Edmonton Real Estate Investor: alberta real estate investing

Here’s a question – “Should real estate investors be sitting on the sideline in 2012, or are the Alberta market conditions right for taking action?”

Each year, REIN™ answers this question, (and hundreds more) by revealing to thousands of Canadians like you, the precise research and action steps you need to make today’s real estate market conditions work in your favour.

Introducing... The Authentic Canadian Real Estate (ACRE™) Program -- Your Quick Start Guide to Investing in Income-Producing Real Estate Click here To Find Out More

Presented Live by Canada’s #1 Best Selling Real Estate Author, Investor & Researcher, Don R. Campbell, this is the Canadian real estate investment bootcamp that you can’t afford to miss!

Wow! What a hectic few weeks. Ronan and I got to spend a delicious week with our family - what fun! He actually took the picture I've used for this blog - not bad for a two year old...

The only downside of holidays is the amount of work you come back to after one. I'm busy catching up still.

Yesterday as I was driving I heard Andre Agassi on CBC radio. I was only able to hear a short clip but what I heard was wonderful. Andre was asked how young people can be successful and he said by defining what your idea of success is.

Before you take any step in any direction you must decide what YOU require to feel successful. Not your mom, not your dad, not what anyone else says is success but what you determine. By doing so you will save yourself a lot of frustration, disappointment and perhaps feelings of failure.

What great advice!

So what is your definition and have you reached it? Maybe you're there and you don't even know yet.

I met a little American boy the other day who told me how much he hated vegetables. I actually hear this a lot from western kids and I wonder why. Whereas in Japan kids will tell you how delicious vegetables are some even going so far as to give recipes for best results.

Where do they get these ideas? Are they from parents who think kids who hate spinach are cute? Or TV where kids are feisty and well aware of parents attempts to sneak extra nutrition into food.

It brings me to memes and specifically those related to money. Investing is risky. Real estate gets you up at 4 am. Tenants are a headache that eventually reduce your R.O.I in terms of time management. The safest thing is to invest in mutual funds and keep my head down working. I can retire in 35 years.

The problem with my generation is we've got the memes of our parents (university,job security, pension) and also the memes of the information age- where fortunes can be made online. The paradox of risk and security can leave you in inaction.

At any rate we DO have the power to select the memes we live by. Though many will tell you you're crazy to take the road less traveled by... it makes all the difference.

So eat your vegetables and take control of your financial future.

This is the final part in our 4 part series Fear and the Investor. If you haven't yet go back and read Types of fear, Get educated and Get into action.

"Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy" Dale Carnegie

Make your plan and work back from it. First a 5 year plan, then break it down to 1 Year, then 1 month and then one day - today. These are your baby steps towards running.

I didn't say all this was going to be a walk in the park. In an upbeat market, there is less to fear. In an unstable market your biggest obstacle is also your greatest advantage - your mindset. Once you have adjusted your mind for success this new psychology will take over and guide you. Every supposed failure holds a success within it, as long as you learn from it. The better educated you are, the easier it is to identify potential risks and take advantage of opportunities and by doing that you'll lead a happier and more relaxed life.

After scanning over my blog I realize we are on a lot of great mailing lists. Getting news from industry leaders is crucial to staying on top in any business. It's what separates savvy investors from "flying by the seat of my pants" investors.

One mailing list we are so grateful to be on is Garth Chapman's of Jencor Mortgages and Remasoft. Garth is a wonderful mentor to us and has helped us streamline our investments to both our and our joint venture partner's benefits. He knows real estate investing from all angles, as a successful investor, from developing a software system specifically for investors and as a mortgage broker.

An excerpt from his last mail-out:

"Here is a nice simple explanation of how fixed mortgage rates are tied to bond rates – and how to predict when they might be headed up or down.

Canadian 5 yr bond yields -.03bps to 2.73. The spread, based on the MERIX 5 yr rate published of 4.34% is 1.61. Just as a reminder, the floor and ceiling rates suggest the “comfort zone” (currently between 1.35% and 1.55%) where lenders want the spread to be.

If the “Rate Barometer” (which is the spread between the fixed 5 year rate and the 5 year bond yield) stays within the floor and ceiling range, then you likely won’t see a rate change. If the spread, dips below the floor for extended periods (over a week), then expect a rate hike.

And likewise, if the spread remains above the ceiling rate, expect a rate drop in the near future.

The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch.

If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Ideally lenders are looking for a spread between 1.35 and 1.55."

