GAME NIGHT?!
Have you ever played board games, or even outdoor games, with kids? If you have, then you’ve probably experienced that phenomenon where the rules of the games change, or at the very least shift. Sometimes with little warning, and usually to the advantage of whichever child just created the “new” rule. There are lots of ways that parents respond to these attempts to “rig the game,” but this is not a parenting blog.
As real estate investors in 2022, it’s easy to feel like the proverbial “someone” is constantly changing the rules of the game right now. Crazy inflation – we haven’t seen that for decades; exactly how did that new rule sneak into the game? Rising interest rates? Well, that discussion could be a VERY long rabbit hole about how the new bank rates were “created.” And new bank qualification guidelines. Haha, well “he who has the money makes the rules.” Shifting bank paradigms have actually been a part of the game … for just about forever.
Tenants seem to be campaigning to change the game too. Some truly believe they have the right to live for free, “screw the landlord,” and even campaign for more lenient landlord-tenant laws. Unfortunately, their efforts seem to be causing more and more small landlords to “quit the game.” The unintended consequence is an even tighter rental market. Oops.
Even government regulations are constantly changing, for better and worse. There are possible new rules in Calgary this week to promote mid-density building. In BC, there are possible plans to change density laws and bylaws for the entire province—trying to remove the NIMBY objections (not in my back yard) at the municipal levels.
So what’s a real estate investor to do?
Well, some of the rules haven’t changed. And none of us has a crystal ball. So let’s focus on the fundamentals of business, and real estate investment.
We know there is an abundance of customers for our products, whether we have a long-term rental, Rent to Own, Build to Rent, or even flipping. Our client base is very likely to grow, before any solutions can be found to increase the housing supply. Okay, so demand is clear.
We know the fundamentals of real estate investing, thanks to the research and data from previous investors, mentors, and expert teachers. That means we can narrow our choices to where the fundamentals are strongest: jobs, in-migration, economic growth, diversifying economy, affordability (yes, relatively speaking), …. Hmmm, did I hear someone say Calgary? Alberta?
And we know that we need solid business numbers. Mortgage paydown isn’t as sexy today as it was with 2% interest rates, but it is still a solid and real profit with each year of our investments. Cashflow can be found, and/or improved in some cases. Appreciation can be forced—meaning a rough house in a good location can be improved to “create” more value in a property. Passive appreciation in any market is never a guarantee—but those supply and demand laws sure have been accurate over many business models and many years!
We are encouraging our colleagues to “stay in the game” in Alberta these days. And we are encouraging our new friends to adapt to the “new rules of the game.” The shifting paradigms and laws haven’t “rigged the game;” they just changed it. And it won’t be easy, but that means a little less competition for those of us with a powerful WHY. Is your financial future worth it?
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