# Real Estate Values and Private Reits



## johnlewisgrant (Apr 1, 2011)

Revisiting the question of how relatively quick drops in residential real estate values, say in the range of 10-20 per cent over 2 years impacts on private reits: is there a definitive or quasi-reliable answer to this sort of scenario?

JG


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## Berubeland (Sep 6, 2009)

There are several factors to consider in evaluating this question. 

1-Confidence of investors is the biggest factor I fear. Confidence in real estate as an asset to make your rich is at an all time high. This is why we've seen a rash of flippers, people wanting to buy 2-3 properties and "rent them out" When people's houses start losing some serious value this will completely destroy this idea that people have. IMHO people will then start shying away from this sector completely. (A scalded cat fears all water) This will shift money away from the entire sector. People are not smart enough to realize there is a difference between an apartment building and a single family house. Assets will therefore lose value as less people try to buy in and mindlessly flee real estate completely as an asset class

2-If financing is tightened as it was in the USA it will become extremely difficult for businesses including private REITs to finance acquisitions, improvements and raise funds. During the US crash buildings that were fully sold out could not be built because no banks had a sufficient amount of capital to build buildings. The most they were lending was about 5 million per project and so in the case of Sherway 3 for instance they were trying and failed to put together 20 different lenders to build the project. 

3- CMHC financing is huge for buildings as you'll save about 2-3% on your mortgage. If CMHC has reached their cap it will be much harder to get this type of securitization. This means that people buying a building will need a higher cap rate to deal with higher interest rates which means that the asset will be worth much less.


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## Mall Guy (Sep 14, 2011)

Private REITs don't tend to mark to market their investments, and claim they are above the noise associated with publicly traded REITs. However, your ability to get out depends on them bringing in new money and as BBland stated confidence is key. The private REITs tend to be started by an entrepreneur back by several high net worth individuals. They are in it for a liquidity event (get taken out). If the sector is off, no event. Likewise the ability to finance at different points in the market cycle could bring a weak private to the edge. Never liked the private REIT sector, mostly because of their lack of disclosure, and their control on redemption. Look at US examples, where people ended up with dead money.


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## johnlewisgrant (Apr 1, 2011)

Mall Guy said:


> Private REITs don't tend to mark to market their investments, and claim they are above the noise associated with publicly traded REITs. However, your ability to get out depends on them bringing in new money and as BBland stated confidence is key.


OK... those are important considerations, which I need to be alive to. 

Volitility? The ace for privates? Aren't they right in saying that the unit price and yield for Centurion and Skyline (the main Ontario Reits) remained constant, while publicly traded reits bottomed with the rest of the market during the LAST market collapse (2009)? Ergo: one would think the argument that private reits are much less susceptible to market (psychological) highs and lows plausible?

But now, of course, we're facing BOTH a market correction (worldwide) which I think inevitable; AND we are facing a reckoning in the Canadian real estate market, which for me is merely a matter of depth and breath (hoping for a "soft" landing).

If, in the end, we are looking at a much more reasonably priced equity market (read major market correction) and inflation, then private reits would seem, superficially, to have both ends covered? (Because apartment reits (which is what Centurion and Skyling DO) alow the owner to increase rents to cover the effects of inflation)!!!

Just throwing this out .... I'm actually on the fence....and obviously in need of education.

Is the game at this point really reduced to laddered bonds and super conservative pref shares ? I mean, are those of us with a conservative outlook REALLY obliged to start cashing in the private reits? 

JG


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## Mall Guy (Sep 14, 2011)

johnlewisgrant said:


> OK... those are important considerations, which I need to be alive to.
> 
> Volitility? The ace for privates? Aren't they right in saying that the unit price and yield for Centurion and Skyline (the main Ontario Reits) remained constant, while publicly traded reits bottomed with the rest of the market during the LAST market collapse (2009)? Ergo: one would think the argument that private reits are much less susceptible to market (psychological) highs and lows plausible? JG


Yup, no price volatility, but no buying opportunities (RIOCAN @ $12, H&R @ $6) but if the public REITs crash, likely no new investor for the privates, redemption denied . . . the sponsor needs to find new cash to pay you, no new cash, you can't exit, but no price volatility . . . like a paper loss on your house, if you don't have to sell it in a down market you didn't loss any money . . . again, read some of the horror stories out of the US, people and estates trapped as the market nose dived . . . not saying I don't like Centurion and Skyline, but closely review their redemption policy, management fee, asset management fees, special earn outs, fees for acquisitions, fees for charging fees, AND the market the buildings are located in, employment, major employers, and the REITs debt policy . . . my main concern has always been their disclosure . . . visit League Partners and tell me if you learn anything about their properties (I understand you get a nice "blue book" but not so much on the disclosure side IMO)


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## Just a Guy (Mar 27, 2012)

Private REITs do not have a lot of regulation. Real estate is ripe for manipulation of the numbers. A lot of private REITs can easily become a Ponzi scheme if the people running them are so inclined.

