Old news, but important news

It is now going to get harder to buy your first home. The government has recently decided that lending rules must get tighter, so that when, not if, interest rates go up, we will not have a real estate crash similar to something that occurred in the US recently. I think it's a solid proactive move that will help the Canadian economy in the future.

The new qualifications are based on a 5 year fixed term mortgage. In the past, the lending rules were more lenient in that a person would be able to qualify for a mortgage with something less than the 5 year fixed term standard. When interest rates have been at a historic low, this is not an issue. This only becomes an issue when interest rates begin to go up, and that is the only way for them to go.

Some people in the real estate business may not like this news. It means that there might be a few less buyers out there for some properties. The extra buyers are not worth the risk that this presents to our economy. First, there is currently an inventory shortage in many cities across Canada, leading to historically high home prices as there are more buyers than sellers. Thus, I don't expect that this rule change will alter home prices all that much. This can be good news. It means that homes remain affordable.

The second issue is the fact that those who will face trouble when interest rates go up will be fewer in numbers. This means less people liquidating their properties in a mad rush. This will keep home prices stable when interest rates do eventually go up.

A Great Start to 2010 for Ottawa’s Housing Market

From the Ottawa Real Estate Board

""Members of the Ottawa Real Estate Board sold 713 residential properties in January through the Board’s Multiple Listing Service® system compared with 529 in January 2009, an increase of 34.8 per cent.

Of those sales, 156 were in the condominium property class, while 557 were in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, stacked etc.) which is registered as a condominium, as well as properties which are co-operatives, life leases and timeshares. The residential property class includes all other residential properties.

“These numbers are more in line with what we might expect for a typical January, whereas 2009 started off abnormally slow due to uncertain financial and market conditions worldwide,” said Board President Pierre de Varennes. “Although listing inventory remains low, we expect that will change as we head into the spring market and interest rates remain low,” he added.

The average sale price of residential properties, including condominiums, sold in January in the Ottawa area was $320,966, an increase of 11.4 per cent over January 2009. The average sale price for a condominium-class property was $259,273, an increase of 22.5 per cent over January 2009. The average sale price of a residential-class property was $338,244, an increase of 8.2 per cent over January 2009. The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average sale price is calculated based on the total dollar volume of all properties sold."

“A Great Start to 2010 for Ottawa's Housing Market”. http://www.ottawarealestate.org/news_release.shtml (9 February, 2010)

Groundhog day!

This may sound strange, but "groundhog day" is one of my favourite movies. Each year, I try to watch some TV rerun, so I can enjoy it. In a way, it reminds me to keep things fresh. I don't want to ever live the same day, over, and over, and over again. I think it's a lesson that we sometimes need to be reminded of when we are stuck in the 9 to 5 rat race. There are little things you can do each day to make each day special.

Anyways, that's enough for my emotional reflection of an old movie. I want to talk some real estate.

I think today, if you've been thinking about moving, is a great day to start to plan it. It's still a little cold to move, but there is a lot of planning that needs to be considered. You might want to take advantage of making an RRSP contribution before the March 1 deadline. Under the home buyer's plan, this can significantly influence whether or not you are able to buy this year or next. It's important to start to ask the questions now.

The next thing is that interest rates are still at historically low levels. Why not take advantage of that if you can? Home-ownership will only likely be more expensive in the future with any rise in the prime rate.

If you are looking at moving in the spring, you should find out how much prices are going up now. Inventory of homes in certain areas is low, it may be a hard time to find something to buy without the proper strategy. You should contact me to know whether or not it is a good time for you to sell your property. There are many, many things to consider.

Again, I remind everyone to continue to try to get some referrals for me. Whether or not you are interested in a condo, investment property, single-family home, new, old, or you are just curious about real estate, let's talk! Real estate is an interesting business, and you should know some of the basic ins and outs. For most people, it is the single largest investment that they make in their lives. You should work with a professional.

"The Millionaire Real Estate Investor"

Hey everyone, I apologize for the time between posts, but things have been quite hectic. I have a few things on the go right now and the blog has just taken a back seat.

I had previously mentioned that I read 3 real estate related books on my Californian crusade. The only book I haven't discussed yet is "The Millionaire Real Estate Investor". I should start by mentioning that I picked up this book probably for one reason. This book was written by Gary Keller. He is the "Keller" of Keller Williams. Since I work for them, I figured I should know what people are talking about when they talk about his book.

