How Canadian Real Estate Investors Should Structure Mortgages,HELOCs & Cash Flow

Rakhee Dhingra (00:00)
You could look great on a balance sheet, but that wealth doesn’t necessarily equate liquidity, cash flow, or choices. When we structure financing, it’s really to give that end client choices. And that’s not always built in as clients are securing and acquiring leverage. There needs to be a component. It’s not looking wealthy on a—on a balance sheet; it’s having the flexibility and resilience to be making choices as life

shifts and pivots.

Dylan Silver (02:01)
Hey folks, welcome back to the show. Today we’re joined by Rakhee Dhingra, the CEO and broker of record of Mortgage Savvy, helping homeowners and investors strategically use mortgages, equity, and cash flow to build wealth. Rakhee, thanks for joining us here today.

Rakhee Dhingra (02:18)
Dylan, thank you so much for having me.

Dylan Silver (02:20)
What types of deals are coming across your desk these days?

Rakhee Dhingra (02:24)
Well, we’re seeing the surge of renewals. The mortgages that have come up from the 2021 sort of market surge with purchases, those are now coming up for renewal in ’26. And that’s where we’re spending our time coaching and supporting clients through a change in the rate environment.

Dylan Silver (02:40)
We’ve had a lot of Canadian investors and service providers on our show over the past couple of months, and this has educated me on just how different the processes are. But I’d like to dive in there to start. When we look at the mortgage environment right now in the US, people are looking at mortgages that extend decades. I understand this is not the case in Canada.

Rakhee Dhingra (03:03)
You date the rate here in Canada. So see, typically a three- to five-year term that you’re committing to when you’re renewing your mortgage. So it’s more of dating the rate and I often say marry the strategy.

Dylan Silver (03:14)
With that being the case, I can imagine that folks and their lenders have a closer relationship because this is someone that you’ll see then not just once, but potentially a handful of times.

Rakhee Dhingra (03:26)
Absolutely. So we stay with the client through the entire sort of life cycle of their real estate journey and that sort of—and through investors even with the build. It’s ensuring that there’s a strategy behind the acquisitions and structuring renewal dates and ensuring that the leverage is where it needs to be.

Dylan Silver (03:43)
When we talk specifically about the investor side of this, in the US, we talk a lot about investor-friendly loans, debt service coverage ratio, bank statement loans. What does this look like on a granular level in Canada?

Rakhee Dhingra (03:59)
Very similar in terms of lending guidelines and ensuring that we’re meeting debt service ratios, the component of sort of rental income that we can also utilize in the overall sort of qualification and how that impacts the debt servicing ratios that all comes into place. But very similar to the US in terms of the overall sort of underwriting guidelines and programs are quite similar. It’s really the term of the loan and how long we can hold the rate for that becomes material.

Dylan Silver (04:26)
When folks are looking at their first investment property, a lot of times you’ll hear house hacking, but you’ll also hear folks having a little bit of what I like to call like shiny object syndrome. Not sure if they should be looking at a short-term rental, long-term rental. Should they be looking for a flip opportunity? Do you see newer investors favoring any one type of deal?

Rakhee Dhingra (04:51)
So over the last couple of years and sort of the fluctuations just economically, I do find that the multi-unit properties are doing quite well because that also mitigates risk and helps sort of liquidity issues, right? It prevents that. It ensures that the clients and the investors have a little bit more fallback and security with the multi-unit.

Dylan Silver (06:00)
I’ve heard this as well, and what’s particularly interesting is sometimes folks will think that because they’re buying a quadplex or a triplex or a duplex that this is going to complicate their approval. But in many cases, it does the exact opposite.

Rakhee Dhingra (06:14)
I would completely agree, because now we’re able to utilize the income from the individual unit. And should they have an issue with vacancy, we have the additional rental income to offset that. So it gives them additional cash flow.

Dylan Silver (06:25)
When we talk about approvals in those contexts, I’ve heard various different accounts, and I’ve heard folks talking about them needing to be occupied versus them not needing to be occupied. What type of due diligence are lenders going to do for newer investors when they are buying a multi-unit property?