They can also be illiquid.

In many cases, the managers are the only ones who are confident of making money. I'd be very careful of a private REIT.


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## Just a Guy (Mar 27, 2012)

Berubeland said:


> 2-If financing is tightened as it was in the USA it will become extremely difficult for businesses including private REITs to finance acquisitions, improvements and raise funds. During the US crash buildings that were fully sold out could not be built because no banks had a sufficient amount of capital to build buildings. The most they were lending was about 5 million per project and so in the case of Sherway 3 for instance they were trying and failed to put together 20 different lenders to build the project.
> 
> 3- CMHC financing is huge for buildings as you'll save about 2-3% on your mortgage. If CMHC has reached their cap it will be much harder to get this type of securitization. This means that people buying a building will need a higher cap rate to deal with higher interest rates which means that the asset will be worth much less.


I believe you'll find most private REITs rely on private money (the investor's) to finance their acquisitions. They often raise more money in their offerings than the amount of the actual purchase. The extra money covers fees and covers expenses.

They rarely get loans, and CMHC is even rarer from what I've seen, so these wouldn't really play a role.

Investor confidence however is key. That's why they often have slick marketing, and are often abused.


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## Mall Guy (Sep 14, 2011)

Just a Guy said:


> I believe you'll find most private REITs rely on private money (the investor's) to finance their acquisitions. They often raise more money in their offerings than the amount of the actual purchase. The extra money covers fees and covers expenses.
> 
> They rarely get loans, and CMHC is even rarer from what I've seen, so these wouldn't really play a role.
> 
> Investor confidence however is key. That's why they often have slick marketing, and are often abused.


I think we have become "Just A Mall Guy", well said! Private REITs are for those who can take a large position and can have influence on management!


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## CanadianCapitalist (Mar 31, 2009)

Mall Guy said:


> the sponsor needs to find new cash to pay you, no new cash, you can't exit, but no price volatility . . .


The point that liquidity can dry up is a huge negative. Just ask investors in venture capital funds. By contrast, publicly-traded REITs are extremely liquid. You will get your cash in 3 days after the trade settles.


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## Berubeland (Sep 6, 2009)

It is my understanding that Public and Private REIT get their seed capital from investors, then finance the rest of the building using CMHC if the building is eligible. Many private REITs start out self funded. The guys from Skyline REIT started out in student housing. There is a limit to how much the bank will let you borrow to buy single family homes. There is a definite path from self funded to private REIT to public REIT. 

The value in any kind of REIT lies in its buildings, and the income they generate. This really doesn't fluctuate at all. Building Valuation is a tricky game because the market sets the value and you have to sell the building to actualize it's true worth. 

Having said that, interest rates can and do change the value of buildings but not right away...when you refinance because your mortgage cost remains the same. Any new purchaser will have to take this into account. 

On the stock market you may be paying a premium for that liquidity. In any case both public and private REITs have plenty of room for fast & loose accounting and of course outright fraud.


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## andrewf (Mar 1, 2010)

Private REITs seem to be valued at liquidation value (NAV), while public REITs are valued through discounted cash flows. Discounted cash flows are more volatile--small changes in discount rate (either due to change in risk premium or risk-free interest rate changes) or cash flows can have large impacts on the unit price of public REITs.

So yes, there is a liquidity advantage to public REITs, but perhaps that means there is a liquidity premium (higher ROR) for private REITs.


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## kcowan (Jul 1, 2010)

Berubeland said:


> In any case both public and private REITs have plenty of room for fast & loose accounting and of course outright fraud.


And serious errors too. If the accountants misread the market (like too optimistic), then the NAV is overstated. Do you value the inventory at cost, at market value, or at depreciated cost? None of these are correct.

While valuing at discounted future cash flows sounds nicer, it is highly dependent on discount rate, vacancy assumptions, et al. I suppose liquidity just serves to eliminate that problem. It's worth what someone will pay for it!


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## Just a Guy (Mar 27, 2012)

REITs are a lazy man's approach to investing in real estate. Mutual funds are the lazy man's approach to investing in stocks. When you're lazy, you'll pay for it.

Most people soon realize that mutual funds only ensure that the fund managers and their companies get money at the expense of the unit holders. Well, hate to break it to you, but the same is true for REITs. There are so many ways to legally manipulate your returns in real estate that I can easily make any property I own either make or lose a fortune on any given day, forget about the illegal tricks.

