With 2012 in full swing and January all but passed us by, the time is now to look at what we can expect to see in the different regions across the country. As sophisticated investors know, there is NO Canadian real estate market – markets are specific to region and specific to neighbourhoods within a certain region.

The focus  (as it always is) is going to be on the economic fundamentals that are driving the various markets, and which key influencers and drivers are going to come into play as a result. Condos, job creation, ship building contracts – these are all going to be hot topics in the months to come.

I decided to sit down and give you the straight goods on what is coming for 2012, and no better way to do that than in the flesh. Albeit a brief synopsis of my research, the video below will be a starting point for your investigations for the entire year and beyond.

Remember: it's not necessarily what you are going to buy – it's where and whether or not it is producing positive cash flow. So grab a pen and paper, take a few notes (or keep them mentally) and press play. Your real estate investment business will be better for it.

If you'd like to download the most recent edition of The Reality Report, you can click here to get a copy of it to read, print, share with friends and business partners.

If you'd like more information and a chance to register for the ACRE™ Live program in a city nearest you, you can visit http://www.acrelive.ca to get all the details. Here's to 2012 being your best year yet!

Cheers,
Don

2012: The Year of Confusion, Concern & Consternation
“The Perfect Environment for a Sophisticated Investor”

2012 is going to be a year of confusing economic signals, mixed real estate messages and fearful investors. In other words: the perfect environment for the sophisticated long-term real estate investor.

Over the last 20 years, my research team and I have been analyzing the Canadian real estate markets from a unique point of view – we don’t look at the real estate numbers. This approach has allowed us and the sophisticated investors who understand this approach to move forward when real estate signals all seem to be showing “stop” – and stop when signals all seem to be green.

Using this approach is now more important than ever with the European debt crisis, turmoil continuing in the Middle East, a US government unable to solve their massive job loss problem and soaring world oil prices. In fact, never before have investors been faced with so many mixed signals.

We call this the Long Term Sustainable Market Indicator approach, a long name with a long history of correctly predicting real estate market trends. Here are five insights to ensure you cut through a lot of the confusion and take the sophisticated approach in 2012 and beyond:

#1 Ignore Real Estate Statistics

If you are trying to predict what is coming in the real estate market, don’t look at the real estate statistics – they only represent the past. That would be the equivalent of trying to drive across the city while only looking in the rear view mirror. A sophisticated investor understands that what is going to occur in the market is more important than what has already happened. Sounds simple, doesn’t it? Yet, people still allow monthly headlines to dictate how they invest and how they feel about their portfolios.

To accurately predict where the market is going, an investor must understand the basic principle of “No economic growth = no sustainable real estate market”. If you pay close attention to economic and population growth, you can accurately predict the direction of a real estate market 18 months in advance of its move. These are called the Key Drivers of a market.

The Sustainable Momentum Graph (below) shows the impact of economic activity on a real estate market.

In a nutshell this graphic states the following:

GDP growth = Job growth = Population growth = Job Growth = Population Growth = Increased rental demand (12 months later) = Increased rents = Property purchase demand (18 months later) which eventually leads to property price increases.

This cycle works in the opposite direction as well, over roughly the same time lines. Sustainable real estate price increases occur approximately 18 months after a region’s economy begins to grow and they drop approximately 18 months after the economy in a region begins to shrink.

As you can see, if you are only analyzing the real estate market using real estate numbers you are at least 18 months behind the sophisticated investor. Below is my most recent interview with BNN talking about these very points. Give it a watch to help you set up the rest of the article.

BNN: December 30, 2011

#2 Ignore National “Averages”

Using the Long Term Real Estate Formula is key; however, it is important to not try to predict your specific target region’s market using national numbers. For instance, it is impossible to predict Ottawa’s or Calgary’s real estate market when only looking at GDP or job stats for Canada as a whole. This is especially true when analyzing markets in countries with a large geographic size such as Canada, the US and Australia.

Averages Don’t Matter

Market averages are areas of confusion for most real estate investors. Real estate values are measured in various ways throughout the world, including averages, medians and other forms of indexes. Some of these measurements produce an inaccurate indication of what is actually happening to real estate values.

It is surprising how often less reliable data, such as averages or median sales prices, are quoted as a representation of what’s happening in a real estate market. These figures often present a distorted view of a market’s performance. For instance, when there is a disproportionately high level of sales activity of superior real estate in an area in a given period, it may appear that values in the whole region are increasing purely because the average and/or median price will look higher than it had previously. Prices as a whole may have actually decreased, but this may not be represented by the average or median figures.

The reverse is also true. A high level of sales activity of inferior or lower-priced real estate in the same area may indicate that overall values in the area are decreasing purely because the average and median sales prices are lower. In reality, that period may have been characterized by a few sales of higher priced real estate, so while the average and median figures indicate that values are declining, they may actually be increasing.

In order to cut through the confusing signals, it is important to look at your target city’s specific economics, rather than real estate market numbers. A great place to begin in 2012 would be to get answers to the following questions on your region:

1. Are long term jobs being brought into the region?
2. Is the unemployment rate dropping?
3. Is population growing with younger families?

Real estate investing involves a lot of variables, so minimizing your risk is imperative. The best offence is a good defence, and making sure you’re informed and on top of the latest trends and research is going to keep you ahead of the curve. Be proactive – get out there and find as much information on your target region as possible. This is going to give you the confidence to make the right decision when you need to.

#3 Be Aware of Key Influencers

Key Influencers differ from key drivers in that they often prove to have a shorter term, yet dramatic, impact on specific markets. These key influencers can confuse a real estate investor as they make it look like a boom or bust is occurring when it really isn’t. These influencers can be economic or government based.

For instance, the introduction of HST in BC and Ontario created mini-booms in new housing during the period between the announcement and the implementation as buyers tried to ‘avoid’ the new tax on their purchases. And now that BC has voted to remove the HST, the market is once again confused and there is a slow-down in new property purchases until the repeal.

A second influencer we are witnessing in some cities across the country is the ‘Canada as a Safe Haven’ trend. With world economic confusion occurring, investors large and small across the globe are parking their money in Canadian real estate and other assets. This influencer has pushed property demand beyond the true economic demand of the region, making it over-priced. How long this influencer will be in effect is more difficult to predict. However, as we have seen in the past, once the economic confusion begins to clear, a lot of this money will be repatriated to higher yield economies and when that happens, an increase in supply will hit these markets.

Remember: influencers push real estate markets outside of their predictable real estate cycles and can lead to a false sense of security to those investors who don’t understand that they are temporary.

