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!


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 Invest In Northeastern B.C.?

Northeastern B.C. will be one of the top investment markets in Canada with both Fort St. John and Dawson Creek seeing massive capital investments.  Investments like these lead to job creation. Job creation leads to a population boom and, in turn, raise demand for housing.

People will move to northeastern B.C. to fill jobs

In 2014, the population of Fort St. John grew by 4.5%. According to the North Peace Economic Development Office, the population is set to double over the next 6 years. Fort St. John was recently ranked #1 by B.C. business as best city to work for in in B.C. There are over 2000 people employed in the forestry industry and thousands of additional jobs being created with the Site C Dam and the natural gas industry. The employment base is heavily diversified and ripe to expand. The number of jobs created in Fort St. John will likely grow exponentially over the next 10 years.

The projects driving growth in the region right now

  • In 2012, a new $350,000 hospital opened in Fort St. John, population 25,000. The government believes there is a major population boom on the horizon.
  • Plans are in place to twin the highway from Fort St. John to Grand Prairie. Another major capital project.
  • Fort St. John has the second largest OSV plant in the world, operating with 400 employees per 8 hour shift running 3 shifts per day.
  • The Horn River and Montney natural gas fields are the third largest hydrocarbon fields in North America.
  • enCana is spending $600,000 on drilling in the area in 2015.
  • BC Hydro has announced the Site C Dam for the region, a $9 billion project, the largest infrastructure project in Canada 7 km away from Fort St. John.
  • Petronas announced their decision to proceed with a $36 billion natural gas project, the largest capital investment project in B.C. history.
  • In 2015, Shell’s BC LNG received approval from the provincial and federal governments for their $40 billion liquefied gas project.

There has never been a better time to acquire brand-new cash flowing properties in what is becoming one of the top real estate investment markets in the country.


The Hudson: Opportunity In Northeast B.C.

There has never been a better time to acquire brand-new cash flowing properties in what is becoming one of the top real estate investment markets in the country. Introducing The Hudson Condominiums, located in the heart of Fort St. John, one of the fastest growing communities in Northeast B.C.

Maximize Your Investment Return

There are several reasons to buy new in order to maximize your return on your property investment by buying new.

Here’s a rundown of the benefits:

·        A Quality building with modern finishes means durability and energy efficiency

·        A 2 – 5 – 10 new home warranty means there is no further cash to increase the revenue

·        It generates more rent per dollar investment and attracts a better tenant profile

·        It secures today’s prices with only a small deposit; a rising market gives instant equity upon closing

It gives investors a professionally-managed, predictable revenue stream – a complete Turn-key solution

Hudson Interior1 Hudson Interior2

 

 

 

 

 

Why I Believe This Is A Good Investment

As there are only 10 units left available, the developer is prepaying the interested costs for the next 5 years in order to meet their pre-construction threshold. This would effectively give investors a Net Effective rate of 1.49%* on their mortage.

A High Growth Market For A High Return

In 2014, more than $10 billion in projects was invested into the region giving Fort St. John the highest investment per capita in the country for that year. In 2014, the population of Fort St. John grew by 4.5%. According to the North Peace Economic Development Office, the population is set to double over the next 6 years. Fort St. John was recently ranked #1 by B.C. business as best city to work for in in B.C.

The facts are clear. Capital investments lead to job creation. People move to these areas to fill the jobs, driving rents higher and increasing the price of real estate. The region is set for maximum capital appreciation on your investment.

*For more details on this offer, download our brochure.

 


Fort St. John City Council preparing for ‘exponential growth,’ according to Annual Report

Lori Ackerman PhotoFort St. John’s city council is preparing for a continuation and acceleration of unprecedented growth in the area. “With over $68 Billion in recent investments, the lowest unemployment in the province, and anticipated exponential growth, we are firing on all cylinders economically,” writes Mayor Lori Ackerman in the city’s 2014 Annual Report.

