September 2021 — Phoenix Real Estate

Investors competing with retail home buyers?

September 8, 2021 by admin

WOW I just read an article which I think made a total BS comment on the housing market in Canada. Has the market been on a tear? Yes in many places it has, have prices risen artificially? You bet, but claim that they just made is ridiculous!

In this article that is from a source I shall not name, stated that prices in many areas are being driven up by investors competing with retail buyers in a lot of our Canadian Real Estate markets. It would seem vastly apparent that they do not invest in real estate themselves, or do not know many real investors that know what they are doing.

Warren buffet put it very well, buy low and sell high – that is pretty fundamental for any investment class, and his holding period is often VERY long also a great principle to live by in real estate or other asset classes.

Real estate is no different, you have to buy below market value to make money in real estate. Many make the mistake of getting excited and paying too much for something and they regret it. (yes we have as well – that is how you learn!)

One cannot expect to pay retail for a product and expect to re-sell or refinance down the line that same product and have consistent results. Now, there are some times you can get lucky and the market can take off and that asset (real estate) can rapidly appreciate….but that is simply LUCK and not a business model, you might as well go to the casino and put it all on black and hope for the best.

This same article wasn’t all bad however it did state that part of the housing pricing problem is supply VS demand – which I totally agree with BTW. This article cited city red tape in Vancouver as the example of slowing development approvals making it hard for developers to get anything done to meet the demand. There is a lot to be said for that issue in many Canadian cities.

In Calgary for example we have had planning policies that support urban sprawl and fight against density in the inner city for many years, that is SLOWLY changing which is a good sign for the aging inner city corridors.

I have never met an investor in over a decade in this game that would compete against a retail home buyer to get a property to rent, flip, or do a rent to own on that property – retail buyers looking to buy a home and live in it will always pay more than an investors looking for a ROI. If anything, the retail home buyer is competition for the investor!

What are you thoughts on the “housing crisis” which the media is currently taking and running with it?

To your success,

Tim Reid

-Respect The Hustle

3 Ways Investors Impact the Price of Real Estate

September 2, 2021 by admin

There have been some interesting articles floating around out there speculating in the material impact that investors have on the real estate market.

Often we hear a lot of noise in the media about foreign buyers driving up real estate markets like Vancouver and Toronto, but what about the last 18 months through the Covid19 pandemic? There was a massive reduction in immigration and foreign investment, so that would indicate a lot of that noise is just that…noise.

For example the BoC (bank of Canada) published stats that would see investors accounting for 20.1% of residential purchases in Canada. That may seem like a lot, but that centers only around residential properties. With having 80% still being purchased by retail home buyers, the impact of investors in this space would seem not that large.

What are the key impacts that Investors do have on pricing?

1. They pay cash or have 20% down and don’t have insured mortgages. — That means they do not pay too much for properties (over market value) or at least they don’t very often and certainly not with our guidance! Typically savvy investors will pay less than market value but at only 20% of the market volume this does not drag the average down significantly

2. Investors force appreciation – through renovations, adding suites, garages, so this does drive up the prices because they are adding value to the properties (example flipping houses) in a short period of time. This has the largest impact on pricing, which often occurs in older areas with naturally higher prices and infill activity in the inner city areas of most Canadian cities

3. Rental increases – while updating, adding value, and of course for rental purposes the goal of a cash flow investor is to maximize that as much as possible, then doing a re-finance to pull capital back out of properties also can have an impact on valuations on properties especially when it comes to commercial assets (6 units or more)

These are the key areas that Investors have a material impact on the stats IMHO. Also, I always like to point out that a lot of residential investors buy directly from home owners which are private sales – which do not get reported by the real estate boards and therefore do not show up in the statistics.

The regulators, banks, real estate boards and media have to work with the data sets that they are given – but this is not the whole picture.

If you would like to know more about how to have your own impact on the real estate market through investing in real estate without the hassles of day to day management Contact us today and let’s chat.

To your success,

Tim Reid

-Respect The Hustle

Archives for September 2021

Investors competing with retail home buyers?

3 Ways Investors Impact the Price of Real Estate