In the Press

Closer to home better for investors

Ozzie Jurock

Calgary Herald
Saturday, August 19, 2006

Where should you look to buy investment property? The short answer is: the closer to home, the better.

Having said that, now let’s talk about making some compromises.

The farther you go away, the more time and money it’s going to take to manage your investment. If you are just starting out, your investment should be within three hours’ travel time from your home.

Naturally, that’s three hours by car. Three hours in a 747 will allow you to live in Los Angeles and invest in Chicago.

Anything more than three hours by car means you have to climb on a plane, and then it doesn’t matter where the property is.

Anytime you visit your property, it’s going to be a three-day exercise.

If you’re a bigger player, or if you’ve got relatively deep pockets, then you can cast a wider net.

After all, if you’re buying a 100-unit apartment building for $10 million, the last thing you’re going to worry about is the price of a plane ticket.

If you do have to go wandering far from your home base, here’s what you need to consider:

• Price: On a comparative basis, you want to be getting the best bang for the investment buck.

• Cash flow: Your property purchase must be the best thing you can do with your money in terms of cash return. At the very least, you’ve got to acquire it at a price and at terms that will make it self-supporting.

• Growth: The area has to be growing. People have to be moving in — either because it’s such a wonderful place to live that everybody wants to be there, or because industry is growing and creating jobs so that even though it’s not paradise on earth, people want to live there because they can get a paycheque.

• Diverse economic base: You don’t want to be in a single industry town. You want to be some place where even if one of the big employers leaves town, it’s not the end of the world.

Just remember that statistics are footprints, history in the form of numbers.

You have to keep watching them because when they change, the first person to notice the change has the advantage when it comes to buying or selling.

Humourist Will Rogers said that making money in real estate is simple.

All you have to do is go to where people are going to go before they go there and buy the land so that when they get there, you can sell it to them.

That, by the way, is only half of his advice. The other half is: “If the people are not going to come, then don’t buy the land.”

Whether you’re roaming far from your home base or investing next door, there are three segments to your investment: the purchase, the management through the holding period and the eventual sale.

Management is the critical factor because it has the most controllable variables.

If the property is next door, you can manage it yourself. If the property is halfway across the country, then you’re going to have to hire someone to manage it for you.

This should be arranged before you buy the property. If you can’t find a good manager, don’t buy.

Most people live where they do for reasons other than real estate investment.

However, if you are a full-time real estate investor (especially in the smaller properties) there is no reason why, if one city is better than another, that you shouldn’t move there and enjoy the benefits of being close to your investments.

This will be especially true if you are “flipping” or “sharking.” Then, the short time strophes inherent in these kind of activities will work in your favour.

It’s virtually impossible to do short-term transactions from a distance. One thing that has changed the real estate investment scene is the use of the Internet as an exploratory tool.

You can use the Internet to help pinpoint potentially profitable areas and identify buyer trends. But don’t let the romance of far-off places make you careless.

The Wall Street Journal recently published a survey listing the most corrupt countries in which to do business.

Here’s a sampling from this list, starting with the most corrupt: Nigeria, Pakistan, Kenya, Bangladesh, China, Cameroon, Venezuela, Russia, India and Indonesia.

Suffice it to say that, for the most part, you are better off to put a pin in the map where you live now, tie a pencil on a string to the pin and draw a circle on the map at a distance of a three-hour drive by car.

That’s your best playing field for investing in real estate. Inside that circle, you should be able to keep yourself as busy as you want to be and, given enough time, make yourself as rich as you want to be.