Welcome back to the Wisdom Lifestyle Money Show. I'm your host, Scott Dillingham. I wanted to do a market update for everybody here so you kinda knew where things are going as we enter 2026. I was recently on Erwin Zito's podcast, which is a fantastic podcast. I don't know if you've you've heard of it, but definitely look him up, find it.
Scott Dillingham:He's got great, information. It's called the truth about real estate investing. So great podcast. If you don't listen to it, check it out. But we did a market update.
Scott Dillingham:I don't think it's live yet. So if you're hearing this, you're probably hearing it before his gets played that we recorded, for early January. So many investors are asking what's going on. Right? We want to invest.
Scott Dillingham:We wanna grow, but we're uncertain. We're concerned. We're worried. You know, what's what's what? So I'm gonna give you the answers from multiple standpoints in everything that I see.
Scott Dillingham:Of course, I don't have a crystal ball. You know, I can't I can't predict the future. I wish I could. But from experience, you know, years in the business and just seeing trends and stuff, I feel like I have a pretty good grasp on what's going on. So first, let's talk about interest rates in Canada.
Scott Dillingham:So we have had an anomaly the past few years. So first, we had COVID, which drew the prices of real estate sky high. Right? Then we had the Bank of Canada raising the variable rates, which brought them to nearly unaffordable rates. Right?
Scott Dillingham:People were shocked. They went up, like, three times, three x over what they were before, which is just massive. So that had an impact, big time on on people, and then rates started coming down. So as a mortgage professional, we do tons of preapprovals to get people lined up, you know, to to make their next purchase. And we've seen lots of trends.
Scott Dillingham:So we saw, you know, when the rates were really high, investors saying, hey. We're on the sidelines for now. We're waiting till the rates come down a little bit. Plus during that time, especially in Canada, right, the tribunals were backed up. Everything was really slow.
Scott Dillingham:I mean, they still kind of are, but it's at a much better point than what it was at the end of COVID. So we had buyers that were literally on the sidelines saying, we're gonna wait until the rates come down. So now the rates have, I'm gonna say, almost hit rock bottom. Almost. I think that we might be in for one more rate cut this year.
Scott Dillingham:I don't think there's gonna be much more unless our economy completely crashes. Right? Then I could see stimulus and them lowering the rates to help boost the economy. But, you know, everyone's predicting maybe one some people are predicting no. No more decreases.
Scott Dillingham:Right? Like, it's done. So we we don't know. Like, nobody truly knows. The Bank of Canada has been very strategic in reviewing the data that they have.
Scott Dillingham:Usually, it's like a couple days before the announcement. So, you know, whatever's going on, they're not really they're not really too into it unless it's a couple days before they're looking at all the data and then they're making their, decision. So most banks predict that the the rates are going to stay flat this year. Some banks think it'll drop a little bit. Some banks think it will raise a little bit.
Scott Dillingham:So I think we're at the bottom of the market. So people always ask me, should I buy now? Should I buy now? Right? Just like a tree.
Scott Dillingham:Right? The best time to plant a tree was twenty days ago. The second best time is today. Right? It's the same thing.
Scott Dillingham:I'm going to say yes. But here's my logic behind it. Right? I'm not just saying yes because this is my profession. Knowing that we've had people waiting, and I'm gonna say hundreds of people waiting, not just like, you know, that that we've spoken to, that are waiting for the rates to lower.
Scott Dillingham:Well, I think what's gonna happen is when investors and homeowners find out rates are at the lowest they're gonna be. From here on out, they're gonna slightly go up over time. I think what you're gonna see is a lot more people come out to market to buy. Right? And we all know the more people that are buying, right, because when a homeowner's up against an investor, an investor's looking at the numbers and saying, I can only make this profitable if I buy up to x purchase price.
Scott Dillingham:A homeowner saying, I don't care what I pay. I love the bathroom. I have to have this house. Do know you what I mean? So that's what you're up against, if you're buying smaller residential properties.
Scott Dillingham:So I think the price of the housing should go up. I mean, historically, right, the the more bidding wars and the more, the more it's a seller's market, the higher the pricing goes. So right now, it's it's a buyer's market. Right? There's, buyers have say buyers are getting discounts, but not if everybody else comes out to market.
