Welcome back to Simply Real Estate w/ Todd C. Slater. This week we’ve got to talk about what’s going on in the economy, and we’ve got some staggering news coming across just about every single news source in the world. Everybody’s calling recession, and right now. Taking a look at the bond yields there is an inverted market. What does that mean? That means returns are going down on the bonds and everything’s pretty much backwards.
So at this stage, where should you have your money? Well of course, since you’re listening to Simply Real Estate, one of the things that we like to focus on, obviously, is Investment Real Estate. So this week, we want to talk to you about why owning Investment Real Estate during a recession is so important.
Owning Real Estate During A Recession
As we know, a lot of the major banks through out the North America are going to be reducing rates, but most importantly the U.S. Fed and Canadian banks are going to be taking a look at what is going to happen to prime. Prime is probably going to continue to reduce with some incentives, trying to keep the market balanced.
Nobody wants to go into a recession. There’s a lot of factors that are being considered right now. First and foremost, we’ve got some trade issues, we’ve got a lot of world economies that are starting to struggle. We’re not seeing growth, and of course, inflationary is actually going to be exceptionally low.
Because here’s the thing: even though we may see real estate values have kind of maxed out in some marketplaces and seen them taper off in others, we may not see huge growth. But if you’re an Real Estate Investor, meaning you own Real Estate long-term, this is where you can benefit. Let’s think about what people naturally do…
So when we start looking at markets like this, the most important thing you have to remember is that even if the value of the real estate goes down a little, what actually happens is rents will continue to stay stable, if not go up again proportionately, every single year. Why? Because your value of your real estate has no indication on what the rent should be.
So, it doesn’t matter if the market stops into a recession. With the low vacancy rates that we are experiencing right now, you can have a premium position where your investment real estate is actually going to be worth more to you long-term. So in the end, you ride out the storm, you find a good tenant, and guess what, few years down the road you’re gonna come out of this much further ahead!
That’s one of the things that we want everybody to understand about Investment Real Estate. Focus on the long term goal. This is not about today. It’s not even about tomorrow. It’s about years from now, and that’s why when you become a Real Estate Investor, not a speculator, you’re going to turn around and benefit from a market like this.
Todd always tells people the best time to buy real estate is in a downturn market because you’ll always find a tenant, and most importantly this is, normally, where you’re gonna find some good value.
When you take a look at the terms of the mortgages, right now, a lot of people were surfing a variable rate because it was so low. We wouldn’t recommend variable rate, right now, even though we know that we’re going to see some interest rates drop.
But you can keep it a little bit shorter term, ride out the market, and as soon as you start to see an uptick in the market place this is when you’re going to lock in a five-year rate. Make sure you lock it in because you’re going to know about your cash flow. Again, cash flow is king when you talk about Investment Real Estate.
If you’re gonna speculate right now, this is where we would tell you to put on the brakes. If you’re looking at brand new construction thinking that the markets going to be in great shape three to five years from now, this is where you’re gonna have to really consider your options. What happens if the property does not go up enough in value that you’re going to turn around and sell or assign?
What happens if you have to turn around and actually have a tenant in it or you have to close? Are you set to close? Do you have the money to close? Well, these are the kind of things you need to think about when you’re going to do speculation for the long term play in brand-new construction.
The best thing you can do is jump feet first, know what your property is going to be, short close, and you’re into the market. Lock-in your rates. This is a good time, and now, we know a lot of people are sitting there saying “Yeah, but what if…” The what-ifs is what stop people. How long do you sit on the fence? Again, when we take a look at a market place like this, we have to realize that this is an important market.
If you have any questions or are unsure about anything we covered this week, you can book a phone meeting or in-person meeting with Todd below, and he would be glad to help you out.
Also, be sure to subscribe to our youtube channel to be notified when the next episode is released because you’re definitely going to want to tune in for that one.
Other than that, we hope you have a great rest of the week, and we can’t wait to see you next episode!