Mortgages, Financing & Real Estate


Ryan Bond and Natasha Phipps

Francois: We have Natasha Phipps of Phipps Realty and Ryan Bond of Mortgage Line. They'll be taking you through to different real estate investing strategies in Western Canada and the mortgage tips for each of them. 

Be sure to join our community and check out all the free resources and training, education and information you need for your real estate investing business. 

So, Natasha began investing in real estate at 20 years old. So, it's only been a year, Natasha. I can't believe it. And a love of entrepreneurship, driven by the goals of her clients. The endless options of real estate provides Natasha. And Natasha is a firm believer in helping others to take control of their financial futures through real estate investing. 

Francois: So Ryan currently works with many of the top home builders throughout Alberta while he maintains a close relationship with his book of real estate investors.

So he has the ability and knows how to get mortgages structured for approval. So take it away. Natasha and Ryan, you guys are the experts. Thank you. And welcome.

Ryan: Thank you Francois.

Natasha: Yeah, thanks for having us. We're excited to be here. Maybe I'll just give a quick little background, so you know how Ryan and I got to be working together, but we're in Calgary, Alberta, and I am an investment specialist, realtor, and Ryan's an investment specialist, mortgage broker.

And we've been working together for about six years now. And real estate investing is pretty well what I live in breathe every single day. I'm a licensed realtor, but all my attention, I'm 38 right now about my first property, like you said, when I was 20. And the great thing about Alberta is the ups and downs have taught my husband and I a lot since we have done our first projects many years ago.

So, what I love about that is it's taught us a lot and I can translate all that experience into. And I have a team here in Calgary. There's six of us and we're all investment minded and focused. So yeah, we'll dive into Calgary a little bit, but maybe I'll let Ryan just give a little bit more background about you as well.

Ryan: Sure. Yeah, six years have been working together now. It's been a lot of fun. We've been working with a lot of investors. Yeah, I've been in the industry for about 22 years. I started off as a financial advisor and did that for about seven, eight years. And then back in 2007, I decided to get my mortgage license because I wanted to figure out why all my wealthy clients weren't getting wealthy off from the mutual funds that I was selling them. It was off of real estate. And so that's when I made the shift and wanted to figure out this whole mortgage product so that I could be able to say, Hey, we need to do some planning around your financial portfolio that isn't RRSPs, it's real estate. And so got into that and been loving it along the way and showing people how to do their retirement real estate planning. 

Natasha: And the approach that we take is with planning and we are going to talk about strategy and the planning component. This is obviously the really important first step that we have that plan.

So I want to talk a little bit about what strategies people are making their plans with when it comes to Alberta real estate and why they are looking to Calgary or Alberta to create these financial plans. We work with clients from all over the country. These are not just Calgary investors.

And in the last few years we have gotten really dialed into working with out of province investors. And a lot of them are looking for similar things. So, what makes really good sense for Alberta right now is if you have that long-term buy and hold vision, right? You're not just thinking about next year or next month.

And you're taking that long-term view. What the history of Calgary has taught me is that is the safest way to reduce your risk in Calgary, because we do follow the real estate cycle, like a textbook. So, you need to be employing the right strategies at the right time in that real estate cycle.

And I have found that to be one of the most important lessons to learn and to be working with professionals that understand that because the most expensive mistakes are the wrong  strategy at the wrong time in the cycle. So, right now I'm looking for cash long-term buy and hold is what most of our clients are looking for.

And that long-term vision for Calgary. We can break that down specifically, and this is true for actually Edmonton as well. It's pretty similar where you're looking usually in residential real estate, particularly if you're just getting going in your investing career and you're not quite in the commercial space yet.

For Calgary, the main thing to be aware of is our downtown market and our suburban market really are two different worlds. And if you're looking for cash flow and getting a good tenant and just buying a property and keeping it, moving forward for you, the suburbs are really where it's at and secondary suites.

What I love about secondary suites combined with the buy and hold strategy is this has worked in Calgary's worst times and best times there's really no market I've experienced where you can't make those numbers work. Whereas when we talk about condos or flipping, or even the BRRRR strategy or multifamily, I can't say the same for all of those sectors during different points in the market.