Scott Dillingham:So keep that in mind. So I think I don't think they're gonna go up this year. I'm really uncertain if they're gonna go down. Like I said, maybe just a little bit, but for sure they're staying steady. So that tells me we're we're pretty much there.
Scott Dillingham:We're pretty much at rock bottom. So, there's no there's no real reason to wait. I thought last year at this time was going to be the rebound year after the rates were up because there were honestly so many people that are just waiting for the rates to drop. And then we got hit with tariffs. I feel like tariffs are definitely impactful, but it's been a year of it.
Scott Dillingham:Right? And we're all still here. Obviously, you know, and unfortunately, there there have been, job loss, but I have known people that have lost jobs that have found something else for similar or greater pay. And some people are thankful that it happened because they never would have, you know, made that move. They would have stayed in the same position.
Scott Dillingham:Right? So it's I I hear both. Right? I hear I hear bad and good. So if if you're affected by this negatively, you know, I'm sorry for you.
Scott Dillingham:I it it sucks. And I hope that you're not. But the the fact remains that, you know, the tariffs have been here a year and the engine is still running. People are still doing their thing. So, I feel like a lot of people have kind of forgotten about the tariffs, and they've they've kind of moved on.
Scott Dillingham:So that's that. So let's briefly talk about the states too because we have a lot of investors that buy in The States. So, Donald Trump last week announced $200,000,000,000 of bonds that Fannie and Freddie are allowed to purchase. So what that means is interest rates in The States are going to go down. Now these are owner occupied purchases that I'm referring to.
Scott Dillingham:So it may not in fact or affect at all investor mortgage interest rates, but it will affect the market. Right? Because if homeowners are buying and they're getting out there, then that's more competition. Right? And more competition means higher prices, all that good stuff.
Scott Dillingham:So as an investor, right, if you should buy now, yes, in both countries, whether it's US or Canada that you're investing in, yes. There are strategic things going on. Put politics aside. I know a lot of people bring politics into this. This is not meant to be political in the least amount of of of of of it.
Scott Dillingham:It's me looking at a property, seeing how much my investment is to buy that property, and how much income or positive growth I can receive from that property. And I've just erased the border between Canada and The US when I analyze properties. I just pretend there is not a border, and I see what's the best deal. That's how I do it. That's how I encourage you to do it.
Scott Dillingham:Some people love Trump. Some people hate him, but I would never say, oh, I'm not buying real estate because Trump buys real estate. You know what I mean? Like, it's silly. Just look at the investment.
Scott Dillingham:If it makes sense and you like it and it has better profit than something else you're looking at, then do it. Right? This is you. This is your bank account that we're concerned with here. Not, you know, what some president might say or do.
Scott Dillingham:So that's my opinion on the matter, politically speaking. So okay. So let's talk some strategies. So obviously, we are seeing a lot of Canadians invest in the states. So that would be one strategy.
Scott Dillingham:I'm not gonna touch much about it here. We have dedicated shows on that if you wanna listen to the previous ones. But that is absolutely a strategy that investors are doing. Some of them are doing it for better landlord rules. Some of them are doing it for better cash flow.
Scott Dillingham:Some of them, they just don't have the money to qualify. Like, we actually have a lot of buyers in Toronto that they just can't buy you know, they wanna buy a fourplex there, which is 1 and a half, $2,000,000. Do know what I mean? Like, they don't want to put in that much money where they can get a fourplex that gives them equivalent income for 3 or 400,000 in The States. Right?
Scott Dillingham:So it just that is an avenue. Okay? But let's just say that avenue is not for you. Okay? Let's just say that's not for you.
Scott Dillingham:So there's a couple of different programs, really the missing middle they call it, which is, you know, more of adding additional units to existing properties that's becoming incredibly important. There's lenders that are financing these. We're doing multiple transactions like this as we speak, where buyers are adding EDUs. One client is adding one to his basement and one to his backyard. So we're giving him a construction loan to finance, this these, you know, builds and additions.
Scott Dillingham:And then at the end, we're refinancing with a permanent lender to give him a great rate, and obviously longer amortization, good cash flow, all that good stuff. So this is becoming very, very popular, and the rules about this have greatly increased to the investors' favor. So in the past, the rules around the EDUs were very tough. You had to have so much, you know, backyard space and all these different rules. And I mean, those rules are still there, but they're much more relaxed.
