Investors who can set aside at least one hour to assess their options will be in the best position to grow their real estate portfolio and evaluate possible savings opportunities and deals.
1) Optimize Your Tax Payment Schedule
The longer you can hold on your cash, the better off you will be. If you haven’t already, adjust your tax payments to governments.
Review Your City of Edmonton Property Tax Payments.
You have the option to delay property tax payments to August 2020. That gives you relief for a few months while the market stabilizes. As Alberta moves ahead with reopening measures in the spring, this delay may give you enough breathing room to invest.
There are several programs available for individuals and businesses that can help you as a property developer. If your company has a significant number of employees, take a close look at the WCB premium payments. You may be able to defer payments until 2021. Further, the government has also offered payment deferments for utility payments until June. If you have a vacant property in your portfolio, changing your approach to utility payments will help.
Examine Government of Canada Relief Measures.
Due to Ottawa’s greater resources, there is a wide menu of available programs to improve your down payment. Start with the simplest programs: tax payment deferrals. You now have a longer time frame to pay income taxes and sales tax. That measure alone will help if you have a significant amount owing.
2) Save Money By Taking Advantage of Reduced Interest Rates
In March 2020, the Bank of Canada lowered interest rates down to 0.25%! That means borrowing is now at levels we haven’t seen in over a decade. Since the rates were reduced as a crisis relief measure, we can’t be sure they will stay longer.
There are two ways to take advantage of this temporary change:
- Reach out to your current lender
Talk to your bank and ask for interest rate reductions. Think of it this way. In less than a day, you could save over $1,000 on your borrowing changes. You can reinvest those savings right into your new downpayment for a public lot.
- Borrow more funds for development
These low-interest rates mean borrowing is cheaper than ever before. According to Ratehub.ca, there are now multiple lenders in Alberta offering mortgage rates under 3%, such as Motus Bank, Equitable Bank and First National. Your circumstances may be different, but it’s worth reaching out. In less than one day, you can call these lenders and find out what deals they are willing to offer you. Based on that information, you might be able to save several thousand dollars in interest expenses.
3) Get $40,000 In Federal Supported Loans
The Government of Canada announced a unique program to help small businesses: the Canada Emergency Business Account. Thousands of companies have already applied. Find out more here through the government’s website.
With $40,000, you could:
- Increase your down payment on a public/developer lot.
For example, $40,000 is a 20% down payment on a $200,000 lot. What if you want something larger? Let’s say you have $40,000 available already, you can then double your downpayment and purchase a public lot priced up to $400,000.
- Prepay your preferred contractors to start work on a new project this summer.
For example, you could make several advance payments to your contractors so that they can get started quickly once the restrictions are eased. Many contractors do not have many projects underway right now, so this is a great time to make a deal. By starting your project in the summer, you will be able to make fast progress and avoid delays from suppliers.
- Take advantage of promotional deals for supplies from suppliers.
Reach out to the suppliers you’ve worked with before and ask them if they can offer flexible payment options. By deferring payments to a later date, you will have more cash available for a down payment. For example, Timber Town is currently offering some flooring supplies at clearance prices.
4) Indirectly Leverage Relief Measures For Large Companies
There are some government relief programs aimed at large employers. Take the Large Employer Emergency Financing Facility program as an example. At first glance, this might appear to be irrelevant to a property developer. There’s a different way to look at this program. Think about all of the suppliers and contractors you deal with to develop a property. Some of those companies may be large enough to qualify for the Large Employer program. When those companies have more resources
5) Leverage Economic Diversification Programs
While Alberta has had a limited direct impact from the pandemic, the province has suffered economically for months. According to the Canadian Association of Petroleum Producers, 30% of the province’s economy is directly tied to the oil industry. That focus has brought the province considerable wealth. However, it also hurts the economy when oil prices crash as they have in 2020.
As a property developer, you may be eligible for government assistance. We suggest contacting the Western Economic Diversification Canada organization for more details. For example, if you are not eligible for the Canada Emergency Business Account program, you may be able to get up to $40,000 in assistance from the organization’s Regional Relief and Recovery Fund. Note that there are a variety of rules associated with this program including a requirement that you had less than $10 million in revenue in 2019. In addition, you also need to show how the COVID situation has impacted your business. Certainly, there is some paperwork involved to get these funds but it may be just what you need to get ahead.
Find Real Estate Development Opportunities
By using the measures above, you will have more cash on hand. As we head into the summer season, it’s the perfect opportunity to start a new property development project.