With all the recent media reports coming out about the Canadian Real Estate market slowing down the usual suspects are out pumping their doom and gloom real estate opinions.
I have a friend who has been negative on the Canadian Real Estate Market since 1998. LOL, one day he’ll be right.
But what got us thinking about this is that someone we met who really wants to start building a real estate portfolio has frozen because she’s confused by some of the negative headlines about a possible real estate slowdown in Canada.
We know there’s probably a few more people having the same thoughts.
So here are some things to keep in mind as you see the Canadian Media spin negative stories over the next few months…
Investment real estate is very different than a person’s personal family property. But that distinction is rarely, if ever, made clear.
If you’re buying a home for you and your family to live in then, and only then, can trying to time the real estate market make any sense. And for personal homes, there is a chance we may be at the top of the market, especially in Vancouver and Toronto, but will only know for sure when it happens … until then everyone is just speculating.
But here’s the thing …. if you’re buying an investment property that produces positive cash flow for you then timing the real estate market may be just plain silly.
Back in late 2008 and early 2009, we met a lot of potential new real estate investors who backed out of buying property because of the financial meltdown. They thought it was the worst time ever to buy property.
We did our best to calmly explain that you don’t make any money with investment real estate by trying time the market. No one can time the market with regular consistency. No one. And if anyone tells you they can do a 180-degree spin and run … fast.
The highest paid professionals can’t time the market with a team of analysts, tools, data and experience.
You really only make money in real estate from “time in” the market, not by “timing” the market.
How do we know this?
Well, our parents were renting out properties in the 1970’s for $12/week. Our father was “flipping” homes in the late 1980’s and in the early 1990’s during a deep recession. Nick flipped his first property at 21 years old. We’ve flipped, rehabbed, upgraded, rented, rented to families, rent to students and rented to people we should never have rented to! I helped a friend buy the power of sale in Oakville, Ontario for $930K that he sold shortly afterwards for $1.25 Million.
We’ve seen a few things. But here’s the most appropriate experience/story we can share with you.
Back in early 2009 when many people were not buying investment property we know of two different people who went ahead and bought property that produces positive cash flow … small little single-family rental homes on the outskirts of the Greater Toronto Area in communities that had growing population bases and diverse employment sources.
Remember, at this time many people were frozen.
These investors ignored the negative doom and gloom media and ploughed ahead with a sound plan.
Over the last few years, they’ve been earning monthly positive cash flow while the doom and gloomers have been screaming the sky is falling.
The properties have appreciated rather nicely, the debt continues to be paid off and they have cash flow and equity to be happy out. One of them is selling the property for a tidy profit that they’re ploughing back into another investment.
Even if the value of these investment properties had fallen 10% to 20% during these years they wouldn’t care because they bought them smartly … they would continue to rent them out and at least cover their debts but likely be cash flow positive during the entire time even in a down market.
Some close friends in the U.S. have survived a 30% decline in prices because rents did not fall and they were able to continue renting out their properties.
The key to this is that they’re buying property that they felt comfortable owning for ten years or longer. They didn’t operate with a short 18-month time frame. They bought the right homes in the right areas for the right reasons.
You make money in real estate by “time in” the market, not “timing” the market.
They surrounded themselves by a strong team of professionals and took action.
So when reading negative real estate press remember that at the same time those articles were being printed there are hundreds of Canadians who are successfully building their wealth every single day.
Real Estate is stressful, there are problems to deal with, cheques to track down, numerous people to deal with, expectations to set and sometimes you want to cash in your chips and bail out. It would be too simple for us to sell the idea that investment real estate is easy … it’s not, but it is profitable.
In the long run, we’ve never met anyone who wasn’t happy with a properly run investment property.
Don’t let the ankle-biters get ‘ya.
Stay positive, stay strong, continue learning, push forward, hustle hard.
We’ll see you on the other side!
Until next time … Your Life! Your Terms!!