Archive for November, 2016

The #1 Investing Mistake – Fighting Your Emotions

Monday, November 21st, 2016

Try an experiment. Pick a stock, a business venture, a real estate area, or another kind of investment and ask your friends and family what they think about it. What do you think will happen? We are willing to bet you will get as many different answers (or at least variations of answers), as the number of people that you ask. The question is: Why?

Where Do Our Emotions Come From?

Everyone has past experiences that shape the way they view the world today. Without delving deep into the psychological, everyone carries emotional baggage attached to the events that have occurred at previous times in their life. This is unavoidable; however, the key is to recognize the facts from your own jaded perception.

If someone heard their parents warn them about a potential real estate crash (similar to that in the 1980’s), and never looked deeper into it, then it is likely they will avoid real estate investments. If someone read an article in the paper about a murder in a certain area of town, they may feel the area is dangerous. Had that same person never been subjected to these stories, they would likely never have had any fear attached to real estate, or a particular area of town.

The Origin of Fear

We are actually only born with two natural fears: the fear of falling and the fear of loud noises. But what does this mean for all of the other fears we have? Every other fear in our life has been learned and taught to us. Someone with different experiences will have completely different fears. How do we know if something is dangerous or should be feared?

Think back to some of the fears you may have: spiders, snakes, etc? Or maybe things a little more pertinent: bankruptcy, certain areas of town, technology stocks (especially after 2001), etc? What do we have to believe to feel these fears? Chances are our fears are based on a small piece of information we gained in the past. We have now spent our lives focusing on supporting evidence for this fear and perhaps overlooked real, refuting evidence.

Your Emotions’ Role in Investing

Since emotions and fear are based on “hearsay” and false evidence that seems real, and not on facts and fundamentals… they have no place in investing. It is impossible to make an unbiased investment decision when emotions rule the basis of that decision.

Investing out of emotion and not fundamentals is the #1 investment mistake.

Fear is not the only emotion to be careful of. If you are choosing a place to invest because you grew up there or because it is close to your home, or you think the house is cute, or worse yet, because your parents told you too . . . Be Wary.

Fundamentals vs. Emotions

Investing fundamentals are based on objective, unchanging, non-deviating facts, whereas emotions are based on . . . well . . . very little, if any facts. If your research and due diligence meets the criteria, and is in line with your ultimate goal, then make the investment. However, if you are basing your decision on the past advice of a friend or relative that no longer applies to a marketplace, then run away until you can get the facts straight. You want undeniable, measurable facts.

Real Estate Fundamentals

If a city is growing in income level & population, the development in the area is starting to take off, the price to income ratios are low, vacancy is low, interest rates are low, unemployment is low, and prices have begun to climb after a plateau . . . then invest. If an area is beginning to redevelop (i.e. new buildings) with a few projects and things are starting to clean up, where traditionally this has been a “tough” area of town, then invest and ignore the fear.

There are lots of economic indicators that will make a particular city (or area) a good place to invest in real estate. These indicators are what you need to make your investment decisions based upon. If the type of transaction fits into your portfolio (flip, wrap, lease option, joint venture, cash flow, etc.) and will help you meet your goals, then the decision is unquestionable.

The Boring Side of Investing

After you have done 1 or 2 transactions, real estate investing should become boring. It is a mindless game. Either the fundamentals are there, or they’re not. The numbers work or they don’t. You don’t care what the house looks like, where it is located, or what nationality is prevalent in the area. The only thing you care about is this: Are the facts good and will it help me reach my goal? Investing in real estate is a mindless process that can be repeated over and over.

The fun of real estate investing is rising above your fears & emotions, and enjoying your wealthy retirement as a result.

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The 5 Reasons Homes Don’t Sell

Friday, November 18th, 2016

Most people believe there are lots of reasons why a home doesn’t sell. However, there are actually only five. If you address these five common mistakes, then you will never have a problem getting your home sold.

Over Pricing and Speculating

We all wish we could ask whatever we wanted for our homes, but unfortunately price is set by comparable properties and market conditions. If you are priced above either of these, then your home will sit for a long time.

