Will you even be able to purchase Real Estate as an investment in 2022?


Brian Hogben

Sarah: I'm going to introduce Brian Hogben and then I'm going to pass it onto Brian who’ll let us know what we need to learn and know from a financing state. Brian began his career as a commission-based mortgage agent to build a massive real estate portfolio and open Mission 35 Mortgages.

He became one of the top mortgage brokers in his first three years of existence and currently has 11 locations across Southern Ontario while you grew really fast because I didn't remember you having 11 locations. That's awesome. And Brian's also the author of, How to get a mortgage free really f-ing fast and he's able to show other people that becoming mortgage-free many years earlier than what typical Canadians think is possible is not just a pipe dream. It's a reality. So, if you haven't read his book, go check it out.

So, Brian welcome to the show, but tell us more about the importance of investing in real estate today. Forecasting for the future of the mortgage markets and what we should be aware of as real estate investors. So, welcome. Thank you so much. And I'm excited to hear what you've got to say today.

Brian: Awesome. Sarah, thanks so much for having me and just thanks to the REITE club nation as well too.

You guys are awesome. I love what you guys do and what you put on, and I'm so happy to be a part of it. I feel like I'm just with my peeps. Thank you for having me here. Everybody asks me about Mission 35 name, just to let you guys know about Mission 35 where the name came from. Cause it's not freedom 55 it's Mission 35.

And I wanted to be financially secure by the time I was 35 years. I wanted to have my house paid off. And my dad was my biggest fan. He ended up telling me to spend less than what you make, which is actually still great advice today. And he also told me things like, if you're broke making 30 grand a year, you'll be broke making 300 grand a year.

Again, good advice today. My dad was my biggest fan. He helped me invest in real estate and I actually borrowed some money from him and I bought a whole bunch of investment properties about one without JVs and flips. I bought one and then I bought another one refinanced and kept doing that program from my early twenties and moving along.

And then in June of 2012, I got a phone call from my dad. He said, I got to go into the hospital for some tests. It turned out that he got Acute Myeloid Leukemia. So, anybody who's been touched by cancer, I can feel you for that. And he died three months later. It made me really want to pursue my goal.

By the time I was 35, because two years later I was able to achieve my goal and, on my birthday, I really like to celebrate a good time. I can't wait till we can do that. And I raised a glass to him on my birthday, July 17th, 2014, and just sorta opened up Mission 35 in his honor because he always gave great financial advice.

And that's what we want to do at Mission 35. And that's why I love the REITE club because really, we joke at the office say, whereas, happy to get you into a mortgage as we are to get you out, because we really want to help people get debt free. So, I hope you're excited about today. I'm going to talk about four things today for you guys, and hope we didn't scare you about getting a mortgage in 22, but there's some interesting realities going on.

And I'm going to talk a little bit about the pandemic. Okay. I'm going to talk a bit about mortgage rules. Mortgage rates where they were, where they're going. And also bubbles, bubbles, sorry, I got a four-year-old daughter and I practiced my presentation with her. And when I said bubbles, she was like, you're going to talk about bubbles. I got really cool for a second. 

So, anyways maybe she'll be interested in this later. And the bubble and what to do with this stuff guys, because 2022 is going to look significantly different than 2020. So, first of all, we talk about the pandemic past and present future. I don't want to talk about it too long because I'm sure we're bored of it, but the reality is, everything has patterns. The past has patterns, and we can look at patterns and see what that holds for the future. So, when I look at, if you ever Google pandemic, it can see all the ones like the bubonic plague, and then you see smallpox. All the different ones that we've had over the course of time, you started looking at smallpox one and the 1800’s and Spanish flu 1918 give or take that.

There's an interesting pattern that I was reading about, and it was about savings. Okay. People's savings went up dramatically and that's something that's happening today as well, too. The news tells us a lot about the doom and gloom, but the reality is this savings is in the trillions right now in the global economy.

People have saved Trillions, Trillions. Okay. It's so much money right now. And this is the same thing. Back in the olden days as well, people can't go out, can't spend money. They're not going to concerts, events and all that type of stuff. So, what does that mean?

What does that mean for us? As real estate investors, we're all super excited because we've seen property values go up a ton. And when I think about it, I use this analogy a lot. I think about it like a Slingshot. Okay. Because typically when we get past a stage of certainty in pandemics, the spending doesn't start to happen overnight.

We've already seen some inflation. I believe it's the tip of the iceberg from what we're going to see over the next 12, 18, 24 months, because people's behaviors have already changed. So, it's not like everybody's going to get their vaccine shot and go back to normal right away. It's going to take time to revert back to other behaviors and what that means.

