Top Real Estate Money-Making Tips
Top Real Estate Money-Making Tips
Real Estate Guru Shares Money-Making Tips

By Pamela Fieber, Calgary Herald, March 21, 2009

The recession isn’t necessarily bad news if you’re looking to invest in real estate. In fact, you could say it’s a great opportunity. “People think, ‘oh no, I have to give up on my dream because the economy won’t let me do it,’ ” says real estate guru Don Campbell, author of the best-selling book Real Estate Investing in Canada: Creating Wealth with the Acre System. “But just because the economy changes doesn’t mean your financial goals have to change.”

Campbell says the number one mistake people make is speculating on real estate rather than investing in it.

There is a key difference, and the goal of Campbell’s book, now reissued and updated for the current economy, is to explain that difference to potential investors.

“I was becoming discouraged by human nature,” Campbell says during a Calgary stop to promote his new release, which will donate 100 per cent of its profits to Habitat for Humanity. “The get-rich-quick schemes and flipping of properties. I set a goal in 2001 to change the tone of the conversation in Canada about real estate.”

And so he did. His book has sold more than 35,000 copies, and provided more than $400,000 to Habitat for Humanity.

Campbell says real estate investing is still a great way to reach a financial goal — whether that’s replacing a salary income or paying for the kids’ university — but the key is to do your homework before jumping in. In other words, don’t speculate.

But don’t let fear hold you back either.

“You’re not going to put your kids through university by huddling in your basement worrying about (what happened in) 1982,” he says. “The reality is, the next 18 months are going to be a roller-coaster. During a roller-coaster ride you’re always freaked out. But keep in mind that roller-coaster rides always end.”

If you’re worried about your job, that’s no reason to stay out of the market. In fact, all the more reason to get into the bank and secure that loan while you have a job.

“Are you going to try to get a mortgage for a cash flow property while you have a job, or after you lose your job?” he says. “And if your job sucks now, then use it to get a good credit rating.”

The goal, Campbell says, is that maybe with the secured mortgage (and a steady job is helpful in getting that from the bank) you may end up in a position where “your job becomes an option, not a requirement.”

But that doesn’t happen until you have some cash flow properties.

That means a property that pays you an income each month. A rental property, for example, as opposed to a speculative property that you intend to flip when the market goes up again.

Never go out on a financial limb in the hopes that property values will make a huge leap, he advises. Instead, look for properties that will still pay you an income even if their value goes down. The numbers have to make sense, and Campbell’s book makes the math look simple.

Here are Don Campbell’s top four tips for making money on real estate during a recession:

1. Have a telescopic view, not a microscopic one.

Campbell offers a step-by-step system for determining if a town, or a neighbourhood, is a good place to invest. He uses the example of the overstock of houses in the U. S. They are not building more houses, therefore they are not looking to Canada for lumber. Therefore, a lumber town might not be a great place to invest right now.

In the book, Campbell goes into more detail and shows how you can apply this logic to regions, cities and neighbourhoods. Key factors are transit access and proximity to a major employer (and the prospects of that major employer).

2. Become a landlord. In recession, more people need to rent as they hold off buying their own home. You will have a steady clientele.

3. Buy near universities and colleges. During a recession, more people go to university, especially high school graduates who can no longer walk into lucrative labour jobs. And they need rental housing.

4. Follow transit improvement plans. If you keep up on where the next big road is going in, or where the new train station is going, you will know the best neighbourhoods to invest in. The key is timing: you have to wait until the project is actually starting (to guard against a reversal of plans) and you have to get in before the new route is established and prices have already gone up.

“If you buy within 800 metres of a station, and then the demand goes up for homes within walking distance of that station, you’re in a good position.”

So what stops people from real estate investing?

Fear, mostly.

But Campbell has an answer for that.

“Always look at your financial goals,” he says. “If you don’t want to make any more money than what you make now, you want to rely on your pension, then don’t invest in anything.”

Many people are also afraid to become landlords. Campbell, however, suggests thinking of tenants as customers of your business.

“If you think about it, we’ve all been renters,” he says. “Did we tear out the carpet and break everything? No. Students may spill more stuff on the carpet, but 99 per cent of tenants are good.”

If you set the tone of the relationship right at the beginning, you can avoid many of the pitfalls.

Campbell suggests providing tenants with phone numbers for a plumber and/or handyman, and make it clear that they can take care of any problems they’ve created themselves.

That will cut down on the dreaded middle-of-the-night maintenance phone calls.

“It should say right on there, if you caused, it, you pay for it,” he says. “So if you’ve flushed Ernie down the toilet and now he’s stuffed in there . . .”

Campbell is an advocate of property managers, which takes that element out of the picture completely. That, he says, allows you to focus your energies on the big picture and finding more good deals.

And the deals are out there.

What Campbell aims to do is help people find them.

If you follow his system, there is little room for error. For example, you would never buy a property that didn’t offer a positive cash flow. That goes against the grain of what thousands of investors did in Calgary in the past few years, buying up multiple condos, for example, and flipping them before the building was even complete.

That can work in the right market, Campbell says, but it’s a lot riskier than buying a cash-flow property that will provide a slow and steady income.

If the value goes up, you are in great shape. If the value goes down, it doesn’t matter because you still have the monthly cash flow.

Bottom line is, the recession may actually help investors.

“There is this perception out there that the banks aren’t lending,” Campbell says. “That’s not true. They are for decent deals. They care about the worst-case scenario: if they have to take the property back, can it pay for itself?”

Those are the same principles that should be guiding your decision to buy.

Don Campbell, who hosts regular seminars across Canada, is also the author of 97 Tips for Canadian Real Estate Investors and 51 Stories of Canadian Real Estate Investors.

Real Estate Investing in Canada is available in bookstores for $36.95.

Top Real Estate Money-Making Tips was last modified: April 30th, 2010 by admin
 

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