Housing market hit by economic uncertainty - " A report out from RE/MAX today says the global economic crunch has made an impact on housing sales in major Canadian cities towards the end of 2008.

About 440 000 homes are expected to change hands in Canada this year, that's a 15 percent drop from record levels in 2007.

Here in Edmonton, just under 19 000 homes will have been sold by the time 2008 is said and done with. That would mark an 8 percent drop from last year's number of 20 437.

The average house price in Edmonton dropped only about a percent this year with the number sitting at $335 000. That number isn't expected to change in 2009."

After all is said and done the price of average house in Edmonton only dropped 1%. Think of your stock investments and how much they have dropped or rather plummeted in the last few months. Isn't it time to turn your paper assets into less liquid and volatile investments?

Alberta’s Government Fills the Province’s Labor Force Shortage with Temporary Foreign Workers - "Walk into a convenience store, coffee shop or supermarket in Calgary and chances are you’ll be waited on by a temporary foreign worker (TFW).

Though they come from many countries, they share one story: relocation for the chance to earn decent wages, and in some cases, the hope to reside permanently in Canada.

“There is a wide variety of TFWs that come to Alberta - from skilled laborers like welders and carpenters, to pipe fitters to semi skilled trades like cleaners. These are men and women from all parts of the globe,” says Avnish Mehta, Program Coordinator of the Calgary Catholic Immigration Society’s (CCIS) Temporary Foreign Worker Integration Advisory Office."

This is why Edmonton's economy is so strong. When the temporary workers decide to reside in Edmonton they will either rent or buy. Your investment property will either be tenanted or sold. It's not a greater fool situation but one where you are offering a necessary product.

Houses are still homes - "Falling home prices can actually result in positive change. For one, people will be less inclined to borrow against the equity in their homes to pay for things that don't appreciate in value -- and that they don't really need -- such as vacations or home renovations. Too many people, when their equity was growing faster than a properly pruned hydrangea, treated their homes like shingle-clad credit cards.

Home buyers will also, one imagines, be more reluctant to purchase houses they can't really afford. In recent years, many people worried little about buying well beyond their means because they believed home prices could only go up. A homeowner who lost a job or experienced some other financial calamity could always sell and reap a tidy profit. Why worry? But now, with home sales falling alongside prices, we now know that no plan is free of risk.

Another benefit to a more rational housing market is that people learn to diversify their investments. It is not uncommon for homeowners to have the vast majority of their net worth wrapped up in their houses. But buying a big house is an inadequate retirement plan. After accounting for expenses -- property taxes, insurance, repairs, renovations -- it becomes clear that a house, while a sensible investment, should not be one's only investment."

No, a house isn't an investment unless you have planned for it to be. It's true many people use their home equity to buy depreciating goods then complain when markets fluctuate (as they do) and they are left with huge mortgages. Buying an investment property and using your home as a credit card are two entirely different things.

Market worries take whack at your wallet - " Frugality is the new black. A financial meltdown has sent markets and consumer confidence sliding.

An October report from the Conference Board of Canada ranks faith in the economy at its lowest level in more than 25 years.

Even the once-ravenous shopping appetite of Albertans is shrinking, with retail sales dropping about 18 per cent from August 2006 to August 2008.

Alberta is the only province where retail sales in August fell from the year before, Statistics Canada says.

Sales here remained below year-ago levels for the fourth straight month as retailers head into the crucial holiday season.

Some economic observers say Albertans are reacting to bleak headlines about troubles elsewhere, not to hard times at home. Locally, at least, they think the crisis is mostly in our heads.

"The pendulum tends to swing to the fear side, and we're right at the extreme end of fear right now," Canadian Western Bank president Larry Pollock said."

Alberta is a financial island in Canada. The province is strong economically and there is a lot of demand in the real estate market. However seeing paper assest drop will makes consumers wary of spending freely.

Condos going ahead More private capital being used than borrowed - "The last few weeks have seen condo projects in Calgary, Kelowna and Canmore grind to a halt. But developers behind some of Edmonton's most high-profile projects insist it's business as usual.

"We're building those first two phases," "I think the fundamentals in Alberta haven't changed. I think we're better off than the rest of the world so we haven't noticed even in our Calgary projects any cancellation of deals." George Schluessel, CEO of Procura Real Estate Services."