If you are content with single digit returns while the companies running your funds make a killing, but a REIT. If you want to make huge returns, buy real, cash flowing, real estate properly. Keyword PROPERLY. Not all real estate is a good investment (over the past decade I'd say they are scarce, but they are out there).

To me personally, REITs are a scam to make others rich, private REITs even more so. Well, maybe not scam, since that implies something illegal, but I'll bet you the companies running a REIT make mutual funds look like a great deal.


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## CanadianCapitalist (Mar 31, 2009)

Just a Guy said:


> Most people soon realize that mutual funds only ensure that the fund managers and their companies get money at the expense of the unit holders. Well, hate to break it to you, but the same is true for REITs.


If you employ the same logic, you shouldn't invest in stocks but go into business yourself because you are only making the managers rich. I'm not trying to dismiss the concern over agency problems in REITs, private or public but I take issue with your claim that every REIT has these problems.


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## HaroldCrump (Jun 10, 2009)

There is no end to this logic, as CC said.
You should do your own electricals and plumbing and not make the electricians and plumbers rich.
You should maintain and fix your own car and not make the mechanics rich.
You should home school your kids and not make the teachers and professors rich.
Where does this logic end?


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## Four Pillars (Apr 5, 2009)

The difference in 'effort' between REITs and a rental house is far greater than the difference in effort to buy mutual funds vs individual stocks.

Plus you have the diversification factor as well. Even with individual stocks, it's not that unreasonable to have a diversified portfolio with a relatively modest portfolio - let's say $30k. With a rental property you are generally looking at a minimum of $100k or far more, which is a lot of money for a single investment.


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## Just a Guy (Mar 27, 2012)

CanadianCapitalist said:


> If you employ the same logic, you shouldn't invest in stocks but go into business yourself because you are only making the managers rich. I'm not trying to dismiss the concern over agency problems in REITs, private or public but I take issue with your claim that every REIT has these problems.


I meant more that there are so many ways to cook the returns in REITs that they aren't good investments. They are open to far more corruption than most people think. And where money is on the line, people tend to help themselves more often. 

To give one example...With a stock portfolio, you know exactly what the individual stocks are worth, thus the NAV is easy to see. With real estate what is the "value" of a building at any given point? I can get such a wide variety of "values" from appraisers that it's meaningless. I know which one I'd use if I were wanting lower property taxes vs the one I'd use if I wanted a loan on the property, both are "certified". So,how valid is a NAV for an REIT? Until a building is actually sold, there is no real way to know.

As for mutual funds, when compared to ETFs are they worth the extra fees? A lazy investor has someone recommend a basket of mutual funds. A less lazy investor reads an article about couch potato investing, sets up a trading account, and buys ETFs probably getting better returns. An investor who's not lazy, does some research and probably can expect double digit returns, instead of listening to talking heads who are trying to get you to buy their pump and dump schemes.


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## Just a Guy (Mar 27, 2012)

Four Pillars said:


> The difference in 'effort' between REITs and a rental house is far greater than the difference in effort to buy mutual funds vs individual stocks.
> 
> Plus you have the diversification factor as well. Even with individual stocks, it's not that unreasonable to have a diversified portfolio with a relatively modest portfolio - let's say $30k. With a rental property you are generally looking at a minimum of $100k or far more, which is a lot of money for a single investment.


Personally I tend to buy real estate with none of my own money, giving me infinite returns since I haven't used any of my money, while other people pay the bills, you can't get that with stocks. I worry about the cash flow of a property not it's value. I know what my market will bear in a bad economy and make sure the property can cash flow in that time period. In good times I bank the difference. It's definitely more work than an REIT, but the returns are very high.

I'm not a fan of diversifying in stocks just to diversify. Why pick a group unless they are a group of potential winners? I research each stock individually, and pick out ones that seem like winners. It makes no sense to buy probable losers just to diversify. When Nortel dominated the TSX, I never wanted Nortel, I knew about some of their "business practices" and thought they looked weird. So I didn't buy them. At the time people thought I was crazy, and I admit I missed out on some huge gains...but I also missed out on the crash. I'm not a trader, I'm an investor.

I buy stocks I like when they are low, usually are obvious investments, and then forget about them. The Canadian banks were a good example of these. During the financial meltdown Canadian banks, which don't operate even close to the american ones, got clobbered. Their dividends were paying out at greater than 10%, so I got in. I know the banking industry quite well both from the inside and as a client, I know these are rock solid. Sure enough, they all recovered probably a 100% capital gain, and are still paying 10%+ (some increased their dividends already) on my original investments. 

