Is Real Estate a good investment in times like these?

Question

Hey y'all, these past couple months have been really crazy, with inflation being so high, the Canadian bank is likely to mimic the U.S 75 basis point rate hike, meaning that mortgage rates will probably go up and home prices will begin to slow down or even go down. With the Stock and crypto market already falling a lot YTD, im not to sure if right now is the best time to be buying real estate, I may be wrong though, I was planning on buying a home somewhere in Ottawa the beginning of this year, either a single family or condo, im only 20 though, so I do not have any skin in the game, so if anyone with more experience than myself can pitch in, that would be great.

Scott Trench · Answer

Depends on the alternatives you are considering.

I'm sure glad I own real estate and not bitcoin right now..

Chris Baxter · Answer

@Jefferson Mondragon welcome to BP and congrats for considering investing in real estate.  As mentioned by @Stevo Sun, you can make money in real estate in any market condition. When interest rates go up, more people turn to rental housing. Unfortunately, many homeowners are over-leveraged in Canada and the pending interest rate hikes will price people out of owning a home.  It may also force undisciplined investors out of their investments as properties where interest rate changes weren't anticipated in property analysis.  Stock and crypto are legalized gambling, as far as I am concerned and, like @Scott Trench, I am sure glad that my retirement is based heavily on real estate.

We have a pretty active Canadian forum here on BP. Post some targeted questions and we'll be happy to help.  Good luck!

Adam Krawec · Answer

It may be an ideal time to buy soon, just the past few threads in this forum are indicative of experiences I have been coming across in Niagara.

1) Buyers of new builds with hopes of assigning did not actually have financing in place with closings coming up in the next several months2) Overleveraged single family landlords going into negative cash flow3) Small-scale multi-family landlords with multiple delinquint tenants, that are taking too long to evictThings are just getting started, with another rate hike looming over our heads, not sure how much longer these property owners will be able to continue to hold on.

Andrew Odoardi · Answer

Hey @Jefferson Mondragon, I would definitely agree with @Nick Vazquez!

Virtually anytime can be great to invest in as real estate is typically a longer-term vehicle. As sellers do get more desperate, buyers are re-gaining negotiating power. If you are ready to start looking, I would recommend getting pre-approved before July 13th. You can lock in a better rate and the lender should guarantee said rate for 4 months (I am not a mortgage specialist so don't quote me on it lol). This way, if there is another increase in July, you have locked in that lower rate and can get shopping.

No one has a crystal ball, and a lot of people are just waiting on the sidelines for the right time. Personally, I can see the market continuing to cool until buyers adapt to the increases. But again no one can predict the future and as the old adage says 'don't wait to buy real estate, buy real estate and wait'.

Lastly, there are specific strategies that may be a bit riskier in these times of uncertainty. But for a simple buy, rent and hold as long as the math works now is a fantastic time!

If you need any help or have any more questions feel free to reach out!

Nick Vazquez · Answer

Hey @Jefferson Mondragon, it is definitely a wild time right now in the world. Interest rates are rising and prices are falling but I would argue that now is a really good time to buy. There are a lot of homes sitting on the market for longer than expected and some sellers are getting desperate. Also you've got a lot more negotiation room and less competition. Just make sure the numbers make sense for your situation/goals and build in some buffers with your analysis like others in this forum have said.

Patricia Berman · Answer

I think it depends on the deals you are doing.  I think it makes sense to keep in mind that over long periods of time, real estate trends up in appreciation.  The other thing to consider is that real estate is a finite resource.

I know that these times are a little bit scary.  But, that has caused me to think that the best thing to do is to purchase primary residence properties, live in them for a year and build a portfolio that way.  Perhaps purchase a property with an additional dwelling unit.

I imagine that you will always need a roof over you head and purchasing primary residence properties allows you to put less cash down and take advantage of lower interest rates.

Just some food for thought.

Jose Porto · Answer

exactly! and add to that those who bought a property at the peak of the market and have to sell another property now in order to close and are starting to get desperate as they are not getting the prices they thought

Is Real Estate a good investment in times like these?

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