Category Archives: Alberta (Commentary)

Calgary-Edmonton community profiles

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One of the keys to successful real estate investing is to have specialized knowledge of an area which you are potentially investing in. Before saying anything else, one must recall the old adage that “The map is not the territory”.  However, it is a very good place to start. Listed below are two links for Alberta’s largest cities of Calgary and Edmonton.  Although smaller cities have explosive potential in terms of equity appreciation, the large cities are where most investors tend to focus their attention. Some of them can be found throughout the site.

Also, having access to current market rents in Alberta is a key to success.  Rents represent cashflow which is everything!

Having this kind of information before viewing property is almost like cheating but it simply is using the internet to your advantage.  Remember to investigate before you invest……and after!

Calgary: http://tinyurl.com/kkagz4g

Edmonton: http://tinyurl.com/k33dzuh

Alberta rentals: http://tinyurl.com/ocqbcap   

Sports teams and real estate

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This past year, Edmonton finally received funding approval for their downtown arena. Vancouver has also showcased their new stadium B.C. Place as one of the best in North America. Sports venues are one of my favorite measures of seeing the direct measures of a local economy’s real estate market. When a local economy does well, this is reflected in higher attendance at sporting events regardless of how the team is doing. I am sure that the businesses around B.C. Place are doing quite well financially when the team plays a home game, Conversely, the redevelopment of a hockey arena or other sporting facility serves as a drawing feature for others to visit the area and see the type of community that exists. The redevelopment serves to create jobs in the short term and provide a base for the long term benefits which can ripple out to surrounding areas.

The next time you see a new sports facility being built or modernized, call your investment realtor who specializes in the area and see what potential investment opportunities exist.

What do bankers look for in a real estate deal?

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As an investor, there are a number of factors which make a deal appealing to you.  They may include great cash flow, tremendous upside in equity and multiple exit strategies for disposing your property.  One of the many steps you must consider when purchasing an investment property is what your banker looks for when signing on a mortgage agreement. Having to look at the deal from someone else’s perspective is not as simple.  However, here are a few rules of thumb to help you out

1)  Credit rating. Having been current with all your payments including utilities will be a plus when speaking to your banker. They like dealing with people who pay their bills!

2)  Down payment. The larger your down payment, the more positively you will be presenting yourself as someone who is willing to take a risk with the bank. Low money deals mean the bank takes most of the risk and this is not a good thing for them! You need to have your skin in the game. By all means, please do not ever max out your credit cards for a down payment.  This is insanity at its worst and will only lead to trouble!

3)  Capacity to pay the mortgage.  If you are making $5/hr and expect to obtain a 2 million dollar mortgage, chances are you will be turned down. You must have the ability to make the bank comfortable in lending you money. Your capacity to pay them back in this case will not work. The bank is asking themselves if you are able to make the payments long term.

4)  Charisma is a vital factor. If you have a personal relationship with your banker and know them one on one, your chances of being approved have just gone up.  People like dealing with other people and most of the time, they just want to help you out. Send them a thank you card/Christmas and birthday card throughout the year.  You never ever know when they could help you out again.

IOS 7 release

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Apple’s annual IOS release in September has made this month along with April (for tax reasons) two of my favorites.  All around the world, Apple users will download this latest update to their smartphones and tablets on September 18th and see what developers have been up to over the past several months.

Curiosity will also get the best of me but I will not download IOS 7 on that day but will wait until Friday.  My time in the IT world has taught me to let other people download and test this release first and let them take any hits to their computers.  Even though it has probably been tested quite thoroughly, there are always small bugs which cannot be predicted.  A patch release to address these issues is usually sent shortly thereafter.

Even though it won’t be available, I will be doing some Google searches to see if there is an interface between Siri and WordPress as we incrementally move to automate the process of providing updates for Alberta’s real estate market.  WordPress 3.7 and 3.8 will be available this year and we will be vigilant on this development but are not having any expectations as we realize this is far off into the future. We will have much more to say on this at a later date.

Does Buy and Hold work?

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When investing in an asset class, it is very important to determine your exit strategy before taking any action.  One school of thought is to buy an investment and hold onto to it forever.  This has been made popular by Warren Buffet.

In recent years, stock markets have become much more volatile than say 30 years ago and some have questioned whether this method still works today. I realize that there are two schools of thought here regarding stocks and will leave that for others to debate but I am here to present my thoughts regarding real estate.

If you are constantly flipping properties, you must keep doing it to maintain a cash position as there is no cash flow in flipping. Furthermore, there are commissions, taxes and other unforeseen expenses which can eat into one’s bottom line.

