Income Property’s Scott McGillivray on navigating a choppy real estate market

Scott McGillivray is bit like Superman for first-time home buyers. Amid the deep, thumping rhythm of "The Fight Song" by Canadian indie band The Young Goulets, he swaps outfits, swoops in and saves the day.

McGillivray, the host of HGTV's popular television show Income Property, inevitably ends each episode opener with some variation of: "They'll buy it; I'll renovate it. And in the end they'll have a property they can bank on."

Pretty bang-on message for a show that is aimed at teaching people to be a bit more savvy when it comes to buying real estate, renovating it and becoming a landlord.

Using a portion of his student loan as a down payment to get started, McGillivray found a business model that fit. He owns more than 100 rental properties, and has done renovations on some 300.

Airing on Thursdays on HGTV Canada and in its seventh season, McGillivray, 34, continues to share his experience over the past decade or so in order to help potential find ways to make some cash in the house market.

Here is an edited and condensed version of an interview with McGillivray.

The outfit change and sledgehammer opening of your show is funny. In your own words, why did that change from previous seasons and what message are you trying to convey?

"We decided to change the intro to be more representative of what the entire show is about. We do a lot of real estate investing, searching for the real estate. There's a lot of financial stakes involved with real estate so we decided to show we've got the shopping for real estate down pat, the financing of real estate down pat and the renovation. Those are our three specialties. We call it the triple threat."

I notice you wear a lot of plaid. Whatever color, short sleeve, long sleeve. Do you really love plaid shirts or are the producers making you do this for handyman stereotype?

"The truth is in season one I wore several plaid shirts. My wardrobe is full of them and I love them. We had a meeting about them. The producers are, like, you gotta stop wearing this plaid. There's too much plaid, you're over doing it. You need a variety. I kind of sort of worked away from the plaid for a bit. But it didn't make me happy. I wasn't happy without my plaid. I said the type of shirt I'm wearing shouldn't influence the quality of the show. I'm going to wear what I'm wearing and that's it ... If you see me wearing plaid it's probably Ben Sherman."

What is the most surprising and common theme about first-time home buyers you encounter on your show?

"The number one thing is when I'm working with first-time homebuyers it's a big lesson for them of balancing their emotional needs and fundamental requirements. It's the finance versus oh, I want something pretty versus I want something I can afford. I have a slight advantage in that most of my home buyers have come to us because they're already thinking smart, they're financial savvy, they're thinking I should buy a house with an income suite because I know it makes sense."

Do you think Ottawa's move last summer to tighten mortgage rules was appropriate?

"I think the new restrictions that (Finance Minister Jim) Flaherty put our were fine. They were reasonable. They were almost necessary. But people get caught on the four or five changes that he made. They don't necessarily look at what's still available. Those rules haven't really affected me, first of all. I typically do conventional mortgages. I don't do insured mortgages because I do rental properties. If I'm putting 20 per cent down I can still get a 30-year mortgage, and a lot of people don't know that. Those restrictions were appropriate because they're going to regulate the people who are sort of at a tipping point."

Is the house market headed for a soft landing or crash?

"The way things are right now we will have a soft landing, if all things stay equal. If all the rules stay where they are and the interest rates stay where they are then everything should be pretty soft because we're basically just approaching an affordability balance ... If interest rates go up soon or quickly then there will be a much larger correction."

A recent poll suggested there is a lot of caution around buying, do you believe that?

"My true belief is we're moving from a seller's market to a buyer's market. I don't think that's any big secret. There's a million different ways to analyze the real estate market. I can always find good news and I can always find bad news. I can tell you sales are down over this month last year, but then I can say some prices are up. Who cares? It doesn't matter. All these numbers and predictions are such a small piece of a bigger picture. There's not one indicator that can give you the best prediction. Although we do look at all these things, we focus our attention on cash flow. That's our biggest indicator. Will these properties cash flow in a rental situation? ... Rents don't go down. Rent continues to go up even if housing prices go down."

Given all this, how should Canadians, first-time homebuyer or not, navigate the current housing landscape?

"The only person that is at a slight advantage right now is the first time home buyer because we are turning into a buyer's market and they don't have anything to sell so they don't have to worry. Those people, I think, should be patient and cautious over the next year. I think there will be unique opportunities for the first-time homebuyer to capitalize on interest rate increases. Once the interest rates start to increase a little bit there will be people who are motivated to sell their properties for less than market price. The only other people that are at a slight advantage are those who are upsizing because the value of a larger asset will proportionately be at a bigger discount."

How can Canadians follow in your footsteps. That is, using the housing market to invest and grow net worth?

"You have to have a business model that works in all markets. A lot of people focus on real estate and they think the only way to make money in real estate is that you buy something and the market goes up. The less discussed, less apparent business models are those of cash flow, forced appreciation and long-term principal recapture."

What are some tips to get on your show?

"Number 1 is fill out the application and be as thorough as possible. So if it says provide pictures, give us 10. Number 2 is to be realistic with what you can afford and what your budgets are. Make sure you've got some money. If you've $800 and you apply to the show chances are we're not going to be able to work together. The last thing is to have an open mind. Don't come at us and say we want to be on the show, we have a budget and here's the list of the 300 things we want done to our property. You've got to have an open mind because chances are you have not done as many income properties as I have so I'm definitely going to be making some of the decisions for you."