This isn't rocket science, I'm no genius, I just did a little work and waited for the right time. I've got a pretty solid double digit return for a long time to come, with no MERs. Solid and safe, and I've got a 50% stock price cushion to cash out on if anything changes.

I diversify by owning real estate, buying individual stocks and owning a business. I work at all three. I'm not a gambler, or a trader, I'm not all that smart but I do know how to work and I expect to be paid well when I do.


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## CanadianCapitalist (Mar 31, 2009)

Just a Guy said:


> To give one example...With a stock portfolio, you know exactly what the individual stocks are worth, thus the NAV is easy to see. With real estate what is the "value" of a building at any given point? I can get such a wide variety of "values" from appraisers that it's meaningless. I know which one I'd use if I were wanting lower property taxes vs the one I'd use if I wanted a loan on the property, both are "certified". So,how valid is a NAV for an REIT? Until a building is actually sold, there is no real way to know.


You should be specific which REITs you are talking about. Publicly-traded REITs rarely trade exactly at NAV. RioCan, for example, has an NAV estimate (note that the estimate is made by analysts, not the company. Presumably, they work with a spreadsheet and key in values from comparable sales. And naturally, this is simply an estimate) of around $23 and is trading at $27. Occasionally in the past RioCan has traded at a discount to analyst estimate of NAV. 

Of course, there is a possibility of malfeasance or mismanagement at a publicly-traded REIT, just as such a possibility exists at any other publicly-traded company. That doesn't mean an investor should stay away from stocks. Same thing with REITs.


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## HaroldCrump (Jun 10, 2009)

One advantage of REITs is that the income can be tax protected inside a registered account, unlike the income from a direct ownership of a rental/income property.
Granted, direct ownership has the potential for claiming substantial tax deductions for expenses (some real, some inflated) but REITs inside a tax sheltered account like TFSA offset some of the perceptions of lower returns.

The other aspect is that REITs provide exposure to sub-sectors of the commercial RE market that are virtually impossible for a single, retail investor to acquire on his/her own.


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## Berubeland (Sep 6, 2009)

The thing about REITs both public and private is that they invest in "investment grade real estate" which means that right out of the hopper they are much further ahead than the average person buying a single family home. Single family dwellings with a basement suite are not "investment grade real estate" 

We've had a record run up in prices and people forget what it was like before that trying to make money as a landlord off of cash flow. The only game in Toronto anyways is capital appreciation. That's it. There is no cash flow to be had. If you apply the same metrics as investors apply to apartment buildings then you'd get some amazing returns. Even if you passed that hurdle, you'd have the cost problem. Single family homes and the differently split up variations are inherently inefficient to service and repair compared to purpose built buildings. For a simple example I pay $800 plus HST to paint a three bedroom apartment. That includes repairs, painting and materials. It includes white doors and trim. I get volume discounts at almost every supplier. You obviously cannot have an on site superintendent to deal with issues and emergencies. 

If you expand that a little bit it starts to be more trouble. Lets say you buy 10 houses. That means 10 furnaces, 10 roofs, 10 sets of eavestrophs, 10 driveways, 10 leaky basements with marginally qualified tenants, 10 outdated kitchens, 10 toilets and 120 appliances. At this point you've definitely stopped calling Mr Rooter for your clogged main drains. There's also 10 lawns to cut, and driveways to shovel. 

If you have a 10 plex you'll have one furnace, one roof, one basement. The problem is that to buy a ten plex you'll need 30% down and some back up money. You'll also have to show the building financial statements to the bank. The bank will tell you how much money you can borrow based on the income and expenses. 

To buy a single family home the barriers to entry are very low, it was 5% down for a long time even 0% and 40 year amortization. Lots of landlords are really proud of their "positive cash flow property" They really have to stop drinking the Koolaid. Some of them have $100 in positive cash flow. That's a tank of gas and lunch at McDonalds in the circles I travel, not exactly something to pat yourself on the back for. Imagine any other business and see how silly that sounds.


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## Chris L (Nov 16, 2011)

What was stated above x2! Single family RE as an investment is dead for about 10 years I would say.


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## Just a Guy (Mar 27, 2012)

Is this the Toronto money forum? 

There is a whole world outside of there. 

All have investment grade places, some dirt cheap. Heck, some investors have even picked up 10 plex places in small towns (not Toronto) for $100,000 making cash flows of $5,000/month or more. Other investors have started with a single house and managed to trade them up to 100s of doors. There are investors who get so big they start their own contracting or property management companies to maintain theirs and other properties generating even more income. 

There are many levels of real estate investing, and many ways to become successful at it.

