The $600,000 Penalty. Why I recommend against Private Lending
By Erwin Szeto | Host of The Truth About Real Estate Investing for Canadians
Recorded: April 2026
Host: Erwin Szeto, The Truth About Real Estate Investing for Canadians Podcast
Three Real Estate Stories the Headlines Are Missing in 2026
Three stories crossed my desk in the last few weeks that every Canadian real estate investor needs to hear about — together, not separately. Because when you put them side by side, they tell one story, and it’s the story the headlines are missing.
Story one: Ontario’s HST rebate on new-build homes launched April 1st, and sales surged at major builders. Story two: Alberta’s new-build market — the province everyone has been telling you to buy into — is showing real cracks. And story three: a regulatory ruling from FSRA that hit close to home for me personally, and that carries a lesson every private investor needs to absorb.
Here’s what they have in common. The headline is never the whole story. The loudest voices in a market are rarely the most informed. And your job as an investor is to do your own work.
Let’s get into it.
Story 1: Ontario’s HST Rebate Sparks a Sales Surge — But the Investor Window Has Already Closed
On April 12th, the Globe and Mail reported that new-build home sales in Ontario surged in the first week of the province’s new HST rebate. Major homebuilder Minto sold nearly 120 new homes in Ottawa and the Toronto region. Branthaven Homes sold more homes in one week than they did in all of 2025. The industry trade group BILD called it a “jolt.”
If you’re an Ontario landlord or investor, the question is obvious: is this the bottom? Is preconstruction back? Should I jump in?
Before you do, you need to understand what the rebate actually covers — and what it doesn’t.
How the Ontario HST New-Build Rebate Works
Effective April 1st, 2026, Ontario buyers can claim a rebate on the 13% HST on new-build homes. The transaction window runs until March 31st, 2027. The rules differ depending on whether you’re buying to live in the home or to rent it out.
For end-users (people buying a home to live in), construction has to start before December 31st, 2028 to qualify. That’s a meaningful window.
For investors (people buying to rent the unit out), the rules are dramatically tighter. Construction must already have been started by March 31st, 2026 — a date that has already passed. In other words, the investor version of this rebate only applies to product that’s already in the ground. There is no path for an investor to buy a brand-new project and qualify.
It’s also worth noting that the rebate is not yet ratified in legislation. Buyers and developers are transacting as if it is, but the federal Department of Finance told the Globe it cannot speculate on timelines.
The Case for Optimism
Let’s give the rebate its fair due. Thirteen per cent off a new home is real money. On a $700,000 townhome, that’s $91,000 — a meaningful down payment, not a marketing gimmick.
The volume is undeniable. Branthaven sold 120 townhomes in Milton and Mississauga and another 20 condos in Oakville in a single week. Construction jobs are coming back — Branthaven’s president told the Globe he expects to rehire up to 30 staff and put dozens of subcontractors back to work. And it begins to clear out the more than 10,700 cancelled GTA and Hamilton condo units that have hung over the market since 2022.
The Case for Caution
Not every builder is sharing in the surge. Fernbrook Homes — a 45-year veteran developer — told the Globe they had “many calls and inquiries” but the result was “no sales. Zero.” CEO Joe Salvatore said buyers are “100,000 per cent gun shy” after years of economic upheaval and the U.S. trade war.
Minto’s own CEO openly questioned whether the surge would last: “Is this a short spurt that will peter out, or will it be sustained?” Pauline Lierman of Zonda Urban — a leading preconstruction researcher — was even more direct: “Demand and confidence is not all there.”
And the underlying affordability problem hasn’t moved. Solmar Development just cancelled its large Bristol Place condo project in Brampton and converted it to rentals. Their executive vice-president told the Globe the issue was simple: buyers can’t qualify for mortgages and can’t come up with the down payments. “Affordability continues to be an issue, regardless of the rebates.”
