There has been a surge of renter households in the US. As a result, the economic shock waves set off by the coronavirus pandemic will reverberate not only for tenants but the owners of those properties as well. Whether you are an accidental landlord that has enjoyed income from your old primary residence or are depending on your multi-family real estate portfolio to provide the majority of your income in retirement, here is a summary of the obstacles and opportunities you need to consider.
Obstacle – The current economic downturn has drawn several comparisons to the most recent recession. While the causes are significantly different, lenders have tightened their criteria again for home purchases for both home buyers and real estate investors. Recently, the FHA has significantly tightened their credit scoring criteria for qualifying for a loan. In addition non-qualified (NQ) lending has reportedly taken a hit as well. This is a significant concern for some real estate investors that need short-term lending to purchase and renovate if they do not meet income standards.
Opportunity – While credit has tightened on several fronts, financing may offer significant upside for property owners that qualify. Today’s rates are relatively low. If you meet mortgage lending guidelines, you may be able to refinance a property at lower rates. Additionally, if you were planning to expand or improve your real estate portfolio, you can borrow against the equity in your existing properties at historically low rates.
Single Family Housing
Obstacle – With unemployment increasing as a result of this pandemic, anyone owning rental property is likely concerned about their tenants’ ability to pay. Because of the passage of the CARES Act, evictions are frozen for 120 days starting March 27, 2020 for renters who live in properties that receive federal subsidies such as Section 8 vouchers or for renters whose landlords have government-guaranteed loans, including loans backed by Fannie Mae, Freddie Mac, the FHA, or the USDA. If the rental unit is not covered by the CARES Act, many individual states have issued similar suspensions on evictions.
Opportunity – While the CARES Act gives some tenants a means to avoid eviction, homeowners with government-guaranteed loans may be able to request forbearance for up to 360 days if their income is reduced as a result of COVID. In order to determine if your mortgage is backed by a government agency, start with the two largest entities: FannieMae and FreddieMac. If your loans are not backed by a government agency, speak with your loan servicer and ask about what options would be available in your situation.
If your tenant is struggling to pay but they are an otherwise good tenant, consider using the mortgage reprieve to temporarily reduce or suspend rent for a predetermined period. You should also help make your tenant aware of the stimulus support and temporary unemployment benefit increase. These resources will not only help them pay you but help get them get back on their feet faster once the economic downturn subsides.
Obstacle – Just like smaller properties, multi-unit apartment complexes are going to face problems with tenants who have lost their job or taken a steep pay cut. Anything larger than 4 housing units cannot be financed with a mortgage, so the loan forbearance options through Freddie Mac or Fannie Mae don’t apply.
Opportunity – That doesn’t mean that you are without options. If you have a larger rental property, follow much of the same guidance as earlier. Work with your tenants if they are good tenants to help them access relief so that they can pay you at least in part and stay in your unit long-term.
You also want to reach out to your bank right away to see how they can work with you. Just like you don’t want to lose a good tenant, they don’t want your loan to go into foreclosure. Ask them if they can work with you by skipping some payments and adding them to the end of your loan or temporarily making interest-only payments on your loan. That way, if your tenants can pay enough rent to cover this lower payment, taxes, insurance, and other fixed costs, you should be in a much better spot to navigate the COVID outbreak.
Obstacle – Similarly, many small businesses have been forced to close by state and local stay-at-home orders, which limit their ability to bring in the revenue to pay their rent. Commercial property cannot be financed with a mortgage, so the loan forbearance options through Freddie Mac or Fannie Mae do not apply.
Opportunity – If your property is leased out to a small business(es), then you may want to work with your tenant to make sure that they have applied for the Payroll Protection Program if they are eligible. If your tenants qualify for the PPP, then they can use a portion of those funds to pay their rent, which is a huge relief to you. Similarly, if you currently pay yourself a smaller salary but get more of your income from the rent your business pays to you, the PPP can help your business not only protect your paycheck but also the rent you pay to yourself as long as it is reasonable for the local market.
