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This content is provided in partnership with Zhen Liang from Prime Properties TO.
What happens to rental rates when a real estate market crash happens stay tuned to this episode of Primetime TV. I promise you it’s definitely worth it.
Good day Toronto, welcome to another episode of prime properties TV. So glad you could join us here as a seasonal real estate investor or investor to be I’m sure you’ve come across your fair share of real estate millionaire weekend boot camp classes.
I know I have a handful of US-based classes are the first hits that you get on Google searches when you want to learn more about real estate. They promise you how to be a multi-millionaire real estate investor over the weekend by using OPM- Other People’s Money to buy properties of 0% down.
Well, let me save you a $10,000 class fee and say that it’s a complete waste of time money and focus it’s a very steep fee for not enough return on investment. I would highly suggest you passed on it. Here’s a simple secret.
Let me tell you the single most important piece of information that will never tell you in this real estate boot camp class, the secret is to buy a property that pays for itself. IE. Where the rental income covers all your expenses. That ladies and gentlemen is just the bread and butter of real estate investing.
All right, there are multitudes of methods and strategies for real estate investing that range in complexity and difficulty.
But to this day buy-and-hold is a simple most reliable way of investing, especially if you are just getting started and it’s the one I would recommend for you as well.
Remember this, generational wealth is created by time in the market and not timing the market very important.
Nobody can predict what happened to prices and as I can gather data and am entrenched and day to day trading of real estate. Still, anything can happen such as 15% foreign buyer tax. If anyone tells you to buy real estate because it’s simply a good investment and it always goes up, you should turn around and run the other way away as fast as you can. What makes your real estate a great investment vehicle, is that you have a hundred percent control of your asset and it pays you three different ways. You can watch more about that. I’ll put a little link to the video up here.
The first principle is the cash flow. So which is what I’ve been talking about all episode the rental income covers the expenses and allow me to elaborate on why it is important when evaluating next investment property.
Back in quarter 3 in 2008, when we know all new poop hit the fan of the financial crisis. We all know what happened to the prices of real estate in u.s. I’ll put a chart up over here for you guys to see.
What do you think happened to rental vacancies when everyone decides to not pay their mortgages anymore three months after the crash the start of 2009 when the government bailed out Wall Street people start to default on their mortgages and you can see by the graph over here the impact on the rental market was a turning point for vacancies and start to plummet to historic lows.
Discover How To Rent A Property With This Step By Step Guide
This was a time when people no longer paid their mortgages that instead bought or sought out a rental property to put a roof over the heads instead and you’ll note that the lower the vacancy rate the better it is because it just means that there are less empty rental properties just sitting around. What do you think happened to rental rates when the vacancy rates drop meaning increased demand.
Here’s a chart shows the rental rates during the same time period. It did not drop like the prices in the buying and selling Market. In fact, it stayed fairly consistent.
Now, there is a caveat to this similar to real estate boot camp that was talking about in the beginning the above in full as us driven and not necessarily applicable to us in Toronto.
However, it does give us a good indicator of how the market reacts and behaves should Toronto ever experienced a crash as significant as the one in the U.S. in 2008 what you must understand is this is very important.
It doesn’t matter what happens to the price of your property, as long as we buy a property that pays for itself even after a crash your vacancy rates will decrease, rents will increase and your property will be filled over time. And because you have undertaken the buy-and-hold strategy property prices will eventually rebound and you’ll be fine. Even your property is worth one dollar as long as the tenant covers all your expenses. You survived the crash because they’re not paying anything out of pocket.
There will be ups and downs in the real estate prices. I can guarantee you that. As long as you buy a property that pays for itself, you’re well on your way to creating generational wealth. This is why it’s at most importance to work with investment-oriented Realtors such as myself and not just your about your brother’s uncles nephews cousins friend who’s a realtor, not all investment properties are created equal and frankly. Some are just really really bad. If you want to learn more about how and where to find the best investment properties.
Our team will guide you in the right direction and help you make the real estate investment goals so that your dreams can come true. Thank you guys for watching. If you learned something this video make sure you give me a thumbs up if you enjoyed the content of this channel subscribe.
As well, if you want to learn more about how a strong mortgage can help protect your investments during a market crash, click the link below for a free strategy call today.