I would describe this book as an instructional book. It gives pretty clear advice on how to spend your time and energy when it comes to real estate investing. Gary Keller tries to make things as systematic as possible. He wants people to use resources that exist to them that help to save on your most precious resource, your time.

Generally, I don't think I would give this book to someone that is looking at getting into real estate investing for the first time. To me, it is not written in a spirit that is all that inspirational unless you can visualize the product of your efforts. Since you don't quite know how involved you need to be, I cannot foresee how you can visualize the end result. I found that rich dad, poor dad, was more inspirational than instructional, and I think that is critical for someone who needs to take the plunge into real estate.

If you have already bought a property or you have an incredible need to do more research before you buy, I would recommend this book. Again, this is an American book, so some of the strategies may not work in Canada. This is especially true considering the time that the book was written. The book pre-dates the housing bubble that had burst during the housing crisis. My advice to you is that you do your due diligence before acting upon what you read.

Rich dad, Poor Dad

This is another book that I read while I was in transit to San Jose. This is probably the easiest of the 3 reads as the book is pretty fluent. I thought it was also the best read for an investor starting out for the first time.

The reason I chose this to be the first book for an investor (of the three I read on the trip) is because it talks about some fundamental principals about money. Being an accountant, I have some finance background that certainly aids me in my financial endeavors. When I am talking about fundamentals about money, I am talking about some of the myths associated with home ownership. Specifically, I am talking about thinking of a house as an asset.

In accounting, an asset is something that is purchased to generate income. A typical owner-occupied home does not generate income, however, this concept delivers an important lesson about money. If you can somehow generate an income or at least reduce your monthly payments, you can generate an opportunity to make more money, making your money work for you instead of you working for money.

The book goes into detail about how people move into bigger and bigger homes when their salaries go up and up. The problem becomes that people don't really get further ahead because they carry larger mortgages as a result. In that sense, you fall into the rat race. The book starts to go into detail about how to get out of the rat race. By the end of the book, the tips become more advanced (and more American), so these points may not be advantageous for the person just starting out. I like to think that this book can convince people to think of real estate when thinking about their investments.

The reason I am stressing this point is because I think our education system is somewhat flawed. I remember in multiple math classes learning about trigonometry and wondering when the hell I would use this info. After university, I still think that trig is somewhat useless for the average person. I'm not saying that trig should be removed from the curriculum, but I think money should be added.

How many people get themselves into deep credit card debts? How many people have trouble with student loans? There are people that don't understand basic concepts about money and I think a more concerted effort should be taken in our schools to help kids understand how to use money properly and effectively. It can be the largest lesson a kid could learn. Anyways, it's just my two cents.

97 Tips for Canadian Real Estate investors

When I was on my trip to San Jose, I picked a few books to read while on the road. I figured I could do a little more research and share some of the advice from those books. The first book I read was called "97 Tips for Canadian Real Estate Investors" by Don R. Campbell.

The best part of this book is the fact that it is a Canadian book. The tips and advice that are offered in this book relate to many things, but it is nice to know that things such as tax advice are applicable in Canada, and not necessarily worldwide. I've noticed in the other books I have read that not all the tips necessarily work.

As an example, in some American books, there is a special rollover available to real estate investors that allows them to increase their investment in real estate without necessarily incurring a taxable event. I think this should serve as a lesson about any real estate book that you pick up. The advice and tips that are available may not work for you for a variety of reasons. However, you should learn about the possibilities and do the research necessary to ensure you are making the right decision.

The reason I am making this point is that, when I bought a different book, I was asked some questions by the person who recommended the book. It was a tax question, and being a CA, I questioned the tax advice that he had learned about. After reading the book, I realized where he got his misinformation. Although the information in the book was true, it does not apply to Canadian property at this point in time. Canadians have a different set of rules. You should contact a tax specialist to learn more.

Back to the book.

I thought that this book was a pretty advanced book. For the novice investor, I would say that if this was the first book you read, be sure to pick it up once you've gained more experience. There is a lot of content in this book and you won't be able to take it all in at once. It's also a very fragmented read. You might want to have this book in the bathroom, so you can read it in bursts. I don't find it easy to read from beginning to end. It's too scattered in the thought process.

The thing I do like about this book is that it can act as a good reference guide down the road. The advanced tips will be there to quickly read, so that you can move quickly on any investment decisions. It's like picking up a bible for some quick guidance, except this is for real estate. Therefore, if you are just thinking about getting into real estate, I might recommend a different book. If you are a novice investor, I would highly recommend for you to pick up this book if you are involved in real estate in Canada.