Given the multiple announcements made in the Federal budget which will have an impact on real estate investors across the country join us for a special edition of our National event to hear from professionals in tax, financing, rent-to-own, and real estate about what the budget proposal may and will mean and what you can be doing to mitigate their impact. In this session join Christopher Hummell as they talk about Real Estate & Investing.
Alfonso: We have Christopher Hummel from Smart Home Choice Realty, budget interpretation from the real estate side of things. Christopher is a full-time investor and a full-time real estate agent. Working with some of the best in the industry, winning several real estate awards and being profiled in several recent visit magazines and articles.
Welcome Christopher. We're excited to have you on and to share your knowledge from the real estate market. Everybody's talking about it. It's a crazy market. I swear if I got a dollar every time that I heard it's a crazy market, I could probably buy my next property cash and then refinancing. Christopher, give us an overview. Let us know what you're thinking from the real estate agent perspective, and you're a real estate investor as well, too. Let us know what you're thinking.
Christopher: Thanks a lot, guys. I really appreciate it. You know what Alfonso? Why don't we flip the script a little bit because Travis took a little bit out of my thunder earlier. A shout out to Travis. Brian, I think you speak a lot of truth there. I really appreciate you going first.
Here's the deal Alfonso, it's totally different. I'll tell you guys as investors, a lot of sellers are nervous. I'm just telling you that they are nervous. Why? Because it's not the feeding frenzy that it once was. Now we know the market has changed. The market is softened.
Here's the funny part, the news seems to catch these little news bites and they run with it. What happens is just like the radio, you hear the same song over and over again. You hated it the first time, but you love it now. You're singing it. It's in your head. That's the same thing with the real estate market especially with the news, you keep hearing the same thing over. What does that do? That small little news bit into a big thing, fair enough for the market's changes.
Interest rates have softened the market. I'll venture out to say that the market was already starting to crest a bit. Guess what the government's going to do? They're going to say hey, wait a second. You see what we did? That was all for us. You gotta understand now of course, with the budget here they're hoping to take a lot of credit for a lot of these things as well. I just want to highlight a couple of points and then maybe what you and I can do is we can do a little question and answer period. If you're okay with that?
Alfonso: Good. Make sure of the REITE Club community, you get your questions into the chat as well.
Christopher: I'm just going to throw this up real quick. I don't want to take too much time with this, like a set it's real quick and dirty. What I wanted to do is unpack this budget here for you guys real quick. But again, Travis, you did a great job in covering this so much better than I could. And frankly, did you see all the graphics that he had to look really nice. Here's the point, there are a couple of good points. I don't agree with everything.
I can see certain things, making some sense. For example, the housing accelerator funds. They're looking to put in $4 billion and we know this point, but the whole deal is this, it's supposed to incentivize these communities, these cities to create new middle-class homes. Strangely and it's also to modernize, build new homes, create more density.
I love the more density bit, and I think a lot of you guys out there as investors like that as well. I'll tell you what I'm doing. A lot of you guys now you're doing basement apartments or accessory apartments. Whatever they call them in your community. A lot of us now are moving in, gearing towards the garden suites. I guess I love garden suites as well. I'm moving towards actually building. I think that's the next best thing.
Everybody's doing the basement apartments and a lot of people now are considering the density with the extra suite I like taking down and I liked building. Some of you guys might be involved in that as well. But here's why. It's because I believe from what I'm seeing here, that they are going to be expanding the zoning and that's important. They already did that for the basement apartments for the second suites.
I expect they're probably going to be able to do that or be doing that sort of community for the zoning. Maybe it doesn't need to be. Maybe our one will allow you three, four units. It may not need to be such a large frontage. I liked that too, because a lot of lots now don't have the frontage. Maybe they're going to allow that all of these things really are unclear. We don't know. I'm just inferring and guessing. To me that is the direction.
There's a couple affordable housing programs and some great stuff, but here's the deal. If you guys are into bigger projects they got this rental construction financing initiative. I won't get into detail about it, but the point is, increased construction of new rental housing by offering low interest loans and mortgage insurance, which everybody loves low interest loans.
There's a caveat of course, is that you got to have 40% of the units. That must be at 80% of market rent or better. Now, is that really something that we're looking to do? No, not particularly. There's some strings attached. But honestly, if you're looking at the bigger picture and this fits your portfolio, then this might be something that would make sense for you guys.
