A lot of very strong investors are feeling the pain right now. It's amazing to me that many people (myself included) weren't more cautious when financing properties during the Covid-19 and post-Covid era of low rates. Like many people, I took some variable rates that in hindsight should have been fixed.
Luckily, I did take some fixed-rate mortgages that have been a lifesaver over the last few years. There was a lot of FOMO in the market at that time, and herd mentality. It's easy to get into an "echo chamber" when you are surrounding yourself with people who think like you do.
What I'm getting at is simply this: If you are struggling right now, you're not alone. We can all look back and wish we had done things differently; however, I truly believe that this period of high rates was needed. It will make those that survive stronger, better investors. Here are some strategies for survival that you can fall back on if you are currently struggling.
Full portfolio review: Can you save money by switching insurance providers or tweaking coverage? Dive into each policy and review it with your broker or agent. Can you provide extra services such as coin laundry or paid parking and increase your cash flow that way? Can you increase rents? New units built after Nov. 15, 2018, are exempt from rent control. You can also apply to the LTB for an above-market guideline increase if your property taxes increased by an extraordinary amount. More info on that here.
If your mortgage is up for renewal, shop around. Fixed rates are falling, but the banks aren't advertising lower rates yet. Push for a better rate and see what you can do.
Can you increase your cash flow by building a garden or laneway suite or adding an additional unit? There are government grants that incentivize the construction of new units in certain circumstances. Of course, this is a cash-intensive process; however, with the removal of HST on purpose-built rental units, now may be the time to dive into this!
Bring on a partner. Networking is a powerful thing. There are many creative ways to help make a deal viable again for both you and a partner or buyer. Things like vendor take-back mortgages (VTB) and joint ventures are both creative ways to provide liquidity.
There's no shame in selling if you have to. You may not get what you would have several years ago, but peace of mind is a powerful thing. When you are in a more comfortable situation, the creative juices can begin flowing again to help propel you to the next level.
This period of high rates will pass. When it does, I believe any properties purchased now will be set for growth. While I don't expect to see the Covid interest rate lows again, barring a significant crisis, I do expect to see rates return to the long-term average. Now is the time to seek out opportunities if you can!
Happy house hunting!
Have questions about your portfolio or want an outside opinion? Please select the button provided below, and I will schedule a free half-hour call with you to go over your situation! Talking to the right people can really save you money. I really believe that this is the time to expand your network and learn from those around you. I'll be in touch!
I'd love to hear your thoughts on this! Have a great week while working past those obstacles on your climb to success. Let's Grow Together!
Jonathan Beam
Real Estate Investor and Entrepreneur
Jonathan Beam is a real estate investor in the Niagara region who is passionate about helping you achieve financial freedom through real estate. He works with new and experienced investors to formulate a plan that fits your specific situation and provides market guidance and consultation on the best places and strategies to pursue within the Niagara Region. Book a free, half hour no obligation consultation to see how he can help you to achieve your goals. His travels are available at www.realestateandrepeat.com
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