Tariffs might sound like distant economic policy, but they're hitting your real estate investments in ways you may not realize. We peel back the layers on how these import taxes create chain reactions that can derail budgets and timelines for property investors and developers.
When construction materials like lumber, steel, and aluminum face tariffs, costs don't just increase—they ripple through your entire project. But savvy investors have options. We explore strategies from locally sourced materials that bypass international volatility to pre-buying in bulk before prices climb further. Could prefabricated construction be your answer? These "giant Legos" often sidestep traditional tariff-impacted materials while delivering predictable pricing structures.
Your contracts matter more than ever in this environment. We discuss why fixed-price arrangements provide crucial protection against those dreaded "surprise bills" that can sink profitability. Geographic diversification emerges as another vital strategy—some regions feel tariff impacts far more than others. Meanwhile, smart financing approaches like securing long-term loans before inflation takes hold can effectively lock in favorable terms.
Even after construction wraps up, operational costs continue facing tariff pressure. Learn how property managers use escalation clauses, strategic rent adjustments, and cost-efficient technologies to maintain profitability. We highlight why healthcare real estate deserves special attention as a sector less vulnerable to these economic shifts, potentially offering a haven for concerned investors.
Whether you're breaking ground on new construction or managing existing properties, understanding tariff impacts equips you to move beyond reaction into strategic opportunity. Give us a listen, then check out our sponsors—Graceful Journeys for compassionate transportation services and Flowers and Associates for accessible housing solutions. Your real estate portfolio will thank you.
Episode Transcript
Okay, so we're diving into tariffs today and, you
know, it's something that Ithink a lot of people kind of
scratch their heads about, Likewhat exactly are they and what
do they mean for me?
Speaker 2 (00:10):
Especially in real estate.
Speaker 1 (00:11):
Especially in real estate.
Yeah, you're interested in realestate, it sounds like, maybe
even with an eye on the homehealth care side of things.
Speaker 2 (00:17):
Okay.
Speaker 1 (00:19):
But you're like okay, so how do tariffs?
Play into this whole equation.
Speaker 2 (00:24):
Yeah, these import taxes can really throw a wrench
in your plans if you don't seethem coming, and they can hit
you in some really unexpectedways.
Speaker 1 (00:33):
Yeah, Like.
It's not just about like OK,this thing costs more now.
Speaker 2 (00:36):
Exactly.
Speaker 1 (00:38):
It kind of has these ripple effects.
Speaker 2 (00:39):
It's a chain reaction .
You know, the price of onething goes up and suddenly your
whole budget's out of whack.
Speaker 1 (00:45):
Right and we're going to talk about some of those
ways that that happens.
Speaker 2 (00:48):
Absolutely.
Speaker 1 (00:49):
So let's start with, just like, the very basic.
Speaker 2 (00:53):
Okay.
Speaker 1 (00:55):
Construction costs?
Sure, so you know.
Lumber, steel, aluminum, theseare like the building blocks,
the building blocks of anyproject, and when you slap
tariffs on those materials, thatcan get pricey.
Speaker 2 (01:07):
It gets expensive fast.
Speaker 1 (01:09):
Yeah, so you know that new construction project.
Speaker 2 (01:11):
Right.
Speaker 1 (01:12):
Or even just like a renovation you've been dreaming
about.
Speaker 2 (01:14):
Right.
Speaker 1 (01:15):
Suddenly is costing you way more than you thought it
would.
Speaker 2 (01:18):
Yeah, and you mentioned you're looking at
properties and listenerslocation right Right, looking at
properties and listenerslocation right Right.
Have you thought about maybeusing locally sourced material
instead of relying on tariffimpacted material?
Speaker 1 (01:30):
Oh, that's a good point.
Speaker 2 (01:31):
Yeah, it could really save you some money.
Speaker 1 (01:33):
And I feel like that plays into this whole idea of
like local sourcing and likesupporting the economy where you
are.
Speaker 2 (01:41):
Right, it's a win-win you get better prices and
you're boosting your localcommunity.
Speaker 1 (01:45):
And you're less reliant on these global markets
that are so volatile.
Speaker 2 (01:49):
Exactly, and on that note, another thing to consider
is pre-buying in bulk.
Speaker 1 (01:56):
Oh, interesting.
Speaker 2 (01:57):
Yeah, especially if you've already got your plan set
.
Speaker 1 (01:59):
Right.
Speaker 2 (01:59):
You can lock in those prices before they go up even
more.
