Location, Location, Location Right? Kind of…

When It Comes To Real Estate Location Is Key

map searchYou have all heard it before when you are looking to buy real estate it is all about LOCATION, LOCATION, LOCATION!  Right?

Well sure, everyone has heard that gem before, but what does that actually mean?  The reality is it will mean different things to different people, depending on a lot of factors.

Factors That Go Into A Real Estate “Location”

A great location for someone who has kids may be within a block of a great school so the kids can walk.  A home next to a school may not be as desirable to a single professional who places greater priority on walking distance to the trendy bars and restaurants.

Before you start your home search it is important to take a little bit of time and make notes on what you would consider a positive in location and what would be a negative.

Once you have a list of the pros and cons of locations you should start to consider what kind of features you need.  If you are the family wanting a home by the schools so your three kids will be able to walk to school, you might also want a large fenced back yard.  And because you are blessed with three girls you know that sometime in the not-too-distant future you are going to be fighting past the curling irons and makeup to have a shower… that is if you can beat the kids to it in the morning.

Dad may say he needs a garage because he can claim it as his domain and can hide out and polish the car to get away from the days stresses.  The young professional may be looking for a short commute to work and has no need for more than 1 bathroom.

Whatever it is you want as a “feature” make a note of it.

Now that you have gotten all excited and made a list of your dream features it is time to get down to business.  Go and talk to your bank or a mortgage broker and find out what you are qualified for.  This, in my opinion, is the MOST important step.

There is nothing worse than taking a buyer out to view properties and have them fall in love with a home only to find out it was way over budget.  Do you really think anything else will compare to the home of your dreams that you have seen and already visualized the family living in?  Not a chance.

Once your heart is set it better be aligned with your pocketbook, or we will never be able to find anything that will compare.  Save yourself the heartache and find out the budget you have to work with BEFORE you go and look at homes.

The next step is to pick a Realtor.  If you happen to be looking at Edmonton area real estate, I happen to know a great one! 😉  Look for someone who has expert level knowledge of the area you want to buy in.  It can be very frustrating as a buyer when you find a home that you love which seems to fit the criteria, but your Realtor knows nothing about the neighborhood.

A good Realtor is one that can answer questions about what you find important.  A great realtor is one who works with you to understand what you find important and takes that into consideration before you have to ask.

Starting Your Home Search

Any Realtor can set you up on an MLS search and let me just say that if all they do is start feeding you listings and then wait for you to scroll through them all and call them to ask about a property, you picked the wrong Realtor.

A great Realtor might get you set up on a quick search based on what you tell them you are looking for, but they will then dig deeper.  I personally like to get you on the ground looking at homes as soon as possible so I can get a feel for what you like and don’t like in person.  Remember, the pictures you see in real estate listings can be very deceptive.  I have seen my share of Realtor pictures of homes that have been taken with a wide angle lens from just the right angle on top of a chair to know you need to see the inventory in person so we can get you into what you really like.

It’s also important when working with your Realtor to keep an open mind.  I have worked with buyers who told me that they want a 2 story house and so don’t show them anything but 2 story houses.  After seeing a few 2 story homes with these buyers and listening to what they had had to say it quickly became clear that a 2 story in their price range didn’t have enough main floor living space.  I threw a couple of ‘comparison’ bungalows in the mix and the buyers fell in love.

If all I had done was send these buyers 2 story listings and only showed them 2 story listings, they might still be searching for the home of their dreams.

Also, much like a yoga devotee, flexibility is important.  It is critical to have a features list and to know the budget going in and to work with a great Realtor who will help you check as many boxes as possible in the right neighbourhood, but remember that everything you put on your features list and even community requirements may not ALL be available in one house.  You will need to prioritize as you go through the progress and find the best home for the best price in the best location FOR YOU.

After that, all that remains is the packing.

Real Estate Investors

This doesn’t just apply to families looking for places to call home, but it holds true for real estate investors as well.  Many real estate investors are experts on the deal.  They can structure the offer, arrange the financing and breeze through the paperwork, but they often need local knowledge – especially if they aren’t from the community themselves.

A good investor Realtor will be able to tell you whether the home is underpriced for the neighbourhood and which schools and amenities are nearby.  A great Realtor will work with you to understand your real estate investor needs.

What is the tenant profile you are looking for?  Looking to attract families?  Your realtor should be able to tell you what the demographics of the neighbourhood are – is it attractive to young families, is there a dog park nearby, what are the school options?  Looking to attract young professionals?  Your realtor should know how far the nearest sushi restaurant or micro brew pub is, and what the local nightlife options are.  Students?  What about public transit and walkable shopping?

