59: How Commercial Lending is Impacting the Every Day Consumer with Will Pigott

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back to the Kelowna Real Estate
Podcast.

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I'm mortgage broker host, Taylor
Atkinson.

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And I am your real estate agent
host, Matt Glenn.

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What's going on, Taylor?
Yeah, having a pretty good, you

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know, Good Friday, actually.

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So we're recording this intro, but

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yeah.

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Easter Easter weekend is here, so

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everyone gets a bit of a break.

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Yeah, Great Friday.

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My son was born last year on Good
Friday, so I renamed it to Great

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Friday.

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Nice.

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Yeah, the last year was april 7th
so i've got a couple of weeks

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still or 10 days or so yeah yeah
no i'm looking forward to that

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birthday party yeah good yeah
we've had two one-year-old

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birthday parties in a row when you
have a one-year-old you'll have

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lots of friends that are also
one-year-olds so you go to a lot

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of baby parties and it's awesome
at least i'm looking forward to

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that birthday party yeah good
short you know it's like a

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two-hour window because everyone
has a nap schedule so it's like

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yeah they're short there's short
there's drinks there's cake and

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you get out of there yeah it's
actually okay well what's going on

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i mean it seems like every day
there's legislation changes and

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new bills coming out so what's
happening yeah so the renter's

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bill of rights proposed so this
will allow the renters to use

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their rental payments that they
make as their credit score when

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they're looking for a mortgage to
eventually get into the housing

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market.

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Landlords will have to disclose

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what units were previously rented
for.

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And a standard lease agreement
nationwide.

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Yeah, standard lease agreement.

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But like, BC has a pretty strong

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lease, so like I think if
anything, it's going to stay the

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same, if not get a little weaker.

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Can't imagine it gets any weaker,

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so it's probably going to stay
very similar.

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I mean...

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I'm okay, I think, with the

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standard lease agreement across
the think the standard lease

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agreement's fine as long as it's
decent and protects both parties

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instead of in BC where it just
really protects the tenant.

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I mean, if I was in Alberta, I'd
probably be pretty upset because

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the lease agreement- Well, that's
what I'm saying.

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Are they going to make the BC one
stronger?

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There's absolutely no way that
Alberta is going to love that.

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Well, I mean, is also just a
standard lease agreement, but they

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don't have rent control?
Or are they talking about like the

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same rent control across Canada as
well?

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Yeah, I guess we have the
Residential Tenancy Act in BC.

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So it would just be the lease
agreement, not the whole act,

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obviously, across the country.

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Yeah.

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But I mean, the lease agreement
for BC we get from the tenancy

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branch branch anyways, but yeah,
we do not oppose to the standard

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lease.

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I'm not opposed to the credit

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score.

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I think that's actually a decent

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idea.

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They've been talking about that

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one time.

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My thought when I heard the credit

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score thing was like, man, it
doesn't, this is more leverage for

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the landlord.

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Like, listen, don't ruin my place

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or I'm going to give you a
terrible credit score.

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But then you were saying that it's
automatic reporting from your

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digital payments or from your
electronic payments.

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I that's how it's supposed to be.

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But I mean, policing any of this

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is going to be like so time Even
me just thinking about this is

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crazy.

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How much money is it going to cost

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just to push paper to get this
Yeah.

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And then disclosing rent for the
previous history really doesn't

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achieve anything.

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It doesn't help anyone negotiate.

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I mean, none of this really makes
a ton of sense.

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Again, to me, it's like they're
grasping at low hanging fruit

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media straw just to act like
they're doing something.

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But the resources that they'd be
spending on this is just insane.

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I would love to see the budget,
the man hours allocated to it,

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because I feel they could probably
build a hundred houses instead.

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Way more than a hundred.

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A hundred houses a day.

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Yeah.

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It just, I don't know.

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It's chaos.

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We had an episode, what, about a

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month and a half ago, Nicole
Watson came on, CPA, accountant.

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We spoke about- Yeah.

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I saw this.

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i was thinking about her yeah bear
trust agreement which like put

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accountants under a ton of stress
over the last couple months yeah a

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ton of stress over the last couple
months put everyone under a ton of

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stress like listen i was calling
clients like you co-signed on this

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one you should call your
accountant yeah and everyone was

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working on this until a few days
ago yeah and now they've just like

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decided to change it again well
because they cause they realized

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it was insane.

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Like I don't even know how many

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thousands of houses would not have
reported that they co-signed or

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that they were, had a 1% name on a
title.

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They had no idea.

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I never thought about it.

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And now they got these tax rules.

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was also a slight revision on the

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short-term rental legislation and
they kind of broke down.

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Like if you were operating before
December 2023, and the building

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has a front desk and like a couple
other little requirements, then it

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potentially could continue to
operate in the future.

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And like, I think that's great.

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That's positive.

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But stop changing your mind.

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Like, I can't keep up.

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I Is that supposed to come in May
1st?

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Like that whole thing?
So it is.

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I guess they can't change their
mind now.

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Yeah.

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Yeah.

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I appreciate that step.

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But I think they're opening up a

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can of worms like they're giving
themselves you know more thread to

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pull on and then what was that
thing beside the ramada they're

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gonna build that little yeah for
short term renting oh yeah what

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yeah same mark anthony group which
is great like a 12 story kind of

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boutique hotel well well something
honestly we've talked about this

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before something needs to happen
with that site sure my god i think

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originally it was like a four to
six story kind of wine tasting

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venue, like, you know, a great
little spot.

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And I would probably do the same
thing if I was a developer and I

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knew that short term.

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But why are we like taking those

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units off and then building?
It's just, it's tough, man.

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I'm exhausted.

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Yeah.

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But yeah, to focus on some more
positive news this week, Century

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21, who sponsors this show and
every show moving forward, threw

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on a great award ceremony at Mount
Bushry Winery.

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My My God, they throw a party.

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Yeah.

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It is awesome.

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Yeah.

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Yeah.

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Where were we?

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Mount Bushry at the Modest
Butcher?

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Yeah.

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I guess the Modest Butcher was

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upstairs, but we had a fantastic
party.

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Wine was flowing all night.

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We gave out our awards.

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And like, I've played hockey my
whole life.

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I have a lot of trophies.

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I have never got trophies like

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these trophies, man.

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These are quality trophies.

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They like have some girth.

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They have some weight to them for

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the Centurion Awards.

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So that Yeah.

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a fun night.

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Everyone, I think, had a great

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time there.

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Yeah.

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Judging by social media after,
everyone had a great time.

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to you and my wife, Emily.

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You guys both did a fantastic job

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last year and got some
acknowledgement for it.

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Now you're making me kind of
think, though, like I played

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sports my whole life, too.

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And I think I got some T-shirts to

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show for Yeah.

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Honestly, Emily and I are at the

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best brokerage there's no doubt
about it that night i actually sat

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back with my wife we got our spots
right by the bar so it was perfect

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the food just kept on coming to us
and also everyone had to get

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drinks so we just got to talk to
absolutely everybody in the place

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over and over again and i just was
thinking like we have something

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good going on at this brokerage
and i love it if you're looking

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for a change or you want some more
help like give max a call or give

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me a call like Like I can't say
enough about it.

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I just love it.

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Or if you just want like a good

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party and wine and yeah.

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Yeah.

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Heavy award.

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award.

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So going into show, well, today I
guess we brought on Will Piggott.

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He's a friend of mine.

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I was introduced to commercial

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mortgage financing broker.

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He used to work for one of the

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very large banks, a of creative
deals.

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He's recently changing over to
commercial real estate agent.

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So we're kind of in this
transition period, but had some

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great insight on some regulation
changes that came in from the

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lender perspective and why they've
kind of tightened their asset

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portfolio a little bit yeah but
things that were like not everyone

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in the public would know it but it
has major implications for like

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the housing market and you just
it's one of those things that

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happens you don't you would never
know until you talk to a guy like

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will yeah it was an interesting
episode Obviously, it was

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definitely in your guys' lane as a
lending more, but I loved it.

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Yeah.

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And I it goes hand in hand.

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And what we've said before on the
show is like, as the end consumer,

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you're never going to know all of
this information, even as like a

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mortgage broker.

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I'm not going to know all the

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rules of a real estate agent and
vice versa.

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So you just really got to work
with people you trust and rely on

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them to have your best And it was
interest.

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really fun to so, chat yeah, to
people you trust and rely on them

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to have your best interest.

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And so, yeah, it was really fun to

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chat to about that kind of stuff.

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Amen.

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Like, honestly, it was like, I
just did not know.

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It was like I was getting smacked
in the side of the face with

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information.

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You kind of think as an agent,

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like, I know what's going on with
mortgage broking.

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Obviously, you kind of know the
basics.

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But then you have a conversation
like this.

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And it's like, yeah, this is why
you have professionals.

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No, and just in general, I mean,
he's an awesome guy.

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He's out ski touring and living
his best life.

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So yeah.

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If you want to talk to him about

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some commercial financing stuff
and or commercial purchases or

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selling or whatever, yeah.

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Reach out to him.

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He's, he's a good guy to chat to
and have on your contact list.

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So enjoy the show, guys.

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Happy Easter.

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Yeah.

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And congratulations for your work.

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again, Matt, thanks for coming on
the Hey, man.

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Will, show, welcome Yeah, to the
show.

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Thanks for having gents.

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me, This is awesome.

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Yeah, so how we like to start our
show is just kind of what does

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your perfect Friday look like?
This is a Kelowna real estate

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orientated show.

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So a bit of business and then

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leading into the weekend, having
Yeah, totally.

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So I usually start my day at 630,
try and get to the gym.

250
00:08:11,232 --> 00:08:15,053
I find a little exercise really
starting the day with purpose

251
00:08:15,053 --> 00:08:19,246
really makes a big impact on my
focus for the day.

252
00:08:19,246 --> 00:08:20,625
Usually try and skip breakfast.

253
00:08:20,625 --> 00:08:21,718
I'm kind of a half-hearted

254
00:08:21,718 --> 00:08:22,229
intermittent faster.

255
00:08:22,229 --> 00:08:24,271
I don't let it control my life,

256
00:08:24,371 --> 00:08:36,740
but if I can make it till noon
with a cup of coffee without

257
00:08:36,667 --> 00:08:37,710
eating and it helps me, I don't
find the energy impact is too

258
00:08:37,690 --> 00:08:37,740
significant.

259
00:08:38,640 --> 00:08:43,900
So my role is kind of a mix of

260
00:08:43,763 --> 00:08:44,190
business development and credit
underwriting.

261
00:08:44,120 --> 00:08:45,783
So if I can mix in both within a
day, I'm usually feeling pretty

262
00:08:45,778 --> 00:08:45,978
good.

263
00:08:45,908 --> 00:08:46,525
So maybe the morning's hammering

264
00:08:46,525 --> 00:08:48,155
out some client meetings or some
cold calls in the doing afternoon,

265
00:08:48,085 --> 00:08:51,174
a usually underwriting, feeling
pretty So maybe the morning's

266
00:08:51,174 --> 00:08:51,246
good.

267
00:08:51,246 --> 00:08:52,598
hammering out some client meetings

268
00:08:52,698 --> 00:08:53,524
or some cold calls.

269
00:08:53,524 --> 00:08:54,200
In the afternoon, underwriting,

270
00:08:54,200 --> 00:08:56,312
doing a little bit of analysis.

271
00:08:56,312 --> 00:08:58,168
And then in the summertime, if I'm

272
00:08:58,168 --> 00:09:01,944
on the golf course at 3.30 with a
client, that's usually a nice way

273
00:09:01,844 --> 00:09:04,146
to mix in some business with
pleasure.