Rakhee Dhingra (06:46)
So there’s a varying degree of flexibility there. If there are current tenants occupying the unit, we can use historical rents or have an appraiser come in and sort of assess current market rents. So there’s quite a bit of flexibility there as long as it is considered a legal unit and the individual units have separate entrances and they meet sort of code for the city. There’s quite a bit of flexibility there in terms of confirmation of income.

Dylan Silver (07:14)
How often do you come across investors who are utilizing some type of debt to finance a value-add opportunity on a single-family home? Is that common or relatively uncommon?

Rakhee Dhingra (07:26)
So on a single-family home with the intention of it functioning as an investment property in Canada, it always makes sense to utilize leverage from another property, borrowed funds, because there’s tax advantages in doing so. So we’ll generally recommend leveraging to purchase.

Dylan Silver (07:43)
On a granular level, if we can break this down a little bit—

Rakhee Dhingra (07:47)
Really?

Dylan Silver (07:48)
What does that process look like? It sounds like the ability to pull equity out of an existing property into another, but granularly, what does that look like?

Rakhee Dhingra (07:58)
So it means that as we own property and it appreciates in value and we continue to make our mortgage payments, what we do is we lower the principal balance of that loan. And the difference between the value of the property and that loan, we can source a portion of that as the equity and liquidate it to use that as a down payment towards the next purchase.

It’s difficult to put funds aside to save, so the leverage piece gives us ability to take what we’ve built in terms of wealth in our home and take that towards purchasing that investment property, or leveraging from an existing investment property that has over the years appreciated for you in value. Taking those funds and reinvesting them gives you the ability then to use that as an interest deductible on your income that you’re generating, which lowers your overall

taxes that you’re paying to the government and gives you the ability to take those funds and continue to build wealth with those borrowed funds.

Dylan Silver (08:54)
I haven’t asked this before, but do those equity loans mirror the overall rates for home purchases, or is that different?

Rakhee Dhingra (09:04)
So it’s different, because the government knows that you’re utilizing those funds to purchase for the sake of it generating additional income. So there’s usually a rate premium that is attached to investment mortgages. And that generally is about twenty-five basis points we find from a standard owner-occupied rate to an investor rate.

Dylan Silver (09:23)
Tough to say. So putting you on the spot maybe here in some capacity, what I’ve noticed is there’s not as much awareness or comfort that American investors feel when it comes to HELOCs, because I feel like this is potentially a risky proposition: “I have equity here, I don’t want to take against it to invest in another property.” But it sounds like there may be less opposition to this idea in Canada where there’s even more tax.

Rakhee Dhingra (09:52)
For sure. The focus often for clients is the rate—they want to win on the rate. And I often say the goal is to win on the strategy. And tax exposure here in Canada, we’re taxed up to 58% of our income. That’s the reality. So if you’re in a healthy household income, you’re also in a very high tax bracket. So often utilizing your home equity line of credit, a HELOC, and taking those funds and utilizing them towards investments

where they’re building wealth, you can then write off the interest component of that loan. So it actually works for you. You want to be mortgage-free, but you wanna have debt exposure on your HELOC because it works for you.

Dylan Silver (10:29)
When we talk about the tax strategy component of this, it’s interesting because I hear how this can become someone’s focus of their real estate strategy, really. And I’m imagining there’s ways—can this potentially be used to offset maybe even their—what we would call in the US—their W-2 income from their job? Is that the case?

Rakhee Dhingra (10:49)
Absolutely.

Absolutely. And that’s where the structure of a mortgage, when I say strategy, it’s providing the oversight. It’s not just the interest we’re paying on the loan; it’s the tax exposure that comes along with it.

Dylan Silver (11:00)
I’d like to pivot here, Rakhee, and talk about a different side of the investing business, which is acquisitions. Now, as real estate investors, we tend to be ultra-focused on the next deal, and we kind of think, “Well, if we find the next deal, the money will come.” But I also understand that for a lot of folks, their biggest bottleneck is their capital stack. And so when you’re talking with clients and prospective clients,

when is the right time for them to be looking at how they’re gonna finance their next deal?