#4 ALWAYS Invest Based on Cash Flow

Ensuring that your portfolio and each property within it creates positive cash flow from the beginning is extremely important in economic times like these. There is no telling what can happen when an unidentified market influencer hits your target market or one that is currently pushing your market goes away. The only way to ensure that you can hang on during dips in the market is to ensure that you are focusing on creating positive cash flow.

Many speculators whose only profit model is one where markets go up in value call themselves investors, which unfortunately is just not true. Investors focus on buying positive cash-flowing properties in areas of strong economic and job growth while considering the increase in value to be a bonus.

With a positive cash flow portfolio you can weather any storm, you can get additional bank financing for future investments and you can begin to replace your job income. If, on the other hand, you can only profit if the market goes up at the right time for you, then you have just added a substantial level of risk to your portfolio and in today’s market conditions, added risk is not a great choice to make.

#5 Invest Green – and I Don’t Mean Eco!

There is a lot of talk about “Going Green” these days, but when I say that you should invest “Green” I don’t mean buying a property and outfitting it with solar panels. What I am talking about is identifying how one specific green choice being made across Canada by your future tenants and buyers can dramatically increase the value of your property. If you want to own in an area that will increase in value, or increase in rents – upwards of 15% faster than similar properties in your region – then it must be in an area where major transportation changes are taking place. In fact, over the next 5 years, this demand trend will increase more quickly than it has in the last decade, providing you a unique opportunity.

Knowing this fact, we have completed an extensive analysis of transportation changes implemented in regions across North America and Europe. These peer-reviewed journal articles provide us with a snapshot of what we can expect in terms of the impact on real estate prices by major transportation improvements. The findings are quite remarkable for real estate investors.

As fuel prices continue to rise, commute times, commute costs and accessibility to job centres become key determinants for potential home buyers and renters. Residents now measure their commute distances in minutes, not kilometres, a process that leads to higher demand for properties that are located farther from their jobs in distance, yet closer in terms of commute time. Combine this fact with a larger cohort of people choosing to use transit for ‘green’ purposes and you have a dramatic increase in demand around rail and light rail stations.

In Canada, we have just surpassed a record number of people riding public transit and this positive trend has increased at an even faster rate than first expected. This increase in demand is beginning to provide property owners who own within 800 metres of a rail based transportation station an increase in value of 15% more than similar properties outside of this zone. This is also proving to be true with rents, as 2-bedroom apartments are shown to be renting for over 16% above similar units in the same city.

This is a trend that will continue no matter what the economic conditions are. To conclude, buying near a transit hub is the equivalent to playing both offence and defence with your real estate portfolio. You can have free access to our research on the effects of transportation changes on housing values for many major centers across Canada at the following link:

http://myreinspace.com/downloads/research_reports/m/research_reports/default.aspx

Conclusion

As I have emphasized many times over the last 20 years, it is great being a strategic investor during boom times, but it is critical to be a strategic investor during confusing economic times.

As we enter 2012 it is important to remember the 5 Insights above but to also remember that strategic investors always think and plan long term. For the long term investor, there are no other real estate markets in the world with the resilience of key Canadian real estate markets. It will not be a straight line – we will be influenced by what goes on elsewhere in the world. The position in which we sit as a country is quite remarkable.

Currently, during the economic turmoil, we are a safe haven for capital and investment which supports our economy. When the economic turmoil begins to disappear over the next decade, we will then step in to being the safe and secure supplier of the 4 key commodities the world will need during its recovery. Each of these commodities will bring strong job growth to specific regions of our country and, as you read in Insight #1 above, these jobs will further fuel demand for rentals and property purchases.

Markets are very specific (regional), and the fundamentals must be heeded exclusively to each individual area.

The 4 F’s the world is going to need (and we are going to provide) are:

Food:

Higher food prices are coming, with some saying they’re already here. As a matter of fact, the key food items around the world (i.e. rice, corn, wheat, soy) are already bouncing off of record prices and this is during an economic downturn. The world’s population just surpassed 7 billion and it is not shrinking, so food demand is going to increase. Canada, as a major food producer, will benefit from this trend: on one hand you will have to pay more for food, but the Canadian economy will also benefit from higher prices.

Fuel:

There is no hiding from it. Petroleum based products are becoming increasingly more expensive, solar power is still very expensive, coal demand is through the roof as China tries to keep up with power demand and nuclear power is still increasing despite the Japanese disaster. What you’ll notice about all of these sources of fuel is that Canada produces all of the main components for these. In fact, we have quietly become a safe and secure source of these critical commodities and our influence will continue to grow as demand outstrips supply around the world.

Fertilizer:

The three primary macronutrients of fertilizer are: nitrogen (N), phosphorus (P), and potassium (K); large reserves of potassium are found in Canada and the other components are created by our petroleum industry. More than 150 countries use potash, but only 12 countries produce significant amounts. As a result, about 80 percent of the potash produced moves across borders.

Canada is one of the world's largest exporters, accounting for about 40 percent of the total world potash trade. It is a world priced commodity, so as demand in other parts of the globe increase, the price we receive also increases.

The largest markets that Canada exports to include: US, China, India, Latin America (primarily Brazil), and other Asian countries (Malaysia, Indonesia, Vietnam, Thailand, Philippines, Taiwan, Korea and Japan).

With food shortages throughout the world, countries will try to get a higher yield out of their food production, while trying to improve the quality of the food. Fertilizer will be required to support the global food demand and Canada is poised to grow, based upon this trend.

Forestry:

The images coming from the Japanese earthquake and resulting Tsunami were horrific but, as things starting to settle down, the task of rebuilding will begin. Japan is a large importer of high-quality lumber and will be importing this from Canada. In October of 2011, China imported a new record amount of Canadian forest products with no end in sight for this demand.

Couple those two facts with the forecasted recovery of the U.S. residential construction industry in 2014, the Canadian forest industry is soon to be entering a super-cycle. You are going to see lumber markets spike in the next few years, translating into more Canadian jobs.

So at the end of the day, what do these facts mean to you? Simply, 2012 – 2015 will be the years that the strategic, long-term thinking investor will come out on top. In times of confusion the more sophisticated investor digs deeper for the hidden trends behind the monthly headlines in order to position themselves best for what is coming… rather than continually looking in the rear view mirror.

Whether it’s selling yourself as part of the deal or failing to report all the details to your mortgage broker, mistakes in the joint venture game can be costly – for the present and the future. If you haven’t had the chance to read the first three parts of this series, I encourage you to check them out after you’ve been through the final set of landmines. Do your due diligence on both the properties you’re looking to acquire and the partners you intend to work with. It will make your working relationship smoother and will ensure you optimize the work to maximize your profit.