274
00:09:04,146 --> 00:09:06,632
I haven't quite figured that out
for the winter months.

275
00:09:06,632 --> 00:09:09,200
Got to find some prospects that
love skiing as much as I do.

276
00:09:09,200 --> 00:09:10,341
Get the sim.

277
00:09:10,341 --> 00:09:11,100
Yeah, that's the 2025.

278
00:09:11,100 --> 00:09:12,662
That's on my hit list.

279
00:09:12,662 --> 00:09:14,419
Well, I mean, i'm a client that

280
00:09:14,419 --> 00:09:18,496
loves to ski hey man we gotta make
that happen i see your instagram

281
00:09:18,496 --> 00:09:21,569
stories you're out there shredding
powder all the time and you know

282
00:09:21,669 --> 00:09:24,840
here i am behind a just please i
love the business golf idea

283
00:09:24,840 --> 00:09:25,176
honestly i'm trying to embrace
that this oh it's the best way to

284
00:09:25,135 --> 00:09:25,400
get to know someone kind of at a
deeper level you know conversation

285
00:09:25,375 --> 00:09:29,037
evolves so much in four hours and
you can really see how somebody

286
00:09:29,037 --> 00:09:30,814
operates on the golf course,
whether they're a putter thrower

287
00:09:30,814 --> 00:09:33,167
or just like calm, cool, collected
I course, doing a presentation at

288
00:09:33,167 --> 00:09:36,377
my office last year, like probably
around this time, probably in the

289
00:09:36,377 --> 00:09:36,581
spring.

290
00:09:36,581 --> 00:09:38,610
I was like, my goal, I want to go

291
00:09:38,610 --> 00:09:41,148
golfing like once a week with
clients or random people and just

292
00:09:41,148 --> 00:09:43,804
meet people on the golf course and
know them.

293
00:09:43,804 --> 00:09:46,778
And I was like, and I have a baby
due in a couple of weeks, just

294
00:09:46,778 --> 00:09:47,222
immediate laughter.

295
00:09:47,218 --> 00:09:47,756
What's so funny?

296
00:09:47,754 --> 00:09:50,902
What's so funny about this?
and it turns out the whole year

297
00:09:50,902 --> 00:09:53,969
i've been golfing like two times
and they're both work events so

298
00:09:53,969 --> 00:09:56,929
like didn't get out once so but
this year this year is my year

299
00:09:57,120 --> 00:09:59,421
let's make it yeah life gets less
busy as your kids get older for

300
00:09:59,421 --> 00:10:02,693
sure i know okay well back
business, because some of us work

301
00:10:02,693 --> 00:10:04,081
around here, not like you two.

302
00:10:04,081 --> 00:10:06,245
So you work for a major Canadian

303
00:10:06,145 --> 00:10:08,385
Institute for Lending on the
commercial side of things.

304
00:10:08,385 --> 00:10:12,566
What have you kind of seen in the
landscape over the past year to

305
00:10:12,466 --> 00:10:14,629
two years?
Like obviously, you know, Bank of

306
00:10:14,629 --> 00:10:17,257
Canada has come out and, you know,
Matt and I are more focused on the

307
00:10:17,257 --> 00:10:19,375
residential side of things, but
the commercial point is very

308
00:10:19,375 --> 00:10:21,520
important because a lot of these
projects are being facilitated

309
00:10:21,680 --> 00:10:22,703
from commercial lenders or even
small business owners supporting

310
00:10:22,702 --> 00:10:23,042
the economy.

311
00:10:23,042 --> 00:10:23,970
So what's been your guys'

312
00:10:23,870 --> 00:10:28,577
position?
How's your portfolio look?

313
00:10:28,577 --> 00:10:29,718
Are you guys deploying money in
these projects?

314
00:10:29,699 --> 00:10:29,807
Yeah.

315
00:10:29,807 --> 00:10:30,803
So it's been, I'd say, a little

316
00:10:30,748 --> 00:10:32,142
bit slower in the last couple
months, for sure.

317
00:10:32,087 --> 00:10:34,625
But in part, the rising interest
rates have a lot of people on the

318
00:10:34,625 --> 00:10:34,916
sidelines.

319
00:10:34,916 --> 00:10:36,151
So maybe you're seeing certain

320
00:10:36,151 --> 00:10:39,317
opportunities that are slightly
more marginal, or it's just harder

321
00:10:39,317 --> 00:10:41,407
to debt service at the higher
borrowing costs.

322
00:10:41,407 --> 00:10:45,762
So that's definitely been a little
bit of a pullback on transactions

323
00:10:45,762 --> 00:10:49,795
taking place because people are
kind of waiting to see when are

324
00:10:49,795 --> 00:10:53,657
interest rates going to fall and
then maybe make a move then.

325
00:10:53,657 --> 00:10:57,097
But it's been a pretty dynamic
year, I'd say, for 12 to 18 months

326
00:10:57,097 --> 00:10:59,002
in the commercial banking side of
things.

327
00:10:59,002 --> 00:11:00,506
There have been some pretty
significant regulatory changes

328
00:11:00,406 --> 00:11:02,488
that have shifted how the banks
think about doing business.

329
00:11:02,488 --> 00:11:05,730
So Basel is essentially like an
international set of rules that

330
00:11:05,730 --> 00:11:07,649
all the banks have to adhere to.

331
00:11:07,649 --> 00:11:10,264
And beyond that, you've got OSFI,

332
00:11:10,264 --> 00:11:12,481
who is the Canadian banking
regulator.

333
00:11:12,481 --> 00:11:16,863
So they can make some rules in and
above that.

334
00:11:16,863 --> 00:11:19,392
But on the heels of the financial
crisis, you'll see these

335
00:11:19,393 --> 00:11:22,134
enhancements to the Basel rules.

336
00:11:22,034 --> 00:11:24,749
So in 2023, there was a new set of

337
00:11:24,749 --> 00:11:26,631
rules that came out.

338
00:11:26,531 --> 00:11:28,569
And the biggest impact that we

339
00:11:28,569 --> 00:11:30,868
felt from that is really the
capital allocation that the banks

340
00:11:30,868 --> 00:11:31,896
have to have.

341
00:11:31,896 --> 00:11:34,359
So there was a 2% increase in the

342
00:11:34,359 --> 00:11:36,705
common equity or capital equity
component that the bank has to

343
00:11:36,805 --> 00:11:38,823
hold for every risk-weighted asset
that they have.

344
00:11:38,823 --> 00:11:42,565
So 2% increase on the trillions
that the bank have out in loans is

345
00:11:42,565 --> 00:11:43,563
a pretty significant change.

346
00:11:43,563 --> 00:11:44,999
So essentially, within the course

347
00:11:44,999 --> 00:11:47,620
of years, billions of dollars that
the banks have to hold more in

348
00:11:47,620 --> 00:11:50,136
equity for all the money that
they've already lent out.

349
00:11:50,136 --> 00:11:53,835
So with that, we've really seen a
big shift in capital allocation

350
00:11:53,835 --> 00:11:56,840
being a focus for the bank.

351
00:11:56,840 --> 00:11:58,798
So you've always got the credit

352
00:11:58,798 --> 00:12:01,573
component whenever you're looking
to lend out money.

353
00:12:01,573 --> 00:12:04,288
Now there's the business element,
where are we deploying the

354
00:12:04,288 --> 00:12:06,392
capital?
Does this make sense for the bank

355
00:12:06,492 --> 00:12:08,047
from a financial perspective?
This is super interesting.

356
00:12:08,047 --> 00:12:11,127
This is something that most people
wouldn't know of a rule that

357
00:12:11,127 --> 00:12:11,414
changed.

358
00:12:11,414 --> 00:12:11,700
Yeah.

359
00:12:12,460 --> 00:12:16,123
It was kind of behind the scenes
and even somebody working in the

360
00:12:16,123 --> 00:12:19,341
banking space, it's kind of been
fluid in how this comes out.

361
00:12:19,341 --> 00:12:23,411
So where we've seen the biggest
impact of that is return on it's

362
00:12:23,411 --> 00:12:25,672
very important metric that the
banks look at.

363
00:12:25,672 --> 00:12:29,553
Whenever we're looking to do a
loan, that's basically what we

364
00:12:29,553 --> 00:12:29,824
look at.

365
00:12:29,824 --> 00:12:32,205
How much equity are we setting

366
00:12:32,205 --> 00:12:34,264
aside?
What's our return on that amount

367
00:12:34,264 --> 00:12:36,449
of money?
So when you're having to hold,

368
00:12:36,449 --> 00:12:40,786
let's say, 2% more money than you
were before, your return on equity

369
00:12:40,786 --> 00:12:42,068
has already been impacted.

370
00:12:42,068 --> 00:12:45,820
So we felt that in our internal

371
00:12:46,060 --> 00:12:49,798
cost of fund across all the banks,
you're basically seeing more of an

372
00:12:49,798 --> 00:12:52,326
internal cost of funds for any
dollar that you're lending out.

373
00:12:52,326 --> 00:12:56,004
So not only the Bank of Canada
hiking interest rates, are you

374
00:12:56,004 --> 00:12:58,643
going to feel that obviously
immediately, but this is something

375
00:12:58,643 --> 00:13:01,880
else that has been kind of
trickling out over the last year

376
00:13:01,880 --> 00:13:02,579
or so.

377
00:13:02,579 --> 00:13:04,598
And it's something that people are

378
00:13:04,598 --> 00:13:08,760
still getting grasp of, but it's
had a pretty significant impact in

379
00:13:08,760 --> 00:13:11,680
what we've seen over the last 12
to 18 months.

380
00:13:11,662 --> 00:13:14,413
So if So if that regulation comes
out, just thinking about this,

381
00:13:14,395 --> 00:13:16,055
they can't just get to 2% right
away.

382
00:13:16,055 --> 00:13:17,018
It probably takes a while.

383
00:13:17,018 --> 00:13:17,339
Yeah.

384
00:13:17,339 --> 00:13:20,034
So there's an implementation
period in which that would be

385
00:13:20,034 --> 00:13:20,288
required.

386
00:13:20,288 --> 00:13:21,303
But as Canadian banking systems,

387
00:13:21,303 --> 00:13:21,874
pretty sound.

388
00:13:21,974 --> 00:13:23,334
So they bring out this rule,

389
00:13:23,334 --> 00:13:27,387
everybody's already on side of it,
but you want to make sure that

390
00:13:27,387 --> 00:13:29,760
you've got quite a bit of wiggle
room.

391
00:13:29,760 --> 00:13:32,695
So it's not like it was a material
impact right out of the gate from,

392
00:13:32,695 --> 00:13:35,101
oh no, we're not going to meet
these requirements.

393
00:13:35,101 --> 00:13:39,137
Everybody was pretty much there,
some more so than others, but

394
00:13:39,237 --> 00:13:42,094
you're not going to be tiptoeing
like the minimum requirement.

395
00:13:42,094 --> 00:13:44,860
You're going to want quite a bit
of wiggle room.

396
00:13:44,860 --> 00:13:47,851
So really a lot more attention
being paid to these risk-weighted

397
00:13:47,851 --> 00:13:50,608
assets and where the capital is
being deployed.

398
00:13:50,608 --> 00:13:50,761
Interesting.

399
00:13:50,761 --> 00:13:53,255
Would a way to recoup some of that

400
00:13:53,255 --> 00:13:57,020
or build that buffer in, like just
that time of renewal, say somebody

401
00:13:57,120 --> 00:13:59,919
has a mortgage product coming up
for renewal, you as the lender

402
00:13:59,919 --> 00:14:03,144
would just say, our renewal know,
X amount and it's quite a bit

403
00:14:03,144 --> 00:14:04,534
higher than some of the other
lenders.

