The Investors Housez – Your Calgary Real Estate Information Site

People just don’t seem to have an idea of what is going on down in the US regarding the Real Estate Foreclosures. For some families it is a complete nightmare as will see in the video from the link below. People abandoning their homes, leaving all their possessions behind and companies coming in and throwing EVERYTHING away! Over inflated properties that are now selling for 50% of their original value since there is no one to buy them.

When you see this video and get a bit more of an understanding of what is happening in many areas of the US, the first question you may want to ask is, Why would you want to invest in US Real Estate right now!!Yet the ads keep showing up on billboards, radio and magazines touting incredibly low prices in the US and a great time to buy. It could be years before some of these areas make any type of recovery, yet you are stuck in the investment. So think carefully before you jump into any US based opportunities. There will be a time it works, but it just isn’t now.

Once you watch the video, if you could take a minute to post a comment here on the blog, I would love to see what your thoughts on this are, whether you had any idea of how bad it was and any other thoughts you may have about the market.

=====>>>>>>The Sad Reality Foreclosure Alley

There is a lot going on right now with mortgages, banks and the Real estate markets, so I won’t email update you on everything, but be sure to check in over the next week to see if you are missing anything.

In an effort to keep the economies moving the Central Banks in many countries are announcing rate decreases today. By lowering the cost of borrowing this helps spur peoples incentives to purchase items with credit. This in turn keeps the economy active and helps stabilize the entire financial market. In theory at least.

From personal experience over the last month while rates may be lowering, the banks themselves are tightening up considerably to the point of creating their own demise. Think about it, and this is what annoys me, the banks are in business to loan out money and make a profit on the money they lend(and a killing on service and setup charges), yet they are getting so tight they aren’t lending money out unless you have near perfect credit and don’t require the money. They are being so freaking conservative with their lending it creates a situation where even if rates are lowered people cannot qualify anyway.

So now they have low rates, but won’t give you the money to spur the economy and then may request federal assistance due to the state of the financial industry after recording record profits for how many years in a row? No irony there!!

Here is the link to the story >>>>> Central Banks Announce Coordinated Interest Rate Reduction

The $2,000,000,000,000 loss reflects how much has been lost in American retirement plans and I had to use all the zeros for the best effect. The link to the complete article will be below, but here are some quick thoughts and comments.

That works out to be about a 20% decrease in value in just over a year on average. Even with the slow down in the housing market here in Alberta, neither us or any of our investors and partners have been hit anywhere near that bad. It didn’t hurt that 80% of our properties were purchased before 2007 either. On top of that our Real Estate provides cash flow which also helps.

As several other investors have commented to me in the last month, aren’t you glad you aren’t in the stock market? And if you are, when are you getting out? Love to see some comments.

The Link >>>>>>>>>> Retirement account losses near $2 Trillion

It appears the new revised bailout was approved, the full story is here, http://www.msnbc.msn.com/id/26987291/

So after another week of posing, posturing and making sure they made the news they have passed the amended bailout, watch for another update next week.

I seem to have a steady flow of updates on the US bailout coming my way, so hopefully I can break down some of the information for you that helps explain it a bit more.

The key point from all this is that it will add stability to the US financial markets. Right now everyone is scared about the tax payers being stuck with the bill. It may not be quite as bad as it seems. While the US government is bailing many companies out by buying up their assets, it isn’t paying full price for these assets and there is a tremendous potential for them to be resold in the future for a profit.

It will definitely separate the stable well run banks and financial institutions from the companies that took the money and the excess risks and are now paying for it. Watch for the companies that went for the easy money and took on significant sub-prime mortgage debt to get swept up by the larger stable companies and/or the Feds. Think of it as a cleansing that creates more stability.

Homeowners who are stuck with over mortgaged properties or who are on the verge of foreclosure are still in the same boat. While the bailout is helping the large institutes, it does nothing to save the homeowners mortgages. It does however create more confidence in the banking industry. The intent of this is to prevent the struggling US economy from completely stalling and going into a full blown depression.

The other important point of the bailout is the government will control the golden parachutes and huge bonus payouts for the companies they take over. The out of control payouts some of these executives were receiving will hopefully cease to exist and it may bring some sanity back to the markets. One payout that stuck out from last year was the president of Lehmann Brothers receiving a $22 million bonus last year for a company that had to declare bankruptcy this year. What a great way to run a business!

I would love to hear some feedback from you, so tell me your thoughts if you can find the time. I will add more information as all of this plays out and more information comes out of it.

