Risks of BRRRR in Canada. *mortgage rate increase

[Scott Galloway]

Some investors will use the BRRRR strategy where I'm from. Everywhere I read they mention things like appraisals coming in low, people not refinancing for what they hoped for, unexpected construction costs, it taking to long to get renters in, renovations taking to long, and I'm sure I'm missing a few common other ones.

What nobody ever mentions is mortgage rates going through the roof. I don’t understand how that isn’t the main concern. I’m a total newb, never done anything like that. I’m just curious as to how that’s never mentioned. Anyone who knows what there doing around Edmonton where I’m from is adding secondary suites during the renovation. These cashflow very well (upwards of $500 from what I’ve seen). But what would these people do if we ever saw the mortgage rates go up to say over 8-10%. That would be a pretty ugly situation for anyone with multiple house unless you had some DEEP pockets. Can someone please explain to me how this isn’t the main concern for most people?

[James Ma]

The most the interest rates would rise in a year would be about 1% and it is usually much less... I'm on fixed mortgages myself but even if on variable, if things get too risky you can always convert into a fixed mortgage later. As Luc said, the rates won't rise too aggressively as it would cause a housing collapse like the US. Even the 2% stress test implemented was to help prevent the risk of a collapse.