404
00:14:04,534 --> 00:14:07,355
And then somebody's going to
switch their mortgage to a

405
00:14:07,355 --> 00:14:07,782
different lender.

406
00:14:07,782 --> 00:14:09,611
And then you recoup that capital

407
00:14:09,611 --> 00:14:10,360
back or like.

408
00:14:10,340 --> 00:14:11,338
that could be a scenario, you

409
00:14:11,238 --> 00:14:12,991
know, where you're basically
saying, hey, we need our return on

410
00:14:12,991 --> 00:14:15,717
equity to be X. And this is where
we feel comfortable renewing a

411
00:14:15,717 --> 00:14:15,927
facility.

412
00:14:15,927 --> 00:14:18,962
And if you're not there, like if

413
00:14:18,962 --> 00:14:23,536
you got to take that business
elsewhere, that's just the way it

414
00:14:23,636 --> 00:14:24,340
goes.

415
00:14:24,240 --> 00:14:27,320
So yeah, we have seen it on the

416
00:14:27,580 --> 00:14:28,528
residential space.

417
00:14:28,528 --> 00:14:29,423
There is a lender that basically

418
00:14:29,423 --> 00:14:31,424
it was just out of the space for
the last 12 months.

419
00:14:31,424 --> 00:14:33,303
They've finally come back to the
market with like competitive

420
00:14:33,303 --> 00:14:35,062
rates, which is nice to see.

421
00:14:35,062 --> 00:14:36,820
But you do see that every three,

422
00:14:36,820 --> 00:14:40,218
four or five months, different
lenders will have a more

423
00:14:40,118 --> 00:14:42,558
aggressive rate and deploy that
capital because they don't want

424
00:14:42,558 --> 00:14:45,180
the cash just sitting there not
making money.

425
00:14:45,360 --> 00:14:45,685
Absolutely.

426
00:14:45,685 --> 00:14:46,769
So you're really walking quite a

427
00:14:46,769 --> 00:14:47,203
fine line.

428
00:14:47,303 --> 00:14:48,829
And so you could see certain banks

429
00:14:48,829 --> 00:14:51,980
that maybe have a better capital
stack, more capital to deploy.

430
00:14:51,980 --> 00:14:55,509
And those banks can be a little
bit more aggressive on the rates

431
00:14:55,509 --> 00:14:58,026
that they're able to provide
because they've got that money

432
00:14:58,026 --> 00:15:00,982
that's sitting there, maybe not
generating as much as it could.

433
00:15:00,982 --> 00:15:04,589
So there maybe is a bit of
disparity between some of the

434
00:15:04,689 --> 00:15:07,023
banks right now with these changes
that have been coming out.

435
00:15:07,023 --> 00:15:09,520
Man, I need to work on my capital
stack.

436
00:15:09,520 --> 00:15:14,463
do you see in terms of like, what
do banks like as a portfolio, like

437
00:15:14,463 --> 00:15:17,371
to allocate the assets?
Do they want a certain percentage

438
00:15:17,271 --> 00:15:18,406
in residential, commercial,
industrial, construction?

439
00:15:18,406 --> 00:15:22,263
I guess, what's the least amount
of risk with the best amount of

440
00:15:22,163 --> 00:15:22,399
Yeah.

441
00:15:22,399 --> 00:15:25,233
So, I mean, asset types, like the

442
00:15:25,233 --> 00:15:27,383
flavor of the month can always
shift, right?

443
00:15:27,283 --> 00:15:29,740
Like right now, office is
obviously a bit of a tough space

444
00:15:29,740 --> 00:15:30,269
to be in.

445
00:15:30,269 --> 00:15:31,792
In Kelowna, you've got one

446
00:15:31,792 --> 00:15:32,447
developer finishes a massive
project.

447
00:15:32,447 --> 00:15:35,726
Now you've got this a bit of a
tough space to be In in.

448
00:15:35,726 --> 00:15:37,945
Kelowna, you've got one developer
finishes a massive project.

449
00:15:37,945 --> 00:15:41,021
Now you've got this insane amount
of supply that can completely skew

450
00:15:41,021 --> 00:15:41,350
the market.

451
00:15:41,350 --> 00:15:43,260
So I would say office is one

452
00:15:43,260 --> 00:15:44,940
that's probably a bit tough.

453
00:15:44,940 --> 00:15:47,306
But each asset that we're

454
00:15:47,306 --> 00:15:49,656
evaluating is going to have its
pros and cons.

455
00:15:49,656 --> 00:15:51,185
So really understanding what's the
tenant makeup.

456
00:15:51,185 --> 00:15:53,444
You know, if it's residential,
where is it located?

457
00:15:53,444 --> 00:15:55,709
I wouldn't say that there's's
de-risked based on a certain type.

458
00:15:55,709 --> 00:15:57,054
There's obviously so many
important characteristics.

459
00:15:57,054 --> 00:16:00,295
But from a commercial perspective,
looking at who is the landlord,

460
00:16:00,195 --> 00:16:02,007
what's their experience, who's
managing the property, the tenant

461
00:16:02,007 --> 00:16:03,561
makes one of those leases
maturing.

462
00:16:03,561 --> 00:16:06,426
What is the risk that someone's
going to walk from their lease

463
00:16:06,426 --> 00:16:09,527
within the middle of our term, and
then we're not going to know where

464
00:16:09,527 --> 00:16:11,132
our loan's going to get paid back
from?

465
00:16:11,132 --> 00:16:14,087
Those are the key things that we
look at when you're looking at the

466
00:16:14,064 --> 00:16:14,385
income producing properties.

467
00:16:14,362 --> 00:16:17,511
But I'd say the big thing for

468
00:16:17,511 --> 00:16:18,538
banks right now is relationship.

469
00:16:18,638 --> 00:16:20,897
Like we hear it so much across all

470
00:16:20,797 --> 00:16:21,208
the banks.

471
00:16:21,208 --> 00:16:22,829
Basically, we want everything that

472
00:16:22,829 --> 00:16:23,152
you've got.

473
00:16:23,152 --> 00:16:27,739
And so before maybe you would

474
00:16:27,639 --> 00:16:32,184
benefit from having your eggs
spread around, you know, maybe a

475
00:16:32,184 --> 00:16:36,584
little bit over at bank A, a
little bit at bank B. Now there's

476
00:16:36,584 --> 00:16:37,934
more value for the customers.

477
00:16:37,934 --> 00:16:41,181
If you have all your eggs in one

478
00:16:41,181 --> 00:16:44,027
basket, they can put more weight
on all of the products that you're

479
00:16:44,027 --> 00:16:45,341
taking and give you a better deal
as a result of that.

480
00:16:45,216 --> 00:16:46,080
I think that's been a shift that
we've seen in the last 12 to 18

481
00:16:46,080 --> 00:16:46,280
months.

482
00:16:46,249 --> 00:16:47,281
As we look at things holistically.

483
00:16:47,281 --> 00:16:49,635
That's really you a frontline
approach in what we're looking at

484
00:16:49,630 --> 00:16:50,473
for new taking, customers.

485
00:16:50,473 --> 00:16:52,597
know, As we look Is as well?

486
00:16:52,597 --> 00:16:53,473
It's residential as well.

487
00:16:53,473 --> 00:16:56,190
So the funny thing with that is

488
00:16:56,190 --> 00:16:58,505
like I have that conversation
pretty frequently with clients

489
00:16:58,505 --> 00:17:00,100
because I go, okay, here.

490
00:17:00,500 --> 00:17:01,105
That That of me.

491
00:17:01,167 --> 00:17:02,700
Yeah, I just pocketed the extra
profits.

492
00:17:02,700 --> 00:17:07,679
So there's certain lenders that do
like a cash back promo, but to get

493
00:17:07,679 --> 00:17:11,730
the cash back, like when we fund
the mortgage, you have to have

494
00:17:11,730 --> 00:17:14,112
your mortgage payment coming out
of their accounts.

495
00:17:14,112 --> 00:17:16,833
You have to set up an account with
that lender.

496
00:17:16,933 --> 00:17:19,920
Other lenders will provide a
better rate, you know, kind of

497
00:17:19,920 --> 00:17:22,301
like a cash back, but it's a
savings over the term.

498
00:17:22,301 --> 00:17:23,378
And it's the same deal.

499
00:17:23,378 --> 00:17:24,680
You have to sign up.

500
00:17:24,680 --> 00:17:25,965
You have to have an account.

501
00:17:25,965 --> 00:17:27,141
They're really trying to like claw

502
00:17:27,141 --> 00:17:30,670
people in like, so who would know
that one works for?

503
00:17:30,570 --> 00:17:30,780
Yeah.

504
00:17:30,780 --> 00:17:32,880
So it says it on our rate sheets.

505
00:17:32,880 --> 00:17:36,519
It says, you know, these are the
stipulations of the cash back, or

506
00:17:36,619 --> 00:17:37,868
here's a standard rate.

507
00:17:37,868 --> 00:17:40,696
If you do not want to bank with

508
00:17:40,696 --> 00:17:45,030
this bank discounted rate, if you
come in and you set up an account

509
00:17:45,030 --> 00:17:47,816
and you have a one-on-one meeting
with said lender, it's not like

510
00:17:47,916 --> 00:17:48,198
life changing.

511
00:17:48,198 --> 00:17:49,876
We're not talking like they're

512
00:17:49,976 --> 00:17:53,257
going to give you a percent Well,
yeah, we can talk.

513
00:17:53,157 --> 00:17:53,481
Yeah.

514
00:17:53,481 --> 00:17:54,939
It can be impactful though.

515
00:17:54,939 --> 00:17:58,265
It's really trying to get away
from the single service product

516
00:17:58,265 --> 00:17:58,319
offering.

517
00:17:58,319 --> 00:17:58,649
Yeah.

518
00:17:58,649 --> 00:17:59,846
That's been kind of the flavor.

519
00:17:59,746 --> 00:18:01,172
And really trying to 12 months, 12

520
00:18:01,172 --> 00:18:02,589
to 18 12 to 18 months, I'd say.

521
00:18:02,689 --> 00:18:05,160
I think like, you know, I'm kind

522
00:18:10,060 --> 00:18:10,200
of guessing where it's coming
from.

523
00:18:10,124 --> 00:18:10,200
And I think it's largely from
these capital requirement changes

524
00:18:10,183 --> 00:18:03,660
that the regulators have been
imposing.

525
00:18:11,760 --> 00:18:11,810
Right.

526
00:18:12,211 --> 00:18:15,158
Because then as a client, you're

527
00:18:15,058 --> 00:18:16,716
going to hold other assets,
investments, cash, et cetera,

528
00:18:16,716 --> 00:18:16,773
there.

529
00:18:16,773 --> 00:18:19,459
And that's going to help build up

530
00:18:19,460 --> 00:18:19,917
their capital.

531
00:18:20,017 --> 00:18:21,260
I mean, if you're taking a piece

532
00:18:23,460 --> 00:18:27,872
of the bank's pie in terms of like
borrowing money from them, they

533
00:18:27,872 --> 00:18:30,360
want to make sure that like if
we're setting that aside for you,

534
00:18:30,260 --> 00:18:33,085
what are the other products that
you may be taking on rather than,

535
00:18:33,085 --> 00:18:35,329
you know, certain banks maybe were
really going hard on just trying

536
00:18:35,329 --> 00:18:37,592
to do as many mortgages as they
could.

537
00:18:37,592 --> 00:18:40,155
And the thought being maybe we'll
get the extra business that comes

538
00:18:40,155 --> 00:18:40,805
from it.

