Hi Folks, we are getting some great discussions on Chris`s blog
Here is my post,
I think it`s an important question to explore: how do we use research on economic fundamentals and translate them into returns for our investors and for ourselves. I think it would be really valuable to everyone at REIN for you to give your insights.
I`ll copy and paste what I wrote but you wont see the graph unless you go to Chris`s blog
Do You Drink the REIN Kool-Aid?
Filed Under For REIN Members, Guest Blog Posts (Edit Post)
Man I had blast this weekend at get A.L.I.F.E. workshop. The Western Canadian REIN members are so amazing, getting to know a lot of you was absolutely inspiring.
The idea for this blog came to me talking to some rookie Ontario REIN members while at get A.L.I.F.E. this weekend. I was in line to get something to eat during our lunch breaks, and I was amazed to hear that REIN members could still potentially pass the buck doing due diligence just buy saying Don recommends it at top 10 town. This is the quickest way to failure…especially when doing JV’s..YOU HAVE TO DO YOUR OWN DUE DILIGENCE DOWN TO THE PROPERTY LEVEL.
Just by knowing that your area is a top 10 town doesn’t mean your real estate will will appreciate 10% a year…believing in this gives the WRONG impression on what REIN is and you will set yourself up to fail. What the top 10 town report is a guide showing you where to start.
Rhyming off stats on net in-migration, plant openings etc not only make you feel good in front of non-rein members, it also gives you what’s called the “illusion of validity” by behavioural economist Daniel Kahneman.
It’s a problem that afflicts us all, says Kahneman, who won the 2002 Nobel Prize in economics for his work on irrational choices. From stockbrokers to baseball scouts, people have a huge amount of confidence in their own judgment, even in the face of evidence that their judgment is wrong. I’ll prove this by comparing AVERAGE downtown Toronto pre-construction condos vs the AVERAGE semi-detached homes in top 10 towns in the GTA.
This is a pretty provocative topic so I want to be clear: I’m not recommending that you use this data to buy pre-construction condos and I’m not saying that top 10 towns are bad places to invest into..what I am saying is you must do your own due dilligence above what you read, whether it’s REIN materials or conference board of canada.
Here goes
The top 10 towns in the GTA in 2005 according to REIN were:
1. Brampton and Orangeville (3rd Overall)
2. Markham and Whitchurch-Stouffville (5th Overall)
3. Durham Region – Pickering, Ajax, Whitby (6th overall)
4. 404 corridor – Aurora, Newmarket (7th overall)
5. Oshawa (8th overall)
And here is a chart comparing the performance of semi-detached homes vs the average pre-construction condo.
As we can see pre-construction condo’s blew apart everything in the GTA since 2006 and if done right were a great investment, on the flip side, buying an average semi-detached property in top 10 towns around the GTA could have been a bad investment. What’s even more suprising, there seem to be stronger fundamentals behind the pre-construcion craze in downtown Toronto than we would like to think.
My price data was compiled using stats from the Toronto real estate board and from Realnet. I don’t buy pre-construction condos in downtown Toronto. The numbers don’t lie and we as REIN members must always do expert due diligence ourselves before we invest in any property.