Rakhee Dhingra (11:33)
So biggest mistake is entering into a conversation at the time we’re looking to make the purchase. It needs to be done in advance. There needs to be an alignment of the current properties, the overall asset portfolio, and how that helps them get to their end goal. Oftentimes it’s very immediate, it’s very transactional, it’s very like a shiny object, but it needs to fit the overall plan. And wealth on paper doesn’t necessarily mean liquidity. It doesn’t necessarily mean choices.

So that strategy needs to have an end goal in mind. And that’s often missing. So the restructuring of an existing portfolio may make sense to begin to create the leverage to ensure that taxes have been considered, the overall goals have been considered, and then the end goal is also very clear to ensure that those steps or that acquisition fits that overall plan. So it’s about going back, restructuring, ensuring that you have the end in mind, and also understanding

that equity doesn’t necessarily mean liquidity.

Dylan Silver (12:32)
In the US, we have guidelines which will say if you’re going to use the property as an investment property, taking out a traditional loan, you need to be in the property for one year. Do you have similar rules in place for investment properties in Canada?

Rakhee Dhingra (12:47)
Only if you’ve purchased a property with the intention of living in it as your owner-occupied property prior to converting it into a rental. That twelve-month period is also required here in Canada.

Dylan Silver (12:59)
I wanna ask you about the pathway to becoming an investor. We were talking in the green room about folks buying their personal residence and then becoming investors later on. I can imagine, outside perspective looking in, that because you have multiple touchpoints with people over the course of their homeownership, that you may be seeing more folks who are open to these types of conversations about becoming investors. Is this something that you think

maybe happens more so up there than down here?

Rakhee Dhingra (13:30)
I do find that over the last sort of beyond 2021, we were seeing a consistent sort of increase in property values for well over a decade. And that was very sort of comforting for a number of first-time homebuyers to begin paying their mortgage, purchasing their first home. But the focus was to eventually build that equity, build that wealth, to eventually leverage it towards a second purchase.

We’ve seen fluctuations in the market, and those gains haven’t been as consistent as they were over that 10-year period. So now it’s approached with a little bit more caution as well. There’s that period, there’s potential for vacancy. It’s really become more so a cash flow concern for a number of clients. So where there’s affordability, there’s absolutely opportunity in the market, and experienced investors are taking advantage of that. But it’s really having the education and understanding

the structure of it and whether it makes sense.

Dylan Silver (14:24)
We’re talking today at the time of this recording, it’s August 31st. I believe, if I’m not mistaken, that now international investors can buy single-family homes in Canada. Is that true, or are we still not permitted from purchasing these homes?

Rakhee Dhingra (14:39)
Still not permitted, but changes are upcoming.

Dylan Silver (14:43)
This is particularly interesting, because this feels like in stark contrast to what happens here in the States, where you can really be from anywhere and be purchasing property. So in many cases, our most desirable locations have a very international-heavy presence. Are there any limitations for Canadians when it comes to owning investment property, such as a specific cap on the number of single-family doors that they can own in a given area?

Rakhee Dhingra (15:09)
So we’ll say in Canada we’re highly regulated, and the stress test requires us to ensure that we can qualify a client at the current rate, but also add that two percent should rates continue to rise over time, which is more of a safety measure, but it does constrain clients. Once we hit that four or five property mark, it becomes difficult. And that’s where there’s also the option of holding a property under a corporation versus having that property reflect under

a personal asset. And there’s tax benefits to doing that as well. But again, it goes right back to the structure. So there are options. We can get creative with it. But again, overall personal debt servicing is capped because of how regulated we are here in Canada.

Dylan Silver (15:52)
I wanna unpack that a little bit. So, very interesting. So you see folks being capped at, let’s say, six or so homes, but they do have the option of forming a corporate entity and then purchasing those homes in that entity to open up new financing avenues for them.

Rakhee Dhingra (16:09)
Correct, and that usually requires a higher down payment. It also works really well if you’re a self-employed individual that is looking to purchase a property for the purposes of running their business. And then there’s some tax benefits to owning a property under a HoldCo or a corporation for that purpose.

