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“Here’s something to think about: How come you never see a headline like ‘Psychic Wins Lottery'” -Jay Leno
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FOR DETAILS … SEE BELOW
- Best U.S. Ski Town To Invest In: Whitefish, Montana
- Kimberley Love
- 16% Price Increase; 0% Vacancy In Terrace
- Spotlight: Buying A Hotel. Winning When Multiple Bids Are Competing
- Edmonton’s Apartment Market Is Solid, Boring
- Calgary Realtors Too Cautious In Outlook?
- Financing Spotlight
- Springboard To Real Estate Action
- Best Mortgage Rate This Week
- Plots Of The Week
INTERNATIONAL: Watch For An Increase In Buyers From China
If you thought that investments from Mainland China were big over the past two years, get ready. According to China watchers, the big movement is now “outbound” and Chinese investments in other countries could be double this year what it was in 2013.
“A striking feature in the [Asian] market is likely to be a big increase in outbound capital investment by Asian investors,”
says Simon Lo, executive director of research and advisory, Asia, at Colliers International.
“They will be seeking to exploit the big differences between the property cycles in Asia and the US and Europe in order to achieve better yields and
enjoy the strategic benefits of diversification.”
“Chinese investors are set to lead the way in this trend. They are likely to spend at least twice as much on overseas property assets as last year.
Their favourite investment destinations will be gateway cities like London, New York and Chicago.”
Major Point: We see Vancouver as a gateway city as well that will continue to see strong Asian investments this year. Toronto is selected most often as No.2 with the
balance going to Calgary. Watch for action in the hotel market, prime office buildings in downtown Vancouver and, potentially, a major mixed use complex
with retail and residential. There is less competition from REITS, opening the field for offshore investors.
Best U.S. Ski Town To Invest In: Whitefish, Montana
(www.realtytrac.com), the leading online marketplace for foreclosure properties, has picked the best ski resort towns in the U.S. for real estate
investing, which ranks towns with high-quality ski resorts based on the health of the local housing market and opportunity to acquire profitable investment
homes. The resort town had to have at least 2,500 people and the local hill had to be ranked in the top 50 ski resorts for “awesome skiing
” by ZRankings (published in Forbes magazine). The towns were also rated by distance from closest airport, unemployment
rate, median list price of a residential property, foreclosure inventory per cent of all housing units, rental vacancy rate, gross yield on a rental
property, 2013 foreclosure rate, and per cent change in foreclosure rate from 2010.
Whitefish, Mont., led the way thanks to No.1 rankings for three of the eight real estate-related factors. It had:
- the lowest median list price of any of the 19 towns,
- the lowest rental vacancy rate, and
- the biggest drop in foreclosure rate between the peak foreclosure year of 2010 and 2013.
The median house price in Whitefish is $249,700, according to RealtyTrac. (Whitefish is also just south of Calgary, which makes it an attractive investment
for Canadians.) There is also a huge lake in the Whitefish area, providing that important second leg (golf).
Joining the top 5 are: Vail, Colorado (Vail Ski Resort), with a median house price of $626,100; Truckee, California
(Squaw Valley), with a median house price of $379,500; Avon, Colorado (Beaver Creek Ski Resort) at $459,658; and Jackson
Wyoming (Jackson Hole Ski Resort), where the median house price is $647,042.
CANADA: Kimberley Love
You know I like this quirky place. Some investors have done extremely well here from 2004 (when we recommended it first) to 2010. However, after the
international financial collapse in 2008/2009 it – together with hundreds of resorts – never recovered fully – yet. Foreclosures abound in snow country.
However, there will always be a bottom. I think that bottom maybe in place this year. Once foreclosures come out of the market, the market will stabilize.
In the meantime there are some spectacular deals to be had here. A crazy thing: Foreclosures are often dealt with in Nelson! I think that does not bode
well for the foreclosed owners. If the locals can’t get to court to bid … some insider will always steal them!
Major point: Why Kimberley? Skiing!