Very much looking for cash flow and they're coming to Alberta and they're putting their equity to work, which Ryan will talk about. I'm sure putting their equity to work in their assets and other cities that they can take that equity, tap into it and put it to work in Calgary for Ashlyn properties. I don't know if you want to touch on that, maybe a little bit Ryan. Because we do a lot of that.

Ryan: Yeah. I always get this question from my investors. When they come to me, they say, Hey, I want to invest in real estate. I often go back to them with how many properties do you want? Why do you want them?

What's your long-term plan? What are your goals? And they usually draw a little bit of a blank. So when it comes to the product, I feel like the plan is almost more important than the product. You can always get the product. But if you don't have the plan attached to your investment philosophy and why you're doing this and then, everything else falls apart.

I have some clients that come to me and they say, Hey, Ryan, I want a hundred doors. And I have others that come to me and say, you know what? I just want three to five doors. And I have some that come to me and say, I have no idea what I want. So, I always start off with a plan and I use that.

Sort of analogy of, going out and buying a business, right? You go out and buy a restaurant tomorrow and walk into the bank and say, Hey, I want to buy a restaurant for 300 grand. They're going to say, okay, go do up your plan right. Yet, so many investors don't start off with a plan. They just know what they want, they know that it's an investment, they want to get into it and they just don't know how. So, we start off with a plan that's where you and I have always worked. Natasha, let's figure out what their goals are. Let's not make this about a transaction. Let's make this about setting goals and working towards something. And that's really what we do.

That's where we start from the products. We go to the different ones that are out there. I've got a handful that we use, whether you are, doing the Burr or the flip or whatever you're looking to do multi-family we look after all of that. But at the end of the day we want to use the Smith maneuver type of product that allows you to write off your interests and the cost associated with real estate. So, we specialize in helping clients figure this out and broaden their education. So, they understand part of the reasons why they're doing this. That's generally where we start. So whether it is multi-family or residential, whatever it is, we've always got the product.

Natasha: A hundred percent. And that's why I love working with Ryan so much because it's okay, when you're shopping and you're looking, you can get your, really excited about what's in front of you, but we want to, as the team makes sure we're thinking about what's coming and where you're trying to go.

I'm going to talk a little bit more about the secondary suites, and then I'll talk about a few of the other strategies that are secondary to. For Calgary and Edmonton, there are variances between secondary suite rules and legislation per municipality. So what is happening in Calgary?

Maybe very different than Saskatoon in Saskatchewan or Toronto or wherever. So if you're looking at Calgary you need to start learning what the legislation is around secondary suites. If you're looking for residential real estate, You're going to end up with secondary suites because that's where the cash flow is.

And in Calgary right now, what's super interesting is there's a kind of a pending deadline coming up here. So the city of Calgary has taken a very firm stance on that. They are no longer okay. With illegal or non-conforming secondary suites. Now, most of the country has these all over the place. And that was how it was done here for many years as well, but the city Calgary back in 2018 started making some changes. So as it sits today, if you want to get into. It is casual residential real estate. And you want to look at secondary suites. There's two routes to do this. One is to buy a property and combine this with the burst strategy. Do a renovation, bring the property up to fire code standards.

If it has an existing suite that was there prior to March of 2018, you can bring this up to fire code legislation and the city will give you your secondary suite permit that will run with the property. That's one way. The other way is to go, new construction, buy something brand new, off the shelf and for our out of province investors, that's usually what they're looking for is something easy.

And then why this is important to understand right now is if you're looking to do the BRRRR strategy and the renovation opportunity. Time is of the essence after the end of this year to do that exact same project. So you buy a house, it has a suite, it's not legal and you want to bring it up to legalization.

After this year, you will actually have to meet building code. It wouldn't matter if it existed. It won't matter if at one point it was grandfathered or some realtor said it was legal at one point. Like you have to be very diligent with what you're buying. And I've been hearing time and time again, where, the realtors don't know what they're selling and they're not educated on how to check.

Really do your homework. And if you want to do a BRRRR in Calgary, it's an excellent time to legalize an existing suite, because I know that after this deadline passes these legal suites are going to be in consistently high demand. And they're going to be in very low supply because as of today, there's just over 5,000 legal suites in all of Calgary and tens and tens of thousands of illegal ones.

And the last piece of interesting information there is the city is going to move into enforcement stage next year. So, if you own an illegal suite in Calgary, and you're trying to just, pretend this doesn't apply please don't you need to address this head on and to give you an idea of the cost difference.