It might seem silly to think of picking a Realtor based on some of this criteria but how bad would you feel if you bought your investment property and find out a month later the school is a 45 min bus ride and the pickup time for the kids is 7 a.m. and the kids will have nobody to play with on the weekends because everyone else in the neighbourhood are empty nesters.

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Proper Tenant Screening Protects Your Real Estate Asset

The Right Tenant Can Help Your Investment Real Estate Business

The Wrong Tenant Can Cost You Thousands

Years ago it was enough peace of mind for a real estate investor or property manager to just meet someone to get a “feel” for them as a person.  A “what does my gut say” way of screening a potential tenant…

Sadly in this day and age this is no longer a viable way to determine if the ones signing the lease are going to take care of your investment real estate, or put another way if they will take care of your “business asset”.  And really when you look at it, the people you pick are going to be in charge of a substantial investment.

When things go wrong, you had better hope the person in charge of this valuable asset does the right things to deal with the problem, or at very least calls you or the property manager right away because if they don’t it could cost you thousands.  Imagine the damage an unattended water leak can do, or a broken window in the dead of winter.  Think of the potential damage.

To put it in perspective, would you hand over the keys to your brand new $40,000 car to just anybody to take off on a test drive without you there based on a quick gut feel?  Doubtful.  If you weren’t going to go with them then at the very least you would ask lots of questions, verify their identity, maybe take a picture of them and their drivers license before you ever let them get behind the wheel.  Even then I would guess if you are anything like me there will only be a select few who will be given the opportunity to take your baby for a spin.  So why would we hand over the keys to an investment that might be worth 10x that value?

A gut check is an important PART of to the process but let me be clear it is just the start.

First Impressions Are Important Too

Early on in my investing career I met a potential tenant at the bungalow I had just purchased.  It didn’t start well as they didn’t arrive until 20 minutes after our scheduled appointment time when I was getting ready to leave.  I stood in the living room window looking out and watched vehicles as they drove by with none of them stopping or even slowing down.  Just when I was ready to turn the lights out and lock up I see three boys on bikes.  To my surprise they rode onto the sidewalk to come to the front door… now I’m stunned… did I mention it was a snow storm?  And when I say they pulled up on bikes I mean pedal bikes.  And by pedal bikes I mean BMX bikes.

After a brief roll of my eyes, I pull myself together and convince myself I shouldn’t judge a book by its cover.  Just because it is snowing and they are on pedal bikes doesn’t mean they aren’t responsible young men who just happen to enjoy riding bikes in the snow…

The doorbell rings.  I open the door and introduce myself and invite them in.  As they pass me I see the back of their jackets are soaking wet from the spray coming from the rear tire of the bikes and I realize they are even younger than I first thought.  It goes downhill from here.

I follow them around the house and listen to them rave about the beer fridge, the room for the insanely loud sound system and the firepit big enough to fit “everyone from work”.  At the end of the tour they informed me (very politely) that the three of them were representing themselves and three others who intended to share the house.  I thanked them and told them I would be in touch.

As they pedaled away, no doubt arguing over who got the master bedroom and planning their first big house party, I vowed to ask more questions up front next time.

I learned to ask more questions before I book an appointment and that just because someone wants to see the house doesn’t mean I need to take the time to show it to everyone.  A few well worded questions up front could have saved me a lot of time, but then again I guess I wouldn’t of had this story to share with you.

Check And Double Check

But back to the business at hand.  A gut check is an important part of the process but I now never stop here.  If they are good enough to show up (on time) and pass the gut check when I meet them, they move onto step 3.  For me step 3 is getting a rental application filled out.  I don’t use my own rental application but instead use one from Tenant Verification Services.  I like this one because it asks all of the regular questions like full name, employment history and references but it also asks for drivers license and social insurance number and has them to sign that they are authorizing me to do a credit check.  I always take a few minutes to go thru this part and make sure they understand what I will be doing.

This is a very important step as I have found it to often be the tipping point.  If I am on the fence about someone this is generally where the scales lean one way or the other fairly quickly.  You would be surprised how many people panic and start spilling all of the dark secrets – the unpaid phone bills, the furniture from the Brick they bought on the “don’t pay for 18 months” plan and then sold 12 months later and forgot about paying for, the notices from cable companies, and so on.

At this point I need to make a decision are these people still in the running to rent my home or have I learned enough to determine they are not a good fit?  If at this point there are no giant red flags and I am still thinking they could be the ones to rent the house I go back to the office and pick up the phone.