By the calls and messages I was finally updated that our rooming houses made the paper. While I was a bit disappointed it didn’t talk more about our places and us, it did come out fairly well. Of course, who ever likes their own picture?

Read the story here, Calgary Herald Rooming House article

The REIN Western Conference all day workshop took place last week here in Calgary and as usual, it was packed with information about investing in Real Estate. Particularly about investing in Alberta Real Estate of course, but much of the information was transferable to wherever people invest.

One of the highlights was the latest list of the Top Ten Towns to Invest in Alberta. It’s already in the media, so I guess I can tell you that Edmonton was number one and Calgary was number two on the list. The top five were rounded out by Red Deer in third spot, St. Albert in Fourth, and Grande Prairie in fifth.

Realistically if you pick any of the larger cities in Alberta to invest in and you are looking at holding onto a property for at least three years you should do quite well. Just watch out for one industry towns (unless the industry is oil), especially forestry, and remote areas that are not influenced by the prosperity of larger centers.

Also at the event was Steve McKnight. Steve is a well known Real Estate investor in his home country Australia and he had some very well thought out ideas about Real Estate and wealth. At its basis, it revolved around forming a plan and keeping focused on it. This isn’t too far fetched from any of the success stories you see out there. He did however have a pretty positive bias towards commercial property.

Some of his points were very valid. With commercial properties, your tenants usually sign long term leases and there are yearly increases factored right into the lease. In addition, the tenants pay for all their utilities and your taxes, unlike a residential property where they may pay utilities, but you cover taxes. Perhaps most importantly the tenants are responsible for any improvements in a commercial building and then when they leave, they leave the improvements behind.
This really opened my mind to the thought of looking at some commercial property. Even from a financing standpoint it makes sense, as commercial properties are financed in an entirely different manner than houses. A homeowner has to show that he (or his tenants in our case) can service the debt on a monthly basis. With a commercial building, the banks put the weight of whether the building qualifies for a mortgage on how much it earns on a monthly basis and not how much the buyer earns.

It’s an entirely different sandbox with many different rules, higher dollar amounts and even higher cash flows. But it is intriguing!
One of the other speakers at the event was a former Real Estate agent who discussed some of the “tricks of the trade” that Real Estate agents are encouraged to use in the industry. Most of these are well known to investors, but it was a good reminder.

For the curious some of the main highlights were conditioning, which involves setting a higher listing price than is realistic, just to get the listing, incomplete comparables which may lead to inaccurate price points on both the buying and selling side, and the coincidence of the last house you look at while on tour with an agent fitting you the best. Now not all agents use these tricks and it is really just the weakest Realtors that do. Just realize that they are out there and make sure you choose your agents wisely.

Over all it was a great reminder that we are still investing in the best place in North America, if not the world, and that we have a good run still ahead of us. We just have to make it through this current plateau which has become an incredible buying stage for many Real Estate investors.

As a side note, I am busy learning about Web 2.0, Social networks and other interesting internet tidbits. If any of are on Twitter look me up under BillBiko, or check out my Squidoo page at the following link, http://www.squidoo.com/KatSid.

So it looks like I was bumped from the Herald this weekend, I am trying to track down the reporter to find out when the story will be in the paper. Here is the link to the original post, Herald story.

If you missed the original post it was regarding some of the properties we operate as higher end rooming houses for individuals looking for short term rentals here in Calgary. Many individuals who arrive in Calgary need affordable places to stay until they get their feet under them and we have some higher end options available.

While we do get dogged with the stigma that accompanies rooming houses, our properties are in the top 10% category and include cable TV, free laundry facilities and many properties even include free wireless internet access. Here is an example of one of those properties, Braeside.  If you know of people looking for temporary lodging of a week or two when working here in Calgary we love referrals!!

I just met with a reporter and photographer for the Herald this morning regarding an upcoming article on rooming houses. The story should be in this Sunday August 24th’s paper.

It was a few weeks ago that a rooming house in North Calgary had a fire and two tenants died. It turns out the negligent landlord not only didn’t have working smoke detectors and most of the windows were nailed shut to keep people out. This tends to be the norm when dealing with landlords who have rooming houses, so the reporter was looking around to see if there was another end of the scale.

We just happened to fit the bill as we have established ourselves on the high end. They had just left a rooming house in the Mission area and were very happy to see ours. The Mission property had nine tenants, mold everywhere and apparently had not seen much upkeep in it’s life. Also the owner was using it for storag. What do you expect for $300 a month?

Our property on the other hand was recently renovated and painted, has only four tenants total, hard wired smoke detectors, windows that open, wireless internet, TV’s with cable in every bedroom and the common area and free laundry facilities. Of course, our properties were a bit more at $200 per week, but where would you rather stay?

