Podcast 22: Getting Creative in the Housing Market with Glenn McQueenie
Podcast 22 - Getting Creative in the Housing Market with Glenn McQueenie
Most people that think they have lost their chance to build wealth in real estate, but there is still opportunity to win in this market. You just have to get a little creative.
Does it have to be one house, one family anymore? Will sellers buy down mortgage rates? Developers putting in second dwelling units? How about seniors with lots of equity in their homes? Tenants in non-rent controlled buildings?
There are so many possibilities given our current landscape. It's no wonder why Glenn calls it a crisis and an opportunity at the same time.
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Gleen McQueenie, guys! He's like, Majority owner of founder of a brokerage. Hmm. Wealth of experience. 30 years into the business. More than 30 years. 33. 33. You've seen a lot. I have . I've seen a lot. You're surprised by this market? Well, no. You know, I was just lucky. Be, well, maybe it wasn't lucky, but when I came into the business in 1989, It was like a rising market.
And then when the market turned in 90 and then was down for the next couple years, um, I was a little bit frightened because I just started, you know, I just finished it was my, um, my job. I guess I just finished university. But there's a certain gift to like a shifted market too, where it gives other people the opportunity to get into the market and it gives even agents, I was just young, an agent at the time.
Um, A chance to go and help more people because so many agents got out of the business, you know, so mm-hmm. , um, and you got to learn so much about, from creative financing, to pricing, to staging, to dealing with power sales relocations. Like, it was just amazing. So I think it's, um, I think just all knowledge is.
Mm-hmm. there opportunity as well too, I guess, right? There's, yeah. I think we could call it a crisis opportunity. . Okay. . Or a crisis opportunity, you know, because every crisis is just really just, um, giving everyone else a different opportunity and I think. For most people who think they have lost their chance to build wealth in real estate, that this will go down as the biggest wealth transfer right now that's ever happened because there'll be some people who are over leveraged who are giving up wealth, and there's gonna be a possibility to really get some more value in the market and to build your own wealth over the future.
Okay, so with that, who do you think is winning in this market? . Yeah. I think you just have to pick who wins, right? So I think the first person that wins the most right now is someone who's got a, a condominium in downtown Toronto where prices really not dropped, maybe seven, eight, 9%. Most Uhhuh . Um, so they're selling their condo for 8 50, 9 50.
Um, they probably bought it for four or 500,000. Um, they had a good mortgage rate on. and now they want to move to Markham or Richmond Hill or New Market. Instead of paying 1.8 million for a detached home, they can get in there for 1.2 or three. Yeah. So instead of having a delta of a million dollars, It's only a 300,000.
And if they have an existing mortgage at 1.9% and they're only adding 300,000 more at 4.6 or 5%, they're gonna end up with a 2.4% mortgage. That's right. With a rate, yeah, with a blended rate. So I think that's who wins the most for sure. Um, and I think the other people win is we just have to start getting a bit more creative how we think about real estate.
Like does it have to be one house, one family anymore? . You know, I think about, uh, the TV series, the Golden Girls, and if you remember the Golden Girls, you know, it was four unrelated females move in. They all have their own bedroom and bathroom, but they share, you know, the living room, kitchen and family room and hilarity and suits, right?
that's the one on premise. Um, so, you know, I think about my own mom who lives in a condo and in that same building, seven of my other friends have their. Living there. Right. And they're all paying separate maintenance fees, separate utilities. And the other thing they have in common is they're all lonely, right?
And I think who wins is if we could start getting some people like that living together, um, and they just want to chat. You know, my mom doesn't say 20,000 words every day. She goes crazy, right? . So she just needs someone to use her words on, you know? And I think the other people who win is, what if I. Like four people who were thinking about buying a condo, they went in together and bought a fourplex.
Yeah. And they agreed that they were gonna live there for five years. Yeah. And their caring costs would be half of what a condo would be. And the appreciation of a fourplex is like double that of a condo. Right. You know, so it's like, and most of the fourplexes are in all the great neighborhoods, like they're all next to subway stops.
Mm-hmm. , you know, and they're next. They were built right on transit and they're usually in really great walkable neighborhoods from blue or west to Danforth, to Eastside, central Toronto to, you know, Meco, you name it. Like they're in the great, the beaches. They're all in the great neighborhoods. Yeah. Now as of right, you can do a threeplex, right?
Or try. Yeah. So that'd be nice in. Well, that's a game changer again. I'm glad, I'm glad you brought it up, because you know, before you could have the neighbor saying, I'm not letting you do that. Right. And now when they basically said it's as a right zoning, which means if I want to convert my home into three units, I have it as a Right.