Dylan Silver (16:26)
When we talk about down payments, I’ve seen in the States investment properties typically looking at somewhere around twenty percent, although I have heard as low as twelve percent, especially when you’re primarily looking at bank statements and not what their total availability to finance a property through traditional means might be. Is it similar up there, or are there different percentages of down payments?

Rakhee Dhingra (16:50)
Yeah, what’s actually very different here in Canada: so the minimum requirement when purchasing an investment property is twenty percent, and that’s with declarable income as you would report on your W-2s—we refer to that as our T1s here in Canada. But if we’re going strictly on bank statements, lenders generally want a higher down payment of twenty-five percent. That’s all fine.

Dylan Silver (17:11)
Do you see therefore at that higher down payment that investors are therefore more likely, even in early stages, to partner with others? Is that more common, or are most folks who are buying their first property doing this on their own?

Rakhee Dhingra (17:26)
So majority are typically doing it on their own, but we do see seasoned investors, when they’ve hit that threshold or that limitation on their qualification, reach out to your sort of sphere and collaborate on purchases as well where it makes sense.

Dylan Silver (17:41)
I want to pivot here and talk about acquisitions. Folks do have to find these deals in order for them to need the lending component of it. In the States, we have so many different ways where folks are able to find distress, right? Whether that is a property that’s sitting on market for a long period of time and not selling through traditional means, a property that is being foreclosed or pre-foreclosure, or in the probate process and maybe there’s been a death in the family or divorce.

Do you see Canadian investors maybe mirroring any of these tactics, or something else that I haven’t mentioned?

Rakhee Dhingra (18:14)
No, absolutely. We have a strong percentage of our population aging with ineffective estate management sort of processes in place, and cash constraints are a real issue here. So absolutely, we have investors that are very seasoned that know how to access these types of deals. And if you have the liquidity and you have the organization of the structure, you can move quickly when these opportunities present themselves.

Dylan Silver (18:40)
Moving quickly can sometimes be challenging for people. I want to go back to your earlier point about having the lending in place. In the States, I’ve seen more times than not the issues arise with the lender, especially when people are doing hard money loans, as we call them in the States, right? And they have a pre-approval letter, but something inevitably comes up in many cases, and there’s an additional inspection or appraisal that is needed. When you’re working with investors,

what are the common errors that you see throw a wrench into things, maybe in the days before closing?

Rakhee Dhingra (19:13)
There are many. One is to just ensure that—what investors fail to sort of remember is that it’s not just their financial covenants. It’s not just ensuring that we can secure the loan. The loan is secured to a property that the lender needs to have comfort in. They need to ensure that the value or the purchase price is in line with market value, and that the lender owns a portion of that property, so they want to ensure it’s a sound investment as well. So it’s very property-specific as well.

That can definitely impact the qualification, and lending guidelines continue to shift and change. And it’s very specific to a property. So if we’re looking at investors, we’re looking at rental income, we’re looking at vacancy, tenancy, we’re looking at the area in which the property is located, their purpose—it becomes so specific that the lender can come back

with concerns. So it is important that you’re not only reviewing financial covenants, but you’re setting a strategy on the client’s end goal. What are they looking to purchase? And should that shift and pivot, that we’re prepared to address the lender’s concerns.

Dylan Silver (20:14)
I wanna talk about where you’re based, your backyard, Toronto. Are you seeing investors bullish on flipping? Are you seeing them bullish on short-term rentals? Is there certain restrictions that make either of these particularly challenging?

Rakhee Dhingra (20:30)
I think in the current market, we’re not seeing properties move as quickly as they once did. So I do think that the focus really is multi-unit and ensuring that there’s that fallback on cash flow, liquidity, ensuring that they can debt service. There are multiple properties if there’s more than one, and sort of building those contingencies, because here in Canada, tenants have a lot of power and landlords are quite constrained. So having that flexibility built in, it becomes really

where investors in this market are looking for opportunity where there’s that added degree of stability there as well.

Dylan Silver (21:04)
In some of the more challenging landlord states and cities, you can see eviction battles last a year or longer. Is it a similar situation in—

Rakhee Dhingra (21:15)
Very similar.

