Edmonton Real Estate Investor: November 2010

I've obviously got very strong ties to Japan. We've only been out for 6 months so I'm still closely drawn to Japan's economic situation.

When we left things were looking dire. All the close friends we keep in contact with say they are getting worse. It looks like the Japan's economy is stuttering and may not ever start again.

The power is shifting to China and many young Japanese people will have to change drastically how the are educated and expect to live. The current economic structure is so archaic and aged heavy that young people must wait years to advance.

Here is a really interesting story of the power of choice in Japan.

Cage Match - Ethical Oil vs Enviro Disaster Bringers - "The event was a reprise of sorts of the recent throw-down in Calgary between Levant and Andrew Nikiforuk, author of "Tar Sands: Dirty Oil and the Future of a Continent."

The writer of this article is clearly on the side of the Enviro Disaster Bringers, and admits it. I feel for Ezra Levant yet see his willingness to go and speak in a clearly hostile environment a growing trend amongst oil sands supporters.

Oil Wealth cushions Alberta from soaring loonie - "Alberta's oil wealth is somewhat cushioning the provincial economy against the hard knocks from a soaring loonie, but 2011 will still be a slow ride, says the head of Export Development Canada."

The global demand for oil is down thus limiting the growth that Alberta will experience. Even so our oil wealth will help us make it through the slightly bumpy ride 2011 is showing to be. Alberta's only limit is demand and when demand increases - from China and other growing economies so will our economic health.

This means we can repeat our real estate cycle of buying in the current low market (winter is the best for deals) and sell when the global economy ramps up.

Are you scared to show your face at libraries in Edmonton because of huge fines? Today November 27th, and today only, you can take a food donation to any Edmonton Public Library and decrease your fines to a max of $25.

It's a great way to reduce that nagging fine and help the Edmonton Food Bank.

Go here to watch the video JUMP!

Edmonton's temperature is a fun -34C with the windchill, it's around -26C without. That's pretty darn cold. I took my son outside this morning and he started crying "Mommy it's too cold!" "Go that way to the house!" I totally agree.

It's freezing and frankly we aren't acclimatized. Luxurious lows of 5C in Japan in the dead of winter have made us soft and weak. I realize all my winter clothes are actually just warm fall day clothes and don't cut it out here. The fun part - buying more winter gear!

Our plan this year was to spend the whole year in Canada rediscovering the country we left a decade ago but frankly I'm lured by the ads of $345 to Cuba.

Now, if only I can talk Todd into it.

Gary Lamphier of the Edmonton sun recounts 10 Lessons to Learn from the Great Recession. It's focused reading and informative and he does a great job of summing them up.

I have 5 things I learned from the global recession of 2008:

1. Keep a cash reserve - you need a reserve that can be accessed whenever you need it. Hopefully it will be large. A line of credit is the obvious choice it should be set up long before you need it because we all know banks don't give out money to the needy. You have to prove you can pay it back.

2. Keep your costs as low as possible - Don't spend on anything superfluous. Unless it's improving property value or reducing tenant turnover - you don't need it. I think this way for my own home too! It's comfortable but I'm not getting into consumer debt without seriously thinking about it.

3. Expect to pay more than you are - We ride the variable and can handle the thrill. Mortgage rates went to historical lows but if I buy my properties expecting to pay 5, 6 or 7% they are able to survive any rate fluctuations and consistently produce cashflow. These low rates are not here to stay bank on them being higher and give your portfolio an excellent buffer. Do this with every expense you have related to your investment - build a buffer (see number 1)

4. Never over leverage - Leverage is what makes real estate an incredible investment but if you get too leveraged you're on thin ice. You can easily find investments that will produce well with 80% loan to value. Sure it's great to save some cash and get a 90% or 95% LTV but if rates go up and your mortgage payments are higher than your rental income you'll have some serious trouble with negative cashflow.

5. This too shall pass - You might get wiped out - it does happen but what are you going to do? Give up? Robert Kiyosaki said 9 out of 10 businesses fail. Be prepared to fail and try again. The knowledge you learn in a economic crisis is what makes you an expert. You'll know how to protect yourself in the future. Failure is the best education you can get.

There is a very good article on Yahoo Finance on real estate agents being the next to go obsolete. New interim rules introduced by the Canadian Real Estate Association allow members to offer basic services, including only posting properties on the mls.ca - leaving the seller to show the property, field offers and close the deal may be a step in the "we don't need you anymore" direction.

I'll be the first to say that I don't like paying such high commissions for our sales. We've been thinking of listing with a flat rate brokerage recently too. The things I worry about are the quality of marketing being done and the response from the buyers representative when they notice our Realtor is flat rate - who will pay them and how much?

An sad example- the owner of one of the first discount real estate agency received death threats from other Realtors. Their fear of what the flat rate /discount fee trend would mean for the future of their livelihoods led to an outburst of dangerous irrationality.

