Surviving Ontario's Condo Market: Appraisals, Cash Flow & the Smith Maneuver

Introduction: Why “Cash Is King” in 2026

[00:00:00] Kevin Breitner: Welcome, Ontario landlords, to another episode of CRESI’s Ontario Landlord Series. Today we’re going to break down why cash-flowing investment properties are so important. We have different types of investors out there, and cash has always been king — that’s been the case for a long time. We’ll break down what’s going on, especially with speculative investors, and touch on pre-construction too. To help with all of that, I’m joined today by mortgage broker, cash flow specialist, and Smith Maneuver-certified mortgage broker Mr. Roberto Pelaccia. Rob, thanks for joining us — how are you doing today?

[00:00:50] Roberto Pelaccia: Thank you, Kevin. I appreciate the warm welcome — I’m doing very good, and I’m excited to talk about cash flow.

[00:00:58] Kevin Breitner: Excellent, well, thanks for joining us. Let’s get right into it — why don’t you share a bit about your experience and why cash flow is what most investors should be looking out for.

The Core Goal: Using Leverage to Acquire Cash-Flowing Assets

[00:01:12] Roberto Pelaccia: Cash flow is the reason you bought a real estate investment in the first place — it’s the biggest thing you’re trying to achieve when you buy an investment property. The more units, the more cash flow, naturally. But the magic of real estate is that we use leverage and debt as a tool to acquire that cash-flowing asset, which has to be managed over time — you’re not just making money every month from cash flow, you’re also gaining worth as the loan depreciates. In the last five or six years, we’ve seen people acquire properties that weren’t always cash flowing right away, so understanding how to turn that around, using the depreciation of the loan, is really important — as well as how you handle that practically, month to month. It’s a grind sometimes: you might have to put $200 or $500 a month into your investment property. We help clients plan for that so the investment stays worthwhile. A lot of people have felt burdened by their investment properties over the past few years, but I think there are great opportunities — you just have to be very intentional with your cash flow.

Speculation vs. Cash Flow: GTA Market Shifts & Regional Opportunities

[00:03:02] Kevin Breitner: People buy investment properties in all markets — it’s always a great investment. When properties weren’t cash flowing, people would say, “okay, I’m putting in $100 or $200 a month, but that’s just going into a better savings account.” I get that that sometimes works, but if you can find something that cash flows, or a way to make a property cash flow, that’s a different type of investment than buying something speculative. In our world, you had to go outside the city — Niagara, Hamilton — to find something cash flowing, versus being in the heart of the GTA. Different people want different things. But cash flow is always king, and it’s going to help you get through everything. What you mentioned earlier was the pre-construction condo buyers who got into trouble — buying speculatively years before closing, expecting it to cash flow by the time it came through, until we ended up in the situation we’re in now.

Pre-Construction Crisis: Square Footage Costs and Foreign Investor Exits

[00:04:29] Roberto Pelaccia: Over the years, square footage costs really crept up on investment properties. They seemed to be going well, and a lot of people anticipated more equity growth, but unfortunately those buyers were the hardest hit, especially once foreign investors left the market. Real estate is never an easy short-term investment — it’s a great investment if you think long-term. If you had the mindset that it would work out short-term, you may have been caught off guard or made the wrong decision when you became an investor. But I do think this is a good opportunity now, since we’ve seen prices come down, especially in the condo market.

[00:05:39] Kevin Breitner: I’ve got a triplex in Mississauga right now that my colleagues listed for $700,000 — a semi-detached triplex. There are definitely opportunities out there. Condos are on sale like crazy, especially one-bedroom-plus-den units — that demographic has so much inventory. Two-bedrooms are doing okay because they’re larger. We have over six months of inventory right now on the Toronto Real Estate Board for one-bedroom and one-bedroom-plus-den condos, which means if we didn’t take another listing, it would take almost seven months to sell them all at the current sales pace. Back when we were buying pre-construction, assignment sales were something we always looked at to make sure people could close when the time came — that was the plan, not just making money off the paper, because that’s too risky. When you’re buying for the long term, at least you have time, since the only time value really matters in real estate is when you’re buying, selling, or refinancing. Otherwise, as long as you’re collecting rent and doing things properly, it doesn’t matter as much. We always looked at assignment sales as a parachute — “something’s changed in my life, I need to unload it.” Luckily, with what’s going on lately, we didn’t have anyone stuck in that situation, since they were all planning to close anyway. With appraisals dropping, I’m sure people like you are out there saving investments and getting creative. Do you want to talk about anything that’s happened recently?

