The Top 5 Things Real Estate Investors Should Know in Calgary 2023

Calgary, the largest city in the province of Alberta, Canada, has always been an attractive destination for real estate investors.

With a strong economy, a thriving job market, and a diverse range of investment opportunities, Calgary continues to be a hot spot for those looking to invest in real estate. As we enter the year 2023, there are several key factors that real estate investors should keep in mind when considering Calgary as their investment destination. In this article, we will discuss the top five things that real estate investors should know in Calgary for the year 2023.

  1. Diversification in Property Types: Calgary offers a wide range of property types, including residential, commercial, industrial, and retail. In 2023, real estate investors should consider diversifying their portfolios by exploring different property types. While the residential market remains strong, there are emerging opportunities in the commercial and industrial sectors due to the city’s economic growth.
  2. Focus on Transit-Oriented Development: As Calgary continues to grow, transit-oriented development (TOD) is becoming increasingly important. The city’s expanding public transportation network, including the C-Train system and bus routes, presents significant opportunities for real estate investors. Properties located near transit hubs and planned transit expansions are likely to experience higher demand and appreciation. Investors should closely monitor the city’s transit plans along the new green-line.
  3. Sustainable and Green Initiatives: In recent years, Calgary has placed a strong emphasis on sustainable and green initiatives. As environmental consciousness continues to grow, real estate investors should consider properties that align with these trends. Energy-efficient buildings, LEED certifications, and sustainable features can enhance the value of a property and attract environmentally conscious tenants. Many renovations are taking place in the downtown core on the c-class buildings to bring them up to these standards and reduce op-costs.
  4. Calgary’s Economic Diversification: Calgary has traditionally been known for its oil and gas industry. However, in recent years, the city has made significant strides in diversifying its economy. The technology, renewable energy, and aerospace sectors are experiencing rapid growth, bringing new investment opportunities. Real estate investors should consider properties located in areas that align with Calgary’s diversification efforts. Researching and understanding the key industries driving the city’s economy can help investors identify promising investment prospects.
  5. Rental Market Opportunities: Calgary’s rental market has experienced fluctuations in recent years, influenced by factors such as the oil industry downturn and the COVID-19 pandemic. However, the city’s rental market is now on FIRE in 2023, driven by population growth and increased job opportunities. Real estate investors should carefully analyze rental market trends, vacancy rates (currently near ZERO), and rental demand when considering investment properties.

Calgary offers a plethora of opportunities for real estate investors in 2023. By diversifying property types, focusing on transit-oriented development, embracing sustainable initiatives, considering Calgary’s economic diversification, and analyzing the rental market, investors can position themselves for success. As with any investment, thorough research, staying informed about local market conditions, and working with experienced professionals will be key to making informed decisions. Calgary’s real estate market is poised for growth, and by keeping these top five factors in mind, investors can navigate the market with confidence and capitalize on the city’s potential.

How is the Real Estate Market? That is the wrong question to ask.

I get asked all the time get asked all the time by clients, prospects, investors, other agents even what the real estate market is like. The answer always starts the same… (I did not even really consider the habitual way I answer this question and thus the inspiration for this post!)

That answer is “well, real estate is a cycle – it goes up and down and has a top/middle/bottom and in Alberta due the energy sector economy that cycle is typically 7-10 years in Alberta.

A better question might be, where are we at in the real estate cycle? Where do the fundamentals indicate where it might go next? Now, we can only ever have access to so much data from real estate boards, stats can, local media. I do not have a crystal ball, never profess to have owned one in fact – however I can and do speak on what the economic, behavioral, and most importantly the “in the trenches” intel that only those active in the industry are privy to. (those actively investing, renovating, renting real estate in a given market)

The stats year over year, and even month to month sometimes can be a bit deceiving – for example interest rates have dramatically changed in Canada which sort of makes comparing the 2 market conditions a bit silly…but we have to go with something and the public has a short memory so a 12 month period is normally used.

While interest rates do play a role in pricing, because more than 80% of buyers are getting mortgages – the demand side of this equation is not really driven by interest rates. Demand is driven by population growth/decline and that in turn is driven by the availability of mid-high paying jobs in the Market/Area in question.

The reason more people buy houses when money is cheap is that the people who wanted to buy a house can afford it in that current job market with a different “average wage” climate. Cost of labor and materials also drives prices as we have seen in markets like Ontario where developers can’t even complete the buildings due to costs rising over 50% in many categories.

Development does not support increases like that or the project will lose money, and the red tape that makes the process take so long is a post for another day. (I am looking at you government of all levels)

To your success,

Tim Reid

-Respect the Hustle

Calgary Market Update Spring 2022

Well despite the little snowstorm we had a week ago, spring looks like it may finally be here and the inventory is coming in with the warm weather.

