BC working with feds on Pacific NorthWest LNG delay

Provincial officials are in Ottawa today to work with their federal counterparts on overcoming the latest delay for Pacific NorthWest LNG (PNW), B.C.’s natural gas minister says.

In a statement, Rich Coleman said senior officials from the province are in the capital to “reach a positive final outcome that helps our economy, protects the environment, and respects First Nations.”

“I’m confident that any remaining questions can be answered completely and quickly. They have to be. Jobs for British Columbians should not be held by unnecessary delays,” Coleman said.

“After all, this just isn’t any project. At $36-billion and 18,600 jobs, PNW LNG would be the largest private sector investment ever in Canadian history.”

“The positive impacts of PNW would be felt across almost every community in BC and across [full article here] 


Jordan Cove LNG lands sales agreement for gas

Jordan Cove LNG, a natural gas export facility proposed on the Oregon coast, has signed a 20-year sales agreement with world’s largest liquefied natural gas buyer.

The deal appears to put the project, which could take gas from the B.C. Montney formation, back on track after running into a roadblock with U.S. regulators.

JERA Co. Inc, a joint venture of the Tokyo Electric Power Company and Chubu Electric Power Co., Inc., signed on to buy 25 per cent of the project’s proposed 6 million tonnes per year output in a deal announced Tuesday.

The company is owned by Veresen Inc., a major midstream natural gas player with assets in the Dawson Creek area. [read full article]


Site C Dam civil construction begins in May

Site C Dam is 8 months into the 10-year Site C Dam project. While the physical construction of the Dam doesn’t begin until May, there has been lots of progress made to date.

This is the largest infrastructure project happening across Canada, located 7 km from Fort St. John.

Over the course of the project 33,000 jobs are expected to be created.


Billion-dollar gas plant approved for Dawson Creek area

A partnership involving Veresen Inc. and Encana Corp. that has already committed $1.5 billion to two new gas processing plants in the Dawson Creek area has announced plans to spend nearly $1 billion more on a third gas processing plant.

Veresen is already building two new gas plants in the Dawson Creek area – the Sunrise and Tower plants – with a combined capital cost of $1.5 billion.

Last year, Veresen acquired natural gas gathering and compression assets from Encana and the Cutbank Ridge Partnership.

As part of that deal, Veresen committed to $5 billion worth of investments to build out additional assets for Encana and the Cutbank Ridge Partnership. Under the agreement, Veresen is funding 55% to 60% of the three new gas plants.

The investments underscore the attraction of the Montney formation in Northeastern B.C. [full article here] 


Squamish Woodfibre LNG project gets federal environmental approval

The federal government gave its stamp of approval to the $1.6-billion Woodfibre liquefied natural gas project Friday.

Exporting and processing 2.1 million tonnes of LNG each year from the former pulp mill site southwest of Squamish is unlikely to hurt the environment, according to a release from Catherine McKenna, Minister of Environment and Climate Change.

Winning environmental approval from the federal government was the last major hurdle to clear for the polarizing project, which can start launching 40 double-hulled LNG-bearing tankers to Asia each year, beginning as early as 2017.

The project should create about 650 construction jobs during the building phase and more than 100 jobs once the plant is operational. [full article here]


14 Factors To Help You Predict The Price Of Real Estate

Following my past post on the 7 things you need to know about investing in real estate, I’m going to expand on investing in the fundamentals. Why? Because this is by far the most work and, depending on how much work you put into this step, it will take your investment portfolio to a whole new level. This is the work that will allow you to predict, within a fair margin, the price of the real estate within the region in which you are investing.

What are the factors to look for when you want to predict real estate prices? There are many to consider. I’ve collected a bullet-list of the what I believe are the most important ones below. Each is important in its own right and by doing your homework on each and everyone one, you can enjoy the security afforded by such detailed knowledge.

The Factors

Economic, job, and population growth. Demand for real estate is driven by population growth. Population growth is fueled by job growth. Job growth is fueled by economic change within a region (ie employment trends, net migration, industry diversification, etc.). Let’s look at these factors one by one.

