which one.

I am often asked about the real estate market in Kamloops compared to other cities.

Here is my answer.

I am an area expert in Kamloops and do extensive research here, so I know which properties in Kamloops are a sure thing.

When I hear someone tell me “I hear Edmonton is climbing like crazy” or “Fort St John and Dawson Creek are getting the site C dam and a pipeline!” I usually just nod and smile.  Sometimes if the other person is an area expert, I will ask them questions about their investment model to learn how they select a property and plan to manage it.  While the promise of appreciation is nice, waiting for it can be hard – the money is in the management.

I want my money invested where it will work the hardest. For me, that means Kamloops.  Hard-Working-Money I am making great returns here in Kamloops. For me, my family members, and my investment partners.  This is great news, because the more money I make my partners, the more money I will eventually get to take home.  It will be a nice surprise when I get to give my investors more than they bargained for.

I have overcome the extra transaction costs in BC(Property Transfer Tax) and can withstand the delay of a major project by finding motivated vendors(ie private sales) and consistently commanding much higher than market rents. Both are difficult to do in a market I am not an expert in.

The potential for a mistake in a market I do not know, in a place I am far away from, cranks up the risk too high. In an unfamiliar market, I am not certain money I manage is safe.

I had a meeting with a potential money partner today(a fellow who has made a LOT of money with property), I was told my projections are very conservative, and I command a very high rent.  I am proud of both these statements and that my strengths are recognized by such a seasoned investor.

My conservative projections on properties I own and those I plan to purchase match or exceed those I have seen in other hot markets(where appreciation is calculated too high in my opinion).

Don’t get me wrong. I don’t doubt there is plenty of opportunity in other markets. There is lots of money to be made when proper due diligence is completed, and here are 4 of my secret steps I have taken to ensure Kamloops is the best place for my investment dollars:

1. Right Market:  Do Macroeconomics support the local economy? This is what will bring(and keep) jobs in the region- and keep tenants paying your bills.  For example, the boom and bust cycle of the oil/natural gas industry nearly crippled investors I know who had heavily invested in Grand Prairie in 2009.  They burnt through a reserve fund of $400,000 in a matter of months when all the workers left during the last recession.

In a recent video announcement of REIN’s updated Top Investment Town Report  Kamloops is once again a top 5 BC investment city(has been for many years). Prospective/future projects include the Ajax mine and twinning the Kinder Morgan Pipeline.  There are also a dozen major employers already based in Kamloops, as such we are not susceptible to a failure in any single industry.

2. Realistic Projections:  Are the numbers you see in your pro-forma real? You can fool yourself into thinking you have a great opportunity and pay too much for the property.  Are the rents real market value for the neighborhood, is appreciation calculated appropriately, are taxes/strata appropriate, is vacancy allowance enough, are utility costs a factor, is building maintence budgeted for…. There are lots of places a salesman can monkey with the numbers to make a return look better.  Once the property closes, YOU ALONE will be holding the bag.  It will take many years to recover your  original investment, let alone make any returns.

Ask me how I know this :). I slightly overpaid for my first property by calculating the rents higher than I should have – not realising that existing tenants ARE IN NO HURRY to leave or have their rent raised to market. I made this mistake with my own money, and you can read about the fallout in my post “Am I a mean Landlord?”  Things have worked out now, but it took a year to fix. It was a huge hassle/stress, not to mention the opportunity cost because my money could have worked harder elsewhere.

3. Reliable Data Source:  Is this an established investment property(real numbers) or based on promises?  If based on promises, can you trust the source? Are there at least comparables(rents, recent sales) available for you to see? What is the track record of the source of the information? What are their motivations? Will they earn money no matter what(like advisors in the stock market), or are their returns tied to yours? Perhaps they are not malicious, but are they biased because of the structure of their business? How many people get paid before you do? In other words, are they sharing the risk?

I subscribe to daily Kamloops news alerts, I watch the classifieds like a hawk to make sure my rents are top of the market, I speak with everyone I meet about Kamloops real estate, so I am VERY CERTAIN my data is reliable.  I also ensure to eliminate any bias by structuring things so my partners receive all of their money back FIRST.  I don’t see a dime of profit until my partner makes a great return.  I am a nice guy, but I don’t work for 5-10 years for free, so you can be sure I am certain the investments I select are top performers.

4. New Build/Pre Construction Alure VS an Existing Property:  Existing properties have no GST.  Will the GST on the New Build diminish your returns? Is the builder’s final product going to be completed on time, or will your deposit be tied up? If you have a reputable builder and there are deficiencies(there always are), the work will be completed on the builder’s schedule, not yours.  Here is a cautionary story about a builder in Kamloops who had lots of projects and many years experience hurt both pre-construction investors and contractors. He blames the economy, but high leverage(common for builders) is what brought him down.

I invest in existing properties only, with modest leverage. Rent starts coming in as soon as the place closes, and income covers all costs and more RIGHT AWAY. There is no guessing when the project will be completed, no builders to research, and no GST.

 

That sums up 4 of my secrets, reasons why, and how I invest in Kamloops. Sign up for my newsletter today for future posts where I will share more secrets about the opportunities in Kamloops.

 

Until next time,

Stay S.A.F.E.