- Joined
- Sep 14, 2007
- Messages
- 121
I am starting this thread to provoke a discussion on getting back to the basics, or essentials of why invest in real estate, particularly Canada.Consider it also a very sincere yet polite rebuttal to Jack`s postings, that generally center around "What`s Behind the Curtain" - from a negative standpoint. I`d said it earlier, I`ll say it again, I think its great to see Jack posting references in the media to the challenges that Canada`s facing.One of my goals is to keep my life simple, so here`s a very back to basic list of the premise`s and reasons to invest, in particular real estate and in Canada in general.
1) 1st lesson ever taught to me in high school is that every economic system is founded on the reality of a scarcity of resources vs unlimited wants.
2) In reality, generally, humans consume resources as they make their lives more comfortable.
3) The world`s population is growing. Demands on resources will increase if population forecasts are correct in saying the earth`s population is on a steady track towards 9 billion over the next 100 years.
4) Only a small population live in technologically advanced societies, and/or only a small population have access to 1st nation technologies.
5) Canada has the largest land mass vs smallest population vs resources available. Hence,we are relatively rich and wasteful (I believe #1 in the world for wasting water per capita. I digress).
6) Out of the resource rich countries, Canada`s political (notwithstanding lefty coup d`etat`s
and economic system is relatively stable, and we`re generally viewed as a peaceful country and a great place to live and raise families.
7) Our birth rate has declined, but immigration has sustained population growth.
8) India, and in particular, China, do have growing middle classes that have had a "taste" of the "American"/North American dream, and, over the long term, their demand and consumption of resources will dwarf - due to population dynamics - our demand, in time.
Therefore, growing world population, growing Canadian population, growing AB population (long term trends here) means more demand for real estate. Tensions, disparity between rich and poor, conflict, means Canada`s overall stability makes us look like a haven in the world`s eyes. Now add we are resource rich, or as Don puts it, Food, Fuel, Fertilizer, means over the long haul, Canada should do well, especially if all our politicians could collectively pull their heads from their rear ends more than once-in-a-while.
Simplicity from a real estate perspective:
1) Choose your time frame. Say 1 to 40 years.
2) If its 1,2,3,4,5 years - i.e., relatively short, the shorter the time frame the more resemblance to a speculator you are. "Day Trader" mentality as REIN would put it. You are not in total control, as you are subject to the markets whims. If you bought last year, looking to flip this year, I`d say you`re toast.
3) I am guessing here - but most REIN members invested with a 5 to 10 year time frame. But what if the market takes 5-10 years to turn around (worst case scenario).
4) Then stretch your timeline, is what I say. If you followed a system, be it REIN`s, someone else`s, your own, whatever, what was your back-up plan? Every time money gets invested, do you formulate a plan whose basis is "What if I am wrong?" If you did make a plan based on that question, you`re probably doing fine.
All this market is doing to us REIN members is 2 things:
1) We now get to see whose been swimming naked when the tide has gone out, tyle="vertical-align:middle" emoid="
" border="0" alt="smile.gif" /> 2) Everyone, whether they planned for it or not, has now had their investing horizon and timeline stretched. How big a deal is that. Depends.Thomas Beyer has touched on this on another post, but again here are the absolute basics that I have tried to remember over the past several months.
1) Say you you did your best and achieved the hardest goal, as an example, buying three properties.
2) You`ll do awesome, if you have the right timeline. If you chose conventional mortgages, conventional downpayments, what happens?
A) If you want to wait 25 years, you`ll have had someone else pay off 75% of your cash flowing asset.
B) By the way, how does it feel to have a super-cash flowing asset once the mortgage is paid off?
C) In the meantime, how much cash flow did it produce over 25 years? If you started right away with cash flow on the purchase, have their been rent increases for 25 years? What will a 1 or 2 bedroom apartment or 3 bedroom house go for in the year 2033? Did you have a sustainability fund to make through hard times and vacancies?
D) Equity - aren`t properties a hedge against inflation? Isn`t reasonable to think your property, on average, will appreciate 2%-4% a year? What will 3 properties be worth in 25 years? 10 years?
Now wait you say; "I wanted to have that happen in 10 years or less, or I don`t want or have time to wait 25 years."
Folks, its called due diligence, Gold mine scorecard, buying right, and being patient. That`s your edge and your hedge. THANKS REIN!
And also, the absolute magic of buying more than one property, because once you have more than one, the math really starts to work in your favor. In the example above, what if real estate only does 2%-4% a year. Will you have to wait 25 years? Not necessarily -and this is but one reason why big investors can really win. Because they have the power, flexibility, and choice to simply run the numbers on a simple spreadsheet and figure out how many x properties do I sell before 25 years to pay off y properties I keep. A little more advanced perhaps. But its simple math, in my opinion. If you have more than one property, do you really have to wait 25 years on each property to be paid off to reap the benefits. Can you accelerate the process a bit by having more than one property? Look, some oaks grow faster than others, but they still turn into oaks, if you planted the seeds right.
I tried to say all of the above simply, not sure I really succeeded, lol.