Yeah. Nobody can object. And it's the same, it's like, Building a deck is as a right, as long as you just fit in, you know, to that. Um, and I, I think that's the, that's the key. Did you also see that today they announced that the, they don't have rooming houses as long as it's like it's gonna be licensed or whatever.
So no issues with zoning again and, uh, in Toronto, that's, uh, that's gonna be. Different as well too for, you know, cause there's a lot of people that come in from Immigra to Canada and they come here with a sticker price shock of Wow, it costs how much to get to place. Mm-hmm. . And they're all looking for roommates as well too.
But it's, you know, it's hard to find a roommate if you're coming from a different country. Yeah. So, um, yeah, if you get a roomy house for 900 bucks, a thousand bucks a month or whatever, . It's like the Golden Girls model, like you were saying. Exactly. You don't know each other. Yeah. And you're got your own room and you can go and, you know, you know, we've had rooming houses in Toronto for 130 years.
Like this is not a new concept. And it was a place where people could go and get their start, you know? Um, and right now we've just created, uh, almost an atmosphere where Alberta can. About how cheap it is to go to Albert Alberta. Yeah. You know? Um, but who else wins too, Ken, right now is if you've got a detached home, not only could you turn that into three units, but let's say you didn't want to, let's say you just want to put in a basement apartment.
Yeah. Or two basement apartments. And now you can put in an accessory dwelling unit Yeah. In your backyard as a Right. You. And I know, um, like there's some people that they can install them cuz they're all modular now in about six hours. It's put into your backyard and, you know, it's great for the environment.
They just have to connect to the sewer and the, um, the water and the electricity, uh, lines and. I know of another person right now who's building one, and it's costing them about 165,000 to build just under 500 square feet. That's key, but they're gonna be able to rent that, and this is in Windsor for $1,300, which means it would be $1,800 in Toronto.
So I'd rather rent a coach house with a backyard that I could sit on my deck or whatever I wanted to do. Then be in a tiny 4, 382 square foot box in the sky at $2,700. You know? So in theory you can get the triplex going and then add the ADU afterwards. Yeah. And do four units, right. In a, in a property, a single family property.
Right. And yeah. And what if you bought the fourplex and then you just finance the um, The, this rental, um, the accessory dwelling through there and you just took all of that rent and it would probably pay for itself at 2000 bucks a month in seven or eight years. Yeah. Completely paid off. And because so much of it's going directly to the principal all the time, your amortization is gonna be shorter too.
So I think that's just another opportunity for someone else to win. . Yeah, yeah, yeah. Those are only people that are, you know, even an interest rate environment like this. It's just a short term, you know, one, two year, whatever, how long it's gonna take to, hopefully it comes back down a little bit. Reverse the mean.
So, um, if you can just get in, well, the prices are loads, everything's on sale, you know. Yeah. Well, it's on sale and the rates are not that bad. Like, you know, 4.65%, you know, uh, residential too for residential, you know, and when I started, um, they went from 7.9 up to 59.9. And I think what you're going to see here, um, depending on high rate, how high rates go is you're gonna start seeing builder.
now where you're gonna see sellers offering to buy down the interest rate. Like every house I sold at 91 92, um, it was the seller agrees to credit the purchaser $20,000 on closing to buy the interest rate down from 15.9 to 9.9% just so they could qualify. Right. And a lot of the banks were like, we're not doing that yet.
I'm like, well, it's coming. Like you're gonna have to. Right. And a lot of the builders are doing that now. In fact, you know, builders can win too, because, They're sitting with some unsold inventory right now and um, I was talking to one the other day where we showed it. I said, how much is it to build this?
And he was like, $48,000 to put in a basement apartment. I said, if you put in that basement apartment, the purchaser now qualifies for $200,000 more in your house. Mm-hmm. , you could even raise your prices a bit more. Um, raise it up to a hundred, spend the 48 on, on this, and everybody wins because now the purchaser, um, is gonna get 12 of $1,500.
You know, so I think they win. Um, . Yeah. And I think, you know, even people who wanna downsize now, like a lot of seniors, um, they can win now because they might not have got peak, peak price, but many of them bought it when their house was 13,500. Yeah. And instead of selling it for 2 million, it sells for 1.6 million.
but now they can take all that money and put it in the bank and be guaranteed 4.5% in a treasury bill. Uh, you know, so they win now where before they couldn't cuz they'd take all that money out and they were only gonna get like half percent in the bank. So I think Downsizers get to win on, on this. Um, and I think, um, if you're a family with young kids, uh, you know, , you can't wait for the market to come back around if you want to get your kids into a great school district right now.