In our world and our space for investors is that it's going to have a lot of money flowing into the economy. So, we're going to see some massive inflation. So, what does that mean? Things are going to be more expensive. Okay. In 2022, they're going to be way more expensive. CMHC, Canada Mortgage and Housing just released this week, I believe was in the past seven days.

They're expecting in the next 12 months real estate to go up by anywhere from 10 to 14%, this is the same company that predicted. Prices going down by 18% in March last year. So, we've gotten the most conservative company predicting a 14% increase. Okay. So, I want to put that in your mind because, could it be cheaper next year than this year?

And you're going to see a ton of inflation and that's going to affect your construction costs, renovation costs. It's going to affect every single thing that you do. Okay. 

Now, Secondly, I want to talk about mortgage rules. Okay. So, mortgage rules have changed a ton over the years, so let's pretend I'm going to grab Sarah, put her in my DeLorean, and go back to the future.

Okay. I'm a little nerd. I like Back to the Future. Okay. Put in my Plutonium in 1.21 gigawatts hit the flux capacitor going back to 2005, 2006. What do we see there? In 2005 and six, it was actually interesting. We saw a moment in time where mortgage rules were stagnant. They got looser for a bit, then started getting tighter. 2005 and 2006 was a moment in time where you could start to get, sorry, are you sitting down getting comfortable.

You could start to get insured mortgages for 35 years and 40 years. Yeah, I'm sure if it was me, Sarah and Alfonso, that we'd be out there buying everything possible because you could buy a rental property with 5% down on a 40-year mortgage. They quickly cut that back. Okay. Cause we saw the subprime mortgage crisis in 2008, not surprised, right?

Because in 2006 you could get a mortgage. If you wrote it down, make a hundred thousand dollars on a napkin. Okay. And it didn't even matter what color the napkin was. You were getting approved. So, what does that all mean? I think when the government looks at things, we're not going to be in a state next year, two years from now or three years from now we're mortgaged.

Get any easier for real estate investors. Okay. 2022 is not going to be a year where the people that financial services regulation authority, or other lenders are going to be looking. They're going to be scrolling through the media and seeing, oh my God, look at all these real estate millionaires.

They're making so much money. We should really come out with an easier program for them to get approved. It's not going to happen. Okay. I'm very sorry, that's not going to happen. And the second thing too. Put yourself in the perspective of being the Bigwig CEO, get a big, comfortable chair. You're the Bigwig CEO.

Okay. If you have two files, you got Tommy and Susie who are buying their first house and Tommy's a teacher and Susie works for the city of wherever. They got an 800-credit score and they're putting out 20%. That's so easily approved. In fact, probably a computer could approve it, but I won't go all John Connor on you on that.

Okay, but super easy. The alternative in our space, we've got Alfonso and Sarah buying a property together and they've got 40 other properties. So, now that the underwriter or the bank has to look at 40 mortgages, 40 lease agreements, 40 property tax statements, like it's just a pain in the ass for the lender and from a business owner perspective right now, if you look at that, if I've got two mortgages that I could approve, okay.

From a business owner perspective, and this is how banks look at it, they won't tell you this, but I believe this is how they were going to look at it. If I've got the same profit margin, this one takes me 10 minutes and this one takes me 10 hours. They're not going to do that one anymore. They're just going to say I'm done with that.

So, what you're going to see for mortgage rules, they're going to get much tighter for investors because logistically and for human capital and resources, the banks are making billions right now, each quarter in this market and they can then continue to do so because our market's going to continue to move along.

So, when you're making billions, you can afford to be a little bit picky and choosy of which customer you want to have. And that's what we're going to see when it comes down to mortgage rules. Okay. Not going to get any easier. So, whatever you seeing and you're going to get right now in 2021, you jump on it to get that money because 2022 is not going to be easier.

The only thing. Yeah, just because I'm making fun-filled predictions right now. But the only thing that I could see, which will probably fuel demand because there's becoming such a gap, is that you may see something come out for first time home buyers to help them get into the market, whether that's extended amortization for insured mortgages.

That means that the first-time home buyer who's got five or 10% down can now get a 30 year or 35 year mortgage. I'm a member of mortgage professionals, Canada. We're always lobbying the government to say, hey guys, you're doing it wrong. Okay. But we ended up saying, this is something that could help. So, that is something that they could end up doing. 

So, now rates. Okay. So, we look in the past. If I got Sarah, my DeLorean, again, we go back to 2000, 2006, the past 20 years, right? Interest rates were a five-year interest rate that you would have fought over to get was around five and a half to 6%. This is back in 2005 and 2006.

Some prime rates were similar. Do you know what I mean? They were around 6%, 7% sometimes. When you look at that now we've seen interest rates come down over the years. Right now, we've seen the trough. Now, we're seeing them creep up a little bit. So, that kind of means that things go up and down all the time.

