Is real estate a good investment in today's market?
| 10 October 2011
Given all of the uncertainty in today’s global economy, that’s a question that’s coming from inside—and outside—the realm of those already investing in Canadian real estate. While I think the answer is an unqualified “Yes!”—I also believe we’re asking the wrong question.
When current and prospective investors come to me with questions about the state of the real estate investment industry, I encourage them to go after the specific information they need to make sound investment decisions. Instead of asking: “IS real estate a good investment in today’s market?” I tell them to ask me: “WHAT makes real estate a good investment in today’s market?”
That opens the door for me to talk specifics. And those specifics are pretty darn convincing.
Here are the top three reasons I see real estate as a good investment in today’s market:
1. Real estate is reliable.
Mark Twain once said, “Buy land. They’re not making it anymore.” One hundred years later, the basic truth still applies. People need places to live. What makes real estate a good investment today is the fact that people like me can help people like you find opportunities to invest in real estate with steady cash flow.
2. Cash flow makes sound economic sense.
While market appreciation is a bonus, cash flow is what makes a real estate investment work.
I buy properties that I can rent out for more than it costs to maintain the property and service the mortgage. Every quarter, I pay my investors a sum of money based on what that property was budgeted to make (over and above mortgage and repair and maintenance fees). I even budget for temporary vacancies. The end result is that the property pays for itself—with money “left over” for investors.
Compare that common sense approach to what’s happening in global investment markets, where the price of gold is dropping and the U.S. dollar is rising. Both of those market realities fly in the face of economic truths; which is exactly what happens when emotions trump facts.
3. You can plan for success
Real estate investors do not have to know everything about buying investment property. They do need to hook up with someone who does.
HGREI Inc. follows a proven approach to real estate investment. I buy houses in west Calgary. I stick to houses in the $320K to $350K range and focus on renting to young professionals with good-paying jobs. This is most likely to be the last properties these tenants will rent, since most are preparing to transition to home ownership. All of our properties are suited (for two or more tenants) and have double detached garages that can be rented to tenants or others.
I like to focus on two things: my relationships with investors and acquiring great revenue properties. My investor-first approach means we need to talk before I go shopping. This helps me find the property that’s right for you.
7 Secrets