real estate as an investment?

[iherald]

They key is cash flow. I'm from Toronto and not finding any reasonable return on my investment around here. So I'm currently looking for places in the US. The prices are 1/10 what I'd pay in Toronto and the rent is 1/3 of what I'd get in Toronto. So the numbers do make sense. But, like anything you need to do your due diligence.

[HaroldCrump]

With the housing correction taking place

What correction? Taking place where?
Are you speaking of the US?

[dvelecka]

Phankinson,

I think that although learn-as-you-go is beneficial in some instances, I do not think that in mine it would be. The opportunity cost of learning all there is to learn in terms of property management (i.e., evictions, screening ect) is much too high.

I have done my research, and am considering investing in Alberta... the province fits all the criteria for a positive cash flow investment.
I read these two articles which helped me sort of direct myself... http://bestofourmarket.com/2012/09/r...fficult-is-it/
http://bestofourmarket.com/2012/09/4...e-investments/

My advice is to start as small as you can. You really can only learn by doing. If you've got an extra room in your house, try renting that out first. That will teach you how to write compelling ads, taking beautiful pictures, talk with potential tenants and go through the screening process. If that's not an option, I'd suggest opting for a small condo and going from there. I suggest investing local to where you are, don't invest in a town or city hours away from yourself for now. You can do that later when you have a better understanding of what's involved.

You'll hear lots about why you shouldn't invest in real estate, but if you look for economic fundamentals such as growing population, increase in income and general economic growth in the area you are looking to invest, you should be in an OK situation. Buy something that generates lots of cashflow, that way you're protected. It is possible to still find great deals, but it will take you a while to understand what is a great deal.

[dvelecka]

Hi Harold, no I am talking about Canada and the housing corrections taking place here.

What correction? Taking place where?
Are you speaking of the US?

[dvelecka]

Hi iherald,

I was advised not to even consider the US because the risk is too high... poor GDP growth, low employment rates and migration which therefor decreases the demand for housing. But, if you are looking for a holiday home for yourself that you will not be renting than it is a good investment.

Do you think that Toronto is reaching a buyers market with sales down 27%?

They key is cash flow. I'm from Toronto and not finding any reasonable return on my investment around here. So I'm currently looking for places in the US. The prices are 1/10 what I'd pay in Toronto and the rent is 1/3 of what I'd get in Toronto. So the numbers do make sense. But, like anything you need to do your due diligence.

[dvelecka]

Young&Ambitious,

I don't know about being "ready to jump on" without a proper market analysis first... don't you think that would be a bit risky?

Everyone has an opinion. What makes this source more credible? It's impossible to tell the future.

Get informed and be ready to jump on an opportunity if you see one come up that you believe in. That's my 2 cents.

[iherald]

It's difficult to be broad about real estate. You can't say "The Canadian market will rise" or fall. Can you say the Toronto market will rise or fall? It's difficult.

Is Toronto reaching a buyers market with sales down? Well sales are down but prices are up. Usually this indicates that prices will soon drop, but who knows. I suspect that prices will drop further in certain neighbourhoods (I suspect cityplace will be hit harder than the Annex).

Is the US a bad investment? We won't know for ten years. My worry about investing in the US isn't housing prices, it's actually currency valuation. Imagine if you bought a house three years ago for $10, and now the price has increased to $10.50. That's great, but the value of the US dollar has dropped 20%, so you're losing money. I will say this though, I have more worries about Toronto maarket dropping than the Miami market. The Miami market may not grow, but it's already down huge and seems to have found a bottom.

Hi iherald,

I was advised not to even consider the US because the risk is too high... poor GDP growth, low employment rates and migration which therefor decreases the demand for housing. But, if you are looking for a holiday home for yourself that you will not be renting than it is a good investment.

Do you think that Toronto is reaching a buyers market with sales down 27%?

[Just a Guy]

Having been a landlord a long time, I don't think I'd ever want to rent a room in my house. If you are going to start out, don't rent an old house of yours that you have fond memories in either. It makes it easier to deal with if there is less emotions involved when the place is trashed.

I'm not saying all tenants are bad, I found the number to be well under 10% ever cause any issues, but a fraction of the 10% can leave lasting memories...

[dvelecka]

I couldn't agree with you more. Finding the best tenants for your rental property can be very hard... but I think in this instance, it really boils down to the right marketing. When you understand what your target market of tenants want to rent you’ll know what properties to buy, you’ll know why they like that area and that type of rental and as a result you’ll know what to say to your tenants to attract them to the property. (of course you want to first find the right target market, those who will respect the property!) I think that once you know this, you can find high quality tenants for your rental property and maximize the property value on a long-term basis.

Having been a landlord a long time, I don't think I'd ever want to rent a room in my house. If you are going to start out, don't rent an old house of yours that you have fond memories in either. It makes it easier to deal with if there is less emotions involved when the place is trashed.

I'm not saying all tenants are bad, I found the number to be well under 10% ever cause any issues, but a fraction of the 10% can leave lasting memories...

[andrewf]

Housing in the US is a much better proposition. It is possible to find houses that have cap rates of 10%, and house prices are well below long term averages relative to rents and incomes (per the Economist). In Toronto, neither of these things are true. As far as low GDP growth, there is not going to be an appreciable difference between Toronto's income growth and most of the US. We are not Calgary or Alberta, and the same things dragging down income growth in the US will affect us as well (except perhaps the fiscal tightening from governments reducing budget deficits in the US).