Edmonton Real Estate Investor: January 2008

Mark Milke wrote this excellent article for the Edmonton Sun. If you are unhappy with the economic boom in Alberta now, then perhaps 1988's statistics will help you see the light - 9.7% unemployment and 18% interest rates. Seems unbelievable doesn't it?

"So let's keep present problems in perspective, even with the environmental or social problems -- which I don't downplay -- that accompany the energy industry's success.

Whether you're an Albertan who works in the resource industry, a doctor whose salary is paid partly by the existence of energy royalties, a trades guy or gal who doesn't have to beg for jobs -- unlike in the 1980s, an artist who received an Alberta government or corporate grant, or the recipient of a welfare cheque itself funded partly by oil and gas royalties, we're better off in this province with the resource industry than without it." READ MORE

Edmonton, Alberta: How Do You Heat Your Igloo? (Todd Millar) I replied in a lighthearted way that spending my money on sunsets and sandy beaches is what I do when I'm on holiday, not when I plan and weigh out an investment option. Sunsets sizzle, and when we imagine the lifestyle associated with them, emotion takes hold and reason leaves the room.

Quality-job creation: Another area where Canada outshines US
The bad news is that, like the United States, Canada's economy is shedding manufacturing jobs. The good news is that, unlike the U.S., Canada is replacing them with high-quality work in the public administration and energy extraction sectors.

Canadians vote like mad for Monopoly real estate
It may sound like fun and games, but some people are taking getting their cities into Monopoly's upcoming World Edition rather seriously. Full-blown campaigns on social site Facebook and other Internet sites have boosted the fortunes of Canada's three candidate cities vying for spots on the game board.

CPP buys big chunk of Scotia Place
The Canada Pension Plan Investment Board has bought a 40-per-cent interest in Scotia Place at 10060 Jasper Avenue for $63.5 million.

"The Edmonton market is strong and getting stronger, and obviously has a long-term future," Graeme Eadie, CPP senior vice-president of real estate investment, said today.

Silver lining to expected slowdown
The Canadian dollar has, overall, surged in value for two reasons:

First, the demand for Canadian energy -- oil and natural gas -- continues to remain high. Second, the U.S. housing market has been hit by the sub-prime lending crisis, which has dampened confidence in the American economy, devaluing its currency against others -- including the loonie.

The immediate effects of a high Canadian dollar are felt in manufacturing, which has come to depend on the lower loonie and a strong U.S. economy for steady exports south of the border. In November, 16,000 jobs were lost in Canada's manufacturing sector, according to Statistics Canada.

Canada is getting a lot of first prizes among the G8 countries. We rank first in quality of life, have the lowest cost of living, and the lowest unemployment rate.

Canada has diverse resource driven economy that, less than a decade ago saw significant proportions of all exports heading for our neighbours to the south. Due to Canadian government's tireless support of businesses diversifying their exporting focus and incredible foresight, now, nearly a quarter of all exports are destined for non U.S locations which has helped us to avoid the economic slump now prevalent in the U.S.

Canada’s economy has often trailed the US economy, however today it is leading the US - as is the Canadian dollar which has seen the most gains since at least 1971 because of a surge in investor interest and confidence in commodity-exporting countries according to a Bloomberg report.

Statistic released by the Canadian Real Estate Association show clearly that Canada has just finished the best year ever for sales of existing homes; with records being set for house prices and new listings.

"Those lower interest rates will also help temper any erosion in housing affordability in Canada because of additional home-price increases," "The challenge for the Canadian housing market will be the extent to which consumer confidence is affected by a slowdown in the U.S. economy." Ann Bosley, president of The Canadian Real Estate Association

Now more than ever is the time to invest in Canadian Real Estate.

A Japanese friend I spoke to the other day was disgruntled because the price of soy sauce is increasing. It's all because we are trying to reduce consumption of fossil fuels .

Interest in using food crops (ethanol is derived from sugar beets, wheat, corn or sugarcane) to produce alternative fuel sources for cars is causing many nations to fear subsequent increases in food prices.

For example soy bean oil is heavily relied on to make biofuel - the renewable diesel fuel additive. Cooking oils and many other products prices are increasing because the price of soy beans, corn and cereals are increasing. Milk prices increased 3% in Japan because it is more expensive to feed cows and beer will increase because the price of malt has risen.

Think tanks predict prices may even rise 80% as crops and farmland are diverted to producing biofuels. However other experts predict that with increasing technology we may only see a 5% -15% increase.

