New market conditions spark investor interest again

Investment properties back

Build wealth with affordable housing projects

Seizing the Moment

The real estate market is changing, and with these shifts come incredible opportunities for those willing to act.

Whether you're an experienced investor or someone looking to make a significant impact, now is the time to consider pooling resources with a group of like-minded individuals to create something substantial.

With new zoning rules, attractive financing and land assemblies emerging across town, you can now access prime development opportunities that were previously out of reach.

Case Study: Valleyview and Vista Road projects

Our Valleyview and Vista Road projects serve as perfect examples of how strategic planning and perseverance can yield significant returns. Starting in 2016, we assembled the land, navigated challenging negotiations and capitalized on new zoning rules and government incentives.

These projects will deliver 216 units of affordable housing, generating more than $5 million annually in rent and creating approximately $15 million in value, with just $70 million in construction costs.

With federal financing covering 95% of the project's value, we are able to finance $70 million in construction with minimal equity. That type of leverage is a game-changer, allowing smaller groups of investors to achieve institutional-quality projects without needing vast amounts of capital.

Why the timing is right

• Lower land prices—Market cooling has brought down the cost of land, allowing you to secure prime development sites significantly less cmopared to just two years ago.

• Easing interest rates—As rates begin to fall, financing becomes more affordable, making it easier to fund your project, and improving the cash-flow picture

• New zoning rules: Previous residential areas are being rezoned for higher-density use, turning quiet neighbourhoods into new opportunity zones.

• Land assemblies—These are becoming more common, allowing smaller investors to combine multiple parcels into larger, more lucrative development sites.
Recent incentives and policy changes

Here’s is a list of recent government programs that make this strategy a winner:

• Federal financing program—Ninety-five per cent financing for qualifying projects with rates far below commercial levels and a 50-year amortization period.

• GST exemption—No GST on construction costs, saving 5% of the total cost.

• Ten-year property tax holiday—Significant tax savings during the first decade of operation.

• Density bonuses—New zoning regulations allow for higher-density development, increasing the number of units you can build.

• Development fees waived on micro suites, saving hundreds of thousands

• Depreciation benefits—Changes in the tax code allow for accelerated depreciation, reducing taxable income in the early years of the project.
Why you should consider partnering now

With these favourable conditions, now is the time to consider pooling resources with others to develop something substantial. Whether it’s a 100-unit apartment building or a larger multi-family project, partnering with a group spreads the risk and amplifies the rewards.

By securing a project in one of these new opportunity zones, you’re not just creating value—you’re building long-term, multi-generational wealth.

Why commercial multi-family real estate is the future

As regulations tighten and costs rise for residential landlords, the advantages of controlling institutional-grade assets become more apparent. Apartment buildings offer stable, long-term cash flow, benefiting from government incentives while addressing the critical need for accessible housing.

Through programs like the Canada Mortgage and Housing Corporation’s financing initiative, you can build a $50 million asset with just $2.5 million down. Over 25 years, that asset could appreciate to $100 million, fully paid off and generating $5 million annually in cash flow. This is the kind of legacy that secures your future and creates lasting wealth for generations.

For the action takers

If you're interested in exploring these opportunities, whether it’s finding land assemblies, securing shovel-ready projects, or partnering with others to build something transformative, I invite you to reach out.

Email me for a list of potential sites or projects that fit your goals. Let’s take advantage of these favourable conditions and start building something incredible together.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

The 12 rules of real estate investing

Real estate investing success

Real estate investing comes with highs, lows and everything in between.

After some hard-learned lessons in 2007, followed by more than a decade of success, I'm sharing 12 practical insights I wish I knew at the beginning of my journey.

Rule No. 1: Speculating is not investing

In the world of real estate investment, you’ll find two kinds of individuals, speculators and investors.

Speculators buy property, hold it for a few years, make quick improvements then hope to sell for a profit one or to years later. If the housing market turns sour and they want their money back early, speculators can face devastating losses. Speculation is basically gambling.

I learned this rule the hard way. In 2007, I purchased some presale high rise condominiums in Kelowna. By the time they were completed in 2010, their market prices had dropped by more than my initial equity. I was deep underwater and forced to close, leading to my first humbling real estate “tuition” payment of $150,000.

Investing is a far wiser strategy. Investors know that trying to time the housing market is nearly impossible. They also know housing prices typically trend up over time. Regardless of where you’re at in the market, a property that produces positive cash flow and lets you pay down the mortgage on a long-term horizon generates a solid return on investment.

So, keep your head up, relax those shoulders and focus on the long haul.

Rule No. 2: There are no good or bad markets, only good or bad tactics

Some tactics work best during a slump. For example, trading up when higher-priced homes get hit the hardest. Or creative deal-making like seller financing where the buyer mortgages a property directly from the seller.

