 In 1686, Newton’s law dictated that a huge object moving in one direction has considerable momentum – a quality which requires it to continue moving in that same direction. For example, the largest cruise ship of all time, The Titanic spotted the iceberg from a mile away yet could not turn in time – a result of too much momentum. The stock markets of the world do not have momentum. A significant 9-11 event or a simple illness of a president can typically cause big changes in the direction of movement of the entire stock market. It is scary and sad to see hundreds of millions of people to invest in unpredictable stocks yielding weak results. A real estate market in a city can have enormous momentum to go up, it continues for many years, relentlessly, sometimes without ever pausing, or even momentarily dipping on its way up.
The Bubble
The real estate investment world is at a turning point. Unprecedented world events and market conditions are creating a sense of insecurity and trepidation about the future of real estate investment. Analysts have coined a simple term for this uncertainty: the real estate bubble. Let’s look at Vancouver as an example. Is Vancouver real estate at the top? Based on statistics and graphs, from 1999 to 2007, average detached resales have rocketed from $357,000 to $700,000 – an increase of about 100%. With current prices dropping by 10% and number of listings leveling off, it seems poised for another fall before the 2010 Winter Olympics comes. Only time will tell. If you are a momentum buyer, you wait until the market has started to move up, before buying; you let a few other investors break the ice for you. After it’s been going up for a while, you get out, and let the speculators take over. For example, if you bought an average detached home in Vancouver for $400,000 in 2003, which was the first rising year of the cycle, and you sold it for $700,000 in 2007, you would have made $300,000 – a 75% profit. Another sophisticated approach for successful timing is contrarian investing – buying against the market. Essentially, you need to study the demographics and buy before the wave hits; you buy when everyone is selling as more people get out of market, it drives prices down. As long as you’re buying for cash flow, and not appreciation, it doesn’t matter if the market goes down a little bit further. It’s already a good business decision based on the cash flow that the property generates. If you’re buying for cash flow, you’re in the property for the long haul; you’re not a day trader. The biggest challenge for this type of investing is identifying the bottom of the cycle using key indicators like natural resources around element of job market, demographic poll of people to pull from. Remember: markets can turn around even in depressed markets. Is your local real estate market headed for depression, recession or opportunity? The truth is …all 3. It all depends on your location and your perception!
Our Move to Caledonia, ON
Thankfully, the weather in Brantford has warmed up this month. We have taken a tour of Dunville, Cayuga, Caledonia, Hamilton, and Binbrook to decide which town we should move to. We don’t like to live in overcrowded cities like Toronto. Caledonia turns out to be the best selection for us. One, it is only 13 minutes from Hamilton; Two, it is a clean, safe, quiet and friendly town of about 5,000 people; Third, you can get an absolute gorgeous view of the Grand River, if you live by the river. The river extends all the way from Port Maitland at the foot to Dundalk at the head.
As we work hard on our real estate investments, we enjoy watching the river flowing, the geese honking, and the squirrels frolicking on the lawn. We can also go for our morning jog along the trails beside the river to refresh ourselves and to enjoy the sunset casting its beams across the river. We feel grateful to have a cozy home to live in since we left Vancouver, BC. We sincerely wish everyone a comfortable home to live in, despite the current economic recession.
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The ACRE Program (Quickstart)
It was such a treat for us to take Don Campbell’s ACRE program in Brampton, ON on April 17-19, 2009. 605 people attended; the information presented was truly valuable to all. You may have the best cash flow property analyzer and the best power team in your market. However, you definitely don’t want to skip analyzing the 12 economic fundamentals before you invest in any property in any region. With the economic fundamentals, we can scout the top 10  towns in Ontario for us to invest in. What are the goldmine keys? As mortgage interest rates decrease, overall demand increases over a six month lag or longer. Increased average income, decreasing income tax rates, and increasing retail sales in a town is an important key. Increased job growth and in-migration drives up house demand and will always drive prices upwards. A real estate doppler effect can occur when a new factory moves to a city and indirectly drives up the value in nearby towns. A progressive, real estate investory-friendly political climate stimulates growth. Is there any critical infrastructure expansion taking place? Is there any increase in raw materials or labor to drive current values upwards? Is there any areas of gentrification & renewal where change is inevitable? Is there any opportunity for highest and best use such as converting an old factory into loft apartments? Can you buy below market value and sell retail? Can you run marketing campaigns to increase your rents, your sale prices and most importantly create a buyers’ list and a sellers’ list? Can you do renovations to increase property’s equity? Is there speculation for you to make a quick profit provided you know what you’re doing and you are armed with facts, not rumours? These are just some questions you can ask yourself to help qualify a market to invest in.
Upcoming Complete Apartment Investing Workshop
Scott Scheel is going to be teaching a complete apartment investing system for the first time and the only time. It will be in Atlanta, Georgia on May 6-9, 2009. He will be giving special focus to profitable investing in affordable housing. Given the high demand in apartments in today’s market, it is good timing for us to learn from Scott’s complete system. We can’t wait to share with you some strategies from Scott, who walks the walk, not just talks the talk. Hope to see you there!
The Deal That Wasn’t To Be
We have been looking at a property in earnest in Hamilton lately. However, after spending some time analyzing it, running the numbers, and weighing all the possible options we have decided not to go ahead with it. Everything looked great on paper, but we felt that there was just too much potential for the numbers to become very skewed, because of the age of the building, and the lack of existing services. On another note, we are constantly pursuing other properties that fit our profile. If anyone is open to joint venture possibilities, please feel free to email our Acquisitions Department.
Tweeting on Twitter
If you haven’t heard about Twitter yet, perhaps you should. It’s a great tool for both propelling your online presence to the next level, and to hobknob with some of the best minds in your areas of interest. Since joining Twitter, we’ve found a wealth of information on real estate and search engine optimization (SEO) that we wouldn’t otherwise have known about. Before you jump onto Twitter, you might want to learn one simple rule of etiquette. If you like something someone said, and you want other people to know about it, you should ‘retweet’ it. In layman’s parlance, that means give credit to the original author. You do this by preceding the quote with ‘RT @twittername’, where ‘twittername’ is the twitter username of the person you’re quoting. ‘RT’ means ‘retweet’. If you wish to reply to someone, merely type in ‘@twittername Whatever your response is’. If you wish to send them a private message (a direct message in twitterspeak), type in ‘D @twittername Whatever your direct message is’. If you would like to join Daniel on Twitter, you can follow him at @dlynes. Happy tweeting!
“Be faithful in small things because it is in them that your strength lies.”
- Mother Teresa
Daniel Lynes and Julia Lee Lynes
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