Edmonton Real Estate Investor: September 2009

Last weekend I was reminded about the quantitative reality of thought. Danielle, Ronan and I visited our friends George and Harue at their newly completed home . When George first shared his dream to build this fabulous business office-cum-home it was a few years back when we were on holiday at a hot spring resort.

We regularly get together over the New Year and plan strategies for our businesses simultaneously. It's a great way to brainstorm and hold each other's feet to the fire the following year. I had no doubt that George and Harue would reach their goal. What blew me away was the detail and velocity in which their goal was achieved. You could almost see it go from thought to action to result.

I first visited the building site last fall and it was just grass, dirt and a few old cherry tree branches strewn about. As we drove up on Saturday Harue said "Do you remember how far up the road it is?" I was about to answer 'up ahead on the left', when the car slowed and a warm neon light shined in. Illuminated in front of us (on the right I might add..) were the letters 'Seibu Net Home' in a golden orange glowing sign.

Every detail was exactly how I imagined it. Now, think about that for a minute... How I imagined it.

George and Harue had talked about the details with us and had been pretty specific, but to see their vision manifest exactly as they planned was extraordinary.

The Seibu Net Home building is three floors; the main is the Realty office, second floor is divided in to two luxury rental suites and the third floor is their finely finished home. The roof has high walls and they are developing a BBQ area, putting green and outdoor bath. You can see Mt. Fuji on a clear day too.

By the way when I say luxury what I mean is that when you open the bathroom door the toilet seat automatically pops up to greet you. As the seat warms, soothing water sounds emanate from speakers hidden in the ceiling. When you leave the toilet flushes, lid closes and it says 'good-bye'.

That my friend is comfort.

It is inspiring to see a dream come true. And this enforces the truth of 'When you believe it, you'll see it'.

Choose to believe.

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We spent a weekend in Saitama with our good friends Joji and Harue. We often spend any holiday we can with them but this time was a very special visit. We went to celebrate their moving into their dream home.

This has been several years in the making. Jorji and Harue have really succeeded with their business, meeting their goals and life dreams.

They've built a fanatastic 3 storey commercial residential mix with Seibu Net Home on the main, tenants on the second floor and a fantastic living space on the third.

The roof, which has a spectacular view, will be turned into a green space where Harue can relax and Joji can practice putting. It's all located near the bustling station

They really stayed focused, worked hard and put everything into making this dream come true. The one thing that Harue said that really inspired me was " It came a lot faster than we expected." They had some difficult times after the Lehman Brothers collapse but put their heads down and stayed on track to their goal.

What inspiration!

Cashflow. Cashflow. Cashflow. What happens when it stops? As Rich Dad Kiyosaki says the minute an asset starts taking money out of your pockets it's no longer an asset. It's an alligator that will eat you.

Not literally. But cash draining out of your pockets, bank accounts and piggy banks every month is every investor's nightmare. Chris Davies' - Two Ways to Stop Bleeding Cash helps you determine how serious the bleeding is and possible ways to staunch it. It's excellent advice.

One thing I've learned and forgot and then learned again is to buy positive cash flow properties. The constant flow of income is crucial to the health of your investment's bankbook and can be used to purchase more assets in the future or improve the assets you have.

If you have negative cash flow on an otherwise good property MAKE SURE your cash reserves are big. You'd be surprised how one big repair or a few months vacancy can eat through your cash reserves.

This is SECOND to trying to make the property cashflow by:

1. Extending amortization - this will lower you monthly mortgage payments
2. Increasing rents
3. Adding value - i.e. rent out the garage or put coin laundry in
4. Convert a garage to rental space - extreme, lots of permits

Whatever tactic you use make sure the cash starts flowing back in and not out of your investment.

The market in Edmonton is finally balanced again. Although prices are a little lower, less than 1%, than what we saw in August last year.

"Although sales numbers cooled a bit after record sales in June and July, we are still experiencing the strength of the market in Edmonton," said Charlie Ponde, president of the Realtors Association of Edmonton.

June and July saw sales rise 28% over the same period one year before; low interest rates and great deals were probably behind the jump in activity. Seasonality could be in effect as well were winter saw a near freeze. The market picked up in the warmer weather.

Alberta's economy will make a comeback in 2010--strong enough to contribute to the national recovery, yet modest enough so that we don't see the problems associated with the break neck growth we saw in the mid 2000s.

Every field has it's star professionals, those who play in the top 1 or 2% and really make the money.

Panhandling apparently is no exception. Edmonton police claim that some panhandlers make up to $400 a day and that one even lives in a high-rise condo in the downtown area.