16% Price Increase; 0% Vacancy In Terrace
We recommended Terrace last year and also this year. Terrace continues to be a good, stable bet for real estate investors seeking opportunities in North
West B.C. The towns of Kitimat and Prince Rupert are getting much of the attention because that is where most of the LNG jobs will be created. But much of
the money earned will likely be spent in Terrace, which is the service hub for the region, being about half an hour from Kitimat and an hour from Prince
Terrace’s residential rental vacancy has decreased to a near zero and there has been a big increase in retail outlets, including big boxes like Walmart and Canadian Tire, said Jason Pender and Aaron Abrahamson, who are active
investors in the North West. Vancouver-based Bosa has bought and improved the local shopping mall and Tim Hortons is already in town.
Terrace realtor Shannon McAllister owner/broker of Terrace Real Estate Company Ltd. (www.terracerealestatecompany.com) filled us in on what is happening as of the end of December 2013. McAllister notes that the
average Terrace house price has increased 16% in the past year, to $251,477, up about $35,000 on the year. Housing sales, at 219 in 2013, are well up from
the 190 a year earlier. Meanwhile, the number of listings has fallen, with just 256 houses on the market as of year-end. It now takes an average of 57 days
to sell a property, down from 66 days in 2012. “Terrace now has a lack of inventory,” McAllister said “it is a sellers’ market.”
She adds that a lot workers and investors are coming into town.
Major Point: An example of a potential investment in Terrace: 11 condos for sale
in the same building, with two bedroom units offered from $80,000 each. MLS N230552. “You can buy one or buy them all,” MCallister said.
Spotlight: Buying A Hotel. Winning When Multiple Bids Are Competing
Tips on winning when competing in a multiple-bid environment – outlined here for the suddenly hot hotel market – can be effective in any overheated
marketplace, including apartment markets.
Canada’s national hotel property sales topped a record $2 billion in 2013. The sale of the Westin chain (including Vancouver’s Bayshore)
in a $758 million deal was the deal of the year, but analysts say 2014 could be a time for hotel vendors to cash out. There has been an increase in foreign
investment (the Westin purchase included Middle East buyers, for instance) as tourism from China is expected to soar, especially in B.C.
“Many buyers have been seeking deals in secondary, tertiary, or even smaller markets,” notes William G, Sipple (303-512-1226 or
firstname.lastname@example.org) who wields the investment arm of HVS International, one of the world’s largest hotel industry consultants.
“Competition remains strong for almost any type of hotel with a decent location, a productive existing brand or attractive rebranding options, and good
Sipple, in fact, believes such hotel properties could face multiple bids this year. HVS deals on the world stage, but we expect the B.C.,
Alberta and Saskatchewan hotel markets to show strength this year, with most of the action on the Prairies.
So, short of making a high bid, what are some ways to get your offer for a hotel accepted in a multiple bid situation? Here are Sipple’s main tips:
- Be prepared to defend your offer
– The owner has the benefit of reviewing and comparing a number of offers. This allows them to spot offers that seem to lack logical sense. While
there may be good reasons for a particular pricing, offers that do not allow for adequate returns are suspect and may indicate that a re-trade is
forthcoming. Be ready to explain how your investment strategy supports your pricing and structure, and do this in your initial offer.
- Respect the process
– If the seller is running a formal process, it is a low-percentage play to try to circumvent it by making a preemptive bid. Usually, you end up
being a ‘stalking horse’ bid for other buyers. While many buyers would like to remove the “competition” from the competitive
process, sellers will not know if they are getting a reasonable price without letting the sale run its course.
- Minimize the number of contingencies
– I have a saying, “a confused mind always says no.” This is particularly true when reviewing multiple offers on a property. The more
moving pieces associated with your bid, the more likely the seller will look to other less complicated offers.
- Be sensitive to the timing
– Time kills all deals. The more time requested, the higher the execution risk. Most accepted offers in today’s market do not have a financing
contingency and typically have 30 to 45 day due diligence periods, with an additional 15 to 30 days to close. Buyers that need time to assemble
equity capital, or arrange financing will be at a real disadvantage in the bidding process.