539
00:18:40,705 --> 00:18:41,878
Sometimes you do, sometimes you

540
00:18:41,878 --> 00:18:42,071
don't.

541
00:18:42,171 --> 00:18:44,070
And I think now with the fact that

542
00:18:44,070 --> 00:18:46,971
capital allocation is getting such
a focus, like if you're not going

543
00:18:46,971 --> 00:18:49,853
to bring us that other stuff,
maybe we'll give you an offer, but

544
00:18:49,834 --> 00:18:51,780
it's not going to be as good for
our clients that have everything

545
00:18:51,920 --> 00:18:52,408
with us.

546
00:18:52,308 --> 00:18:53,028
That is interesting.

547
00:18:53,028 --> 00:18:53,194
Yeah.

548
00:18:53,194 --> 00:18:54,912
Sorry, I don't need to dwell on

549
00:18:54,912 --> 00:18:56,332
this, but like, I feel like...

550
00:18:56,332 --> 00:18:57,517
You can't get a cheaper rate

551
00:18:57,517 --> 00:18:57,767
match.

552
00:18:57,767 --> 00:18:59,514
This is something that you should

553
00:18:59,514 --> 00:19:03,128
plan for in advance or can you
just change it at the time of

554
00:19:03,128 --> 00:19:04,554
applying for a mortgage?
Yeah.

555
00:19:04,554 --> 00:19:06,434
Time of applying for the mortgage.

556
00:19:06,434 --> 00:19:08,231
So like, you know, there's a

557
00:19:08,231 --> 00:19:10,959
couple of major lenders who are
super competitive in the

558
00:19:10,859 --> 00:19:12,257
residential space, very equal type
of products.

559
00:19:12,257 --> 00:19:15,553
And basically the requirement is
for one of them, you just have to

560
00:19:15,453 --> 00:19:17,702
have an in-person meeting and set
up an account before the date,

561
00:19:17,702 --> 00:19:18,385
your mortgage funds.

562
00:19:18,385 --> 00:19:20,265
And the other one, you have to

563
00:19:20,165 --> 00:19:22,881
have an account set up and your
first mortgage payment being taken

564
00:19:22,881 --> 00:19:25,794
from that account, like an auto
withdrawal to get the cash back

565
00:19:25,794 --> 00:19:26,145
incentive.

566
00:19:26,145 --> 00:19:26,346
Yeah.

567
00:19:26,346 --> 00:19:29,195
Maybe the relationship building
aspect, it's not like you need to

568
00:19:29,295 --> 00:19:32,003
bank there for five years, at
least on the residential side.

569
00:19:32,003 --> 00:19:33,391
I'm sure commercial may differ.

570
00:19:33,391 --> 00:19:33,484
Yeah.

571
00:19:33,484 --> 00:19:36,211
I mean, if we are looking at
something and we understand what

572
00:19:36,211 --> 00:19:38,301
would come from that, you're going
to price that into your

573
00:19:38,301 --> 00:19:38,556
opportunity.

574
00:19:38,556 --> 00:19:40,018
If we're just looking at doing a

575
00:19:40,018 --> 00:19:42,316
mortgage, all you're looking at is
the spread on whatever interest

576
00:19:42,316 --> 00:19:44,118
rate you're going to be providing
on the mortgage.

577
00:19:44,118 --> 00:19:47,278
Now, if we're bringing in Ford
Exchange, for example, or if the

578
00:19:47,278 --> 00:19:49,091
person has private banking or
wealth management, all of those

579
00:19:49,091 --> 00:19:52,664
things, we really have improved a
lot in terms of looking at how all

580
00:19:52,664 --> 00:19:54,649
those areas drive revenue for the
bank.

581
00:19:54,649 --> 00:19:57,833
And at the end of the day, that's
going to drive down your pricing

582
00:19:57,833 --> 00:19:59,647
on whatever product you're looking
for.

583
00:19:59,647 --> 00:20:02,065
I think I've had this conversation
four times today where you think

584
00:20:02,065 --> 00:20:04,847
everyone knows what you know, but
then you tell people and nobody

585
00:20:04,847 --> 00:20:05,149
knows.

586
00:20:05,149 --> 00:20:06,540
So in the real estate space, we've

587
00:20:06,540 --> 00:20:07,920
had legislation coming down every
week.

588
00:20:09,880 --> 00:20:12,100
It feels like something changing,
interest rates, city, what this

589
00:20:12,100 --> 00:20:12,540
municipality is doing.

590
00:20:12,620 --> 00:20:14,636
As an agent, I'm in this every

591
00:20:14,636 --> 00:20:18,108
day, so I feel like I know all
these things and they're just kind

592
00:20:18,108 --> 00:20:19,194
of getting boring me telling it.

593
00:20:19,171 --> 00:20:20,011
But then I have client after

594
00:20:20,011 --> 00:20:22,261
client just has absolutely no idea
what's happened and all these

595
00:20:22,261 --> 00:20:22,600
rules.

596
00:20:22,780 --> 00:20:24,533
So I think for you guys in the

597
00:20:24,533 --> 00:20:27,361
mortgage and lending space,
something like this, this is mind

598
00:20:27,361 --> 00:20:28,596
blowing to Okay.

599
00:20:28,596 --> 00:20:30,850
No, thank you for putting that

600
00:20:30,850 --> 00:20:31,676
out.

601
00:20:31,676 --> 00:20:31,827
Yeah.

602
00:20:31,827 --> 00:20:33,029
It's a topic of conversation.

603
00:20:33,029 --> 00:20:35,003
Like I have in my call with

604
00:20:35,003 --> 00:20:36,448
clients and usually I get a
similar response.

605
00:20:36,548 --> 00:20:37,893
Like, well, this seems annoying.

606
00:20:37,893 --> 00:20:39,897
Like, why do I have to set up a

607
00:20:39,897 --> 00:20:42,090
bank account there?
But it's purely a business funnel

608
00:20:42,090 --> 00:20:45,281
for lenders to go, okay, if we're
going to give you money, we want

609
00:20:45,381 --> 00:20:49,378
to try and, well, it makes sense
now that they've changed more you

610
00:20:49,378 --> 00:20:51,175
bring to the table, the better
offer you can drive.

611
00:20:51,175 --> 00:20:51,335
Yeah.

612
00:20:51,335 --> 00:20:52,285
All right.

613
00:20:52,185 --> 00:20:52,557
You somewhere.

614
00:20:52,557 --> 00:20:55,041
So I feel like the narrative is

615
00:20:55,041 --> 00:20:57,939
kind of like, oh, these poor
banks, you know, the government's

616
00:20:57,939 --> 00:21:01,217
come out with these changes and
now you have to stack your capital

617
00:21:01,217 --> 00:21:03,000
a little bit thicker and all this
stuff.

618
00:21:03,360 --> 00:21:05,545
For me, I'm like, I'm starting to
feel a little empathetic, but then

619
00:21:05,545 --> 00:21:07,002
there's like, you know, lenders
are making trillions of dollars.

620
00:21:07,002 --> 00:21:09,496
So do they really need to like
have such a buffer?

621
00:21:09,496 --> 00:21:13,390
Like what is the risk that the
Canadian banking system is just

622
00:21:13,290 --> 00:21:14,241
going to Yeah.

623
00:21:14,241 --> 00:21:15,904
So, I mean, the Canadian banking

624
00:21:15,904 --> 00:21:17,488
system is pretty sound, like.

625
00:21:17,488 --> 00:21:17,884
Yeah.

626
00:21:17,884 --> 00:21:19,895
I So, the mean, Canadian banking
system is pretty sound, like

627
00:21:19,895 --> 00:21:21,198
internationally regarded to be
quite up there.

628
00:21:21,198 --> 00:21:24,180
So, the reason they do this and
have the banks hold this equity

629
00:21:24,177 --> 00:21:27,088
relative to whatever they've lent
out is to make sure that, you

630
00:21:27,088 --> 00:21:29,616
know, when loans start going
sideways and if there's write-offs

631
00:21:29,616 --> 00:21:33,323
that have to occur, the bank needs
to be able to withstand those

632
00:21:33,323 --> 00:21:35,209
losses and ensure that it doesn't
collapse.

633
00:21:35,209 --> 00:21:40,049
So usually we see these additional
rules come out on the heels of

634
00:21:40,149 --> 00:21:40,546
financial crisis.

635
00:21:40,546 --> 00:21:41,763
So this one might've been in part

636
00:21:41,763 --> 00:21:43,944
relating to the Silicon Valley
bank, but we don't want to ever

637
00:21:43,944 --> 00:21:45,034
push it that close.

638
00:21:45,134 --> 00:21:46,322
And so as the loan loss provisions

639
00:21:46,322 --> 00:21:49,140
go up, they really just want to
make sure they're planning it

640
00:21:49,240 --> 00:21:49,576
pretty safe.

641
00:21:49,576 --> 00:21:50,556
So, I mean, it's a very

642
00:21:50,556 --> 00:21:51,155
complicated metric.

643
00:21:51,155 --> 00:21:53,145
There's a whole lot that goes into

644
00:21:53,145 --> 00:21:53,919
those rules and regulations.

645
00:21:54,432 --> 00:21:55,880
I've only kind of done a high

646
00:21:55,980 --> 00:21:58,935
level research to try and
understand what I was seeing on

647
00:21:58,935 --> 00:21:59,504
the banking front.

648
00:21:59,504 --> 00:22:01,336
Like, why are we seeing cost of

649
00:22:01,336 --> 00:22:04,365
capital go up internally?
And so, yeah, I think there's a

650
00:22:04,365 --> 00:22:06,441
lot of buffer within the Canadian
banking system, but you don't want

651
00:22:06,441 --> 00:22:07,787
to risk it too much.

652
00:22:07,787 --> 00:22:09,618
So is our system in a good spot

653
00:22:09,618 --> 00:22:11,529
because of these kinds of
regulations, you know, like, or is

654
00:22:11,529 --> 00:22:14,815
it just because the banks are just
really good people and they're

655
00:22:14,915 --> 00:22:16,112
homeless?
There are some pretty tight

656
00:22:16,112 --> 00:22:17,251
regulations out there.

657
00:22:17,151 --> 00:22:19,202
So there's like a lot of bandwidth

658
00:22:19,202 --> 00:22:21,857
for the banks to absorb quite a
bit of defaulting loans.

659
00:22:21,957 --> 00:22:25,418
Like I just thought about from you
and you're like, the banks are

660
00:22:25,418 --> 00:22:27,015
hurting, but they have to do all
this.

661
00:22:27,015 --> 00:22:30,071
But it's like, the reason why
we're in a good position is

662
00:22:29,971 --> 00:22:30,593
because of these.

663
00:22:30,593 --> 00:22:31,747
Oh, thank you, banks.

664
00:22:31,647 --> 00:22:32,701
I'll send out my later.

665
00:22:32,701 --> 00:22:34,848
It's funny how regulations still

666
00:22:34,848 --> 00:22:36,179
change in the banking system.

667
00:22:36,179 --> 00:22:38,027
It seems like such a simple kind

668
00:22:38,027 --> 00:22:40,498
of black and white economic
system, and it's been around

669
00:22:40,498 --> 00:22:40,913
forever.

670
00:22:40,913 --> 00:22:43,145
How much more do we need to

671
00:22:43,045 --> 00:22:44,507
change?
But bear in mind, we haven't

672
00:22:44,423 --> 00:22:45,043
really seen all that much
turbulence yet, right?

673
00:22:45,059 --> 00:22:46,575
Like we're kind of waiting for the
shoe to drop.