Dealing with Appraisal Shortfalls: Creative Financing & Builder Rebates

[00:07:36] Roberto Pelaccia: At the end of the day, the biggest barrier for anyone closing on a new condo right now is appraisals. Evaluations always happen in every real estate transaction — either an appraisal is done on a computer system and the bank waves it through, or someone is sent out to inspect the property. Whenever there’s a big discrepancy between what you paid and the appraised value, it becomes the buyer’s responsibility to make up the difference. The hardest part about pre-construction is you’ve already put so much money into the project, so you’re tied into the transaction — it’s less sticky to walk away, and obviously you want the asset you wanted to buy. But when there are big shortfalls, there have been some saving graces for people, mostly capital — money that needs to come into the transaction. A lot of us are from an immigrant base, so we’ve seen money come in from overseas, either savings or family, to help rectify the situation, and lenders have been more open to that than they used to be about foreign bank statements. I’ve also seen people sell an interest in the property when they couldn’t raise more capital on their own, turning it into a joint venture — that works really well when family or friends are interested in the same thing. It is challenging, though some builders have understood the gap between valuations and purchase price and have offered rebates or loans to make up the difference; big banks are still receptive to that, and the term “vendor take-back mortgage” is still around. We’ve also seen more alternate lenders being open to it. But at the end of the day, if you’re going to get the property, you need a plan for how you’ll manage it — we help people predict this ahead of time and build a cash flow plan around it, so they’re not stealing from themselves. We look at what a refinance in three, four, or five years would look like, how much the loan will depreciate, and how conservative to be with future growth. That’s really the core of our job — helping people make informed decisions for themselves.

Avoiding Panic: Why Long-Term Mindset Beats Reactive Selling

[00:12:02] Kevin Breitner: I love that — we always talk about knowing all of your options so you can choose whatever’s best for you. Two things you mentioned stand out: builders want people to close, since they don’t want to take units back, resell them, and chase money — that’s more headache for them too, so they’ll get creative to help people get over that edge. And bringing in another investor or money partner, selling shares — I’d rather hold onto a property for five to ten years to make money than dump it today and lose a bunch. I’ve talked to people who didn’t even consider that — they just wanted to unload it out of panic, not realizing there were other options. Even realtors in our industry who bought pre-construction have given away properties at a loss — a nice townhouse in Port Credit overlooking the water that would be worth something in a couple of years — just to get rid of it. But people do what they have to do.

[00:13:44] Roberto Pelaccia: Absolutely. A lot of people make decisions from the wrong mindset — out of fear and panic. It’s a classic scenario: people dump when things are low because they’re scared, and the smart investors try to pick things up while they’re down. Then when the market swings the other way, people jump in at the last second because they see proof in the market — but by then, prices have already gone up. The winner tends to be the person who can see past the noise and not react. Being overly reactive tends to make you lose money, and that’s true in any investment scenario.

[00:14:36] Kevin Breitner: That reminds me of one of my favorite Warren Buffett quotes: when other people are greedy, you should be fearful, and when others are fearful, you should be greedy.

[00:14:52] Roberto Pelaccia: Yeah, I’ve heard that before — it’s so true. If you make decisions with math, things tend to work out a lot better from an investment perspective.

[00:15:06] Kevin Breitner: Sadly, people are able to take advantage when others are at a disadvantage — even something like buying a house from someone going through a divorce, where the property will likely need to sell faster because things need to separate. Let’s circle back to cash flow — the other big thing is when tenants aren’t paying rent and we worry about cash flow, especially with multiple properties or multifamily. Let’s hear a bit more about cash flow — where are we at?

Cash Flow Management: The Smith Maneuver & Tax Benefits

[00:15:54] Roberto Pelaccia: Being prepared is the best way to go — having solid emergency funds set up so you can access liquidity when you need it is the best plan. But if you need to move cash flow around using equity, you should do it in a way that gives you better tax benefits. Something like the Smith Maneuver can be a great benefit, because you’re going to have ups and downs in income, and using your home equity on your personal home to pay rental property expenses can help flatten out those expenses in months when cash flow is low — which happens, whether you’re remodeling or waiting for a new tenant. The best way to smooth that out is to have capital liquidity available. If there’s one mistake I see real estate investors make, it’s not having enough liquidity — the ability to move funds from here to there, whether it’s cash or a home equity line of credit. The CRA is built around you using debt — new money is created every time you take a loan. So you have to shift how you think about debt and moving money around. A lot of real estate investors are already somewhat in tune with this, since it’s all about using other people’s money or lenders. The extension of that is having a real plan around your cash flow — being intentional, having a plan for when a tenant defaults or during the natural cycle of tenants moving in and out. Once the system is built, things happen on their own, because your success in any business is based on your preparation and the systems you have in place — that’s something I’m a big proponent of building for people.