Scott Dillingham:So they're letting they're letting things slide. They're giving variances or exceptions on the rules. So, like, for an example, if you had a single family house that was on one one floor, if you did an ADU, it had to also be on one floor. Well, if you only had a small enough space and you made it on one floor, that ADU might be nothing. Right?
Scott Dillingham:It might just be a living room, so it might not be worth it. So they're giving variances which will now allow people to add a second level to this even if their home is on one story. Now again, it's a variance. It's an exception. It's not given to every single investor.
Scott Dillingham:So you have to apply for this. But what my point is, is the cities, they're more open to it and we are seeing variances being given for these type of things. So this is absolutely an avenue. You could have a property that does not cash flow now, but if you add an extra unit or two to it, it would. Right?
Scott Dillingham:So this is massive. So we're seeing investors really traverse into, you know, the edu, market space. We're also heavily and we're investing in these projects ourselves as a team, but we're we're seeing multifamily projects, where we're tapping into CMHC financing, you know, up to 95% of the project's value, with amortizations up to fifty years. You've got to have five or more units to be able to tap into these programs. We're self building a whole bunch of eights all the way up to 94 units.
Scott Dillingham:Now these are in Alberta. Different benefits through different markets, right? Like if we're tapping into affordable rents, like say we want to get the maximum amortization under the CMHC MLI select program, we have to, in Ontario, take a rent reduction. So in Windsor, to give you an idea, if we had to create an affordable unit, the rents would have to be just over $800 a unit. Or market rents for that property, or, like, you know, a one bedroom unit could be closer to 1,500.
Scott Dillingham:So you're seeing you're taking a massive discount on the rents to make it qualify for. And then there are even additional cities in Ontario, which are their own rules for how long in addition to CMHC's requirements do you have to keep these units affordable? So we know of one guy, you know, we've we've done some business together, and he he signed up for this program. And his city after the fact told him he's gotta make it affordable for an additional twenty years. So he did the program you know, signed up on the program for ten, but now he's gotta keep it affordable for thirty, right, which he was not aware of.
Scott Dillingham:So that's a problem. Right? That's definitely a problem. So that's where the stuff in Alberta is fantastic is because you're not reducing the rents for it to be affordable. Because in Alberta, the average income per person is higher.
Scott Dillingham:So the rents are higher. So it's a fantastic opportunity. Now I think Alberta will be overbuilt just like Toronto, but in some time, right, they have a mandate, for Edmonton, for an example, where they wanna double their population in ten years. So there's gonna be lots of growth, but it's just, you know, a pocket of time. So we're developing these properties.
Scott Dillingham:It takes a lot to invest in these. Right? It could be money. It could be experience. It just depends on what you have and what the project is.
Scott Dillingham:But, you know, if you have capital and you wanna invest in these these projects or properties, let me know. I can show you what's going on. I can introduce you to the builders and developers, and you can talk with everybody, see some numbers of past projects, and see this is something that you'd be interested in. But we're seeing a lot of investors dive into this program because not only are you getting the longer amortizations and the higher leverage, you're also getting better rates. Like, for traditional houses, like regular investment property, single family house, I'm gonna say low force would be the interest rate today.
Scott Dillingham:But with this program, it could go as low as and again, I'm recording this in January 2026. But we're seeing as low as, like, low threes depending on the cost of funds above the the Canada Mortgage Bond. So each lender has their own sort of target, but, I mean, that's fantastic, right, to to get that much lower of rates for a large apartment building as opposed to a single family home. So that's a fantastic opportunity. We're seeing tons of investors do that.
Scott Dillingham:We're also seeing and I know we we briefly did talk about The States, but we are seeing investors, get creative in in the in The States, with flipping properties. We're seeing a lot of RV and trailer park purchases, a lot of storage facility purchases we're seeing as well. Like, above and beyond, like, a year or two ago, investors weren't like that wasn't the product that they're looking at, but they they are now. Right? Different rules apply apply to different asset classes.
Scott Dillingham:So we're seeing a lot of that going on, which is fantastic. We're also seeing investors get maxed out. Now this is this is more on the financing standpoint. So this is where we we help investors big time. But we're seeing a lot of investors come to us from their banks or whoever, and they're saying, hey.
