Our 2023 Real Estate Investing Strategy

It’s no secret that there is a lot of volatility in the Canadian real estate market.  Interest rates increased an astronomical amount over the past year, immigration is also increasing, and house values seem to be on the decline.

So, what is a real estate investor to do?

First, I want to clarify that I’m a real estate investor, not a speculator.  A large portion of our portfolio is invested in real estate (in different forms). We buy single-family homes and plan to hold them for the long term.  

And I believe that long-term buy-and-hold real estate investing should be boring.

That doesn’t mean it always is. But I have no interest in flipping properties, wholesaling, or buying pre-construction condos.

A Little About our Portfolio

My husband and I started investing in real estate in 2015 after paying off the mortgage on our primary residence.  We bought 4 properties that year, and the rents were great.  Then the market softened, and rents went down, but we were still cashflow positive on all our properties.

Over the next few years, we continued to acquire properties and now have 9 single-family homes in our portfolio.  We have also survived the (hopefully) worst of a global pandemic and, after a solid year last year, hope to continue to be bored by our investments.

When it comes to our overall property portfolio, we like to look at the big picture to see what we can expect this year.  There are 4 main things that we come up with a plan for, our properties, mortgages, tenants, and maintenance.  

So here is an inside look at our real estate investing strategy for 2023.

The following is our personal circumstance and is for informational purposes only. It should not be considered financial advice in any way.  Please consult your professional team when making financial choices.

The Properties

We have no intention of selling any of our properties this year.  But we have had multiple conversations about selling properties and when to do that.

I’ve wanted to sell 1 or 2 for multiple reasons (difficult to rent, not cash-flowing enough, etc.).  But hubby is more patient and always wants to stay the course.

Looking forward, there may be 1 property we look to sell in 2024 when the mortgage comes up. But at this point, a lot can change in a year (hello, interest rates in 2022). So, we will re-evaluate when it comes time to our real estate investing strategy for 2024.

The Mortgages

We have a little bit of everything regarding mortgages on our rental properties.  We have 5 properties with fixed terms with rates ranging from 2.79% to 3.34%.  Three mortgages are variable and getting very close to hitting their trigger rates.  

And then, finally, we have 1 mortgage on an adjustable rate. That mortgage has increased by more than $450 a month. A 47% increase!

When it comes to the variable rate mortgages, now that the Bank of Canada is signaling a pause in rate increases, we will look to increase the monthly payments on those mortgages.  That will help to ensure that they don’t hit their trigger rate and we don’t get a call from the bank.

We have 1 mortgage coming up for renewal this year, and I would be lying if I said I wasn’t a bit scared of how the payment will increase.  That mortgage doesn’t come up until June, so we still have some time for rates to stabilize.

Realistically we will probably be looking for a shorter-term mortgage with an attractive rate.  We are by no means mortgage experts, but we also believe that rates won’t stay as high as they are for the long term. I also don’t believe they will be hitting rock bottom again anytime soon.

We will have to wait and see once the renewal comes out.  

The unfortunate part is that because of the size of our portfolio and owning them all personally and not through a corporation, we usually have limited choices when it comes to renewing.  We can’t shop around at other banks because many have policies against lending on the number of properties we have.

The Tenants

At the beginning of every year, we like to do a rundown of our properties and try to predict how many will turnover that year.  We always try to have our leases coming up in the spring and summer months, as those months are typically easier to find new tenants.

But it means that spring and summer can be busy times for us. Last year we had 2 new sets of tenants move in on the same weekend to 2 different properties, and hubby was working that weekend. It was a hectic weekend for me, to say the least. Thank goodness for grandparent babysitters nearby.

Looking at our portfolio of properties, we think that 1-3 may have tenants moving out this year.  But that’s just an educated guess.  We could have no turnover, or all could turnover.  In reality, the most we have ever had turnover in a year is 5.

Lease Renewals

Our strategy with lease renewals is to contact our tenants 6 weeks before the end of their lease.  That gives us enough time to get things ready to rent in advance if needed.  

We also like to list our properties early. I get very stressed if we are less than a month out from a lease expiring and we don’t have a new tenant lined up.

In the past few years, we had a lot of turnover, and previous tenants went on to buy their own homes (yeah!). Whenever there is a turnover, that’s when we look to increase rents.

Because of our tenant screening process, we are fortunate to have great tenants for the most part. We tend not to hike their rent when we have a good tenant. Because having a good tenant is worth a slightly lower rent than going through the process of constantly re-renting.

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Maintenance

When it comes to our rental portfolio, we can’t always predict what maintenance will come up.  That’s why we also keep a healthy contingency fund.  Our previous years’ cash flow is the source of our contingency fund.

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In the past, we have had to deal with broken-down water heaters, appliances that have stopped working, and furnaces that needed servicing.

When we first bought the properties, part of our real estate investing strategy was to buy newer buildings to minimize the short-term maintenance required.  We also tended to do most of the maintenance ourselves.

And while we still try to troubleshoot problems ourselves first, since having kids, we are more likely to get our handyman to go and take care of things for us.  Our time is better spent elsewhere. And our properties generate enough cash flow that we don’t have to do all the maintenance.

And while some maintenance is unpredictable, there are certain things that we can predict or anticipate.  This might be from putting things off from the past, keeping up with regular semi-annual inspections, and being aware of the “shelf-life” of certain things.

This year we have 2 major expenses when it comes to maintenance.  

We have one property that needs a new roof.  Seems pretty straightforward, but it’s a duplex, so we will have to coordinate everything with the attached neighbour.

Another of our properties needs a new fence, gates, and retaining wall.  This property has a large raspberry bush that has gotten a bit out of hand and now needs further support on the retaining wall that it’s growing on. 

And the fence has just worn out from age. We also want to replace the gates with ones with a code or lock because the current tenants have had a few people randomly come into their yard. They asked for the extra security, and we are more than happy to oblige.

Final Thoughts

So, if everything goes to plan, that is our real estate investing strategy for 2023.  I would love it if things went to plan, but they never seem to.

Being prepared is key to real estate investing.  Some ways we stay prepared are to have an annual plan like this, a handyman on call if we need it, and a healthy contingency fund that will buffer any unexpected expenses.

What about you? What is your real estate investing strategy for 2023? Are you looking to buy or sell a property this year? Do the increased interest rates have you a little scared too?