674
00:22:46,575 --> 00:22:50,129
Like if rates don't start coming
down, you know, maybe we'll start

675
00:22:50,129 --> 00:22:50,700
feeling that pain.

676
00:22:50,700 --> 00:22:51,809
Obviously people are already

677
00:22:51,809 --> 00:22:53,057
feeling that pain.

678
00:22:53,057 --> 00:22:54,999
I heard on the news this morning

679
00:22:54,999 --> 00:22:57,310
that mortgage defaults are
increasing, but like you would

680
00:22:57,310 --> 00:23:01,536
assume that that's going to happen
when you've got the Bank of Canada

681
00:23:01,536 --> 00:23:04,779
overnight rate at 5% for as long
as it has been.

682
00:23:04,779 --> 00:23:09,224
So I guess it's been interesting
to see the interest rate forecast.

683
00:23:09,224 --> 00:23:11,928
Everyone's expecting these cuts to
happen, but it keeps getting

684
00:23:11,928 --> 00:23:15,600
bumped out and bumped out because
I was looking at what our forecast

685
00:23:15,500 --> 00:23:18,223
was in January and we were like,
undoubtedly, it's going to happen

686
00:23:18,223 --> 00:23:18,557
in Q2.

687
00:23:18,557 --> 00:23:21,057
And now it's like, ah, I think

688
00:23:21,057 --> 00:23:23,057
it's going to be Q3 now.

689
00:23:23,057 --> 00:23:25,534
And so maybe it's only going to be

690
00:23:25,434 --> 00:23:27,148
75 basis points in 2024.

691
00:23:27,048 --> 00:23:28,005
They're still expecting another

692
00:23:28,005 --> 00:23:28,722
percent in 2025.

693
00:23:28,722 --> 00:23:30,664
But it's definitely like getting a

694
00:23:30,664 --> 00:23:31,541
little dovish on the cuts.

695
00:23:31,541 --> 00:23:31,833
Yeah.

696
00:23:31,833 --> 00:23:34,914
I guess what's your stance?
Like I know Matt and I are pretty

697
00:23:35,014 --> 00:23:36,434
optimistic of the Kelowna market
in general.

698
00:23:36,434 --> 00:23:40,047
But are you like the world is
going to end or things are going

699
00:23:40,047 --> 00:23:42,683
to be OK?
I think we live in a little bubble

700
00:23:42,683 --> 00:23:43,642
here in the Okanagan.

701
00:23:43,642 --> 00:23:44,536
You know, there's such population

702
00:23:44,536 --> 00:23:45,750
growth that's driving everything.

703
00:23:45,750 --> 00:23:48,469
You know, so much of what we see

704
00:23:48,369 --> 00:23:50,599
on the commercial banking
portfolio is the support of real

705
00:23:50,599 --> 00:23:52,117
estate development, whether you've
got subtrades and whatnot.

706
00:23:52,117 --> 00:23:55,958
And that's just been ticking along
famously for the last little

707
00:23:55,858 --> 00:23:55,981
while.

708
00:23:55,981 --> 00:23:57,760
So we really haven't seen too many

709
00:23:57,760 --> 00:23:58,660
cracks in the portfolio.

710
00:23:58,660 --> 00:23:59,167
Hopefully that continues.

711
00:23:59,167 --> 00:24:01,459
I mean, in my talks with
developers and the subtrades,

712
00:24:01,430 --> 00:24:02,501
everybody's still doing pretty
well for 2024.

713
00:24:02,501 --> 00:24:04,305
Maybe you start to see projects
curtail end of this year, 2025,

714
00:24:04,380 --> 00:24:05,379
maybe that's where the gap starts
coming in.

715
00:24:05,373 --> 00:24:07,700
But everybody seems to be doing
well for the time being.

716
00:24:08,900 --> 00:24:14,182
And population growth, really, I
think it's got to be the biggest

717
00:24:14,182 --> 00:24:14,319
driver.

718
00:24:14,319 --> 00:24:16,030
That Canada, obviously, GDP is

719
00:24:16,030 --> 00:24:17,141
growing primarily from that
population growth.

720
00:24:17,141 --> 00:24:20,360
And then you see that even more so
in this amazing place.

721
00:24:21,000 --> 00:24:22,020
Yeah, I mean, we've spoken about
this before.

722
00:24:22,020 --> 00:24:25,455
It's like, as a developer, would I
want to be developing in BC right

723
00:24:25,555 --> 00:24:27,289
now with provincial legislation
that's been coming out?

724
00:24:27,289 --> 00:24:28,492
There's a lot of volatility from
it.

725
00:24:28,492 --> 00:24:32,044
But like you said, said the safety
nets in the population like and

726
00:24:32,043 --> 00:24:35,766
how amazing it is here well yeah
yeah and the we in this building

727
00:24:35,766 --> 00:24:40,333
and then you get to hang out with
math that's right oh and i have a

728
00:24:40,333 --> 00:24:43,728
party man yeah so that is uh yeah
yeah a family house is worth it

729
00:24:43,728 --> 00:24:47,139
just for that you said you don't
think the shoe has dropped yet on

730
00:24:47,139 --> 00:24:48,276
the interest that interesting.

731
00:24:48,276 --> 00:24:50,984
Well, I mean, in a 2023, we're

732
00:24:51,084 --> 00:24:52,934
thinking that rates were coming
kind of Q1 2024.

733
00:24:52,934 --> 00:24:55,565
And now, I mean, the Bank of
Canada's got their next

734
00:24:55,565 --> 00:24:56,321
announcement tomorrow, all
indications.

735
00:24:56,321 --> 00:24:59,213
It's a holding pattern, really
looking for what kind of

736
00:24:59,213 --> 00:25:00,319
additional commentary they provide
on that.

737
00:25:00,419 --> 00:25:03,943
But it's really going to be a
matter of, you know, is it Q2 or

738
00:25:03,943 --> 00:25:06,320
is it Q3?
And they're really concerned about

739
00:25:06,320 --> 00:25:11,333
giving too much of an indication
that rates are going to start

740
00:25:11,333 --> 00:25:14,810
coming down because then it's
going to be that flood in the

741
00:25:14,805 --> 00:25:15,031
market.

742
00:25:15,031 --> 00:25:16,417
You know, the amount of people

743
00:25:16,417 --> 00:25:19,820
that are kind of sitting on the
sidelines waiting to make a move

744
00:25:19,820 --> 00:25:20,871
on real estate is pretty
staggering.

745
00:25:20,871 --> 00:25:21,660
So we'll see.

746
00:25:21,660 --> 00:25:21,989
It's though.

747
00:25:21,989 --> 00:25:24,725
Like to me, the floodgates have
kind of already opened early for

748
00:25:24,723 --> 00:25:27,611
spring market like we're recording
this early march and this will be

749
00:25:27,611 --> 00:25:32,115
out a little bit later but like
it's been busy fixed rates have

750
00:25:32,115 --> 00:25:35,702
just steadily been bumping down
you know like you can get an

751
00:25:35,703 --> 00:25:38,940
insured mortgage for less than
five percent now people are

752
00:25:39,200 --> 00:25:42,700
comfortable with that a lot more
activity so yeah i agree like as

753
00:25:42,700 --> 00:25:46,473
soon as we get that first rate cut
and there's confidence it's gonna

754
00:25:46,473 --> 00:25:50,467
be the clouds have lifted then do
you think they're gonna give a

755
00:25:50,367 --> 00:25:54,399
rate cut and then the next one
they're gonna bump it back up

756
00:25:54,399 --> 00:25:59,183
again and just be gotcha yeah i
feel like they don't want to over

757
00:25:59,183 --> 00:26:02,505
correct here and it's so hard i
don't envy their position because

758
00:26:02,505 --> 00:26:05,909
you know you're looking like so
far out yeah the lens that they're

759
00:26:05,909 --> 00:26:10,969
looking through it's it is kind of
nice though to be in a position

760
00:26:10,969 --> 00:26:14,080
where like if things start to sink
there is a lever to pull where

761
00:26:14,600 --> 00:26:17,921
they could just drop the rates
right so it's kind of nice to have

762
00:26:17,821 --> 00:26:22,191
that instead of just the rates at
rock bottom then she hits the fan

763
00:26:22,191 --> 00:26:26,868
so what do you do now you know so
like i feel like that's a bit of a

764
00:26:26,868 --> 00:26:29,990
yeah can you give us a little bit
of rundown on some terminology?

765
00:26:29,990 --> 00:26:32,564
Like talk a lot about cap rates
and commercial.

766
00:26:32,564 --> 00:26:35,034
Like if somebody wants to get
approved for a commercial

767
00:26:35,034 --> 00:26:36,732
mortgage, say it's an investment
property, multifamily or

768
00:26:36,732 --> 00:26:38,806
commercial office space, and they
come to your office and say, Hey,

769
00:26:40,037 --> 00:26:41,289
Will, give me some money.

770
00:26:41,289 --> 00:26:42,107
What are the requirements?

771
00:26:42,107 --> 00:26:42,340
Yeah.

772
00:26:42,340 --> 00:26:42,807
Great question.

773
00:26:42,807 --> 00:26:46,645
So I would say in the current
environment that we're in, great

774
00:26:46,645 --> 00:26:48,648
So I would say in the current
environment that we're

775
00:26:48,648 --> 00:26:51,920
loan-to-value is kind of out of
the So the amount of financing

776
00:26:51,820 --> 00:26:53,820
that you get Yeah, relative to
question.

777
00:26:53,820 --> 00:26:58,335
the value of the it doesn't even
the biggest in, thing we're

778
00:26:58,335 --> 00:27:00,358
looking for is the debt servicing
question.

779
00:27:00,358 --> 00:27:00,645
ratio.

780
00:27:00,645 --> 00:27:02,153
property, really, So whatever your

781
00:27:02,153 --> 00:27:04,667
net operating income is, cash flow
from the property less any

782
00:27:04,667 --> 00:27:07,785
operating expenses needs to be
typically at 1.25 to 1 of whatever

783
00:27:07,785 --> 00:27:08,657
your debt obligations are.

784
00:27:08,657 --> 00:27:10,460
So if you're going to a chartered

785
00:27:10,460 --> 00:27:12,954
bank, you're going to have to have
some form of a buffer in there.

786
00:27:13,054 --> 00:27:14,562
So that's typically how we're
looking at it.

787
00:27:14,562 --> 00:27:17,056
So having looked at a fair amount
of commercial and income producing

788
00:27:17,056 --> 00:27:19,913
properties in the Okanagan here,
right now, say you're borrowing at

789
00:27:20,013 --> 00:27:23,434
6% financing, for example, you're
like 45% loan to value.

790
00:27:23,434 --> 00:27:26,185
So you're going to get 45%
financing of the purchase price.

791
00:27:26,185 --> 00:27:29,540
Now, that I think has been in part
why we've seen a bit of less

792
00:27:29,540 --> 00:27:30,928
action in that space.

793
00:27:30,928 --> 00:27:33,184
The sellers aren't really willing

794
00:27:33,184 --> 00:27:37,382
to give things up for a discount
right now, like where are you

795
00:27:37,382 --> 00:27:41,151
going to deploy your capital?
And the buyers are having to come

796
00:27:41,151 --> 00:27:43,589
up with these massive equity
contributions in order to get

797
00:27:43,589 --> 00:27:44,601
these deals off the line.

798
00:27:44,601 --> 00:27:47,047
Now, you may be able to go to

799
00:27:47,028 --> 00:27:49,148
other lenders out there that don't
care about cashflow as much, but

800
00:27:49,148 --> 00:27:51,772
amongst the big five, you're going
to need to be able to cover those

801
00:27:51,772 --> 00:27:53,542
debt obligations with a buffer on
top of that.

