Do you shop for spreadsheets or real estate?

[RedlineBrett]

It's tough to find that property where you aren't making a couple modest concessions... In Calgary if you have to have your price and cash flow you won't get into the AAA locations... or you'll have to take a property that needs work or caters to a tougher tenant profile. But as we all know nearly any property looks great if you look far enough ahead.



So how far out do you take your numbers? Are you willing to make very little in the short term to be very well positioned in the long term? At what point do you worry less about the numbers on day 1 and instead turn to how this property will look in your portfolio long term? Everyone has their own metric and I'm curious to see where most forum members draw the line.

 

[kfort]

For me personally I am in the buying phase (beginning) so I need to ensure I can keep buying! I need decent numbers right now so I can keep shopping. My goal is a large one, but I have also set a date of ~15 years to complete it. I think each individual's goal and current status on the road to completing it will dictate that answer.



If I were at the point where I had surpassed my goal and set a new one, I may be more liberal with my $. Although I sure hope I never get to the point where I forget what got me there!



It's end game for me, and right now that requires cash flow!

 

[2ndstory]

If you have no or very low cashflow, how do you expect to qualify for financing down the road??? As well, if you have chosen properties with low cashflow, you are going to have really watch it when interest rates rise or when the furnace goes!



Tougher tenant profiles scare some, but just because a tenant is more affluent, does not mean they are going to automatically be easier to deal with or treat your home any better. There are tenants out there that may not be able to afford high end rent but are honest hardworking people. It's up to you to determine what type of tenant you are dealing with before they sign a lease.



Once you have equity in your buildings, you may choose to trade up down the road. I think this is the way most of us are going to have to do it if we want to build a large portfolio and do not have an unlimited access to capital.



Nik

 

[bizaro86]

[quote user=RedlineBrett]It's tough to find that property where you aren't making a couple modest concessions... In Calgary if you have to have your price and cash flow you won't get into the AAA locations... or you'll have to take a property that needs work or caters to a tougher tenant profile. But as we all know nearly any property looks great if you look far enough ahead.




I think it depends what your goals are as well. I'm buying in Calgary, and am definitely keeping my purchases in better neighbourhoods. (I've been tempted by the cashflow but haven't given in so far)



I've been more willing to compromise on level of repair, and do a reno going in, than on cashflow. If I take a property or two that are negative, that would end my ability to purchase, whereas if I buy and reno, I only have a month of vacancy while I'm doing the reno and then its back to positive cashflow.



Even under these cases finding properties that work is definitely a challenge, but I only need 1-2 per year anyway. If someone has a goal that requires buying 10 doors per year, they're probably going to have to go multi-family or compromise more.



Regards,



Michael

 

[housingrental]

I think the market is telling investors something

Few are listening even though it is SCREAMING.... DO NOT BUY .....

Rent to purchase prices just are not where they need to be for most people in 2011....

 

[RedlineBrett]

Thanks guys for your replies.



Adam - all the market is saying is that you can't be leveraged like you could be a few short years ago. Most analysts (including Donny C) take a more optimistic outlook than you..

 

[Rickson9]

[quote user=RedlineBrett]So how far out do you take your numbers? Are you willing to make very little in the short term to be very well positioned in the long term? At what point do you worry less about the numbers on day 1 and instead turn to how this property will look in your portfolio long term? Everyone has their own metric and I'm curious to see where most forum members draw the line.



Speaking for myself, I look for good cash flow from day one. The better day 1 looks to me, the better it looks in my portfolio long term.



Best regards.

 

[wgraham]

[quote user=housingrental]I think the market is telling investors something

Few are listening even though it is SCREAMING.... DO NOT BUY .....

Rent to purchase prices just are not where they need to be for most people in 2011....





Adam,



once again...please elaborate. How is it that the market is screaming "DO NOT BUY"?



Are prices too high? Rents too low? Market ready for the big crash? Zero upside? A Canadian government collaps? Interest rates going to go through the roof?



Until you start backing up these "opinions" with something I am going to keep calling you on it. As soon as you have some evidence to support your statements I will be happy to listen. Screaming the sky is falling, the sky is falling doesn't add any value to this forum.

 

[housingrental]

Hi Brett

Yes with less leverage you have more safety in your operations (at sacrifice of potential ROI) - can be a good call for many investors... It does not do you much good if your property is purchased at a low cap rate - as the vast majority of economically viable area's in Canada are currently selling at - and asset values fall and do not recover for a long period time.....Again to be clear no one knows how the future will play out for certain....







[quote user=RedlineBrett]Thanks guys for your replies.



Adam - all the market is saying is that you can't be leveraged like you could be a few short years ago. Most analysts (including Donny C) take a more optimistic outlook than you..

 

[housingrental]

Hi wgraham - You have likely missed it but I have posted many times in detail over the last 12 months... and the last 6 months especially on this topic.... as I do not have these saved and its time consuming searching through rein site trying to find I do not repeat in every single post.....to directly answer your questions - and if you have more happy to answer please let me know:







Are prices too high? In most areas in Canada YES

Rents too low? NO.... They are too low to justify operating single family rentals as a profitable business from operations - after true costs are accounted for like property management, time to administer, periodic eviction, capital improvements over time, periodic landscaping, etc.... - with standard leverage.... with cash buying the rate of return is very low + has risk of asset devaluation + lacks liquidity + has high transaction costs - THE REASON TO BUY IN MOST AREAS IS TO BE ON FUTURE APPRECIATION - IF YOU VIEW THIS AS A LOW PROBABILITY TO HAPPEN FOR THE NEXT X YEARS THAN YOU TOO MIGHT ASK WHY TAKE THIS BET????



Market ready for the big crash? Some might...many others not.... maybe flat for 10 years.... maybe flat and slightly down..... maybe higher in some areas..... maybe....



Zero upside? As a general.... Yes that is my perspective in most area's for the next 5 years...



A Canadian government collaps? No



Interest rates going to
go through the roof? No... but likely higher... even if this low in 5 years still risk of material devaluation in many markets...Debt to income measures are WAY WAY WAY off historic norms and SOME REVERSION IS LIKELY ......



[quote user=wgraham] [quote user=housingrental]I think the market is telling investors something

Few are listening even though it is SCREAMING.... DO NOT BUY .....

Rent to purchase prices just are not where they need to be for most people in 2011....





Adam,



once again...please elaborate. How is it that the market is screaming "DO NOT BUY"?



Are prices too high? Rents too low? Market ready for the big crash? Zero upside? A Canadian government collaps? Interest rates going to go through the roof?



Until you start backing up these "opinions" with something I am going to keep calling you on it. As soon as you have some evidence to support your statements I will be happy to listen. Screaming the sky is falling, the sky is falling doesn't add any value to this forum.