Yesterday, the Bank of Canada raised their rate by a whopping 1%. It’s the biggest rate hike in a long time, and it’s got a lot of people talking. Mostly negatively (surprise surprise) but I for one have no interest in talking about what you can’t control. Instead, I want to talk about what you can control. There’s a way you can capitalize on a rare opportunity to grow your net worth over time, and it runs contrary to everything you’re hearing on the news:
Buy real estate.
History Repeats Itself
The last big market correction was in 1990. Real estate prices plummeted by up to 50%, and they plummeted quickly. I specifically remember it starting in March of that year and peaking by September. That’s how quickly it happened. Lower priced properties like townhouses and semi-detached homes dropped the least. Higher end homes dropped the most.
Take for example a newly built 5000 square foot home in Richmond Hill. In 1988, it sold for $1 million. In 1991, the owner was forced to sell for $500,000. Sounds like a horror story, right? In the short term, maybe. No one wants to be in a situation where the value of their property is slashed in half – especially if they’re forced to sell.
But in the long term, the story could have ended differently. Homes of that size in that area are now selling for $3mm. If the owner was able to hold onto that property, they would have made 3x on their investment. What am I getting at? Real estate may have its minor peaks and valleys; but in the long term, it always goes up. And I mean always.
Don’t Follow the Herd
Over the last 32 years, I’ve gotten to know a lot of successful people. They all have one thing in common: when the majority zigs, they zag. They don’t sit around and wait for the market to bounce back; they grow their net worth by investing in discounted properties. They see an opportunity, and they jump on it. Most people, more than 99% of them, do not.
I myself still regret many missed buying opportunities from my past. A storefront on the Danforth that I almost had for $200k in 1986. A Scarborough condo I could have purchased for $87k in 1987. And more recently, a condo at King and Peter that would have been $400k in 2017, and has since almost doubled in value.
All of these instances taught me a valuable lesson: take a great opportunity when it presents itself. Rent would have covered the mortgage on those properties, and I would have been able to build up my portfolio over time. Instead of doing what everyone else was doing, I should have done the opposite.
The Bottom Line
Learning from my own mistakes, I’ve got my eyes on the prize. And so should you. You know that real estate always appreciates in the long run, so play the long game. Don’t let rising interest rates scare you into doing nothing. Doing nothing gets you nothing. Instead, do something.
Wayne Gretzky once famously said: “You miss 100% of the shots you don’t take.” But he also once said something less commonly quoted: “A good player plays where the puck is. A great player plays where the puck is going to be.”
When it comes to your financial future, always think about where the puck is going to be.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; firstname.lastname@example.org