• April 5, 2020

Investing in Real Estate During a Recession

Investing in Real Estate During a Recession

Investing in Real Estate During a Recession 1024 683 NorthLend Financial

In Canada, recessions do not occur very often. The last recession was in 2008-09, popularly known as the financial crisis. Our economy entered that recession primarily because of problems in the market in the United States. It is worth noting that the Canadian economy was not hit as hard as our neighbour or some European countries.  

By definition, a recession is a temporary period of time when the overall economy declines.  

Typically, when the markets do well, so does the economy. When the economy is stable, so are the incomes of the many shareholders participating in the economy. For most, stable income means more capital to invest. As we know, when more people buy into the bullish market, the prices will rise. The same goes for the opposite, and this is when investors will look to buy real estate. An economic slowdown can be a reason to buy real estate. Here’s why: 

Income Property

Owning property is a huge investment as it allows you to be in charge. In owning your property there is always the option of turning your estate into a rental property and creating a stable cash flow. It is important to carefully select tenants in order to insure a stable income. You do not want to be a in a place where you are looking for new tenants every few months, this will be more of a hassle then anything. The steady cash flow that is gained by reliable and stable tenants can mean that you may have enough cash to cover your expenses. In addition, the rental income may be profitable right away, and the extra cash can be pocketed or reinvested into the property.  

Return on investment (ROI) 

By owning property, you stand to gain from an increase in the property value. This increase in value is due to the changing demands in the area over time. In addition, you should consider making improvements on the property as it will further increase the value of your investment. In fact, most upgrades actually increase the value of the property by more than the actual cost of the renovation. Moreover, increasing the value of your property allows you to charge more for rent. The return on your investment is significant.  

Real estate investing allows you to grow your net worth by buying more properties. This is a good long-term investment because of the appreciation of the property.  

Here’s Why You Should Invest Now 

Right now, you will receive an even bigger ROI based on the current economic climate of Canada. Just recently the Bank of Canada reduced its interest rates to 0.50% from 1.25%. This major drop comes after the outbreak of COVID-19 and the plummeting oil prices. Forecasters predicted 2020 to be a favourable time to buy, but now it looks like prices will be lower in 2021. However, at this stage, it is difficult to determine the impact that COVID-19 will have on the market. If you are thinking of buying property, try to drive a hard bargain and pay as close to market value as possible.  

Investing in a property is a big decision, to make sure you are getting the best deal check NorthLend Financials free downloadable information package to learn about your investment opportunities.  

Are you in the market for a new home and want to act now, call our professional brokers at NorthLend Financial.