Weekly Market Update, May 5/17

We're officially set an all time record for prices at this time of year. With Alberta's economy expected to lead the country in 2017, and probably 2018 too, I think we're due for the next large leg up in prices.

The only way that could happen would be for the loonie to fall into the 30 to 40 cent range since oil and natural gas are priced in U.S. dollars. While I don't doubt the loonie will fall to 50 cents the 30 to 40 cent range is a stretch.

Tom:
Alberta economy expected to lead the country in 2017?
Have you been drinking?

Well, with Turdeau at the helm, yes, I can see the loonie falling to 30 cents.

GM, here's an article about how Alberta is expected to lead the country's economy in 2017. We'recommend starting to take off again into the next boom. It's about time, this recession has dragged on for years.

http://www.cbc.ca/news/canada/calgary/conference-board-of-canada-winter-alberta-recovery-1.3995247

Rising oil prices is how Alberta is expected to lead the country’s economy in 2017?

LOL... well oil is closer to $45 then $50 and it's May already

Who knows if Alberta will lead the country next year, it hasn't happened yet. How many people expected Trump can be US president?

Steel has been as expensive as gold in the history, you never see that any more. We can't expecting oil can be also way that high to kill other industry. It's very important for Alberta to be diversified.

Late last year he predicted Calgary would be worse in 2017 than 2016 like 4% down and here you go the average in Calgary in 2017 is about 5%to 6% up. I just came back from Calgary and good properties in good locations go the same day or at a few days at the latest. I believe the same is happening in edmonton. 2016 was the year one should have secured a couple good properties when they were sitting on the market way longer than this year so good luck finding something great now if you don't jump in right away!

So you tell me if the theory worked or not!

The money could still from PacNet or AdvantageBC trying to manipulate the market, not from real buyers.

I think his theory is accurate, but no one can predict actual results; it's just a prediction, much like "stock market" portfolio manager on bnn predicting the movement of the stock market - it's not possible, but i believe underlying fundamentals are there. I'm no expert that's for sure.

I like Notley, and so does everyone I know. In the words of the Health Minister, it's only 'sewer rats' that spend time with the Wildrose.

Data maybe grim, but Alberta economy is still the strongest in the country. https://www.google.ca/amp/s/sec.theglobeandmail.com/opinion/data-may-be-grim-but-albertas-economy-stands-strong/article34912443/%3Fservice%3Damp
If don r Campbells theory is right, edmonton still should feel some downward pressure on home prices this year.

NDP actually did a good job cut funding for doctors. Very doctors work as individual business, the quality of health care and money waste test is a big concern.

Thanks! The graphs really detail lots of info!

I'm still shocked in this negative sentiment. Almost every house will rent for around $1500 on the low end. If you take houses around $350,000 with 20 percent down almost every house will cash flow. Interest rates are almost nothing and so much of your payment is going to principle.

if your good sometimes you can make $20,000 and more on a deal. From what I see the investors who have at least 3 or more properties are pretty wealthy.

Sometimes I think in a negative market you might make more money because so many people panic and this is where you get the deals.

I closed on a property 6 months ago and probably made at least $60,000. Wealthy people know you can always make money on up and down market. If I wasn't making money, while would I or any investor do this.

The problem with renting no benefit, my renters are making me wealthy. I figure with capital appreciation 2-3 percent a year and cash flow each property should make you around $2000 minus your taxes.

$2,000 a month.

The weird thing so many investors don't have a zone map when you are throwing your hard earned money. Too many people rely on others to do their work for them. The reason you need that zone map is because you need to compare areas and find out if that area to another area is undervalued. Kind of giving different grades and value to the zone and area. All real estate is a numbers game and if your numbers are more accurate then the next you are the winner.

For me, I probably spend a couple of hours a day doing this sourcing out deals. In real estate you need to do your homework and be confident in you abilities.

Once you have secured the deal you need to be good at managing the proprty yourself, can't rely on other people to do your dirty work. I think if your not handy, okay can always hire. My repairs are minimal compared to what I make a year on a house.

A great book is one house at a time, probably the best book I have read.