Looking at the price of homes currently listed for sale in your neighborhood only tells part of the story. You must research how much homes are actually selling for, and price your home accordingly. Your home will only sell for what buyers are willing to pay for it.

Exposure

Even a well priced property can’t sell, if no one knows about it. If you are not marketing your home where the buyers are looking, then you will not sell it. The greater the percentage of your target market that sees your home, the better chance you have of selling.

More and more, people are using the Internet as their primary source of research. Be sure your home is easy to find in the most common places that people look.

Poor Marketing

You have to make buyers WANT to look at your home. If your marketing makes your property look like every other listing, then you are simply “rolling the dice” and hoping for the best. Is your marketing truly compelling?

A great question to ask is… Why should someone buy my home, versus any other home in the neighborhood or city? If you don’t believe that you have a compelling reason, then the buyer won’t either.

Presentation

So now you’ve got someone to look at your home, but it’s a mess, smells bad, or simply shows poorly. If a buyer doesn’t feel comfortable in your home, you can forget about the sale.

If you can, don’t be around during showings, keep the house clean, and do some research on staging your home for selling. A small investment can make, or save you thousands.

Lack of Buyer Confidence

Purchases fall through every day, because sellers cannot confidently answer the buyer’s questions, provide accurate paperwork, or verify important details. If you are not organized before you sell, then you may watch all of your hard work go to waste, as a potential buyer walks away due to a lack of confidence.

Do Your Homework

You need to be very realistic with your goals when you are selling and you must do your homework. As the marketplace changes, so must your strategy. Too many people spend thousands of dollars, hours of their time (not to mention stress) and miss the best opportunities to sell because they don’t have the proper information to make a sale possible.

“Get the advice of experts when you can.”

Gather all of the information that you need and get the advice of experts when you can. At the end of the day, hiring a professional to ensure your sale is handled properly may be one of the best investments you can make.

For a free home consultation contact us. 

 

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10 Ways to Get Your House in Tip Top Shape Prior to Selling It! And Maximize the Most Income!

Monday, November 14th, 2016

Many people want to know what the secret is to getting the most out of their real estate and to appeal most consumers looking for real estate today.  This report will guide you through doing many of those things to help get the most dollars when selling your property.

  1.     Paint the interior!  Most buyers appreciate a good fresh coat of paint and this will help enhance your properties value.  It will also help brighten your rooms giving a new clean                       appearance.  Stay away from bold and bright colors and focus more on lighter and softer earth tone shades.  This will also help make the rooms feel larger and appeal to a bigger group of         potential buyers.
  2.     Paint the outside!   Curb appeal is important and there is nothing worse for area estate professional to try and market a home that has peeling paint or is in desperate need of painting.         Of course depending on the time of year and the weather conditions if you can paint but if at all possible paint the exterior.  As noted with the interior suggestion of using soft lighter                 neutral colors do the same for painting the outside of your home.  Stay away from bright colors that others may not like.
  3.     Pick Up Any Outside Debris, Trash or Clutter!  First impressions make a huge impact on potential buyers.  Should your property have unwanted clutter at the initial greeting to               consumers when your property is shown, it will not help in the marketing and selling of your home.  A few hard hours of raking cleaning and picking up odds and ends could add                         “thousands” to the sales price of your home.
  4.     Reduce Extras and Odds and Ends From Your Home!  Rooms with too much furniture or decorations can often detract from the showing of your home.  Usually too much décor           can make the rooms look smaller and hurt your chances of selling your home.  Store unneeded furniture or items that you can do without during the marketing stage of your property               listing.  Your goal is to make your property look spacious and comfortable.  Buyers also want to see rooms that appear and look spacious to them.
  5.     Be sure and Open Blinds and Draperies!  This is a great idea to help aid the salesperson sell your home.  When your property is in tip top share and ready to show having as much            light as possible helps brighten your home and give it a good feel.
  6.     Avoid Playing Music!  Although you may like the music playing in the background it can be a deterrent to the agent and buyers while looking at your home.  Keep music off while your         home is being shown.
  7.     Price Your Property Right from the Beginning!  Many buyers take the approach and attitude that they can always come down on price.  This can be a bad thing to do.  Many buyers       feel if a home has been listed for a long time that there is something wrong with it.  Most agents will tell you that the best activity occurs during the first two to three weeks of the listing             begin date.  After a few weeks the activity will begin to taper off and showings will cease.  If your home is priced incorrectly from the beginning it will not get a lot of showings and the                 longer your home is on the market the more buyers will feel that it’s tainted or something’s wrong.  Price your home right at the beginning to help get the most activity and a quicker sale.
  8.     Have Your Carpets Cleaned!  It’s a good idea to have your carpets cleaned or your hardwood floors polished or waxed.  This is normally not too expensive and can usually add a lot of         appeal to potential buyers.
  9.     Hire a Staging Company!  If possible hire a staging company to help show you ways to maximize room appeal and value to your residence.  Many real estate firms have a staging                   company or people on staff who can aid in this service.  Feel free to ask me about how I can help with staging too.