Mm-hmm. . So this might be a chance for them to get in there because prices have come off 10 or 12% depending on, um, At least probably in some of the, the key neighborhoods. And so now they can get in there a little bit cheaper and they're probably gonna be moving up. So they'll be similar to those condo people we talked about where it's just the additional cost is at a higher interest rate, not the whole mortgage.
Sure. Yeah, if you're on a fixed mortgage, you can port it right. Some people where you can't port it, but, uh, yeah. Yeah. And you know, I'll tell you, national Bank, they, they sent this because all mortgages used to be portable. Right, right. As long as it had the same ratio of value, debt, equity ratio, you know, to the property.
and National Bank, I guess, had come out, um, and said, we're not gonna do that anymore. And then they got such big backlash. I think it was just this week. They said, oh no, no, , go move your mortgage . Yeah, yeah, yeah. So it's great. I think they win. And then I think, um, uh, tenants can win now because, , they're in a really precarious situation right now where if they're not in a rent controlled building, the, the landlord can raise the rent from 2,700 this year to 3,400 next year.
And, and if you don't pay it, there's a lineup of people who are c desperate to pay it. So if the tenants want to be in control of their life, this is a great opportunity for them to, uh, partner up with maybe two or three friends and go buy a trip plank together, or buy detached. or buy detach and put it into three units.
Right. And still put the basement apartment in. And they'll still be way cheaper owning that house and paying their own mortgage than if they were to stay at the risk of that landlord maybe. Oh, I see what you're saying. Yeah. Or they could stay in place, continue renting at the right control building, and then invest in the market when it's down a little bit as well too.
Um, if they're in a rank controlled Yeah. Yeah. But I was talking Yeah, more if they weren't, you know, where, just arbitrarily, cuz there's a lot of units now that are not covered by rent control. That's right. So, cause everything's going up by 20, 25% year over year. And, It's not a top immigration, people are still coming in.
We need the immigration. They could, you know, so that's not gonna go away anytime soon. So there's definitely a floor in the pricing for sure. Yeah. And you know how many, um, renters can go to their boss and say, Hey, listen, if you don't gimme a 20 or 25% raise, I'm out of here. Like . Yeah. You know, like they can't, so they, there's no elasticity for them to go and even try to pay it.
Right. And um, so I think this is a great time. , um, people who are renting right now to maybe just think about getting together and it's just a five year plan. Go buy something for five years mm-hmm. , um, and take all of your rent. Um, and, you know, you'll be paying less, I'll guarantee if you buy a house with a few friends.
Mm-hmm. . And, um, you know, like there's some, there's a property now just on Avenue Road north of, um, upper Canada College, and I think it's. , 3.2 million, 3.4 million, but it's five units. Mm-hmm. , that's like five, $600,000 condos. And there was a place just by sporting life on Young Street on Strat Gallen, I think it was, and they can Google it if they're, I think it was called for number 42 Strat Gallon, and it's sold for 2 million and it was four one bedrooms.
And I was like, well, that's perfect, you know? Um, like couldn't four single people buy all of that and pitch in $500,000 each. , and I'll guarantee you that it, it's, they can't get a, any condo that they probably like for 500. And so I just think they would win. And you could still put in an accessory dwelling unit in the backyard, and if those places, usually it's say 18,000, 1500 bucks a month to probably cover your taxes and heating and water.
Um, the accessory dwelling unit could just cover that now. Yeah. So I just think there's a, there's always. In crisis. There's always just some great opportunity in this market. And what would you say to those people that are already holding property and are maybe underwater their interest rates, they've hit their trigger rates and they have to increase their payments, all that stuff.
Well hang in, right? It's gonna be a wild ride. Well, it's a cycle, right? Yeah. And it, and I don't think anybody really knows where the economy's going now. and, and there's two camps, like one, it's like gonna be short, shallow recession. Year, year and a half. Hold on. Others are, this is more structural. It's gonna be seven to 10 years.
Uh, and we don't know. I do know in 1990 that when the market corrected, it took until 2002 for the prices to go back to where they were in 1989. Right. So that was 12 years, which surprises most people. But I think just hang on right now if you can. If not, it's okay to downsize, you know, um, uh, and get to where you need to be.
Um, but maybe you could even, maybe there's a model where if you sold your place, we could find you something where we could, it's got a basement apartment already that's gonna be cheaper for you for the next five years. Um, but we'll still probably hold its value. Well, and we can put in an accessory dwelling unit.