Speaker 1 (02:02):
So it's like you're kind of creating your own little
stockpile.
Speaker 2 (02:05):
Exactly A strategic reserve of materials.
Speaker 1 (02:08):
Okay, but that's a big upfront cost, right, that's
true.
Like, how do you navigate thatas an investor?
Speaker 2 (02:14):
Well, it's all about balancing risk and reward right.
You have to weigh the potentialsavings against the cost of
holding that inventory.
But for those key materials,the ones that are likely to see
price hikes, Right.
It can be a really smart movein the long run.
Speaker 1 (02:29):
I see.
So you're basically betting onthe fact that it's going to be
even more expensive later.
Speaker 2 (02:34):
Exactly.
Speaker 1 (02:35):
Okay.
Speaker 2 (02:36):
And you know something else I've been seeing
more of.
Speaker 1 (02:38):
Yeah.
Speaker 2 (02:38):
Is prefabricated and modular construction.
Speaker 1 (02:41):
Oh yeah, it's like building with giant Legos it and
modular construction.
Speaker 2 (02:44):
Oh yeah, it's like building with giant Legos.
It is a bit like that or houses.
And because they often relyless on those tariff impacted
materials.
Speaker 1 (02:50):
Right, they can be a really cost effective option,
interesting, ok, so you've gotyour materials.
Speaker 2 (02:58):
Right.
Speaker 1 (02:58):
You figure that all out.
Uh-huh, you've got yourproperty.
Speaker 2 (03:00):
Yeah.
Speaker 1 (03:00):
What about contracts?
Speaker 2 (03:02):
Contracts are crucial , especially when you're dealing
with new construction.
Speaker 1 (03:06):
Okay.
Speaker 2 (03:07):
You need to protect yourself from those fluctuating
costs.
Speaker 1 (03:10):
So fixed price contracts.
Speaker 2 (03:12):
Fixed price contracts are your best friend in this
situation.
Speaker 1 (03:15):
Okay.
Speaker 2 (03:16):
It's like a safety net.
You know, exactly what yourproject's going to cost, no
matter what happens with tariffsor labor costs.
So you're not going to get hitwith like surprise bill like
halfway through, no surprises,okay, good, yeah, it gives you
that peace of mind.
Speaker 1 (03:30):
Okay, so we talked about materials.
We've talked about contracts.
What about location?
Speaker 2 (03:34):
Location, location, location right.
Speaker 1 (03:37):
Always.
Speaker 2 (03:38):
But seriously, some regions are just way more
vulnerable to tariff impactsthan others.
Speaker 1 (03:44):
Oh, that's interesting.
Speaker 2 (03:45):
Yeah, think about areas that are heavily reliant
on international trade.
Speaker 1 (03:50):
Right.
Speaker 2 (03:50):
They're going to feel those tariff tremors a lot more
.
Speaker 1 (03:52):
It's like if you're putting all your eggs in one
basket.
Speaker 2 (03:55):
Sacked.
Speaker 1 (03:56):
And that basket is in a very tariff heavy zone.
Speaker 2 (03:59):
You're setting yourself up for potential
problems.
Speaker 1 (04:01):
Okay, so diversify.
Speaker 2 (04:03):
Diversify, diversify.
Speaker 1 (04:04):
Spread it out.
Speaker 2 (04:10):
Spread it out geographically.
Speaker 1 (04:10):
Okay, it's like a buffer against those economic
hiccups.
That makes sense, yeah, okay.
So we've got the location,we've got all this stuff sort of
figured out.
Speaker 2 (04:16):
Right.
Speaker 1 (04:17):
Now what about financing?
Speaker 2 (04:18):
Financing is where things get really interesting.
Okay, imagine this you secure along-term low interest loan
before inflation really kicks in.
You're essentially locking infavorable terms and mitigating
the impact of rising costs.
Speaker 1 (04:33):
So you're kind of outsmarting the system.
Speaker 2 (04:35):
You're playing the long game.
I like it.
And don't underestimate thepower of local partnerships,
both with suppliers andinvestors.
Building those relationshipscan really help you weather
those global market fluctuations.
Speaker 1 (04:48):
So, like you're creating this little ecosystem
that can kind of support itselfExactly Less reliance on imports
, more stability all around.
Speaker 2 (04:59):
I like it OK.
So we've talked about all ofthe like sort of getting the
project off the ground, part ofit.
What about the day to day, likethe operations?
