As a Canadian-based real estate investor, the question of whether to invest in the Canadian housing market is a significant one. Right now, the U.S. housing market is a goldmine of opportunity. The Canadian housing market? Not so much. Recent reports on Canadian real estate indicate warning signs of a potential dip in housing markets, while others are predicting a full-on crash.
My opinion? The cyclical nature of real estate dictates a market correction in Canada – soon. If you are interested in real estate investments, U.S. housing is much more lucrative. The process is not THAT difficult, but you just need to prepare properly.
As the year winds down, it’s a good time to take account for your extra-financial activity and do the math. I like to look over my time and my returns and make sure that next year is bigger, better and wiser. If you notice that you may be facing increasing debt or just don’t have enough income, U.S. real estate may well be the investment you’ve been waiting for, the returns are sure to give your finances padding to safeguard you from the volatility of economic conditions.
In spirit of the upcoming New Year, here’s a short list of factors to consider for your U.S. real estate investments.
1. Location, Location, Location
The U.S. is a big place. You need to make sure you are actually getting a good investment. It’s smart to take a look at U.S. national information and see if there is job and population growth in the region you are looking at. You want to be sure that there is actually a demand for housing so you can benefit from home value appreciation and rental income. In general, the Florida real estate and Arizona property tends to be a favoured Canadian destination (sunshine!), but again, you need to delve into local factors.
2. Market Research
There are a lot of demographic information available online but one of the fastest ways to asses a potential market is the job market. You can find a lot of information using local chamber of congress sites and determine the type of property that is marketable within a particular U.S. region. For example, is the market growing because of students, families, retirement homes – determine the market demand and buy a property that you know will be sought-out.
3. Peripheral Vision
It’s a REALLY smart idea to ‘follow the money’. Whether you are buying property near A-class Hedge fund acquisitions or nearby a local fortune 500 company, these type of organizations usually generate job and population growth and exert a great deal of effort to assess a market.
The U.S. housing market is not exactly a secret opportunity at this point, there’s a lot of competition for undervalued properties across the country. As a real estate investor, it may be wise to set up a business platform for investments and make strategic presentations. You have to consider how you will arrange financing opportunities and consider what you can offer potential investors or hard money lenders. The good news is, with the numbers right now, your deals should be able to offer excellent interest rates…try to stick to renewable terms with annual pay outs.
As a smaller investor, you want to focus on repositioning undervalued property. This allows you to create as much equity as possible. For instance, you can refinance the property within the first year and leverage any equity increase for another deal…and another and another…you get the idea. To accomplish this, you need to get at least one contractors estimate on the time frame and expenses for the property. You want to perform renovations that cost in the ballpark of $25,000 and can be done within a reasonable time frame.
I’ve been in U.S. real estate for about 6 years now and I can promise you that it can be an amazingly simple and extremely lucrative opportunity – but if you don’t know what you’re doing you will make expensive mistakes. At least, I did at first. Learning from doing can be a great teacher, but it can also be expensive. It is wise to shell out the cash for consultation and guidance than to create a money-pit. Save yourself the hassle and seek out support and guidance from experience to ensure your investment makes money.
Real estate is an incredible opportunity for anyone who is creative and business savvy because there are always opportunities to boost your profits on a deal. The trick is to stay open to possibilities. The right strategy on one property won’t necessarily work on another – you have to roll with the punches and be ready to react to changing circumstances. One minute you’ll be crunching numbers and the next you’ll be marketing and at the end of it all, you’ll make more money for your time than in any other industry. That’s what I call gratifying work.