      10.  Purchase New Linens and Towels for Bathrooms!  This can help aid in giving a new appearance to your bathrooms.

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Joint Venture Explanation

Monday, November 14th, 2016

Brief Explanation

The Joint Venture is by far the most powerful business concept ever conceived. The ability of two or more people to pool their resources together (money, time, skills, etc) to achieve a greater goal, has been the hallmark of the world’s most successful companies and business ventures.

The joint venture’s application to real estate is absolutely natural, and has allowed hundreds of thousands (if not millions) of people to accelerate and multiply their results.

Two or more people with a common goal (typically financial) get together and offer each other their resources. One partner may offer their time and services, whereas the other may front the money for the transaction. Since the active partner (time and service) may not have the money, and the investing partner (the source of financing) may not have the time or expertise, both parties are required to successfully bring a transaction together.

An agreement between the two partners is formed. The nature of this agreement is truly mutually beneficial to both parties and huge rewards can be realized.

The Benefits

Investing Partners

  •         Higher ROI
  •         Increased Investment Possibilities
  •         Passive Income
  •         No Time Commitment
  •         Opportunity to Diversify Portfolio
  •         Increased Net Worth
  •         Minimized Risk Due to Investment Nature
  •         Proven Systems and Clear Cut Agreements
  •         Opens the Door to Otherwise Unavailable Investments

Active Partners

  •         No Money Required
  •         Infinitely Repeatable
  •         Increased Net Worth
  •         Minimized Risk Due to Investment Nature
  •         Unlimited Purchase Power
  •         Monthly Cash Flow
  •         Leverage Your Time
  •         Proven Systems and Clear Cut Agreements
  •         Opens the Door to Otherwise Unavailable Investments

How It Works

Once the partners agree to work together, it is time to figure out how the details of the arrangement will unfold. It is important to note that there are no concrete laws involved in determining how the terms of this agreement will look, however, we recommend looking at past successful models for guidance. This is what will be discussed here.

A common joint venture agreement is between two parties. One person has some money to invest, however, maybe not the time or desire to properly manage a real estate investment, and usually also lacks the specific skills necessary to acquire, maintain and properly assess such a venture. The second partner may not wish to front any money, however, has the time, wherewithal and commitment to appropriately acquire, maintain and assess the value of a property.

In this arrangement, the investor typically fronts all of the required money and the active partner contributes their time, effort and skills respectively. The investor will cut a cheque, and the active partner will find the property and take care of everything else. Since both parties are equally important, the ownership is divided up 50/50.

Each party will split the income from the property equally after the investor receives their initial investment back. This means that there will be a return of the investment and a return on the investment.

There are three ways you will make money. First, is through the equity that comes from the mortgage being paid down. This has nothing to do with the investor’s down payment, but is the amount that is paid down after possession is taken. Second, is through the cash flow that occurs if the property is rented and the amount of rent collected each month exceeds the monthly expenses (typically paid out quarterly). Finally, the appreciation that is gained as the property increases in value.

A Quick Example:

A property is purchased for $250,000 and the investor fronts $65,000 for the down payment and initial costs. Rents are collected and there is $200.00 per month positive cash flow. Meanwhile, the mortgage is paid down $4000 per year. After 3 years, the property is now valued at $330,000 dollars and you decide to sell.