Of course, their employees and contractors may assume these things impossible (they tend to show their ignorance by assuming quite often, and spouting uninformed options), but that's what makes them employees and not investors. If everyone were an investor though, it would be a lot more work since they'd have no one to hire to do the work.

People who are happy with single digit returns can go for REITs, I just said there were better options if you were willing to do a little work. When you get a job, you may have to move, you may not always like the work you have to do, you may have to come in after hours, you may have to deal with difficult people. That's part of working. Investing is work, well paid work for some, not for all.

The world is a big place, and there are more ways to make money in it than one person could possibly learn in a lifetime...that is if they have an open mind. If you take the easy path, and never challenge the status quo, that's fine. It's not the path others follow.


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## ddkay (Nov 20, 2010)

Love the back and forth going on here :encouragement:


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## andrewf (Mar 1, 2010)

Investing is investing, and work is work. Being a landlord is investing AND work. Many small landlords don't assign value to their time when counting their investment returns.

Just a Guy, please show me a 10 plex trading for $100k that has a net cash flow of $5k per month. I will literally eat my hat. What kind of 10 plex trades at $10k a unit in livable condition? Mining ghost towns?


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## Berubeland (Sep 6, 2009)

I agree that anyone who comes across a ten plex for $100,000 cash flowing $5000 per month should definitely buy it, that would be according to the standard definition of cash flow which means after expenses. That would be a no brainer. I would really like to know what small town that is in because I would move there immediately sell my house in Toronto, bank the $400,000 and live off dividends from my new $300,000 trading account, and my $50,000 dividend income from my real estate investment company. I wouldn't even need a mortgage on the property. 

Feel free to provide a link to this investor's mecca just one will do... 

Generally there are a few issues with small town properties, that I am aware of coming from a town of 1000 people. 

Rents tend to be very low, where I come from you can rent a whole house for $400 plus utilities, however the property taxes are about the same as my Toronto property. (200 per month) 

No depth of tenant pool, with property so cheap, most people who would be ideal tenants, good credit, good job are homeowners. 

Serious lack of work problems in the community. 

Renovations cost the same... Even if you do the work yourself, the materials cost close to the same or more in a small town and you really can't jack up the rent like you can in Toronto. 

In many cases you'll have to live in the small town to manage your property or at least go there and oversee the property on a regular basis. In the small town I was raised in for instance, we only have one real estate agent and no property management companies. The next nearest town is about an hours drive away. Gas costs more that it does here. 

In any case it doesn't matter to you does it because you don't listen to people who have only worked in this business for the last 15 years. It doesn't matter how many properties I make cash flow, repair, rebuild or how many tenants I've rented to. All that matters is how many I own. It doesn't matter that my specialty is buildings with 25% and over vacancy rate. It doesn't matter that I've worked for thousands of landlords some small some big, commercial, residential and even a little industrial. Most of all it probably shouldn't matter to you that the investors who call me and pay me do so ask me to solve problems that they themselves have been unable to solve sometimes after years of trying. I get calls from paralegals to manage properties where the owner is being sued by tenants for harassment for tens of thousands of dollars. I just took on property management of a commercial property where there is over 7000 square feet of space that's been empty for 9 years. I get paid on a percentage of income I wonder how long I'll tolerate that vacant space for. (Not Long) 

This is a free country, do what ever you like. I'm not going to go out and buy a couple income properties to provide subsidized housing for tenants so I can advise you for free on an internet forum. I'll wait for my link instead.


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## Four Pillars (Apr 5, 2009)

andrewf said:


> Just a Guy, please show me a 10 plex trading for $100k that has a net cash flow of $5k per month. I will literally eat my hat. What kind of 10 plex trades at $10k a unit in livable condition? Mining ghost towns?


I think J a G (without spaces) is just a born-again Montrealer.


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## Mall Guy (Sep 14, 2011)

Berubeland said:


> I would really like to know what small town that is in because I would move there immediately sell my house in Toronto, bank the $400,000 and live off dividends from my new $300,000 trading account, and my $50,000 dividend income from my real estate investment company. I wouldn't even need a mortgage on the property.


Berubeland . . . are you sure your going to be happy in Elliot Lake ???

http://www.realtor.ca/propertyDetails.aspx?propertyId=11650921&PidKey=-1418413420

http://www.realtor.ca/propertyDetails.aspx?propertyId=11650923&PidKey=-217569698


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## Mall Guy (Sep 14, 2011)

Four Pillars . . . Nice call


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## indexxx (Oct 31, 2011)

Mall Guy said:


> Berubeland . . . are you sure your going to be happy in Elliot Lake ???
> 
> http://www.realtor.ca/propertyDetails.aspx?propertyId=11650921&PidKey=-1418413420
> 
> http://www.realtor.ca/propertyDetails.aspx?propertyId=11650923&PidKey=-217569698


holy, holy, holy god... either of those low-end 1-bedroom apts would be about $350K in Vancouver. Kill me now...


