Last evening I met with some great homeowners that have built and customized a beautiful home in a new community in NW Calgary (thanks B&D!) What we found after looking at the sales and active listings in the area is that the market is dictating that the value today is considerably less than what it cost them to build this home only four years ago. What we find in this scenario is this... if the Seller needs a specific price to make a sale happen (taking into account the amount owed on the property and such) and a Buyers perceived value is considerably less, we come to a stalemate. If a Buyer and a Seller cannot find a price they are both comfortable with we will not see a sale. The bottom line as a Seller is we want to get the most that we possibly can in the current market, and if that is not a possibility we need to explore other avenues to look after our real estate investment.
Leasing is certainly a good alternative for a long term
holding. I would suggest it may be quite some time before we return to where we
are right now in the market. With the uncertainty in the world economy, and
especially with regards to our neighbours to the south, the possibility of us
escaping these issues unscathed is miniscule. We
– as Calgarians and Albertans – did quite well last year in a world that is in
turmoil. I feel it is only a matter of time before these national and international issues
and challenges catch up with us. If we see a flat
market this year, I feel we will be ahead of the game. Realistically, I think we
may lose steam this year and see further declines in pricing. If you do decide
to rent or lease your property, I would suggest you consider a long term
plan, at least five years as that is how long it may very well take before we
see any significant changes in the market.
I would also caution you to be diligent in your research if
you are considering a lease-to-own strategy. I personally designed a
rent-to-own program back in 2006 where we set up a scenario for renters to put
them into homes with a five year program to set them up to purchase their home. My belief was then - as it is now - that all Calgarians should have the opportunity to own their own home. We were
actually able to get most of the folks that applied for this program their own mortgage approval
right off the bat (that’s why I love mortgage brokers!) The only two families that we did need to use
the program for have walked from their deals and the properties have reverted back
to us. These properties are more of a hindrance than an asset for us, they are
not properties that I would have personally chosen for their investment potential. Ask yourself this, why
would someone get involved as a Tenant in a lease-to-own situation with
mortgage rates at historical lows? Our philosophy at the time was to assist
renters that could not get approved for a mortgage from the banks by building
their credit so that they could get their own mortgage at the end of the term.
We even enlisted the help of a financial advisor for them. I’m afraid that what I have learned from this
experience is that there is often good reason these folks were initially turned
away by the banks.
As I have mentioned many times in Blogs past, it is essential to enlist the expertise of a knowledgeable real estate professional to assist you with your own real estate investment strategy.
Let me help you make it happen!
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