Heading Into 2023: 4 Strategies to Stabilize and Fortify Your Portfolio

This post is written by Trusted Partner, Dalia Barsoum of Streetwise Mortgages. To become a contributing editor, please contact our Real Estate Investor Solutions Specialist, David Maxwell at david@reincanada.com.

Hi, I’m Dalia, founder of Streetwise Mortgages.

To say that 2022 was a roller coaster year for real estate in Canada would be an understatement. I am not going to rehash old news headlines and call that my 2022 reflection, I prefer to look forward instead, and give you some actionable tips to consider as you plan for 2023.

First, take a moment and revisit the real estate investing goals you set out for yourself in 2022. What have you done against these goals: What worked? And what didn’t? Write down a top-5 list of things you learned and would do differently in the future.

Second, no one, and I seriously mean no one, can accurately predict what will happen in 2023. Although I am sure many guesses will come close. However, it is essential to stabilize and fortify your portfolio against whatever may come.

Here are 4 specific actions for you to consider to stabilize and fortify your portfolio:

1.  Address cash flow pressures at the total portfolio level. Explore debt restructuring solutions such as extending amortizations, paying down expensive debts with cheaper money, or see if the Streetwise Cashflow Booster Strategy (click here to learn about this strategy) may work for you. As I said, keep in mind the total portfolio level cashflow, if getting every single one of your investments to positive cashflow is not feasible, consider adding additional revenue by charging for storage, parking, switching to short term or mid-term rental. Alternatively, consider investing in a high cashflow property. There are starting to be some excellent finds out there. You can also consider lending out some of your capital in conservative, well-vetted private mortgages. In times of uncertainty, cash and cash flow is king, there are many ways to get to it.

2.  Wherever feasible, exit any private loans you may already have. Many private lenders are changing their appetite to lend and will likely significantly increase their lending rates. Unless you have specifically planned for the higher rates, and have a clear exit plan, this is not the time to lean heavily on private money.

3.   Manage your interest rate exposure. If you have properties that are coming up for mortgage renewal in the next 6 months, the rate decisions you make today are more important than ever and may have a long-term effect on your success.  Everyone generally agrees we are near the top of the rate increase cycle. This means you should avoid getting into a five-year fixed rate because this will lock you in at the highest rate in 15 years. If you can afford the additional 50 points increase forecast for 2023, and value the flexibility of being able to rebalance your portfolio on short notice, then go for a variable-rate mortgage. Otherwise, consider short-term fixed rates of 1 to 2 years.

4.  My fourth and most important tip to you is: Please remember to prepare and plan for success! By that I mean, free up any underutilized capital you may have. Yes, this capital can be used to weather a storm, but even better, you will have it available to jump on opportunities that I am sure will start presenting themselves. At the beginning of COVID when the markets were tanking I shared with you the quote: “luck favors the prepared”, and today I share it again. Unlock that capital. Set up or increase your secured lines of credit carefully and with guidance from your broker get those unsecured lines of credit. Ask your joint venture partners to do the same. Remember, prepare for success.

As always, my team and I are here to help you make 2023 your best year ever in real estate. Please reach out to update or create your financing roadmap to incorporate these 4 key actions into your 2023 plans.

Contact us today at info@streetwisemortgages.com to book your planning session and get a customized complimentary financing road map, or schedule an annual portfolio review so we can help you ensure the financing on your portfolio is optimized to excel in 2023 and beyond!