- If you have a good transaction track record, flaunt it
– Sellers want to know that the buyer has experience in transacting at the agreed-upon price and within the agreed-upon time frame. Make sure the
broker is aware of previous smooth purchases that demonstrate your competence and an absence of a “re-trade mentality.”
- For the best and final round, bid as high as possible
– There are no second chances in best-and-final scenarios. Sometimes, the difference between a winning and losing bid is minimal. Buyers should
decide on the last dollar at which they will feel good about entering into a deal, and beyond, which they won’t kick themselves later for having
lost the property.
In life you do not get what you deserve. You get what you negotiate. A rule of thumb: As we teach in our investment courses … The person that shows the
least interest has the most control. So, it depends on how much you are prepared to say: “So what? Next!” and let the other side know it.
Edmonton’s Apartment Market Is Solid, Boring
We have long recommended Edmonton for a landlord investment and the evidence remains pretty compelling: but note that prices for rental apartments are
rising; there are a lot of new rentals being built and the inflow of workers may slow this year. Edmonton, therefore, offers stability but lacks the quick flip profits possible over the past two years. In a word: boring. But we all know that can be a good thing for the
In 2013, Edmonton welcomed 58,000 newcomers according to the Conference Board of Canada, with 66 per cent coming in as immigrants and the
rest from across Canada, likely seeking better-paying jobs. The outlook is, that net migration to Edmonton will first drop to around 35,000 this year and
next there will be better job creation in other Canadian cities that will draw workers away from Alberta’s capital.
Still, Edmonton’s rental vacancy is a tight 1.2% and average rents are more than $1,060 per month. Apartment buildings are selling now for around $137,000
per door: this is up modestly ($1,000) from 2012. (Note that the average price for small, walk-up apartment buildings is closer to $115,000 per door.) Cap
rates are also at all-time lows (though they are higher than in Vancouver or Calgary) and are averaging 5%, according to CBRE Commercial, Edmonton.
CBRE notes that, with 3,491 purpose-built rental apartments under construction and another 2,000 proposed (plus a lot of condos under construction)
Edmonton’s landlord market might be more challenging this year for investors.
Relatively low apartment prices, high incomes and a low vacancy rate keep Edmonton among the top long-term landlord markets in Canada. It is also our pick
for great cash flow.
Calgary Realtors Too Cautious In Outlook?
Calgary MLS sales are forecast to rise by 3.6% with prices going up by 4.28% this year, says the Calgary Real Estate Board, in its annual
forecast released this week. The board sees overall city sales climbing to 24,335 units in 2014 and the benchmark price rising to $418,162. It said new
listings will increase by 1.7% to 32,703 units. The forecast says single-family home sales would rise by 2.4% to 16,693 with the benchmark price up by 3.8%
We think the price forecast is too modest. We expect Calgary MLS prices to increase by about 6% this year, with detached house prices increasing 8% due to
more new and more expensive new homes coming onto both the condominium and detached market.
By Kyle Green
Deciding on Variable vs Fixed: Looking at the numbers
With fixed rates much higher than their all-time lows and variable rate discounts getting better, many of our clients have been strongly considering a
variable rate. Over the past 18 months we have seen many 4 and 5 year fixed terms at or below 3%, but are now 3.39% with most lenders. Currently variable
rates are available at Prime – .4% (2.6%) with most lenders ,but can be as low as Prime – .55% (2.45%) for certain circumstances and terms. When fixed rate
terms were much closer to the net variable rate during the summer of 2013, most clients opted for the lower-risk option and went with a 5 year fixed rate.
That said, there are many factors that should be reviewed before making a decision. Making sure you have gone over these prior to jumping into something is
Stephen Poloz, the Governor of the Bank of Canada
has stated that they expect they will not be approaching inflation and growth targets until well into 2015 (4th Quarter), and subsequently most
economists and analysts predict the next rate increase to occur “well into 2016”. So it seems likely that the Prime rate may not change
for about 1.5 – 2 years (possibly longer).