What This Means for Investors
If you’re a first-time buyer or end-user, the rebate is genuinely worth a serious look. The math on your primary residence is different than the math on a rental, and you have a meaningful window to act.
If you’re an investor hoping the rebate unlocks Ontario rentals, slow down. The investor cutoff has already passed. Anything you buy now does not qualify for the investor rebate. And Ontario’s underlying landlord economics — rent control, tenant board wait times, eviction process, capped annual increases — have not changed. A one-time purchase discount does not fix ongoing negative cash flow.
If you’re an existing Ontario landlord whose properties are not cash-flowing, this rebate may actually create a window for you to exit. If new-build sales pick up broadly, the resale market tends to follow with a lag. That could be your opportunity to redeploy capital into something that actually cash-flows.
Which leads us to where many Ontario investors have been looking for the past few years.
Story 2: Why Toronto Investors Are Walking Away from Their Calgary Preconstruction Deals
For the last three or four years, the loudest advice in Canadian real estate investing circles has been some version of: “Sell your Ontario rental, buy in Alberta.” I get it. Landlord-friendly legislation, no rent control, lower provincial taxes, a growing population, better affordability than the GTA or the Lower Mainland. On paper, it’s everything Ontario isn’t.
Then on April 2nd, the Globe and Mail published a piece titled “Glut of new build homes starts to unhinge the Alberta market.” Every Canadian investor with Alberta exposure — or who is considering it — needs to read it carefully.
The Calgary Townhouse Glut, By the Numbers
According to Altus Group data cited in the Globe, unsold new-build townhome inventory in Calgary hovered below 1,000 units from mid-2023 through early 2025. By the end of 2025, it climbed past 1,030 — and rising. The share of new-build townhomes priced at or above $500,000 jumped from 40 per cent to 72 per cent in the same period, putting them out of reach of many local first-time buyers.
Here’s the line every investor needs to absorb. Edward Jegg, Altus’s research manager of data solutions, told the Globe: “Many projects started in the early 2020s were targeted to Toronto investors,” and “a number of those sales to out-of-town investors are not going through, so they are coming back to the market.”
Translation: the Toronto investors who bought Calgary preconstruction in 2021, 2022, and 2023 — when everyone was telling you Alberta was the next big thing — those deals aren’t closing. Investors are walking away or can’t qualify, and the inventory is landing back on the market and piling up.
The Cash-Flow Story Has Changed
Calgary agent Michael Ferianec of Urban Upgrade & New Infills explained why investor demand has dried up: “The cash flow that once made new-build townhomes an attractive investment has dwindled, as a healthy supply of purpose-built rentals, combined with slower population growth, drives down asking rents.” He’s also seeing “more flip-over from rental to sale. Because the rental market already has a lot of listings.”
That’s a feedback loop. When rents soften, landlords list for sale instead of rent. That adds to for-sale inventory. That softens prices. Meanwhile, Calgary’s unemployment is still elevated, and oil prices are squeezing local cost of living. Three buyer segments — local first-timers, local renters, out-of-town investors — are all soft at the same time.
The Long-Term Alberta Case Is Still Real
I want to be fair here. The structural case for Alberta is still intact. Landlord-friendly legislation remains among the most landlord-friendly in the country. There is still no rent control. The eviction process is faster and more predictable than Ontario’s tenant board. Provincial tax burden is lower. Long-term population trajectory — interprovincial migration, international immigration — remains a tailwind, even if it has slowed.
This isn’t a story about Alberta being broken. It’s a story about cycles. Calgary in 2026 looks different from Calgary in 2022. The investors who made money on Alberta over the last few years didn’t do it because Alberta is magic — they did it because they bought at the right part of the cycle, at the right price point, in the right sub-market, with the right financing.