Provincial health restrictions had been lifted and society is starting to get back out there into malls, retail, restaurants, and rental properties have picked up like crazy.

Not only do we help people buy, sell, invest in real estate we also are heavily involved in Calgary/area real estate investments including rental properties.

I have not seen this kind of rental demand in many years since back before the last correction in 2014 where there we bidding wars for rentals in Calgary! Indicators show we might be back there again soon if the vacancy rates and in-migration to Alberta continues at the current pace.

Single family home are the hot commodity at the moment with The detached benchmark price rose to $628,900 in April, which is 19 per cent higher than last year. Causing strong market conditions in this asset class.

All markets have picked up with the rising interest rate cost causing SOME buyers to re-think the total amount of mortgage they want to take on and buying smaller and different properties such as townhouses and condos.

Investment in Calgary real estate is now the target for a lot of out of town buyers from Expensive trophy markets such as Vancouver and Toronto where they have seen huge equity gains and they are looking for better ROI and cash flow which can still be found easily in Calgary by comparison. Why even bother with a 2% cap rate in Vancouver/Toronto for a dog house built in 1939?!? Crazy that non-developers will do these kind of things.

If you need help or have questions about the market or anything else in real estate Contact us today we are here to help!

To your success,

Tim Reid

-Respect the hustle

How To Flip Houses 101 Calgary Edition

When we get a lot of calls from investors looking to flip houses, often after watching TV shows or youtube gurus from other countries – there are a lot of harsh realities we have to hit them with. Now, a coaching company we always want to be motivational as possible while also giving customers the straight goods on what the business model actually looks like.

Firstly, the key is to get the property below market value. Yeah yeah we have all heard that before….well my point here is that below market value does have a range, who decides how low is good? I would suggest to you that it depends on your flip type.

We like to break flipping into 3 categories:

Level 1 – mostly cosmetic changes, appliances, trim, fixtures and some minor overhaul of bathroom components

Level 2 – some structural changes such as removing a wall to create an open concept or updating plumbing and electrical, and finishing a basement.

Level 3 – Fully gutting a house, adding additional square footage through additions/second levels, adding an ensuite, carriage houses, workshops.

These are all flips, but take very different levels of capital, experience, holding costs and require very different skill sets. Lastly, they are going to be sold to different end user market segments.

This factor is an often overlooked element of flipping, who is your buyer going to be? If that pool of buyers who will pay top dollar for the renovated product is small you may have longer holding costs and have to discount the price further for a quick sale.

So, first thing is the get the property below market – a good goal for that is to have 50-100% of your renovation cost discounted on the price, which is a good argument for value when speaking to sellers because those things need to be updated, fixed, or changed.

The second thing is to pick a scope of work and budget and stick within it -that also includes a time budget, if your project goes longer than expected that can break your deal or crush your profit margins. Having the work done on time is equally important to keeping it on budget, sometimes more important if you miss the busy season in your market where buyers are most active. (terrible time to sell is nov-jan especially in any cold climate areas)

Lastly, the flipping business model is about volume not so much about the margin per deal. If you are going to look at this like a business your job as investor is to get product, improve it, and sell it as fast as possible. One of the biggest mistakes I see new investors make is they get emotionally attached to both the property and it’s target profit – targets are just that something to aim at….you don’t always hit the bullseye but you keep shooting.

Keeping the property for sale at the wrong price will slow down the velocity of your flipping business, sell it fast for the best price you can get and get onto the next one. I am not saying sell at a loss, find a way to rent it or do a rent to own if the market turns against you. The business model is about doing a bunch of deals in a year, not waiting for the 100K profit deal that may never come, or if it does you might only do 1 deal that year, when you could have done 10 deals at 50k each which would be 500,000 – which would you rather have?

If you have questions about how to get into flipping houses in Calgary/other markets (the skills are the same) or how to expand your flipping business contact us to book a discovery call we are here to help.

To your success,

Tim Reid

-Respect the Hustle

Investors competing with retail home buyers?

WOW I just read an article which I think made a total BS comment on the housing market in Canada. Has the market been on a tear? Yes in many places it has, have prices risen artificially? You bet, but claim that they just made is ridiculous!

In this article that is from a source I shall not name, stated that prices in many areas are being driven up by investors competing with retail buyers in a lot of our Canadian Real Estate markets. It would seem vastly apparent that they do not invest in real estate themselves, or do not know many real investors that know what they are doing.

Warren buffet put it very well, buy low and sell high – that is pretty fundamental for any investment class, and his holding period is often VERY long also a great principle to live by in real estate or other asset classes.

Real estate is no different, you have to buy below market value to make money in real estate. Many make the mistake of getting excited and paying too much for something and they regret it. (yes we have as well – that is how you learn!)

