway infrastructure, etc. So I think the 905 is a very good opportunity as the greater horseshoe area keeps growing outwards and investors tend to drive until they qualify. So that’s a great opportunity.

Mortgage Jake: In terms of the downtown market, if you’re getting a prime building in a prime location, you will attract the prime tenant. So that’s still an amazing opportunity for you. And what I tell a lot of investors is let’s do the math here. Let’s say you buy a property that’s 600,000. You put your 20% down, and you’re $500 a month cashflow negative. So that overall is 6,000 a year. You’re cashflow negative after all your expenses. Here’s a question. Will your property rise in value by 1% that year? If yes, technically you’re even. And that’s how a lot of the downtown investors are looking at it. They’re looking from a cap appreciation perspective, long term. Versus a monthly cashflow. Because these clients still have a strong income to qualify on a monthly cashflow basis. They can absorb that monthly loss if they’re seeing the capital appreciation gain. But if you, certainly if you’re a new investor and you’re looking not just downtown. I love the 905, I love the surrounding region. I love Ottawa, Guelph, Kitchener, Waterloo.

Mortgage Jake: One thing I will say about Kitchener, Waterloo, Guelph area about Durham. Student rentals are not as easy to qualify as you may think. Even though the income is guaranteed, it’s not something that many lenders or all lenders like to do. So if you’re buying a strictly student rental property, I think those properties will continue to do very well. But you got to be realistic with which lenders will end up financing your project. And I definitely know a few so we can chat more about that. But in terms of predictions, I do think Bank of Canada will eventually need to force the prime rate down by a quarter. I don’t know if you’ve seen, but insolvencies have grown higher than they did prior to 2008. The highest level in the last 10 years. CIVC believes part of that was because of a three quarter jump in prime rate. We’re the only central bank or one of the only out of 42 central banks that has not dropped our rate yet. Obviously a lot of the geopolitical things that are happening in the world change on a dime. But nationally, if the economy slows down a bit, I can see a quarter drop in prime rate.

Mortgage Jake: And I also see again, a lot more liquidity. A lot more investor designed mortgages or solutions for these investors coming out more and more. Maybe a lot more lax financing rules for investors. Right now, they’re just punished with the 50% offset rules with most lenders. But I see a lot of lenders talking about it in the background. So I definitely hope to announce some amazing stuff in the first or second quarter.

Mortgage Jake: I don’t think HELOCs, or home equity lines of credit will change anytime soon. There was some rumors that we’ll see them go down to 50% or see them amortized over 25 years. Which just means the lender will force your payment at principal and interest. I don’t see that happening right now.

Mortgage Jake: What we hear about is a lot of that in Canada. We don’t hear of the net worth that’s grown in Canada. But I know that banks and lenders are certainly looking at that net worth. And the majority, a great majority of the HELOCs are not being used. They’re available balances but they’re not being touched. So there’s a lot of capital that borrowers can tap into there to keep investing.

Mortgage Jake: So those are my loose predictions. I know that I’m not saying a specific asset class will do great. But that’s just what I think is going to happen. That’s why I think 2020 will be even better than 2019.

Andrew la Fleur: And obviously, you’re an investor yourself, Jake. I’m just curious and people I’m sure are curious as well. Are you looking to grow your own portfolio this year? What types of opportunities are you keeping your eye on or looking for? For 2020, for yourself.

Mortgage Jake: So currently, I feel like I’m looking for development potential opportunity. So properties that I can see in the long run being developed into multiunit housing. Because I feel that, and this has been talked about greatly. Toronto is missing the missing middle. The two, three, four story multiplex properties, intensified types of properties. And that’s the kind of opportunity that I’m looking for. I have not participated very much in the condo investment space yet. But certainly, I’m always active in it and I’m always looking at opportunities in that world. I just haven’t seen anything that would work for me at this time.

Andrew la Fleur: Yeah. So you’re looking at under land, single family homes that could potentially become small apartment buildings or small condos, or bundled into development sites in the future?