The Bigger Lesson — Stop Chasing Narratives
The narrative that moves through Canadian investor circles is always one or two steps behind the data. In 2020 and 2021 it was “Toronto condos forever.” From 2022 through 2024 it was “get out of Ontario, buy Alberta.” And a lot of investors bought Calgary townhomes from a floor plan, sight unseen, in a sub-market they had never visited, based on a spreadsheet a promoter handed them at a free seminar. Now those units are completing, the rents aren’t where the pro-forma said they would be, the values aren’t where the pro-forma said they would be, and the investors are either walking or holding something that doesn’t cash-flow.
This isn’t an Alberta problem. It’s a chasing-the-narrative problem. I’ve watched the same pattern in Toronto, Hamilton, Barrie — and now Calgary.
Where the Real Opportunity Is Right Now
Many of my recent podcast guests — active investors, builders, experienced operators — have told me the same thing. Deals are hard to come by right now. Construction costs are inflated. Property values, even in softer markets, haven’t collapsed the way some expected. The spread between what it costs to build and what you can sell or rent for has narrowed. That’s a tough environment to find a great deal in. The consistent message from those guests has been: be patient, underwrite quality, and don’t force a deal just to be in the market.
With that context, here’s the opportunity I’d actually be paying attention to. A glut of unsold new-build inventory and small developers under real pressure — softening rents, oversupply, carrying costs, nervous lenders — is motivated-seller territory.
Think about it. Why take on financing risk, development risk, construction risk, timing risk, and pay today’s inflated build costs — when there’s a small developer who has already carried all of that risk, has a finished building, and needs to move it? You can potentially buy turnkey, at a discount, with actual rent history and actual expense data. No pro-forma guessing. That’s a fundamentally better risk-adjusted position than buying preconstruction from a floor plan. The patient buyer with cash or pre-approved financing is the one who gets paid in this cycle.
Story 3: FSRA’s $600,000 Penalty Against Claire Drage — and Three Lessons Every Investor Must Absorb
The third story is the hardest one for me to write. Because it isn’t about a market or a policy — it’s about a person, and many in the Ontario real estate investing community knew her, including me.
What FSRA Found
On March 11th, 2026, the Financial Services Regulatory Authority of Ontario (FSRA) announced six administrative monetary penalties totalling $600,000 against Claire Drage, formerly a licensed mortgage broker in Guelph. The full release is available on FSRA’s website, and I encourage you to read it directly.
FSRA’s findings, in their words: Drage “engaged in a prolonged and extensive pattern of misconduct, exposed investors to significant losses, failed to mitigate those losses, and derived significant economic benefit from her contraventions.”
FSRA states she brokered hundreds of mortgages and other loans for a group of real estate developers, raising over $100 million from the investing public. The cited regulatory breaches include failing to disclose material risks, failing to disclose conflicts of interest, providing inaccurate valuations, failing to take reasonable steps to ensure mortgages were suitable, and failing to address inaccuracies in mortgage applications. The real estate companies behind those loans became insolvent and were granted CCAA creditor protection on January 23rd, 2024, exposing investors to real losses. Drage did not contest FSRA’s proposal, and the order was issued as-is.
Why I Have to Disclose My Own History Here
I knew Claire personally. She was a sponsor of my investor conference back in 2019. We referred clients to each other. She was, for a period, someone I considered a respected peer in this industry.
At a certain point — years before any of this became public — something came up in my own network that concerned me. Out of fairness, and because there was a regulatory process that has only just concluded, I’m not going to get into specifics. But after that experience, I quietly made the decision to stop referring clients, and I took down the podcast episode I had recorded with her. I didn’t go public or issue a statement but I pulled back.
I have to be honest with myself here. Almost three years passed between when I pulled back and when this all became public with the CCAA filing in January 2024. In that time, Claire continued to speak at other podcasts, sponsor other meetups, and appear at industry events. I wasn’t the gatekeeper for an entire industry. But I do sometimes ask myself whether I should have said more, sooner. It isn’t a clean answer. I had a hunch. I acted on it for myself and my direct clients but I didn’t broadcast it. Reasonable people can disagree about whether that was the right call.