One cannot expect to pay retail for a product and expect to re-sell or refinance down the line that same product and have consistent results. Now, there are some times you can get lucky and the market can take off and that asset (real estate) can rapidly appreciate….but that is simply LUCK and not a business model, you might as well go to the casino and put it all on black and hope for the best.

This same article wasn’t all bad however it did state that part of the housing pricing problem is supply VS demand – which I totally agree with BTW. This article cited city red tape in Vancouver as the example of slowing development approvals making it hard for developers to get anything done to meet the demand. There is a lot to be said for that issue in many Canadian cities.

In Calgary for example we have had planning policies that support urban sprawl and fight against density in the inner city for many years, that is SLOWLY changing which is a good sign for the aging inner city corridors.

I have never met an investor in over a decade in this game that would compete against a retail home buyer to get a property to rent, flip, or do a rent to own on that property – retail buyers looking to buy a home and live in it will always pay more than an investors looking for a ROI. If anything, the retail home buyer is competition for the investor!

What are you thoughts on the “housing crisis” which the media is currently taking and running with it?

Contact us to book a time to chat and let’s hear your thoughts.

To your success,

Tim Reid

-Respect The Hustle

3 Ways Investors Impact the Price of Real Estate

There have been some interesting articles floating around out there speculating in the material impact that investors have on the real estate market.

Often we hear a lot of noise in the media about foreign buyers driving up real estate markets like Vancouver and Toronto, but what about the last 18 months through the Covid19 pandemic? There was a massive reduction in immigration and foreign investment, so that would indicate a lot of that noise is just that…noise.

For example the BoC (bank of Canada) published stats that would see investors accounting for 20.1% of residential purchases in Canada. That may seem like a lot, but that centers only around residential properties. With having 80% still being purchased by retail home buyers, the impact of investors in this space would seem not that large.

What are the key impacts that Investors do have on pricing?

1. They pay cash or have 20% down and don’t have insured mortgages. — That means they do not pay too much for properties (over market value) or at least they don’t very often and certainly not with our guidance! Typically savvy investors will pay less than market value but at only 20% of the market volume this does not drag the average down significantly

2. Investors force appreciation – through renovations, adding suites, garages, so this does drive up the prices because they are adding value to the properties (example flipping houses) in a short period of time. This has the largest impact on pricing, which often occurs in older areas with naturally higher prices and infill activity in the inner city areas of most Canadian cities

3. Rental increases – while updating, adding value, and of course for rental purposes the goal of a cash flow investor is to maximize that as much as possible, then doing a re-finance to pull capital back out of properties also can have an impact on valuations on properties especially when it comes to commercial assets (6 units or more)

These are the key areas that Investors have a material impact on the stats IMHO. Also, I always like to point out that a lot of residential investors buy directly from home owners which are private sales – which do not get reported by the real estate boards and therefore do not show up in the statistics.

The regulators, banks, real estate boards and media have to work with the data sets that they are given – but this is not the whole picture.

If you would like to know more about how to have your own impact on the real estate market through investing in real estate without the hassles of day to day management Contact us today and let’s chat.

To your success,

Tim Reid

-Respect The Hustle

Want Cash Flowing Real Estate? Look to Alberta

It might seem like Alberta is a have-not province over the last few years with the energy sector down turn. When you look at other areas such as Toronto (the GTA – greater Toronto area) have seen gains in prices in areas soar as sales volume increases hit as high as 96% in central Toronto this is driving prices into almost un-rentable territory.

How can rent keep pace with that? Well quite simply it can’t not to support a mortgage with 80% Loan to value, forcing investors who want to operate in that market to put huge down payments equal or greater than commercial rates.

This has forced investors to look further and further out to the suburbs to find rental properties to get decent returns on investment. When you consider multi-family cap rates so low it does not even out pace inflation, you are only land-banking in essence which is a speculative game.

Eventually there can be a shift in interest rates that would bury all those properties bought at those rates, forcing even more cash to go into those assets to prevent massively negative cashflows.

More investors are looking for better cap rates and better cash flow in other markets. Due to the energy sector taking a hit over the last few years we have seen downward pressure on pricing in Alberta overall, but only a small downward pressure on rents.

Since there have been harsh rent controls in Ontario and BC these markets also have those forces working against rental property investors. Alberta has seen rental rate gains back to normalized rates at or above pre-covid19 levels

What this means for investors is that we have the opportunity for massive upside in appreciation, and also an older value-add potential for many older assets that have been allowed to accumulate deferred maintenance for years in Alberta.

Have you thought about rental property in other markets?

If you are considering Alberta locally or from abroad in Canada contact our team to book a discovery call, we are here to help with access to private deals/Vendor financing opportunities just to name a few!

To your success,

Tim Reid

-Respect The Hustle

Canadian Election Effect on Real Estate Market

WOW we have had a heck of a year and a half in the Global covid-19 pandemic, with governments having to put billions into the economy to support workers and businesses alike.