Click here to purchase a copy of “Real Estate Joint Ventures”

Click here for Part One of the 20 Landmines series.

Click here for Part Three of the 20 Landmines series.

Landmine #16—The weak deal: Your JV agreement is not enforceable

Errors or omissions on your JV agreement can leave you vulnerable and at risk of failure.

Evasive action

This is an area where excuses never fly. You can fix an agreement after a deal closes, but why would you ever put yourself, your partner and your investments in that position? Seek legal counsel early and make sure your JV agreement is thoroughly vetted by your lawyer and an independent lawyer paid for by your money partner.

Landmine #17—Sacrificing legal diligence: You don’t insist your JV partner get independent legal advice

Smart real estate investors don’t like to waste money. But they don’t cut corners that will cost them later.

Evasive action

Refuse to deal with a potential money partner who will not get independent legal advice on your JV agreement. You are the real estate expert, but your partners should want to understand how the deal works to protect their interests. They should be reading all the information you forward, and they should understand what they are signing.

If a partner simply refuses to get independent legal counsel, have them sign a document that states that they were advised to do this and opted out.

Landmine #18—Keeping secrets: You don’t provide full disclosure to your lender and lawyer

This landmine is way too common. In addition to giving lenders and lawyers the wrong information, some real estate investors are prone to leaving things out because they wrongly believe that’s the way to get a deal done faster.

This is not the way you want to conduct a professional real estate investment business—especially when you are using other people’s money.

Evasive action

Information changes as real estate deals progress. That can be frustrating, but it’s never an excuse for not making sure lenders and lawyers know exactly what you’re dealing with. The documents you use to get lender pre-approval and then qualify for a mortgage with must be kept up to date. Anything less could constitute mortgage fraud.

Err on the side of caution. Make sure your lender and lawyer know about changes, including the addition of new names to a mortgage application. These changes could alter the way you structure a deal (especially if a partner has trouble qualifying for a mortgage), and that may not be a decision a lender allows without input.

Always disclose changes as early as possible, since last-minute changes are likely to boost your legal fees and will most definitely annoy your lawyer.

Where a partner’s participation is questionable, use “nominee” language to close the deal and then add the partner later.

Landmine #19—Poor communications: You don’t provide quality communication to your JV partner

One of the main reasons JV deals encounter problems is that the real estate expert doesn’t provide the communication the money partner wants. It’s great to work with money partners who don’t want a hands-on role in the deal; these people are attracted to joint ventures by the real estate expert’s knowledge and the deals he or she proposes.

But you should expect your partners to ask questions—and they should expect answers. Remember, this is a relationship and that demands a commitment to two-way communication. There’s a very good chance a new partner will ask a lot of questions precisely because they don’t know the answers. They’re seeking information, not trouble.

Evasive action

Real estate experts who want JV partners for their deals will always be cultivating new leads. But they also know that it is easier to work with existing partners and that these people are your best leads to new partners.

Make it your business to address issues up front. Send your partners regular updates on the investment and on the economic fundamentals of the places you’re investing in. Why risk an opportunity to let them know how well you know the business of real estate investment? Use regular communications as a way to remind them of why you are good at what you do.

Landmine #20—You sell yourself short

Real estate experts make this mistake when they fail to address all that they bring to an investment deal. This is how you end up owning less than your “fair share” of a property, or making other concessions you will regret.

The following graphic comes from Strategic Real Estate Solutions (www.strategicrealestatesolutions.ca). It is a powerful reminder of why real estate experts are worth at least 50 per cent of a deal, and experienced and novice real estate investors sometimes show it to prospective co-venturers who question the real estate expert’s value as part of a negotiating strategy.

Evasive action

If you are not sure what you bring to a real estate investment deal or are unclear about all of the relationships you manage, deconstruct a deal. Write down every person you dealt with, from your real estate agent to your lawyer, home inspector and insurance agent and all of the assistants in between. Now calculate how often you phoned, e-mailed or met with them. Do you think this makes you worth 50 per cent of the deal?

Picking up the wrong type of milk from the grocery store might not be the end of the world, but if you pick the wrong deal, there’s a chance that you’ll be in a tough situation. The same can be said for skipping out on your homework – it can be detrimental to your bank account and your portfolio. You’re best option is always to cover all the bases and make your decisions based on facts and not your gut feeling. Here’s your chance to find out five things you need to avoid to ensure success in your joint venture dealings.

Click here to purchase a copy of “Real Estate Joint Ventures”

 Click here for Part One of the 20 Landmines series.

 Click here for Part Two of the 20 Landmines series.

Nothing will derail your business plans faster than investing in the wrong property. Believe it or not, this can be easier to do when you have a money partner. Sometimes, the issue is the sheer desirability of the partner himself. Don’t let your desire to work with a particular individual cloud your due diligence. There is no question that some partners can make a huge difference to an investor. These folks may have the money and contacts to help you bring deal after deal into your portfolio. Protect that relationship—but not at the expense of the wrong deal!

The other reason people make this mistake is related to greed. The fact that you are working with someone else’s money should make you more diligent, not less. You should do more due diligence with JV deals, and always make sure that the deals you are offering to co-venturers are deals that you would be willing to invest your own money in even if the partner didn’t get involved.

Don’t let the emotional high of closing a deal cloud your judgment. Instead, focus on the deals that make sense. Remember always have a Plan B. If you are not prepared to swing a deal completely on your own, then it’s not a “good enough” deal for you to risk someone else’s money.

Evasive action

The “perfect partner” is only perfect when the deal makes fiscal sense. Be honest with your prospects about why you want to work with them (e.g., they have the money), but tell them you won’t work on a deal that’s not a win-win deal for both of you.

Practice the same due diligence when it comes to choosing the deal. Use this question as a measuring stick, “Would I put my mother’s life savings into this deal?” In the end, your reputation is your most valuable commodity; a couple bad deals and you could be done. This is not an area where you make mistakes. It’s where you under promise and over deliver.

Landmine #12—Not enough information: Your prospect doesn’t understand the deal

When a potential money partner turns down a deal, always ask them what you could have done to get them to say yes. Their responses will teach you the importance of making sure your deals are well understood. Sticking with the principle of attraction versus pursuit, the key principle is to “tell, not sell.”

Evasive action

Make sure that every one of your prospective partners gets a one-page executive summary of the deal you’re working on, or a deal you have recently completed. That summary for a completed deal covers the items in the following list.