"Too many of us are not living our dreams because we are living our fears." Les Brown

As I write this article the headlines in the paper are screaming bad news. Oil is up to $147, then down to $115, war in Afghanistan, Russia, your backyard wherever threatens us. Hurricanes, earthquakes and tidal waves all add to the turmoil. South American and Middle Eastern leaders turn on and off the oil tap at their whim, playing with the economy as they would a spoiled child. Healthcare is bankrupt, layoffs are eminent. Riots erupt in protest for cheaper medicines. Food prices are soaring as we turn to making bio-fuels because our planet is dying; global warming is cooking the penguins alive - but no-one will eat them because they're all vegetarians.
America slips into a recession, or a depression if you’re feeling especially gloomy. The U.S. housing market is so bad that bankers in Detroit can barely give a house a way for a dollar- then when they finally do, half of the derelict property has been stolen; metals melted down for money, wood burned for fuel...

It is enough to make you scared isn't it? There is a lot more to be pessimistic about too, especially if you watch TV or read the papers regularly. But, that's not the only story. As overwhelming as it all seems sometimes, it's not so bad.

One of the scariest things I see people doing these days is sitting on their money, frozen in fear. Afraid to lose their fragile nest egg by making a bad investment all the while it erodes away, slipping into the hungry mouth of inflation. Read More

I was delighted to see that Don R. Campbell updated his blog recently. The newest post shows how to be a successful investor rather than a statistic on the MLS - care about your tenants.

"That means that the absolute first step in becoming a sophisticated real estate investor is to begin to think of your tenants as clients or customers. Without them you do not have a successful business no matter how hard you work or how many properties you own. Change your thought paradigm from tenant to customer and your marketing and business opportunities will begin to grow exponentially." Don R. Campbell

REIN (Real Estate Investment Network) actually has a series of publications that help you rent your properties and treat your tenants in a way that keep you the most tenanted and talked about property on the block.

Real estate meltdown? Not likely - "It's true that a few Canadian cities are showing much smaller price declines - Edmonton down by 4.9 per cent in the past year, Calgary down 2.4 per cent and Windsor down 5.5 per cent - but only in Windsor does this reflect economic distress. In Alberta, the price reversals look more like a hiccup after huge run ups.

So is Porter really suggesting that Canada's housing market is about to follow that of the U.S. down the drain? Apparently not, despite the provocative words. "No, we don't think we're headed for a U.S-style bust, said a colleague at BMO Capital Markets, senior economist Sal Guatieri."

Alberta's business owners optimistic - "Despite worrisome economic signs in the United States and Central Canada, optimism among Alberta businesses is rising, suggests a new provincial survey.

The business sentiments index, released Thursday by ATB Financial and the Western Centre for Economic Research, asked 403 companies across Alberta to gauge their opinion for the third quarter of 2008."

Alberta posts highest earnings growth - "Albertans continue to earn more than other Canadians, according to figures released Friday by Statistics Canada.

April figures show average weekly earnings for Albertans were $873.25, including overtime.

That's up six per cent from the same month last year -- the fastest growth in Canada."

Living in a country where English is not the first language enforces a learning curve that you don`t get when you can communicate in your native tongue. When I came to Japan 6 years ago my Japanese extended to Domo Arigato Mr. Roboto courtesy of STYX's hit in the 80`s. I had to assimilate to live. Now that I can speak Japanese I look back on those days cringing at what passed for "speaking Japanese".

The same holds true for investing in Real Estate. I started investing 5 years ago, I read all the books, joined Cashflow circles and ventured boldly ready to make "deals". With all the information and opportunity available on the web it seemed mere months until I held my dream portfolio.

Boiling down my experiences to the purest essence. I have come up with 5 tips for Learning Another Language and corresponding tips for Purchasing Investment Real Estate. They surprisingly overlap!

5 Tips For Learning Another Language vs. 5 Tips for Purchasing Investment Real Estate

1. Never ever repeat words until you know the meaning - I once had a catchy tune that a few little boys were singing stuck in my head. They roared with joy when I repeated the song and sang along with them for the remainder of our time together. For the next few days I would alternately hum and sing the easily pronounced words feeling quite pleased that I had picked up the language. It wasn't until days later a concerned co-worker actually explained the meaning of the dirty ditty did I learn this valuable lesson.

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1. Do your own homework - It doesn't matter if the property you are looking at is in a great area and really cheap. You are responsible for your financial future. You must never take anything at face value. My mentor Don Campbell always says "What's behind the Curtain?" Research your property, the area where you are, go there at different times of the day. Research other houses on the block or in the area, How much did they sell for? Ask impartial realtors, lawyers and people in the know for their input then sift the results. In the end only you will be paying for your real estate negligence or reap the benefits of your diligence.

