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How Come Everyone Is An Expert On Investing In Real Estate?

Even though “they” own no investment properties

I know I often repeat myself on one particular issue when talking about investing in real estate to friends, clients, experienced and new investors; be prepared for everyone who knows you are or thinking of becoming an investor to be an “expert” on the subject and inevitably tell you now is not a good time to invest.

Then be prepared for these “experts” to contradict themselves and tell you how much they made on their last sale. They forget to mention that all this profit was immediately spent on a new home!

I bet that the “profit” in their possession for that split second before shooting out again on a new home was the most cash they ever had.

Imagine if the profit didn’t have to go towards a new house

The media are not immune to this negative bias against investing in real estate and I have found tend to be more pro the stock market.

I recently read some articles that support this view; admittedly it is USA based but I believe the sentiments carry over to the Canadian media as well.

From the CNN money web site entitled:

“10 years…no gain in home prices”

It starts “Taking into account inflation, home prices are actually lower than they were 10 years ago . . ..”

Further on though explains  that there was “no gain in home prices” in inflation-adjusted dollars. In fact homes prices increased by 25% over the decade.

A very pro stock market article in USA Today does not take into account the effects of inflation but still the S & P 500 was down almost 25% during the same period.

Now where would you prefer to invest? Real estate UP 25%, stocks DOWN 25%.

This does even take into account the tax advantages and leverage.

Finally I would like to relate a recent experience of a client. The couple bought their first two ever investment properties early last year. Both in Barrie, both rented out before the first mortgage payment and both have positive cash flow taking into account everything including the interest on the Line Of Credit used for the down payment. One set of tenants have asked to leave at the end of February due to financial difficulties , a few months before the 12 month contract ends. With out going into too much detail the owners have advertised for new tenants and been overwhelmed by the interest. I offered to advertise the house on Craig’s List with a high profile advert but was told :

” If you don’t mind I will hold off posting( on Craig’s List) for a couple of days, as we may have it rented out. Had a couple of viewings on Sat and have a completed app. form but am just working on the references, so will let the potential tenants know if they have been successful by tomorrow. Have also had a couple of enquiries today as well.
It gives you the bug to do this ten fold when you realise the interest out there!!!”

To paraphrase from the movie “Field Of Dreams”:

“Buy it and it will rent.”

This entry was posted on Tuesday, January 12th, 2010 at 1:05 pm and is filed under Investment Opportunities. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Helen C said at January 13th, 2010 at 9:49 pm

   With reference to the above, we are pleased to confirm that our property in Barrie is rented out. Despite having had a 1 year ‘fixed term tenancy agreement’ in place with our current tenants it was alarming that they were giving early notice. However, using the same original advertising methods, the responses began the following morning and within a week had a completed application form in hand. We were concerned given the time of the year, ‘would it prove more difficult to let a property in the Winter as opposed to the Spring’, as was the case last year when we started out down the landlord route.

   Obviously not…the first couple to view wanted to proceed! As with everything in life, there is always a first time for everything and while we expected to deal with a situation like this at the end of contracts not mid-term, we have learned that there are ALWAYS potential tenants out there. Just ensure you do the market research on what other comparable properties are requesting for monthly rental rates.

2. Andrew McKay said at January 13th, 2010 at 9:56 pm

   Excellent news. Without fail the number 1 concern for new investors is “will it rent out.” Yes it will if you buy the correct property. Check out:
   http://wasagabeachtalking.com/2009/11/20/rent/

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