Executive Summary

Profit and loss summary (quarterly and annually)
Cash-flow summary
Balance sheet summary:
    Assets
    Liabilities/mortgage
    Equity
    Initial investment
    Joint investor share of gain
Highlights of the past quarter:
    Profit and loss, and the cash-flow position (positive or negative)
    Plans such as a property rent increase
    Summary of any deduction in the mortgage
Economic update:
    Regional/provincial
Five specific items regarding the economic fundamentals of where the property is located
Local/municipal
Key factors impacting the local real estate market

The goal of an executive summary is to provide financial detail without overwhelming your potential partner. This showcases your due diligence and your knowledge of the economic fundamentals.
Use the following formula to help present your research:

Landmine #13—The Pollyanna problem: You are overly optimistic and it scares prospective partners

You can make money with real estate investment—and you can lose money, too. Never forget that your partners need to understand both sides of that equation. As the real estate expert, it’s your job to find deals that will make you and your partner money. But never try to sell a deal, even a “great deal,” as perfect. Make honesty, and realism, your friend.

Evasive action

When REIN™ principals and our guest speakers teach novice investors about real estate investing, we like to talk about the need to look at what’s “behind the curtain.” Our goal is to remind all real estate investors that they should never take anything or anyone at face value. This has nothing to do with not trusting people. When choosing partners, we simply want you to ask the tough questions so that you can be sure you’ve got the best answers. Believe it or not, some JV prospects might not have thought about how their interest in a JV deal could be impacted by their spouse’s lack of interest in that same deal. Others might want into your deals so badly that they are willing to mislead you with regard to their current financial situation because they see you as a kind of financial savior.

This look at what’s “behind the curtain” goes both ways because your business partners will also be asking you tough questions. Learn to anticipate those questions and plan your answers accordingly. Again, under promise and over deliver.

Do this by being honest about what your partners need to know and then deliver the goods. When working with new investors, part of your role as the real estate expert involves education. You want to teach them how to “look behind the curtain” so that they can see that you know what you’re talking about.

Real estate experts who focus on being realistic will deliver more than they promised. One of the easiest ways to deal with this issue is to provide estimates instead of hard numbers (see Landmine #14!).

There is no such thing as a guaranteed joint-venture real estate investment. We repeat: there is no such thing as a guaranteed joint-venture real estate investment.

JV investors who ignore this landmine are doomed to failure. Human nature is such that if you quote a range of return, people remember the higher number. So if you say the return will be between 8 per cent and 12 per cent, your partner will remember the 12. If you talk cash flow of $50 to $300 a month (which may be reasonable depending on maintenance and repairs), your partner will hear $300. Worse, they will likely do the math and calculate an annual return of $3,600, perhaps even multiplying that over the course of an investment’s projected lifespan.

Evasive action

Never guarantee numbers. Talk in percentages and be realistic about what can impact those figures. If a potential JV partner wants a guarantee, arrange to take their money as a loan and use it to secure a property. This may mean they’ll make 10 per cent interest when they could have owned 50 per cent of the property. That is not your problem. They can’t have a guarantee and half the property.

A deal isn’t necessarily lost when a partner sets terms you can’t live with. This is a creative approach to a problem. Some investors find it easier to deal solely with loaned money versus co-ownership. If that’s what works for your system, that’s okay.

Landmine #15—Stiffed: A JV partner walks out as the deal is ready to close

This is a major frustration and it’s not a landmine you can necessarily avoid stepping on at least once in your JV career. Even with the four levels of commitment (a partner’s word, cash in your lawyer’s trust account, an Expression of Interest letter and a Letter of Intent), some deals fall off the rails just as you’re about to sign the legally-binding agreements that will close the deal.

Can you sue them? Maybe. But why would you want to revive a dead deal with a partner you can’t trust to meet his end of a bargain? It’s probably wiser to put that lesson in the bank and move on.

Evasive action

This is where your Plan B comes into play. Let’s say your real estate agent doesn’t actually look for a deal until he knows you’ve got your Letter of Intent along with a partner’s word and some cash in trust. And now that agent is frustrated because it looks like the deal can’t close, so he’s out time and money. At this point, you may also have talked to other members of your real estate dream team, giving a heads- up warning to everyone from your lawyer to your home inspector and property manager.

Your Plan B should enable you to make the deal regardless of what happens with a particular partner. If you have been cultivating new leads, you may even be able to qualify a different partner and sell them 50 per cent of the property soon after the deal closes. This frees up your cash for the next deal—and your next Plan B backup plan.

To keep your Plan A option as open as possible, I suggest the cash deposit you request from your money partner be set at $1,000, with another $5,000 due upon removal of conditions on the deal. If your partner backs out before the conditions are met, you can still walk away from the deal and you won’t have wasted a lot of your team’s time. When potential partners realize they could lose $6,000 if a deal doesn’t close with them onboard, they are more likely to stay in the deal.

Click here to purchase a copy of “Real Estate Joint Ventures”

I took a short hiatus from the Joint Venture blog series last week with the announcement of the brand new Top BC Investment Towns research report, but this week I’m right back at it with part two and the next five joint venture landmines you must avoid.

Understanding your potential partners is critical when you’re pitching deals and looking for qualified investors. If you miss the mark, you might miss out on not only one deal, but also the potential for multiple deals with that person in the future. Don’t get left in the dust by wasting time – make sure you are laser focused on who and where you are devoting your time to when pitching the deal.

Click here to purchase a copy of “Real Estate Joint Ventures”

Click here for Part One of the 20 Landmines series.

Landmine #6—A lack of insight: You don’t understand where your JV partners will come from.

Review the REIN™ Circle of Influence. Joint-venture partners can come from all three levels in your Circle of Influence. But Level 1 candidates carry significantly less risk compared to prospects from Level 2 and 3. Ignore this rule at your peril.

Evasive action

Make a list of your Levels 1, 2 and 3 contacts. Try to identify 15 to 25 people who are at Level 1 and design a plan that targets those Inner Circle candidates first. Once you have developed JV partnerships, look at how you can reach out to Level 2 contacts. Track all of the names and revisit the list regularly. Your Circle of Influence changes over time. Savvy JV investors track those changes and act accordingly.

Landmine #7—Sitting still: You can’t attract more leads

Investors who step on the first six landmines are likely to step on this one, too. Generally speaking, investors who can’t attract more leads are looking in the wrong places!

Evasive action

Your list of leads can never be too long! Aim to cultivate new leads. Take a critical look at your marketing materials. Do your business cards describe you as a “professional real estate investor”? Make that a priority. Get yourself 500 business cards that have your name, phone number and e-mail. Don’t forget your website, if you have one. Hand these out to people you know.

Set goals for lead cultivation. How many people do you want to talk to about real estate investment on a weekly basis? Set your goal, make a plan to accomplish it, and then track your progress. Attend meetings, set up appointments, network and pursue direct communication. Letters and e-mails to get people thinking about your follow-up call or visit are critical. Following the principles of JV wealth attraction, assess what you’re doing to get people to invest in your deals.