A Possible Solution....
Japan has taken steps to produce ethanol for cars out of inedible biomass like straw and chaff.

"We already have the technology to make ethanol from straw and chaff, but we've only succeeded at the laboratory level......"

"What we are trying to do is to collect straw and chaff on a relatively large scale in a local community to make biofuel and then use it for the first time for vehicles and other uses...."

"If we can use biofuels from inedible parts of crops, then markets for biofuels and markets for foods would not have to compete," Eiichiro Kitamura- official in charge of Japan's Ministry of Agriculture, Forestry and Fisheries innovative project

A rental property has to have a lot of things going for it to ensure it puts money in your pocket. Nice location, above average amenities, sturdy construction, neutral yet stylish design and the list goes on. However, none of this will mean much if your property is overpriced.

The "put the For Rent sign out" and they will come mentality doesn't work in every market. If the market is tight and your vacancy rate is low you can rent for a little more but if the vacancy rate is increasing then your rent not only has to be in line with the market but also cover your expenses and reflect the quality unit that it is.

So...?

Someone brilliant has invented Rent-o-meter.com you simply fill in the fields for address, province or state, postal code, current rent, number of bedrooms and units in the building. Press the Analyze My Property and you get a clear spectrum of the average, high and low rents in your particular area.

The site not only shows you where you unit is on the "Rent-o-meter" but shows other rents of comparable properties in the area with pictures and addresses on a Google map. The property I put in was compared to 103 other units within 5.39 miles (8.67km) of my property.

Mind you there is nothing wrong with being on the high-end if you property is a real beauty.

Rent-o-meter works for Canadian, American and London locations.

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Is It Time For The Market
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Next Quickstart LIVE!

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REIN Members only Workshop Friday Night February 15^th
Sat, February 16^th 8:30am – 7:00pm AND Sun, February 17^th 8:30am – 7:00pm
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In fact, previous attendees of the "Real Estate Investors' Quickstart Program" have purchased over $2,292,700,000 (billion) worth of Canadian investment real estate. And before they attended, some didn’t even own their own homes – while others already had a strong portfolio but wanted to make it even better! This program makes huge differences in people’s lives… both veteran and rookie investor alike….

RBC's latest provincial forecasts:

"Alberta leads all provinces with above-average economic growth, followed by Saskatchewan and Nova Scotia. On the opposite end of the scale, and showing a complete turnabout with its mega-projects now in maturation, Newfoundland and Labrador is posting the slowest economic growth rate of 0.5 per cent, and on its heels is P.E.I., as well as Quebec and Ontario with its manufacturing woes. However, a more bullish outlook is in store by the end of this decade for Newfoundland and Labrador, New Brunswick, Nova Scotia and, in particular, Saskatchewan, where there is a possibility for a triple play of diamond mining, rich uranium deposits and a massive oil strike in the southeastern part of the province."

Get Your Copy Of Report Here

If you still think Alberta's economy is on the slide,

"Alberta's economy remains the 800-pound guerilla of Western Canada. At some $290 billion, Alberta's GDP -- gross domestic product -- is almost 15 per cent larger than that of B.C. and Saskatchewan combined.

So when housing starts in Saskatchewan's two major cities soar by 60 per cent -- as they did in 2007 -- it's from a tiny base. Even with a slowdown, Alberta's housing starts will top those in Saskatchewan by six or seven to one in 2008.

Indeed, although home builders in Edmonton plan to curtail new construction in the first half of 2008, some are already worrying that they won't be able to meet new demand by this fall, when inventories are likely to be depleted.

In short, rumours of Alberta's economic demise are greatly exaggerated."

READ MORE HERE

Ask any Realtor and they'll tell you that winter is a time to prepare for the next year. Plant the seeds on the sales they plan to make in the spring because real estate comes to a near grinding halt over the winter months. But not this year.

Royal Lepage Real Estate Services reports that the last quarter of 2007 saw the Canadian market slowing down only a little rather than the full on braking that has come to be expected in last quarter.

Edmonton can expect a moderation and balancing of prices and that is ok by me because I'm looking to significantly increase our investment portfolio and overpriced homes need not apply.

"In Alberta, where Edmonton’s prices were rising at a 50 per cent annualized clip early in 2007, the breakneck rise in recent years "has moderated demand," the Royal LePage report said.

