As I look at Real Estate investments, I review the usual costs, purchase price options and cash flow.  One factor that continues to grow at alarming rates isn’t increased mortgage rates.

Historically, a mortgage rate of 5.5% is a bargain.  Currently, in the States, it’s over 7%.  That works if you have a proper return on an investment.  A 10% CAP rate to even bother looking, with a target of 14% to make something look possible.

A province or state’s laws that are forced on tenants and landlords are one major factor.  In unfriendly Ontario, Canada, or Los Angeles, California, in the US, tenants can not pay rent but still live in your building for months, if not years.  If you have a 200-unit building, it may be manageable.  If you have a duplex or triplex, it could be financial ruin.

While that is important, it’s not the factor I’m most concerned about.  I try to stay away from bad places to invest, much like the honeybees do that inspire my investments.

It’s property taxes.

As an example, the Municipality of Chatham-Kent in Ontario, Canada, increased property taxes by over 8% in 2025, citing inflation as the major cause.  But inflation was reported to be just 2.5% or so during that year.  They also cited the need for more spending on water and other “infrastructure”.  That means they didn’t plan well and took years off from spending on needed CAPEX.  What other costs are looming?  Only a disclosure of line-item spending will help us understand the poor shape they are in.

A poorly planned, overspending Municipal Government, combined with horrific rental laws, makes investing impossible in many jurisdictions.

The solution is simple.  Once discovered, I don’t invest in them.  Increased property taxes because of poorly managed Municipal and provincial governments are a non-starter for investing.  Just as compounding with investing is a good thing, compounding with expenses will destroy my investments.  In most areas where we invest, property taxes are 50% or more lower than in the municipality of Chatham-Kent in Ontario, Canada.  That’s tens of thousands of dollars a year in money wasted.

When you buy right, in the right places, locking in your mortgage and locking in your cash flow, real estate is an amazing investment.  It will always be.  People must live somewhere.  It’s a staple good or service.  That’s likely why I love it.  Property management firms such as TreePad, which manage our investments in Nova Scotia, make it hands-off: never a call for a plugged toilet, never empty units. 

What’s the Next Investment?

I’m digging into some gold mining companies, given that gold itself has been a superior investment to the TSX average over the last 20 years.  But solid gold, while great to sleep at night, provides little income.  So I’m struggling to find a gold company that is managed properly and has managed risk.

That’s hard to find.  Although Lundin Gold pays a 7.2% dividend, there are risks associated with ownership.  They produce most of their income from one mine that is now challenged by the country’s government on taxation.  So, there are risks.  I’ll keep digging and let you know next month which, if any, I’ve purchased.  Lots more work to do.

I still review Real Estate weekly, more for my education than any action.  It continues to be overpriced in my opinion, with the returns not equaling the risk profiles.  Many sellers are still thinking of the days when a duplex generating rent of $2,500 before any costs are deducted was selling for $550,000.  I don’t waste my time starting to look unless that type of gross income is generated by a $200,000 investment. Even then, it has to produce significant protected cash flow and be a value that I’ve determined makes sense for me.

So, I wait.  It could be years.  I don’t care.  Being confident in understanding value is so very important.

Governments spewing more Shite

I’ve been watching a lot of BritBox lately, so you can understand the headline.  When watching the news, I’m amazed at how much ### the governments at all levels are spewing about their new financial engineering efforts.  In Canada, the federal government talks about decreasing deficits and spending because they have a new accounting way to classify it.  They are spending more than ever but calling it investments so it isn’t really government spending.  What?  That’s not an expense; you can just change what you call it?

That great bottle of wine you bought is an investment in your quality of life, so it’s an investment, and you can depreciate it on your income taxes?  Not sure the government would accept that calculation for us simple folk.

The second Shite observation comes from the book by Chris Voss that I continue to read over and over again.  You can tell someone is lying to you by the types of words they use in their spin, and their need to continually talk about it in a highbrow, verbal diarrhea-like way.  Listen to our Canadian Prime Minister, any Municipal or Provincial politician.  Are they lying to us about debt and their “investments”?  Have they built any housing in their new housing programs and initiatives?

So, my answer is to try to invest where there is less government.  Many rural Municipalities in Nova Scotia, for example, continue to work within their means.  They have few departments, which means fewer places to waste money.  As they grow, they all end up with the same spending disease.

Staying simple is a way for me to stay away from the Shite.

Investment Focus

Doing nothing becomes the discipline once things are in place.  I’m documenting some things, writing more AI code, and really getting back into cooking.  I’m doing some serious digging into public companies that I will share in the December letter.  For now, I’m watching the bees finish up getting ready for winter, and I’m going to do the same.  Enjoy and Bee well.  Talk soon.

Hank