This week was a dramatic week in the markets. And the headlines in every paper are talking about market crashes, soft landings, hard landings, government bail outs and housing value drops. It is easy to let the panic overtake you, but, it makes me reflect back 15+ years ago when I bought my first investment with my parents. **check out the article Julie wrote for our free newsletter – she talks about the recent headlines and the best way to make investments in troubled times)**
It was in the early 90’s and the market (in B.C.) had been steadily climbing for a few years (at a more gradual pace than seen recently). At the time, I just wanted to start buying properties and with a bit of help from my parents (we split the down payment 50/50 and they signed as guarantors on the mortgage), I got into the market.
It wasn’t a perfect real estate investment – the rent didn’t quite cover all of the costs, but it was in a good area and hey, the market was rising so we thought we’d be fine! After a year or so, the market stalled and then the slow, but painful, drop in values began. The drop continued and continued until the value of our investment had dropped 15% from the high when we bought it.
This sounds like a bad story, and it would have been a bad story if we had given up and sold the property then. But, we didn’t panic. We kept feeding it with a bit of cash each year while our tenant continued paying down the mortgage. After over 10 years of owning it (and when the market was starting to appreciate again), we sold it for a decent profit – even taking into account the money we had supplemented it with over the years.
The moral of the story – even if you buy at the top or near top of the market, if your rent covers most of your expenses and you can keep your rental occupied with decent tenants, over time, you will get your money back and if all goes well, a lot more than you put in. And while it wasn’t our best investment, it taught me how to better assess the peaks and valleys of the market.
We sold a bit too soon in terms of maximizing our return, but I can tell you this, if I had not put my money into that property at that time (I was in University), my money would have just been spent and I wouldn’t have made an investment that put $50,000 in my pocket 10+ years later after selling.
Next blog I’ll tell you about buying (so far) an absolutely gem of a property when no one else wanted it!