Plenty of opportunities in times of ‘chaos’ for strategic investors
Ok, maybe ‘chaos’ is an over-exaggeration when describing the current real estate market in major centres across Canada. Although, it is a common description that I have heard many use.
We saw housing prices soar seemingly without end. Then Kathleen Wynne announced the Fair Housing Plan for Ontario on April 20th, 2017. From that point on, the market seemed to settle, almost overnight, eliminating the once too common multiple offer situation. Then, over a series of three quarters, the bank of Canada increased interest rates, putting further downward pressure on residential home sale transactions in major markets. If interest rate hikes weren’t enough, another policy aimed to cool the overheated real estate market, OSFI (The Office of the Superintendent of Financial Institutions), announced three national mortgage rules that came into place January 1, 2018.
I guess you can say it has been a bit chaotic. But where there is chaos, strategic real estate investors find new opportunities to grow their portfolio and ‘zig’ when everyone else seems to be ‘zagging’.
In fact, if you are looking to build your portfolio, the time couldn’t be better, as long as you have a plan in place to mitigate all the potential risks.
Forces that have created new opportunities for real estate investment:
Whether you are buying ‘on-market’ through MLS or sourcing your deals privately – as I do for the majority of my deals – sellers are willing to sell their properties for much less than they did prior to April 20th. For buy and hold investors (those that are buying properties to rent for a few years), this is a perfect time to acquire properties at a cost that will increase the likelihood of cash flowing.
Strengthening Rental Market – Growing Demand
Compounding the effects of the Ontario Fair Housing Plan which as an ‘unintended consequence’ reduced the supply of rental units in the market; and the increased interest rates and new mortgage rules coming into effect on January 1st, is reducing the capacity of first time home buyers to buy their first property. This creates upward pressure on rental demand. With the supply of rental units essentially remaining stable, this will cause rents to go up. The exact opposite of what the Wynne government aimed to do with their Fair Housing Plan by the way!
Time to be more selective
The hot market of pre-April 20th had most buyers submitting offers without any conditions on financing or inspection. I know I did many times. Now that the pendulum has swung in favour of buyers, there is more time to conduct thorough due diligence on the property before finalizing the deal. This will help mitigate property risk and ensure you don’t face any surprises upon possession. With more time on your side, you can afford to be more selective in the properties you buy.
With homes staying on the market longer and an increase in the number of sellers trying to sell their home, supply of single family and some multi-unit properties has increased dramatically. For the strategic investor looking for a property that meets all of his or her criteria, this is a bonus. As investors, we can be more picky with what we acquire, which helps us mitigate risk and benefits our portfolio in the long run.
With all these changes occurring, are you going to sit back and watch as strategic real estate investors take action or are are you going to roll up your sleeves, think strategically and take advantage of some great opportunities to start or continue building your real estate portfolio?