If however, you purchase a property in a strong market with a solid cash flow, this method is probably the simplest and effective way to preserve wealth. A rising tide lifts all boats and your risk is diminished.  It is by no means as appealing from an emotional perspective but it has undisputed bottom line results which are proven the world over!

Anything worthwhile requires you to go against the flow

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This month is one which marks an important date in history for me. 25 years ago, I had enrolled in my first university computer programming course. At that time, I was introduced to email and TALK (now called livechat). I had never programmed extensively except for some BASIC which I taught myself when I was a teenager. In the 1980’s, computers were definitely not mainstream and I had faced a lot of criticism for spending so much time in front of a monitor for hours on end.  I even went so far as to let my grades slip in school so I could spend time with my floppy disks, keyboard and hard drive. Walking down the hallways of my old high school with 5 ¼ floppy disks in hand would always result in an odd look or verbal criticism.

My reason for pursuing this was that I believed against everyone else’s notions that computers could one day change the world. I did not know how or when, but I was sure it would occur. I still do not believe it has achieved the level of penetration that I had envisioned when I was young, but it is slowly evolving and perhaps 20-30 years from now we will get there.

The point is that I started when very few people would even look at a computer.  Anything worthwhile requires to go against the flow. The courage to take action when no one else will is the key to winning in any endeavor including financial freedom. If something is trendy, you know it is too late even though it feels good to be accepted such as buying real estate in 2006. If you need to be accepted, get a new group of friends who will support your vision.

What do smartphones and tablets have to do with real estate?

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One of the most important parts to purchasing a property is the viewing of the property. I sincerely hope no one out there purchases a deal “sight unseen” as you are asking for trouble it could very well get you!

Every time that you do this, please bring your smartphone or tablet to record what you see. Preferably, the settings should be to HD quality video.  This important step is just as important as the offer itself.  There can be no ambiguity as to what is present should there ever be a dispute as to what actually exists.  You can view this many times before submitting an offer and put in clauses indicating repairs you would like done before a purchase.

A copy of this recording should be kept for as long as you own the property.  Apple users should note that only the iphone 4s or afterwards has HD video quality. This is a very simple but often overlooked part of the deal.

Why do stock and real estate markets go up or down?

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Investing for equity gains whether you are in stocks or real estate is the goal of many investors (myself included). The sight of seeing a large increase in any asset class is always a welcome sight to see and I doubt anyone would argue with that! This leads to a simple but often misunderstood question of what drives a market up or down.

The immediate answer from investors is that there are more buyers than sellers or sellers versus buyers.  More buyers indicates higher prices and more sellers leads to a price decline. This popular notion however is completely untrue. For every buyer there is always one seller and vice versa in stocks or real estate. The correspondence is always one to one.

The real answer is the spread between the sales price to list. When the market average has sales prices above list, the trend is upward and when the list price average is below sales, it puts downward pressure on a market. A similar argument can be made for stocks and whether the bid is above or below the asking price of a stock.

The next time someone mentions that buyers are flooding market to drive prices up, just be sure you are armed with these facts and not someone else’s hype of misinformation.

Special thanks to Wall Street Supertrader of the millennium Daniel Turov for illustrating this to me many years ago.

You don’t have to bring money to a deal

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Last year, I was approached by an acquaintance to get involved in an oil exploration startup company. In order to be part of the group, I would have to bring something to the table.  At this point, many people may think it would have to be money. This can be one requirement in any business or real estate deal, but that was not what I was bringing to the table. I was offering my knowledge and experience of production and revenue accounting in Calgary’s oil and gas sector. Alberta has a world class energy industry and the skills I have learned over the years can be applied universally. My acquaintance’s deal involves oil wells in the United Arab Emirates and my skills could definitely have applications at some point in lieu of cash.

When involved in a real estate deal, you can bring your knowledge, time, expertise or any other item of value to complete a transaction. It may or may not be money just as long as it moves a project towards completion.

Credit ratings

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No matter where you live or even if you do not invest in real estate or common equities, your credit score is essential to your future. The ability to borrow money (such as for a mortgage) and to pay it back is not just for the very wealthy but for everyone. It has been said that having bad credit is better than no credit to a lender because there is at least a track record for them to gauge. A good credit score is essential to low interest loans and increasing the ability to purchase items.

If you have a credit card, that is one way that your history speaks for your abilities to pay money back.  The good news is that even if you have a poor credit rating, it can be improved upon with some assistance from a mortgage broker who specializes in investment properties.

Each country around the world has its own credit agencies and ways of calculating credit.  Although I do not have them all at my own disposal, here is a partial list which can help you get started.

Read more: http://tinyurl.com/l6h7ns2    

Once your credit is on a solid footing, you can start the process of getting qualified for your first or next piece of real estate.