At first I felt slightly disgusted by this. Why should this person beg other people for money and live better than some of them who generously give to him?

Then I realized people make money all kinds of ways and if his talent is begging....... It's not so uncommon apparently as a quick Google search yielded up "panhandling tips"

I personally wouldn't make my money leeching off of others. It's better to provide a service than demand money.

My biggest concern is the true poor and needy that aren't getting what they need because charity is being given out on the street rather to organizations with proven track records and history.

The only other thing I can say is you know a region has a great economy when begging brings a 6 figure income (tax-free!).

This year is the first year that a group of holidays in September is being called "Silver Week". We have always had Golden Week in April but this is the first time we've have 5 days off in a row in September. It's not a common holiday and the next time the dates fall in a row like this will be 2015 then 2026 so we better relax while we can.

Some believe it is the Democratic Party's attempt to jump start the economy with more spending and workers using up more of their paid holiday leave.

“Promoting longer paid holidays is an effective way to expand domestic demand, not only in the travel industry but in retail as well, said Yoshiki Shinke, senior economist at Dai- Ichi Life Research Institute. “Legislation and an awareness campaign for companies are necessary” to get people to take all their holidays."

We're doing our usual trip to the cabin to relax amongst the wild monkeys in Kirifuri, Nikko. I'm on a cooking and baking spree with banana chocolate chip bread, home-made pizza and curried lentils and rotis to be some of the highlights of our week away.

Have a great weekend!

There has been a lot of money changing hands this month in Edmonton. It is all good stuff too, which you can read about in the links below.
A new conference and exposition center, community health facility (a really BIG one) and a ramp up in infrastructure to name a few.

All of that creates strong short and long term jobs, which are great for kick-starting the economy.
The oilsands deal with China is pretty impressive to boot. I wouldn't say it pulls us out of a recession yet, but you can read the articles and decide for yourself.

Recession is over, says economist
By Mario Toneguzzi, Calgary Herald, September 12, 2009
Rising commodity prices will fuel modest economic growth in Alberta in the next two years as demand for energy grows in the world's emerging markets, says a national economist. Canada's recession is over and the country will lead all G-7 peers in economic growth next year, paced by Alberta's strong energy sector, said Benjamin Tal, senior economist with CIBC World Markets Inc.

"The difference in the resale housing market now, compared to the beginning of the year, is night and day and nowhere is this more evident than in the West," said Dale Ripplinger, association president.

"Homebuyers recognize that interest rates and prices have bottomed out, and are taking advantage of excellent affordability before prices and interest rates move higher."

A five-year fixed-rate mortgage, the most popular among consumers, is still available for less than four per cent at some financial institutions.

Variable-rate mortgages, tied to prime, remain at about three per cent and are not expected to rise until June. The Bank of Canada has pledged not to change its lending rate until then -- but it is not an ironclad guarantee.

The low rates seem to have worked and have the market even hotter than in 2007, a record year. July sales in 2009 were 3.9 per cent above the previous July high set in 2007.

It has been a stunning reversal for a real estate market that had almost ground to a halt over the winter." Read More

After an intensive 17 week course, 15 women are ready to go out there and move some heavy equipment around.

"Wanda Wetterberg, operations manager for Women Building Futures anticipates that the exodus of baby boomers from the workplace, combined with the student’s hands-on experience with loaders, graders and dozers, will help open the doors wider for women in the field.

“There is and will continue to be quite a heavy demand for heavy equipment operators,” she said, adding that the same holds true in other trades.

“Even if the construction industry has slowed down a bit, the demand for operators is still pretty high. And it certainly does pay well. That’s what our students are looking for,” she said"

For now gone are the days when 12 year-olds are working at fast-food chains and restaurants are closing due to restricted staffing.

Any women who are interested in taking the course should contact Olds College or Women Building Futures

Until this recession housing prices where slowly and steadily creeping out of the territory of affordable for many first time buyers.

The truest example of this was a "starter home" in Vancouver for $700,000. Of course location and other market comparables would set aside this property from the rest, it's still not in my idea of the starter home region. Vancouver's housing affordability is still an unbelievable 63%. That means 63% of income must be devoted to mortgage payments.

Now we now why Vancouverites are so svelte - they can't afford food!

Housing prices cooled and low interest rates brought back affordability but how long will it last? According to some experts not so long.

"The two major contributors to the significant improvement during the past year or so — the decline in mortgage rates and the drift down in prices — appear to have reached turning points."

"Supply of properties for sale is dropping as demand bounces back, which is working to heat up prices again in many parts of the country."

RBC senior economist Robert Hogue

We are in a one-of-a-kind situation to pick up great properties with low interest rates at incredible prices. There is such demand in Canada and especially in Edmonton, Alberta for quality housing, price increases are going to return in the next year.

