As a REIN member and an investor I am a big fan of Don Campbell and here is a clip for an excellent interview Don just had regarding Real Estate and what is coming up for 2010.
Don has some great points in here about investors starting to spread investments from just stocks and into more Real Estate investments. He also talks about viewing Real Estate as a longer term investment, not a get rich quick scenario. What are your thoughts on the interview? Did he make sense to you?
I had a few inquiries yesterday whether I was packing it in, this is far from what is happening. We are actually simplifying and this involves getting rid of quite a few of our current properties.
Most of them are rooming houses which although they have been a huge source of income for us over the last five years, have also been a drag on our morale. Originally there was three of us working together doing all the required work, but over the last nine months I have been dealing with all the tenants basically alone and it has just worn me out.
So we are simplifying things by getting out of all but three of these units currently. For someone willing to put in the work and eager to get some great cash flow it will be a tremendous opportunity. I just wouldn’t recommend renting out 48 rooms to tenants all on your own!
As for some of our other properties, perhaps we are just getting lazy, but we have the one property in the NE (Marlborough Park) we are selling and then we have another couple coming up over in Bowness as well. These properties are both about a 45 minute commute for us, we have made our money off of them and are ready to pass them on to someone else looking for a great deal and who will profit for many years to come.
We will spend the next several months re-balancing our lives, simplifying and/or removing our headaches and then come back harder and faster than ever. We have some fairly simple plans for 2010 which involve getting back to our original business model which allowed us to be successful for so long.
2010 will involve plenty of Real Estate and there will be many new opportunities for people to become involved with us for short term investments and more Joint Venture partnerships. If you want to jump on our bandwagon and come along for the ride be sure to contact us, be sure to follow my postings and be sure to buy me a coffee!
I know many of my readers are already investors, some who invest in their own properties and many who are even investors with us in our properties. So some of my thoughts coming up will be of interest or even concern for many of you.
It can be a scary ride
First off, we have to realize that the incredible years we had in Real Estate during the mid part of this decade were an aberration. Yearly increases in property values of 30-40% are not healthy, not common, and not easily replicable except when everything comes together perfectly as it did for several years in a row here in Alberta. I’m ecstatic that I was able to be heavily involved with various Real Estate investments during that time and I am excited that I was able to drag friends and family along with us for the ride.
Whenever a great ride like that comes along, there also has to be a slide back down the slope after the fact and that is what we have been going through for the last couple of years. The recession, world credit crisis, and general economic malaise have helped drag this out far longer than it should of, but that’s part of the cycle sometimes.
We’ve always been optimistic about Real Estate and honestly, we have had our concerns about the markets the last year. You can only get continually hammered by negative news before it starts to wear you down. During the last year plus, when the markets didn’t recover as we anticipated we were concerned, often times anxious and many times frustrated with how the Real Estate market was behaving.
We have to face it, our livelihood, our dreams and our plans all revolve around what happens with our Real Estate investments. To make the burden even more over bearing, we also have many investors who we have brought on board who are also having to deal with concerns about their investments with us. Values are down and they just aren’t rebounding as fast as we would hope. While we still have positive cashflow from properties and mortgages are getting paid down each month, appreciation is such a huge positive and it has been sorely lacking.
Fortunately, we have always taken a longer term outlook with our Real Estate investments and we all just have to realize we will all see our money start to grow yet again. It just won’t be at the crazy levels previously seen. Currently it is increasing at a snail’s pace, but considering the reverse trend we had been seeing, single digit yearly growth doesn’t seem that bad in the big picture. As always the great aspect of Real Estate is we have cash flow and mortgage paydown at the end of the day and a long term view.
That’s where we sit. The problem I see that will be occurring over the next couple of years (or even faster) is going to revolve around the problems the bigger players have created for us.
As Real Estate investments currently go, with smaller deals it revolves around Joint Venture agreements. This is what we deal with when bringing investors in on a single property. When you move up the chain of Real Estate investments, you start getting into Limited Partnerships, Syndications and the officious sounding Offering Memorandums. This is where significant problems have arisen over this last year.
In certain provinces there are regulations requiring a certain dollar amount of currently held investments and/or yearly earnings to even become involved with these type of offerings. Sort of a rich get richer scenario as it appears only the rich are allowed to play.
Of course, with Alberta being part of the wild west we have been outside of these
The Wild West
boundaries. Unfortunately though, with the recent goings on with companies like Concrete Equities, Shire Investments, Bridgecreek and who knows who else will be added to the list in the next six months, we have to expect this to change. This is part of my upcoming conspiracy theory!
As more details of investors getting bilked through ponzi schemes, Real Estate developers over estimating returns and numerous other problems, it will lead to the government jumping in with both feet to “help” out the investors. This will lead to nothing but additional regulations, lengthier more stringent requirements for individuals to invest in anything “off the grid” of bank stocks and mutual funds and more hoops for the little guy like ourselves.
At the same time, banks and investment advisors will be in an even more profitable situation as other investment options will dry up for the middle income families. On the other end of the spectrum, the parties that take advantage of the loop holes and work the system, and their will be plenty of loop holes initially, will not necessarily have the best intent of the investors in mind, but will most likely be concerned about getting as much investment capital as quickly as they can before that door becomes closed. This can make a very precarious situation for someone with smaller amounts of investment dollars.
So here is your warning, there will be change in the industry, in the opportunities and the way Real Estate investments will be allowed or structured. It most likely won’t be overnight, but it will take place in the near future. For small investors the ones who can adapt to the change and already have great systems in place it will be an easier transition. For investors who have been flying by the seat of their pants this will probably bring a quick demise to their careers.
Now is the opportunity for any landlords out there actively pursuing Joint Venture partners to ensure all their systems and procedures are documented and ready to go. This will help streamline any regulatory changes that do come about and also provide a place to start when moving forward. It may also be an opportune time to purchase additional properties prior to the rules of the game changing.
For potential investors, it will be even more important to do all of their due diligence and to be vocal if it appears they may be locked out of the opportunities afforded the bigger investors with larger pockets. Currently many financial advisors are changing their approaches with clients and coming up with creative ways to access more investment capital. By backing any regulations that block investment with smaller Real Estate investors it will just benefit them as alternatives get reduced.
Whatever your situation, watch for changes to come. Just be aware that not all the change will necessarily be benefiting the proper people, but perhaps protecting the financial industries instead. This is a great topic to get feedback from you on, so I would really appreciate any thoughts you may have on this. Feel free to comment ont his post, or email me directly at bill@housez.ca.
