experts: real estate column Friday, May 23, 2008

Flipper or Investor? Find Your Comfort Zone

We do love owning and buying real estate, we love to own and buy it in Canada. But - in any market - pick your real estate carefully. Go back to the basics.

By Ozzie Jurock

Yes, affordability is a real issue ... it takes 67 per cent of our income in Vancouver to buy the average priced property. Clearly and substantially out of whack. But supply and demand is in check, we have large inward migration, huge capital investment in the province and we live clearly in a (largely) unreported inflationary environment.

We do love owning and buying real estate, we love to own and buy it in Canada. But - in any market - pick your real estate carefully. Go back to the basics.

Understand yourself first.

Are you a flipper or an investor? It's all good but make sure that you understand what you are and what your expectations are.

If you are a flipper, you may still play very well in the downtown Vancouver/Edmonton/Calgary/Montreal or small town 'with future potential' markets. There's nothing wrong with being a flipper downtown. In fact, as a flipper you want to be playing where most people are located.

Also remember at this time: big price - big upside and big downside, when prices go against you. Low price, low upside, low downside.

We have seen flippers make $80,000 on a flip in a downtown condo (this year); we have also seen them lose an average of $46,000 (on 36 sales) in just one building at City Gate in 1997. Conversely, at the Lougheed Mall a 1-bedroom condo rose by $15,000 so far this year and in the worst year (1994) lost $7,000.

That is the thrill a flipper lives for -- fast cash. But don't fool yourself: A flipper is not an investor looking for safety first. Paying $800,000 for a condo downtown and renting it for $2,500 is not an investment, it's a gamble on a higher priced sale in the future. Flippers often get caught in downturns, you must be able to weather one, when it comes.

Generally, if you need cash flow now, if you wish to be an investor you are likely best off in suburbia or the smaller towns. Coquitlam, New Westminster, Surrey, Abbotsford or selected small towns with good population bases, good employment and a strong base of renters (like Kamloops or Nanaimo) are good bets. Now you are safe, whether prices rise or rents increase becomes irrelevant. It is a bonus. You have somebody paying for your property. Someone else is creating passive income for you - eventually.

The question of where to buy is always personal. Even in investment. Clearly, if you believe that all that exploration, all that gas and oil investment is going to continue, then buy in Fort St. John, Dawson Creek, Smithers or Terrace. If you believe that the new container port in Prince Rupert will be come a Superport, then Prince George and Edmonton are worth another look. For people that want to benefit from small town living, look at Nanaimo, Courtenay and Qualicum. In the Interior look at Vernon and Salmon Arm for recreation.

If you believe in recreation, look at Mt. Baldy, Look at Kimberley and Rossland. Look at Harrision Hot Springs, Pemberton, the Sunshine Coast, all of Vancouver Island, all of our islands with regular ferry traffic ... In that regard buy any waterfront anywhere if it is a good deal. (We have said this for 10 years!)

In the Lower Mainland, buy anything anywhere, but get a good deal. Even if you pay too much, you just will have bought it too soon. We are limited geographically, unlike Calgary or Edmonton where new suburbs can be created ad infinitum; Vancouver is bordered on three sides, mountain, sea and the U.S.

Speaking of the U.S. - look at Point Roberts, where you can still buy relatively inexpensive recreational property - but make sure you have good water.

Yes, these are troubled times, we also may be getting closer to the end of this particular cycle but long term we will be just fine.

To buy real estate in 2008 will feel as troublesome as it did in 1966 or 1975 or 1983 or 1988 or 1991 or 2001 when we had all these troubled events (stock crashes, crisis, troubles) the previous year. And aren't you happy you bought then?

For all the 38 years I have been in this business there are the same stories every year.

There are too many Realtors in the business.

No young couple can afford to buy anymore.

I wish I bought 5 years ago.

Every Year!

Published in the Vancouver Sun on Thursday, April 03, 2008




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