Dylan Silver (21:16)
When investors are therefore looking at underwriting these deals, are they factoring that into their pro forma? Or is this a situation where they’re thinking, “Well, that may happen, but really we have to vet the tenants to eliminate that as being a possibility”?

Rakhee Dhingra (21:33)
So as long as we can demonstrate the debt servicing, that becomes the focus of how to secure the loan. But I often say I want my clients to like me after they’ve acquired the property. So having that conversation on the upfront, you want to build in for contingencies. Cash flow means resilience. I always say that to my clients. We need to ensure that we have the sufficient cash flow, that we’ve planned for life’s unexpected events, and ensure that we have

the ability to be resilient, should there be a shift and pivot that we’re not expecting, which is how life typically unfolds.

Dylan Silver (22:05)
That’s right. It’s always the next corner then you have to adjust.

Rakhee Dhingra (22:09)
Ha.

Dylan Silver (22:09)
When we look at value-add, especially when it comes to multiple units, one of the strategies that investors have is finding deals and then raising rents where maybe the previous landlord had not done so in a long period of time. But if I’m understanding correctly, that can be maybe a little bit more challenging in Toronto.

Rakhee Dhingra (22:28)
It can be, because when you’re acquiring a property that’s currently tenanted, for example, you need to then secure vacant possession on closing. And that can have its challenges as well, given that the tenants have a degree of rights. So if you’re looking to get a deal, you’re usually a little bit more flexible on potentially acquiring an existing tenant and grandfathering the existing lease that’s in place as well.

Dylan Silver (22:51)
And increasing that rent and writing a new lease, even if it’s at the end of that lease, can that be more challenging? Is there a cap on the percentage where—

Rakhee Dhingra (22:59)
There

is. There’s a percentage cap to that as well. So that really limits—and I can’t quote that, but it’s a very insignificant increase that is permitted.

Dylan Silver (23:10)
This is interesting, right? Because so much of our investing underwriting is based on where the rents are trending to and how much you could increase the rents, even potentially without always doing substantial rehab, simply based on the previous owner’s maybe lackadaisical attitude when it comes to rent increases. But not having the ability to do so certainly changes things.

Do you see therefore investors holding on to these properties potentially longer? Is there a standard set time where investors look to exit a property, such as five, ten years, or longer?

Rakhee Dhingra (23:46)
So the focus with real estate, period, is always to take that longer-term sort of perspective with owning property. And for investors, it really becomes a function of liquidity and where they want to end up and how that one property fits into that equation. As an investor myself, my focus always is: Think longer term, and where equity is building, how do I access that and utilize that for further sort of—

like diversifying my overall wealth-building portfolio as well. So I think the focus has really shifted in the sense that there’s tax exposure even when you’re selling an investment property here in Canada. So often that longer-term focus becomes required, and so you get creative with the leverage strategy to sort of offset some of that and continue to build where you can.

Dylan Silver (24:35)
When we look at buying in Toronto, but also in other markets in Canada, do most investors that you’ve come across self-manage these properties? Is it still profitable to find a property management company to do this for you, or because of the limited increases in rents, that can be cost-prohibitive?

Rakhee Dhingra (24:54)
It can be. There are a number of my clients that will take that on themselves, and then there are those that will default to a property management company, but there’s a cost associated with that as well. So it really comes down to convenience and affordability and cash flow sort of constraints that really determines what that client is willing to sort of bend for that service, or if they’re willing to take on the added sort of work that comes with managing a property.

Dylan Silver (25:20)
When we talk about another side of this, which is the holding costs, when folks are looking to do any type of transaction that’s gonna require a value-add, one of the challenging things is we don’t know how long a property will take to sell. We also don’t necessarily know exactly if our exit strategy will work in a given situation. We have to have, as you mentioned earlier, contingencies. In a multi-unit scenario, when folks are looking at acquisitions,

therefore, do they prefer it to be tenant-occupied? Is vacancy better for most investors? What makes more sense?

Rakhee Dhingra (25:55)
Really, it’s determined by where the rents are sitting at that time. Where a property is already occupied by a tenant and it’s in line with where market rents are going to sit, taking on that property, having it occupied and tenanted from day one gives that added cash flow on an immediate basis. So there is a benefit to that. But it all comes down to where those rental rates are currently sitting and what that means to the bottom line and the overall impact.

