This time, the market was expecting it.
That doesn’t make it hurt any less for most Canadians.
There is fear in the market and still uncertainty.
But, there could be a bright side especially for real estate investors!
Here are some of the highlights from the Bank of Canada meeting today:
We’re seeing a few things on the ground.
From an equity stand point, this is good news for those who are looking to grow their property holdings.
With prices coming back down we are seeing a more realistic market.
One investing strategy that a lot of realtors have been pushing is called an assignment of sale for pre sale properties.
It involves putting a pre-sale purchase under contract and assigning the contract down the road when the property values have gone up.
These are the usual steps:
Now, these come with a huge risk: what happens if you cannot assign it?
This is where we are right now.
There are a large number of investors who’ve entered into these contracts that have been told they can assign. Due diligence hasn’t been met and they have no exit plan.
If they just don’t close, they could be liable for a lawsuit.
So what happens? Well, that’s where some investors come in and negotiate a huge discount to buy new build properties for a fraction of the price they were listed for.
It’s been years since places like Vancouver and Toronto have seen a Buyer’s Market (i.e. where buyers have control).
We’re getting closer and closer to one now.
Over the last 2 years, buyers have had a hard time because sellers were in control. Many offers had to be “subject free” which puts the buyer under stress. Most listings had double digit offers and bidding wars were common.
As the market reverses, we’ve been seeing subject to financing, and other subject clauses coming back to the market which has made a HUGE difference.
You should seek a professional advisor and chat with them about the pros and cons.
This is not intended to be financial advise but is a current market update of what we’re seeing right now.
There is still a lot of risk and uncertainty in the market.
You need to make sure you are comfortable taking on risk. Double check your numbers ESPECIALLY your cash flow.
When investing in real estate, you are more than likely taking on debt (as a mortgage). This means you need to be more cautious and diligent than someone investing in stocks. You could lose MORE than the money you put in.
With leveraged investing, like real estate, liquidity is one of the key considerations you need to look at. Do you have the liquidity to cover if something bad happens?
The other major consideration is what is your exit plan? What if things go south? How will you get out of the investment for as minimal loss as possible?
Overall, yes the rates are going up. The Bank of Canada wants you to stop buying. We may be heading for a recession.
Historically, millionaire’s were made during recessions. They were diligent, and took calculated risks.
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