Buying a Rental Property During COVID-19
I am often asked if using the equity in your home is a good idea for buying a rental / income property. In most cases, the answer is yes. However, with the changes to the landlord / tenant relationship and current rules in place due to COVID-19, is this still the case?
What is different now?
- Rental Increase Freeze – Due to the economic impact of COVID-19 the government has placed a freeze on all rental increases. However, this is expected to be lifted before your new rental property can increase the rent as they only allow an increase once a year.
- Eviction Moratorium – During the pandemic, the government is preventing any new evictions, including an eviction for nonpayment of rent. This means that your tenant can simply not pay rent and you have no rights to evict them. However, there are many ways to mitigate this possibility.
- Get a history from the current owner of any unpaid rent and current employment details.
- Ask to the purchase the house without the tenant in place. While there is no guarantee the current owner can offer this, they may be able to work an agreement with the current tenant before you take possession.
- Potential Market Crash – While no investment offers no risk, real estate is still on of the safest investments you can make. While there are reasons to be concerned in many markets, Victoria is in a special situation.
- Victoria still has an incredibly strong rental market helping to keep home prices high.
- Victoria has very little land to develop on compared to the rest of Canada.
- Victoria a high level of wealth with most homeowners having over 50% in home equity.
- Victoria has a strong employment rate and large amount of secure government jobs.
Even during these unprecedented times, owning a rental property is still one of the best long-term investment strategies available. Moreover, given the instability in the stock market, I still highly recommend to my clients who are looking for a long-term investment strategy, to focus on income properties that are funded by the existing equity in their primary residence.
To learn more about what properties could work for you, give me a call!
To learn more about how much you could afford, give David Steinberg from Olympic Mortgages a call!