Edmonton Real Estate Investor: why real estate is a good investment

I was reading the Globe and Mail online today when a link on the side caught my eye. The title "Could investment in a second property go sideways?" I chuckled. If you have to ask then you shouldn't be buying a second property...

However, there are so many "Real Estate Riches" seminars that tell you how great real estate is (which it is) showing the insane returns possible (which there are) because of the leverage a mortgage allows. The allure is strong but the hours, days and years of WORK after the thrill of buying your investment is almost never covered.

I want to tell you, as a seasoned investor, that the most important thing you should think about when you buy a second property is it going sideways - and what your Plan A, B, C to X will be.

When you can handle any situation that your property throws at you, you are a real estate investor.

Bad Things that have happened in my rentals:
Floods
Mould
Death ( Natural and Unnatural)
Evictions
Destruction
No rent
Huge Renovations
Tenant Bankruptcy
Midnight Moves

Good things that have happened in my rentals:
Exponential ROI
Excellent tenants that improved the property
Insurance Funds coming through
Helping tenants become homeowners
Getting my initial investment out and still having the property
Mortgage free ownership
Cashflow every month
Repairs on or under budget
Increase in flexibility/time/freedom

It's ying and yang! No investment is all up and no down. That's just a life fact and yes - it even applies to investments.

Real estate.

According to a Nu Wire Investor article that's the plan for those with more than $800,000 to invest.

"The prospect of strong returns in bargain real estate is driving interest, especially among the wealthiest, who are predicted to boost allocations in property to 30 percent — with portfolios of over 50 percent property holdings not uncommon. While the majority of investors see the expense of financing as a deterrent, property's perceived potential is edging out stocks and bonds. Among locations, the US residential real estate market is a top pick for investment. See the following article from Property Wire for more on this."

It's not surprising as many are really worried about were to put their money. Especially after have about 10 years of saving disappear over the last few years. One thing about real estate is it's tangible, insured and worst comes to worst you can live in it.

"Investors from Canada and the Gulf region were the most likely to increase their property allocations, with an average increase of 4% being put into real estate."

Sick babies, vacuums and microwaves. What do they all have in common? Hard to guess for most, but for me they are a flurry of things that went sideways in my house last week. It brings to mind the old adage trouble comes in threes. Our challenges were small this month but what about months when you're hit with bigger and longer lasting bumps in your path? The ones that go from speed bumps to small mountains.

Deepak Chopra wrote that America's safety net is unraveling to the point where an illness can wipe-out a middle class family.

In Canada (and Japan) we have relatively good health care systems, especially when compared to elsewhere in the world. Last week our son Ronan had a cold that went to his chest (bronchitis) and had to spend the night in hospital getting an I.V. That was worrying to say the least. We are fortunate to be able to move our schedules around to look after our little guy.

It makes you consider weaving the safety net even finer and stronger to protect yourself more. That may mean increased flexibility around your job or in your business or greater control over your finances; magnifying the point that creating a wall of financial security around your family is paramount.

The microwave and vacuum? They blew up the same day and were easily replaced.

My friend Grahame posted pictures of his new 'neighbors' last night. I was a bit surprised to learn that they mainly consisted of a rag-tag group of poisonous reptiles, somehow peacefully coexisting in and out of the structures of his home.

The last time I visited Grahame was in sunny Victoria, B.C., we toured his modest house and sat on his newly built deck over looking the oriental pond that he'd built. So, the shock of reptilian neighbors made me think that the old neighborhood had really changed.

But these neighbors are a new set.

Grahame actually sold up his Island home and moved to Nicaragua a few months ago. His lifestyle change had temporarily slipped my mind, probably as I'm getting used to my new lifestyle with baby Ronan.

Moving to Nicaragua was a massive step for my friend and one that he weighed out with considerable thought. It's definitely not for everyone, but I bet its pretty liberating for those that can do it.

Grahame used a fair chunk of profits from his home sale to fund the costs of building his villa. He continues to co-operate a successful business back in Victoria, and coupled with other investments, provide him the cash flow needed to cover daily living expenses.

Although Nicaragua may not be your dream, yours may be Paris, Zimbabwe, New York or just to pay off your home's mortgage.

Grahame's story is another example of how you can use your real estate (and other investments) to seize your dreams anytime in life - you don't always have to wait for retirement, especially if you're open to mingling with new neighbors.

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My friend Ryan forwarded me an email from his financial planner last week. I wonder if you've received messages like this one I too? I'll paraphrase:

"Dear Ryan, as you know it's really hit the fan down there in the U.S.. The economy has taken such a beating we don't ever know when it'll be sorted out. Many of the stocks and funds that we've invested in have crashed. It's worse than pretty bad, it's downright awful. Every night I look at the bottle of Scotch on my bedside table and wonder if tonight it will hold the answers I need to know...

The only thing I can tell you for sure is not to panic. (He's panicking now and you can feel it in the letter, almost see the swollen streams of ink where the tears fell)

Keep your money invested in these funds even if they go to zero, because I have to eat too. And remember, everything will be ok one day. The markets can't stay down forever, right? Right?"

You could really hear the fear and uncertainty come through in his letter. I agree that the markets won't stay in the gutter forever. But, hey I'm not going to live forever either and I don't want to spend the next couple of years floating around in the toilet of discontent waiting for another big flush.

The truth is that time heals most wounds. However, when it comes to investing you sometimes have timelines to meet, like retirement for one. You don't want to be tossing good money after bad as things balance out. I also got a letter like Ryan's from my planner. I've actually been watching one of my stocks go from ~~$26.00~~ a share down to today's new low of $1.44. So, I'm not making light of real losses.

Obviously I prefer hard assets and have 90% of my wealth invested into them. The simple reason is that time and time again a well purchased revenue property repeatedly proves it can survive and thrive a dip in the market and bloom during the peaks.

You know some people will worry and others will take action. That's just the way we are. Those that can brave the miasma of uncertainty today are the same few that will savour the smell of sweet, sweet roses tomorrow.

Edmonton has got a bargain sale going on. Investing in tangible cash-flowing assets will not only protect your wealth but also increase it exponentially over time.