To the Investors Who Were Hurt
Behind that one paragraph from FSRA about penalties are real people. Retail investors — often mom-and-pop lenders, sometimes retirees putting RRSP or TFSA money into what they thought was a safe, secured, first-mortgage investment — who lost money or had their capital tied up in an insolvency that may take years to resolve.
If that’s you, I’m truly sorry. Nothing in the rest of this article is meant to lecture anyone already hurt. You did what a lot of smart, well-intentioned people did — you trusted someone licensed by the province, endorsed by the community, on stages with people you respected. That isn’t naive. That’s human. The rest of this is for everyone else who hasn’t yet made a similar decision and can still learn from what happened.
Lesson 1 — Do Diligence on the Person, Not Just the Deal
When you invest in a private mortgage, a syndicated mortgage, a Mortgage Investment Corporation (MIC), or any real estate syndication, you are not just investing in a property. You are investing in the people running the deal — their integrity, their processes, their disclosures, their willingness to tell you bad news when bad news happens. The property is a commodity. The operator is not.
Concrete steps to do diligence on a person: check their licence status on the regulator’s website (FSRA for Ontario mortgage brokers, OSC for exempt market dealers). Search the regulatory enforcement database. Search their name with terms like “lawsuit,” “complaint,” “FSRA,” “OSC,” and “CCAA.” Ask for references from past investors on deals that went badly, not just deals that paid out — anyone can give you a happy reference. Ask about the deals that didn’t go well: How were they handled? How was the communication? Were losses disclosed and mitigated, or papered over?
Pay particular attention to conflicts of interest. If the same person is the broker, the promoter, a connected party to the developer, and the recipient of transaction fees — that’s a stack of conflicts. It does not automatically disqualify the deal, but it has to be disclosed clearly and accounted for in how you size your investment. FSRA specifically cited failure to disclose conflicts of interest in this case. That isn’t a technicality. That’s the whole game.
Lesson 2 — Private Lending Is Risk Capital, Not GIC Capital
A lot of retail investors have been sold on private mortgages and MICs over the last decade as a “safe, secured, high-yield” alternative to GICs. That framing oversimplifies the actual risk.
A first mortgage on real property is secured — yes. But secured against what? An appraisal value the broker provided? A property in a small town with a thin resale market? A development project where the value only materializes if construction finishes and lease-up succeeds? A borrower who may be connected to the broker arranging the loan? “Secured” is not the same as “safe,” and “high yield” exists for a reason: it is compensation for risk that’s real, even if you can’t see it on the pitch deck.
When these deals go bad, they don’t go gently. They tend to go via CCAA filings or receiverships, and by the time you hear about it your capital is frozen for years while lawyers work through the priority stack. That isn’t a bond. It’s a fundamentally different risk profile, and it has to be sized in your portfolio accordingly.
Well-structured private lending, with a trustworthy operator, genuine arm’s-length underwriting, and a property in a liquid market, absolutely has a place in a portfolio. What it doesn’t have is a place in your GIC bucket. If losing it would be devastating, it doesn’t belong here.
Lesson 3 — Trust Your Gut, and Act on It
When something feels off, act on it. Don’t wait for proof. Don’t wait for the regulator to catch up. Don’t wait until you can articulate the concern well enough to convince other people. Just protect your people.
I pulled back years before any of this was public. I had no proof — just a hunch from one interaction that didn’t sit right with me. A lot of voices in our industry would have told me I was being paranoid, being unfair, burning a bridge with a successful operator for no reason. I pulled back anyway. Today I don’t regret that — I only regret not being louder about it earlier.
If you’re a referrer — a realtor, a planner, a coach, a podcaster — the people who trust you are extending your reputation to the people you refer them to. That is a real responsibility. The stage someone stands on, the sponsorships they buy, the podcasts they appear on — those things confer credibility. All of us in this industry who platform people owe our audiences more diligence than we often do.