Staying Prepared For Future Uncertainty
By now, you have noticed that if you have cash and a good credit score, it gives you more flexibility in terms of dealing with this crisis. Here are a few best practices to live by to keep your real estate portfolio in good standing in this and the next crisis:
· Maintain little or no credit card and other high interest debt
· Maintain a credit score of 740 or higher
· Maintain enough cash to cover vacancies and maintenance on the target property for a year
· Maintain enough income to pay the rental property mortgage if there’s a sustained period of vacancy
There is a decent chance that if you make good moves in this market, you can possibly walk out of this with a better real estate portfolio.
RE/MAX | Where to Invest in Ontario Real Estate – RE/MAX News
The impact of COVID-19 has been felt across the province, country and the world at large, as so many of us have pressed pause on routines, plans, businesses and even our short-term goals. What is just as important as keeping you and your loved one safe amid this unprecedented crisis, is remembering that this is temporary. Life will, eventually, start to regain some normalcy, and we’ll be able to breathe new life into goals that we previously put on hold.
If investing in Ontario real estate was part of your 2020 vision, continue to keep your finger on the pulse. An experienced Realtor will help you stay abreast of what is happening within real estate markets across Ontario, which have shown strength and favourability. Below we share some of our top choices for those looking to secure an investment property within Ontario, for those who are in the market to buy.
London headed into 2020 with a smoking hot market, according to the RE/MAX 2020 Housing Market Outlook Report – and it is easy to see why. The city is home to two big post-secondary schools, Western University and Fanshawe College, as well as several large hospitals. These institutions not only help keep a steady flow of people into the city, but they are also three of the top employers for London and the surrounding area. More recently, there has been an influx of digital media companies dotting the city’s downtown core, earning London a reputation as the region’s burgeoning tech hub. These are only a few of the many reasons why, over the past five years, the city has experienced significant growth due to migration from the GTA, adding to the high (and ever increasing) demand for housing.
London maintained a seller’s market throughout 2019, and is projected to stay this way through 2020, even despite a COVID-19-related cooling of demand. Real estate investors looking to purchase within the city’s hottest neighbourhoods should look within North and South West London; these regions are in close proximity to the city’s hospitals, university, and entertainment and retail hubs, as well as Hwy. 401. Due to high demand, vacancy rates for these areas, are accordingly very low. According to Canada Mortgage and Housing Corp.’s yearly rental market report, London’s vacancy rate was 1.8% in 2019, down from 2.1% in 2018.
For a more affordable investment property within the city, East London is a hot neighbourhood worth looking into.
While the popularity of London as a place to live and work has certainly contributed to steadily rising average home prices over the past few years, property price tags are still immensely more affordable than those within the GTA.
Kitchener-Waterloo boasts a thriving (and growing) tech industry, universities, state-of-the-art health institutions, and a real estate market that has recently seen promising growth.
In 2019, residential real estate offered solid returns on investment, with the average sale price of homes climbing 9.3% for the year. According to the RE/MAX 2020 Housing Market Outlook Report, prices were expected to rise 7% for the year ahead.
According to the 2020 RE/MAX Housing Affordability Report, Kitchener-Waterloo ranked 11th on the affordability scale, out of 16 of Canada’s most populous regions. The COVID-19 public health crisis has temporarily cooled many markets across the province, however with demand heavily outweighing supply within this real estate market, there remains much optimism for a healthy bounce-back post-crisis.
The Niagara Region has a lot to offer besides a breathtaking waterfall. The area is one of the country’s most popular tourist destinations, drawing wine lovers, casino enthusiasts and nature buffs. Niagara is also home to a quickly growing number of businesses and residents, with the demand for affordable housing and rental properties outweighing supply.
With the Niagara region playing host to a massive Metrolinx expansion that will take place over the coming years, the popularity of this destination is projected to skyrocket. Upon completion of this proposed expansion, there will be 11 GO trains connecting Niagara to downtown Toronto, which will make it an attractive destination for commuters looking to avoid the manic GTA rush-hour traffic.
Now, let’s talk prices. The average house price differs significantly across the cites that make up the Niagara region.
According to data from the Niagara Association of Realtors, for the first quarter of 2020, the average price of a home within the Niagara Region was $496,000, however within the region, there is much variance between price points. The cities of Niagara-on-the-lake and Fonthill & Pelham tip the scale with average price tags of $792,000 and $706,000 respectively.
