IT’S A NUMBERS GAME
Big or small, real estate investing is all about the numbers: cap rate, interest rate, vacancy rate, return on investment, inflation rate, etc…. But the great thing about numbers is that they have no emotions. A nine is a 9, whether that’s a win or a loss for you. The trick is to avoid being distracted by any of the other factors that a real estate investor considers before a purchase.
For example, a smaller investor might assess one deal at a time. Income: what will it rent for? Expenses: mortgage, taxes, insurance at a most basic preliminary level. If income minus expenses is already negative, could you reasonably increase income or lower expenses. If the answer is “no,” then it’s time to move on. Simple. No bright shiny objects involved.
We are pointing out the obvious today to remind ourselves and our colleagues not to get distracted. Sometimes HGTV leads us to believe that every property problem can be solved with paint and a little bling. Um … no. Sometimes it seems like “all the cool kids” are doing something, so maybe we should too – maybe yes, and maybe no. Do the numbers WIN for you?
This article quietly came out during the municipal elections. It’s fascinating that “the big players” are all about numbers, just like us in the smaller investor world. “Purchasing a warehouse costs an average of $3.5 million less than in Vancouver.” And shipping costs are “almost 50% cheaper from Calgary than from Vancouver.” Alberta also doesn’t have land transfer tax; plus there is no PST (only GST). What is so obvious to the bigger industrial players, is also true on the smaller scale for us humble investors.
House purchase prices are dramatically lower in Alberta (compared to BC and Ontario especially). The cost of living is lower without a provincial sales tax. More jobs are already arriving with each new warehouse space, or building project. Recovery is here – it’s just not a big enough news story to catch everyone’s attention – YET.
It’s just business. Each investment property is a small business where we attract customers, manage employees (or colleagues) and calculate profits and losses. Alberta is quietly attracting more business people who are looking to cut their expenses—because the numbers make sense here. Meanwhile, humble real estate investors are seeing very similar advantages with slowly increasing rents, and much lower vacancy rates. The real estate cycle has skimmed along the bottom for a while in this province; many of us are assessing a limited downside risk, with a strong potential for growth. We haven’t been on a “bubble” list for years! If your assessment of the numbers leads you to Calgary, connect with us anytime.