Those same tactics will not work in a boom market. When the market is trending up, it's usually best to use a “buy-fix-sell” strategy.

During recovery periods—between the end of the slump and the beginning of the next boom—buy and hold, rent-to-own or make agreements for sale (similar to using call options in the stock market). Recoveries are also great times to launch new real estate development projects. The key is always knowing where you're at in the market cycle. The housing market always cycles from boom to slump to recovery, in that order. If you’ve been in a slump for a while, get ready because a recovery is almost inevitably on the way.

Rule No. 3: Your team matters

One of the top reasons I joined Canada’s Real Estate Investment Network, was to rub shoulders with professionals who specialize in real estate investment. Growing my network, then building out my own dream team, was one of the biggest contributing factors towards my success in real estate.

With a team of real estate services professionals at your side, you’re more likely to achieve your goals in a shorter time.

First, find an investor-focused realtor and ask them to refer you to trusted mortgage brokers, lawyers and insurance agents. Add in an ace property manager and you'll have a dream team that can leverage you to your highest of heights.

Having the right people on your side is the difference between buying a couple of properties with varying success and building a well-oiled real estate machine that produces fantastic returns but doesn’t consume your life.

Rule No. 4: You get what you negotiate

A sharp real estate agent can get you a great deal. But to truly thrive in this market, you’ll need to attain mastery in the art of negotiation.

Check your ego and your emotions at the door and allow the process to unfold over time. Never be in a rush to close, and never slam the door on a counter-offer. Remember real estate negotiations aren’t always about price. When it comes to value, the terms of the deal are often more important than the dollar amounts.

Find out what’s important to the other side and try to help them solve their problems, while creating a wonderful situation for yourself. Dates, inclusions, improvements and even financing options are all up for negotiation. If you ask, you just may receive.

Rule No. 5: Find your niche

Don't try to be an expert in everything. Instead, focus on a particular property type, then study until you become an expert in that niche. It could be homes with basement suites, condos that allow short-term rentals, multi-family units or commercial properties. The key is to find your groove, double down and master it.

If you invest into a mixed-bag of properties, it’s extremely difficult to build a resilient portfolio, negotiate the best terms and produce great returns. When you only focus on one niche, you’ll become more confident and shrewd with every new deal, and each one will turn out better than the last.

Rule No. 6: You don’t have to invest where you live

Most people like the idea of being able to drive over to their investment property and kick the tires, so to speak. While it might feel reassuring owning assets in your hometown, they might not actually be your best investment options.

Look for opportunities in markets showing strong economic fundamentals so—over time—you can increase your rental rates, property value and cash flow. For example, cities with strong economies, job growth and relatively lower home-price-to-income ratios will yield the best returns.

Your own home town might be nearing the end of a boom cycle, but cities one or two provinces over might be coming out of a lengthy slump. On a five-year horizon, you might find far more attractive opportunities in a neighbouring province purely because of where they are headed in the market cycle.

Once you find an opportune place to invest, a strong team of local professionals can help you make smart investment choices—without requiring constant travel.

Rule No. 7: Graduate for economy of scale

Once you've mastered single-family homes and have reached the limits of bank financing—which usually happens at five properties—look into multi-family properties so you can achieve economies of scale. When you own multiple units in one location, you’ll have far lower per-unit costs for ongoing expenses, like roof repairs, landscaping maintenance and HVAC repair.

Quality investment properties streamline and simplify your real estate investment portfolio.

Rule No. 8: Big numbers do not always mean big risk

A $1 million fourplex carries less risk than a $500,000 home. And a $5 million apartment building is less risky than a $1 million fourplex. That might seem counterintuitive at first, but it comes down to the mathematics of diversification.

When you have more units available for rent, you minimize the probability of falling into a negative cash-balance situation due to tenant vacancy. For example, if you own a multi-family property, three out of your eight units could suddenly become vacant and you’d still have enough cash flow to cover your mortgage. But if your individual apartment or single-family house suddenly has no tenant, you’re on the hook for paying the entire mortgage payment until you find a suitable tenant.

Rule No. 9: Master joint ventures

Eventually, you’re going to hit a limit on what you can accomplish as a solo investor. Everyone runs out of one of the three key ingredients you need to expand an investment portfolio.

Capital for a down payment is the limit most investors run into first. After you’ve deployed your liquid capital, it takes a long time to save up for another down payment.

Access to financing is the second problem, because individuals can only borrow so much money from a bank at one time.

The third ingredient is time and expertise. You can only stretch your own personal resources and knowledge so far.

When you reach one of these milestones in your journey, it’s time to embrace the art of joint ventures.

For every person out there flush with cash, but lacking time or expertise, there’s another cashless person with the knowledge, skills and bandwidth to execute your plan. These are the matches made in heaven that can launch your investment career to new heights.

