ROYALTY FOR REAL ESTATE INVESTORS
How’s your little real estate kingdom? If you’re anywhere near Alberta these days, it’s a pretty exciting place. Things are happening! Property prices are jumping, multiple offers are becoming normal, and rents are rising as more-and-more landlords are cashing in on the hot market.
Many of the Kings (male or female) out there, with cash in their pocket, are diving in! Some are working carefully with their Queens, and some are just in Buy mode. That’s not a bad thing. Plus, it certainly does appear like passive appreciation will be a real event in this area, for a while.
So why are we blatantly favouring the Queens (male, female or other) in our article today? Because in our opinion, Cashflow is the difference between a speculator and a strategic investor. Speculators bank on and depend on the price of a property going up. Period. Speculators meet Alberta: in this province the real estate market goes up AND down.
Wise investors today are cautiously reviewing anything that can or will raise their expenses. For example, inflation. It’s not just a buzzword, and it can have dramatic influence on our bottom line. Specifically, rising utility costs are impacting many property owners. Also, inflation has had a dramatic effect on building and renovation costs for both materials and labour. Can your existing real estate strategy handle these increased costs? Or can your existing lease/utility agreements manage a rapid rise in heating and electrical bills? Is it time to add a new clause?
These same strategic investors are watching interest rates. There is nothing the average King or Queen can do about the Bank of Canada’s decisions, or the banking rates. However, we all need to be aware of how a rise in interest rates might affect our cashflow and/or our mortgage paydown. Is it maybe time to offload some of those properties that haven’t performed very well—even at historically low interest rates? Or, are you willing to pay extra every month to cover expenses as mortgage rates rise? We all have choices.
The other little monster lurking in the background these days is property tax. I’m just saying, as property prices rise, and cities continue to recover from Covid, property taxes will also rise.
Cashflow is sometimes a subtle thing. $100 bucks here, $100 bucks there, doesn’t seem like much. Until they all start adding up. The Queens in our story today, are encouraging purchases that have positive cashflow on day one. This provides a buffer for the “what if’s” and the expected increases in expenses.
Again, why do we care? Because real estate investing isn’t a gamble in our world. It’s a strategy to financial certainty and freedom. The King and Queen in our house are working together: to enjoy the cash that comes with an appreciating market, and to plan for the next downturn in the economy. Keeping it positive AND keeping it real as #yycrealestateinvestors.