802
00:27:53,542 --> 00:27:56,750
And so there was so much action
two years ago when rates were

803
00:27:56,750 --> 00:27:57,190
maybe 3%.

804
00:27:57,190 --> 00:27:59,168
Now there's a lot less happening

805
00:27:59,168 --> 00:28:01,596
unless maybe there's ulterior
motives for a property.

806
00:28:01,596 --> 00:28:03,144
Could be income producing for the
moment.

807
00:28:03,144 --> 00:28:05,578
Maybe you've got aspirations to
develop that.

808
00:28:05,578 --> 00:28:08,250
In those situations where you can
see the value add down the line,

809
00:28:08,250 --> 00:28:10,480
maybe people are willing to make a
move in those cases.

810
00:28:10,480 --> 00:28:12,766
So would it have to be like an
experienced developer to buy

811
00:28:12,766 --> 00:28:13,579
something like that to get
favorable?

812
00:28:13,579 --> 00:28:16,076
Well, so if you're looking at it
from a traditional commercial

813
00:28:16,076 --> 00:28:18,456
banking perspective, in terms of
how much money can we give you for

814
00:28:18,456 --> 00:28:22,668
that I'm really only going to look
at it based on what the leases

815
00:28:22,668 --> 00:28:23,575
support in rental revenue.

816
00:28:23,575 --> 00:28:26,168
If you're looking at it from a

817
00:28:26,168 --> 00:28:28,189
development perspective, most
likely, depending on the dollar

818
00:28:28,089 --> 00:28:31,592
value, you're probably going to
have to talk to a credit union.

819
00:28:31,493 --> 00:28:36,153
But I mean, it can take a little
while to get those plans in place.

820
00:28:36,153 --> 00:28:38,961
So maybe it is you're financing
with a chartered bank at the

821
00:28:38,961 --> 00:28:41,146
get-go, get those permits and
whatnot.

822
00:28:41,246 --> 00:28:44,920
Down the line, the credit union
can look at financing the Not to

823
00:29:06,804 --> 00:29:06,980
put you on the spot here, but how
does a bank look at something like

824
00:29:06,863 --> 00:29:06,949
a vendor financing on projects?
It seems like a lot of the deals

825
00:29:06,900 --> 00:29:06,980
have some sort of creative
financing Yeah.

826
00:29:06,914 --> 00:29:06,980
I mean, I would say right now with
the tricky landscape and the

827
00:29:06,962 --> 00:29:12,426
divide between buyers and sellers
on the commercial side, like those

828
00:29:12,426 --> 00:29:14,570
creative aspects to a deal, it's
kind of the differentiating factor

829
00:29:14,570 --> 00:29:15,954
to get things over the line.

830
00:29:15,954 --> 00:29:16,043
Yeah.

831
00:29:16,043 --> 00:29:17,293
It would probably need to be deal
specific.

832
00:29:17,293 --> 00:29:19,692
I can't say in my experience doing
any real estate financing, there

833
00:29:19,792 --> 00:29:21,116
has been a vendor note behind the
bank.

834
00:29:21,116 --> 00:29:21,980
We don't typically love that.

835
00:29:21,980 --> 00:29:24,388
I mean, the issue there is whether

836
00:29:24,388 --> 00:29:26,184
it's interest accruing and
amortizing, then you're going to

837
00:29:26,184 --> 00:29:31,154
have to consider how is this loan
going to get're fully behind the

838
00:29:31,054 --> 00:29:33,716
bank on this, doesn't matter.

839
00:29:33,716 --> 00:29:36,180
Then that could really probably

840
00:29:36,540 --> 00:29:39,412
help you get in the deal across
the line.

841
00:29:39,412 --> 00:29:42,458
The bank would have to be
comfortable with that.

842
00:29:42,458 --> 00:29:46,498
But if there's any element of debt
repayment, I mean, the biggest

843
00:29:46,498 --> 00:29:49,970
issue you're facing in today's
environment is how do I get this

844
00:29:49,970 --> 00:29:52,988
thing to debt service at the
higher interest rate environment?

845
00:29:52,988 --> 00:29:55,600
Because we haven't really seen
rents booming like we have on the

846
00:29:55,590 --> 00:29:56,256
capital value appreciation.

847
00:29:56,256 --> 00:29:57,540
Now, how that pans out over the

848
00:29:57,540 --> 00:30:00,810
next 12 to 24 months in this
higher interest rate environment,

849
00:30:00,810 --> 00:30:02,757
maybe we start seeing some of
these properties that can't quite

850
00:30:02,757 --> 00:30:05,907
debt service at the higher rates
coming on the market.

851
00:30:05,907 --> 00:30:09,765
There just hasn't been a whole lot
of transactions taking place from

852
00:30:09,765 --> 00:30:10,231
what seen.

853
00:30:10,231 --> 00:30:10,382
Yeah.

854
00:30:10,382 --> 00:30:14,086
Like it's pretty tough to have a
vendor take back behind, like in

855
00:30:14,186 --> 00:30:17,514
second position, like to make up
for that equity you need fine.

856
00:30:17,514 --> 00:30:22,070
But then if you're debt servicing
it, like unless the vendor take

857
00:30:22,070 --> 00:30:27,052
backs at like 1% on a 50 year AM
and the payment's so small that

858
00:30:27,052 --> 00:30:29,332
the lender's like, oh, cool.

859
00:30:29,332 --> 00:30:31,822
It doesn't actually like they can

860
00:30:31,822 --> 00:30:33,533
afford that in their debt service
ratios.

861
00:30:33,533 --> 00:30:36,878
You know, I think when you get
into that larger landscape, yeah,

862
00:30:36,878 --> 00:30:39,256
it kind of has to play a role.

863
00:30:39,256 --> 00:30:40,477
The funny thing you mentioned

864
00:30:40,477 --> 00:30:43,559
there is like you guys qualify
mostly on that cashflow, that debt

865
00:30:43,559 --> 00:30:44,024
service ratio.

866
00:30:44,024 --> 00:30:46,582
And I find a lot of people trying

867
00:30:46,582 --> 00:30:49,396
to get into that space, whether
it's a multifamily or office

868
00:30:49,396 --> 00:30:50,878
space, they're almost upset.

869
00:30:50,878 --> 00:30:52,635
Like, Oh my God, like, just give

870
00:30:52,635 --> 00:30:56,669
me the money, you know, like, but
it's such a safety net to go

871
00:30:56,669 --> 00:30:59,527
through the due diligence with
commercial lenders and appraisers

872
00:30:59,527 --> 00:31:00,710
and everyone that's doing their
job.

873
00:31:00,710 --> 00:31:03,102
Because like, how are you going to
float a $4,000 net loss every

874
00:31:03,202 --> 00:31:04,340
month?
You know, like people don't really

875
00:31:04,340 --> 00:31:06,109
look at it that way on the cash
flow.

876
00:31:06,109 --> 00:31:07,760
They look at, you know, the
upside.

877
00:31:07,760 --> 00:31:11,019
So I think it is like super
important that banks are doing

878
00:31:10,919 --> 00:31:12,194
their job in that regard.

879
00:31:12,194 --> 00:31:14,941
I would add on that too, from a

880
00:31:14,941 --> 00:31:16,620
commercial banking perspective,
when we're looking at these income

881
00:31:16,620 --> 00:31:18,813
producing properties, it's really
on the credit merit of the

882
00:31:18,813 --> 00:31:19,490
property itself.

883
00:31:19,490 --> 00:31:20,782
Like we're not considering what

884
00:31:20,782 --> 00:31:22,965
your personal net income is to
float any gaps there.

885
00:31:22,965 --> 00:31:26,254
It's really, can this property on
its own support the mortgage

886
00:31:26,254 --> 00:31:29,220
that's being requested?
So that you sometimes see that bit

887
00:31:29,220 --> 00:31:33,254
of a difference on the small
business side, perhaps where they

888
00:31:33,254 --> 00:31:35,620
take into consideration the
personal credit worthiness a

889
00:31:35,620 --> 00:31:38,327
little bit more, but yeah, in
commercial, it's pretty much on

890
00:31:38,327 --> 00:31:41,939
the merit of the I mean, you just
mentioned the rent, where rents

891
00:31:41,939 --> 00:31:45,934
are, do you feel commercial space
right now is fairly equal for the

892
00:31:45,934 --> 00:31:48,367
rental income compared to
residential rent?

893
00:31:48,367 --> 00:31:53,336
And the reason I'm asking is
because so obviously in BC, we

894
00:31:53,336 --> 00:31:57,696
have residential rent control
tenancy act where Alberta, we

895
00:31:57,696 --> 00:31:57,898
don't.

896
00:31:57,898 --> 00:32:00,535
Now, Alberta, we see home prices

897
00:32:00,535 --> 00:32:04,590
and I know like we're completely
different provinces with different

898
00:32:04,590 --> 00:32:07,675
resources and different buyers,
but like it works pretty well

899
00:32:07,675 --> 00:32:07,770
there.

900
00:32:07,770 --> 00:32:08,908
If we just remove that completely

901
00:32:08,908 --> 00:32:11,167
in BC, do you think it would still
work?

902
00:32:11,067 --> 00:32:13,633
And I mean, it does work on the
commercial side.

903
00:32:13,733 --> 00:32:15,198
There is no rent control.

904
00:32:15,198 --> 00:32:16,986
So as as a like if you're looking

905
00:32:16,986 --> 00:32:21,513
at a multifamily building, is it
not just way more risky in BC

906
00:32:21,513 --> 00:32:25,368
because you know that you're
handcuffed by rent increase?

907
00:32:25,368 --> 00:32:29,818
Yeah, I would say I'm not quite as
familiar on the multifamily where

908
00:32:29,818 --> 00:32:30,984
cap rates are right now.

909
00:32:30,984 --> 00:32:34,112
I'm a little bit out of touch on

910
00:32:34,012 --> 00:32:34,278
that.

911
00:32:34,278 --> 00:32:36,302
But what I would say is from a

912
00:32:36,302 --> 00:32:38,647
risk perspective, on the
residential side, we find a little

913
00:32:38,647 --> 00:32:40,154
bit more comfort in the rental
market.

914
00:32:40,154 --> 00:32:43,243
Whereas on commercial, maybe you
feel the ebbs and flows a little

915
00:32:43,243 --> 00:32:43,620
bit harder.

916
00:32:43,620 --> 00:32:44,732
I mean, in Kelowna specifically,

917
00:32:44,732 --> 00:32:47,328
vacancy on the residential side
has been so low for so long.

918
00:32:47,328 --> 00:32:49,044
So I think that de-risks the
property in a sense.

919
00:32:49,044 --> 00:32:51,099
Whereas, you know, if you've got
commercial property and there's

920
00:32:51,099 --> 00:32:54,195
like one or two tenants, if one of
those tenants leave, that's a big

921
00:32:54,195 --> 00:32:54,934
deal.

922
00:32:54,934 --> 00:32:57,400
So that can carry a little bit

923
00:32:57,500 --> 00:32:57,739
more risk.

924
00:32:57,739 --> 00:32:58,998
Whereas if you're in a

925
00:32:58,998 --> 00:33:01,195
multifamily, your risk is a little
bit more dispersed because there's

926
00:33:01,195 --> 00:33:02,467
so many tenants in the Yeah.

927
00:33:02,467 --> 00:33:04,568
And I think you see that a lot of

928
00:33:04,568 --> 00:33:09,230
times on the cap rate too.

929
00:33:09,230 --> 00:33:09,992
Like people are more comfortable.