Edmonton and Calgary now have "a surplus of inventory," it added, and "while demand is strong, the increased supply has impacted the resale market and homes that are not priced appropriately will take longer to sell."

Soper said the Alberta econ-omy needs time to adjust to the "frankly unhealthy increase" in home prices between late 2005 and early 2007." Royal LePage president Phil Soper

Realtors' Association of Edmonton president Marc Perras predicts Edmonton-area home prices are to rise four per cent over the next 12 months while a CMHC market analyst, Lindsay Kendall, predicted that Edmonton prices for all forms of resale housing will rise 6.5 per cent in 2008 to $360,000.

Now, I like to manage expectations and prefer to factor in a conservative rate of appreciation at 8% per year- which is a safe average in an up or down market.

I am a contributing writer for Nu Wire investor. I have a new article out on The Fundamentals of Real Estate investing.

This site has such good information for a variety of interests (I am not just saying that because i write for them) take a look at Nu Wire Investor or to directly view my article click Real Estate Investing: Focus on the Fundamentals

Have A Great Weekend!

We just got back from 19 days in Vietnam with a quick excursion into Cambodia. It was a great trip with lots of surprises and delights, beautiful sunsets spent on white sand beaches and excellent food.

Anyone planning to go should visit Ha Long Bay for the incredible caves and kayaking also don't miss Ho Chi Minh it's one of the most interesting culinary cities I have been to - try the street vendors if you are up for it.

After the hectic and successful year we had in 2007 it was nice to be able to take a trip like that. (Actually what I am most thankful for is a business where proven systems and an incredible team allow me to leave, come back nearly 3 weeks later and find everything going like clockwork)

As an avid traveler the writing in International Living or Conde Naste invokes countless dreams of villas in Greece or a secret beach front hideaway in Costa Rica.

This lovely write up for a $59,000 Belize beach front property makes me want to sell up now and head south,
"This little English-speaking Caribbean gem is tucked just under Mexico’s east coast behind the second-longest reef on the planet, making it an ideal scuba destination. The reef keeps the beaches smooth and inviting, and the hundreds of cayes, or islands, off the mainland are a treasure trove for explorers and island-hoppers." International Living

We spent a lot of time on the trip playing our own "International Living" game. We would pick a property, any property and give it a write up like it had never seen before.

My favorite on the 6 hour cruise we took up the Mekong River:

"Live your retirement dreams overlooking the majestic Mekong. Just steps away from the river banks, watch fisherman float by in wooden dugouts as they go to catch tonight's dinner. Spend your days in a hammock or exploring the beautiful historic town you live in...."

There are properties like that all over Vietnam but perhaps at dusk and dawn you must "Deet" yourself against the swarms of malaria carrying mosquitoes, or maybe the swell from the river deposits about 1 ton of discarded plastic onto your river bank each day.

Different seasons, different times of the day and even local festivals can turn your paradise into hades for a while. You should visit your property night and day, rainy season and dry season to make sure you are buying your dream home and not a nightmare.

For example one boutique hotel we checked into at night was gorgeous, great furnishings and a balcony that looked over a bustling street filled with cyclos and street vendors energetically selling their wares. The next morning the cacophony was unbelievable. If you know anyone who has been to Vietnam ask them about the "honking".

My point is that if you are looking at buying an international property your due diligence must go above and behind what you did for your home, back home. The romance you read in the property description may elude you at times.

International Living or another organization like it can certainly offer a wealth of information and local knowledge. But, like any investment it's important to realize what the motivation of the promoter is. Perhaps their expertise lies in the information or services to help you locate your dream property or on the other hand, perhaps they profit purely from commissions brought by inducing a sale. There's nothing wrong with that either- if you're getting what you paid for (I've never purchased a property through International Living or any other similar organization; therefore I am not endorsing nor criticizing their services) in fact this may be EXACTLY the expertise needed to get you started on your second home or new retirement home dreams.

"....you'll be introduced to real estate agents who can tell you about the local market and take you to see properties currently for sale; expatriates already living in the country, who can tell you why they decided to make the move and what they like (and don't like) about their adopted homelands; bankers; economists; attorneys; businessmen..." International Living

What I learned on my vacation is one great sunset does not make an awesome investment property. You've got to come back and visit it during the off-season, festival times and see what the locals are like when you're not just a tourist spending your money... Quite often you may find that a month long holiday is enough time, you don't need to buy the ranch too.

Our next trip will take us to mainland China - I can't wait to find out what I will discover there..