"Jeff Rubin predicts that oil prices may rise to $200 a barrel" was going to be the subject of this blog till I got this unbelievable video in the mail from my husband. Yes, we mail each other although we sit about 3 feet away from each other. Everyone does it.

I'm guessing these Welsh sheepherders had some free time and an incredible amount of creativity to come up with this wonderful display.

Somewhere between 2013 and 2015 oilsands production is set to double. Increased demand in the U.S due to the decrease in oil supply from Venezuela and Mexico make Canada's oil not only desirable but the natural choice.

The first $2Billion dollar pipeline was approved last week and many many more are coming. So what does this have to do with real estate?

At the peak of the mini-boom in 2007 Alberta oil companies couldn't find enough people to work in the tar sands now with plans to double the work force will have to increase as well.

Edmonton as the closest major city to the oil sands (with reasonable housing prices) is going to attract a lot of renters and potential buyers over the next 2 to 5 to 15 years. How does that make anyone money? By either owning the properties for sale or rent.

Don't forget -

During the gold rush entrepreneurs who filled a need serving those who panned for gold made most of the profits. Alberta is in a modern day gold rush and the strongest demand in this province is housing. Areas that are “hubs” are those that are seeing the highest increases in housing values. Edmonton’s strategic location between the multi-billion dollar Alberta Oil Sands projects in Northern Alberta and Calgary, make it the center of all the action.

So would you rather pan for gold or sell the pan, shovel and tent to the worker?

$2 billion investment in Alberta oilsands - A Chinese energy giant is making a nearly $2-billion investment in the Canadian oilsands. Athabasca Oil Sands Corp. says PetroChina is buying a 60 per cent working interest in its Mackay River and Dover oilsands projects in northeastern Alberta.

Although Canada's economy is tied to the U.S our oilsands are bringing interest from around the world. It is a valuable safe source of oil.

New online service makes home buying smarter, swifter for Canadians - Zoocasa.com -- a recently launched online site promises to make searching for a new home an exhilarating and productive experience for Canadians. Zoocasa offers a wealth of "neighbourhood information" for its more than 100,000 home listings.

Sounds interesting!

Location Selected For Alberta Nuclear Plant - According to a report by the CanWest News Service, Energy Alberta Corp. has said that it has formally requested permission from the Canadian Nuclear Safety Commission to construct a pair of twin-unit Candu reactors about 500 kilometres northwest of Edmonton.

"Building a nuclear power facility is a long and rigorous process. This is the beginning of a public and regulatory process that will include environmental, health and safety assessments," said Wayne Henuset, Energy Alberta's president and co-chairman, who termed the application a "historic moment" for the province's nuclear power industry.

Hopefully this will help reduce our greenhouse emmissons.

The emerging energy superpower - Canada's oil and gas industry is surviving the economic downturn. The boom times may be over, but stories of a bust are wide of the mark

AS A MEMBER of the G8, Canada is an anomaly: it is the only member of the rich nations' club that depends on a resource-based export industry to support its economy. Oil and gas are both central to this and Canada's energy sector increasingly influences the way it deals with the world. Prime minister Stephen Harper calls his country an "energy superpower". Notwithstanding the temporary slowdown in the US economy, Americans increasingly depend on imports of Canadian energy to support their lifestyle.

And, like much of the rest of the world, Canada depends on the US: its consumers almost monopolise Canadian energy exports and the political decisions made in Washington – like whether to adopt a cap-and-trade system to fight carbon emissions – will shape the Canadian energy industry and politics

"We are proud to be pioneers in bringing the benefits of clean, safe, reliable nuclear power to Alberta."

Canada is the economic leader in the G8 and Alberta is the leader in Canada, where else in the world should you put your investment money?

Alberta economy predicted to grow 3.3 per cent next year — "Alberta’s struggling economy will recover next year and grow 3.3 per cent, the Conference Board of Canada predicted Thursday.

Gross domestic product will contract 2.7 per cent in 2009 after a 0.2 per cent decline in 2008, the board said in its summer provincial outlook.

“Higher energy prices and lower construction costs should spur oil and gas activity, which will support a rebound in the domestic economy,” the report said.

Scotiabank also predicted that rebounding oil prices and falling inflationary pressures will bring a return to growth for Alberta in 2010, with GDP rising 2.8 per cent after a predicted 2.3 per cent contraction in the economy this year. The bank said the Canadian economy’s output will shrink 2.2 per cent in 2009 and grow 2.5 per cent in 2010."

By next year Alberta will be leading the nation out of the recession.