930
00:33:09,992 --> 00:33:11,848
Like in Vancouver, taking a three
cap on a multifamily is great.

931
00:33:11,848 --> 00:33:13,240
You're not making any money, but
there's a lot of security and the

932
00:33:13,300 --> 00:33:13,910
vacancy being zero.

933
00:33:13,910 --> 00:33:14,570
Big time.

934
00:33:14,570 --> 00:33:17,576
I was wondering that when you were
talking about loaning, like how it

935
00:33:17,576 --> 00:33:20,075
feels like Vancouver's been in
that space for a long time, like

936
00:33:20,075 --> 00:33:20,372
10 years.

937
00:33:20,372 --> 00:33:22,029
In The and a half cap?

938
00:33:22,029 --> 00:33:22,602
Yeah.

939
00:33:22,602 --> 00:33:25,006
Like the low rental rates for how

940
00:33:25,006 --> 00:33:26,308
much a building costs.

941
00:33:26,208 --> 00:33:27,811
Yeah, I mean, you see it also not

942
00:33:27,811 --> 00:33:30,698
just on the multifamily, but in
the industrial commercial side as

943
00:33:30,698 --> 00:33:30,965
well.

944
00:33:30,965 --> 00:33:31,231
It's insane.

945
00:33:31,231 --> 00:33:34,560
Like, I think I was looking at one
in North Vancouver and it was

946
00:33:35,140 --> 00:33:36,869
three and a half, four cap on
industrial property.

947
00:33:36,869 --> 00:33:39,751
And so it's just the amount of
equity to get those deals done.

948
00:33:39,751 --> 00:33:42,860
I guess it's been that way for a
really long time, whereas we're

949
00:33:42,860 --> 00:33:43,549
catching up.

950
00:33:43,549 --> 00:33:46,115
Yeah, it is kind of mind boggling.

951
00:33:46,115 --> 00:33:50,592
So is So is it different lending
practices here or there, or are

952
00:33:50,592 --> 00:33:55,100
they just coming up with more down
Yeah, pretty much more money in.

953
00:33:55,100 --> 00:33:58,040
I think for that, it's more
institutional buyers as well,

954
00:33:58,040 --> 00:33:59,829
right?
You're looking at people that are

955
00:33:59,829 --> 00:34:02,324
looking to park their money
knowing it's like, I don't want to

956
00:34:02,324 --> 00:34:05,395
say it's like stress-free, but
they're like, hey, I've got $50

957
00:34:05,395 --> 00:34:07,616
million, whether it's from a
pension fund that they're

958
00:34:07,616 --> 00:34:08,300
facilitating or something.

959
00:34:08,300 --> 00:34:10,469
Well, they're just like, I need to

960
00:34:10,469 --> 00:34:11,590
park it here.

961
00:34:11,690 --> 00:34:13,592
I'm going to earn a small

962
00:34:13,592 --> 00:34:17,690
percentage, but there's going to
be great capital appreciation.

963
00:34:17,690 --> 00:34:22,534
There's very minimal risk where if
you're trying to build up your

964
00:34:22,534 --> 00:34:25,353
portfolio as a smaller investor,
you're going to go to like

965
00:34:25,353 --> 00:34:27,399
Northern BC, Northern Creston.

966
00:34:27,399 --> 00:34:27,610
Yeah.

967
00:34:27,610 --> 00:34:29,473
That's exactly what I said.

968
00:34:29,472 --> 00:34:30,078
I Yeah.

969
00:34:30,078 --> 00:34:31,840
mean, Will geez, wouldn Northern
Northern BC, Creston.

970
00:34:31,840 --> 00:34:34,724
that's Yeah, exactly what I said.

971
00:34:34,724 --> 00:34:35,289
Yeah.

972
00:34:35,289 --> 00:34:38,132
I geez, mean, Will wouldn't even
lend in Creston.

973
00:34:38,132 --> 00:34:42,623
Come on, I I had to It makes total
you know, sense, do you get into

974
00:34:42,623 --> 00:34:43,989
something like that?
A lot of money.

975
00:34:43,989 --> 00:34:44,248
Yeah.

976
00:34:44,248 --> 00:34:44,507
Yeah.

977
00:34:44,507 --> 00:34:47,431
It begs the question, like why
would you park your money there if

978
00:34:47,431 --> 00:34:49,186
you can make better return
elsewhere?

979
00:34:49,186 --> 00:34:52,627
Like, yeah, there's a little bit
more risk to it, but it's the same

980
00:34:52,627 --> 00:34:54,357
as a bank, I guess.

981
00:34:54,357 --> 00:34:57,532
Like banks could go out and deploy

982
00:34:57,532 --> 00:35:00,865
money at 12%, but do they want the
headache of defaults and chasing

983
00:35:00,865 --> 00:35:03,307
that asset back down?
I think seen is like, unless

984
00:35:03,307 --> 00:35:05,428
you're institutional investor,
like you mentioned, like the

985
00:35:05,428 --> 00:35:07,734
consolidation roll-up play,
whereas you've accumulated a

986
00:35:07,634 --> 00:35:11,707
portfolio, you leverage them up,
buy one, pay that down, and then

987
00:35:11,707 --> 00:35:15,022
just keep rolling it up to get
bigger and bigger.

988
00:35:15,022 --> 00:35:17,540
So, I mean, that's the only
scenario that I've seen where

989
00:35:17,540 --> 00:35:21,015
people can pull that off because
it's hard to understand that

990
00:35:21,015 --> 00:35:24,744
return on investment when you're
having to put so much equity in.

991
00:35:24,744 --> 00:35:29,019
But if you've done it for so long
and you're so familiar with the

992
00:35:29,019 --> 00:35:31,078
space, you understand what the
upside is, whether it's rental

993
00:35:31,078 --> 00:35:32,911
appreciation and capital
appreciation, if the assets are

994
00:35:33,011 --> 00:35:35,297
paying for themselves, then maybe
that's how you wrap your it.

995
00:35:35,197 --> 00:35:35,603
Yeah.

996
00:35:35,603 --> 00:35:37,170
Well, I guess the passive income

997
00:35:37,170 --> 00:35:39,646
part too is a key point because
that's taxed higher.

998
00:35:39,646 --> 00:35:40,473
It's 52.2% or whatever.

999
00:35:40,473 --> 00:35:42,182
So you'd rather run the

1000
00:35:42,182 --> 00:35:44,140
appreciation up, which you would
do in Vancouver, do a refi where

1001
00:35:44,240 --> 00:35:47,677
there's no taxable event, deploy
it on another asset where you

1002
00:35:47,677 --> 00:35:50,108
don't really need the income
because you're going to be taxed

1003
00:35:50,108 --> 00:35:51,872
at it at such a higher rate.

1004
00:35:51,872 --> 00:35:53,576
In terms of Kelowna then, you're

1005
00:35:53,576 --> 00:35:56,619
transitioning more into the
commercial real estate agent role.

1006
00:35:56,545 --> 00:35:58,572
So you're going to be out working
with similar clients and you add

1007
00:35:58,572 --> 00:36:02,390
like a nice value add piece by
being able to run the numbers and

1008
00:36:02,390 --> 00:36:02,640
underwrite it.

1009
00:36:02,640 --> 00:36:04,576
What do you like in the Kelowna

1010
00:36:04,543 --> 00:36:05,380
scene right now?
Like if you're transitioning,

1011
00:36:05,680 --> 00:36:07,409
what's kind of the best bang for
your buck that you see?

1012
00:36:07,509 --> 00:36:12,091
Take off the banker hat because I
know you're just going to like be

1013
00:36:12,091 --> 00:36:12,443
ultra conservative.

1014
00:36:12,443 --> 00:36:14,433
But if you add a few million bucks

1015
00:36:14,433 --> 00:36:16,593
to deploy on some commercial real
estate, where are you pointing

1016
00:36:16,593 --> 00:36:18,837
your clients?
it. I mean, I think this is

1017
00:36:18,837 --> 00:36:21,377
probably the popular consensus,
but industrial is very hot right

1018
00:36:21,377 --> 00:36:21,591
now.

1019
00:36:21,591 --> 00:36:23,086
And I think there's such a limited

1020
00:36:22,986 --> 00:36:23,630
supply available.

1021
00:36:23,630 --> 00:36:25,246
So we're seeing people maybe

1022
00:36:25,246 --> 00:36:25,544
expand geographically.

1023
00:36:25,544 --> 00:36:26,932
But if you can pick up some good

1024
00:36:26,932 --> 00:36:29,171
industrial real estate in Kelowna
proper, you're, I think, going to

1025
00:36:29,171 --> 00:36:30,711
do very well over the long term.

1026
00:36:30,673 --> 00:36:31,601
Real estate development as well,

1027
00:36:31,601 --> 00:36:34,493
population growth is such a huge
driver to this economy.

1028
00:36:34,493 --> 00:36:38,150
And I think the secret's out, so
many people are moving here and

1029
00:36:38,150 --> 00:36:38,841
not leaving.

1030
00:36:38,741 --> 00:36:40,252
So I think that will continue to

1031
00:36:40,252 --> 00:36:43,965
be really a prevalent force in how
much building we see.

1032
00:36:43,965 --> 00:36:49,001
So I think land that you can
develop, there's going to be a ton

1033
00:36:49,001 --> 00:36:50,061
of upside in the long term.

1034
00:36:50,161 --> 00:36:51,201
I mean, driving around now, you

1035
00:36:51,201 --> 00:36:54,843
obviously see how many cranes are
about and how many multifamily

1036
00:36:54,743 --> 00:36:56,132
properties are being constructed.

1037
00:36:56,132 --> 00:36:57,899
So it begs the question, are we

1038
00:36:57,899 --> 00:36:58,858
potentially overbuilding?
Who knows?

1039
00:36:58,858 --> 00:37:02,031
Over the long term, I think
there's going to certainly be

1040
00:37:02,131 --> 00:37:04,554
incredible demand for people
wanting to move mean, question to

1041
00:37:04,383 --> 00:37:04,906
both you guys, are they building a
lot of industrial?

1042
00:37:04,997 --> 00:37:07,000
I haven't really seen much, like
maybe five years five years ago.

1043
00:37:09,800 --> 00:37:11,850
Up by the airport?
Yeah, by the airport, maybe the

1044
00:37:13,420 --> 00:37:13,753
big ticket item.

1045
00:37:16,480 --> 00:37:16,500
But once that's done, I mean,

1046
00:37:17,854 --> 00:37:19,193
maybe Kelowna Springs, the golf
course, who knows what'll happen

1047
00:37:19,193 --> 00:37:19,260
there.

1048
00:37:19,260 --> 00:37:21,560
I'm just, like you mentioned,

1049
00:37:21,507 --> 00:37:24,397
there's thousands of residential
units coming on like condos.

1050
00:37:24,335 --> 00:37:26,444
I know like there's a shortage,
but that seems like it will be

1051
00:37:26,444 --> 00:37:26,494
saturated.

1052
00:37:26,479 --> 00:37:27,343
And most of those people need the

1053
00:37:27,343 --> 00:37:27,585
industrial space.

1054
00:37:27,585 --> 00:37:28,661
I just don't know if the

1055
00:37:28,561 --> 00:37:30,646
industrial space will really keep
up to it.

1056
00:37:30,646 --> 00:37:32,432
Like lease rates are pretty high
for industrial.

1057
00:37:32,432 --> 00:37:36,309
They've been on fire, but again, I
just like, don't understand where

1058
00:37:36,309 --> 00:37:40,969
the supply could come from to
really curtail that.

