# Alberta/Grande Prairie



## kcb (Feb 11, 2012)

Hello all, I recently stumbled upon this forum, and it seems great! I am a young real-estate investor living in Grande Prairie AB. With the seemingly impending "market correction" does anybody have any knowledge/opinions on how hard Grande Prairie (to a lesser extent, Alberta as a whole) will be effected? My gut tells me that the bubble kind of burst in GP about 4 years ago, and as such, with our current property values being relatively reasonable we likely won't be too bothered by it. That said, living here, and being friends with many realtors, I realize i'm also pretty biased, and would love somebody else's opinion.
Thanks much!


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## Berubeland (Sep 6, 2009)

This....http://www.canadianmoneyforum.com/showthread.php?t=10318

Also house prices are at an all time high in Canada and although Alberta is doing well now, it doesn't always do well. 

Prices do go down on real estate...


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## kcb (Feb 11, 2012)

Thank you for your response, from reading this forum, as well as your webpage, I can see that you are very experienced and respected when dealing with these types of issues.
I understand how tumultuous the real-estate market can be, my question, however was more about the specific economics of the region, vs. real-estate investing as a whole. If you had any insights/ opinions on what the next few year would hold here that'd be greatly appreciated.

... I say this both as somebody who currently owns a few properties, as well as somebody who is potentially in the market (either in Alberta, or abroad) within the next few years. Luckily we (my fiance and I) earn enough, and prices are low enough, that none of the properties we own (or would be looking at buying) would really hurt us too much even with a 20% drop in house value/vacancy rates (the latter is far more important to us-short term- anyway)
Thanks again


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## Chad (Jan 30, 2011)

Sounds like you you want somebody to tell you everything will be alright cause its different here. Personally real estate is the last place I'd be investing my money in right now, the easy money has already been made. 
Interest rates only have one way to go and thats up. Canadians have never been so indebted as they are now. The warning signs are everywhere that anyone with half a brain could see. As the previous poster stated, prices do go down on real estate... Just look what happened to our neighbors in the south or Alberta during the 1980s.


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## kcb (Feb 11, 2012)

Actually, no. Everybody I know says "things will be okay" beyond that, actually, business is booming, and everybody wants "in"... luckily, n this town most people tend to drink their money away... but I digress. I own properties, and I will buy more properties, not so much for the equity, but for the cashflow, that said, equity is certainly a bonus (more importantly, being confident about LONG TERM cash-flow). Ultimately, i'm okay either way, a sharp drop-off in house prices is fine, as it will allow me a lower entry point, values shooting up are great too, but it will mean that i'll take my money elsewhere (likely down to our neighbours to the south, to be honest).

Now that that's out of the way, I don't claim to have all the answers (or any of them) that's why I'm here, trying to gain some valuable outsider's perspectives, with that said, I agree that many housing prices will go through a correction, where I'm really curious is how people think it will affect Alberta, and specifically Grande Prairie, "Canadian Real Estate" is hardly a fair term, as comparing real estate in Vancouver to real estate in Winnipeg is like trying to compare the New York City real estate market to Phoenix's. Every city, and region has their own unique set of circumstances that (while affected by province-wide bank rates etc. to a degree) tend to act regionally as well. With that said, a look at a couple of quick statistics:


GRANDE PRARIE
average house: 257,401, 
average age:29.6 years old, 
avg. hshld inc. 121,375

CANADA 
average house price 365,000, 
avg. age 39.5 years old, 
avg. hshld. inc. 53,634

... Obviously those statistics don't tell the entire story, and maybe are even irrelevant? But my gut tells me that, while MOST places in Canada are not where i'd want to put my money, certain pockets (such as grande prairie) may be different. Again, i'm not proclaiming anything, nor am I trying to coerce a particular response, simply hoping to receive some sort of insight that considers ALL relevant information.
Thank you for your time.


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## Chad (Jan 30, 2011)

If there is a crash Grand Prairie will probably fair better than Vancouver or Toronto, but I doubt it will be immune from it either. If your so keen on real estate why not invest in a quality REIT ? They provide cash flow (possibly capital gains) and you do not have to deal with all the landloard headachs. Just a suggestion.


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## k66 (Feb 11, 2012)

I'll second the nomination for REIT's. They have less risk (if sufficiently broad-based), no management headaches, are infinitely more liquid, and still bring in $$$...