Employment trends are one of the most important economic factors related to the current and future health of a market. People who have jobs have the income to afford to pay their rent. Those that don’t will not be able to afford to pay their bills, and may be forced to move to find new employment which often involves moving to another city.

Net migration is another key factor. Are more people moving into the market or moving out? This has a major impact on the market as demand for housing increases and decreases based on the total population in a given market. This increased population growth creates demand for more local housing which helps push property values and rental rates up, in addition to an ongoing need for good residential housing stock. Be sure to put yourself on the right side of the trend.

Past population growth is can be extremely persistent. The best way to predict a counties’ population growth is to look at how much it grew in the past decade. The forces that shape an area’s attractiveness have persistent impacts. If a county grew significantly in population last year, it is more likely than not to also grow this year

Local amenities include things like shopping experiences, proximity to attractive activities, good schools, good social life, conducive to both work and play. The capacity to generate and retain amenities adds considerably to the appeal of a city. The attraction to a city on the basis of its physical and social environment represents a major paradigm shift; whereas people formally followed jobs, jobs now are also starting to follow workers.

Immigration trends tend to concentrate wherever previous immigrants have settled. Kinship ties, shared language, in the existence of common amenities in public goods make; immigrant enclaves; attractive to subsequent immigrants. This might explain the growth of San Francisco’s Chinese population, which already has one of the largest Chinatowns outside of China.

Age Distribution. Countries with very young and very old populations tend to grow more slowly. Specifically, we find the population growth is negatively related to both the share of people younger than 25 and the share of people older than 65. Populations grow faster if the share of people between 25 and 60 is significant.

Industry Diversification. A market with a diversified range of industries offers less market volatility in harder economic times or recessions. A market driven largely by one or two industries tends to be affected harder than more diversified markets, and takes longer to recover afterwards. Although many investors do well in “one trick pony” markets, it’s best to mitigate your market risk by focusing on markets with a broader employment base.

Supply and demand trends. Real estate supply is restricted by availability of land, geographic boundaries (such as water and mountains), political boundaries (permit fees, restricted density policies, etc.) and economic boundaries (availability of development capital and the ability to build and sell new properties at a profit).

Market Conditions. Are you in a buyer’s market or a seller’s market? A buyer’s market is what you get when there’s more supply than demand. There are more people looking to sell houses than there are people looking to buy houses. In a buyer’s market, sellers may have to accept a lower price than they want to sell their property and may have to resort to providing incentives. This is the ideal situation for buyers because they can get a better deal. A seller’s market is just the opposite. The demand is larger than the supply. People have more money to spend on real estate, so sellers will often see several buyers competing to buy their property, which drives up the price. The buyers will have to spend more to get what they want. This is the ideal situation for sellers because they often get a better price on their properties.

Median price (the midpoint between high and low) is often a very good proxy for indicating real-time market activity. As the median price changes, this can indicate key market movements. A rise in median price means that sellers are responding to more sales in their local area which means that the local market might be “strengthening” or getting “hotter” – favoring sellers, so they will ask more for their home. A fall in the median price might indicate the opposite – few homes selling at the current price levels which causes homes on the market to drop their price and for new homes on the market to price more aggressively. A rise in median price could also mean that homes at the lower part of the market are selling and leaving the market. This means that the remaining homes on the market are at a higher price point, which causes the aggregated median price to rise.

Market Inventory Trends. Inventory is simply real estate lingo for “the number of homes for sale.” This stat shows you how much supply is available in the market you are researching. Inventory levels can ebb and flow frequently due to seasonal effects. There’s usually more inventory on the market in the spring-time as the natural rate of real estate activity picks up during this time of year. Alternately, there’s generally less inventory in the fall or winter as real estate activity slows.

Average Days on Market (DOM). Simply put, the Days-on-Market tells you how long the active properties currently for sale, in aggregate, have been on the market.