The dollar value of projects inside the city limits grew more than 14 percent year-over-year, to a total of $154.9 million, and an application to expand the city boundary limits was approved in September.

Fort St. John has enjoyed Provincial support of the burgeoning Liquefied Natural Gas industry. In addition to planned pipeline construction, it stands to benefit from the impending construction of the Site C Dam, which is currently Canada’s largest infrastructure project by dollar value.

City Manager Dianne Hunter notes that “growth is expected to continue at a faster pace in the decades to come due to these major projects.”

Fort St. John’s Population has increased 15 percent since 2010, with a jump of 4.7 percent from 2013 to 2014 alone. In order to welcome and accommodate this influx of residents, City Council has worked to develop recreation centres and parks, improve road infrastructure, and prioritize the revitalization of the downtown core.

2014 Fast Facts

  • Total number of dwellings permitted: 531 permits – Increase over 2013 from 339 permits
  • Total construction value: $154,983,081 – Increase over 2013 from $135,654,000
  • 556 Development permits issued
  • 2082 Formal building inspections performed
  • 95 Single Family homes were approved, 71 duplexes and 22 Multifamily units

 

Sources

Alaska Highway News
http://www.alaskahighwaynews.ca/fort-st-john/fort-st-john-poised-for-exponential-growth-according-to-annual-report-1.1976644
Population Growth
http://fortstjohn.com/blog/fort-st-john-population-growth-spike
Boundary Extension
http://www.northeastnews.ca/fsj-boundary-extension-gets-final-approval-from-province/
Annual Report
http://www.fortstjohn.ca/sites/default/files/report/2014-Annual-Report.pdf

 


Job Growth in BCs North expect to explode

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Join Us for this exciting event.  Great way to see first hand what’s happening in the north!

Register http://irrealty.ca/field-trip-discovery-june13-14-2015/


Bank of Canada's Rate Cut is it Good For Canada?

Peter Hall, chief economist at Export Development Canada, said  the rate cut comes at a time a number of high-profile deal and job announcements have been made by manufacturers, even as layoffs in the energy sector have overshadowed those announcements.

A weakening Canadian dollar is a windfall for Canadian exporters paid in $US dollars.  West Fraser, North America’s largest lumber producer, sees a $21 million increase in earnings before interest, taxes, depreciation and amortization for every 1-cent weakening in the exchange rate, Rodger Hutchinson, the company’s vice president and corporate controller, said in telephone interview with Financial Post reporter.  Sectors of the Canadian economy will actually benefit by the weak dollar as a result of the unexpected interest rate cut this week.

In light of recent financial market volatility, declining oil prices and the return of instability in Europe, the outlook for the BC economy is decidedly positive. Stronger economic conditions are emerging, with more robust demand from the US economy boosting provincial export volumes. In addition, employment growth is trending higher while the provincial population is expanding as a result of increased net international migration and the first net inflow of individuals from other provinces in a number of years. After expanding by just 1.9 per cent in 2013 and 2.8 per cent in 2014, real gross domestic product (GDP) growth is on track to accelerate to 2.9 per cent in 2015 surpassing Alberta for the first time in two decades. (British Columbia Real Estate Association, 2014)

 


The Ups and Downs of Oil Prices

Compliments of Danny Nasser of First Energy Capital

I try to remind my clients (and myself) regularly that I am confident of two things during a commodity pull back.

  1.  The price will come back.
  2. There will be people who say it’s different this time and it won’t.

Some interesting numbers on previous oil price meltdowns that would seem to support those thoughts:

 

Reduction in Price

Duration of Decline

Increase in Price 1 Year After Low

1986

67%

82 days

79%

1988

44%

295 days

58%

1991

57%

90 days

5%

1998

60%

484 days

135%

2001

53%

290 days

46%

2008

60%

227 days

76%

Current

57%

141 days

 

 

 

 


What does the recent Petronas announcement mean for Real Estate in NE BC?