There is a big change coming in the way people sell houses. For me having a savvy Realtor frees up my time so I can work on other things. However, if a savvy Realtor realizes that serving many cheaply is better that serving a few at a higher rate then I know who I'm listing with. As with any service provider I would ask for references and see what kind of work the Realtor you're looking to hire has done.

At any rate the most important thing is a whole new world of options is coming to the Canadian real estate market and sellers will be saving a lot of money.

The Edmonton Real Estate Board reports that Edmonton market's key word would be stability. Although prices are the same as October 2009, meaning we've seen little appreciation in our investments, the market is moving and houses are selling. With many of our investments the fact the mortgage being paid is one of the three ways you profit. If one way falters you still have the other two:
1. Cashflow
2. Mortgage pay down (forced savings account)
3. Appreciation

There is no huge inventory like we saw last year. As the inventory decreases prices will increase. Probably not this winter but from spring 2011. So if you want to sell you're not going to get a price that is way out of line with the market but if you want to buy you can probably find some great deals. Everybody else stay tenanted and keep your property looking great!

There is something in the market for everyone great starter homes, investment properties and cash-flowing multi-family buildings. We're currently looking at multi-family units around Edmonton.

Click HERE to see some of the buildings we're looking at!

As a treat to ourselves we've bought two tickets to the I Can Do It Conference in Vancouver 2011. This is going to be such a powerful weekend. with speakers like Dr. Wayne Dyer, Louise Hay and Caroline Myss you know you're going to end the weekend a much different person than when you entered the conference hall.

It's the first time I Can Do It will be held in Vancouver. Here is a list of the featured speakers:

It's going to be unreal!

  I was in Calgary a few weeks back attending the Buildex Show which had some cool ideas. Dark chocolate tones, granite counter-tops, and blended-stone exterior facades are all beautiful to look at, but can be tough to extract the reno-rent ratio reward out of. For personal homes, executive rentals and commercial face-lifts - yes. For blue collar rentals, no.

There were two booths that I found especially interesting. The first was Cubeit personal storage. Essentially it is a moving container that comes to your property where you load it, then it is shipped away and stored for you. I like that. It's easy, fast and relatively economical.

The second booth I liked was equally glamorous... Waterproof roofing. Yes, sexy, I know. Peddie Roofing specializes in commercial roofing and they waterproof using modified bitumen, among other materials. They are not unique as roofers nor for the products they use; what is unique is how they evaluate the cost/life of the roofs they build and implement a targeted maintenance program. This is helpful when you are budgeting for a major roof overhaul.

I like to take away one or two ideas from a show and apply them; perhaps offering a Cubeit incentive will attract long-term renters who are relocating?

I appreciate all your calls and emails. I'm looking forward to helping you with your next step towards building real wealth.
  Your success continues TODAY, let me help you build upon it.

  “Watch, listen, and learn. You can’t know it all yourself. Anyone who thinks they do is destined for mediocrity.” - Donald Trump   

Kind Regards,  
Todd and Danielle Millar  

Next year looks to be the year when Edmonton's housing market really starts returning to balance.

"Modest," "moderate," "stable" were all words used to describe the Edmonton housing market in 2011 at a Canada Mortgage and Housing Corp. conference Tuesday."

If you been driving on a road full of 6-foot potholes then a road with small ones seems like a smooth ride. Even though the real estate market may be better than the last few years there are still some bumps ahead. Some bumps are bigger than others - like if the US economy doesn't kick into gear. It will drag many sectors in Canada down including employment, energy and retail.

As a buyer it's a good chance to pick up properties as prices aren't set to increase until 2012. However, if your selling, that is one bump that will rock you if you need a certain price because it's a buyer's market and looks to be one until late 2011.

Read more HERE

If you aren't a REIN www.myreinspace.ca subscriber then you are missing out on a lot of excellent resources and forums relating to real estate investing in Canada. It's free so why not go over and check it out?

Here is an example of what you could (and should) be listening too!

A REIN™ Exclusive Economic Forecast from a World-Class Economist - Carl Gomez.

All myREINspace subscribers are in for a special treat. Last week I had the privilege to interview Carl Gomez, Vice President of research with Bentall Capital, and we spent an hour on the phone discussing some very in-depth topics surrounding the Canadian economy and real estate markets.

Carl is a nationally-recognized economist with over a decade of experience analyzing and researching the Canadian real estate market, not to mention a trusted resource for media outlets across the country.

In this interview, discover:

Future of interest rates fixed and variable
What economic sectors are at most risk in Canada
What economic sectors have the most promise
Is it a good time to be investing in Canada?
If the Canadian Housing market will follow the direction of the U.S.
What will happen to the Canadian economy if the U.S. economy continues to struggle?
Quantitative easing... what is this and how will it impact Canada?
What are the 5 most important economic fundamentals to follow, and why
Are we headed for a double-dip recession?
Canadian job market: what are the short-term, medium term and long term prospects for both the job market and the income levels?
Inflation, is this something we should worry about?
The Canadian Debts level... is this a cause for concern?
The #1 rule that all investors must follow... no exceptions!