Here's the reality of it though guys, and this is what we're seeing here in the market is and you know what you speak to builders and they'll tell you all the same thing. They'll say wait a second guys, all of this push for new housing, all of this push. But we don't have any skilled labor. We don't have the materials. We just don't have the supply to build all of these buildings, to build all of these rental units, to build all of these homes, especially not all at the same time.
Look, we already have an influx of kids going to university and no trades, just here skilled labor is really on a deep climb. We just don't have it. We know with the specialty, with the pandemic here, it's really exposed the fact that we just don't have the supplies. Is this a pipe dream? Is it just government speech? It's tough to say today but I'm going with empty promises. I'm sorry. That's what I'm going with. We just don't have the resources to make this happen.
I could be and often I am, but that's my belief here. Especially hearing it from a number of builders, and this is what they're saying, that we can't do this. There was talk about the multi-gen home renovation credit, and I thought that was pretty interesting. I know it's not clear yet, as far as what's what, but it's a tax credit, $50,000. Tax credit, 15% gives you $707,500 back. What's unclear, is the owner occupied only as a for rentals? rather can it be for rentals? Let's find family, who is this for? Is it a senior, does it have to be grandparents? Could it be a cousin? Could it be somebody outside the family?
We don't know but keep your eye on it because I think, you know what, it might make sense. I like this one. I do like it. I have some issues with it. This is the support for first-time home buyers. Yes, there's a tax-free savings account that they're setting up now for first-time home buyers specifically, you have to be under 40 and you can save up to 40,000 tax-free. We know we got some information there from Travis early.
It's like an RRSP, so it's before tax money, but the good thing is it's like a TF, the savings, when you take it out, it doesn't count against your income. That's nice. Now, you can't combine it with the home buyers plan. We know the home buyers plan already exists. You cannot combine both of them. You're gonna have to choose which one or the other. You're probably best to use this one first and then follow up with your TFSA. If it's underused, if it's not used by 40, it reverses, it reverts to a regular RRSP.
Here to me is the critical aspect because I do talk to a lot of people and frankly, you know what? Listen, I do talk to a lot of first-time home buyers. It's not just investors. I have a huge portfolio of investors. But as you can imagine, new entrances into the market are really the lifeblood of the community and of the market itself.
Here's the problem. You talk to a lot of people and they have no idea that an RRSP is not just a savings account. They tend to put their money into just a savings account, without understanding that you've got to invest it in something, are you investing in mortgages? You can invest in stocks, you can invest in mutual funds. You can invest in crypto.
In an ETF format, not directly, but in an RRSP, you can do a number of different things. Frankly, when I talk to a lot of these new entrances to the market, they are putting their money into a savings account. Thinking that this is helping them grow their RRSP. I understand that it's not the way to go. It tends to be that I have to educate them quite a lot. Is it going to help? I don't know, soon to be seen, I guess this is the big one here.
The government is talking about a home buyer, bill of rights, and this is going to affect, I believe a lot of things here. National plan to ban blind bidding. We know that we hate going in and blind bidding. We absolutely afford, we hate it because I don't know what you've been and I don't know how much I'm bidding over or under for that matter. I have not. We hate that. Could I be bidding 30,000 over the last offer? Maybe I don't know.
Sellers love it because they can get somebody off the street and really blow somebody else out of the water right now. Here's the question. Is it really going to help? No, it sounds intuitive, but is it really gonna help? Because I'll flip to the next one here and I'm just going to point out Australia. And a lot of you, people know where I'm going with Australia because they've got an auction system where you'd be in a house that you want with about, who knows 10, 15, whatever the cases, other bidders on the front lawn and the real estate agent is holding the auction.
You're going to bid on this house and if you don't get this house, you're going to move down to 2, 3, 4 down the line. Maybe even one same day. Here's the point though, this is a different system. I don't know that we're going to be looking at this similar system, but it's not a blind bid in the vast majority of cases, but I don't know that you guys can see it, but residential properties have surged 23% in 2021 Australia records strongest annual growth in home prices.
Now, obviously that's been impacted by things like low interest rates, just like we've got here. The pandemic has really accelerated things, but all I'm just trying to point out is they've got a different system yet in the same boat as we are. The question is, does blind bidding or the ban on blind bidding really help or again, is this just government speak?
Something that they're going to take credit for? But it may not mean anything. Just bear that in mind. But listen, at the end of the day, Brian told his best that we're seeing a lot of sellers not get those offers. They're putting their listing low and in today's market. We're not seeing the same amount of feeding frenzy we're seeing.
