The benefits of income property investment during a recessionby Freya Lloyd
During a recession, people are concerned about the safety of their money more than at any other time. It is important to maintain secure investments, and real estate is arguably the best place for that. Toronto has high house prices, but also high rents so many people buy houses in the city to generate income. Economists, real estate agents, and landlords weigh in on the risks and benefits of income properties in the midst of a recession.
As with any investment, real estate is not risk-free. Due to the extremely low interest rates during a recession, many more Canadians have been taking on mortgages. According to The Globe and Mail, “household debt to disposable income has shot to more than 153 per cent, the highest ever and close to the levels reached in the United States before the subprime crash.” Still, Canada has not experienced a real estate crisis and many citizens continue to purchase income properties.
Lillian Adamakis has been selling real estate in the Danforth area for over 30 years. She bought her first income property during the recession in 1989, and can’t recommend the investment more. “Real estate is the only place to invest right now. You never, ever lose because it always, always comes back,” she says. Adamakis now owns two income properties, and argues that it doesn’t matter so much if the value decreases because it won’t stay down forever. If real estate is viewed as a long-term investment, market fluctuations aren’t so stressful, and as long as there are tenants, there is still income.
Richard Cherer took advantage of low interest rates to purchase two income properties, one in the Danforth/Riverdale area and the other in Leslieville. For him, real estate investment became a feasible option that he’s happier with than his other investments. Cherer states that “prices have risen steadily,” particularly around the Danforth. His Danforth neighbourhood house, purchased in 2009, was recently appraised and the value has already risen. Cherer says, “I don’t think you can go wrong in Toronto.”
Clearly housing (and rent) prices in Toronto are steadily going up, despite recessions, which indicate that real estate is a sound investment. According to Adamakis, the real money in real estate investment comes when you sell. If you have an income property, the purpose of the rent is to carry you over until you’re ready to let go. Adamakis currently owns two and a third properties in the Danforth as investment properties. “Will I keep buying here? Absolutely.”
The recession has not affected Toronto real estate too severely. As long as there is enough money to make the initial investment, income properties can be a safe bet during shaky economic times. Increasing house prices mean increasing investment value regardless of plunging stocks. In Toronto, income properties are a strong investment at all times.