JV Investor Insight: The best business card

Business cards can be tricky. But it’s not rocket science, and professional real estate investors never leave home without them. Go through the cards you’ve collected from others. Copy the things you like and head down to a business store to place your order.

No time? Stop making excuses. Make an appointment with yourself and get the job done!

Landmine #8—Wasting time: You think everyone’s a prospect

Potential JV leads are not prospects until they have been appropriately filtered to make sure they (a) have the money and (b) are people you want to be in business with. Be honest about the fact that you can’t deal with every lead that comes your way. You can, however, devise a plan to filter that information automatically.

Evasive action

An unfiltered lead is a suspect, not a prospect. Prepare an information package that’s easy for you to send to prospects. Include an Expression of Interest letter and a special report about why, where and how you invest. If the lead comes from your Inner Circle and you want to showcase your credibility as an investor, include important background information like a copy of Real Estate Investing in Canada 2.0 or 97 Tips for Canadian Real Estate Investors.

JV Investor Insight: Weed out the tire kickers!

Novice investors are sometimes overwhelmed when JV prospects ask for information. While the package you send is likely to evolve (and improve) with experience, knowing what you will send will save you a lot of time in the early days of building your portfolio.

Landmine #9—Prospects Renege: You aren’t Filtering your JV Candidates Carefully Enough

Every real estate investor, novice and veteran, has a horror story about dealing with enthusiastic JV candidates who turn out to be duds. Some of these people never planned to invest—even though they talked as if they did. Others won’t have the money, so their intentions are moot.

Evasive action

While it’s probably impossible to avoid this landmine completely, a quality filter will help you separate the winners from the losers. This is not harsh. You are in business to make money for yourself and other people. When people waste your time, it costs you and your partners.

Never let a prospective JV candidate skip your filtering process. Have them complete an investor questionnaire. If timing is an issue and you can’t conduct a face-to-face meeting, set up a phone appointment so you can go over the questionnaire informally.

Never confuse business with friendship. You can do business with friends, but that is not essential to the JV partnership. Set this relationship table carefully—and early. You want to work with people who want to work with you.

JV Investor Insight: Show me the money!

Work with money partners who can deliver what you need. Self-employed money partners may have more difficulty qualifying for a mortgage, especially if the lender can’t reconcile the difference between the incomes they say they can access versus the income they report to the Canada Revenue Agency. If someone claims $12,000 in annual income, they are going to have trouble qualifying for a loan on an investment property.

The same goes for a bad credit report. The bank won’t allow someone with a poor credit rating to borrow money. This isn’t news. It’s business.

Landmine #10—Confusion reigns: Identify the decision maker

We’ve all seen the good cop/bad cop routine on television dramas. This is where one officer appears to not care about the suspect being questioned, paving the way for the more compassionate officer to elicit a confession. The same roles play out in real estate transactions with money partners. Here, one partner appears to want to make the deal and then another partner walks in and tears up the deal (hoping for a better offer).

Evasive action

Make sure your filtering process nails down the facts about who has the authority to sign the papers that will get you the money to make a deal happen. Does a spouse need his or her partner’s approval? Are there other shareholders you need to bring onboard before a deal transpires?

Asking this question in your formal filtering questionnaire ensures a prospect can’t claim ignorance down the road.

JV Investor Insight: Vet your prospects

If you’re not sure how to vet your prospects, make it your business to learn. Read Real Estate Joint Ventures: The Canadians Guide To Raising Money And Getting Deals Done, partner up with a successful mentor or join a real estate investment group where you can learn from experienced investors.

Click here to purchase a copy of “Real Estate Joint Ventures”

Vancouver, Nov. 8/11 – The Real Estate Investment Network (REIN™), Canada’s leading real estate research organization has just released its latest report on the top cities and towns in British Columbia for real estate investment. Out of the hundreds of cities and towns Surrey ranked #1. 

The report, titled Top British Columbia Investment Towns 2011 analyzes the current and future prospects for real estate investment opportunities in the province, and identifies the top regions that will outperform in the coming decade. 

The findings are based on in-depth research, analysis of the latest statistics, economic and social trends, and on-the-ground reports from REIN™’s research staff and members, along with reports and statistics from organizations such as Canadian Mortgage and Housing Corporation (CMHC), Statistics Canada, Multiple Listing Service (MLS), Canadian Home Builders Association, city and regional real estate boards, and local economic development offices.
  

The report looks at such factors as:  

• Is the area’s population growing faster than the provincial average?
• Are new infrastructures being built to handle that growth?
• Is the area creating new jobs and taking steps to maintain current employment levels?
• Will Surrey benefit from an economic or real estate ripple effect?
• Has political leadership created an economic growth atmosphere?
• Are there major transportation improvements in the works?

Don R. Campbell, president of REIN™ states in the report, “As one of the fastest growing cities in the province, Surrey has spent recent years diversifying its economy and has experienced a tremendous population increase in the last decade. Currently recognized as the 12th largest city in Canada, Surrey is expected to overtake Vancouver’s title as the largest city in BC in the next decade.”  

“Surrey will reap the benefits from the Gateway and Translink Program. A number of projects are in various states of completion that will positively impact the commute for residents to and from Surrey and improve transportation logistics for businesses. In the next decade, the city will continue to see explosive population growth, one of the most important factors to consider when deciding where to invest.” 

The top towns ranked in the report are: 

#1 Surrey

#2 Maple Ridge and Pitt Meadows

#3 Kamloops

#4 Abbotsford

#5 Fort St. John

#6 Dawson Creek

#7 Kelowna

#8 Comox Valley

#9 Penticton

#10 Prince George

#11 Vancouver

ABOUT (REIN™)

Founded in 1993, the Real Estate Investment Network™ (REIN™) has grown over the years to become Canada’s leading real estate research, investment and education organization. It serves more than 3,000+ member clients who own more than 26,000 properties (valued at over $3.3 billion) across the country. Members use the unbiased research and proven systems to invest in properties in economically strong regions across the country. REIN does not sell or market real estate to its members or the general public, but instead conducts objective and unbiased research, analysis and investor education. 