Capacity to Pay. The lower percentage of your income you use to pay for housing, the greater your capacity to pay. Lenders know this and it is a useful tool towards predicting the price as real estate.

Again, I cannot emphasize enough how important it is that this is the work that will allow you to predict, within a fair margin, the price of the real estate within the region in which you are investing. You will be glad you put in the effort.

 


7 Things To Know Before Investing In Real Estate

  1. Educate Yourself

Knowledge can take you from being a “good” investor to a great investor. This has always been true. What is going to separate you from the pack is how much research you put into your investments and how often. Markets are always changing, new trends are always beginning, old trends are always reversing.

If you dedicate yourself to researching and refining your investment strategies and you remain focused on investing in regions where economic growth is booming (which leads to job creation and population growth you will reap the benefits of a stable appreciation in the real estate market.

  1. Set Investment Goals

A goal is not a wish; you plan and execute specific steps to achieve a goal. Investment goals require sufficient research, knowledge, and planning. Setting clear and specific goals (and writing them down!) becomes your road map and action plan to becoming financially independent. You are statistically far more likely to achieve your goal of financial independence by writing down specific and detailed goals than not doing anything at all.

Here is an example of setting clear, concise investment goals for investing in one (or several) real estate property:

  1. Setting the number of properties you need to acquire each year (if desired)
  2. Specifying the type and location of the property
  3. Specifying the annual cash-flow your property should generate
  4. Setting the parameters for your desired rate(s) of return
  5. Specifying the ideal tenant for occupation

It may seem extremely basic, and you may feel you can carry this info around in your head, but by putting it down on paper and using it to keep track of your how you advance toward your goals will free your mind to “see the big picture” and make better (and more financially beneficial) decisions.

  1. Invest For Cash-Flow, Mortgage pay-Down & Appreciation

Cash-flow is what your asset should be generating for you so that your investment will sustain itself without draining additional cash from your monthly income total. It should cover all operating expenses and provide a pay down on your mortgage.

Mortgage Paydown is exactly what the name tells you it is. You pay down your mortgage by leveraging you cash-flow assets. This is unique to real estate investments. There is no other asset class where you can use the bank’s money to purchase the investment, and use a tenant’s money to pay back your loan every month.

Appreciation is the largest source of return on your investment, providing you have done the proper research and due diligence.

  1. Invest In The Fundamentals

Always start by selecting the best markets that align with your investment goals (see 2. Set Invest Goals).

The best approach is to choose your property’s location. To choose your property’s location, you need to consider many factors. Take the time to research each one. There is no “quick and easy way” to do this. Everything your investment does for you leads back to this step. If you are unsure as to whether you can make this commitment consult with an expert.

Primary Factors To Consider When Choosing Your Property’s Location

  1. The current housing market
  2. Unemployment rate
  3. Projected job growth
  4. Population growth
  5. Capital spending on any major infrastructural projects (ex: hospitals, highways, hospitals, hydroelectric projects, etc.)
  6. Supply and demand trends
  7. Capacity to pay

Secondary Factors To Consider When Choosing Your Property’s Location

  1. Amenities
  2. Transit access
  3. Schools
  4. Crime
  5. Rental demand

This is the most work and takes the most time. Research, research, and just when you’ve had enough, do more research. You really need to do your homework. Investigate each factor in as much detail as possible and you will be able to assess your investment opportunities base don the facts. You will be glad you did.

  1. Diversify Across Markets

Our recommendation: focus on one market at a time.

Accumulating from 3 to 5 income properties per market is a very good start to creating a solid portfolio. Once seasoned (and after doing even more homework) you would diversify into another prudent market that is geographically different than the previous one.

One of the underlying reasons for diversification within the same asset class (real estate), is to have your assets spread across different economic centers.

The reason for this is simple: every real estate market is “local”. Each housing market moves independently from one another. Diversifying across multiple states helps reduce risk should one market decline for any reason, such as increased unemployment rate, increased taxes, or reduced capital spending on infrastructural projects (see Primary Factors above).