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## Just a Guy (Mar 27, 2012)

Yep, you guys caught me...nothing like that could possibly exist...no sir. No farming communities where farmers retire to the local small town, no place where they'd pay $600 rent plus utilities. I'm wrong. No east coast areas a few years back where people thought, "Gee, Hybernia is going in here soon, and you can buy property for nothing out here today..." (of course today things are pricier, but still pretty cheap). No places where the vacancy rate is very low because of work or schools. Nope, you are right.

People who spend that much time convincing themselves they are right have to be. People who don't bother thinking such things and looking for opportunities are obviously wrong, especially since the properties aren't as common as negative opinions. It's easier to say they don't exist.

Not every property available is a good investment, owning real estate doesn't make you a good investor. If you buy a stupid property that you can rent and which won't cash flow, you shouldn't be in the industry.

Of course it doesn't matter, because you don't listen to people who own such properties. Even if I showed you such a property, it would be discounted as a "one time thing". Employees are always smarter...you win.

BTW, Four Pillars, I think you got the wrong JG, don't slander the poor guy from BC...it's not his fault. I've got spaces.

I remember watching a CBC documentary once. They followed a "conservative" guy from Alberta and introduced/compared him with a "conservative" guy from Newfoundland. The guy from Alberta came to the rock and thought of all these ways he could create work for himself and the wonderful community he was now moving to. The guy from the rock wanted the Federal government to "bring back the fish". No matter how much the Alberta guy tried to convince him of the opportunities, the other one couldn't get over the fish.

I think the same show, or it may have been a different one, then went to New England, where they compared a seasonal worker to one from the rock. THe one in New England fished in the summer, sold X-mas trees, shovelled walks, and did landscaping during each season. The one from the rock fished and then went on UI. 

Now, I'm not slamming Newfoundlanders here, it wasn't my show, I didn't edit it. I guess, however, that life and opportunities depend on where you come from and what your attitude is.


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## Mall Guy (Sep 14, 2011)

Four Pillars said:


> I think J a G (without spaces) is just a born-again Montrealer.


. . . Lucy ???


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## Mall Guy (Sep 14, 2011)

Just a Guy said:


> Now, I'm not slamming Newfoundlanders here, it wasn't my show, I didn't edit it. I guess, however, that life and opportunities depend on where you come from and what your attitude is.


pretty sure they would like you to just stay out of their way, same as in in 1949, hottest economy in Canada . . .


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## andrewf (Mar 1, 2010)

Just a guy, I'm still waiting on that property that sells for 10k a unit and has net cash flow yield of 60% per annum.


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## Just a Guy (Mar 27, 2012)

I know people who invest by buying lottery tickets. Maybe you should try that while you wait for me to find you a property. Beats actually looking I hear.

While not actually close, there are a group of three condos, each currently rented between 750-800/month (I'd have to pull up the podcast where the exact a,out was mentioned) for 30k each listed on www.jurock.com under hot properties. Not as good as some deals I've found, but still nothing to sniff at. But I'm sure Phoenix doesn't exist either.


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## HaroldCrump (Jun 10, 2009)

Just a Guy said:


> People who are happy with single digit returns can go for REITs, I just said there were better options if you were willing to do a little work.


It is not "a little work".
It is a lot of work.
Also, for the last several years, REITs have been providing double digit returns.
Maybe not 20%, but certainly in low double digits including distributions and capital gains.

It is perhaps true that DIY landlording may provide higher nominal returns (without imputing self labor), however, in the historial context keep in mind that we are in the midst of the biggest bull market in RE in the last 30+ years.
A lot of the success in RE has to do with the cycle of that market.

Reminds me of late 1999 and early 2000 days when even the local butcher and the cab driver used words like "portfolio" and knew the ticker symbols on the NASDAQ.


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## CanadianCapitalist (Mar 31, 2009)

HaroldCrump said:


> Also, for the last several years, REITs have been providing double digit returns.
> Maybe not 20%, but certainly in low double digits including distributions and capital gains.


XRE returns for the past 3 calendar years: 21%, 22%, 53%. Many on this board bought some REITs in the market crash of 08-09 and are likely very happy they did.


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> XRE returns for the past 3 calendar years: 21%, 22%, 53%. Many on this board bought some REITs in the market crash of 08-09 and are likely very happy they did.


