In this week’s Insight Article, I’m purposely writing this as a public service announcement to all my of clients and to anyone who is an investor. Simply put – DO NOT FREAK OUT.
There is a lot of panic and fear in the real estate market right now. Multiple clients have expressed their concern, so I do want to take some time to address what you SHOULD and SHOULD NOT be doing in order to survive the coronavirus pandemic as an investor.
1) Pushing the Panic Button
Don’t panic-sell your property just because you think prices will plummet like the stock market. Frankly, I have no crystal ball and cannot be here to tell you for certain as to what will happen with real estate prices but you should definitely steer clear of panic-selling your property.
As long as your property carries itself from the rental income that it generates, you are still A-OK. This is why we ONLY recommend properties that can carry themselves to begin with – so that it can weather bad storms like these. In times like this, if your property is being paid for by a tenant then there is nothing to worry about. Again, this is why I’ve always emphasized buying cash flow positive properties because prices will go up and down but as long as your property is paying for itself, then just take a deep breath and relax.
The constant talk and fear of the coronavirus will get to you, so trust me when I say that it gets the better of me sometimes too (I’m only human that way)! On the other hand, if your property is not paying for itself, it is STILL a bad time to sell because you won’t get top dollar for your property right now. As usual, selling should also be assessed on a case-by-case basis. If this is you, feel free to email me your situation at Zhen@PrimePropertiesTO.com and I’ll do my best to assist.
2) Is NOW a Good Time to BUY?
This is a double-edged sword. On one hand, yes, interest rates are down by quite a bit and the fear of coronavirus is keeping a lot of people at home which means less competition. However, the situation could still get worse. I’m bullish on the real estate market but even I know that right now, I wouldn’t make a move yet (especially as an investor) given how rapidly things are changing.
If you’ll be personally living in the property, then yes, proceed with your purchase if you are seriously looking for a home. Just be careful when you’re out and about because I’m still seeing activity at open houses and these are technically “social gatherings” that you should be trying to avoid right now. Tour the listings virtually, if possible.
3) WHEN to Sound the Alarms?
As I write this Insight Article, I’m waiting to see what Trudeau’s stimulus package will consist of. The easy answer is probably some sort of quantitative easing (i.e., printing more money to assist Canadians). At the time of writing, I don’t know what that is and when it’ll get here. I would sound the panic alarm as investors when people start losing their jobs. A lot of companies have declared that everyone should work from home and their salaries will still be paid out. However, those who work hourly jobs don’t have the luxury of this.
Like many others, I’m waiting to see the type of aid that will be coming to those who need to pay rent. If tenants start to default on their rent payments, that’s when I would sound the panic alarm. If there are defaults on rent payments, then there may be a ripple effect as this may cause investors to default on their mortgage payments if they don’t have the 3-month buffer that comes recommended as an investor. Most banks allow for one deferred mortgage payment, so as investors, check with your bank for those options.
The Canada Mortgage and Housing Corporation (CMHC) is also working on a program to help those who cannot make their mortgage payments and they’re also buying up the bank’s mortgage in order to, hopefully, prevent a really bad recession.
The Silver Lining – I’m predicting that an announcement of a recession will be imminent by the end of Q2 2020 because there is no way that the GDP will be increasing amidst all of this chaos. The silver lining is that my family who went through this exact situation in China said that it took 47 days of quarantine before they were finally allowed to go outside again. China has effectively flattened their curve and the province of Hubei, where the coronavirus all started, is starting to revert back to normal.
At this point, I’m praying that Canada will go through 45-60 days of quarantine along with other curve-flattening protocols and thereafter, we’ll be starting to revert back to normal. Mixed that with financial stimulus packages and financial support for Canadians, we should be able to shelter the worst of the coronavirus.
I’ll be providing more updates via YouTube as things are changing SO quickly. Make sure you subscribe to the PPTO YouTube channel by CLICKING HERE Tune in to PPTV – I promise you it’ll be worth it!
Until Next Time, Your Move, Your Future!
Zhen