Written by Chris Biasutti, Director of Sales & Marketing Western Canadian Properties Group Ltd. Dec 10 2014

  1.  Progress Energy (petronas’s wholly owned subsidiary in NE BC spent $2.5 billion on drilling north of FSJ in 2014. They announced they plan to spend the same amount in the same region on drilling in 2015 and are continuing to develop infrastructure in the region. The continued spending to drill new wells and develop infrastructure will continue to create jobs in a region that is already at full employment. I believe rents and values will continue to rise as Progress moves forward with its 2015 drilling program.
  2. Petronas has cost certainty from the Provincial government on their Tax Regime and they have environmental approval from the provincial government
  3. Petronas does not yet have the CCA adjustment they would like to see from the Federal Government and they are still waiting on a few Federal environmental approvals. Petronas is unable to make any investment decision until they have certainty around these costs and approvals.
  4. Though Petronas claims their decision is due to the correction in the oil price, we believe this is primarily a negotiation tactic as Petronas’s pricing model is not highly sensitive to the Oil price because they own their own production already through Progress Energy and they are their own purchaser of the Gas downstream
  5.  Unlike Fort Mcmurray, NE BC has a diversified economy and is not totally reliant on the oil and gas business to support to growth in the real estate market.
  6. The real estate market in NE BC has experienced steady, stable growth over the past 10 years and, as a result of its stable economic base, was able to avoid the significant market corrections other markets experienced in 2008-2009. I believe we will see the same resilience from the NE BC real estate market today as the effects of the volatility in the oil price are felt stronger in other markets.
  7. The Forestry industry continues to recover in Northeast BC employing approximately 2000 people in the region today. Agriculture also continues to play a role in the stability of the NE BC real estate market. NE BC currently produces 90% of the province’s grain.
  8. At the center of our decision to invest in Fort St. John and Dawson Creek is the fact that over 50% of the rental housing in those 2 markets was built in the mid-1980s or earlier. New rental accommodations are badly needed. With a population having an average age of 30 years and an average income over $100,000 per year, the current rental stock is simply inadequate to meet the needs of this demographic. There are 18 LNG projects proposed for British Columbia. Petronas is certainly one of the more important ones as many believe that it will be the 1st domino to fall. In a recent article in the Vancouver Sun, it was pointed out that Petronas which is a company with over $100,000,000,000 in annual revenues, has already invested up to $8,000,000,000 and made significant commitments to the federal government as part of the federal governments conditions to allow them to buy progress energy.
  9. Research shows the gas fields outside of Dawson Creek and Fort St. John are the 3rd largest hydrocarbon play in North America behind only Texas and Fort McMurray. Only 2% of the population of BC lives in the north yet today it generates 9% of the GDP. This population base is expected to grow to 4 to 5% of the population of BC and some economists believe that over time it will generate 25-30% of the GDP of the province. If any significant portion of this growth takes place, the potential real estate appreciation in the north could be staggering.

Questions an investor should ask….

  1. Is there a risk that projects of this size that could ultimately run into the hundreds of billions of dollars could take longer?
  2. Is there a risk that these natural gas reserves will not be developed?

Each individual investor needs to understand and get comfortable with. We believe that there is no question that many of these projects will ultimately take longer and not all 18 of them will go ahead. We are extremely active building duplexes, townhomes, condominiums and single-family homes in Dawson Creek and Fort St. John. The rental market is very strong and most of the properties that we complete have a tenant in them within 3 or 4 days of receiving an occupancy permit.

Western Canadian Properties Group Ltd. is the largest developer in the BC’s northeast region with over 194 completed since 2012 and another 294 planned or under construction for 2015 or 2016. WCPG is heavily vested in the area  with 50 acres in Dawson Creek and 27 acres in Fort St. John they are the largest land owner within the city boundaries.


Cold Lake heating up as oil boom accelerates

Interesting article published by Financial Post July 25th.

Cold Lake’s population has grown 9% in the past two years to just under 16,000, and non-residents would probably take the population closer to 18,000.

Read more…