Investors looking to get the most bang for their buck can look to affordable communities where vacancy rates are still low, and demand is still high. On the more affordable end, St. Catherine’s – the largest city in the Niagara region – offers homes with an average price tag of $457,000, and much new development on the horizon. With the GO Transit expansion to include a stop within St. Catherine’s, prices could be on the rise.
For insight into the most liveable neighbourhoods in Niagara, check out our list of the Best Places to Live in Niagara for 2020.
Just kissing the US/Canada border, Windsor sits at the southern-most tip of Ontario across from Detroit, and from all angles, is a city on the rise! While historically known for its cheap cost of living and low property price tags, the tides have been slowly shifting within Windsor in recent years. The area has become an attractive destination for business, and accordingly, the employment rate in Windsor is the highest it has been in close to 20 years. Job prospects also attract new immigrants, which is driving up the demand for properties.
This rate of growth is fuelling an already high level of housing demand, which is driving up prices, but comparative to the rest of Canada, Windsor still sits comfortably on the top spot as the most affordable real estate market in Ontario, according to the 2020 RE/MAX Housing Affordability Report.
Affordable prices, the gradually re-opening economy and sustained demand are all positive signs for hopeful real estate investors.
Birds that come by looking for real estate (8 photos) – NewmarketToday.ca
I am fortunate to live on a farm property a little north of Alliston, where there is a mix of open land, a stand of mature conifers, smaller trees and bushes. It is a wonderful bird habitat.
In the past couple of months some of those birds have been searching for suitable living quarters. I was fortunate to be able to purchase an Eastern Bluebird Nesting Box from friends of mine who made boxes and donated the proceeds from sales to a local food bank.
I was pleased to have this personal connection to the builders of the potential home, and pleased at the prospect of having a nesting pair of these birds of happiness as neighbours. I have had them in the ‘hood other years and thus was hopeful they may chose to move into a home built with them in mind.
I was very excited one day in April when I spied a pair in nearby trees. And, as you may well imagine, even more so when I saw them checking out the house. The male sat on it and went in, no virtual tour was available online. He seemed to like what he saw and called his mate to check it out. They came back a couple of days in a row. To me, it seemed like an easy sale. Alas, I was mistaken.
The bluebirds moved out of the picture and a pair of Tree Swallows followed pretty much the same procedure. By this time, I was hoping to double my chances with a second nesting box. The Tree Swallow couple went from box to box for about a week. It seemed to me they were testing out flight patterns from the two locations. They were very tolerant of my presence and stayed in place even when I was near. I thought – hey, they like me.
They are splendid aerialists and fun to watch. They also eat such things as mosquitoes on the fly – an impressive and appreciated skill.
After the week, however, they moved down the fence-line to a more established neighbourhood and took up residence there. There is more open field thus more comfortable room for free flying.
I was feeling a little dejected. As is the norm in my way of thinking, it was all because I did something wrong.
After wallowing in self-pity for a couple of days, I was amazed to see a male bluebird back at the box. I was cautious of being hopeful. When he was back the next day with his mate and they checked out both boxes, the stirring of excitement was hard to suppress.
I can now announce with great satisfaction and happiness, the pair chose one of these homes, moved furniture in, and have been very joyful neighbours for nearly two weeks.
It’s so great to look out my office window to see the male sitting on the nearby fence, or in the tree. He is more visible than the more muted coloured female. He is also very protective of the nest.
They are such charming little neighbours. I am delighted by their presence, and it is a privilege to have them so close.
As the weeks go by, I will share some of my experiences of bird visitors with readers. In the meantime, keep your eye to the sky and look for birds that may come by.
