Overcoming Negative Cash Flow: 3 Strategies for Rental Investors

In this episode of the Wisdom Lifestyle Money Show, host Scott Dillingham addresses a common challenge facing rental property investors in Canada amid high interest rates. With many investors holding variable rate mortgages, rising rates have eroded positive cash flow, often leading to negative scenarios. Scott explains why variable rates have historically been ideal for investors—offering low exit penalties, higher prepayment options, and lower overall rates—but notes how recent hikes have flipped this dynamic. Drawing from frequent client inquiries, he outlines practical solutions to restore profitability without selling properties, emphasizing the importance of consulting experts like the team at LendCity Mortgages.

Scott details three key strategies to combat negative cash flow. First, converting to an interest-only mortgage or line of credit reduces monthly payments by eliminating principal repayments, though at a slightly higher interest rate. This appeals to seasoned investors who prioritize cash flow and appreciation over debt payoff. Second, switching lenders allows for extending the amortization period back to 30 years, significantly lowering payments compared to staying with the current lender's shorter term. Third, refinancing to add a second suite or renovate the property pulls out equity to boost rental income, offsetting increased mortgage costs. He stresses checking local zoning and municipality rules for feasibility.

As of November 2025, the Bank of Canada has maintained its policy rate at 3.75% following a series of cuts earlier in the year, providing some relief but not fully reversing prior hikes. Variable mortgage rates hover around 5.2-5.7% depending on the lender, while fixed rates are slightly lower at 4.5-5.0% for 5-year terms. Scott encourages investors to act proactively, as these options have helped many clients save on interest expenses. This episode equips listeners with actionable insights for navigating Canada's evolving real estate market, blending expert advice with real-world applications for long-term wealth building.