Scott Dillingham:You know, they said I can't qualify for anymore. What can you do? Now I wanna call this out because I'm not trying to pick on anybody, but a lot of brokers will just get the customer into a b lending mortgage or a private lending mortgage. We do not recommend that unless that's the only option available. Now most brokers don't have access to commercial.
Scott Dillingham:In fact, we have a lot of brokers that refer us commercial mortgage clients because they don't know how commercial works. Right? They don't at all. So and obviously, there's some that do. But, I mean, I just wanna paint that picture that I'm gonna say nine out of 10 brokers don't do commercial loans.
Scott Dillingham:Right? They'll all do residential, but very few do commercial where we have a dedicated commercial team that can help you through this. So, anyways, the reason I wanna call this out is is commercial, especially if it's multifamily, is quite often similar rates as residential on the a side, but there's fees attached. So when you go from an a lender to a b lender, the rate goes up maybe half a point to 1% higher, even sometimes even higher than that depending on the B lender and how risky the file is. And then you've got fees which range from two to 3%.
Scott Dillingham:That includes lender and broker. I'm giving you everything combined. If it's higher than that, you're also getting ripped off. Walk away from that broker. Give us a call.
Scott Dillingham:We'll help you out. But with commercial, right, so you're getting those lower a residential rates. There's still fees. Now I'm gonna say, let's call it 2%, and that generally should include the lender and the broker. Sometimes if it's like a CMHC insured loan or a bridge loan, those fees could be a little bit higher, but I'm just talking traditional, regular, conventional, commercial.
Scott Dillingham:But because the rates are lower and they're still equivalent or maybe slightly lower fees than a bLending deal, this makes a lot of sense to move forward with. Right? So we're helping investors to do this. Now on commercial, the beautiful thing about commercial is you don't have to have an income. They're basing the approval solely on the property.
Scott Dillingham:So that's why when an investor gets maxed out in a bank and they say, hey. Your debt ratios are too high or you own too many properties, we can just continue them. There's no magic to it. It's just we understand the lenders and their policies, and we we we just flow there. Right?
Scott Dillingham:But it's a lot cheaper than going with the b lender. Now private lending, I would only do private lending if we're turning over a property. Like, if it's in terrible shape and we're turning over the property, I would tap into it. If you're going to a private lender because your income doesn't support it and that's your only option, that is such a short term loan. Like, you're gonna just have to get rid of the property.
Scott Dillingham:Right? Privates are not meant to be carried on renewal after renewal after renewal. And we're seeing more and more now that with the market's cooling, and I'm speaking Canada specifically here, but with the market's cooling, a lot of the lenders that are doing privates, they don't wanna renew. Right? They're concerned that they might not get all their money back if they had to sell the home, right, if you can't afford it.
Scott Dillingham:Because some markets, the values are going down month after month. Do you know what I mean? So which again to tie back to my first statement, I mean, that is potentially a great reason to buy. Right? You wanna buy when prices of things are going down, not when they're going up because that's how you really capitalize it and to grow.
Scott Dillingham:Right? And as long as you don't need to sell it tomorrow, right, you just hold it, ride the wave, everything over time goes up. Look up the index chart. It's a n d e x. It's a tool that the banks use to show customers different investment classes that if they had invested in from 1920, what their, you know, value of their portfolio would be today.
Scott Dillingham:But you can see every asset class up there has its ups and downs, but long term over time, it goes up. Okay? So that's that's the point here is that this is not like buy the investment tomorrow. You're you're absolutely rich. It's gonna take time and you've gotta wait it out.
Scott Dillingham:But so don't do the private if you're maxed out on debt ratios because it's just it's gonna potentially set you up for disaster. And if the lender doesn't wanna renew and you haven't done what you needed to do with the property yet, like, it's just it's not good. Okay? So that's that's the market we're in, and that's what this episode is about is the market update. So I just wanted to share all these things with you.
Scott Dillingham:Of course, give us a call. The link to our site, and everything will be in the show notes below. Book a strategy call. There's no obligation. Okay?
Scott Dillingham:You'll be speaking with an expert on my team, and they're gonna dive into your scenario with you and let you know what the options are. And if you like the options, obviously, then we'll we'll move forward. But thank you so much for listening. I really appreciate you. If this show was valuable to you, please share it with a friend.
Scott Dillingham:Please follow the show. It helps us to grow and to help more investors to grow as well. Okay. Thank you so much. Take care.