Another Trip Around the Sun. The Worst Year for Real Estate in My Experience.

It’s not all bad 🙂

Thank you to everyone who took time out of their busy schedules to wish me a happy birthday. The vast majority of messages came from the real estate investing community, and reading all the comments and seeing the names brought back a lot of memories—many from easier times for real estate investors.

My fellow escape-room-loving, nerdy friends attempted to be among the elite 4% who successfully escape... #FAIL

 

This mango cake tasted better than it looks

 

The Problem: The Changing Real Estate Landscape, for the Worse

Since the peak of the market around late 2021 to early 2022, prices have declined while the cost of operating a rental property has continued to rise. Rent control has squeezed landlord incomes, leaving many of my clients and fellow investors struggling. We real estate investors never signed up to backstop inflation for our customers, and not once has anyone said, "Thank you."

Some of my clients have endured nightmare tenant situations: one tenant owes over $30,000 in rent; another caused $20,000 in damages; and another had terminal health issues, not paying rent, leaving the house in such a disastrous state that it had to be sold as-is. Our client unwittingly became a social service provider overnight, and they’ll never be Ontario landlords again. Why buy and hold a move-in-ready property for ten years only to experience this kind of grief? This is not what my private citizen client signed up for.

In the areas where Ontario where majority of cash flow oriented investors invest like Oshawa, Barrie, Hamilton and Kitchener are well off their peak prices.  Duplexes especially. In Hamilton where the majority of my clients and my duplexes are located we're 20% off peak prices and we're experiencing low showing volume of our tenanted and vacant duplex listings.

Market rents are coming down on long-term rentals too as international students aren't coming to Canada in droves any more but our university (not college, we're not a fan of college student rentals) student rental rents have still climbed slightly, even over last year's historic increases.  I was finally able to get rent PLUS utilities on my McMaster University rental.  Those same tenants have already renewed for the following school year.  I feel bad for parents of university students as I review rental rates for upcoming listings we have near Brock and Western University at $700 and up per room. (Please let me know if you have anyone looking to buy a student rental near Brock and Western University :). University student rentals are my favourite local investment strategy for both cash flow and limited landlord tenant board risk.  From what I see in the local market, student rentals have the most demand from investor buyers.

This is the most buyer advantaged market I've seen other than 2008 and early covid but with the Landlord Tenant Board risk and cash flow, rents across the country are declining but not that far off historic highs, so overall housing affordability is still bad on the historic side.  So no surprise, I've never seen such low local investor buyer interest.

As such, Realtors and full time investors have returned or pursued other careers. My own team of investment focus Realtor/coaches has shrunk, it's just the original Tim Hong and I now servicing our clients and our clients mainly want to sell which is great us as Realtors, not so great is tenanted properties take a whole lot more effort, lead time and risk management in our experience but we love it.  We love seeing our clients take profits, take a load off their shoulders and enjoy themselves, usually it's travelling to exotic locations.

It's challenging but such rewarding work.

For months, we where taking calls from pre and construction condo investors but unless they wanted to take massive losses, in some case 20% or more of their purchase price as there is six months of condo supply downtown Toronto.  That's what's on market and can be tracked. I've been in the Facebook groups for private assignment sales and there are endless private listings there as well. 

Condos have always gone against my investment philosophy.  Land is a hard asset as it is finite, no one is making more of it vs. condos are in the sky and there's plenty of space above land to many, many condos.

Generally condo investors have no choice to hold, rent it out, negative cash flow a thousand or two each condo and pray the market recovers in two or three years.  I feel bad for new condo investors and at the same time, grateful our strategy of buying on land real estate for value and cash flow has worked.

The Guide: What Smart Investors Are Doing Instead

In my nearly 14-year career coaching clients in real estate, I have never seen challenges like these. Thankfully, our clients have fared much better than most, as they’ve renovated smartly to optimize cash