I call the employers past and present, former landlords and references.  If I am still happy at this point then and only then will I do a credit check.  I use Transunion but Equifax is also available and both are great.  You may be wondering why I haven’t done this as soon as I left the house, well it is because this is the step that costs me money.  It is money that is well spent and worth its weight in gold, but I won’t spend it until the free stuff has been gone through.

Once you get the report make sure that you read it and with all of the information in front of you it is time to make an informed decision and get a lease signed.  While you can’t take all of the risk away that you can have a bad experience taking these steps will help to minimize the risk.

Tenants can either keep your real estate asset in good shape or they can cost you thousands.  It’s important to do a proper screening of tenants and that includes references and credit checks.

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Alberta is (still) the place to be

Canadian Bills and Coins

Paydays are bigger in Alberta

When people ask us why real estate prices in Alberta have weathered the economic storm better than other places, we tell them that the major reason is that people keep moving to Alberta for jobs and opportunities.

This article from the Globe and Mail explains things:

Canada’s record pay gap: Why so many are leaving home for Alberta

MICHAEL BABAD – The Globe and Mail

Published Friday, Nov. 01 2013, 7:41 AM EDT

Record wage gap

Canadian readers can be forgiven if they missed a key statistic – $6 – because they were riveted by that other news story yesterday.

That $6 figure represents a record hourly pay gap, including overtime, between wage earners in the province of Alberta and those in the east.

Mining trucks sit parked at the delayed Barrick Gold Pascua-Lama project in northern Chile. After its second major writedown in just six months, Barrick is trying to wooing back shaken investors by focusing on assets closer to home.

Data released yesterday by Statistics Canada showed the difference in average hourly wages in Alberta and the rest of the country, but for Saskatchewan, widened again in August.

“Note that hourly wages are now nearly $6 less in Atlantic Canada than in Alberta, the widest gap on record, a factor that has contributed to pushing more than 11,000 migrants out of the region in the past year – a major headache for housing markets, government finances, etc.,” said senior economist Robert Kavcic of BMO Nesbitt Burns.

“Even B.C. is seeing the wage gap approach $4/hour versus Alberta, and not coincidentally is also seeing a decade-high net outflow of workers.”

Average weekly earnings, including overtime, rose in Alberta in August to $1,117.68, according to Statistics Canada, the highest in the country but for the Northwest Territories.

Compare that to Nova Scotia, where those paycheques fell to $809.31.

According to a recent study by Toronto-Dominion Bank, Alberta and Saskatchewan were along among Canada’s provinces in drawing in people between 2010 and 2012. All other regions saw people leave home.

Last year, for example, more than 100,000 people flocked to Alberta, while 56,000 left the province. That brings the net inflow to just shy of 46,000, or 1.2 per cent of the population of the home of the nation’s oil industry.

Alberta and Saskatchewan also boast the country’s lowest unemployment, at 4.3 per cent.

“Consistent with general perception, the destination of migrants is increasingly the greener economic pastures of Alberta and Saskatchewan,” said TD economist Jonathan Bendiner.

“Indeed, Alberta, which accounts for 11 per cent of the national population, managed to attract over 100,000 in-migrants (almost one-third of total migrants) from other provinces in 2012 – a higher reading than compared to the heyday of the oil boom in 2005-06.”

Source Article

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Edmonton Beats Calgary as Top Alberta Investment City

We thought our investor clients might be interested in this article by Mario Toneguzzi of the Calgary Herald (link to article at bottom)

Edmonton housing market overtakes Calgary in investment ranking

Both cities poised to lead Canadian economic growth

BY MARIO TONEGUZZI, CALGARY HERALD OCTOBER 19, 2013

CALGARY — Edmonton has overtaken Calgary as the top community in Alberta to invest in residential real estate.

The ranking was done by the Real Estate Invesment Network and released Saturday. Edmonton was second behind Calgary on last year’s list.

“Before the flood hit, Calgary’s real estate market was performing right in tune to the underlying economic fundamentals. Not too hot, not too cold,” said Don Campbell, senior analyst of the REIN Research Institute. “After the floods hit, the rental as well as the housing markets over-performed the underlying fundamentals and have pushed it into the too hot level, but this situation should not last longer than 12 months. We continue to experience zero vacancy rates, strong in-migration, one of the strongest job creation economies in the country. So slowdown of the effect of the post-flood transaction bump will not be felt negatively in the market due to the pent-up demand. Good news overall for Calgary’s market for the coming years.