2. Mimic the language of people around you- A direct contradiction to my first tip! However you can be sure that if I had emulated my successful 60 year old business lady friend I would have been singing a different tune. In Japan especially, age and sex are very important in determining the type of speech you use. If you hang around 50 year old business men your Japanese will reflect that. So choose with care whose speech you emulate.

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2. Mimic successful people around you - Research the people in your area who are doing what you want to do. Find the multi-plex buyer and take him to lunch that meal could make you a millionaire or at least help you on your next deal. The best way to succeed at anything is to copy the people who are already successful at it. Most people who are successful want to give back and help people who are starting out.

3. Supplement a formal education- You CAN learn new languages by yourself. In fact I spent my first two years in Japan watching Japanese T.V. with a dictionary and notebook so that I could learn the colloquial Japanese. Speak what the real people speak. It paid off I have excellent listening comprehension and can converse readily on many t.v. celebrities and programs- a useful ice breaker. However, my spoken Japanese didn't really take off until I attended a formal language school. The teachers guided me around pitfalls and I could practice with people that spoke that language rather than talking to my T.V.

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3. Join an investment group and take seminars - Sure it costs money, sure there are scams out there. Some gurus only hold seminars to sell their products or courses. That is a chance you have to take but when you find the right group you will be connected to a wealth of experience, information and like minded people. I am a member of REIN- Real Estate Investing Network in Alberta. That allegiance has propelled my business like nitro in those cars in the Triple X movie series. My sphere of influence now includes best selling authors, people who hold millions of dollars in real estate and some of the best tax specialists, lawyers and Realtors in Canadian Real Estate. I have avoided some mistakes because someone in my group already made them and that resource was readily available to me.

4. Making mistakes makes you a better speaker - This only works if someone corrects you! If you don' t say anything then your speaking ability won't improve at all. In my first baby steps in learning the language I know I said some pretty far out things. Times when I wanted to say "This meal is delicious!" I came out with " I am delicious" or my favorite pointing to a little girl and saying "scary" when I meant to say "cute" actually it could have gone either way with that one. It happens but luckily I had friends who took me aside and pointed out the grammatical, pronunciation or syntax errors of my ways. Now I only say "I am delicious" when I want to.

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4. Making mistakes makes you a better investor - You cannot learn until you make a mistake. Granted you can have a mentor who helps you and guides you around the mines of investing. What you are getting there is the benefit of him or her making mistakes in the past. Babies don't walk without falling, bicycles aren't mastered without scraped knees and investors aren't made without those "Holy #&("! " deals. Be thankful for them. They are what separate the Trumps from the chumps.

5. Speak Speak Speak- Just do it. Talk to the grocer, the mailman, the neighbour and anyone who will humour you. It is learning by action. Immerse yourself in your new language. I listen to the NHK National Japanese Radio whenever my iPod's batteries die while I am driving. I watch Japanese T.V. and study in my free moments. And you know what? Sometimes I can speak Japanese pretty darn well.

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5. Just do it- Don't be a perpetual student. Go out there and invest. If you don't have the finances just look at properties on the MLS. It is free and you can quickly get a feel of the market and what is available. Using a city map you can compare market values for properties in the same neighbourhood, street or complex. If funds are low then partner with friends or other people who want to invest in the same area. You can always Joint Venture with a professional so that your first deal isn't so daunting.

With time you will be surprised at how far you have progressed in becoming a polyglot or an investor.

When I hear people say that buying investment real estate is dangerous or risky it makes me wonder what could have happened to make them feel that way. Sometimes its a sour deal or bad tenants but more often than not it's who they bought the property with.

It's easier to buy a house if you split the down payment with a family member or friend but it's also a great way to ruin a perfectly good relationship. So how do you avoid the troubles that may come in purchasing together?

Excellent legal advice, a clear strategy and a clear separation between the private a business relationship is crucial.

"The most important thing is to do your planning," "A house is something that has an emotional tie to it, yet people want to go out and do things very quickly, especially if a real estate market is booming, and if you dawdle along you're not going to get that house you're after."