The US FED has advised that they will begin tapering their bond purchasing program, which is a way of keeping borrowing rates low (fixed
rates are 98% correlated to bond yields). We could then expect fixed rates to increase. There is growing sentiment however that if tapering occurs, North
American markets may hurt more than expected and softer growth may occur. It would be reasonable to expect that bond yields (and therefore fixed rates)
could increase when tapering takes effect, but may drop after if markets soften.
It is never wise to put yourself in a position where your mortgage could become unaffordable. I like to say: “The only way to lose in real estate long-term is to be forced to sell”. Rising mortgage payments by being in a variable rate could put you in
that kind of situation. Make sure you analyze your budget and make sure you “stress-test” your mortgage payments, by seeing what the
payments would be at 5% or higher.
There are a number of other reasons to consider:
Reasons to go short term (- 4 years fixed, or variable):
– You might be selling the property before a longer term would expire
You think that interest rates will drop or stay the same
You really want a variable rate but aren’t happy with the current variable rate discounts (currently best variable is Prime – .55% which is 2.45%) and
believe they will get better (to Prime -.75% or better as it has been in the past)
You only need to borrow the funds for a short period of time
You may be coming into a windfall like an inheritance in the near future
If an investment property, it will still cash flow even if rates rise significantly
Variable rates have traditionally out-performed fixed rates
You are a risk taker
You want to be more flexible than the typical 15% – 20% you are allowed to pre-pay on your mortgage balance
Reasons to go long term (4+ years fixed):
– You expect to be keeping the property for an extended period of time
You want to protect the cash flow of an investment for an extended period of time. The average home price in Canada has historically always been higher
over a 10-year period since the 1950s, so guaranteeing the cash flow can nearly guarantee the returns
After 5 years of being in a fixed rate in Canada the maximum penalty is a 3 month interest penalty, so you can break it inexpensively
You believe rates will rise during the term
You will lose sleep if mortgage rates move up
You are not a risk taker
Running the numbers
One of the toughest parts about comparing a variable rate to a fixed rate over an extended period of time is predicting the changes to the Prime rate.
However, what we can do is look at how much the prime rate would have to change for the fixed rate to outperform the variable rate. With this information,
we can make a decision as to whether or not we feel that the Prime rate will increase more (and more quickly) or less than the figures used.
We just ran a scenario for a client who was looking for advice on whether to take a variable rate or a fixed rate for his renewal on his $575,000 mortgage.
Under the assumption that the Prime rate would remain at 3% for 2 years, the Prime rate would have to increase 12 times over the remainder of the term, or
once every 2.5 months for the variable rate to cost as much in interest as the fixed rate. With this knowledge, the client decided to go with the fixed
rate as they believed that they felt more comfortable with the security of having a fixed rate. Some of our clients will choose variable given the same
numbers, so everyone is different. What would you choose?”
Kyle Green is a top mortgage broker with Mortgage Alliance Meridian Mortgage Services Inc. You can reach him at Toll Free: 1-888-531-8890 or Kyle Green
BEST MORTGAGE RATE THIS WEEK:
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2. PARKSVILLE, 3 mobile homes (plus 2 10×10
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$283,000. Price: $270,000;
3. Sechelt: 3,800 sq. feet home on 1.25 acre lot on highly desirable RedRoofs rd. Only 10
yrs. young. Price: $699,000;
4. OAK BAY’S CHEAPEST CONDO, 788 sq. ft – is assessed at $180,500 (2014) down from $242,800 in 2013. Price:
There is no charge and there are no warranties. You must do your own diligence … please read the disclaimer. Contact info is on YOUR password
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Springboard To Real Estate Action
You are Personally Invited As My Guest to Attend
“SPRINGBOARD TO REAL ESTATE ACTION”
An Exclusive Workshop presented by Ralph Case
on Where and How to Buy in 2014 for Huge Profits!
Dear Friends of Jurock Real Estate Insider,
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a new workshop called “SPRINGBOARD TO REAL ESTATE ACTION” An
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This knowledge is essential to your real estate success, whether you
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Ralph will be holding 1 pm and 7:30 pm Workshops from Monday, January
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All the best in 2014!!!
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