Cash (Flow) is King – Kyle Green | The Green Mortgage Team
According to The Green Mortgage Team Owner Kyle Green, “Cash is king.”
Alberta is a cash flow play right now and Kyle says cash flow is probably THE most important thing to financing. “When a lender decides whether they’re going to lend to you or I, it all comes down to debt servicing. So they look at how much equity you have and how much debt you have, and the more cash flow you have, of course, the more you’ll qualify for. So it’s very difficult to get financing on a property you’re speculating on and you’re purely buying off of projected appreciation,” he says.
In Vancouver and Toronto, it’s getting harder and harder to qualify for those properties because there is a bigger gap between the values and the rents. A metric Kyle usually looks at is the “rent-to-price” ratio (i.e. the monthly rent compared to the market value of the property.) In Vancouver and Toronto, it is often about 0.3% to 0.4%, while in Edmonton it is often 0.6% to 0.7%. The much higher rent-to-price ratio in Edmonton makes it a lot easier to qualify. Calgary’s rent-to-price ratio is slightly lower than Edmonton’s as the condo values are high and rents don’t go up at the same time as property values.
Less seasoned investors tend to paint the entire real estate market with one brush, but Alberta is a very unique market right now because of where it stands in its cycle. A lot of people are starting to look at investing in Edmonton and Calgary again because their markets are in the “trough” and it likely won’t be much longer before they start to appreciate. “Even if they don’t [appreciate], you’re still getting really good cash flow out of those properties,” says Kyle. “So I think that people are feeling a lot more comfortable with owning Alberta real estate long-term.”
The financing world is constantly shifting and Kyle says in general, it is getting easier to obtain financing. “What we found is that after the government really did a lot of auditing in the banks in 2017/2018, it got a lot tighter. And we found that it was a lot tougher to get financing, the stress tests came out, and the banks were getting audited non-stop.” The banks were basically being told “this is your box and you have to lend inside of it”, and if they didn’t, they would get a slap on the wrist or worse. According to Kyle, most banks need to make exceptions that are outside of that box, so some lenders have now created programs where they have a “box” for those clients who otherwise wouldn’t qualify.
“We’re finding that net worth mortgages are starting to come back in a big way,” Kyle says. What this essentially means is that if your income can carry a $300k mortgage but you have another $400k in liquid assets (for example), they will bump up your qualification by the same amount as your liquid assets. “[This] makes sense because in theory, you could liquidate those assets and pay down the mortgage to a level where your income could support it.”
Investors often get stuck in a story of “I couldn’t get financing last year so I’m probably not going to get financing this year.” But the truth is, the real estate landscape is ever-changing, with new programs coming out all the time. It’s critical to stay up-to-date and current on what’s going on in the real estate market, which is why Authentic Canadian Real Estate (A.C.R.E) Investor Summit is so important for investors of ALL levels. It is the one time of year you get the real facts of what’s happening in your market, not only from a research perspective, but also from a financing prospective. This year, our revamped and revitalized agenda combined with our renewed line-up of real estate investing experts will show you how to build REAL wealth using REIN’s Success Formulas for Financial Security and Certainty.
There are incredible opportunities, even in times of economic confusion, for investors who know what to look for and how to do it. Using our latest and greatest research, A.C.R.E Calgary will guide you on how to make smart, strategic decisions at the right time… in ANY and EVERY market condition.
To learn more and find out why you need to be at A.C.R.E Calgary on March 6-8, watch REIN CGO JG Francoeur’s latest interview with Kyle Green now.