“Is now the right time to buy?”
As a mortgage broker, I am often asked this question.
It’s a tough question to answer. I really wish I had a crystal ball when people ask me that. So if you are reading this article and know where I can find a crystal ball, please let me know.
In the meantime, I am of the belief there are some simple deductions you can make to determine when and where to invest your hard earned dollars for the highest possible gain.
The irony is that real estate as an investment is actually really quite simple. Real Estate markets follow a fairly basic pattern and natural cycle. The timing of that cycle may fluctuate, but there are always two constant denominators: 1) The market will go up (Boom) and 2) the market will go down (crash).
Now let’s get even more fundamental. The simplest (albeit not the only) way to profit in real estate is to buy low and sell high.
Pretty simple right? That’s it. Those are the most important four things you ever need to know, that you probably already knew about the real estate market.
What’s even better is with modern technology and communication, you can now get access to any market almost real time! I think we often take that for granted and I think many of us are still stuck in the mindset of ‘buying local’. If that is your mind set, you need to change it ASAP.
Now I am not suggesting if you live in Toronto to invest in Mongolia. There are sub-markets within a reasonable distance. For example, if you lived in Vancouver, accessible markets could include Saskatoon, Edmonton, Calgary, Seattle, San Diego, Phoenix. Pretty much any market within a 3 hour flight is an accessible market.
Unfortunately, there is an old school mentality in play that has most people limiting themselves to their own backyard. Sorry to sound like a broken record, but if you are one of those people, change that mentality now!
For example, at the time of this article, if you live in Vancouver or Toronto, it’s no secret that the markets are booming in those cities! Buyers are lined up, deposits in hand, ready to make ‘cash offers’. Houses are selling well over ask. Hey that’s great for my business (actually my business is great either way) … but this makes very little sense to me.
Let’s just take a step back. As you read above, the simple rule of investing is buy low, sell high. And I don’t think that’s any secret but if you are buying in an already booming market, is that in line with the principle of buying low?
Now I don’t purport to know if those markets will continue go up for a month, a year, or a decade before the inevitable decline. But making an impulsive leap into the market out of fear you will miss the buck, simply is not a sustainable approach. Personally, I believe, at this point, the only people making money in those markets, at this very moment, are sellers.
The beauty is, you now have access to many more markets than ever before! Markets that were, until recent, primarily only accessible to the already super wealthy.
On the contrast, some of the Alberta markets, such as Calgary and Edmonton, at the time of this article, have been or are on a decline. The funny thing is, majority of people in those markets are selling! The panic lies with the property owners. In my view, I believe that the only people making money in those markets are the buyers.
Of course it is ideal to own the home you live in, but that doesn’t always make sense. For example if you lived in a hot market, maybe renting the home you live in and buying another property for investment in a declining or cool market might make more sense.
You are still in the market, so any potential gains you may have had in the hot market should at least flow with or exceed the potential hot market gains. If you are already invested in a cool or declining market, hold tight, the storm is likely to pass and will soon be forgotten!
The same cycle can be said for the USD/CAD exchange. For as long as I can remember (without revealing my young age) the US and Canadian dollar have played a cat and mouse game. The US dollar just about makes it to par with the Canadian dollar, then surely but steadily it climbs back up to just under $1.4. That’s a solid 30% cycle that seems to be fairly consistent.
Perhaps waiting for the USD to hit close to par would be the time to divest into some US real estate. Phoenix, Palm Springs, Washington state and Oregon could be great options for those on the West Coast. Miami, New York State & Vermont could be good options for those further east.
If history repeats itself (and I am not making any promises). Even without any gain in the market, you should see a 30% gain on your investment within a matter of a few years. Better yet, invest in a cool market with the dollar at par, you may even see much greater gains.
The beauty about real estate is you can leverage your dollar & more often than not you can achieve rental income to offset any cost of financing and provide a steady ROI.
It’s no secret that going against the grain can often make you the most gain.
For more information about how you can implement this strategy, request a call with me here and we can set up a discussion right away!