For more information please visit www.reincanada.com 

To order a copy of the complete Top British Columbia Investment Towns research report visit http://www.topbctowns.com/

Media coverage:
http://www.municipalsuppliers.com/news_detail.asp?ID=360528
http://www.cjdccountry.com/News/Story.aspx?ID=1568430http://www.thenownewspaper.com/Report+ranks+Surrey+best+place+invest+real+estate/5677465/story.html
http://www.kamloopsnews.ca/article/20111108/KAMLOOPS0101/111109786/-1/kamloops/transportation-hub-makes-kamloops-top-real-estate-investment-locale 
http://www.bclocalnews.com/news/133447698.html
http://www.opinion250.com/blog/view/22036/1/p.g.+tops+vancouver+as+better+place+to+invest 
http://www.bclocalnews.com/news/133499003.html
http://www.vancouversun.com/business/Surrey+rated+hottest+housing+investment+market/5676507/story.html
http://www.bclocalnews.com/opinion/133472158.html

When you’re getting involved in a business as serious as real estate investment, the utmost care must be taken to ensure you don’t flop – the negative result can be very expensive. Avoiding the most common mistakes sounds like the obvious thing to do, but too many folks shrug these off as “That would never happen to me” situations. I’m committed to success for every single person who reads this blog and with this first post in the series I intend to give you the tools you need to jump the most-known hurdles without skipping a beat.

With the recent release of my new book “Real Estate Joint Ventures” I’ve decided to give you a sneak peek into the book with the 20 Real Estate Joint Venture Landmines you must avoid. Stay tuned over the next four weeks as I lay out the most common problems investors face when dealing in joint ventures, and give you the critical “evasive actions” you can take to rectify each one.

Click here to purchase a copy of “Real Estate Joint Ventures” 

Click here for Part Two of the 20 Landmines series.

Landmine #1—Going it alone: You fail to build a real estate dream team

This landmine is all about the foundation you need to generate successful joint-venture deals in real estate. If you try to develop your business without a quality team behind you, you are doomed to fail.

Evasive action

Recognize that your role as the real estate expert on these deals means you must put together the team you’ll lead. The team’s success hinges on your ability to foster quality relationships with these individuals, every one of whom should have experience in real estate investing.

The Real Estate Dream Team

- Real estate agent
- Lender and mortgage broker
- Lawyer
- Accountant
- Bookkeeper
- Property inspector
- Construction and renovation tradespeople
- Property manager
- Prospective money partners

Landmine #2—Letting your team down: You forget the win-win equation

Every member of your real estate dream team should be able to expect to be involved in a win-win relationship with you. What does that win-win relationship look like?

- Your real estate agent brings you sound deals because she knows what you’re looking for. In return, she trusts that you won’t sabotage a deal and cost her a well-earned commission. So if a deal doesn’t interest you, you let her know so she can shop it to another client.
- Your bookkeeper keeps your records up to date because he knows what you expect and that you won’t burden him with last-minute requests for information unless it’s absolutely necessary.
- Your renovation expert delivers solid quotes and quality work because he wants in on your next project.
- Your property manager takes care of regular maintenance, but makes sure you know where money is being spent.
- Your money partners like the return they’re getting from their relationship with you and they tell others about it.

Evasive action

These win-win relationships can be complicated, since some roles on your team may be filled by more than one expert and there may be times when you need to draft someone new to your bench.

The key is respect. Recognize that each of the individuals on your team will expect a win-win relationship with you. In the vast majority of cases, that win-win will have a financial component: these people are helping you make money and vice versa.

To have an endless supply of JV money for your deals, you need to keep the best on your team. Take care to offer something other investors do not and never forget that you want the members of your team to make money as a direct result of their relationship with you.

JV Investor Insight: Develop a win-win mindset

Sophisticated JV investors know they can make money investing in real estate. They bring others into their deals so they can profit from deals that make money for their partners first. Look at your team members and ask yourself: how can I help them? To bring them onside, answer the question: what’s in it for them?
Under promise and over deliver by finding out how you can help them out!

Landmine #3—Staying too close to home: You choose the wrong partners

This problem is a lot more common than a lot of people realize. When you’re new to JV investing, it’s easy to talk about potential deals with other investors. But no hockey team needs more than one goalie on the ice during a game, and no real estate investment dream team needs a bench of real estate experts!

Evasive action

To avoid this landmine, take an inventory of what you have to offer and be mindful of what it tells you in terms of what you have and what you need. Are you the real estate expert? Do you also have experience with renovations? Is that experience hands on or managerial? Do you know where to find investment properties with great potential for cash flow and appreciation? How are your legal or tax accounting skills?

If you’re putting together your first real estate investment dream team, stock up on people whose skills are different from your own. What kind of investments do you want to pursue? Who can help you do that?

JV Investor Insight: What are you waiting for?

Sophisticated investors take the time to figure out who they need on their real estate investment dream team. Taking a multi-faceted approach to their deals, they look at what they need and when they need it, and then identify the individuals who can help them do that. If you won’t buy a single-family home without a property inspection, what are you waiting for? Line up that inspector before you make your first offer. Similarly, if you don’t like what your mortgage broker offers, find someone else you can work with.

Landmine #4—A lack of confidence: You don’t believe someone would want to invest with you

Remember the principles of JV wealth attraction? Sophisticated real estate investors attract money partners by practicing the seven principles of attraction: abundance, expectancy, imagination, giving, decisiveness, expertise and resiliency.

If these principles have you scratching your head, pick up a copy of Real Estate Joint Ventures: The Canadians Guide To Raising Money And Getting Deals Done. It walks investors through the details of wealth attraction.

Evasive action

Novice real estate investors often struggle with this landmine. They may do the work required to build a great support team, then struggle with how to bring money partners on board. More often than not, the real problem is a lack of action! No one is knocking at your door because you haven’t asked anyone over!

Change that by setting up meetings with people from your Level 1 contacts. Call relatives, friends and business colleagues and arrange a time to talk to them about your real estate investment business. Take a list of specific topics you want to cover—and link each topic to a principle of wealth attraction and tell them how your business generates win-win investments for you and your money partners.

This strategy works on three fronts:

1. It makes you narrow down your business focus.
2. It gives you important practice with face-to-face meetings with prospective JV partners. (Every time they ask a question you can’t answer, you get a new opportunity to find out information you can use to cement your reputation as a real estate “expert.”
3. It targets your message to the most important members of your Level 1 contacts. These people are the most likely to invest with you—and now you’ve told them exactly why they should do just that!
 
Meetings like this typically lead your Level 1 contacts to tell others in their own “inner circles” about what you’re doing. In other words, they will start to tell other people how your deals can help them, too.

Landmine #5—Chasing the money: Desperation scares potential investors

A lack of confidence must be balanced by realism. Potential investors will not be won over to your deals if you seem desperate for the money, or too confident about what you can do with it. Some real estate investors do this full time. Others balance their property portfolios with full- or part-time jobs. Regardless, never underestimate your role as the real estate expert and always conduct strict due diligence on the deal and your partner.

