Recession-proof real estate: Is there such a thing?

By Hunter Milborne
August 29, 2019

Since the late 1940s to early 1950s, the North American economy has experienced an expansion-contraction cycle. These expansions and contractions (recession/depression in senior cases) have varied in length and intensity.

During an expansion, there is a growth in job creation, some inflation, and interest rates are low or stable while property valuesincrease – a good economic time. During a contraction, the unemployment rate increases, property prices drop generally, and interest rates may increase. This is universal. Fundamentally, for those who did not take economics, a recession is typically defined as two consecutive quarters of negative growth. I always believed that this was the case with no exceptions, until I discovered student housing. When you think about it, when the economy slows, people often decide to go back to school.

The other significant factors influencing real estate values and appreciation is supply and demand. Most of our best universities in Ontario have the same story.

Historically, this housing has been university-owned and rented. In the last 10 years, there has been a significant amount of private sector development to fulfill a serious need to help satisfy this supply imbalance.

Also, this housing is very location sensitive. If it is within a five-to 12-minute walk from the classrooms, all is well. If it is further, not so good. Therefore, if the right location is secured, then an investor can purchase a studio, one-bedroom, two-bedroom or large apartment. It is virtually guaranteed to be rented and the ever-increasing demand keeps rent increasing each year, recession or not. This is reflected in an ever-increasing value.

Often, the developer will lease the units back for two to five years, making it a completely trouble-free investment for an individual purchaser.

The buildings are registered as condominiums and function in all ways as a condominiums with the exception that typically they are initially bought by individual investors and rented to students and young adults.

Upon resale, it could be another investor who wants to get on the bandwagon or the parent of a student who wants a new top-level condominium for their son or daughter.

There you have it! Recession-proof real estate, available to anyone with a $70,000 to $100,000 down payment. With positive cash flow, principal pay down on the mortgage and modest annual appreciation, recession or not, these condominium suites can be an excellent investment.

About Hunter Milborne

Hunter Milborne is the Founder and CEO of Milborne Real Estate Inc., now in its 40th year. He’s one of the pioneers of new condominium sales in Canada and personally responsible for the marketing and sales of over $25 billion in properties, having sold over 160,000 units. Milborne Real Estate has served hundreds of clients on a range of diversified projects in locations around the world, having sold more than 700 developments since its inception.

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