CRESI Investor Network: Moving Beyond the “Acquisition” Hype

[00:19:12] Kevin Breitner: We’re launching the CRESI Investor Network this spring — it’s about education, information, and advocacy for landlords, because all the other investment clubs and groups out there only concentrate on acquisition. They tell you how to buy a property, using other people’s money, flipping, wholesaling — it’s all about the acquisition, because that’s where they make their money. But I say all the time: buying a rental property isn’t the win, it’s just the beginning — the game starts after that. You’re now a housing provider with responsibilities and obligations. A lot of investors don’t realize that, because we only know what we know. Especially when the market was going up, people bought something just because their house was going up in value, thinking a house down the street would do the same — but they don’t realize that their new tenant is now their responsibility, and that’s what we’re here to fill the gap on.

[00:20:45] Roberto Pelaccia: Glad to hear CRESI is all about that — I agree with you. I’ve been part of a lot of these clubs, and they’re mainly focused on acquisition. There’s a buzz and a hype, which is great — people get excited — but I’ve seen people go too far, too fast, without being prepared enough. I remember a client I met through an investment club who I set up with the Smith Maneuver, gave a large credit line because he had the equity for it, and within two months he had all these purchase agreements on my desk. I had to tell him he couldn’t go that fast, because he’d have to qualify for all of them sequentially. It was too bad, because I was just a tool in that scenario — it was the group encouraging him to keep going. That got him into a bit of trouble, and while the market didn’t crash in that scenario, we had to get him out of some of the contracts he couldn’t pull through on. Going too fast isn’t a good thing — real estate is a very long-term investment, and seeing your equity grow as the loan goes down is awesome too, not just the cash flow hitting your bank account.

[00:22:16] Kevin Breitner: Not going—

[00:22:43] Roberto Pelaccia: —if you’re thinking, “I’ll hold this for another ten years,” you might see hundreds of thousands of dollars come your way even after taxes. There’s a lot of ways you’re earning here, and the nice thing is if you compound certain strategies — cash damming and the Smith Maneuver, for example — done correctly, you’ll get bigger tax benefits every year and actually get money back, especially if you’re a T4 employee. It can really compound as the years go on, since your tax write-off gets bigger too, and those refunds help you pay back the loan and build more equity and net worth.

[00:23:34] Kevin Breitner: There are so many different ways things can be structured for different people — it comes down to personalization and what makes the most sense for that investor. Rob, I’ll make sure your information pops up on screen so people know how to reach you if they want to ask questions or look into a mortgage or the Smith Maneuver — because I think a lot of investors only think about what they’ll spend or save, when what we should really worry about is what we’re going to net. So please reach out to Rob — his email is r at RobertoPelaccia dot ca, that’s spelled R-O-B-E-R-T-O P-E-L-A-C-C-I-A dot C-A. That’s the best way to reach him, or you can always reach out to us and we’ll connect you. Thanks so much for doing this, Rob — anything else you want to add before we wrap up? We’ve only scratched the surface here.

Final Advice: Free Consultations and Closing Thoughts

[00:24:54] Roberto Pelaccia: Kevin, I think I’m good for now — thank you so much, I appreciate it. I’m here to help, and I offer free consults, so anytime someone wants to reach out, I’ll send Kevin a link where you can book a time directly. It’s thirty minutes, and I’ll give you the advice I’d give if I were in your shoes. Feel free to reach out, don’t be shy.

[00:25:23] Kevin Breitner: Amazing, thanks so much for your time and your expertise — we’ll definitely talk again. And thanks, everybody, for listening. Make sure you share this with another friend or landlord — we’re here to help. Bye for now.

Please remember, while we are professionals, this podcast is for informational and entertainment purposes only. The advice shared may not apply to your unique situation. Always seek personalized advice from a qualified professional before making any investment decisions.