Can you please explain your numbers and how this might cash flow?:

Example you've given: $350,000 - %20 down

($1,252) - Mortgage payment assuming 25 year, 2.49% 5 year fixed which is a reasonable rate right now.
($200) - Property tax, non conservative
($90) - Insurance, again, non-conservative
$0 - I have elected to assume you're making your tenant pay for utilities, if not, this becomes ($250)
($145) - This is a very non conservative .5% of property value set aside for maintenance / repairs

So far, we're at $1687/month required to cash flow positive on this property, and we haven't even included vacancy... Am I missing something? $1500 per month in rent doesn't even begin to come close to cutting it, not to mention intangibles like dealing with tenants.

The only way that any of this makes sense to me is developing a secondary suite and renting up and down where you might fetch $1200 down and $1500 up or something similar. But you have not posed this as a scenario and the addition of a secondary suite is going to increase your cost of acquisition one way or another.

Hi Ann,

It's good to see that you are motivated as a real estate investor.

What I do is put grades in different areas like Glenora, Westmount, Garneau which are like A areas. You will still have to break them down because St. George's crescent and walking distance to university the values are still going to be higher than areas in the middle or the edge of the zone. From there you will need to determine which other areas are B, C, etc. From there you still need to be able to access, lot, house (no 2 houses are alike). You need to know if this area is A then value wise how will it compare to D.

How I did it 5.5 years ago, there was an Avenue magazine and it said that Westmount was the 4th best area that people wanted to live in. Prices were probably cheaper than southwest, Ottewell by $50,000+. In my mind how was that possible when Westmount was the first high end district to downtown and any place in the world downtown and university should have the highest prices.

The steps I take before I will buy any real estate are:

1. Access value house
2. Look on google maps to see location or if you have time drive by
3. Contact listing agent or you can work with discount realtors to get cash back if you buy. If you do have trusted realtor okay, but you need to let them know what you want, can't be lazy
4. See house
5. Determine rental and how much repair bills, only buy houses not much work, unless crazy deal
6. Make offer if value makes sense based on your numbers
7 if you get house, need to get hands dirty, clean up or do little things for your prospective tenants
8. Hopefully, you can find good tenants and sit back and enjoy your investment

As you can see no shortcut if you want to be successful in real estate.

Sure you can contact me at kennyau88@hotmail.com

Hi Kenny,
i like your comments: The reason you need that zone map is because you need to compare areas and find out if that area to another area is undervalued.
i am a beginner investor and i did spend a lot of time researching areas, comparing same category home price (asked and sold), locations, but its hard to reach a conclusion that one area may be undervalued compare to others.
Would you please shed any light on this?
Is that possible to network with you?

Thank you

Hi Michael,

House $350,000

20 percent down payment $700,000
Legal $1,200
Inspection $500

280,0000 mortgage
Variable rate 2.25, I will even say 2.70

Year expenses
Interest a year $7560
Property tax $3200
Insurance $800, but I will take $1.000

$11, 760

Rent $1, 600 a month conservative, $1 500 too low

$19, 200 year minus $ 11, 760

Total $7440

2.5 percent house appreciation is $8 750. Honestly this is way too low, last 3 years Westmount has crushed this.

Total $16, 190 profit/equity

Any house I buy, I will at least try to gain $20,000-$30,000 otherwise I probably won't buy. Why would you if you can't make money. In the end you are in control to give whatever price makes sense.

From this model it should be pretty profitable. The biggest thing is the banks want people to be wealthy with low interest rates.

Warren Buffet says think of investing like a hitter, in baseball you only have 3 strikes, but in investing you can be patient.

One thing is I probably budget $20,000 before I buy the house, repairs, tenants angry destroy your house. What I noticed if you buy a solid house for the first couple of years p, you won't need to spend too much money. The secret is to have a smooth 2 years of rental, then home free.

I guess that is why people fail because they can't manage the property themselves. Getting a good deal is one thing, but earning income a lifetime is another thing.

Thanks for all the interesting info you've shared with us Kenny, it's a nice addition to the discussion.

Kenny, I see that you're excluding the principal portion of the mortgage payments. While paying down of principal is not an expense (you are gaining equity), strictly speaking in calculating whether a property cash flows, you would need to consider the principal portion as it will come out of your own pocket if the rental income is insufficient to cover principal.

Thank you. He's also counting capital appreciation as cash flow which is a stretch at best.

Kenny, cash flow is just that "cash", of which there is none, in either example. While I concede your method could be sound in estimating return on investment based on a future value, at the end of the day it is not a sustainable strategy for the average Joe looking to acquire multiple properties in a short period of time. Don't​ you agree?