August 2026 - The Money Machine - Trends

I’m a big fan of diversifying an investment portfolio. Mix it up. Single-family, duplex, triplex, semi-detached, condo and the odd small commercial property. There are a lot of reasons for this. Condos, for example, are among the easiest to manage. You don’t have to worry about lawn care, snow removal, or exterior maintenance. But they are among the toughest to cash flow. You pay for those services through the CAM fees, which takes a big bite out of your rent. Having one or two in your portfolio can be carried by the surplus rent generated by your multi-families, but it’s hard to make your profit/loss statement work if you have too many. And small commercial can be wonderful. Especially so because most are rented out on a triple net basis. That means that in addition to ‘base rent’ you also collect ‘additional rent’ or TMI, set once a year based on the previous year’s expenses and designed to cover the properties taxes, maintenance and even insurance. You don’t get those calls in the evenings or weekends because a tap is dripping or a toilet won’t flush, and even the cost of repair is covered by the tenant. But there is an exposure here. Whenever the economy turns down, the for-lease signs spring up along the highway and in your strip plazas. People always need a roof over their head, but they don’t always have a business to run. And once vacant, commercial buildings can take a long time to re-rent. I’ve seen some sit vacant for months and even years. You need deep pockets, and you wouldn’t want your portfolio full of just commercial and industrial when a significant downturn hits. Another very key reason to have a mixed investment portfolio is that it shields you from the vulnerability that comes from shifts in our economy. Let me give you some examples. Consider condos, for example. During the boom we experienced in the Covid era, condos were a hot commodity. Investors wanted in because they were easy to own. Not much hands-on care and could be easily rented to offset some of the carrying cost. They often lost money on a month-to-month basis, but the speculator/investor didn’t care. Properties were going up in value in excess of 50% some years, and they were counting on riding the wave. And developers too were jumping on with plans to develop and pre-sell multiple units in proposed building projects. The problem was that when the music stopped, there was a tremendous oversupply with more already committed and in the pipeline. Demand dried up. Prices plummeted. You can weather one or two in your portfolio, but not a heavy overbalance. Now let’s look at residential apartment and single-family home rental units. There is a shift going on here as well. The government has been busy behind the scenes working on what they see as a housing crisis, and in typical government fashion, they have over-compensated, and it’s having a negative effect on residential landlords. They have turned off the tap on immigration, going from an uncontrolled influx right to negative growth. They have closed off a lot of foreign student applications, and they have prohibited non-residents, for the most part, from buying single-family homes, duplexes or triplexes. At the same time as they have radically restricted available occupants, they have attempted to greatly increase unit availability through grants for conversion from industrial, commercial or office to residential. Development of accessory dwellings inside and outside homes regardless of zoning, and grants and interest-free loans for apartment building development. Just look around St. Catharines or pretty well any municipality in Ontario and see all the new residential development. As a result, we are seeing landlords reducing rent and offering 2 or 3 months free as incentives and, in some cases, cash incentives. Buildings that were historically ‘full’ are now putting ‘units available’ signs outside. And as these new projects come into completion, it’s going to get worse. For the short term at least. And that’s why I encourage diversity in your investment portfolio, better than average maintenance of all your units and quality both in location and condition. There will always be trends in real estate. Shortage of commercial. Overabundance of commercial. Shortage of residential units. Over supply of residential. With the same thing applying to student housing. Retail and so on. So, to be safe, don’t put all your eggs in one basket. While one sector suffers, another flourishes. Keep your properties in pristine condition. Keep your rents slightly below market rent and maintain a diversity of styles and types. That way, while not flocking to make a ‘killing’ because of a trend, you won’t be in a position to be hurt by one either. You’ll be exactly positioned to prosper in all market conditions, and you’ll sleep well at night.