To buy or not to buy, that is the question...

[Sherilynn]

I have a warm blankie, a big cuddly pillow, and a substantial stash of wine....I'm prepared for anything.

 

[Thomas Beyer]

sorry .. the blankie now is radioactive ... as is the wine ..

 

[Sherilynn]

sorry .. the blankie now is radioactive ... as is the wine ..

Well, then I'm screwed. (LMAO)

 

[RE123RE]

Hi,
How many investors do you know who purchased 10, 15 or 20 years ago, regardless of market condition, did NOT sell 5, 10 or 15 years ago respectively, and Regret not selling? None or almost none right.
In other words, no matter when you buy, as long as you don't sell for 5 years or better 10 years or more, you are expected to do well.
That's why Sherilynn's strategy is a good one.
Simply look at the last 50 years RE value graph. but we still say expected as we are talking about the future based on the past.
Just have 12 months reserve fund to ensure you never have to sell. it can be in available money, meaning available in LOC, even Visas if you have no cash.
Thanks

 

[Cory Sperle]

If there is an apocolypse in Edmonton you sure wouldn't know it. I was just there and it's even crazier than when I lived there, bumper to bumper traffic, construction, an hour wait for the Keg on wednesday at 5pm, it felt like boom times all over again. Unlike in 2008 when things noticabley slowed down. Rents are flat but vacancies remain low in my portfolio, and buildings appear to be selling for higher prices than they ever have before. Diversity there to me means there is never a bad time to invest there, just jump on good deals when you find them!

 

[Sherilynn]

Diversity there to me means there is never a bad time to invest there, just jump on good deals when you find them!

Agreed! If one buys for cashflow, has a large reserve fund, holds for the long term, and manages proactively, Edmonton is a solid investment.

 

[Thomas Beyer]

If there is an apocolypse in Edmonton you sure wouldn't know it. I was just there and it's even crazier than when I lived there, bumper to bumper traffic, construction, an hour wait for the Keg on wednesday at 5pm, it felt like boom times all over again. ...

That is indeed what I have noted too

... Rents are flat but vacancies remain low in my portfolio ..

That is true only for tenants not moving out. Some have now asked for discounts as newly rented ones are generally 15-20% lower. Just check bwalk.com for example. I expect prices to follow, i.e. 15-20% down for MF assets. Perhaps a bit less for single family houses.

Cash is King - Cash-Flow is Queen. (TM)

... and buildings appear to be selling for higher prices than they ever have before. Diversity there to me means there is never a bad time to invest there, just jump on good deals when you find them!

Not much is selling but prices have DROPPED to the low 100's for some crapper buildings that used to go for 120's to 130's .. and many quality buildings are not for sale ..

 

[Cory Sperle]

Interesting. Don't you find it unusual that Edmonton is busier, congested, construction everywhere, malls, restaurants, etc. all full with people spending cash and yet the city and province is in such dire straits? Maybe rents will go down this year as you say, however MF assessments are WAY UP so it could be ugly in the short term, but not a time to push the sell button. I guess I'm not hunting hard enough for deals if crappy (improvable) buildings have dropped. Hopefully high vacancies will motivate a few vendors to be more realistic in their valuations.

 

[Thomas Beyer]

Give it some time. Far less people looking to rent, and almost all MF buildings have a vacancy or "for rent" sign out, and that always implies that rents are falling. What used to go for $1000 now is $825-$875 and what was $1200 is around $1000, on re-rental. Since only 25-33% of tenants usually move annually it will not drop all of a sudden 15-20% but assuming this continues for 1-2 more years expect overall rent (and thus, apartment building values) to be 15-20% lower, possibly more as NOI will drop more with flat expenses.

Money is still cheap so in many cases a refi is the better option.

Cash is King - Cash-Flow is Queen.

I am not sure the malls are busier. Take your time buying. Oil won't go anywhere fast, and deals are still scarce.

Albertans sitting on their wallets: http://www.atb.com/learn/economics/Pages/the-owl.aspx?aid=466

Vehicle sales are dropping: http://www.atb.com/learn/economics/Pages/the-owl.aspx?aid=468

Lower hotel room rates: http://www.atb.com/learn/economics/Pages/the-owl.aspx?aid=469

 

[James Knull]

Something to consider - how many properties do you plan to buy in the next 3 years?