Mortgage Jake: Yeah. Unless the Ontario government decides to ease up on the green belt zoning and having more urban sprawl if you will, I definitely think that future opportunities will be in whether you want to tie up three or four pieces of land together and then do a project there of that kind where it’s a townhouse rather than four detached homes. You can create eight or 10 different types of properties, whether you’re building upwards or outwards. That’s the kind of investment that I’m mostly looking for in the market.

Mortgage Jake: But frankly speaking, I’ve been very fortunate to invest in both commercial and residential properties. Mostly single family duplexes, triplexes, or storefront and apartments above. And that’s just something that I’m going to hang on to long term. Because I feel like they will, it will have me appreciate the most and give me the most return on value.

Mortgage Jake: Now I will tell you. I wish I got into the condo space on numerous occasions, and I’ll tell you why. Being a landlord of single family duplexes, triplexes is really a hands on approach. It’s a really hands on business. Versus the turnkey investment of I’ve got my tenant, my maintenance fees are paid. I don’t care about snow clearing, grass. None of that stuff. It’s all turnkey, done and done. So that’s definitely something that again, I wish I had done.

Mortgage Jake: One thing that I’m wondering about what will be the effect of, and will we see any change? And I’m curious if you’ve also thought about this is the whole Airbnb changes that we’re expecting to see where we got to register. A lot of it’s going to be cat and mouse. I believe. A lot of people will register. But will the city have enough enforcement to really go after the people that aren’t going ahead with the rules? I don’t know. I frankly don’t know what’s going to happen with Airbnb moving forward. But like Uber, like the ATM. Is Airbnb going anywhere? I don’t think so. So I think we will just simply adapt and adjust accordingly. And we might see a change in government, and maybe that’ll change things as well locally speaking with the city. So that’s something that is definitely on my mind.

Andrew la Fleur: Nice. Nice. Anything else Jake, that I didn’t ask you about today that you wish I did or any other points you want to touch on?

Mortgage Jake: I think we’ve touched on a lot of the important parts which are be organized, be prepared for your closing, get ahead of it months in advance. So that you’re not caught off guard. You’re not surprised by the changes. I also want to say if you bought before 2016 or 2017 depending on what kind of borrower you are, you can still avoid the stress test, believe it or not. You can also avoid the stress test. Yeah, you can also avoid it with a credit union. The DUCA, Alterna, Meridian. Now they charge you a slightly higher rate, but guess what? You can qualify for more money. And one of those lenders is one that still allows a gifted down payment on investments. So there are many options for you. Just be open minded to what a broker will tell you. A, B, C or D.

Mortgage Jake: And get a second opinion. I’ve had a lot of clients come to me after the fact and I look at their file “And I say, why didn’t you go private? You could have done this at half the percentage rate that you’re paying right now.” So get a second opinion anytime. I offer second opinions all the time. I’m sure my clients get second opinions as well, and I hope they do. Just because you want to make sure this is the right financing package for you. Don’t get railroaded into a mortgage that you don’t understand. Read the terms, read the fine print. And get the best mortgage you absolutely can realistically in the market that you’re in.

Andrew la Fleur: Awesome, Jacob. People want to get ahold of you, which I’m sure they will. How do they do that?

Mortgage Jake: Best way to do it is check my website out, You can talk to me directly on the site. You can call me anytime or send me a text. I’m at 416-910-4448. I’m all over Facebook, Mortgage Jake. Twitter, Mortgage Jake. I’m all over social media. If you Google Mortgage Jake, you will find me. One way or the other, you will find me. And I will absolutely be able to get in touch with you. And we can chat. We can chat about the market in general or about your financing options in specific.

Andrew la Fleur: Awesome Jake, thank you so much and I’m sure we’ll have you on the show again soon. Have a good one.

Mortgage Jake: Have a great year everybody. Thank you Andrew so much. Really appreciate your support. And congratulations on all of your amazing work. I think I posted on Twitter that I would run out of zeros if I thought of how much net worth you have created and helped people create by the way that you position these properties. So I definitely think there’s a lot of credit that needs to go to you, and I just want everybody to know. I observe it every day. I see it all the time. So congratulations.

Andrew la Fleur: Thank you very much. And thanks for taking care of many of my clients over the years. Thank you.

Mortgage Jake: Talk to you soon.

Andrew la Fleur: Talk to you.

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