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## Berubeland (Sep 6, 2009)

kcb said:


> My question, however was more about the specific economics of the region, vs. real-estate investing as a whole. If you had any insights/ opinions on what the next few year would hold here that'd be greatly appreciated.


Ok here's what I think without doing an in depth study of Grand Prairie. 

Alberta Laws favour the landlord 

Grand Prairie Fundmentals are good re: Employment 

You will not escape the ramifications of being all in on a sour asset class in Grand Prairie

In the USA not one region has escaped the rout. NOT ONE. Some do better than others. IMHO the REITs will also no escape the hot pototo effect either. 

Or for a more apt analogy for Grand Prairie when oil falls to $80 per barrel every single oil company stock goes to the shitter. 

Also this data doesn't give anything close to the same income level for residents of Grand Prairie http://www.city-data.com/canada/Grande-Prairie.html

I also doubt that you are achieving near enough cash flow to actually cash flow once repairs and replacement of necessary building elements is calculated *over time*. 

It really pains me to be so negative, but it's really been so long since real estate has had a downturn that people forget what it was like before. All I can see is people in the market for 20-25 years cashing in their chips and new buyers taking their place. 

It will be time to invest in real estate when everybody thinks you are an idiot for doing so...


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## kcb (Feb 11, 2012)

whoops! the dollar figure i listed was un-intentional, 83,832 was the dollar figure I had meant to to write, taken from: http://albertaventure.com/2011/06/2011-best-communities-for-business/?gettop25=1
My Apologies.

Still a better than double ratio (vs. the national average) for income vs. housing price though.

And as far as the oil goes, my belief is that over the course of the next 10 years it will do more rising than falling.

That said, thank you. Your short little breakdown was exactly what I was looking for (sort of, haha). I agree re: the REIT, which is why i'm not too interested in them, as I think real-estate is GENERALLY going to be a very shaky investment in the next little while, curious about your thoughts regarding investing in Arizona though?

I will say though, currently One of my properties (11 years old) has a total rent of 2300/mnth.... and I really SHOULD be getting a little bit more. Mrtg.+taxes+utl+ins. average about 1650-1700. Netting 600+/mnth.... obviously that doesn't take into account repairs, but They weren't, nor do I expect them to generally be over 7.5k/year..... Of course economies change, and interest rates rise, so we'll have to wait and see what the future holds!


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## Berubeland (Sep 6, 2009)

kcb said:


> And as far as the oil goes, my belief is that over the course of the next 10 years it will do more rising than falling.
> 
> That said, thank you. Your short little breakdown was exactly what I was looking for (sort of, haha). I agree re: the REIT, which is why i'm not too interested in them, as I think real-estate is GENERALLY going to be a very shaky investment in the next little while, curious about your thoughts regarding investing in Arizona though?


When I referred to oil, I was not referring to the specific merits of that investment but rather to the observable effects of a marketwide downturn on all oil companies. No one is left unscathed regardless of the strength of that particular investment. A similar crash happened to tech stocks. Housing prices will do the same as we have seen in the United States. 

I believe that if you bought in the US you could do quite well for yourself. Their crash has already occurred and Americans for the most part look at real estate as poison. However what stops me from recommending US investing are the difficulties inherent in buying, managing, renting properties thousands of miles way. There are also taxation problems regarding Canadians depending on which state you invest in. 

As for Arizona...I don't believe you can find a *good and popular* investment. I'd go elsewhere and find my own spot to invest in. Somewhere that doesn't have an entire phalanx of RE agents running bus tours of foreclosed properties. Being the contrarian that I am I'd find somewhere closer to Canada, close to a major center that is not dependent on one industry.


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## GrandePrairie (Feb 14, 2012)

kcb:

I'm also a landlord in the GP area. 

Grande Prairie's economy is based on four pillars Agriculture, Forestry, Oil&Gas, and as a retail service hub. Grande Prairie is predominantly a natural gas producing region, not oil. However the current boom is being driven by natural gas liquids (butane, ethane, propane) whose prices are highly correlated to the price of oil. Agriculture has just had a banner year after three years of drought. Our three large forestry mills are all new, highly efficient mills that made it through the recession without any significant labour losses. Rental vacancies in the city are essentially zero. The new hospital, high school, hwy 43 twinning are all going to bring in a lot of workers, not to mention the many other projects that are coming online. 

I'm optimistic about home prices in next 1-5 years based on oilfield hiring, rental vacancies and the construction of LNG facilities in Kitimat and Prince Rupert.


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