Wow, the last few weeks have turned the global community upside down, leaving many of us unsure of what to do now and what will happen next. The pace the pandemic is spreading is sending shockwaves through the financial markets plummeting stock market values and putting downward pressure on the Canadian dollar. Leaving all of us asking, what next?
Suffice to say, no one has the answer how long this turmoil will continue 2 months, 6 months, 1 year or more. The certainty is, the worst is yet to come. We encourage everyone to take advantage of this downtime to read a book, do some gardening, go for a walk, enjoy your children and focus on the positive. Most importantly, be safe.
On a more positive note, the Central Banks in Canada and the US are ready to print money to lend to the government so it can provide relief and stability during the economic downturn. This week both Canada & the US passed massive emergency aid bills. Here is a link to Canada’s economic relief program – Read more
It’s still too early to assess the impact of this stimulus. However, we recommend cash preservation and taking specific action steps to mitigate the economic impact of the crisis.
Here are some guidelines to help you:
Take advantage of mortgage payment deferrals.
- Big 6 Canadian banks allow deferral of mortgage payments by 6 months – Read more
- Here is a link to most lenders telephone numbers – Read more
If you’re renewing your mortgage:
- Extend amortizations to reduce the payment
- Consolidate debt at lower rates
Speak with your property manager to:
- Ask steps they are taking to continue uninterrupted service
- Determine tenant relief programs
Self-managing? Be personal, be empathetic and you will get the same in return.
- Speak to your tenant, what’s happening in their world?
- Help them get relief – BC is offering $500 per month paid directly to landlords – Read more
- Follow the provincial Residential Tenancy legislation
Loss of employment – Canada emergency relief is offering $2,000 per month to various employment situations including anyone who has lost a job due to COVID-19. The application portal will be available by April 6th and money will be distributed within 10 days of application. Read more.
While we believe the governments are reacting to support people with economic relief, we feel the proposed solution does not share the economic burden equally with all stakeholders, and, in fact, landlords will share an unfair proportion. Below we outline our proposed solution and hope you will join our efforts to lobby on behalf of all landlords.
The use of the word “defer” is very misleading. What it really means is in the fullness of time, they expect the landlord to pay in full all amounts “deferred”.
As a consequence of this COVID-19 crisis, many tenant advocate groups, as well as a number of politicians are pushing for a moratorium on evictions for non-payment of rents. Some have suggested that landlords would be fairly compensated for such a freeze by allowing them to defer some of their significant expenses, such as mortgage payments and property taxes. Yesterday, BC Premier John Horgan introduced a new temporary rental supplement, halting evictions and freezing rents, among other actions. Read more
IRR’s Petition is asking to “pause” rent, mortgage, utilities, taxes, and service payments during the COVID-19 crisis so all stakeholders equally share the burden. In our opinion, if properly structured, it would be the fairest and most equitable solution to this problem.
What IRR Petition proposes would achieve the following:
- Help is delivered immediately, with no need for the creation of complicated bureaucracy, needs testing or the distribution of any money
- Everyone involved in the provision of residential rental accommodation shares the pain
- Tenants don’t get evicted for non-payment of rents
Here are a few of the characteristics of how such a pause should be structured until the crisis has ended and should commence immediately:
- Tenants need not pay any rent, commencing with their rent payment normally due April 1st and continuing until the Province declares the crisis has ended
- The lenders that hold mortgages on a rental property may not require landlords to pay any mortgage payments and, also may not accrue those payments or add compound interest to the deferred payments.
- The same pause must apply to property tax payments, City services, electricity and gas payments.
- Insurance companies must pro-rate the yearly cost of providing insurance
- All other providers of services to landlords must also pause (that means forgive) the pro-rata portion of their charges during the crisis.
If you support IRR’s Petition please click the button below. We recommend that everyone affected send their own letter to policymakers asking for relief and to be treated equally.
And finally, we believe that the losses suffered in the stock market will scare many people away from the public market. As people look to diversify and restructure their portfolios, alternative investments will play a larger role in a truly diversified portfolio. Real estate has traditionally been a safe haven to invest by being a hard asset. Multi-family residential has over the years been a recession-resistant asset class as people need a place to live. In fact, rental properties historically have performed better in a recession than most other real estate assets. Read more.
The largest cost of purchasing real estate is the cost of money. Interest rates are rapidly dropping, the Bank of Canada cut rates by 0.50% March 13th. What does this mean? Long term interest rates are dropping. For those in a position to invest, this crisis may be an opportunity to add real estate to your portfolio at historically low-interest rates.
We appreciate your past business, and we are committed to helping you through these uncertain times in every way we can.
Cynthia Aasen & Taylor Steele
Investment Revenue Realty Inc.