A lot of offer dates just pass where they don't get the number they want and you'll see it the next day prices up to closer to what they're looking for. We're finding that things are really changing in the market. Now, people are now getting time for home inspection, which is nice. They're suggesting a legal right to a home inspection. You know what, frankly, I don't mind that as an event. I really don't mind that. They're also saying that they're going to get access to sold data.
We're going to get access to solid data. I should tell you because I'm the agent and more transparent. That's nice, by the way sold that as some of you guys know what it is? Health Sigma that's GTA mean? If you're going outside GTA, they don't typically have the provinces that may not have that available. Again, foreign buyers don't quite make up a whole lot of the buyers, at the end of the day, somewhere between 4% to 7%, it's not a huge number.
Is that really going to make a difference? Is that really going to help again? I think it's the government trying to propose something that may not have too much of an impact, but it sounds great to the average individual and sounds like a great ban on foreign buyers, all those Chinese. I don't know where they're coming from the UK, those guys that listen, man, you know what, some of these guys aren't even buying homes over here.
I don't think that there's a large enough percentage of people that are buying these homes. I'm looking at the numbers here, but hey, soon to be seen. Speculation tax, we already talked about. I won't really get into that, but I will tell you that's going to have some type of an effect. Here's my perspective. I think we should have some type of an adjustment of the capital. This is just me, my perspective.
I think the problem is the market is so tight. People can't afford to move people. Can't sell you as investors, Brian, for example, he told us it doesn't make sense to refinance a property that he's had because he's going to be underwater. Maybe he doesn't want to sell it because he's going to be killed by capital gains. Maybe an adjustment to capital gains tax might actually incentivize some of us to trade properties, trading those four greenhouses. They pickup that one red hotel, if we could somehow alleviate the capital gains tax or roll it into another investment, again, just my perspective.
I will tell you that I believe that this speculation tax will have an effect on the market. There has been a lot of flipping out there just because the market has gone up so much and so quickly. That's really what I wanted to present and we can talk about some numbers as well as to, kind of market, what's happening on the streets right now. I don't know the time that I've got, I almost think that I'm way over. I don't know. What are you thinking about Alfonso?
Alfonso: Just looking at the numbers. I know we've talked about that, like you said, it's crusted and the government wants to take their credit for that. Fairly newer looking to get into real estate investing. They're coming to you and say, okay, Christopher, what strategy? You know what let's try to do? Do you recommend, what should I look at? What are some strategies of risk investing that's going to help me profit and get my portfolio. What would you say to them?
Christopher: I think the old standby multi-family units, two units or the big thing course. Three units and four units. I think you're really great because now you can stay within the residential mortgage space. But some of you guys have already played that out. Most of you guys already have multiple units and you might want to get into the larger multi unit spaces. And frankly, that's what I'm seeing.
I'm seeing a lot of larger purchases. I'll be honest, multi unit, I'm talking six and plus 20 unit buildings and more on fire. It's really incredible because we always thought these buildings were about numbers, that was really what it was. I don't care where the building is, what it is, as long as it makes sense on the numbers front. We're seeing that those properties have been going up like crazy.
I don't know that's going to change because a lot of the larger corporate bodies, a lot of the larger organizations and some of these investors who have done very well with their four green homes. And they're now looking to step up, they're getting into this space as well. It's really crazy. But I listen, for so many of you smaller guys. I still think of the two unit properties, the BRRRR. Shout out to Sarah and her crew because listen, I know you guys were brought up on that and I still think it works but what I do love is and I'm hoping this works in our favor is the whole zoning changes.
I'm really hoping that works well for us because some communities are yet to allow three units. And who's to say, you know what? You might get four, you might get a basement out of that garden. We don't know that might be really interesting coming down the pipe.
Alfonso: Awesome, great advice, great insights, Christopher. There's this contact information there in the chat. Thank you for joining us this evening and sharing your thoughts or insights. Definitely get in touch with christopher@smarthomechoice.ca and for all your needs. He'll be sticking around for our virtual networking as well, too for some Q and A. Thank you.
Alfonso, one last point, you guys, and Brian, you said it, I'm going to reiterate it. You guys are investors. Let's go, I know this market is going to make you pause a little bit, but you don't stop. You guys are looking for future wealth. Let's go now. Let's get you guys in gear, get your money. Get out there. This is the time no one else is looking. Sellers are panicking. Let's go.
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