Why the mortgage stress test is actually a good thing for real estate investors and property managers

How can the mortgage stress test that was implemented in January of 2018 by the Federal Government be a good thing for real estate investors and property managers?

How can making it more difficult to purchase cash flow generating rental properties improve my business when it’s so much more difficult to qualify now?

Well, the answer is actually quite simple. The Government has actually created a barrier to entry for many Canadians to purchase properties, and this is particularly affecting the first time homebuyer segment of the market.

In the past, potential first time buyers would start out in the market by renting properties from you as a landlord, but eventually save up enough to move onto the purchase of their own home. With the new mortgage stress test, they are having a tougher time moving up, thereby keeping them in the rental pool for a longer period of time.

As property managers and landlords, we should all be thanking the Feds for helping us out by increasing our pool of renters! Simple economics would dictate that when the supply decreases (properties available for rent), and demand increases (more renters who can’t afford to buy), prices MUST go up! And that’s exactly what we are going to see play out over the next few years. Most major housing markets across the Country are already cooling off as a result of these new qualifying rules, and vacancy rates are holding steady, if not decreasing in certain markets.

Sure, it’s tougher to qualify for mortgages to buy new rental stock now, but with the decreased demand, purchase prices should come down, increasing your ROI and cap rates should you be able to do so.

Looking for help renting out your property, or to buy or sell your rental property? Please reach out to our property management and realty brokerage here!



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