Market Update – COVID-19 – Multifamily Investment

sign use social distancing

Just a few short weeks ago we published the Winter Landlord Report and all indications were that 2020 was going to be an incredible year… But now everything has changed as a result of the COVID-19 pandemic, and we are all left wondering what happens next, and where we go from here.

Over the last few weeks while working from home I have been chatting with Landlords both large and small and while there is obvious concern over the current instability, most remain optimistic that when this is all over things should return to “normal” rather quickly.

April Rent – So Far So Good

Over the past few days, Landlords have been pleasantly surprised with the number of Tenants paying rent. While this has been a relief for all, Landlords are not resting easy just yet as May 1st will be the first real challenge since the pandemic started for rent collection.  Many hope that with the promise of Federal support payments on their way, Tenants will elect to continue to pay their Landlords. Only time will tell.  If you have questions about how to deal with tenants who are not paying during this time, feel free to reach out for some guidance. 

Market Activity

From speaking with investors – I find most buyers are sitting on the sidelines for the time being waiting to see how long and how deep the COVID-19 pandemic runs.  With that being said, there is no shortage of buyers looking for “deals” in a market that could eventually uncover some motivated sellers – something we have not seen for many years.  At the same time, owners interested in selling are reluctant to list due to logistics of property visits and the appearance of being a motivated seller when in fact they are not. 

Selling apartment buildings during this time is a difficult task.  Entering tenant units is being avoided, and deals should reflect longer conditional periods to give banks time to digest the evolving situation, and to allow sufficient time for inspections and due diligence visits at a later date and time that is deemed appropriate.

Bank of Canada Drops Rates, but when will the banks follow?

In a response to the pandemic, the Bank of Canada has dropped interest rates, but these lower rates have not necessarily translated into savings for investors. Lenders are reluctant to drop their rates to follow suit, as they are pricing in the current risk of COVID-19 and the uncertainty it has brought with it. Eventually when we have more clarity on the timeline of the virus and social distancing measures, we will see rates drop to aid in the recovery. Buyers and owners refinancing will have the opportunity to take advantage of record low interest rates again for what will likely be a long time.  

Closing Thoughts

We are currently going through incredibly challenging times.  I hope each of you are home, safe and healthy with your families. We are all feeling stress and anxiety for how this will impact us and our family, friends and coworkers.  I want to remind apartment building owners that you are invested in one of the most stable investments available today. Any cash flow issues you experience will be minimal when examining from a long term Canadian real estate perspective. When the dust settles, Canada will emerge stronger and our economy will be demonstrate its resiliency. People will always need a place to live, and demand for rentals will be on the rise. I look forward to serving each of you in the future.  

Questions or comments?  Feel free to reach out for some guidance – I am home and happy to chat anytime. 

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