Even with today's lowest "A" lender rates, getting positive cash flow out of most new rentals is like milking a stone. And, it gets that much harder when you borrow at non-prime rates north of 6%.

That's partly why elevated rates are hammering investor-heavy pockets of Canadian real estate (case in point: Toronto condos).

The bad news is that people are starting to dump Toronto condos like stolen goods. The good news is that opportunities will come of it. History shows that when Canadian housing markets with high net migration get battered, they typically (not always) bounce back strong, often with V-shaped bottoms.

Zero in on the GTA, for example, where fear of a condo market crash is being stoked by:

• Plummeting condo sales
• Record condo resale listings
• Soaring rental listings
• 81% of mortgaged investors bleeding cash in the first half of 2024, according to an Urbanation-CIBC report last week.
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When people say GTA condo sentiment is bearish, they don't mean Winnie the Pooh bearish; they mean ferocious Kodiak bear on a bad day bearish.

And that's precisely what you want to see as a new investor playing the long game, because rates won't always be this high.
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Calculating well-capitalized investors look past short-term drama to long-term fundamentals. They know that with:

• Dipping rates
• Sturdy, albeit slowing, population growth
• A future crimp in supply thanks to today's slack in condo projects, and
• Solid rents...
  
  ...the market will bottom out—thus setting up a potential once-in-a-decade entry point for well-prepared buyers ready to pounce in the right places.

Who knows when it'll happen (perhaps by sometime next year?), but real estate investors will ultimately spot the tell-tale signs of a turnaround: stabilizing prices, rebounding sales volume, decreasing inventory, and the media easing off apocalyptic reporting.

When that shift happens, investors will want to have financing lined up. Bargains are easier to snag if you're fast and buy without conditions.

For the cream-of-the-crop borrowers (e.g., those with less than a 44% #TDS#, 20% down from their own savings, etc.), that's no concern.

But imagine sauntering into a Big 5 bank, then asking that bank to finance a rental in a company name at 80% LTV, with salaried income, a 60% TDS and a gifted down payment.

You might as well ask for a map to Blackbeard's Treasure while you're at it.

The question: Where do salaried investors, constrained by traditional underwriting limits, turn for rental financing?

The solution: One option is to pay a tad more and snag a deal with an alternative lender. Both Home Trust and Equitable entertain rental deals for salaried borrowers who need underwriting flexibility. Here's how their programs stack up and when they make sense:

Canada's rate outlook shifted a bit after Wednesday's BoC rate cut, and that shift benefits rate floaters.

To paint the picture, here's a hot-off-the-press chart of the forward rate outlook from CanDeal DNA.

Canada's stretched-thin homeowners caught another break from our central Bank today. Team Macklem dialled back the overnight rate to a breezy 4.50%, setting up a drop in benchmark prime to 6.70% tomorrow.
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The move will:

Artificial intelligence isn't new to Canada's mortgage industry. It's been around since at least the mid-1990s.

CMHC was an early adopter of AI-like systems in 1996 with its revolutionary emili automated default insurance underwriting system. emili zapped approval times from snail-paced days to lightning-fast seconds. For mortgage consumers and originators, it was like going from dial-up to broadband.

For most mortgage professionals, the real "aha" moment for AI didn't hit until 2023. That's when ChatGPT changed the game. By leveraging high-power chips and training its sophisticated model with massive datasets, AI could instantly process answers based on billions of parameters.

Fast forward to today, and, for the first time, AI is creating possibilities like self-teaching automated underwriting bots, predictive default analytics based on a borrower's entire online profile, and eerily human-like voice-based advice.

To delve into how AI is changing mortgage lending, we spoke with Subodha Kumar, Ph.D., the Paul R. Anderson Distinguished Chair Professor at Temple University. Kumar's specialty is AI disruption, including in the mortgage business. He's been ranked #1 worldwide for publishing in Information Systems Research.
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"We've partnered with some of the largest banks in the world, like TD Bank and Wells Fargo," Kumar says. As we speak, he's helping those banks harness AI to radically improve the customer experience and shave millions in costs.

From his treasure trove of experience, Kumar gave MLN a peek at seven AI game-changers for the mortgage business.

Heading into this week's rate council huddle at the Bank of Canada, mortgage borrowers wield four pressing questions. Let’s unpack those with some likely answers.