Rule No. 10: Cash is king but cash flow Is queen

We all know that cash is king, but cash flow is what really helps you achieve your financial goals.

With $500,000, you can buy a new highrise condo, rent it out at $3,000 per month, but still end up in a negative cash flow situation. But that same $500,000 invested in a $2 million multi-family property can bring you close to $15,000 in monthly revenue. That’s five times more revenue per month to help you live the lifestyle of your dreams.

Rule No. 11: Force appreciation

Boosting value through home improvements is one of the best aspects of real estate investing.

Complete “low-hanging fruit” renovations like flooring, sidings and fresh paint to quickly increase your property's curb appeal. Next, invest sweat equity into your income property in the form of landscaping, gardens or other yard projects.

With certain properties, you can unlock even more value through property development, such as adding a secondary suite or rezoning the land for commercial use.

Even if you’re financing has hit a limit, you can increase your portfolio value through strategic improvements.

Rule No. 12: Hold for wealth

You can make good money by buying, fixing and selling properties. So good in fact, some people do that as their full-time job. The problem for those folks is they rely on those profits to live. Real estate flipping ends up occupying all of their time.

In a boom market, real estate can generate serious short-term profits, but the inevitability of an impending bust market means the real magic happens by holding on to solid assets over time.

Remember, real estate investments typically double every 15 years. By simply holding onto real estate for decades, you can create multi-generational wealth.

AJ Hazzi is a real estate coach, investor, and team lead of Vantage West Realty - an independent group of Kelowna realtors, known locally for five-star experiences and the “Guaranteed Sale” program.

If you'd like personalized advice about how to manage or build the real estate portfolio of your dreams, please feel free to reach out for a private consultation.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

How cash buyers can capitalize on the current market

Rising rates, opportunities

When interest rates shoot up, the real estate market inevitably feels the tremor.

For many, affording a home becomes a towering challenge. Let's break it down. Today, financing an average starter home priced at $900,000 (with 5% down) will set you back $5,725 monthly. That's almost twice the rental cost for the same home.

To qualify, without any other debt, you'd need an after-tax income surpassing $220,000. And here’s the kicker—you'd have to qualify at rates 2% higher than the standard ones, which means over 8%.

This same starter home is often what new buyers and investors are both eyeing. Historically, these homes were great for positive cash flow. Imagine a $900,000 home, leveraged at 2.5% interest. It would bring in a profit with just $3,000 in rent monthly. But this profitable picture was largely painted by affordable loans.

However, with economic instability, banks tighten their grip. Rates for non-owner occupied property buyers can surge by 1% to 1.5%. Banks also set strict guidelines regarding the debt coverage ratio, which essentially measures if the rental income can comfortably cover the property's expenses (and then some).

With current rates, most investors would need to make a hefty down payment—often more than half of the property’s value—to even consider a positive cash flow.

Borrowing against your primary home for another property's down payment? Once a viable strategy, it now seems a distant memory. Simply put, the costs of borrowing heavily outweigh the returns from rentals. This shift has left many potential real estate investors on the sidelines.

While there will always be buyers for lower-end single-family homes, albeit fewer, the investor-specific properties, like fourplexes and apartment buildings, face uncertainty. Some landlords, especially those using variable-rate mortgages, find their investments draining their pockets.

Their solution? Selling the property. But here's the snag, prospective buyers face the same soaring interest rates.

To understand the math, let’s dive into ‘cap rates,' a term investors throw around to measure an asset’s return. It's calculated by dividing the asset's value by its net operating income (NOI), giving a percentage as the result. But with higher property prices, the returns diminish.

In a world where investors won't borrow at 6.5% for a 4% yielding asset, the numbers simply don’t add up.

Unlike a young family fuelled by dreams of homeownership, investors prioritize the bottom line. If the income from a property remains stagnant (or even declines), the only logical way to boost returns is to slash prices until the yield is enticing enough.

Enter the cash buyer.

These investors have two unbeatable advantages—no competition and no interest rates to fret over. The ability to close a deal quickly, say in seven days, often leads to significant discounts.

This is the game plan my investment fund, CashOffer LP, banks on. The next step? Wait out the economic storm. As history suggests, the Bank of Canada eventually loosens the reins on interest rates. By then, property values rise, and the smart cash buyer can refinance, earning a significant profit, all while enjoying a steady cash flow.

For those ready with cash to dive in, the next 12 to 18 months promise a golden window of opportunity.

I’m gearing up for it, and if you'd like a deeper dive into my strategy for this high-interest landscape, watch this video on Youtube. Or feel free to reach out, I'm open to sharing my playbook.

If you are interested in learning more about the current market dynamics and what it means for everyday buyers and sellers, you can always catch our latest Vantage Report

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.