Speaker 1 (05:08):
Right, because even if you've bent your property and
you're ready to go, yeah.
Tariffs can still hit youthrough rising operational costs
.
Oh interesting, mainly due toinflation.
Speaker 2 (05:17):
OK, so what can a property manager do?
Speaker 1 (05:19):
Well, one thing is to adjust those lease structures.
Speaker 2 (05:23):
Okay.
Speaker 1 (05:24):
You know, maybe include some escalation clauses.
Speaker 2 (05:26):
Can you break down what an escalation clause is?
Speaker 1 (05:28):
Yeah.
So let's say your operatingcosts go up 5% because of
inflation.
Speaker 2 (05:32):
Okay.
Speaker 1 (05:33):
With an escalation clause, you can pass a portion
of that increase onto yourtenants Right, so you're not
absorbing the whole hit yourself.
Speaker 2 (05:40):
That makes sense.
Speaker 1 (05:41):
Yeah, it helps protect your bottom line and
ensure your investment staysprofitable.
Speaker 2 (05:45):
Are there other strategies that property
managers can use?
Speaker 1 (05:48):
Absolutely yeah.
You can strategically increaserents if the market allows.
Speaker 2 (05:53):
And investing in cost-efficient technology can
also make a big difference.
Speaker 1 (05:57):
Like what kind of technology?
Speaker 2 (05:58):
Things like smart HVAC systems.
Speaker 1 (06:01):
Okay.
Speaker 2 (06:02):
Solar panels, anything that helps reduce those
long-term operational expenses.
Speaker 1 (06:08):
So it's about being proactive.
Speaker 2 (06:09):
Exactly.
Speaker 1 (06:10):
Okay, cool.
So bringing it back to kind ofyour interest in this home
healthcare side of real estate,Right.
That's an interesting sectorbecause it tends to be a little
bit less sensitive to thesetariffs.
Speaker 2 (06:21):
It's kind of a haven in that regard.
Speaker 1 (06:23):
Interesting.
Speaker 2 (06:24):
Yeah, instead of pouring money into new
construction, which we'vealready talked about can be
really vulnerable to tariffimpacts, why not look into
existing properties that youcould convert into health care
facilities?
Speaker 1 (06:36):
Oh, that's a good point.
Speaker 2 (06:37):
Yeah, it could be a way to enter the market while
minimizing your exposure tothose fluctuating costs.
Speaker 1 (06:43):
So it's about being strategic and finding the
opportunity within the chaos,exactly OK.
So just to kind of sum upeverything we've talked about,
yeah.
Tariffs have a huge impact.
Speaker 2 (06:53):
They do.
Speaker 1 (06:54):
On real estate.
Speaker 2 (06:55):
On everything.
Speaker 1 (06:56):
They really do affect every single aspect of it.
Speaker 2 (06:58):
From construction costs to operational expenses.
Speaker 1 (07:02):
Yeah, but there are things that you can do Right,
absolutely.
To mitigate those risks.
Speaker 2 (07:07):
With a little foresight and strategy, you can
navigate this landscapesuccessfully.
Speaker 1 (07:11):
Whether you're interested in new construction
property management.
Speaker 2 (07:14):
Right.
Speaker 1 (07:15):
Or even this home healthcare world.
Speaker 2 (07:16):
The key is to stay informed, stay adaptable and
your real estate endeavors willbe just fine.
Speaker 1 (07:24):
Solid ground, solid ground.
And speaking of solid ground, Iwant to thank our sponsors for
their support.
Speaker 2 (07:29):
Yes, definitely.
Speaker 1 (07:30):
If you are looking for reliable, compassionate
transportation for yourself or aloved one, definitely check out
Graceful Journeys.
Speaker 2 (07:38):
Great company.
Speaker 1 (07:39):
They specialize in transportation for the elderly
and the disabled, yeah, andtheir founder, angela Craft, is
really committed to providingthat top-notch care.
Speaker 2 (07:50):
Absolutely.
Speaker 1 (07:50):
And then for accessible housing options.
Check out Flowers andAssociates.
Speaker 2 (07:55):
Yeah, they're great.
They specialize in specialneeds housing and they really
understand the needs of thatcommunity.
Speaker 1 (08:01):
get it, yeah you can give them a call at nine oh one,
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visit them online at flowers andassociates bookingcom perfect
awesome.
Well, thanks for joining us forthis deep dive it's been a
pleasure we'll see you next time.
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