Going to renovate something to fire a code right now, an existing suite. Maybe you're going to spend in that five and $10,000 range, if it already has a separate entrance and egress windows to do the same thing next year, to meet building code at your minimum $50,000 because you pretty well need to rip everything out and start all over again.

So a huge savings. But that means it's a little competitive right now to find these things, but it's worth it because this is a massive change that's coming. And I'm from Ryan's side of it. When I bring him a deal that has a legal suite on it already, or is going to be legal. That's an opportunity on your end as well Ryan?

Ryan: When we look at a property like that, it's an illegal suite. It is an opportunity, but we can't use that rental income for that suite. We can use it for the ones that are legal, which is great. Those ones have been flying off the shelf and they're turnkey. And there's not a lot that the investors have to do to it.

But when you have that legal suite, we take into consideration the income that you'd be generating from the basement. What we're trying to do is wash it up, wash that property out and then move on and buy another one. So yeah those properties worked very well for that.

The lenders right now, in Calgary and I'm sure they're right across Canada, they're busy. We have some lenders that won't even look at a file for a week until they pick it up. And then they'll take a look and start working on it. So now realtors are forced to go.

I need a two week financing condition on this property. Lenders are busy. Timelines are backed up. There's a lot of opportunity out there and people are taking advantage of it. But timelines need to be noted and taken into consideration when investors are looking at these properties that, if it is in the illegal suite, you've got to get some quotes in there.

You've got to get in and get your numbers all submitted. So that takes time as well. The other thing I just wanted to point out is. Always, we're here, we're an Alberta. We know the product. We know the connections that, the biggest one that we run into is when somebody is not using a local broker and an appraiser, the appraisers play a big role in this.

And oftentimes if you're going through a regular bank. They've got their skew where they send out the appraiser. Those appraisals don't always come in where they're supposed to be. And so being able to control that appraisal is very important in the whole process as well. Just, going back to plan, starting with your goals, what are you looking to accomplish getting the right product?

These side by side duties. Legal suites are an excellent way to go. And then executing with the product and having, that Smith maneuver attached to it, which is, basically a mortgage with a readvanceable line of credit. So as you pay that mortgage down, are you ever, your renters are paying that mortgage down for you?

The access that you're getting to that line of credit is increasing. Why is that important? In three to five years from now, you’ll find another property somebody has been paying that mortgage down. You're going to pull that out. You don't have to apply for anything. It's already set up. It's ready to go.

You write the check from your account and you go buy another property. You don't have to apply. And that's, what's so important is now you've got this rental price. Maybe you took the down payment from your personal property to begin with that. You're writing off that interest. Now you bought another rental property.

You're pulling that equity out to buy another one. And you're continuing this cascade effect of writing off interest on your properties. That's what it's all about. The Americans have had that for years where they can write off their interest. How do we as Canadians do that? This is a great tool for doing that.

The Smith maneuver also includes pulling out equity to invest in the market. And I'm not anti-market, but I personally don't feel comfortable leveraging myself into the markets. I feel very comfortable leveraging myself into real estate and we all know that, those are a few little tidbits that we put out there and want to educate and help people out with understanding that.

So all in all, with putting together the plan and everything else. It's a great concept. And the REITE club is definitely doing the right thing, no pun intended, but indicates you’re education first. And that's what we're all about.

Natasha: Yeah, a hundred percent. And to add to that, if you did something with an illegal suite, they could either go private financing first get legalized.

Like we did that on one of my projects, Ryan where we did the rental and then he brought in a lender once it was legal and done and everything was.

Ryan: Yeah, for sure. You know that's a great strategy as well as most banks if you went and bought. I did some rentals on it and then want to refinance within a few months.

I'm not going to like you, they're not happy about that. They want to place this mortgage and they want to hold onto you for the next five years. And so most lenders won't allow a refinance the first year. Going in with a private, very good point is that, you can get in and actually private will lend you the money for the Reynolds as well.

They'll build it all in. They won't even actually charge you a monthly fee for doing that or a payment. They'll build that into the mortgage as well. So you're doing the rental and get everything ready to go so that you can basically take it to a lender and it doesn't really cost you and they'll lend based on the completed product. So there's some great strategies out there for that.

