The first thing to keep in mind is that real estate investing is a local sport. So don't get caught up in the CNN headlines that say the U.S. market is collapsing. Is it suffering pretty badly? Yes. But not everywhere.
It's like me telling you that, "It's sunny in Canada today". Although that may be true in some parts of the country it's definitely not sunny everywhere. It can be sunny in Mississauga and I'll drive 10 minutes to Oakville and it's raining cats and dogs. Real Estate investing is the same way. You must ignore the headlines. It's mandatory.
You must get the data yourself or work with people that have it. For example, with the "sky is falling" media everywhere I decided to look at the prices in Oakville, Milton, Burlington and Hamilton for August and found prices are up in August 2008 versus August 2009 3-5%.
Get the data for yourself. Use local real estate boards, they have great data. And use Census Canada data for population trends by community.
In good economic times all housing increases in value. However, higher end homes spike up much higher than "starter" homes. So they are usually the ones that fall the most.
For those of you that know us you heard us explain that our family has personal experience in this from the early 90's crash. Be aware of this. When people say house prices are falling, ask them what type of house they are talking about. Make them get specific. Don't let lazy opinions sit unchallenged.
In poor economic times (aside: if there even is such a thing, I know many people who just "decide" not to participate in bad times and go on to create amazing amounts of wealth when everyone else is running for cover), housing and shelter is still a need.
Read that again, housing and shelter are a necessity. So if you focus your investing on categories of homes that are needed (think starter homes) you exposure to risk is much less.
The U.S. was giving out mortgages with no down payments to people who weren't working. Bad idea. Bad business. In Canada, we had and still have some zero down mortgages but you actually have to have good credit and a job to qualify. Big difference. Really big.
In the U.S. you can deduct mortgage insurance off your taxes, in Canada you can't. You actually have to save some money in Canada to buy a house. This is a big deal. Does it mean Canada is immune to a downturn in the real estate market? No.
You know why? Downturns are normal. They are to be expected. To be planned for and to be profited from.
Because real estate is played locally there are always opportunities in any market, up, down or sideways. Focus on good communities (employment diversity, growing population), think Burlington, Cambridge, Kitchener, Waterloo, even the Hamilton Mountain and Brantford.
Then focus on good houses that will produce positive cash flow for you.
Don't get stuck "flipping" a house if you can't afford to hold it for many months without an offer. Been there, and it's not fun and it's not funny. Real estate investing is very different than real estate rehabbing. The later is more like creating a job for yourself.
Find a good team of people. A good team of people who know how to invest. A good team will steer your past obstacles.
We've said this before and we'll say it again. The team is more important than the property. Remember that. Beginners forget it or don't know it. That's not you.
History has proven that massive amounts of wealth have been created in times of uncertainty.
Think Carnegie, Getty, Rockefeller, Trump. Rob Minton has a great report about this that you can download here. More on this topic in a future article.
Don't buy into the hype. Think for yourself. When everyone is running one way there is money to be made going the other way. Just the other day (September 2008) one of our investors got $13,000 up front in non-refundable money from a tenant in one of their properties.
People are making money right in your own backyard. Seriously. If you don't, believe me, track down the book "Acres of Diamonds", it's a short little story, it'll explain everything. I believe this may be the original version here but I'm not certain.
Use these 3 steps. First, find a team of people, second, use a proven system that others have tested and third, get started. Read and go to seminars but after six months if you haven't done anything you are wasting time. Will you make mistakes? Yes.
Will your team of professionals get you through them, yes. Will you grow and come out stronger? Definitely.
Stop listening to your family and friends. Only listen to people who are doing it or have done it. Just stop listening and stop engaging in negative conversations.
Is real estate investing as simple as "colour by numbers"? No. But that's why there's money. Not everyone will use their creativity to create wealth. You will use yours.
Stop sleep walking and get busy. Hustle a little. It's good for you and it's a forgotten mode of operation.
Phew, there it is, now that it's off my chest I can enjoy my day... remember, be a Renegade, always!
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