Here is the simple break down (not including selling costs):

The investor would get back their $65,000 initial investment

Income from Cash flow: $7,200

Amount of Equity Paid Down: $12,000

Income from Appreciation:  $80,000

Total Income: $99,200

50% share to each partner: $49,100

ROI for the investor: 25% annually or 76% overall

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Building Your Real Estate Investment Team

Monday, November 7th, 2016

Whether you like it or not, you can’t do it all by yourself. Investing in real estate requires many different professionals. There are REALTOR®s, appraisers, inspectors, builders, renovators, mortgage companies, banks, property managers, lawyers, partners, accountants, sign companies, printing companies and yes even mentors, buyers, sellers and tenants. I have heard in business that you are only as good as your weakest link. I want to suggest that you choose your real estate investment team carefully. You may even want to go as far as interviewing your team players.

After all, this is a business and the dollar amounts can be substantial, so you want to make sure that your team members have the same morals, ethics, business philosophy and complimentary personality to you. This is not to say that you will not make some mistakes and/or changes along the way, but when you start out with a list of the qualities that you are looking for in your team, it makes the decision-making process much easier. Yes, I did say qualities, and not experience or education. It’s easy to find someone who knows the business or has experience, but it can be a challenge to find the right qualities and personality to match you and your goals.

I would start my search by seeking a referral from someone who is already in the business and is successful. Make sure you know the person you are asking for the referral from, well enough to know that you will be well received when you contact whomever they referred. Notice that I indicated that you seek a referral from someone who is not only in the business, but is “successful”.

It doesn’t do any good to contact a banker for a line of credit when you have been referred by someone the banker just turned down, nor does it look good to contact a REALTOR® referred from someone who just backed out of the last deal they had under contract. I think it is only appropriate to note here, that if you are making a referral to someone who is building their team, make sure you know a little about this person as well. It doesn’t help you to refer someone to your banker, who just got out of bankruptcy and has a history of shady deals. Protect your reputation.

Once you establish your team players, you should be loyal to them. Let me give you an example. Who are you going to call when you find a listing online or another REALTOR®’s listing while driving the neighborhood? Most people would say I would call the listing agent. I used to do the same thing. Let me suggest you call your team player and let them go to work for you.

If you call the listing agent and buy the house, it may be the only sale you give that REALTOR® this year. By calling your REALTOR®, that closed 30 transactions for you last year, they will go to bat for you to get you the price and terms that they already know you are looking for. Not to mention the fact, that you will be the one they call when they find an awesome deal that fits your model. Trust me on this, as I know from experience.

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Consequences of Mortgage Rules Change

Thursday, November 3rd, 2016
As you are most likely aware by now, the mortgage rules changed on October 17th – if not here you can find a summary of changes.  I am going to give you my opinion of what this means to the Calgary Real estate Market. 
First some facts:  Sales for the month of October were 
Week 1 – 352
Week 2 – 375
Week 3 – 463 (rule change week)
Week 4 – 386
Looking at our sales by week makes it very clear that we saw a large spike in sales that was driven by buyers jumping in before the changes took effect. This to me means that the new rules are going to have a large effect of Calgary Real Estate sales volumes. 
 
I forecast that: 
  1. We will now see a substantial decrease in sales as buyers can no longer buy what they thought they would be able to afford. This will increase the number of homes for sale in Calgary putting us into more of a buyers market than we were. Ultimately this will put further downward pressure on pricing. 
  2. Buyers will back off buying as they believe that less people can buy so prices will come down.
  3. Over the next 3 months we will see a shift in what people are buying due to affordability.  IE: Those that were looking at starter homes will now be buying Townhouses and those looking at townhouses will now look at apartment condos. 
  4. I predict that it will take 3 to 4 months before we start to find out what the new normal really is. 
Unintended Consequences: 
  1. Buyers may be driven to borrrow private money (at a higher cost) just to secure the home they want putting them more at risk than before the rule change.
  2. Mortgage interest rates are going to increase.  Already the TD Canada Trust increased their rates as the cost & risk of lending money for mortgages has increased.

