With all the news reporting of record prices and all out insanity in the Toronto real estate market, you have to ask yourself, will this rocket ship ever slow down or stop completed. More than likely, this isn’t something you will have to worry about anytime soon. However, today’s markets are acting very similar to the 2007 markets, and if you are not familiar with what happened just after the boom of 2007, the world went into the largest recession since the great depression. A little scary yes, but what is different from then until now?
For one, the world is still in a bad place. But the Toronto markets fundamentals are still moving strong. Unemployment at record lows, population growth surging and expanding almost exponentially, housing supply at all time lows, demand is not slowing down, interest rates still at ridiculously low rates, and Toronto has become a major player on the world stage of places to be. That wasn’t necessarily the case in 2007.
But the question must be asked, and now more than ever, since the recent government intervention into the Toronto market, how to take advantage of a possible market slow down, or worse, a burst in the non-existent “bubble?”
2008…in the midst of a world economic melt down, little old me was having the time of his life making more money in real estate than I had ever made in my entire life…and in just a few months. Once the world stabilized and people came to their senses, the real estate market in Toronto stabilized rather quickly and surprising everyone on the planet, actually began growing and rapidly increasing in values across the board. So what did I do during the economic slow down to earn so much money you ask? Let me tell you.
Sadly, most people who are investing in real estate, or worse, speculating, have no clue what they are doing. And for most of them, it’s not their fault. We are constantly bombarded with hopes of big pay days on television, and social media. The “real estate guru” agent who just got licensed last week selling investments that are not investments, and of course, your family and friends, who you rely on for everything must know a thing or two about real estate, right? Don’t count on it.
Real estate is not for everyone…but it should be. With a few basic principles, you can become an incredible investors. But that we will save for another day. This article discusses what to look out for in a market slow down. The first things to capture and to look out for, are properties that never should be owned in the first place. The condo that’s too small, the house that’s too big, the “investments” that don’t cash flow. They are typically the ones to hit the market first in a market slow down. That isn’t the sweet spot though. The high end of the market is a great place to make some serious cash, if you are willing to buy on the bounce and hold on to the market recovery, but again, this isn’t for everyone, it’s expensive, and rarely could you get a tenant into a luxury piece of real estate that makes sense financially.
The true sweet spot is hitting up the speculators. The people who think buying something with zero cash flow, but hope and pray the market continues to go up are generally the easiest properties to pick up at a low price, allowing you to flip in the recovery, or better yet, to keep long term with a tenant. Rents don’t typically go as low as property values in a slow down, more demand to rent in a slow down typically drives the prices upwards. When I am talking speculating, think assignments, buying off of a floorplan, or worse, someone bought to fix and flip, but the market fell out beneath their feet.
If you are looking to take advantage of a market slow down, you will need to be like a shark when hunting. There are a lot of investors, like myself, who take serious advantage of the market slow downs and know where to look. If you want help in finding more deals than you can handle, be sure to reach out and give us a call.