"What if one of them dies; what if one of them gets married; what if one of them takes a job transfer and moves out of province? You have to set out in advance what those what-ifs could be and try to document them into a co-ownership agreement. It could be a simple thing like who pays for some of the expenses." Investors Group financial planner Murray Pituley of Regina

IF you shudder at the idea of making a legal document with your brother, mother or friend then imagine what will happen when everything unravels and nobody has a clear idea of what should be happening

Due to high demand, limited supply and increasing rents Edmonton office space is in hot demand.
Prices by the square foot have increased 76% since the beginning of last year.

"Overall, office vacancy has reached historical lows, with unprecedented rental rates being achieved in both the downtown core and suburban office markets," says Canadian real estate services company DTZ Barnicke. READ MORE

Ask any Realtor and they'll tell you that winter is a time to prepare for the next year. Plant the seeds on the sales they plan to make in the spring because real estate comes to a near grinding halt over the winter months. But not this year.

Royal Lepage Real Estate Services reports that the last quarter of 2007 saw the Canadian market slowing down only a little rather than the full on braking that has come to be expected in last quarter.

Edmonton can expect a moderation and balancing of prices and that is ok by me because I'm looking to significantly increase our investment portfolio and overpriced homes need not apply.

"In Alberta, where Edmonton’s prices were rising at a 50 per cent annualized clip early in 2007, the breakneck rise in recent years "has moderated demand," the Royal LePage report said.

Edmonton and Calgary now have "a surplus of inventory," it added, and "while demand is strong, the increased supply has impacted the resale market and homes that are not priced appropriately will take longer to sell."

Soper said the Alberta econ-omy needs time to adjust to the "frankly unhealthy increase" in home prices between late 2005 and early 2007." Royal LePage president Phil Soper

Realtors' Association of Edmonton president Marc Perras predicts Edmonton-area home prices are to rise four per cent over the next 12 months while a CMHC market analyst, Lindsay Kendall, predicted that Edmonton prices for all forms of resale housing will rise 6.5 per cent in 2008 to $360,000.

Now, I like to manage expectations and prefer to factor in a conservative rate of appreciation at 8% per year- which is a safe average in an up or down market.

Edmonton market is letting off some steam and i will too.

PRICES ARE PLUMMETING! - I would hardly call a 6.5% price correction over 5 months plummeting, especially since prices have risen 74% over the last 17. Price correction anyone?

THE ROYALTIES HAVE RUINED THE ECONOMY! - Many articles say the Royalties are balanced and not half as severe as proposed in the original review or even close to other oil rich countries. Hugo Chavez anyone?

THE MARKET IS FLOODED! - Sure there are more listings than say this summer when multiple offers where the norm and a frenzy made the market not a nice place for buyers. People are out there now trying to see what they can get or maybe they bought a new house, are moving or want to cash out. At any rate the market is getting more and more balanced. Buying opportunity anyone?

WE ARE BUST PRICES WILL DROP! - Sure you may have to reduce your asking price $10k to sell right now but prices fluctuate and there are a lot of people trying to sell now.

"...prices will still fluctuate, but decision makers are still laying bets that in the long-run, the oil wealth will keep home prices healthy." Jon Hall of the Edmonton Real Estate Board.

Saskatchewan real estate values/investing has increased in value recently whether it is due to native Saskatchewan returning home, speculative buyers lured into the market now that Alberta has softened or an exodus due to fear of the effect on Royalties on the Alberta Oil Sands is unclear. I know I say this all the time but - as my mentor says, "What's behind the curtain?"

Take this news release I found on CNW Telbec on the 2007 Property Tax Assessment and Tax Analysis of 2006 Data.

A little background on the assessment it is released by REALpac and prepared by Altus Derbyshire, Realty Tax Consulting and hopes to show both the range of commercial and residential property tax assessments coast to coast in Canada and to determine the trends amongst urban centres, allowing REALpac to extrapolate which cities taxes are going up, going down, and how quickly.

This is their take on Regina Saskatchewan:

"Employees won't be standing in line to move to Regina, since the city also has the highest residential tax rate in Canada, with 2.25% of the value of the property going to municipal tax coffers, followed closely by Winnipeg at 2.20%. On a $200,000 home in Regina, that's an annual property tax bill of $4,500. "It's not clear why Regina's commercial and residential rates are so high as to be leading in both categories, when comparable cities such as Edmonton, are consistently much lower," Michael Brooks, Executive Director of the Real Property Association of Canada

Though real estate prices are rising in Saskatchewan what do people encounter when they buy that cheaper house in Regina? Higher taxes and less employment than Edmonton, not to mention it’s as cold as the arctic over there.