The Common Thread
Three stories. One thread. Ontario’s HST rebate surge is real but narrower for investors than the headlines suggest, and the investor cutoff has already passed. Alberta’s structural case is still intact, but the short-term picture is softer than the pitch decks say, and the real opportunity is patient capital buying turnkey from motivated sellers — not chasing preconstruction. And the FSRA ruling on Claire Drage is a reminder that in this industry, the people pitching you a deal deserve at least as much diligence as the deal itself.
The headline is never the whole story. The loudest voices in a market are rarely the most informed. Your job as an investor is to do your own work — check the numbers, check the operator, trust your gut, underwrite on what is actually happening, not what a spreadsheet says could happen.
Want Help Working Through This?
If you’re trying to figure out whether to hold an Ontario rental, exit into Alberta, redeploy into the U.S., or stress-test a private lending position someone just pitched you — that’s exactly the conversation we have at iWIN Wealth Planning every week.
I built this practice with my wife Cherry — a CPA who specializes in real estate tax — so our clients don’t have to navigate decisions like these alone, based on whoever had the shiniest pitch at the last meetup. We bring together real estate strategy, U.S. investment access through SHARE, tax planning, and estate and insurance planning into one coordinated plan.
Reach out through iWIN Wealth Planning to start the conversation.
Listen to the Full Episode
The full audio version of this analysis is available on this week’s episode of The Truth About Real Estate Investing for Canadians.
Until next week — invest wisely.
Want to stay ahead of what’s happening in real estate and the economy?
Subscribe free at www.truthaboutrealestateinvesting.ca — get new episodes delivered straight to your inbox.
Thinking about your next move as a real estate investor?
Book a free strategy call with the iWIN team: Apply here
Subscribe to The Truth About Real Estate Investing for Canadians — ranked #81 business podcast on iTunes.
To Listen:
Audible: https://www.audible.ca/pd/B0GYMKW9HY?source_code=ASSGB149080119000H&share_location=pdp
YouTube: https://youtu.be/ibBWxozAre8
You’ve Built Wealth. Now It’s Time to Understand It.
You’ve Built Wealth. Now It’s Time to Understand It.
After dozens of consultations, I’ve noticed the same pattern again and again: most investors have built real wealth, but they’re not confident they can retire from it. They’re sitting on $2M–$5M in property but feel cash-flow poor. They’re paying more tax than they should because everything is held in personal names. They have no liquidity, no insurance strategy, and no clear plan for what happens if something happens to them. And almost every single client tells me the same thing: “I don’t actually know what retirement looks like for us.”
Real estate builds equity, but it doesn’t automatically build freedom. Without a coordinated plan for taxes, income, protection, and exit strategy, investors often end up working harder in retirement than they did in their 30s. That’s why I created the Wealth Freedom Blueprint – a simple, practical guide to help you understand where you stand today, what gaps are costing you money, and how to turn the wealth you’ve built into a life you can actually live.
Download your free Wealth Freedom Blueprint
Final Thoughts
Whether you’re building wealth, protecting it, or preparing to transition it, you deserve a clear, tax-smart strategy that works in real life.
That’s what iWIN Wealth Planning is here for.
This is how we’re creating predictable, stress-free wealth for Canadian families…
so you can enjoy the life you’re building.
Book your Wealth Planning Call
Sponsored by… Me!
This episode isn’t sponsored—except by my wife Cherry and me. Real estate investing is our life. It’s helped us build wealth and achieve peace of mind about retirement and our children’s future.
Till next time—just do it. I believe in you.
Erwin Szeto
W: erwinszeto.com
FB: facebook.com/erwin.szeto
IG: @erwinszeto
Disclaimer
As a committed advocate for transparent and responsible investing, I want to disclose that I am an Advisor to SHARE SFR (Single Family Rental). I hold equity in the company and earn referral commissions from clients I refer.
My endorsement of their model—focusing on positive cash flow and direct ownership—is based on personal experience and belief. Still, every investor should do their own due diligence.
Leave a Reply
Want to join the discussion?Feel free to contribute!