Hybrid Markets:

Hybrid markets are areas that have linear, slow-growth characteristics for a period time, followed by periods of moderate cyclical-style appreciation. They never boom quite like Florida or California, but they also never need to correct like the more volatile markets either.

Markets like Phoenix, Las Vegas, Chicago, Seattle, Minneapolis-St. Paul, and Detroit are in this category.

Comparing Markets:

Although each market has different characteristics, one is not necessarily better than the other. Each market offers the real estate investor different levels of appreciation and cash-on-cash returns.

Some investors may not sleep well at night investing in a cyclical market and prefer the pace of a linear market. While other investors may find a linear market to slow and prefer to see greater appreciation potential.

However, over the long-term appreciation rates in both market types end up being similar. So the idea of chasing appreciation should be avoided.

It is more important to be concerned about the overall market health and its future prospects than it is to get lost in the potential cash-flow and other “numbers” on the property. They’re all important of course, but purchasing based solely on the property without considering the bigger picture of the market and neighborhood is like trying to sail a ship against strong headwinds.

If you don’t start with the right market and neighborhood, over time you will experience more tenant turnover, shorter lease terms, increased late payments/defaults, and decreased or negative appreciation (see 4. Invest In the Fundamentals)

  1. Use Professional Property Management

Our recommendation: never manage your own properties unless you run your management company. Property management is a complex job that requires a good understanding of tenant-landlord law, marketing skills and strong management skills when dealing with the constant and various needs of tenants. Your time as an investor is valuable.

Finding an experienced property management team is vital to keeping vacancy rates low and tenants happy. Additionally, they will be able to help you manage your investment properties in areas that you may not be able frequent on a regular basis, leaving you with peace of mind and freeing up time for you to pursue other interests.

  1. Leverage Your Investment Capital

Real estate is the only investment where you can borrow other people’s money to purchase and control income-producing property. This allows you to leverage your investment capital into more property than purchasing using “all cash”. Leverage magnifies your overall rate-of-return and accelerates your wealth creation.

As long as you have positive cash-flow and your tenants are paying off your mortgage for you, you are in a good position to borrow more for buying more income property.

The “Buy and Hold” methodology  methodology, as it is applicable to property, is and always has been the cause for making more millionaires than any other method. It lets you develop equity through appreciation over a period of time.

Your goal in property investing must be to develop as much equity as you can in the property while still having enough passive income to get you there. So long as you own the property, you’ll have the extra advantage of tax sheltering that you cannot obtain from any short term methods. This is the reason that explains why the Buy and Hold methodology is king.

As time goes by and you pay off your loan, you get the advantage of additional cash flow which is very useful in retirement. Traditionally, properties have doubled in value every 7 to 10 years going back 50 years in time. Imagine your equity position if you hold a property for 20 or 30 years!

Today, you are able to purchase a brand new $250,000 home with an investment of about $58.000. If you rent this home and simply break even on your cash flow, you will have an asset that grows while someone else makes your mortgage, tax, and insurance payments. At a 5% growth rate per year, that home will be worth over $697,000 in 25 years on a $58,000 investment Think of how you could use that money. This illustrates a major strength of investing in real estate: own something worth 5 to 10 times of the appreciation, cash flow and tax benefits.

True wealth in real estate is realized through equity growth and appreciation. Cash flow, although a must, is the glue that holds the deal together to permit you to wait until the value grows. Let your tenants cover your payments and make you rich!


How GDP Growth Can Influence The Price Of Real Estate

So, I’ve said this before: the most important part of any real estate purchase is its long term performance. This appreciation builds real wealth. With an ability to identify long term performance trends, it’s not hard to pick the right region in which to buy property.

The hard part is doing enough research on the region beforehand that will help inform your decision as much as possible. There is one major factor to this research that will go a long way in helping you do so: GDP growth.

What Is GDP?

