Surrey Real Estate Investors Club - A Presentation on Area Selection and the RE Cycle
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Transcript of Surrey Real Estate Investors Club - A Presentation on Area Selection and the RE Cycle
Surrey Real Estate Investment Club
Welcome!“The most important thing is to do your homework. You
have to read a lot, find out about the areas you want to
go into, where the emerging markets are. It’s a matter
of where you see growth, go and find out, you have to
go into the markets yourself."
~Jim Treliving
Surrey Real Estate Investment Club
Welcome!
"Real estate is at the core of almost every business, and
it's certainly at the core of most people's wealth. In order
to build your wealth and improve your business smarts,
you need to know about real estate."
~Donald Trump
Future Plans
1. Strategy & Getting Started
2. The RE Cycle and Selecting An
Investment Area
3. Property Selection and Cashflow
4. Financing
5. Due Diligence & Making an Offer
6. Tenant Selection & Management
Review of Last Meeting
• A simple, little retirement plan
• add $2,000 / month to your retirement fund!
• Why or why not invest in RE?
• What skills are required?
• What strategy?
• hands-off vs active
• residential, commercial, MFH, SFH, condos
• What tactics?
• Wholesaling, B&H, flips, RTO
• Getting started – your vision and plan
www.AspireRealEstate.ca/blog
Tonight’s Agenda
• What is the real estate cycle and how
do we use it to our advantage?
• How do I decide where to invest?
• Location fundamentals
The Legal Stuff…
The information contained herein (the “Information”) is intended for general informational purposes only and should not be relied upon by recipients hereof. Although the Information is believed to be correct, its accuracy, correctness or completeness cannot be guaranteed and has not been verified by either Aspire Holdings or any of its affiliates.
Views expressed in this presentation are based on research materials available from sources that Aspire Holdings (d.b.a. “Aspire Real Estate”) considers reliable but neither guarantees, warrants nor assumes any responsibility or liability of any kind with respect to the accuracy, correctness, completeness, or suitability of, or decisions based upon or in connection with, the Information.
All real estate opportunities come with varying degrees of risk and past performance is not an indicator or guarantee of future results. Prices can go up or down and current performance may be lower or higher than any performance data quoted for comparisons.
What is the first thing that comes to mind when people talk about the
Real Estate Cycle?
The Real Estate Cycle
The Housing Bubble-Kieran Trass
The Real Estate Cycle
The Secrets of the Canadian Real Estate Cycle
- Don Campbell, Kieran Trass, Greg Head and Christine Ruptash
Caution!
• Market specific
• Nearly Impossible to pin point exactly!
• Tactics to use
• Focus on Trends and WHY
BoomEarly
– Population continues to increase
– Returns are attractive for existing investments but new ones offer lower returns.
Middle
– Population growth, rents peak.
– RE sells quickly, few foreclosures.
– RE Financing is readily available.
Boom continued
End
– Rents fall, vacancy rates increase.
– Constructions levels are very high.
– Renovation is very popular.
– Prices are still increasing but will change quickly.
Prevailing emotions:
Fear that RE is good investment shifting to GREED (Fear of missing out).
Slump
Early
– Slow price increase.
– Surplus of RE inventory.
Middle
– Vacancy rates peak.
– RE horror stories. Non-strategic investors sell to get out.
– Cashflow decreases as rents decrease.
Slump continued
End
– Population/employment growth and rents are low but stable.
– Income and RE sales are stable.
– Price of RE drops and affordability improves.
Prevailing emotions:
Greed turning to Fear
RecoveryEarly
– Population increase.
– Rent increase and vacancy decrease.
– Property values increase (<10%).
Middle
– RE is affordable .
– Construction increases.
Recovery continued
End
– Returns decrease as prices increase.
– Rent increases slow down as people become homeowners.
Prevailing emotions:
FEAR shifting to Greed
Strategies during Boom
Early
– Continue buying for CASHFLOW.
– Good time for construction or selling
Middle
– Get creative with existing properties to increase cashflow.
– Opportunities with good cashflow are rare.
End
– Get ready for slump, sell underachieving properties.
– Vacation time!
Strategies during Slump
Early
– Get ready for opportunities to come.
– Continue vacation.
Middle
– Start shopping. Look for those that NEED to get out.
– Focus on strong cashflow.
End
– Quality properties with great cashflow are available.
Strategies during Recovery
Early
– Buy and Hold. Great time to grow portfolios equity and cashflow position.
– Fixer uppers.
Middle
– Continue buying for cashflow and fixer uppers.
– Land for development.
End
– Land for development and well located renos.
– R2O-be careful of leaving equity on the table.
Important points
• Global economy is still a wild card.
• Buy and Hold with
positive CASHFLOW
is a great
investment.
“The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the
best time to sell.”
- Sir John Templeton.
Why Is the Area Important?
You are only making an investment if you make
money while you own it.
Otherwise you are just
a speculator!
But, you make money on the buy, not the sell.
Good location research will improve your likelihood
of success. Poor research can devastate you!
Where Should I Invest?
You have to ask yourself some other
important questions first:
1. How active am I planning to be with this
investment?
2. How far am I comfortable travelling to do
my research?
3. How familiar am I with that area right now?
Some Big Picture Things to Think About
Population Trends?
Employment Situation?
Transportation?
Healthy Economy?
Appealing Opportunities and Plans?
Case Study: Surrey vs Ladner
Real estate with a CAUSE!
C onvenient
A ttracts ….(families, students etc)
U nder Market Value
Credit to RevNYou.com!
Case Study: Surrey vs Ladner
Real estate with a CAUSE!
C onvenient
A ttracts ….(families, students etc)
U nder Market Value
S tarter Homes
E conomic Fundamentals
•
Case Study: Surrey vs Ladner
C onvenient
A ttracts ….(families, students etc)
U nder Market Value
S tarter Homes
E conomic Fundamentals
GDP → Jobs → Population → Rental
Demand → Decreased Vacancies →
Increased Rents → Increased Prices
Focus on a Sub-Market
Same indicators on a micro-scale:
• Rent Rates• Vacancies• Median income• Typical starter home• Typical home owner & tenant profile• Watch listings/prices/DOM & other signs
• Walk the area frequently – take your dog!