Wow, I didn't realize it had been that good for the overall index too.
I don't hold XRE but a few individual REITs.
The privatization of TransGlobe netted me over 50% in the last month itself.
The smaller cap REITs have done very well too, for example, BTB.

The risk profile of many DIY landlords is way riskier than holding a basket of diverisified REITs.
A large % of DIY'ers are more or less in the rental condo or condo flipping business.


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## CanadianCapitalist (Mar 31, 2009)

HaroldCrump said:


> Wow, I didn't realize it had been that good for the overall index too.
> I don't hold XRE but a few individual REITs.
> 
> The risk profile of many DIY landlords is way riskier than holding a basket of diverisified REITs.
> A large % of DIY'ers are more or less in the rental condo or condo flipping business.


To be fair, in 2008 REITs were down 38%. Still, over the past decade REIT returns have been very good at 13.2%.

I agree with your take on risk. An investor who owns a handful of rental properties in one location has taken on idiosyncratic risk. REIT investors can diversify away this risk by getting exposure to a wider range of properties (commercial, office, shopping centres etc.) as well as over a wider geography. Therefore, REITs make a lot of sense for most investors. Of course, some investors may find it profitable or suitable for their circumstances to own rental real estate. To each, her own.


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## Berubeland (Sep 6, 2009)

Really Just A Guy? Jurock is your answer? Keep drinking the Koolaid my friend. 

Unlike you I actually know people who have made real money in real estate. None of them feel like they should flog a Newsletter and memberships to anything. They don't sell books, they don't hold free conferences where they get people to spend $5000 buying CD's for the latest get rich quick scheme. 

They go out and buy real estate and make money holding it and sell it and make money doing that. 

I didn't say the mythical property didn't exist. I asked you to link it. Jurock = Fail. I also said if any investor finds it they should immediately buy it. I'm not being facetious, I'm very serious. 

You see it's easy to say that people own pink unicorns that poop gold nuggets but finding one is another story. 100% of the people that talk about pink unicorns are total liars. Put up or shut up. 

I'm up to my ears sick of people who completely misrepresent real estate. It's highly unethical. I would know this because I actually work with people who are in trouble. There are lots of them. They get into trouble listening to people like Jurock, Don Campbell and their slimy friends. This is a business difficult like any other business. Telling people that real estate is fast easy money is a scam. I know this because I work in this business. There's no such thing as a free lunch. 

I am not negative on real estate, I love real estate, I've worked in this business for 15 years, I went to work today because I love working and I had things to do. I am negative on cash sucking cow properties. I don't think that landlords should subsidize rents for tenants just for the sheer joy of providing a valuable service. The only reason to own an income property is to make income. It offends me in a way most people will never understand. It's absolutely senseless. Chasing capital appreciation is going to severely spank the specuvestors. It's really unfortunate and it makes me really sad. A lot of really good honest working people will end up losing their life savings in the fall out especially if OFSI implements the requalifying upon refinancing rule. 

It may surprise you but I do quite often find investments that will make money for investors. In fact I recommended an investment last week. Anyone who has 6 million in cash should buy it. They'd double their money in a year. http://www.icx.ca/propertyDetails.aspx?propertyId=11406823&PidKey=-584842002 Of course they shouldn't pay the asking price for this project. 

Also you should stop dissing employees, it's not respectful. The people who work for me make it possible for me do only the things I am extremely good at that most people can't do. There is also nothing wrong with being an employee, not everyone is cut out for the 80 hour work weeks I enjoy. They are my eyes and ears at the building sites I manage and make sure my checks don't bounce because my invoices aren't done on time and do countless other things I don't have time to do any more. A diligent employee is worth their weight in gold. I feel sorry for anyone you hire with that attitude. Most of my job consists of supporting employees so they can do their work without stress. I make decisions they can't stomach or don't want to make. I tell them they are doing a great job and carry them when they're overwhelmed. I make sure their paychecks get to them when they need them. I always consider it a sign of a small person to be unable to appreciate different personality types. No one is more valued in my world than my accountant who is a diametric opposite of me and an employee. It's a perspective I need. Seriously I love the people I work with, I'd be nowhere without them. 

It's not better or worse it's different. I don't enjoy being an employee any more than they'd enjoy being an entrepreneur. I can't imagine not being passionate about what I do. In any case it doesn't matter what you enjoy or don't enjoy for the most part you're either wired one way or the other. For me it's not a choice, I like chasing deals, being on the road, picking my son up after school and "going on adventure" to a building site, stopping to have lunch at IKEA. Most days I don't know what the day will bring, what will blow up or need dealing with. That makes me happy. Most people are not comfortable with that. Not one is better than the other. This world needs both types of people equally. 