Dylan Silver (26:21)
Yeah, because on the flip side, right, if it’s tenant-occupied and you can’t increase the rents, then that can change exactly what you plan to do with the property going forward. I would like to ask you about another side of this game here, which is when folks are homeowners and trying to find out where they fit in that investor niche, what does the conversation look like with you or a member of your team?

Rakhee Dhingra (26:45)
So it’s not what’s just seen on a credit report. It’s also understanding obligations that don’t report on your balance sheet, right? Obligations that you might be—sort of elderly parents, young children, what is your five-year life plan looking like? Where does retirement fit in? And how are we utilizing this property acquisition to ensure that it aligns with your goals? And that’s the conversation—the most—

the least interesting part of what I do with mortgages, it’s usually the life conversation, whether it’s ego, whether it’s fear, whether it’s investors looking to build in that additional liquidity or potential legacy planning for their children. It’s really getting to what is the ultimate real goal of that client, and how do we build around that and ensure that this fits into that model. Oftentimes it doesn’t. So it’s having that conversation, taking the information in, and also

realigning the strategy and the end goal with what they’re looking to do on the upfront. So it really shifts. We’re really looking to kind of take stock of what else are you obligated to? Is there an expense that may not necessarily be a concern today, that may be something that we need to consider in the next couple of years?

Dylan Silver (27:54)
No, yeah, that’s absolutely true. Especially when you consider the fact that if it isn’t your personal residence, you may feel like not as tied to it, but that doesn’t mean that you’re any less financially responsible. And especially when you’re putting—I think you mentioned twenty-five percent down in many cases, this is a large lump sum. This is not something that people are gonna feel at all comfortable walking away from.

Rakhee Dhingra (28:19)
For sure. And then you’re carrying the loan on what you’ve used to leverage, as well as the existing mortgage. And going into an investment purchase, there’s usually a shortfall. There’s usually an expected out-of-pocket contribution. So with understanding that, how is that going to impact your personal cash flow, your personal obligations?

Dylan Silver (28:36)
Do you see it being more common when investors are screening tenants for them to be looking for first, last, security, and any additional fees that might be involved? Or are folks in Toronto not needing tenants, so therefore maybe less intense on how they scrutinize potential tenants?

Rakhee Dhingra (28:57)
So it’s very neighborhood-specific here in Canada, and in Toronto specifically. I find that there’s certain areas and certain pockets that can get a lot of demand, and we’ve had—it’s not unusual to see an offer where a year’s worth of rent is paid up front to solidify a property or to secure it. On the other end, oftentimes it’s difficult to get first and last month’s rent, and landlords are a little bit more flexible versus carrying the full obligation on their own. They’re a little bit more sort of open

to a lower deposit structure where needed.

Dylan Silver (29:29)
When you see investors running into problems when it comes to either their financing or in their overall life cycle as an investor, is there any one thing that immediately comes to mind that you routinely see?

Rakhee Dhingra (29:44)
You could look great on a balance sheet, but that wealth doesn’t necessarily equate liquidity, cash flow, or choices. When we structure financing, it’s really to give that end client choices. And that’s not always built in as clients are securing and acquiring leverage. There needs to be a component. It’s not looking wealthy on a—on a balance sheet; it’s having the flexibility and resilience to be making choices as life

shifts and pivots.

Dylan Silver (30:13)
We are coming up on time here, Rakhee. Any new projects or activities that you’re working on, or also anything you’d like to mention directly to our audience?

Rakhee Dhingra (31:05)
I think it’s so important that we focus on legacy. Why are we building what we are—what we’re building? I think we are in a culture of building wealth through acquisition, but understanding how does the acquisition fill the end sort of goal, and taking time to really assess where are we spending our time, energy, and money, and what is the net return of those investments long term—like calculating the numbers and making sure that they align, not what it just looks like on a balance sheet.

Dylan Silver (31:32)
Thank you so much for your time, Rakhee. Thank you for joining us.

Rakhee Dhingra (31:35)
That was great. Thanks, Dylan.