Because bad news travels fast, avoid getting into situations where a deal will fall through if your money partner reneges and never let JV money go to anything other than an agreed-upon deal.

Evasive action

Put a solid Plan B in place. You do not want to lose a deal because a partner reneges. Nor do you want to close a deal that doesn’t meet your basic goals (cash flow, mortgage pay down and appreciation) just because you’re afraid you might lose a particular investor.

Learn the art of negotiation that practices the win-win approach. When necessary, walk away from a deal. If you can’t come to an agreement, move on. You want to be flexible and still be able to do business on your terms. Remember your role as the real estate expert. When a prospective partner wants to elbow in on decisions that should be yours to make, think about what letting them do that will mean down the road. If you are the real estate expert, you want to own that role in your own deals.

JV Investor Insight: Seek the right partner 

Do not sell yourself short. Novice investors sometimes feel pressured to “prove” themselves and may be tempted to give away more than they should just to make a deal work with a particular money partner. Stick to your guns. If the deal is good, you will find the right money partner (or swing it on your own). Don’t give away the store to keep the front door.

Click here to purchase a copy of “Real Estate Joint Ventures”

Over the next few weeks, I am proud to bring you a series of posts geared around the release of my latest book, ”Real Estate Joint Ventures,” co-written by Russell Westcott. We’ve put together a fantastic checklist of the 20 Real Estate Joint Venture Landmines that you must avoid at all costs. If you want the best chance for success when going into a joint venture situation for the first time, or even if you’ve done multiple deals already, these common pitfalls are ones that you will NOT want to become victim of in your pursuits of wealth.

Click here for Part One of the 20 Landmines Series.

Click here for Part Two of the 20 Landmines Series.

Click here for Part Three of the 20 Landmines Series.

Click here for Part Four of the 20 Landmines Series.

Click here to purchase a copy of “Real Estate Joint Ventures”

Take notes, discuss with friends and business partners, and make sure that you cover all the bases when you head into your next deal. Be sure to check back next week for the first set of landmines you’ll want to avoid.

“What do you want to achieve or avoid? The answers to this question are objectives. How will you go about achieving your desired results? The answer to this you can call strategy.”
—William E. Rothschild

Successful real estate investment strategy is all about doing the right thing at the right time. But none of us lives or invests in a perfect world. No matter how much we know about the right way to go about doing our business, there will always be times when we make mistakes. There will also be times when we look back on our success and know that we could have done better.

Know this: Mistakes are not the enemy. Mistakes only stop us in our tracks if we allow them to be an excuse for not taking action.

To help you avoid investment paralysis, this special report takes you through the ugly details of 20 of the most common mistakes real estate investors make when putting together joint-venture deals. Each is followed by the evasive action you can take to side-step these common errors!

But how can you take action on your JV investments when you know you are going to make mistakes?

You take action by following a proven system and that includes a commitment to learning from the successes and mistakes of others. Indeed, that commitment to learning from others is the first and most important step you will take on this journey of landmine evasion. As part of that system, you will make it your business to find out what your peers are reading, what seminars they are attending and whether they’re willing to talk to you about what works and doesn’t work for their own JV portfolios. To paraphrase Will Rogers, the late American cowboy-philosopher and social commentator, there are two ways to learn new information. The first is from reading and the second is “by association with smarter people.”

Also remember to make sure the smarter people you surround yourself with are action takers, not action talkers. Wanting to invest in real estate with JV partners is like wanting to exercise to improve your physical fitness: You can’t invest in real estate with JV partners without doing the work that it entails—nor can you hire someone else to do push-ups for you. If you’re going to reap the rewards, you’re going to have to do the work.

What’s left after you’ve carefully avoided—or made, and then learned from—every mistake possible? Success! Victory! Triumph! Profit! Call it what you want, a JV real estate investment strategy that avoids unnecessary pitfalls is a strategy where investments pay off and co-venturers come back for more!

JV Investor Insight: Take ownership

At the end of the day, your real estate investment decisions, good and bad, are your responsibility. When mistakes happen, own them and move forward. Don’t blame others, but when appropriate, do give yourself credit for lessons learned. Drivers who stay at home until every light along their route is green will never leave the safe haven of their driveways. The road you take will have potholes and detours. You will avoid some, hit others and sometimes make the wrong turn. As long as you keep driving, you’ll gain experience, make progress and enjoy the journey.

Follow A Road Map to Success

If a proven real estate investment system is like a road map to success, this special report on JV landmines represents a critical learning curve on that route to triumph. Remember: you are not being sent on a life and death mission wearing a blindfold. On the contrary, you are a real estate investor who’s been handed a sophisticated guidance system with an established track record. That implies taking some responsibility for what you are being offered. To get the most from this report, read it with the following three pointers in mind:

1. Step carefully. Choose wisely.

There is no substitute for common sense tempered by education and due diligence. Always do your own heavy lifting, but remember that real estate investing strategies are like a smorgasbord. Pick what works for you, pursue what makes sense for your plan, and learn to move slowly. This is not a race. Sophisticated real estate investing, with or without money partners, is about long-term wealth creation, not short-term riches.

2. Aim to be a settler, not a pioneer. Follow a proven course of action and always test your strategies.

Every JV deal you strike will be unique to a particular set of partners and circumstances; but real estate investing with money partners is not a new invention. Find someone who’s doing what you want to do. Learn from them. Test strategies to figure out what works best for you. If you only have time to nurture Level 1 contacts, stick to that approach. Don’t let yourself be talked into strategies that you don’t have time to develop and perfect. If it works, go for it. If it doesn’t, be prepared to make changes.

3. If you find a better route, go for it!

The strategies you adopt will be your own, but the mistakes you avoid can be based on lessons learned from others. Make continuous improvement, not perfection, a business goal.

The main thing is that you get started on your journey. Do not allow yourself to make the novice mistake of waiting in your garage until all of the lights along your designated route turn green!

And be honest about the way inaction poses as action. For example, a “professional” investment package may help you sell your deals to money partners, but it is not essential to your first JV deals. It’s a sad fact of life that many novice investors spend so much time and money developing a professional investment package that they’re worn out before their first deal is ever pitched.

So keep your eye on the prize. What’s more important in the early days of your JV business, writing reports or finding the deals others will want to buy into?
With an action-based foundation now laid, here are the 20 landmines we want you to study, think about and plan to avoid.

If you’d like to check out the book in it’s entirety, you can grab a copy now at Amazon. Check back next week for the first list of the landmines you want to avoid when dealing in joint ventures in real estate. Cheers!

