Most real estate investors, even the “old-school” ones, now rely on electronic means to collect at least a portion of their rents. Gone are the days when most of us only collected post-dated cheques, or cold, hard cash. Although we still collect cash and paper cheques, at least half of our tenants pay us via direct deposit, or more commonly, via EMT (email money transfer). These EMT’s are offered through Interac, a secure, reliable system governed by the big Canadian banks.  It is not uncommon for us to deposit up to $30,000 on the first of the month in email money transfers.

Well, as many people now know, on Oct 1, 2013, the system came to a screeching halt. Whether it was a hack or simply a system overload I suppose only the insiders really know, but it simply proves once again, that when we become too reliant on technology, we put ourselves, and our businesses, at risk.

By Oct 3rd, Interac was back up and running, which was a welcome relief. The biggest problem for us (and I’m sure a great number of landlords), is that our mortgage payments are withdrawn by various financial institutions on the 1st of the month, and typically the rental income will offset that mortgage payment (plus hopefully leave a little gravy for us.) Fortunately we had the reserves to weather the storm for a few days, but I’m sure that not everyone had the cash available to do so.  I know many real estate investors who are so heavily leveraged, that even a day can throw the whole system into a tailspin.
The situation is very similar to an employee that gets paid on the 1st of each and every month, and her employer tells her that she will have to wait until the 3rd  to receive her paycheque this month (I use this example as I hear this from tenants all the time). Perhaps her rent and her car payment are both due on the 1st. Will her landlord and financing company understand? Likely not.

I wonder if the banks are going to cover NSF fees due to their error? Or, if this were to happen again, could I simply call up CIBC and ask them to hold off on debiting my mortgage payment on the first of the month until I can process my rents? I think that we all know the answer to this one.

The moral of the story here is that reliance on technology for simplifying and improving real estate investing processes is great, but please, please, have a backup plan in place.

By Chris Stepchuk Oct 5, 2013