A must read: 3 articles on how to make money on real estate: how to find the next hotspot, how to invest properly, and how to get the best return on your renos.
by Tim Broadway
How to find the next real estate hot spot
By Dianne Nice
It may be ironic for an author of real estate tips books to advise people not to act on tips, but Don Campbell is adamant that buyers do their groundwork before they invest in the next housing “hot spot.” “I have seen too many people buy a property based on what someone tells them, rather than do their own homework,” says Mr. Campbell, president of the Real Estate Investment Network. “This leads to disaster so many times.”
If you’ve heard that a certain neighbourhood is poised for growth, that’s just the first step, he says. Before you invest a dime, you need to verify the information. Read the minutes of council meetings, ask local politicians whether the leadership is focused on bringing new jobs and growth to the area, and check for a written renewal plan at the municipal planning department. “You can actually see what’s coming if you get one of those reports on the neighbourhood,” Mr. Campbell says. “You just have to have patience, like most investors should.”
Before you buy, drive around the neighbourhood, he advises. Look for renewed signs of pride of ownership that weren’t there before – a sure sign that renewal is under way. Other tips for getting the best return for your real estate investment:
1. Look for transit improvements If you want to buy in an area that will increase more than average in value, choose a neighbourhood with a major transportation improvement occurring nearby. The demand for such properties is always strong, even when market conditions turn sour. Also, think about who the target buyer will be when you sell the property and whether there are amenities nearby to attract such a buyer.
2. Check the zoning Don’t buy a property hoping to convert it into something else without finding out how it is zoned. Check with the planning department to find out whether there are any zoning changes pending.
3. Don’t buy too early Governments announce a lot of things, especially around election time, but not all projects pan out, Mr. Campbell says. “Watch for the tractors and watch for the diggers, and that’ll give you a big indication that they’re at least committed to getting this project going.”
4. Don’t buy too late Once a neighbourhood’s redevelopment is close to being finished, that’s a sign it has become a more mature area and will only increase at an average rate. It’s important to “get in front of the tractors,” Mr. Campbell says.
5. Buy used Many renewal projects involve knocking down old buildings and putting up condo towers and trendy shops. Rather than buying into the new condo building, buy an older home in the surrounding neighbourhood, Mr. Campbell says. You’ll see a bigger bump in the value of your property than with a new condo that everyone is lining up to buy.
6. Consider renting Sometimes when you’re buying a house to live in it’s not the ultimate investment spot, but you may need to live there because of its proximity to your work. In such a case, consider renting your accommodations. If you can afford it, buy another property with more growth potential as an investment.
7. Consider the demographics Is the area’s average income increasing faster than the provincial average? What about population and job growth? If these figures are above average, chances are good that property values will see higher-than-average growth. You can research a region’s demographics by looking at studies done by Statistics Canada, provincial government economic departments and local economic research firms.
8. Don’t get carried away You want a fair price. If you get emotionally attached to a house, you might talk yourself into overpaying for the property, Mr. Campbell says. Similarly, if you get caught up in a bidding war, it’s easy to get swept up in what he calls the “I’m going to win this” mentality and spend more than you should.
How to be a strategic real estate investor
don r. campbell, kieran trass AND greg head
Globe and Mail Update
The following is an edited excerpt from Secrets of the Canadian Real Estate Cycle: An Investor’s Guide by Don R. Campbell, Kieran Trass and Greg Head
Overcoming Common Barriers to Goal Achievement Studies show that less than 10 per cent of people set goals and less than 5 per cent achieve their goals. Strategic real estate investors are in that 5-per-cent slice of the goal-achieving population. To help every investor step up their game and learn to overcome barriers, we have highlighted the differences between a non-strategic approach and the Strategic Real Estate Investor Way.
1. Fear of Failure Most non-strategic investors are afraid of failure, which keeps them from setting meaningful goals. To paraphrase Henry Ford, if you say you can’t, you’re right! The Strategic Real Estate Investor Way: Be Comfortable with Calculated Risk: Strategic real estate investors turn that approach around. They are not afraid to fail because they have planned for success. They take calculated risks and are open to new opportunities and ideas. They thoroughly research potential risks before making a commitment and plan accordingly. Indeed, they practise the prudent advice to “protect the downside and the upside will take care of itself.”
2. Fear of Success Other non-strategic investors are afraid of succeeding. As with those who fear failure, this group will be reluctant to set or pursue any meaningful goals. Investors who fear success do so because they worry that people will envy them and think negatively of them. The Strategic Real Estate Investor Way: Seek Personal Growth: Strategic real estate investors are not afraid to fail because they seek personal growth and adapt well to change. In fact, they are committed to multi-dimensional growth (not just financial growth). They read a variety of self-improvement books to understand personal growth techniques and they continually educate themselves and surround themselves with like-minded people who encourage their success.
3. Lack of Commitment to the Goal Even though many investors say they want to achieve certain goals, their actions show they are not committed to those objectives. Because of this lack of commitment, they don’t give the act of goal attainment their full effort. And as with anything in life, if you don’t give it your all, you receive mediocre results. The Strategic Real Estate Investor Way: Be Goal-Oriented, Determined and Persistent: Strategic investors by nature are goal-oriented. They consistently set goals in writing and regularly review them by measuring and managing their progress toward those objectives. In addition to being goal-oriented, they are stubbornly determined but patient. They possess an underlying determination and patience strong enough to take any setbacks or delays that their real estate investments or the cycle may thrust upon them.