Click here to purchase a copy of “Real Estate Joint Ventures”

We live in a world of headlines that pump national average house price, average number of housing starts, and the average household debt. The most important thing to remember about all these average numbers is that they don’t mean much in the grand scheme of things. When it comes to investing in real estate, an average house price is the equivalent of taking the average temperature of every patient in a hospital, determining that it works out to 98.6 degrees and making the statement that everyone is in good health – it’s just not accurate. ‘Secrets of the Canadian Real Estate Cycle‘ will give you the insight you need to do the digging and look beyond the ‘average’ headlines.

If you have not yet read ‘Secrets of the Canadian Real Estate Cycle‘ yet, here’s your chance to get a sneak peek at a key chapter in the book. Search for the knowledge that will propel you forward and always make sure you’re looking to see ‘What’s Behind The Curtain’.

Measuring Real Estate Values: Averages Don’t Matter

Another area of confusion with real estate statistics concerns the way values are measured. Real estate values are measured in various ways throughout the world, including by averages, medians and varying forms of indexes. Some of these measurements produce an inaccurate indication of what is actually happening to real estate values.

It is surprising how often less reliable data, such as averages or median sales prices, are quoted as a representation of what’s happening in a real estate market. These figures can easily present a distorted view. For example, when there is a disproportionately high level of sales activity of superior real estate in an area in a given period, it may appear that values in that area are increasing purely because the average and/or median price will look higher than it had previously. Prices for such “superior” real estate may have actually decreased, but this may not be represented by the average or median figures.

Conversely, such a period may be followed by a high level of sales activity of inferior or lower-priced real estate in the same area. That may seem to indicate that values in the area are decreasing purely because the average and median sales prices are lower. In reality, that period may have been characterized by a few sales of superior real estate, so while the average and median figures indicate that values are declining, they may actually be increasing.

To obtain more accurate information on real estate value trends, we suggest using one of two methods.

1. Indexes: Indexes that are calculated from repeat sales of similar single-family homes, such as the S&P/Case-Shiller Home Price Indices used in the United States, are considered by many economists to be the most accurate way to represent a market’s overall real estate values. Until 2008, Canada was without a nationally recognized house price index. Fortunately, Teranet, in alliance with the National Bank of Canada, created an index that dates back to 1999 for the metropolitan areas of Vancouver, Calgary, Toronto, Ottawa, Montreal and Halifax.

2. Moving Average: Using the average Multiple Listing Service (MLS) prices reported monthly, economists calculate and trend the 12-month moving average. The 12-month moving average helps normalize the data and remove the month-to-month volatility described above.

Chapter Summary – Put the Cycle Secrets to Work

The real estate cycle is an irregular but recurrent and predictable succession of causes and effects that the real estate market experiences with resultant impacts on the creation and destruction of real estate wealth.

The cycle moves through three phases: boom, slump and recovery. Market influencers may contribute to its progress, or to temporary aberrations. Key drivers, on the other hand, always propel the cycle forward through predictable patterns. The duration of the phases changes depending on key drivers.

Efforts to interpret point-in-time statistics during any phase of the real estate cycle are complicated by a lack of context. The end result is statistics with little meaning, resulting in confusion. Strategic investors in pursuit of reality avoid this confusion by using key drivers to track the real estate cycle. They know the cycle is predictable in terms of its progress, and unpredictable in terms of its duration. That does not distract them from informed action based on what the key drivers tell them to do.

Click here for Part One.

Click here for Part Two.

Click here for Part Three.

Secrets of the Canadian Real Estate Cycle will give you insight into the economic fundamentals that you may not have realized before. Make sure to look out for the next post in this series, coming out next week. Good luck and happy investing!

Cheers,
Don

Fall is just about ready to show her face and take us through the paces into winter. Leaves are changing, temperatures are dropping, and so are mortgage rates (small decrease last week!). With the constant changes in the real estate market, you have to stay on top of all the information that is being distributed across the country. ‘Secrets of the Canadian Real Estate Cycle’ is designed to turn myth into fact and help you understand exactly what is going on around you. A calm perspective is your best ‘chance of survival’ amidst media noise and market changes, so take the chance and be enlightened.

I’m happy to present part three of the series unveiling chapter two of my latest book ‘Secrets of the Canadian Real Estate Cycle.’ You have to consider all the facts in real estate, so now is your chance to get a head start on the masses.

Real Estate Cycle Exceptions

As noted earlier, there are a few exceptions to the rules of the real estate cycle. First, some properties within a city or region may continue to command a premium irrespective of what is happening in the real estate cycle of a nation. These properties are likely to have some sort of serious “X factor.” Perhaps they have historical significance or a combination of uniquely superior attributes. Speaking in terms of real estate investment fundamentals, these are likely to be the best properties situated in the best locations on the best streets in the best neighbourhoods of a city. Whatever the reason, these properties (and the investment deals that involve them) are largely immune to the phases of the real estate cycle.

Another exception involves the emergence of specific localized hot spots. Regardless of the real estate cycle phase a nation, region or city may find itself in, these hot spots can defy the real estate cycle’s impact on prices in the region in which they are situated.

These hot spots emerge for a number of reasons, including the rezoning of land to allow more population-intensive developments to be constructed (therefore effectively increasing land values), or proximity to significant new projects planned for an area. Such new projects can include new infrastructure resulting in the creation of numerous employment opportunities, major transportation improvements like light rail rapid transit development, or a significant increase in the level of public amenities available. But strategic investors should be forewarned: these hot spots will eventually be subject to the real estate cycle because they will reach a level relative to surrounding or similar locations.

Exceptions to the cycle can also emerge as a result of culture shifts driven by lifestyle demands. The impact on real estate values can be positive, negative or both. One example of a culture shift is when baby boomers seek new lifestyle opportunities or abandon previous lifestyles. This could increase real estate values in favoured new lifestyle locations and reduce real estate values in former hot-spot locations. Again, such exceptions to the real estate cycle will eventually complete their adjustment to the culture shift and will then follow the real estate cycle once again.

Statistics and the Real Estate Cycle

Real estate investment is a numbers game, and no discussion of the real estate cycle could be complete without a review of how real estate–related statistics are reported and how we need to view them in order to better understand which phase the cycle is in.

As strategic real estate investors, we want reality, not fiction. That is problematic because most real estate statistics are presented in way that serves a predetermined purpose or that lacks context. And make no mistake: the strategic investor needs to take a hard look at the numbers. We want to make sure we understand what they tell us. We seek context

Click here for Part One.

Click here for Part Two.

Click here for Part Four.

Secrets of the Canadian Real Estate Cycle will give you insight into the economic fundamentals that you may not have realized before. Make sure to look out for the next post in this series, coming out next week. Good luck and happy investing!

Cheers,
Don