Real Estate Talk:
State of the income market

Where the income property market is at and where it’s going

By Joseph Marovitch

People must live somewhere and before the pandemic, as single homes were rising in price and diminishing in quantity, many buyers were opting to either purchase condos or rent as a less expensive alternative. The increased demand to rent was causing rents to rise, which stirred investors to invest in multi-residential property – apartment buildings with more than five units.

A roof over one’s head is a necessity as is food, drink and all other life requirements. This means that pandemic or not, demand will always be there. The pandemic situation is unique as it does not slow down or stop demand but rather bottlenecks demand until the cork bursts.

A roof over one’s head is a necessity as is food, drink and all other life requirements. This means that pandemic or not, demand will always be there.

Some people have sold their single homes, opted to rent and must move soon. Others have expired leases and must find a new place as soon as possible. The problem is that for the past three months, no one was permitted to leave their homes or walk through other properties.

Recently the provincial government has deemed real estate a necessity and is allowing brokers and buyers/renters to move about, visit and make offers on property. However, there is still a pandemic in Montreal that does not seem to be slowing down. Therefore, many landlords are reluctant to allow visits and many renters are reluctant to visit. None the less, some are searching and many more are waiting for the situation to be safer.

In the current situation, some landlords are maintaining income property but are not collecting rents. This is a very difficult situation when trying to maintain operations. Some landlords have savings and can pay their bills for now. There are also government subsidies to assist landlords.

For many landlords, the situation is more than they want to handle. Now is the time for investors to accumulate income properties in distress at discount prices. The properties have tenants but are not collecting rents in many cases. When the pandemic is under control and people are moving about, incomes will continue and rents will be paid or tenants will vacate, in which case there is an opportunity to raise the rents.

The point is that when the dam breaks and people are running to find units to rent, investors want to have inventory to feed the demand and this is the time to accumulate units.

‘For many landlords, the situation is more than they want to handle. Now is the time for investors to accumulate income properties in distress at discount prices.’

By the way, there is risk to consider. If the pandemic worsens rather then recedes as the governments in the U.S. and Canada open their economies, investors can be stuck with buildings and tenants they are responsible for. This leads to two other concerns. First, addressing the issues tenants will experience and secondly, making sure you purchase in a corporation and not personally as discussed in a previous article.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

Next article: Seller’s declaration reviewed

State of the market

According to the Quebec Professional Association of Real Estate Brokers (QPAREB) there has been a 68% decrease in residential sales in April 2020 compared to last April 2019. The QPAREB states that Montreal has been hit hardest by the pandemic, compared to many other cities across Canada.

We cannot judge the market based on the pandemic. The pandemic is a unique situation that occurred suddenly, not over time. If the situation passes, Montreal is still an island with limited inventory for sale. Prices have dropped in this period as many sellers are hedging their bets – better to sell now at a discount than wait only to find out the situation is worse later and prices have fallen even lower.

‘We cannot judge the market based on the pandemic. The pandemic is a unique situation that occurred suddenly, not over time.’

On the other hand, should a vaccine be found and/or the U.S. and Canada smarten up and open the economy very slowly with massive precautions, then we may return to a more normal market and way of life, allowing prices to rise.

There is opportunity in every crisis however there is also risk.

Let’s not forget that people with cancer are vulnerable too!

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Image: Andrew Burlone

Other articles by Joseph Marovitch