If it's one, then sure, try to "time the bottom". But if you're like most of the respondents to this post, it's many. You cant buy and close on 15 properties simultaneously during the one month you perceive "the bottom" to occur.

Taking advantage of a downturn means buying smart properties as SLM so wonderfully articulates through the low period to build a solid portfolio.

 

[Thomas Beyer]

The "bottom" in my (humble?) opinion in Alberta is likely going to be around 2017 to 2018, assuming some upwards trajectory of oil towards and/or slightly over $50 by then. Given the anti-oil anti-investment NDP is in power to 2019 and the anti-oil/pipeline Liberals in Ottawa until 2020 at least it will be a long bottom. There is no rush to buy. If you do not yet own in AB there are many opportunities elsewhere. Check back in in 2020. Take your time. Plenty of near-foreclosures or foreclosures or distressed sellers the next two years. Try not to be one of them.

 

[Sherilynn]

Good points, James & Thomas.

When considering if and for how long to wait, it is important to keep in mind rents could easily further decrease, affecting cashflow and profitability. That being said, it is still possible to get premium rents on great properties. (Yesterday I rented one of our new 1760 sf main floor suites for $1900 per month plus utilities.)

Personally, I'll be reinforcing the strength of our company by increasing reserve funds and improving existing properties, and also positioning myself to buy those near-foreclosures.

 

[Thomas Beyer]

Any AB investment should be analyzed with a 5-8 year minimum view and an assumption of no property value increase during that time, unless of course you spend considerable$s to improve it. Ask yourself:" Does it still make sense to invest?", and if so, then buy.

The easy money is over in AB for a while.

Of course there is plenty of opportunity to profit from other people's misery, mistakes, incompetence, bad luck, greed, lack of knowledge and/or lack of cash.

 

[Sherilynn]

Of course there is plenty of opportunity to profit from other people's misery.

We look at it differently. If someone is facing foreclosure - which would seriously damage their credit for many years to come and possibly prevent them from buying another house when they get back on their feet - then we are providing a service to them whereby we free them from the property, the debt, and the worry. Yes, we will only do that if we have the opportunity to make a profit, but in the end people thank us for it.

 

[LAndersen]

Good points, James & Thomas.

When considering if and for how long to wait, it is important to keep in mind rents could easily further decrease, affecting cashflow and profitability. That being said, it is still possible to get premium rents on great properties. (Yesterday I rented one of our new 1760 sf main floor suites for $1900 per month plus utilities.)

Personally, I'll be reinforcing the strength of our company by increasing reserve funds and improving existing properties, and also positioning myself to buy those near-foreclosures.

I agree. Now is the time to build your reserves if you didn't already. For those who didn't it will be hard to now. Improve your properties strategically for the market your in and treat your tenants like gold. Let them know how much you appreciate them. What can you do for them. Lots of tenants out there and we just have to let them know what great landlord / business owners we are. Ones who care!!

 

[Rickson9]

Any AB investment should be analyzed with a 5-8 year minimum view and... an assumption of no property value increase during that time...

Hopefully this comes true as many who love Alberta will then be able to purchase property there

 

[Sherilynn]

Definitely "no rush to buy." Wait for the right opportunity.

As for rents, don't reduce rents below market rent. We have a few properties for which we were getting premium rents, and we have had to reduce those to a more modest market rent. And we have many tenants renewing at the same premium rents they have been paying. If they like the place and we treat them well, they have no reason to shop around.

 

[AminMurji]

What are the going rates for mainfloor and basement suites in millwoods-Edmonton?

 

[trevismcconaghy]

I love the thoughts on Alberta markets, and the Alberta government. Having lived and successfully invested in Saskatchewan, we have a very positive rental atmosphere and favourable business climate here. Many of the people that moved away in the 90's are coming home to take advantage of the tremendous opportunities. Many of our smaller cities have a broad base of resources as well as industry. Its not a bad thing for Alberta's people to look a little beyond the border. I know people like Thomas have done very well in smaller cities in this great province. Just because Saskatchewan is a bit off the REIN radar doesn't mean we aren't a tremendous place to invest.

 

[kfort]

Agreed Trevis. I think the only reason sask isn't hyped more here is simple population numbers. Two major cities are still small compared to CGY & EDM. That combined with few SK members overall. Saskatoon has treated me very well, and continues to.