Really, buying AB real estate and waiting as long as necessary will seem like a winner in the long run. At least to me. Don`t know if I can do what I wanted to do when, initially, I set out a 5 year goal. But really, it doesn`t matter that much if the game plan stretches out another 5 to 20 years.
You will win with real estate in this country and in this province, in my opinion. Its as close to inevitable as you can get. Just pick the right timeframe. And don`t stray from the fundamentals.
Smitty
1) 1st lesson ever taught to me in high school is that every economic system is founded on the reality of a scarcity of resources vs unlimited wants.
2) In reality, generally, humans consume resources as they make their lives more comfortable.
3) The world`s population is growing. Demands on resources will increase if population forecasts are correct in saying the earth`s population is on a steady track towards 9 billion over the next 100 years.
4) Only a small population live in technologically advanced societies, and/or only a small population have access to 1st nation technologies.
5) Canada has the largest land mass vs smallest population vs resources available. Hence,we are relatively rich and wasteful (I believe #1 in the world for wasting water per capita. I digress).
6) Out of the resource rich countries, Canada`s political (notwithstanding lefty coup d`etat`s
7) Our birth rate has declined, but immigration has sustained population growth.
8) India, and in particular, China, do have growing middle classes that have had a "taste" of the "American"/North American dream, and, over the long term, their demand and consumption of resources will dwarf - due to population dynamics - our demand, in time.
Therefore, growing world population, growing Canadian population, growing AB population (long term trends here) means more demand for real estate. Tensions, disparity between rich and poor, conflict, means Canada`s overall stability makes us look like a haven in the world`s eyes. Now add we are resource rich, or as Don puts it, Food, Fuel, Fertilizer, means over the long haul, Canada should do well, especially if all our politicians could collectively pull their heads from their rear ends more than once-in-a-while.
Simplicity from a real estate perspective:
1) Choose your time frame. Say 1 to 40 years.
2) If its 1,2,3,4,5 years - i.e., relatively short, the shorter the time frame the more resemblance to a speculator you are. "Day Trader" mentality as REIN would put it. You are not in total control, as you are subject to the markets whims. If you bought last year, looking to flip this year, I`d say you`re toast.
3) I am guessing here - but most REIN members invested with a 5 to 10 year time frame. But what if the market takes 5-10 years to turn around (worst case scenario).
4) Then stretch your timeline, is what I say. If you followed a system, be it REIN`s, someone else`s, your own, whatever, what was your back-up plan? Every time money gets invested, do you formulate a plan whose basis is "What if I am wrong?" If you did make a plan based on that question, you`re probably doing fine.
All this market is doing to us REIN members is 2 things:
1) We now get to see whose been swimming naked when the tide has gone out, tyle="vertical-align:middle" emoid="
" border="0" alt="smile.gif" /> 2) Everyone, whether they planned for it or not, has now had their investing horizon and timeline stretched. How big a deal is that. Depends.Thomas Beyer has touched on this on another post, but again here are the absolute basics that I have tried to remember over the past several months.1) Say you you did your best and achieved the hardest goal, as an example, buying three properties.
2) You`ll do awesome, if you have the right timeline. If you chose conventional mortgages, conventional downpayments, what happens?
A) If you want to wait 25 years, you`ll have had someone else pay off 75% of your cash flowing asset.
B) By the way, how does it feel to have a super-cash flowing asset once the mortgage is paid off?
C) In the meantime, how much cash flow did it produce over 25 years? If you started right away with cash flow on the purchase, have their been rent increases for 25 years? What will a 1 or 2 bedroom apartment or 3 bedroom house go for in the year 2033? Did you have a sustainability fund to make through hard times and vacancies?
D) Equity - aren`t properties a hedge against inflation? Isn`t reasonable to think your property, on average, will appreciate 2%-4% a year? What will 3 properties be worth in 25 years? 10 years?
Now wait you say; "I wanted to have that happen in 10 years or less, or I don`t want or have time to wait 25 years."
Folks, its called due diligence, Gold mine scorecard, buying right, and being patient. That`s your edge and your hedge. THANKS REIN!
And also, the absolute magic of buying more than one property, because once you have more than one, the math really starts to work in your favor. In the example above, what if real estate only does 2%-4% a year. Will you have to wait 25 years? Not necessarily -and this is but one reason why big investors can really win. Because they have the power, flexibility, and choice to simply run the numbers on a simple spreadsheet and figure out how many x properties do I sell before 25 years to pay off y properties I keep. A little more advanced perhaps. But its simple math, in my opinion. If you have more than one property, do you really have to wait 25 years on each property to be paid off to reap the benefits. Can you accelerate the process a bit by having more than one property? Look, some oaks grow faster than others, but they still turn into oaks, if you planted the seeds right.
I tried to say all of the above simply, not sure I really succeeded, lol.
Really, buying AB real estate and waiting as long as necessary will seem like a winner in the long run. At least to me. Don`t know if I can do what I wanted to do when, initially, I set out a 5 year goal. But really, it doesn`t matter that much if the game plan stretches out another 5 to 20 years.
You will win with real estate in this country and in this province, in my opinion. Its as close to inevitable as you can get. Just pick the right timeframe. And don`t stray from the fundamentals.
Smitty