We've hit the trough, the bottom. So, we're likely on our way back up a little bit. So, what does that mean? It means money's never going to be cheaper. And for anybody that's on this call, that's getting your first rental property and taking money out of your primary residence. Now, do that right now and buy a property.

If you're approved in the B space, that's what we call the trust companies, the credit unions. Like maybe because you're self-employed or maybe your credit's a little bit lower to put this all into perspective, a B rate. Like I just refinanced one of my properties. For 2.79% for three years. And I was tickled pink about it.

Okay. Like my situation is complicated, it sounds like a dating app. It's complicated, but it is. So, I was super happy to get that. And if you are a real estate investor sitting on the fence, waiting for your situation to get a bit better, it ain't going to get better next year. And I'm saying that with love I leveraged up almost 6 million this year because I believe in what I'm telling you guys because money is so cheap right now, and assets are going to continue to grow that I wanted to put all of it back out into assets to continue to grow. Okay. So, if you think money too expensive right now, you're dead wrong. Very sorry. You should borrow it. Take as much as you can, because I don't know if those lenders, what their stance is going to be a year or two from now.

Okay. In 2022, they may take a similar stance to the bank. Okay. Pandemic pent up savings, going to see massive inflation 22. It's going to push everything strong, like more expensive mortgage rules not getting any easier for real estate investors, guys. Very sorry to say it doesn't mean you're not going to be able to buy property.

You know that the incoming tide raises all boats, everybody who's got property right now will do just fine because all your assets are going to go up. You'll just probably pay more and have a bit more pain in the ass, trying to get the money out in future years. If you don't take it out and try to leverage it up now.

Okay. Mortgage rates, it's going to be more expensive next year. Clearly, when inflation goes up, one of the ways to slow down the economy is to raise interest rates, you raise interest rates. That's what the government will do. I don't think it's going to go up by too much, but it will incrementally go up in 2022.

So, the last part, bubbles Laila's favorite part, the bubble, right? I'm sure we're all sick and tired of hearing about bubbles, right? So, for no reason or sake, think we're sitting in a bubble that's going to pop or burst, or something's going to happen in 2022. But you look at the past, let's say I'm wrong.

You know what? Most times you go back to the past 20, 30 years, if there is a market correction or a dip of anywhere from 5, 10, 15, 20%. If you bought at the peak, you're back within 18 to 24 months, right? So, I'm a big proponent of buying and holding if you're buying something and not an advocate of flipping, especially in this market right now.

But if you're buying and holding, hallelujah, you got to buy, you got hold. If you're BRRRRing the property as well, too. That's great as well. Okay. So, that's what happened in the past. If there were a bubble, I don't believe there is for a number of reasons. So, number one, we talked about rates, mortgage rules.

I want you to think about the stress test for a second. Okay. The stress test right now, so people can get a variable rate mortgage, one and a half, 2%, and they have to qualify at a rate that's almost 5%. Okay. We haven't seen, go back to my DeLorean there. We haven't seen rates at 5% for 15, 16 years, and I'm not knocking the stress test right now.

I think it's good, in certain aspects. But the reality is that people can afford their mortgages right now. It's never been more compliant, like I said, so with that stress test, it's coming out. If there is a market correction and the market goes down by five, 10, 15%, it's not like people are going to be throwing in their keys and saying I can't afford it. I can't pay my mortgage anymore. Okay. 

So, that's one thing. Second thing is I never thought I would talk about Dave Ramsey in a presentation before, but if you guys know who Dave Ramsey is, Google him, he's in the States. He's a financial guru and he's super, super conservative.

I'm exaggerating. Save all your money, don't spend anything, pay off your mortgage and live off Kraft dinner under a blanket. Okay. He's telling people right now in the States, because we do have similar economies, not the same, but similar, right? He's telling people in the States, if you don't buy a house, now you'll never own a home.

If you don't buy a house, now you'll never own a home. This is Dave Ramsey from the States, Mr. Conservative. Okay. I'm not talking about political platforms, just that he's very conservative about money. Because the United States is seeing the same inflation right now in the States they're predicting an 11 to 12% increase over the next 12 months.

And not to mention that savings number that I told you guys about earlier. Credit card debt is down in the US by 11% as well as credit card debt for the States is down. So, what does that mean? People have money. They've got their stimulus money. They've made money and they're ready to spend money. So, what does that mean?

Again? Inflation. It means prices going up when that money goes back out into the marketplace, that's not conducive for a bubble. Okay. 

Lastly, things that were tried and true years ago, still hold true today. And something I look at a lot is in migration into Canada in relation to new builds.