“Calgary did not, in essence, lose its No. 1 ranking. It is still one of the top places in North America for property investment. However, Edmonton grabbed the No. 1 ranking because it is behind Calgary in its residential and industrial recovery curve. This means that Edmonton’s market, beginning at a lower position in the real estate cycle, should slightly outperform the returns a homeowner or investors will experience in Calgary, which is already 12 to 18 months ahead on the cycle.”

Campbell said both cities are poised to be economic leaders in Canada in 2014 and 2015 and therefore the forecast for in-migration and housing demand remains very strong.

The ranking for other Alberta communities are: 3. Airdrie; 4. Leduc; 5. St. Albert; 6. Red Deer; 7. Fort Saskatchewan; 8. Fort McMurray; 9. Grande Prairie; 10. Lloydminster; 11. Okotoks; and 12. Lethbridge.

Source Article

 

 

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Alberta market is heating up

Alberta home sales set new September record

Residential sales activity reported through the MLS® Systems of real estate boards in Alberta numbered 5,694 units in September 2013, up 21 per cent from a year earlier. This was the best September sales figure ever reported. At the national level sales were up 18 per cent from September 2012.

On a year-to-date basis, provincial home sales totalled 52,794 units over the first three quarters of 2013. This was running nine per cent ahead of the same time last year, and marks the best performance over this period since 2007.
The provincial average price of homes sold in September 2013 was $381,308, an increase of seven per cent from September 2012. The national average price, by comparison, rose nine per cent on a year-over-year basis to $385,906.

Monthly residential average prices were up from year-ago levels in Medicine Hat (+21 per cent), Lloydminster (+12 per cent), Calgary (+8 per cent), Edmonton (+8 per cent), Alberta West (+8 per cent), Grande Prairie (+6 per cent), Fort McMurray (+2 per cent), Lethbridge (+0.7 per cent), and Central Alberta (+0.7 per cent). The average price declined 12 per cent in South Central Alberta.

New listings on the MLS® Systems of real estate boards in Alberta numbered 8,380 units in September. This was up two per cent from year-ago levels.

Overall supply levels remain at lower levels compared to recent history. Active residential listings numbered 22,176 units at the end of September, down 13 per cent from September 2012.

There were 3.9 months of inventory at the end of September 2013, down from 5.4 months at the same time one year ago and below the long-run average for this time of year. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

The value of all home sales in the province totalled $2.2 billion in September 2013, up 30 per cent from September 2012. The dollar volume of all home sales in Canada was up 29 per cent on a year-over-year basis.

Sales of all property types in Alberta numbered 6,197 units in September, up 22 per cent from September 2012. The value of those sales amounted to $2.4 billion, rising 24 per cent from a year earlier.

A total of 2,475 home sales were recorded through the MLS® System of the Calgary Real Estate Board in September, rising 21 per cent from a year earlier. The combined value of home sales activity in Calgary was $1.1 billion, a 30 per cent increase from year-ago levels.

There were 1,712 home sales recorded through the MLS® System of the REALTORS® Association of Edmonton, up 25 per cent from September 2012. The total value of home sales in Edmonton was $599.1 million in September 2013, up 35 per cent on a year-over-year basis.

Source: CREA

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Condos a hot seller in June in Edmonton

Another article of interest to investors.  Condos are usually the leading edge of a rising market…

Condos a hot seller in June in Edmonton

EDMONTON JOURNAL JULY 3, 2013

EDMONTON – Condominiums were the biggest price gainers in June for the Edmonton region.

Statistics released Wednesday by the Realtors Association of Edmonton put the average condo selling price for the month in the census metropolitan area at $261,854, up 10.2 per cent from May and 8.7 per cent from June 2012. June’s median price was $242,500, up 6.4 per cent from the previous month and up 6.8 per cent year-over-year.

Single-family dwellings sold for an average of $412,269, down 1.4 per cent from May and up 2.3 per cent from June 2012. The median selling price was $380,000, down 2.0 per cent monthly and up 2.2 per cent annually.

The average all-residential price for the Edmonton region in June was $259,631, an increase of 0.8 per cent from May, and up 4.2 per cent compared to a year earlier.

“Economic conditions in the Edmonton area are generally positive and this is reflected in our local housing market,” said association president Darrell Cook. “Prices have risen slowly through the first six months and there is nothing in our local economic trends to indicate that this period of stability will change.”

The association said single-family home sales of 1,080 in June were off 4.9 per cent from June 2012.

There were 470 condo sales in June compared to 536 a year earlier, but for the year to date, condominium sales were up because of a lack of lower-priced single-family homes, the association said.

The inventory of homes on MLS has increased over the two past quarters to 6,078 properties — still lower than the supply of 6,435 at the end of June 2012.

Source Article

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