Much of the work I do is breaking systems and processes that no longer work and implement new systems that do work. I do this by evaluating the results. If the results of the processes in place at a building create a 25% vacancy rate and continual income loss for the owner, it's pretty fair to say they don't work. If I had a dollar for every time a person who is working in such a building told me to keep doing the things they're doing because they'd always done them that way regardless of the end results, I'd be rich. Needless to say it's not a popularity contest it's a who gets results contest. 

As for the $20,000 condos in Elliot Lake, the maintenance fees are $331 and the rent is $575 a difference of $244 less property taxes. Elliot Lake is a nice quiet retirement community. There is no work to speak of. I've been there a couple times. I'd take 10 of those before taking one Toronto condo that costs me money but a 5 gallon of paint still costs $100 in Elliot Lake so renos and updating would be a problem. Regardless, if I bought 10 it would cost me $200,000 to make $30,000 per year. Let's assume there are no property taxes, no vacancy and perfect tenants that never want anything fixed and pay their rent every month on the 1st (so no legal fees) I'm not being picky, this is just not enough money for me. 

I want the pink unicorn... the $100,000 property that cash flows (after expenses) $5000 per month. Maybe if I bought a $100,000 house and put working girls in every room. Who knows what fast easy money means?


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## kcowan (Jul 1, 2010)

Great post Rachelle! Thanks.


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## Just a Guy (Mar 27, 2012)

Ahhh, I get it now B, your one of those "selective" readers (one who only looks for words that confirm their points), who "edits" reality to prove your point if you even read at all. 

No where do I promote jurock (I guess adding things to prove your point helps you make your point), I used his site to point out a property with potentially good returns. As you point out, finding a property like the pink unicorn listed on MLS Is probably impossible.

As you pointed out, anyone finding one would buy one, as I stated, when I found such a property (which was not listed on MLS), nor on Jurock's site, I did purchase it. (guess you didn't read that part because it didn't support your point)

Personally I agree with your opinion of jurock, however he does have non-MLS listings which may prove to have ridiculous, and uncommon returns. (the only proof you'll accept seems to be an MLS listing, (would it require 30-90 days on the market as well?).

As I stated, even if I found a property listing, you'd find some way to discount it, I guess I was correct there as well.

As for don Campbell, I'm a fan of his, I've made a lot of money off of his followers, who've gotten in over their heads. In fact I'm looking at a former RIEN property right now that's gone into foreclosure and may be available cheap. Note we agree the guy is an bad guy and so is his technique (my guess is you stopped reading by this point and think I'm his advocate, if not him). I stated I make money off of the fools who follow him.

Just because you found a nitch servicing a group of "investors", doesn't make you an expert. As I've stated many times, not all purchases are good. I often warn people not to buy certain properties, or to get out of others (I guess you just ignore thoses posts). The book that I do promote, had you actually read it (which judging by your comments, I'm nearly 99% sure you didn't) and it's site (easysafemoney.com) tells people (beginners) how to evaluate properties, so that they don't buy $500,000 properties which rent for $200/month and thus lose their shirts.

In other words, it probably would reduce your clientele had people read it. Of course, you then accuse me of being the author...maybe if you actually read the book you'd also promote it, as it says the things you "claim" to want investors to know. Btw, because I pointed to a Jurock listing, does that make me him? According to you it makes me a supporter...

As for employees, I agree with you, good employees are invaluable. Of course, when you get a "know it all" one, or the disruptive "experts", you tend to need to fire them. Not all employees are good, just like not all owners of real estate are investors. I think you have easily proved both points, not factual editing required.

Feel free to keep editing the truth to suit your needs, I'll just skip over your future posts...since I don't like to waste my time reading people who change reality or assume things just to prove their point.


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## kcowan (Jul 1, 2010)

Just a Guy said:


> As for don Campbell, I'm a fan of his...


This is a trap for speed readers, for sure.


> Just because you found a nitch servicing a group of "investors", doesn't make you an expert...


It does, actually.

You make a lot of good points and appear to be a savvy investor. Thanks for your post.


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## jet powder (May 29, 2012)

Since puplic reits are sold @ auction & private reits are not. Trying to diversify ones account with real estate & stocks & the real estate portion is held in puplic reits it does not seam to diversify the portfolio as well as using stocks or ETFs with private REITS.

When putting money on the table an investor can often put to much on the table if he thinks he is being protected by buying both puplic reits & stocks for diversivication. Of course in a deflationary crash & there is a shortage of dollars the privates will most likely get hit as well. 2008 the privates never really got hit but I think the 2009 lows will be taken out but most likely new highs first.


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