1059
00:37:40,869 --> 00:37:47,113
I'm almost done my garage, so I'm
happy to lease that out at $50 a

1060
00:37:47,113 --> 00:37:47,773
square foot.

1061
00:37:47,873 --> 00:37:48,487
I I like it.

1062
00:37:48,487 --> 00:37:50,537
I think I might have a couple of
takers for it.

1063
00:37:50,537 --> 00:37:51,763
Yeah, Let's do it.

1064
00:37:51,763 --> 00:37:52,966
We'll kind of segue into our

1065
00:37:52,966 --> 00:37:55,620
wrap-up questions, which I mean,
the first question is essentially

1066
00:37:55,620 --> 00:37:58,020
what we were just talking about.

1067
00:37:58,020 --> 00:38:01,060
But if you could buy one property

1068
00:38:01,060 --> 00:38:03,445
in the Okanagan in the next 12
months, what would it be?

1069
00:38:03,445 --> 00:38:06,879
Yeah, I think, you know, if you
look at smaller markets like a

1070
00:38:06,879 --> 00:38:08,977
Creston, you can drive
significantly higher cap rates.

1071
00:38:08,977 --> 00:38:13,436
So there was a period of time that
I was looking potentially at some

1072
00:38:13,436 --> 00:38:16,745
other investment properties in the
smaller, like one or two bedroom

1073
00:38:16,745 --> 00:38:16,955
condos.

1074
00:38:16,955 --> 00:38:18,779
Maybe it's a couple of years I

1075
00:38:18,779 --> 00:38:19,620
think old.

1076
00:38:19,620 --> 00:38:22,519
you can wrap your head around some

1077
00:38:22,419 --> 00:38:25,880
okay cashflow, like with or two
bedroom maybe condos, it's a

1078
00:38:25,880 --> 00:38:27,650
couple of years I think old.

1079
00:38:27,650 --> 00:38:30,599
you can wrap your head around some

1080
00:38:30,599 --> 00:38:33,983
okay cashflow, like with the
market where it's at right now.

1081
00:38:33,983 --> 00:38:36,493
I don't know if you're finding a
whole lot of opportunities where

1082
00:38:36,493 --> 00:38:39,152
it is cash flowing with 20% in.

1083
00:38:39,052 --> 00:38:42,387
So anywhere close to that, I think

1084
00:38:42,387 --> 00:38:44,949
the longer term would look pretty
good.

1085
00:38:44,949 --> 00:38:47,740
And if you can have it almost
paying for itself, I think you're

1086
00:38:47,740 --> 00:38:47,983
well.

1087
00:38:47,983 --> 00:38:48,286
Yeah.

1088
00:38:48,286 --> 00:38:50,349
What's the best thing you've ever
on, big or small?

1089
00:38:50,349 --> 00:38:54,100
Well, I had a stint where I was
working for the bank in Prince

1090
00:38:54,180 --> 00:38:54,455
George.

1091
00:38:54,455 --> 00:38:57,273
And while I was there, I bought a

1092
00:38:57,273 --> 00:38:59,574
fourplex with a friend of mine who
was also in banking.

1093
00:38:59,574 --> 00:39:03,173
And at the time, you know, I think
we were getting like 800 bucks a

1094
00:39:03,173 --> 00:39:05,939
door and the numbers still made so
much sense, which was kind of

1095
00:39:05,939 --> 00:39:06,170
good.

1096
00:39:06,270 --> 00:39:08,360
I was like, what are we missing

1097
00:38:51,138 --> 00:39:10,893
something here?
This is our first ever kind of

1098
00:39:10,893 --> 00:39:11,710
bigger purchase.

1099
00:39:11,810 --> 00:39:14,325
And then we bought it and

1100
00:39:14,325 --> 00:39:18,336
everything that could have gone
wrong in the first six months went

1101
00:39:18,236 --> 00:39:18,377
wrong.

1102
00:39:18,377 --> 00:39:20,360
It was an absolute nightmare.

1103
00:39:20,460 --> 00:39:23,742
One of the tenants just like, Oh
yeah, I still have nightmares

1104
00:39:23,742 --> 00:39:24,243
about it.

1105
00:39:24,243 --> 00:39:26,485
But anyways, since then rents are

1106
00:39:26,485 --> 00:39:29,438
probably up like 70% and the
rental market in Prince George has

1107
00:39:29,438 --> 00:39:33,668
really gotten quite strong so if I
could buy that thing five times

1108
00:39:33,568 --> 00:39:38,237
over even with the first six
months I had to go through I would

1109
00:39:38,237 --> 00:39:42,700
so I love that you said that
because we've talked about this a

1110
00:39:42,700 --> 00:39:47,096
bunch in the show is that even if
you buy the worst possible time if

1111
00:39:47,096 --> 00:39:49,590
you look back in five years or
however long you've almost never

1112
00:39:49,590 --> 00:39:53,239
regret it totally right so like
yeah I think with everything going

1113
00:39:53,239 --> 00:39:57,078
on right now we're time that's why
matt doesn't ask for a google

1114
00:39:57,178 --> 00:40:01,483
review for five years clients over
the last two years have been so

1115
00:40:01,483 --> 00:40:04,856
pissed off with them just wait
just i promise in five years it'll

1116
00:40:04,856 --> 00:40:09,795
be a five star yeah yeah it is
true though like i mean you can

1117
00:40:09,795 --> 00:40:12,725
get a bit emotional but like most
of those problems you forget

1118
00:40:12,725 --> 00:40:13,515
about, you know?
Yeah.

1119
00:40:13,007 --> 00:40:15,908
I find that that equation, I mean,
I can't remember how you managed

1120
00:40:15,908 --> 00:40:18,814
your Creston one, but it's like
how that consumes your time and

1121
00:40:18,814 --> 00:40:21,553
whether you're willing to pay
someone for that.

1122
00:40:21,553 --> 00:40:26,337
Because there can be a lot of
headaches that go along with

1123
00:40:26,337 --> 00:40:27,690
running a multifamily.

1124
00:40:27,690 --> 00:40:29,474
Some tenants are a lot better than

1125
00:40:29,474 --> 00:40:32,608
others and kind of how you fill up
your cup with like what you're

1126
00:40:32,608 --> 00:40:35,908
going to allocate your time to is
really important question to ask

1127
00:40:35,908 --> 00:40:38,080
yourself when you're getting into
those I think like setting the

1128
00:40:38,080 --> 00:40:41,569
expectation is very important too,
because a lot of people, you know,

1129
00:40:41,469 --> 00:40:44,780
over the last 10, 20 years or
something, it's been, Hey, passive

1130
00:40:44,780 --> 00:40:46,780
income, real estate, you buy and
hold.

1131
00:40:47,709 --> 00:40:50,489
It's really simple, but really you
are buying a job.

1132
00:40:50,489 --> 00:40:52,940
Even if you outsource it to
managers and contractors like you

1133
00:40:52,940 --> 00:40:55,381
still have to be involved but if
you calculate the hourly rate it's

1134
00:40:55,381 --> 00:40:59,349
still worth it yeah very much so
okay what is your favorite charity

1135
00:40:59,449 --> 00:41:02,353
and how do you give i've always
been very involved in sports

1136
00:41:02,353 --> 00:41:04,876
throughout my life it's really
opened a lot of doors from

1137
00:41:04,876 --> 00:41:06,542
relationship perspective and
character traits that i've picked

1138
00:41:06,542 --> 00:41:09,913
up And so the Special Olympics and
motion ball are something that I'm

1139
00:41:09,913 --> 00:41:14,420
pretty passionate about to see the
impact that sports can have on the

1140
00:41:14,420 --> 00:41:14,864
Special Olympians.

1141
00:41:14,964 --> 00:41:16,097
I've got a good friend whose son

1142
00:41:16,097 --> 00:41:19,476
has autism and just seeing how
skiing has changed his life and

1143
00:41:19,476 --> 00:41:22,731
the doors that it opens and the
development that he's gone through

1144
00:41:22,731 --> 00:41:23,780
from being involved in that.

1145
00:41:23,742 --> 00:41:23,891
It's something I'm passionate

1146
00:41:23,878 --> 00:41:24,078
about.

1147
00:41:23,928 --> 00:41:24,227
Yeah, that's awesome.

1148
00:41:24,101 --> 00:41:24,351
Love it.

1149
00:41:24,301 --> 00:41:24,860
How can Taylor or I or the sir

1150
00:41:24,709 --> 00:41:25,180
help you?
Yeah, well, making the leap of

1151
00:41:25,032 --> 00:41:26,743
faith, getting at a commercial
bank and getting into commercial

1152
00:41:26,843 --> 00:41:27,666
real estate.

1153
00:41:27,666 --> 00:41:29,228
So partnering with a great

1154
00:41:29,228 --> 00:41:31,650
brokerage here in town, HM
Commercial, and I think their

1155
00:41:31,650 --> 00:41:33,139
values align really well with
mine.

1156
00:41:33,139 --> 00:41:36,468
There's a ton I don't know about
real estate, so it's going to be a

1157
00:41:36,468 --> 00:41:37,969
big learning curve for me.

1158
00:41:37,969 --> 00:41:39,274
But really, the mentorship that

1159
00:41:39,274 --> 00:41:40,057
those guys can provide.

1160
00:41:40,057 --> 00:41:42,268
I'm going to really be looking to

1161
00:41:42,693 --> 00:41:46,004
build out my network over the next
year or so.

1162
00:41:45,904 --> 00:41:47,982
So any sale leasing opportunities,
primarily going to be focusing on

1163
00:41:47,982 --> 00:41:49,020
industrial and real estate
development.

1164
00:41:49,020 --> 00:41:52,285
And if you've got any questions on
how to finance things, always

1165
00:41:52,285 --> 00:41:54,990
happy to field those calls, really
hoping to leverage my background

1166
00:41:54,990 --> 00:41:56,974
in commercial banking into my real
estate practice.

1167
00:41:57,074 --> 00:42:00,565
So just yeah, hoping to get out in
in commercial banking into my real

1168
00:42:00,565 --> 00:42:01,375
estate practice.

1169
00:42:01,375 --> 00:42:02,353
much as I can.

1170
00:42:02,253 --> 00:42:02,912
I love that.

1171
00:42:02,912 --> 00:42:03,022
Yeah.

1172
00:42:03,122 --> 00:42:06,207
I mean, there's a lot of power to
have an agent that knows how to

1173
00:42:06,207 --> 00:42:07,580
finance those kinds of properties.

1174
00:42:07,580 --> 00:42:08,035
So sweet.

1175
00:42:08,035 --> 00:42:08,164
Yeah.

1176
00:42:08,164 --> 00:42:10,113
We'll pass on all our listeners

1177
00:42:10,113 --> 00:42:10,632
your way.

1178
00:42:10,632 --> 00:42:11,801
You better get ready, man.

1179
00:42:11,801 --> 00:42:13,439
That phone's going to ring.

1180
00:42:13,439 --> 00:42:14,358
All right.

1181
00:42:14,458 --> 00:42:18,224
Well, thank you guys so much for
having me today.

1182
00:42:18,124 --> 00:42:21,640
It was awesome to be part of the
show.

1183
00:42:21,540 --> 00:42:22,260
All Yeah.

1184
00:42:22,260 --> 00:42:22,660
right.

1185
00:42:22,660 --> 00:42:25,781
thank Well, you guys so much for
me It was today.

1186
00:42:25,781 --> 00:42:28,448
awesome to be part of the show.

1187
00:42:28,448 --> 00:42:28,588
Yeah.

1188
00:42:28,588 --> 00:42:28,799
Appreciate Yeah.

1189
00:42:28,799 --> 00:42:29,149
it.