You know, I, I just think this is the era over the next five years, you're gonna see more creativity in real estate space Yeah. Than you've ever seen. And I think relying on the government, like, you know, I'm apolitical, but to build 1.5 million homes in. 10 years when the most we've ever really built is 70 or 75,000 in the year is just unrealistic.
Almost 40,000. Yeah. Yeah. And I think if we count on the governments to really do much, I'm not sure. I think that the, you're gonna see the private sector will innovate like it's never done before. Yeah. And um, the technology behind a lot of that is this modular construction where they can actually, um, it's much cheaper because you don't have.
The very expensive trades working on the house as they're building it, and it's done in the factory, can be put up in a week. It's climate control too and all that stuff. So yeah, that's on the supply side. And then I, I think there's gonna be some innovation in the, in the lending side as well too. There has to be absolutely.
You know, maybe they bring back longer ization. There's a lot of rumors talking about 40 year amortizations as well too for residential mortgages and. . So, um, you know, they didn't drop the stress test today, which kind of, uh, is annoying, but, uh, it is what it is and it's us for good reason anyway. Mm-hmm.
but I, I think there'll be a lot of innovation in the lending industry and then, , you know? Yeah. So let's see what Absolutely. Yeah. I think they're, you're already starting to see some of it and a lot more creativity in that industry than there ever has been. And I think there could even be, um, opportunities for your, your clients where they're, um, they're willing to put up the money for the house and someone is willing to put the mortgage in their name and their joint.
Um, they're just a joint venture investment. Mm-hmm. , where they've got some extra capital and that person is responsible for maintaining it. But instead of it being like a rent to own, you know, where you overpay and rent and you get it back, that no, it's just like I've, you know, it's a five year plan.
We've gone and I'm gonna put down the down payment and we're gonna sell 'em five years and we're gonna share the differences. So I think, um, you're gonna see a lot of that joint venturing, I think. Um, and I think even parents should actually be joint venturing with their kids instead of just giving them the money.
Just joint venture it, because then you're stilling control. Right. You know? Um, so yeah, I think 2023 is gonna be a year of a lot of people winning. Yeah. There's a lot of capital in the world still, and a lot of equity, like different from the eighties, right? Like the, the values went up so much because, you know, the prices went up recently.
So Yeah, there's a lot of equity in there, so, yeah. And I think had this steepness of how severe the rates went up, um, will also be the steepness of when the rates go down. You know, like Right. You know, it's, this hasn't been like a long slow build. This is like, Uh, this is like maximum pain in four months.
And then, so I just don't know. Um, you know, we have a lag of six to nine months until they really figure out what the, uh, impacts are, but it's, the rates going up so much. I, I, I saw a stat the other day that Canada, where, you know, 7% inflation rates or whatever, but there's parts of the world was like 250% interest rates like Zimbabwe and other places like, you know, I think it was Turkey or something.
It was like 80% inflation year over year. That's insane. And some people, like a friend of mine was telling me in Lebanon that, um, they only have electricity during the day. Daytime at nighttime, they completely shut the grid off because of their, their energy crisis in the, in the Europe over there. Yeah.
So we're pretty lucky. Yeah. So people complaining about high interest rates. Yeah, it sucks, but we're not that bad overall. In terms of inflation? Yeah, I think, I think the reason people are complaining is maybe two reasons, and I think they're very well found at Ken. Number one is, you know, this 6% mortgage feels like your parents 12%, because the prices are just, there's more to mortgage, so the shock is bigger.
Right? . And um, secondly is most people we've had 25 years of really pretty good growth, right? Or 20 at least, um, with no real recession. A little dip in eight, a little dip in 17. But, um, so no one's really ever seen this, and we, they certainly never, you know, if you're under 30, you've never seen rates this high ever.
Mm-hmm. , you know, um, so we get used to it. Um, so, you know, . So what? It's a cycle . Well, no, and I, I, I, I mean that's, I'm not, I'm not being cavalier about it. I just think that we have to just, um, people tend to underestimate, um, or overestimate what they can do a year in a year or under, and. , but they under underestimate how they can build wealth over their lifetime.
And I think that the real message here is just try to chill out and hold the fort right now. Um, try to cut your personal expenses by 2020 5%. Do whatever you need to do right now because we'll get through it and what goes up, comes down. And, um, but in the meantime it's, it's a great time to buy. Like, you know, you're not, it's so crazy how in January, people were fighting over each other, 30 people to buy a house.