4. Handcuffed by Analysis Paralysis Many investors let questions and doubts paralyze them. They believe they can’t start on a goal until they have all the answers to every “what-if “ scenario. This is a self-defeating approach to goal setting. The Strategic Real Estate Investor Way:Be Analytical and Selective: Strategic investors are highly analytical. But rather than trying to answer every what-if scenario and getting caught in analysis paralysis, they focus their analytical efforts on two scenarios: the worst-case and the best-case. They are exceptionally careful as to where, why and how they invest any of their resources. When a deal matches their criteria and takes them closer to their goals, they act quickly.
5. Feeling Unworthy Many investors actually sabotage themselves because they don’t feel they are worthy of attaining their goals. They do this, too, without even realizing it. Perhaps they suddenly walk away from a deal that could really move them forward toward their goals, or they shy away from building key relationships. The Strategic Real Estate Investor Way: Express Confidence and Worthiness: Confidence is the foundation of goal attainment, and strategic real estate investors have it in spades. But it is a quiet confidence. These individuals don’t invest in real estate for their personal egos; they invest because they are confident in their ability to produce a high rate of return.
6. Too Many Goals Some non-strategic investors set goals, but simply set too many. Goals are said to be the energy source that powers our lives. As such, they should be used to channel and concentrate our energy toward what we desire. As Alexander Graham Bell once said, “Concentrate all your thoughts upon the work at hand. The sun’s rays do not burn until brought to a focus.” The Strategic Real Estate Investor Way: Maintain Focus: Strategic investors think of themselves as the sun’s rays, and realize that they will not produce positive outcomes until they focus on the goal in question. They concentrate on mastering a few key tactics that they are able to implement when the time is most appropriate. Maintaining focus gets more difficult as your real estate portfolio grows, since a larger portfolio means there will always be something that needs your attention. Strategic real estate investors manage this by building a team around them that shores up their weaknesses, allowing them to focus solely on their areas of brilliance.
7. Failing to Plan Failing to plan is planning to fail. Setting well-defined and realistic goals is a great first step; however, most investors skip the next crucial step, which is to build a plan. Instead, they jump headfirst into buying real estate – without ever making a plan. The attention, or lack of attention, given to planning is directly related to being successful in achieving the results you want.
How to get the best return on your home renos
Are you making upgrades to your home with an eye toward improving your home’s resale value? If so, consider these suggestions before you get started.
Check out the Competition When selling is your end game, the golden rule of home remodeling is to make your home comparable to others in the neighbourhood. If you over improve, you have no chance of recouping your investment. If you under improve, the other homes on the market will sell before yours does.
Look at online real estate listings, attend open houses and talk to real estate agents to find out what features are considered to be the standard in your neighbourhood. If everyone else has scraped their popcorn ceilings and turned that cramped shower stall into a soaker tub, you should consider making these changes to your home too. If no one has an outdoor kitchen, adding one to your backyard probably won’t pay off. Smart buyers are looking to buy either the worst house on the best block or a turnkey home, but they aren’t looking to buy a house that’s nicer than its neighbours. For the extra money, they would usually rather move up to the next nicest neighbourhood.
Pick Your Projects Wisely Avoid expensive, difficult and time-consuming projects like adding more square footage to your house. You may not recoup the money you spend, let alone the time and frustration. You don’t want to over improve for the neighbourhood. If all the surrounding homes have 1,600 square feet, there’s no reason for yours to have 2,000 square feet. Buyers looking for 2,000 square foot houses will be shopping in other neighbourhoods.
There are also some big mistakes you can make in trying to make your home seem larger than it is. The biggest one is to knock down a wall that decreases the number of bedrooms or bathrooms. As a purely practical matter, two small bathrooms are better than one large one and a third bedroom is more useful than a master suite.
Another bad improvement is a swimming pool. While pools are a must have for some buyers, they also increase the ongoing costs of owning a home significantly. Homeowners insurance premiums will be higher because of the potential liability and maintenance costs are ongoing. Pools also take up a lot of the yard, and many people would rather have grass that their dogs or kids can run around on.
Appeal to a Wide Audience With any improvement you make with an eye toward selling, think beyond your personal taste. Neutral, classic colours and textures will have broader appeal than bold or unusual ones. They are also easier to change and personalize if the buyer doesn’t like them. Also, make sure to choose colours and finishes that are currently in fashion. When buyers see outdated decor, they see dollar signs.
Don’t Overlook the Basics If your home has a beautiful kitchen but a home inspection reveals that the roof needs to be replaced and the furnace is on its last legs, price-conscious buyers are likely to ask you to make these repairs or to drop the sale price. If you can’t afford either of these options because you’ve spent the money elsewhere, you could have trouble selling the home. In today’s economic climate, a home that isn’t a money pit is the best selling feature for the ordinary buyer.
Also, there’s no sense in shelling out big bucks for remodeling projects if your house is so cluttered and dirty that buyers can’t see them. If you have too much stuff, a rental storage unit can be a great investment in getting your home sold. Your first instinct might be to cram everything in the garage, the basement and the closets, but buyers will look in all of these places. You want to convey the idea that your home has plenty of storage space.
The Bottom Line It’s important to consider the housing market, economic climate and buyer’s perspective when upgrading your home in order to sell it. Before you spend your time or money on any improvements, make sure you understand what today’s buyers want.