If an investor really wanted to become a landlord, there’s many ways to choose that route with full knowledge of where it leads. But Canada’s real estate market is now forcing that option onto some and locking up their capital until the market recovers, or so the managers are promising.
Real estate manager KingSett Capital Inc. suspended payments to investors in a large Canadian property fund, saying it needs to hoard cash as it deals with the consequences of the sector’s long slump.
The Toronto-based firm said holders of the KingSett Canadian Real Estate Income Fund won’t get any income distributions for the next year, nor will they be able to redeem their units.
The trend seems to be growing and it’s starting to sound a lot like a game of musical chairs.
The trend is most visible in Ontario, where projects like a partially completed condo development in Kitchener have been rescued by lenders. Gentai Capital and partners ELM Developments and Dorr Capital purchased the project out of receivership for $75 million last month. Gentai converted its second mortgage into a majority equity stake, injected new capital, and secured fresh financing from KingSett Capital to allow senior lenders to walk away without losses.
Investors are playing the only game in town thanks to our idiot federal government, while our productivity declines due to lack of investment.
Investors becoming landlords to try and save their investment has a smell of desperation, but at least they’re hopeful, on the other hand, if this is a temporary blip in our macroeconomic trajectory of stupidity, then it is still going to suck for people looking for a place to live in the future.
What a mess…
An excellent reason to invest using ETFs (Exchange Traded Funds) rather than traditional mutual funds, which deserve to go the way of the dodo.
Real estate is a horrid investment. Renters can be great or terrible -not a good risk.
As I told my children, a roof is a good thing. You will find that any increase will be negated by the home you want next.