The gross domestic product (GDP) is one of the most important primary indicators used to gauge the health of a region’s economy. It represents the total dollar value of all goods and services produced over a specific period of time.

Measuring GDP is complex, but in essence it can be measured in 2 ways:

  1. The Income Approach: adding up what everyone earned in that region.
  2. The Expenditure Approach: adding up what everyone spent in that region.

Both are tried and true approaches of determining an accurate GDP. With respect to real estate (and real estate investment), the Expenditure Approach can be very useful in helping to predict an increase in the regional GDP and therefore an increase in the regional price of real estate, particularly when for example, a government elects to increase infrastructural spending in that region.

How GDP Growth Can Influence Real Estate Prices

An Increase in GDP can heavily increase the regional price of real estate.

Here’s a 5-step outline of the process:

  1. A large expenditure in a specific region. This can typically be best exemplified with a large infrastructural project ( a mine, a hydroelectric damn, a new hospital, etc.).
  2. This large expenditure drives employment to that region in order to complete the project.
  3. As jobs are filled, the vacancy rate decrease as people move that region.
  4. Rental rates increase, which makes a mortgage payment seem more affordable. The demand to own a property increases.
  5. The regional price of real estate increases as a result and the regional GDP has seen a dramatic increase as a result of all the above factors.

Due to the fact that many large infrastructure projects are announced far in advance of their actual construction, and that they don’t exactly stop and cancel such large projects on a dime, the process is slow and predictable enough for property investors to take advantage of the region’s (at first very affordable) real estate prices. Once invested, they can enjoy a much larger (and faster) return than if they were to invest in a region without such an increase in spending.


The Value Of Proposition

As a realtor who has exclusively sold investment real estate for the past 25 years, I have realized that the residential real estate cycle is not difficult to predict – as long as you track the right numbers.

For example, northeast B.C. had record land sales in 2008. This was driven by large companies buying massive tracts of land in order to secure access to a valuable resource. In this case, the resource was natural gas. To buy before the crowd, you need to understand what to look for. To understand what to look for, you need to turn to experienced people.

Long Term Performance

The most important part of any real estate purchase is its long term performance. This appreciation builds real wealth. With an ability to identify trends, it’s not hard to pick the right area to buy in, but in this regard, not all developers are created equal.

The Senior Management at Western Canadian Properties Group have developed and sold over 12,000 properties over the last 20 years, through a well-proven and investor-friendly system that is the best in the industry today.

WCPG gives you the opportunity to buy into the best markets in Canada and the United States. These markets are identified through an analysis of economic fundamentals, which means increasing positive cashflow on the properties, and excellent potential for capital appreciation. What’s more, today’s exceptional financing terms and a truly hassle-free optional management program make this the perfect package.

Building New Homes In New Communities

In Northeast BC, WCPG builds brand new homes in growing communities. The VP of construction even lives where he builds. With a small down payment, you can secure your property for future purchase. In a rising market like Northeast BC, this means instant equity.

The materials selected for these homes are long lasting and virtually maintenance free. Everything from lighting to heating is designed for optimal energy efficiency, and with separately metered utilities, you won’t be hit with increased operating costs.

Thanks to a 2 – 5 – 10 New Home Warranty, there are no surprises, and no cash calls. What’s more, WCPG provides a dedicated internal management team, who keep you in the loop with photos and progress updates. You will always know what is happening, and when – all you need to do is ask.

On-The-Ground Leasing Team

WCPG also employs an on-the-ground leasing team, whose sole purpose is to ensure that your unit is rented from Day 1.

The leasing team starts the rental process when the construction of the property is 75% complete, and they leave nothing to chance. They maintain a strong internet presence on Kiijiji, Craigslist, and custom URLs, and run corporate campaigns. They know and speak regularly to the relocation personnel working at the largest employers in town, and field 24/7 responses to inquiries, meaning calls are always taken immediately.

WCPG’s professional management teams are always local to the market. They know the area, know the tenant profiles, and know the market rental rates.

