Nicola Wealth clients enjoy the benefits of investing in real estate without some of the stress and headaches.
They seem to be doing something right at Nicola Wealth. The firm’s dedicated real estate division, Nicola Wealth Real Estate (NWRE), led by Mark Hannah, Managing Director, has seen some positive performance from their real estate portfolio regardless of the volatility of the pandemic. Their in-house acquisition and asset-management specialists attribute this success to the diversity of their portfolio, their ability to keep their finger on the pulse, and ultimately being able to act quickly on opportunities in major markets.
Taking an entrepreneurial approach to investing in real estate through which their team of more than 50 professionals employs; NWRE monitors industry trends and acts quickly. Preferring off-market opportunities, they use a creative lens to find opportunities to add value instead of just buying existing real estate to clip a rental coupon. The firm has applied this strategy for years; boasting 19 acquisitions over in 2021 alone, adding to their Canadian income properties, US income properties, and value- add/development opportunities.
While almost everyone can agree that real estate is an attractive investment these days, the team at Nicola Wealth has a few words of advice to help avoid common mistakes that can have significant impacts on your outcome. For example, Alex Messina, Director of Acquisitions at NWRE, warns against treating real estate as anything less than an active business.
“It’s not as simple as clicking a button to buy a property and letting a property manager take it from there,” he says. “There is a lot of work that goes into underwriting good investment opportunities, completing due diligence and closing. From there, the real work begins where you need to understand mortgage financing, asset management, and leasing to maximize value. We have a team with specialists in all of these disciplines.”
It appears that diversity is key. Avoid putting all of your real estate “eggs in one basket,” opting instead for variety by asset class and geography, and watching for opportunities that are open-ended, which essentially equates to liquidity.
Preparing for volatility in the market means conservative underwriting—don’t get trapped into thinking that prices will just keep going up; make sure the numbers work based on today’s value.
“It also means investors need to be disciplined in their approach to acquisitions,” Messina says. “We take the view that if we can’t get a deal at the right price, there is always another bus coming. We also look for multiple ways out of the room.”
For example, if you buy raw land and the development is delayed or stalled, you’re stuck. But if there are existing buildings with holding cash flow income, you can continue to lease those buildings. “We like to have back-up plans,” Messina says.
From a leasing perspective, NWRE always looks at buildings with good leasing appeal that will attract a wide variety of tenants. Remember that when markets turn, premier locations will typically offer more flexibility from leasing, sales, and liquidity standpoints.
“We can’t control if lease rates in the market soften, but we want to make sure that we have properties that will attract strong interest from tenants so we can ensure cash flow,” Messina says.
Finally, investors need to be prepared for the inevitable rise in interest rates. NWRE has been proactive at locking in mortgage rates for the company’s long-term leased assets to hedge against higher interest rates in the mid-term. “This also impacts our acquisition strategy as we look for assets where we can increase rents in the future to off-set rising interest rate costs, instead of acquiring assets that are leased long-term at fixed rents,” Messina says.
While investing in hard-asset real estate can reap rewards and tips from professionals can help you on your way; remember, it requires significant time, capital, expertise, and good ol’ hard work. It might be best to leave it to the experts – and that’s where Nicola Wealth comes in. Messina says. “Our end goal is to relieve our clients of the burden of sourcing and managing properties, while striving for the best possible returns.”
This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. All investments contain risk and may gain or lose value. Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities commissions.