And now when the prices have dropped 1225, 40%, in some areas, people are like, Ooh, I'm not so sure. And I was like, no, no, no. Now all the wealth gets created in the down market, never gets created in nut market. Right, right. Yeah. No one ever bought like Nortel at the top and got wealthy , right. If you're old enough to know what Nortel is, , right.
You know. Um, Blackberry. Yeah. Blackberry. Yeah. Um, all the wealth creation just gets created when you just understand the basics. And the basics are inflation rates to go up and down, and that is the gear. The biggest influence on the Bank of Canada. And in tough times they're gonna flood the money with cheap capital and other times they're gonna raise it and restrict the money supply and you understand that.
And unemployment rates, um, you know, we still have a labor shortage. Mm-hmm. rates aren't fall, like wages aren't falling. If anything, we're going up quicker than they ever have. That's kind of scary. And. , um, our gross domestic products still pretty strong, you know, like we're doing very well. Capital capital's coming down just cause all immigration.
That's why the GDP is, yeah. Yeah. That's extreme negative. Well, that's okay. Well it does because, you know, we have a, a, you know, with three to 500,000 new immigrants coming, they're not starting at the top of the wage sector and some of them are not at the most productive capacity yet. Yeah. Um, but, um, one of great gifts.
Yeah, and I mean my parents were immigrants. They like we're all, I think the beautiful thing about Toronto now as I heard is I believe that it's like 54% of the population wasn't born in Canada. And Nice. I think it's one of the best case studies on how everyone can get along and we're basically, you know, we can respect each other's differences, um, but just really function very well.
In this great country. Okay, so there's a lot of predictions. There are a lot of bold predictions. Last time we talked in 2017, literally six months later you predicted this, uh, fair housing accident. You said some government intervention was coming up and then they had the Fair Housing Act. That was pretty impressive actually.
So hockey probably might Yeah, no, you knew they had to do something. Right. And, but you can see that the, when the government can really distort a market when it brings in stuff like that, . Yeah, that was, that was huge. And I, I, I couldn't believe how fast they increased the, the rates this time around too.
So it, uh, definitely no one was expecting that. So it's, uh, yeah, definitely killed the market a little bit. But like you say, there's opportunity and, uh, well, I guess we'll see what happens with creativity and the construction industry and the real estate industry and lending. Whatever, right? Mm-hmm.
materials, labor, whatever. So there's definitely gonna be, you know, at the end of the day, we all need somewhere to live and do business. We need somewhere to sleep and we need something to eat. And that's our core necessities. And I don't think that'll ever change. And so I think a lot of people who can win in this market, there can be some people who are gonna lose too.
Like if you bought January and February and you're on a variable rate mortgage and rates just went up, it's, it's pretty painful right now. It's gonna hurt. But, um, so yeah, you're going to have that. But you know, in an up busy market, there was people who were losing too because they were only qualified for 600 and everything went up to eight or 900,000.
So, um, it's gonna be okay. Buying barrel came down. And I, I think that, um, right now there's still a floor in, in the prices. I mean, let alone inventory drink, uh, shrinking because nobody wants to sell a low market. Mm-hmm. also the, the amount of immigration coming in as well too, and the demand for housing and then also the supply shortages too.
Like builders aren't building, there's a lot of canceled. Like the housing starts is lower than normal. It's the lowest ever been really . So we're gonna have this problem in, in four or five years when more and more people coming in, but they have nowhere to. I think you just nailed it. That is the, the story.
As much as the media says, oh, real estate, we just talk about supply. It's like, well, because we understand the law of supply and demand, and when you cut back on the supply and you increase the demand by bringing more and more people to fight for the same product, then the prices are they, you know, They don't go down.
Right, right. . Right. So, and they're certainly not building, I know a lot of the, uh, apartment instruction that was scheduled, they just, they yanked it. We're not building apartments. We're not building rentals right now because we have no guarantee on financing, number one and two, we have no guarantee on capital costs.
Right. And, um, so they're not gonna build. So yeah, I would just, um, Tell all your amazing clients, just, um, breathe . It's gonna be okay. And again, I'm not being cavalier about this. I just think that, um, there's some great opportunities for people to win right now, um, in this marketplace. And, um, your job is to decide if you want to capitalize on them right now.
Yeah. Yeah. Yeah. Yeah. Anyway, thank you for the great insight again, and uh, look forward to seeing this. Thank you for all, so for being so amazing and, um, just taking care of your buyers and sellers at such high level. So cool. Thanks. All right. Thanks for listening guys. That's awesome.