They spend time screening upfront to avoid future problems, and perform regular physical inspections.

Leases are written with end dates, allowing rents and terms to be adjusted beyond rent control limits, maximizing investor return. Investor-friendly reports are distributed on a monthly basis, and meetings can be attended online, so you can easily join regardless of where your property is located.

Optional rental programs are available, such as sharing vacancy risk with other investors, sharing furniture costs to attract higher short-term rents, and negotiating discounts on property management.

The Turn-Key Solution To Property Investment

In short, when you invest with WCPG, you get a dedicated, award winning team of experts who deliver brand-new cash flowing properties in real estate markets which are poised for exceptional growth. You get contemporary modern properties under warranty, which are energy efficient, built with maintenance free materials, and are complete with fully managed rental options that deliver optimized results. This is a truly hassle free, turn-key solution, built for long term performance.


Why More People Are Investing In Real Estate

Since 2010, it’s become more common and more popular for people to invest in real estate. Investors are shying away from the stock market. Why? It’s become volatile.

Some History

The in 1980s the large financial institutions marketed “freedom 55”. The idea was to build up a “nest egg” of $1 million by the time you were 55 years of age, invest it in a GIC at 8 – 10% and live off the income of $80, 000 – $100,000 per year. Simple and effective.

In the 1990s, without warning, it suddenly became known as freedom 65. With GIC rates at 5 – 6%, you were then expected to work until 65. Why? Because you $1 million nest egg was only earning you $50,000 – $60,000 per year.

The trend continued.

GICs and term deposits were losing their appeal. No one was going to live lavishly off the income of their $1 million GIC if it was only earning them less than 5% per year in interest.

People Turn To Real Estate Investments

People began to turn to invest in real estate because it offered 3 things that the stock market seemingly could not:

  1. Cash Flow
  2. Appreciation
  3. Mortgage Paydown

Cash Flow: The Appetizer

Most investors focus on #1 – Cash Flow. With a $50,000 down payment, every $50/month of positive cash flow can generate an annual return of about 1.2%. With positive cash flow, there is no need for investor’s to support their property with money from their working income. As appealing as it sounds, cash flow isn’t where investors see the most gain from investing in real estate.

Appreciation: The Main Course

If cash flow can be seen as the appetizer, then #2 – Appreciation, is the main course. In Canada, the typical property has appreciated by 5% per year. Does this mean you’ve earned 5% on your investment? In a word: no, unless you had enough money set aside to buy the property outright. If you had to borrow any money to buy the property, the situation becomes very different.

Say you buy a property for $200,000 that appreciates 5% per year, your property gain for that year is $10,000. However, if you could only afford a down payment of $50,000 and you had to borrow $150,000 to do so, your $10,000 property gain was really a 20% annual return based on your $50,000 down payment.

 

The real key to generating the highest return possible is finding markets in Canada that will see the greatest appreciation. . If you can find an area that is likely to appreciate at 10% per year, your annual gain on the property would be $20,000 per year which would be an annual return of 40%.

 

Mortgage Paydown: The Dessert

When interest rates were at 6%, a mortgage payment of $960 was made up of principal, plus interest of 6%, meaning that only a fraction went to your principal paydown. In this case only 23.4% or $225.

Now we are in an environment of low interest rates and that same loan amount at 2.99% has a much lower payment of $709. Even more importantly, the principal amount of the payment has jumped to $342/month. Investors are earning 8% per year just by the amount that is being paid down on your mortgage.

If you assume that your property is going to appreciate at 3% per year, you’re looking to earn 1.2% per year on your cash flow. This is just over 8% on your mortgage paydown and 12% on your appreciation for an annual return of over 20% per year. Finding better appreciating markets earns you more per year. A market that appreciates 5% per year can earn almost 30% per year in annual returns. A market that appreciates by 10% per year can earn almost 50% per year.

These 3 items – Cash Flow, Appreciation, and Mortgage Paydown – make investing in real estate one of the most powerful wealth building tools available today.