July 15th 2022
After two of the most amazing years in the history of real estate in Niagara, things have started to change. January saw prices throughout the region increase by approximately $100,000. February continued, although the gains that month were more modest. But at the same time prices were climbing, we could see activity was beginning to decline. By March sales volumes were down by almost 50% and prices were beginning to slide. And today, now midway through the year, the pace of sales still remains sluggish and average home values have dropped somewhere between 15% and 20%. Still above year-end 2021, but not by much. At this point, most of the gains of 2022 have been lost. And what we’re seeing in the real estate marketplace is pretty much the same throughout the economy.
To say the stock market is on a roller coaster run is putting it mildly. Cryptocurrency has plummeted, giving up billions of dollars of wealth. Interest rates are on the rise as the Bank of Canada attempts to reign in inflation, which has nudged up toward 10%. Real estate speculators have, for the most part, run to the sidelines. Sellers and Buyers alike are bewildered. Should they buy? Should they sell? Should they hold? They just don’t know.
My question to you as an Investor is this. Should you be worried?
Let me explain.
If you’ve ever taken my Money Machine Seminar you’ll recall the three guiding principles are: i) Buy one property a year for 10 years; ii) Never amortize for more than 15 years, and iii) Never sell. So, let’s consider number iii) for a minute. Never sell.
You see, unlike the speculator who jumps in, rides the crest for a short time, then bails out, you are in it for the duration. You acquire a property, rent it out and while managing it you let the tenants rent and pay off the mortgage
Well, you say. What if the drop in the market means my property went down in value? My reply to that is ‘how does that impact you?’ You see, while net worth is an interesting principle, and it is contingent on market value and debt load, it really doesn’t impact the investors' model at all. Regardless of the market as long as the rental climate remains strong, and it will, people always need a place to live. And as long as I can lock in my mortgage rate, nothing really changes. I collect the rents. I pay my mortgage payments and property expenses. My debt continues to decrease. Nothing changes. And one day I’ll have discharged all my mortgage loans, and live off the passive income stream. Property value and related net worth, while I own the property, only come into play if I choose to refinance. They don’t affect my investment goals at all.
But you may be thinking, if only I had timed my purchases better I might have gotten a better buy. And while that may be true, it is of little relevance. Regardless of what you paid, the fact remains that one day that mortgage will be paid off and the tenants will have done that for you.
You see, I firmly believe in real estate and as an investor, I believe it’s always the right time to buy. Over time, regardless of temporary dips, the property value will continue to go up. A property I bought in 1990 lost 10% - 15% of its value in the next couple of years, But I had no intention of selling. Today it’s up about 500%.
So let the speculators and even the renovators toss and turn in their sleep. It just doesn’t impact you. Net worth may spike or slide from time to time. So what. It’s always the right time to buy and hold. What you pay for a property isn’t critical. The moment in time you buy isn’t critical. What is critical is that you don’t let opportunities to buy slip away, and once acquired you don’t let go.