Okay. Typically, new building permits are less than immigration into Canada. So, naturally someone comes into Canada. They don't buy a house right away, but they're eventually going to buy a house. If you constantly run at a shortage, that means that demand is going to continue to percolate and your supply is limited, what that does is create a price increase or a bubble. So, my thought is for you guys, when I take a look at all these things, and I'm such a nerd, and I look at these things and I'd be like, they're all conducive for great returns on your investment properties over the next, year, two years, three years, for those of you that got, three, four or 5, 10, 15, 20 houses, like good for you.

That is awesome. You're going to do great for those of you that are sitting there wondering, should I get in, should I not get in if you're fencing and get off the f…ing fence? Apologize. Okay. But seriously, and I say that with love because it's going to be a hell of a lot harder to get off next year than it is this year.

I'm going to share a story with you because I hate seeing this and I see it a lot. I'm going to tell you about one of my clients, Mark. Okay. Mark is an amazing guy. Love this guy. He's got a face for radio, like me, but he's got two little girls. They're cute as heck. And he's such a good dad and he's doing good. Him and his wife, they're doing good. They've got a house. They got some equity. He came to me in 2019. We pre-approved him for $500,000. Okay. Or no, it was $550,000 for a duplex on the Hamilton Mountain. Okay. So, he ended up going out, looking at houses, right? Going out, looking at some houses. You guys remember in 2019, it was still a pretty hot market then too, right?

Like things weren't going $200,000 over asking, but they were still going 20, 30, 50,000 over asking. So, he put in a few offers, lost out, put in another offer, lost out. And so, then he ended up deciding, I'm going to put this on the fence. I'm just going to wait. I'm going to be a dad. I'm going to enjoy life for a little bit, because I think the market is just too expensive right now.

Guess what? We all know how this story played out. Never bought a house two years later, he's priced out of the market and I don't necessarily just mean price out of the market more so he's priced out of its comfort because sometimes we get our own worst enemies and then you just get heavy on yourself and this guy can't buy now because he's just missed the boat instead of buying real estate, he bought a trailer and I wouldn't blame him when the pandemic came wanted to have a place to go.

I understand that, but now he's got less equity, more expenses with the same income and we all know that inflation is not keeping pace with most people's income. Okay. And the second part of this is my friend, Dave. Okay. Dave ended up buying a house in 2019, or it was late 2018. You had to go about 30, 40, 50 grand over the asking price.

Totally outside of his comfort zone. And he ended up buying a place. And he was like, jeez, Brian, like I'm freaking out. But he bought a place, but guess what? He bought the most expensive house in the place. You know what else he got? He got the most expensive room. In that place too. And that's something for you guys to remember because inflation also means rents are going up.

I just ended up buying a 12-unit apartment building and we put up rent. We had two vacant units. We put it up for rent for two of the units and and we put it up at the highest rents ever seen, and we had a Facebooker just shi..ing on us being like, that's terrible. That's crazy. You know, we got it.

Think about Mark, think about Dave, where you guys are your first time ambassadors. And before I go, can I share one story with you, Sarah? One story. This is gonna be fun. So, I can't see you guys right now, but I can see you now, Sarah.

So, close your eyes with me. Okay. We're going to close your eyes. Okay. So, I want you guys to just imagine it's 15 years from now. Okay. It's 15 years from now. And then you came home from your day at work, it was a good day. Nah, it wasn't a good day. It was a shi..y day.

You had a bad day. Okay. It was a rough day. I don't know if tennis didn't pay for something. And you come back to your husband, your wife and you say, honey, you know what can get the red out, get the California red, get the JLR, get the 19 crimes, get the whole Napa Valley section.

Sarah: We're talking about my language right there.

Brian: And yeah, you know what, I'm drinking my dinner tonight. Cause it's just been one of those. Okay. And then you're finally starting to relax. And then your little kid comes in or your granddaughter, grandson or your nephew. They run in and they go, mom, dad, what's going on? And you're like, oh, no, honey, no, it's a rough day.

And say, what's going on with you, honey? And they say, in school today, we were learning about the year 2021. Oh, what'd you learn? We learned, is one of the biggest wealth transfers of all times. So, many people buying real estate made tons of money and certain people didn't and that a big great divide happened and all this happened.

Oh yeah. What else happened? Oh, and it was the lowest interest rates ever in the history of time. And mom, dad, I was curious, what did you do? What did you do at that time? And I want you guys to just think about what story you're going to tell. What story are you going to tell him 15 years from now? So, guys, thank you for allowing me to be here, Sarah.

Thanks for having me here to do guys. Give me a follow at Brian Hogben on Instagram. I've got a small five minute podcast. We'd love for you guys to do it. It's all about getting mortgage-free fast. And if you want to reach out with any questions any time please. 

Our team is passionate. Probably not as caffeinated as me, so they might talk a little bit slower. It might be better, but we just really want to help you guys love this community. So, thank you so much for having us.

Sarah: Amazing Brian, that was a ton of great information.