I read Ozzie Jurock’s book “Real Estate in Canada” last week.

 

The book poses the journalistic questions “W.W.W.W.W. and H.”, then walks the reader through the logical answers.

 

“I keep six honest serving-men, (They taught me all I knew);
Their names are What and Why and When, And How and Where and Who” –
Rudyard Kipling

 

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Who:

YOU! 

This book is about your real estate investments.

 

What:

Page 244 has the best types of property to purchase: Your own home; single family homes with basement suites, waterfront property, newer condos in major cities, apartment buildings, select commercial property, and most importantly BUY FOR CASHFLOW.

 

Where:

Sometimes the best place to put your money to work is in your community, and sometimes it is thousands of KMs away.  Good options include Casino Towns, major markets(during a downturn), or small towns in Ontario, Alberta or BC that have the following:

a) better than average population growth(Kamloops growth is 6.6% compared to BC 5%)

b) vacancy rates at or below 4%(Kamloops is 3.5% or lower)

c) a new highway, employment, or some other reason to grow(Kamloops has a mine and construction of a new inland port(a rail yard) in it’s future)

d) good prices(meaning you can buy with a low downpayment and still cashflow) Kamloops Prices are about 40% of similar property in Greater Vancouver, and yet median incomes are the almost identical.

e) competent property management (I self manage for myself and my investors, because property management companies in Kamloops do an average job for the price.) 

f) more than one industry(Kamloops is home to many companies of over 100 people. There are 12 major employers covering 9 distinct sectors, employing over 10,000 people)

g) university or college with character(Kamloops opened Canada’s first new law school in over 33 years, and TRU has 13,170 students on campus.)

 

Where to Avoid:

– time shares
– limited partnerships that you can’t break
– property near or on native land, as protests/blockades have made some resort owner suffer 50% depreciation

 

 

Of interest is that many Kamloops properties fit the above recommended criteria, and many of the other recommended features found on pages 29-34 and 42- 48 of Ozzie Jurock’s book:
“Superstore index” meaning when Costco/Walmart open in an area it stands to reason that future growth in that area will be strong. These companies spend a lot of money on research and they will only open in communities that their research shows will thrive. in recent years Kamloops Walmart expanded to a super-centre, Costco added a gas bar, Canadian Tire added 10,000 sqft floorspace, and 73,000 sqft of retail and industrial space under construction in 2014
“Casinos:” House prices in Windsor and the Niagara Peninsula rose 20% after casinos entered the area.(Kamloops is expanding it’s Casino and this will also add 200 jobs)
“Resort Opportunities:” Sun Peaks in Kamloops is a top rated resort town by Jurock Publishing.
“Mini Storage Boom:” When the book was written, mini storage was predicted to be a money maker. The number of mini storage buildings in Kamloops is staggering, and from what I’ve seen in other cities its the same all over.(I guess not all the stuff we buy can go to the landfill.)
“Technology:” Big changes to the real estate industry during this information age is predicted as consumers become more savvy. In fact, technology companies and the need for cloud computing have made data centres in high demand. Because of some of the lowest costs for electricity in North America, and the seismic stability of the region, Kamloops attracted a $75 Million investment by Telus in a new data centre that was completed in 2014, and the Q9 data centre that was completed in 2011 as part of a $100M deal with the province..
When:

Timing is more important than location(p247). Timing your purchase means seeing the following changes in your market(don’t worry, they happen slowly enough to have lots of reaction time):

– inward migration to your target area, meaning people are attracted by economic factors(jobs) or sociological factors ie casinos.

– affordability, meaning the end user must be able to afford rents/mortgage payments, if property sells for less than replacement costs prices will likely rise, low vacancy and property prices same as replacement costs means prices will like rise

– inventory, if there is very few desired properties, those properties will increase in value. It’s supply and demand.

– inflation, the trend has been inflation since the 1940s

– environment of growth, values grow where people and jobs go

– demographics, this is more of a long term concern to be considered within context of the other factors

Why:

This book is less of a motivator than a how-to. I know you have your own reason for wanting to build wealth, whether to retire early, leave a legacy, support a charity, or perhaps just for the thrill of the deal. Whatever your “why”, if you own it you can achieve your dreams by following advice in this book.

 

How:

There are many strategies within real estate to achieve your dreams. Once familiar with them, it’s up to you to choose your favorite based on your goals and appetite for risk.

 

This book was a good read, and a fresh perspective for me. Key insights include:
– For new homes you must purchase for at least 12% under market. Because of GST, realtor fees and land transfer taxes, purchasing a $400,000 property would mean to break even you would need to sell for $447,000.
– You make money when you buy.
Sharks are grave dancers and profit from other people’s misery, Flippers are always looking to sell in an up market to the “greater fool”(someone who will pay more than they did) so both these businesses can raise many moral questions. Both Sharks and Flippers do short term deals, in and out in 3-6 months.  Investors on the other hand are primarily concerned with finding low downpayment, cash-flowing properties that will attract quality tenants, and use the principals discussed above to do so.

 

If you want to learn more, I encourage you to pickup a copy of Ozzie’s book!

 

Until next time,
Stay S.A.F.E.

 

PS

If you want to learn how you can live “Your Life. Your Terms.” click here for a free book.