Failing to Plan for the Unexpected

Life by Design

Hosts Jessilyn and Brian Persson dive into the common traps that real estate investors find themselves in when they fail to plan for the unexpected. Many first-time investors focus solely on the purchase price, overlooking hidden costs that can arise down the line. Jessilyn and Brian share their personal experiences of early missteps—like purchasing properties without a clear Plan B, underestimating market volatility, and failing to account for rising condo fees or special assessments. They emphasize the importance of having contingency plans for various scenarios, such as tenant vacancies, economic downturns, and major repairs, to ensure a resilient and profitable investment strategy.

The discussion also highlights the hidden costs associated with condo investments. While condos may seem like an accessible entry point into real estate due to their lower upfront costs, they come with financial risks, including unexpected fee increases and costly assessments. Brian recounts a personal experience where a condo investment became unsustainable due to mounting expenses, ultimately forcing them to sell.

Jessilyn and Brian also emphasize the necessity of budgeting for unexpected tenant-related costs. Whether self-managing or working with a property manager, investors must be prepared for potential issues such as tenant turnover, property damage, or legal disputes. They share insights on how proper screening and proactive financial planning can help mitigate risks, ensuring that a rental portfolio remains stable and profitable. If you’re looking to invest in real estate successfully while safeguarding your assets, this episode is packed with valuable lessons and practical strategies.

Resources discussed in this episode:

• The 3 Mistakes that Keep High Achieving Couples from Building their Wealth, Freedom & Living a Life they Love

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Contact Jessilyn and Brian Persson | Discover Life By Design:

• Website: DiscoverLifeByDesign.ca
• Instagram: DiscoverLifeByDesign
• Facebook: Discover Life By Design
• Linkedin: Discover Life By Design

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Transcript
Jessilyn Persson: [00:00:09] Welcome to the Life by Design podcast. We are your hosts Jessilyn and Brian Persson. Are you and your partner looking to align your financial goals and build wealth together? Have you ever wondered what might be stopping you from confidently investing in real estate or growing your wealth as a couple? Or why it feels so hard to get on the same page financially?

Brian Persson: [00:00:28] That's exactly why we created this podcast, and the 'Riches, Relationships and Real Estate' program to help couples like you invest confidently and achieve both your financial and relationship goals. If you're curious to learn more, visit discoverlifebydesign.ca and take our quiz to discover what type of real estate investor you are. Let's create the life you deserve together.

Jessilyn Persson: [00:00:52] Today's topic is going to be on failing to plan for the unexpected. Many first time investors focus solely on the purchase price. I know, we were there. We did that quite a bit, only to be blindsided by a host of hidden expenses. We don't want this to happen to you, our listeners, so we're going to go through and give you a few takeaways on how to prevent this. And the first one is going to be to make sure you have a plan B and C.

Brian Persson: [00:01:22] And sometimes a D, depending on the property. When we started investing early on, we did not go into our real estate investments with a plan B. What is the alternative if we can't get it rented, if we can't sell it? None of that had a plan B. Only over the last five years have we really cleaned up some of those properties. It would have taken us ten years to clean up some of those properties that we didn't quite have a proper plan B or C for.

Jessilyn Persson: [00:01:57] Now we just put an offer in and then once we were approved, we did all our due diligence to get it approved, and then it was just hope for the best. Of course we did our work to show it and get tenants, but we really did not think about exit at all. We didn't think forward a decade or two about market volatility, about things like pandemic, the economy, how it would impact our budget, but our real estate portfolio knew. But recently we got wiser and started planning all that into our properties. Now going forward, as we buy new properties, it's all part of the bigger picture.

Brian Persson: [00:02:37] By recent, probably just short of ten years recent. I think the last ten years we've done pretty well in buying properties. 2016-ish is when we really got our real estate brains around us and got the right team around us, got the right mindset around us, a lot of things changed then. But before that, I can tell all kinds of stories, but the two simple ones I can think of are buying in the wrong location and losing a lot of equity on the buy and not really understanding how to get out of it, how long you have to rent it. What other things can you do to that property to make it profitable? There was no plan B for that particular property that I was thinking of. It was a little condo here in Edmonton. And the other one was a property that had done okay over the years, but eventually started to not cashflow anymore. I was a little bit smarter at that point and started looking for Plan B's and Plan C's, but because of the way I bought it, there were really no options for plan B or C, and I ended up having to sell it. Still made money on it, but maybe perhaps not as much as we could have if we had gone into the deal with multiple plans in place so that the worst case scenario happens and you can still profit from your real estate investment.

Jessilyn Persson: [00:04:07] Absolutely. Another thing, I don't think that most real estate investors, especially new or budget for, is when it comes to condos. I know this because I had a great conversation yesterday with my laser tech who currently has a condo, and she said her and her partner are looking to buy another two properties in the next couple of years. Of course, a love of mine so I started chatting about it. One thing we had in one of our properties was one of our condos. The condo fees eventually became higher than our mortgage, and we didn't plan for it to get so high. If you're not planning for that and part of your portfolio is, whether it be cash flow, long term money for your retirement, that eats away at all that. Another one of our properties, we had a huge assessment. I'm talking about a $60,000 assessment on it. Most people don't plan for any assessments, never mind one that large. If that happens are you, as an investor, in a position to instantly have $60,000 to pay that without all the interest charges? If you have to borrow from the bank or a third party lender to cover that expense, a lot of times we don't prepare for that. Again, plan B, if you get an assessment or your condo fees start to go incredibly high, are you sinking or are you still swimming with your properties?

Brian Persson: [00:05:32] Condos can be a very attractive investment for a new investor because they're quite cheap. In Edmonton nowadays, in 2025 here, you can get condos for $100,000. If you th...