For a great article explaining above click here

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Nov 1, 2016 Calgary Real Estate Market Snapshot

Wednesday, November 2nd, 2016
Welcome to our Nov 2016 Calgary Real Estate Market snapshot.
The big news for October is that the government changed the rules for mortgage qualification.  This month the stats show increased sales and declining inventory and I believe it is 100% due to people scrambling to get their home before the rules changed.  Next month we may see a totally different picture but only time will tell for sure.
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Stay ahead of everyone else by following our Monthly Market Snapshot of the Calgary Real Estate Market This shows what’s really happening! The market is driven by supply and demand so here we show the inventory (supply) and sales (demand) and most importantly the relationship between the two and how it affects the price of Calgary Real Estate.  A simple way to keep up to date with how the market is trending and to stay ahead of most! All numbers are taken from the Calgary Real Estate Boards Stats package for Realtors. I have also included some general comments which are simply my opinion.

Absorption Rate (Months of Inventory)   (the inventory divided by the number of sales in the last month). What does this mean you might ask?

Buyer’s Market >4.0 Drives prices down
Balanced Market Between 2.4 to 4.0 Prices typically remain stable
Seller’s Market <2.4 Drives prices up

*** Absorption Rate***  

The absorption rate for all categories decreased this month.  I believe this is because we saw a spike in sales due to people entering the market before the mortgage rules changed.  It should be interesting to see our stats for next month once the new rules have been in place for a while.

Absorption Rate Cont. 

  July 2016 August  2016 Change
Detached 2.99 2.49 -0.50
Semi Detached 3.30 2.96 -0.34
Attached – Row 4.88 4.21 -0.67
Apartment 8.26 6.14 -2.11
Total City 3.95 3.30 -0.65

 

Calgary Listing Inventory

October Inventory levels decreased in all categories.   I believe that the change is due to increased sales and a normal amount of new listings.  The bottom line is there are less Calgary Homes and Condos for sale than last month.

Inventory July 2016 August  2016 Change
Detached 2823 2565 -258
Semi Detached 515 486 -29
Attached – Row 888 834 -54
Apartment 1651 1542 -109
Total City 5877 5427 -450

 

Calgary Sales:

Sales in all categories increased this month.  Again I believe that the new mortgage rules are 100% responsible for this increase.  For many people if they did not buy before the changes they would simply not be able to qualify so this created a sense of urgency for buyers.  Note that apartment condos saw the largest increase (25.5%) which was needed in this sector.

Calgary Sales   July 2016 August  2016 Change % Change
Detached 945 1031 86 9.10%
Semi Detached 156 164 8 5.13%
Attached – Row 182 198 16 8.79%
Apartment 200 251 51 25.50%
Total City 1488 1644 156 10.48%

 

Calgary Real Estate Sales Prices: 

All categories showed a slight decrease in prices this month.  Typically you will see a direct correlation between the absorption rate and prices – this month that is not the case and I believe it is again caused by the government rule changes and everyone trying to figure out what the market might look like next month.  Attached – row houses (townhouses) saw the largest decrease even though apartment condos have the highest absorption rate.

 

  Sales Prices July 2016 Benchmark Price    August  2016

Benchmark Price

 Change
Detached 503,400 502,200 -1,200
Semi Detached 386,500 386,500 0
Attached – Row 311,100 308,100 -3,000
Apartment 274,700 273,800 -900
Total City 440,400 438,900 -1,500

 

 

Sales Prices “Year to Date”   

Year to date prices

Sales Prices Dec 31, 2015   Benchmark Price  August 2016 Benchmark Price Change

$

% Change
Detached 514100 502,200 -11,900 -2.31%
Semi Detached 393100 386,500 -6,600 -1.68%
Attached – Row 318500 308,100 -10,400 -3.27%
Apartment 288,000 273,800 -14,200 -4.93%
Total City 452800 438,900 -13,900 -3.07%

 

 

Community Variations 

**Please note that these numbers do change on a community basis and more so for towns.  This report does not include rural properties.  If you would like to find stats on your community just let me know.  If you have any questions about this summary or Real Estate questions please feel free to contact us.

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