Natasha: Yeah, for sure it's a great way to make your money go further with that too, because not everyone has the 20% down and the X amount needed for a renovation. So that's a really great strategy.

So, secondary suites, if you're looking at Calgary just to quickly summarize that, just make sure you know what you're doing and you're doing lots of homework. There is some really great information just on the city calorie website. If you need help with finding that or whatever, just shoot me a message right now, get that info to you.

I want to talk briefly on a couple of other strategies, because I get asked a lot, obviously about all the other strategies flipping properties in Calgary For the last, probably five years, I have been steering people away from flipping properties because the resell market on the sales side was not strong enough to support the risk of buying a property with the intent of selling it.

I'm more confident than I have been in many years. And if you're a flipper and you do lots of this stuff then yes, absolutely. You can be flipping. But I do still think there is some risk there. So my advice for flipping in Calgary is what is plan B and what is plan C?

So if you're not okay with plan B or C and going straight to the sales market doesn't work because some come September, maybe the sellers market is now more balanced and you're not getting what you wanted. What does plan B and be okay with that and stick to for, short-term opportunities and stick to the average price point or under do not be getting into higher price points.

If you are concerned about risk and you want to mitigate risk. And then of course, Ryan has some incredible financing options for flips apply as well. There's good opportunities there. The multi-family space for Calgary specifically. It's something I get asked about a lot.

You know what, whether you're, you've already got a small portfolio or you want to go straight into commercials and the child is great. We have our downtown and then there's like this inner city around there that's dense, but not, it's not super dense. And then after that, it's just suburban houses until the edge of the city and then you're in farmland.

There's not a copious amount of multifamily opportunities that arise. And the ones that are out there for sure will likely need work. I would say 98% of them I see. You need to be okay to do a project, do some work on them. And then the other thing to note about them is because they're underperforming. They need someone to come along and renovate and improve the rents, meaning going back to the financing piece and you can maybe touch on this Ryan is that the rents are underperforming. So the appraisals on these larger commercial buildings are not coming in. Meaning, we need to put more money down to buy the property, which is often where I lose people. Then they go, no, I'm going to go back over here. I don't have anything to add to that, Ryan.

Ryan: Yeah. Just going back to what I had mentioned before is just controlling is really important. Having an appraiser that understands the project understands what's going on with the community. Again, oftentimes I don't want to bash the banks. I use the banks, but they're appraisers and their system is a little bit behind and typically they'll push it out for an appraiser and somebody will pick it up.

And usually it's a junior appraiser. That's where they start off and they're very cautious right there. They're protecting her job, which I totally agree with. But for me to pick up the phone and call the appraiser that I use and say, look here's what we got. Here's where it's at. Here's what we need to have the price be coming in at.

Okay, got it done. It's the phone call that connects. It's the network. It's what you guys out there taught to build your network. Same thing with us. We have our network and we use it. Whereas if you're just going shotgun blast to a bunch you're going to get exactly what you shouldn't be expecting. 

So yeah, and on the multifamily a lot of people they'll typically start with the residential and then they want to buy bigger. They want a big bite of that. No, look at the, five units, six to 10 units and there's some great opportunities out there for sure.

But a lot of people will try away from that because of the financing side of things, that commercial well that's business. And I need a separate corporation, all this kind of scary, big stuff, but it is actually a lot more fun because they're not scrutinizing. As a person, they're basically looking at the business, that six Plex or eight unit, whatever it is that business viable, can it support itself? Can it look after itself? And there's less pressure actually on the individual buying it. They just want to know that you've got some experience. You've got some know-how. And so a lot of people are looking towards those types of products and CMHC finances. You can get in for as little as 15% down. 

A lot of people don't know about a four year amortization. So the payments on it are really minimal versus going the conventional route and putting a 20% down or 25% down each time. I really like multi-family and it's a space that is gaining some traction amongst investors and they're definitely getting some eyes on it for sure.

Francois: Amazing content guys. Yeah, it's just been through that commercial financing just a few weeks ago on a few of my properties. And yes, I agree with what Ryan said. It's nice to not have to pull out all the teeth for us from the past 20 years and just keep digging. It's different. They ask about your corporation.

Yes, your net worth statement is very important to you, usually in the commercial or your partners. So, I usually bring in a partner and find different ways. So, it's been amazing. Thank you very much for those great tips and tricks. And it's nice to hear about the market.