So watch for the story and let me know what you think!

So as a follow up to the article about BMW’s becoming boring in August’s Newsletter (read the Newsletter here, August’s Newsletter), here are some vehicle updates from Tuesday August 19th.

I was shut out on Ferrari’s, Lamborghini’s and Maseratti’s yesterday, but I did see the following as I drove around,

3 Mercedes Convertibles

4 BMW Convertibles

3 Corvette Convertibles

Did anyone else see any expensive vehicles driving around to help support my point that there is plenty of money around Calgary and our economy is still vibrant? Indicators like disposable income are showing that the Alberta and Calgary Real Estate market still has plenty of legs and future growth potential. As a Real Estate investor this long term information is far more important than the short term newsmaking headlines.

If you haven’t read the article that started this topic yet, hurry and go read it here, August Newsletter, and help take part in this social experiment!

FINTRAC stands for The Financial Transactions and Reports Analysis Centre of Canada .

 Read one of my recent articles about the new rules about purchasing or selling property in Canada!!  

FINTRAC or More Privacy Issues!

If you plan on purchasing or selling a property in the next little while there have been some changes in what information you have to supply to your Realtor. In an effort to combat money laundering and terrorism your Realtor requires some in-depth information on you that he needs to keep for five years.

Some of the information they are required to gather include your name, current address, date of birth, occupation or principal business, and type of id provided to verify this. Now contrary to the Personal Information Protection and Electronics Document Act (PIPEDA) which was enabled to protect your personal information, all of this is now defined under a new category deeming it necessary information to fight money laundering.

Once this information is in the hands of your Realtor, it is the responsibility of the Realtor and brokerage to safeguard it under the PIPEDA rules and legislation. Now I could be mistaken, but doesn’t this take time away from the Realtor doing their real job of assisting in the sale and purchase of property? I’m all for combating money laundering and terrorism, but I’m sure the kind of people who need to launder money through Real Estate have some incredible fake identification and wouldn’t be providing their real information anyway.

Further to this, the Realtors and their brokerage are also responsible for keeping on file every financial transaction through their offices. This one has always been important from an accounting standpoint (I don’t want them to lose track of my deposits!), but now the entire report of all the transactions are available to the government whenever they request. Once again, the Realtor is responsible for storing this for five years as well.

Now we can get to the real meat and potatoes, the “suspicious transaction”. A Realtor is now required to file a report on any suspicious transactions they run into. A reasonable grounds for suspicion could involve any of the following, a large cash down payment, transfers from offshore banks (doesn’t that already give it away?), someone purchasing their own personal property under a corporation, a purchase without viewing the property, multiple properties purchased in a short time, multiple sources of funds for deposit and closing with all cash or a majority of cash.

Although these reasonable grounds are referred to as a judgement call by the Realtor if they err in their judgement they are liable for some very hefty fines and jail terms up to five years. So many will err to the side of safety and file reports and paperwork taking up both government and Realtor time. The Realtor is also protected from any civil or criminal liability once he files, no matter what the repercussions for the individual, as long as the filing was done in good faith.

Maybe it’s just big brother paranoia on my behalf, but every year more regulations, more legislation and more requirements keep popping up getting created. They are occurring in everyday business and even to simple things like school registration. We manage to create more paperwork, more steps and more problems for individuals, while more loopholes open up for the people who abuse the systems. Sometimes we have to step back, makes things a bit less complex and maybe we can slow our world down a bit. In the meantime, get your identification ready for your next Real Estate transaction!

In a surprise move by the government today it has been announced by Finance Canada that effective October 15th, CMHC will no longer guarantee mortgages that are longer than 35 years. They also will now require a minimum downpayment of 5%.

There are a few immediate observations about this. One is that it will be harder for many individuals to qualify for a mortgage now as they may not have sufficient downpayment or monthly income for the shorter amortization. This will probably lower home prices as demand weakens. A second observation is this will cause many individuals to continue to rent instead of moving into home ownership, putting more pressure on rents due to increased demand.

Since this takes full effect in October it may create a small push over the next couple of months for people who are on the bubble of qualifying to hurry and buy. This may result in upward pressure on values and increased sales, but it should fall off quickly afterwards as the winter months are generally the slowest sales months anyway.

No word from some of the other mortgage insurerers about what their plans are yet. If you are planning on buying shortly, pressure is on, same with selling as we may see more drops short term due to this. On the positive side, the additional cash flow from increased rents is great and the long term outlook for values is still in the favour of the people holding long term.

The full article can be found here, Report on Business