We’re just into 2014. Calgary’s rocking out. Edmonton’s starting to heat up and I ran into three multiple offers in four days last week. People are bringing rents up by $100-200/month. Does it start to feel like 2004-2007 again? A little bit.
We’re a cyclical economy with a cyclical real estate market.
It doesn’t matter if we’re in a hot market or things have flatlined. There’s always ways to make money in real estate, but there’s a couple things that will help save you in the future if you buy smarter now.
- This is no time to skip due diligence. I dusted off REIN’s Property Goldmine Scorecard for some clients last month. Make sure you understand where you’re buying, what you’re doing and the fundamentals that drive the market. Learn about the property, the tenants, do inspections and searches, and always consult experts.
- Understand the difference between making a rational decision which may challenge your fears with making a foolhardy decision based on emotion where you overpay for a property. The former could involve buying a more expensive property than you ever have, but one that is supported by the income and quality of the property. The latter is often driven by the fear of missing out.
- When all else fails, buy quality and buy slowly. I know several investors who are bankrupt, the subject of lawsuits or are in jail. One of the unifying themes is that they grew far too fast and they bought stuff that was a good deal, rather than buying quality properties. When the market went sideways their values fell faster, the vacancies stacked up and the not-so-great financing fell apart. I bought a townhouse at the peak of the market in 2008, but it was a great unit in a decent complex with incredible tenants. Even with a $30,000 special assessment I’m still positive cash-flow and I’ve survived the dip. I credit that success to quality property, great tenants and great management.
This is the time to make careful acquisitions so you’re well positioned to ride the wave that’s coming.