... and much more

I went over to Don R. Campbell's blog and found a great piece of life wisdom in the form of an interview with Elaine Allison.

Elaine Allison is the author of "The Velvet Hammer" and PowHERful Leadership Lessons for Women Who Don't Golf. She is also an international corporate speaker on Resolve and has worked with Deepak Chopra.

Russel Westcott interviews her on resolving conflict with grace and elegance. It goes without saying that conflict isn't limited to any area of life. This conference call, which you can download here, is just under an hour and well worth the time you'll invest listening to it.

Some of the topics covered:
The 4 ‘never fail’ techniques to resolving any conflict.
The secret word you have to eliminate from your vocabulary, to successfully resolve conflicts
What is conflict.. Is it good, bad or indifferent?
Can you use conflict resolution strategies when dealing with your tenants, Joint Venture partners, contractors and even your spouse?
How long does it take to learn conflict resolution skills?
How do you keep calm during the heat of a conflict… keeping all parties moving forward
Some fail safe methods of ‘broaching’ a topic that may result in conflict.
All this and more…

We've been locking into many of our variable rate mortgages because the rates are so incredible right now. I was offered 3.69% for a 4 year rate the other day at the TD.

While riding the variable is always a good way to increase the cashflow a property produces there comes a time when you have to determine how high your variable rate threshold is. Everyone is saying mortgage rates are going to start rising. If you can withstand that then keep going with the variable.

Rates like this remind me of the early 2000`s when we moved our investment focus from Winnipeg and Hamilton to Edmonton. With the lower prices and low interest rates it's a perfect time to purchase in Edmonton.

Oilsands Dirty Secret: They Add Billions Of Dollars To Our Economy  
By Barbara Yaffe, Vancouver Sun October 21, 2010 

 A call by a trio of environmental groups for Ottawa to apply a legislative sledgehammer to Alberta's oilsands ignores economic reality. The groups -- the Pembina Institute, Equiterre and Environmental Defence -- united on Wednesday to call on the Harper government to start strictly enforcing environmental laws and respecting aboriginal treaty rights in relation to Canada's largest industrial development.  

Their 19-page report, titled Duty Calls: Federal Responsibility in Canada's Oilsands, asserts the oilsands are on track to derail any and all of Ottawa's stated targets for greenhouse gas reductions. GRAB THIS STORY

City Should Follow The Money, Mandel Says
Now's The Time For The City To Promote Cutting-Edge Technologies  
By Andrea Sands, Edmonton Journal October 15, 2010   

The city must foster economic development in areas positioned to become big money-makers such as agri-food, advanced technology, green industries and medical devices, Mayor Stephen Mandel said Thursday. 

The mayoral candidate visited Concordia University College, where he talked with students and outlined the economic vision he will pursue if re-elected Monday.   Edmonton needs to focus on progressive areas of the economy to take advantage of business opportunities here and in the surrounding region, Mandel said later.
READ THE FULL ARTICLE 

Downtown 'Champion' Moves In 
Stantec To Become First Tenant Of Rebuilt Devonian Building  
By Bill Mah, Edmonton Journal October 16, 201  0

EDMONTON - The redeveloped Devonian Building is getting engineering consulting firm Stantec as its first tenant.  

The 10-storey tower at Jasper Avenue and 112th Street has been vacant for about 18 months since it was rebuilt in 2008.

  Stantec has leased two floors, or about 35,460 square feet, in the building, said commercial real estate firm Colliers International, which handled the leasing for owner Canterra Developments Corp. READ FULL ARTICLE HERE  

We're getting ready to have a chilly winter here in Edmonton according to the Farmer's Almanac and the local paper. One headline read "Winter fit for a devil" and a witty reader commented, "Does that mean Hell's going to freeze over?" Whatever the case, we had our first sprinkle of snow last week and it has since melted.

This can be a blessing or a curse. If you have vacancies, the start of November is the big PUSH to get everything tenanted as many folks tend not to move in December, and January can be too cold and awkward to move. Imagine lugging that big screen TV up a frozen flight of stairs in minus 40 weather. Of course there are exceptions, and working with relocation services can aid in winter tenanting.

If tenanting is the curse, then what is the blessing? Seller's become more motivated in the winter, especially if they have a vacant property that they are paying a mortgage on. Less people are shopping for real estate due to the weather; it is difficult to assess landscaping and certain aspects of foundation and roof quality.

Fixed rates in 1-3 year terms are incredibly cheap from 2.5% and longer terms of 5-7 year rates are competitive. Unfortunately the media-spin on dead ducks puts a damper on the renewed growth of the oilsands. But, then again that can work in favour when buying properties in this climate - both politically and seasonally.