A note: Ed and Bryan Osborne sold 120 nesting boxes, and raised $4,110 for the Tottenham Foodbank. They have another 20 or so to sell. Email: firstname.lastname@example.org
Rosaleen Egan is a freelance journalist, storyteller and playwright. She blogs on her website rosiewrites.com
REAL ESTATE: Home Sales Vital To Economic Recovery – Agassiz-Harrison Observer
Having pushed the restart button and emerged into the “New Normal,” we discover that B.C.’s economic engine is but a shadow of its former self. Citizens and businesses must now face the long-term consequences of the national measures taken to combat the Covid-19 pandemic. No amount of government stimulus funding will make up for the loss of personal income, investments and business revenue incurred during the shutdown, and all the federal stimulus money that was pumped into our willfully stalled economy, must somehow be re-paid. Quoting figures released by Mike Campbell, Money Talks, the current debt burden per Canadian individual, including children and seniors, has increased by $29,000 in the last 65 days!
The burden of this debt is now to be shouldered by us all, and it will ultimately be recovered in some form of taxation. The government felt certain Canadians could shoulder an increase in the Federal Carbon Tax during the shutdown, so will they be looking to increase taxes or create new ones to keep Canada solvent?
It is critical that increased taxes are not further eroding one of the main economic growth factors like the housing and real estate market to compensate for overspent coffers. The real estate industry just had the new Foreign Buyers Speculation tax levied upon it in early 2019, and it ultimately had a negative effect on home sales and not the desired outcome of making housing more affordable in B.C..
Real estate sales transactions are already subject to taxation for home buyers, but at present, there is no taxation due upon the completion of a sale by sellers, unless you are a foreign national. Home buyers in B.C. already pay a provincial Property Transfer Tax (PTT) when they buy a home. The tax is charged at a rate of one per cent on the first $200,000 of the purchase price and two per cent on the remainder up to and including $2 million. The PTT is 3 per cent on amounts greater than $2 million. If the property is residential, a further two per cent PTT is payable on the portion greater than $3 million. Home buyers must also pay GST/HST tax on the purchase of a new or completely renovated home. Currently the title owner’s profits from the sale are not subject to taxation unless the sale of the home is deemed income. Foreign buyers are subject to different taxation laws and already pay taxes on both the purchase and sale of landholdings in B.C..
In 2020, over 530,000 real estate sales transactions are projected to be completed in Canada, and for most part, profits collected from those sales are not currently subject to any taxation. It is one of the last sales a citizen can complete without the long arm of government taking a percentage of what they deem a compulsory contribution to federal revenue. Could this be slated to change in the near future? Is the government eyeing this untapped source of sales taxation? Would you be able to achieve your long term real estate goals if you had to pay taxes on the sale of your home or property? Most households need every penny earned in a real estate sale to make their next home purchase a reality, or they are counting on that income for their retirement. An ill-timed tax on landholding sales profit could bring with it disastrous consequences for the longevity of the market and the failing economy.
Resale housing transactions are one of the biggest drivers of economic growth, and a key factor to our recovery, as ancillary spending is attributed to more than $32 billion per year across the country. The Canadian Real Estate Association released their report titled “Economic Benefits Generated by Home Sales and Purchases over the MLS System” in October of 2019. Their findings showed the direct and indirect employment resulting from home sales is significant, and an estimated 234,015 jobs were generated nationally by average annual resale housing activity between 2016 and 2018. The report stated some $64,100 in ancillary expenditures are generated by the average housing transaction in Canada over a period of three years from the date of purchase. Home purchases and sales create significant spending and major spin-offs to other industries. Finance, insurance, construction, manufacturing and professional service sectors all benefit greatly from home sales. Any new tax levied on real estate transactions would have immediate, negative trickle down effects that would stifle badly needed economic growth.
In conclusion, citizens and businesses alike are tasked to find creative new ways to keep an income stream and their own budgets balanced with less, and the government must find new revenue streams to offset their spending without further hampering economic regrowth. It is imperative that key economy building industries like real estate and the re-sale housing market remain stable, so the economy does not come to a complete standstill and create a great depression of more foreclosures and insolvencies.
We are facing one of the greatest challenges of our time in rebuilding the Canadian economy, and real estate and the housing market will play a monumentally significant factor in how quickly we are able to jump start our economic engine.
Freddy Marks, together with his daughter Linda Marks, runs Agassiz’s 3A Group Sutton Showcase Realty. He has been a Realtor in Canada and Germany for more than 30 years, and currently lives in Harrison Hot Springs.
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