Everyone loves a good board game, especially when the internet goes down. In our house, during such times, it’s the tried, tested and true game of Monopoly that often appears on our dining room table. I’ve found that of the many lessons the game teaches, managing cash flow is the key to winning.
My secret strategy — hopefully my family doesn’t read this — is to begin by going after the rail roads: owning all four leads to a $200 charge per hit, which adds up fast and provides an excellent source of cash flow.
I also concurrently use my initial cash hoard to go after the low-to-medium-cost properties but I’m careful not to overdo it so that I can afford to add houses and/or hotels. This really helps build up a nest egg of liquid assets that keeps me in the game.
Trouble usually finds those who either buy too many properties or the most expensive ones, leaving them without enough money to convert those landing spots into cash-flow-generating assets. It then comes down to the roll of the dice.
While the saying goes it’s better to be lucky than smart, I find that being smart means playing the odds and increasing one’s luck. As in the game of Monopoly, Canadians are in love with real estate but often end up making the same mistakes as those in the game do, leaving themselves at the mercy of a dice roll when economic trouble hits.
Instead of keeping a close eye on managing their cash flow and building up a safety net, Canadians have instead gone on a buying binge so significant that residential real estate now accounts for approximately 60 per cent of our net worth, compared to only 40 per cent in the U.S., according to Statistics Canada and U.S. Census Bureau data.
As a result, household spending in Canada is also at 29.5 per cent of disposable income compared to 16 per cent in the U.S., according to OECD National Accounts Statistics. This doesn’t leave much of a cash hoard as deposits, mutual funds, and stocks account for only 28 per cent of Canadians net worth compared to 40 per cent in the U.S. Meanwhile, our household debt as a per cent of net disposable income is at 182 per cent compared to 105 per cent in the U.S.
This helps explain Statistics Canada figures that show that 20 per cent of mortgage borrowers do not have enough liquid assets to cover two months of mortgage payments
So what happens if such a borrower loses their job, or becomes unable to collect rent from an income property or rent it out as an Airbnb?
According to the Canadian Bankers Association, so far more than 700,000 Canadians have opted to defer or skip payments. Should things get worse, unfortunately offloading some of these properties may not be an option with April home sales in Canada falling 57.6 per cent from the same time last year and posting the lowest volume of transactions for the month since 1984, according to CREA.
Then there are those telling investors to buy even more residential real estate within their investment portfolios. While this makes sense for larger multi-family offices and ultra-high-net-worth individuals, remember that they have significantly more cash flow with a lot less liquidity needs and as a result have a much greater ability to stay in the game than you do.
For the average Canadian, it’s not too late to change one’s strategic positioning. A great place to start is by determining how much of one’s balance sheet consists of liquid and illiquid assets and, most importantly, identifying any risks to cash flow. While this approach isn’t as much fun as immediately buying Boardwalk or Park Place, with a bit of luck and some smart repositioning you may not only be able to own them one day but also have the ability to turn them into the powerhouse cash-flow machines they can become.
Martin Pelletier, CFA, is a Portfolio Manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.) a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.
How Is The Real Estate Market In Muskoka Post COVID19 – Hunters Bay Radio
In a brand new video podcast series, Gerry Lantaigne with Sutton Group – Muskoka Realty discuses the world of real estate in Muskoka during the Coronavirus pandemic.
Join Gerry every month as he updates you on The State of Real Estate
Watch the inaugural episode here:
May real estate sales in Powell River promising, says board president – My Powell River Now
Powell River’s real estate market is warming up.
Powell River/Sunshine Coast Real Estate Board president, Neil Frost, said May sales were “surprisingly good.”
“We were up significantly from April,” Frost said. “April was very poor, but of course that was obviously due to the pandemic and state of emergency declared in B.C.”
Frost said there were 23 residential sales plus two vacant land sales in the city last month, which is up from 11 total sales in April.
He added that those numbers are promising, especially in these uncertain times.
“March started out great and in the last half (of the month) really trailed off, and then April is where we’ve really felt the effects,” Frost said.
“May and June have already been very busy. Year-over-year, we’re looking at 41 sales for May 2019 and we had 23 for May 2020, and those are residential sales. Total sales for May 2020 was 25 total sales compared to 46 total sales for 2019.
While down from last year, Frost said 25 sales in a month is “pretty strong for our market.”
Affordability is helping to drive the market locally. Frost said the average home price is roughly $390,000.
“We’ve even seen some competing offers and property selling for over-list price,” Frost said.
The pandemic has changed the way realtors do their job, Frost said: “Worksafe BC has released a series of protocols and each office has also developed their protocols and basically, we’re trying to avoid in-person showings as much as possible.”
That said, serious buyers want to see a home in person before making the biggest purchase of their lives.
“We do take precautions, depending on the seller’s threshold,” Frost said. “Definitely sanitizing, and gloves, and facemasks if requested, (physical) distancing at all times, buyers are asked to keep their hands in their pockets and not touch anything in the homes, limit the number of people inside a home at a time. Really trying to restrict it to the serious buyers or the people that are going to be on title.”
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.
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