Investing in Real Estate in the Current Market

I recently looked through the "BMO Bad List", the list of over 200 defendants to the bank's accusation of mortgage fraud. It will be interesting to see how this all irons out. Rest assured if they see any amount of success, we will see many other financial institutions following suit. Over the past few years there was a ton of money lost and gained in the industry… when it is the "Big Banks" that are in the losing position, you can bet their pockets are deep to remediate their position!

With the real estate market in such a volatile position today, it would seem that many potential sellers will be trying a variety of things to entice a buyer. Rent to own, seller financing, "guaranteed" pricing and such. The bottom line is that we will have to be very careful as many of these schemes rare their heads. I'm not saying they will all be shady - some may be clever and well thought out - but we will certainly need to do our homework… and utilize a knowledgeable real estate lawyer in putting together any type of new or strange situation.

I believe three things are of prime importance in selling a home. The first is the property itself - how is it presented? There are many homes that are online that certainly are not at their finest. Many are full of clutter, messy, dirty and certainly not staged in the best light. A home really should look its finest when presented to a potential buyer, which leads me to the second criteria, marketing. The first line of offense is, of course, the MLS. Are you utilizing all of the tools available to you? Are all 20 photos looking their finest? Other support marketing should also pique a potential buyers curiosity, making them ask questions, and leading to a viewing of the home.

Taking these two important aspects of the listing into account, the third - and most important - aspect of the listing is the price. If the property is at its finest, and the marketing shows off the property in a fine light, one can ask a premium price for the property. Coming to this "premium" price takes into account recent sales, where the market is heading, property assessments and such. Pricing is a very pragmatic process, there is no magic involved. If the property requires updating, if it does not show well, if it is located on a busy street, if it is messy, needs paint etc etc the pricing needs to be adjusted to reflect these insufficiencies. And if the home looks bad online, or the marketing is inefficient, again, the price has to be adjusted to reflect these deficiencies.

If you are interested in a bargain in purchasing a home, they will certainly present themselves over the next few weeks and months. I would suggest we will see a variety of "handyman" specials, foreclosures, and desperate sellers that may list their homes for below the current market value. I can also ensure you that if homes come up that are truly below current market value, there will be a great many bargain hunters, investors and such also looking at those homes. Homes that are of exceptional value will sell quickly.

Having said all of that, to be sure you are in a position to pull the trigger when a home comes up that appeals to you, we should have all of our ducks in a row, starting with the financing. Chatting with a Mortgage Broker can present you with a variety of purchase and financing options.

I am certainly a huge believer in real estate as a viable investment and wealth building tool. Real Estate, however, is a long term investment. Many have been extremely fortunate in "flipping" homes over the past few years. Making a lot of money in an inclining market, or buying "fixer uppers" and renovating for profit. In the current market, however, there seems to be very little profit margin for the handyman. As a matter of fact, if we lose value in general over the time one buys, fixes up and then relists, one may actually lose money. Even worse, many have tried to invest short term and have lost their shirts. I suggest we will not see any significant equity gains over the next year, maybe two or three. That does not mean that real estate is not a good investment, one still can make a profit in the rental market. And if you are anticipating moving into a specific property in a decade and buying a "holding property", chances are pretty good that the values will be significantly higher in the long run.

Bungalows

Bungalows may very well become the preferred house style of the future as the population grows older. Even more interesting are the "villa" either attached or detached style homes, often condo ownership or having a Home Owner Association. The owners want to be able to lock and go. Read that - not having to deal with snow removal or yard maintenance such as cutting the grass!

Bungalows with more than one bedroom upstairs are at a premium, but not necessarily the most popular of this style. They do mostly appeal to "empty nesters" (I will be one before you know it.) Typically retirees or close to retirement type folks would have - in past - moved away from the hustle and bustle of the big city (maybe to the Okanagan or Shuswap.) The trend I am seeing more and more is these folks want to stay in the city for a variety of reasons. The first is what the city has to offer such as culture, proximity to an international airport, and even sports entertainment.

The second, and most important, is that they want to be close to their offspring… and even MORE importantly, to their grandchildren. I would suggest that over time, value of this type of ownership could potentially surpass the rates of other styles of homes such as the two storey house.

As the aging population become more financially independent we also see Canadians purchasing winter homes abroad in such places as Arizona, Florida, Mexico and Costa Rica just to name a few, and the fact you can pick up properties in these areas for a mere percentage of the values in areas like Calgary make two homes more viable for more and more people. I can tell you the thought has crossed my mind this winter, especially with the brutal cold temperatures we have seen this year.

Food for thought!