The Canadian election has been called, now I normally do not like to comment on politics often – however this election will be a real barn burner with the announced platforms of the different parties. Some of these proposed changes to tax law in Canada are HUGE for investors.

Our American friends have enjoyed one of the best tax advantages on earth for many years called the 1031 exchange. What the heck is that? This is a tax exemption that states if you sell an asset, for example an apartment building and have a 1,000,000 capital gain you would need to pay the tax on that normally if you put that cash in your bank account. However, if you buy a like for like asset within an approved amount of time then you defer the tax.

This is an incredible advantage to scale your business without having to incur the tax all the time. In Canada there has been a rental housing shortage for many years as developers focused on for sale product such as condos and single family homes.

Conservative government politicians have realized this is a problem, and making it a campaign issue. The solution they have proposed is for rental property owners who sell to re-invest in additional rental property and defer the capital gains just like the 1031 exchange!

This would be a game changer for Canadian real estate investors, and the renters that would benefit from more supply of better housing. Let’s face it our rental stock is very aged in a lot of cities in Canada with a lot of deferred maintenance. All that deferred maintenance is partly due to the fact that owners can’t sell and buy something larger or similar to extract that equity to perform the repairs – also rental controls which in my opinion also contribute negatively to this problem.

Look at New York’s history of rental control, which has basically forced landlords to not spend money on the buildings there because they are held hostage by rental policy. (that is a whole other post for another day!)

Financial services and investment industry what I like to call “retail investments” offered by banks and mutual fund companies could be shaken up as well. The feds are pushing for more transparency on fees that are charged to consumers when speaking about returns on products such as mutual funds, bonds, EFTS.

What impact would that have on real estate investing? Hard to call, however with a better informed consumer they may choose to look at different investments more often once they know the fixed costs of the alternatives.

Real Estate IMHO is one of the best ways to build wealth for multiple generations, which is 1 of the 3 pillars of wealth

  1. real estate
  2. stocks/bonds
  3. Business investments

They are all needed for a well rounded portfolio, and you have to be at least somewhat active in 1 of the 3 to really crush it. There is no such thing as a great return on investment that is totally passive – 100% passive does mean lower returns than being active, what you put in for effort you get back in higher ROI.

Investing in real estate does not need to be complex or difficult, if you are thinking about real estate investing book a discovery call with our team today to find out how to get started or grow your current investment in real estate.

To your success

Tim Reid

-Respect The Hustle

6 Big Mistakes Buyers Make

Today I wanted to provide a list of common mistakes that home buyers make and more importantly – what do do about them to make your home purchase in Calgary or any area as smooth as possible.

1. Not getting pre-approved for a mortgage before you go shopping. This means that you might lose out on a deal because the bank tells you that you are approved for 50k LESS than you need to buy your dream home

2. Buying too much house and winding up “house poor” winding up with payments that could become unmanageable after “life happens” events such as work hours being reduced or slow times in business can really cause a family a lot of stress if things get tight.

3. Not structuring your mortgage for both short term AND long term goals, being trapped in a mortgage due to a huge payout penalty is no fun at all. In fact, recently I had a client that HAD to keep their rental policy because of this problem.

4. Failing to learn about pre-payment penalties and how they work. What is the penalty if I sell in year 1 of 5 year terms? What is the difference between fixed or variable? Can I port the mortgage? These are all questions that should be asked.

5. Not asking if the mortgage is portable/assumable – not portable you have a penalty for sure, how much is that going to be? Could be 10’s of thousands of dollars if you are not careful.

6. Not working with a mortgage broker and only their bank – the bank wants to make money for their share holders, that is their primary goal. Mortgages are set up to protect the bank’s bottom line not YOURS.

There is a lot that goes into designing a mortgage, it is kind of like building a house from the ground up – there are a lot of things that can go wrong without the proper design/guidance along the way.

Ok great, so now we know what to watch out for…what do do about it?

Here are some solutions and things to think about”

1. ALWAYS get pre-approved when going to shop for a home, investment or to live in. This process involves the bank verifying and checking all your documents (credit score, income, expenses, assets, liabilities just to name a few)

Then they will give you a commitment letter that is an full approval to lend you X dollars with having Y down payment available. This also locks in your interest rate in case rates go up you will get the agreed rate for up to 6 months depending on the bank.

BONUS: this helps you negotiate stronger knowing your max price. Not saying you need to use the whole approval, and generally you shouldn’t to avoid the house poor issue.

2. Biting off more than we can chew is a common trait for North American residents overall. We often feel the need to “keep up with the joneses” and live above our means, in terms of cars, clothes, houses. Real estate is generally the most expensive thing that families will ever buy, so any financial advisor will tell you not to buy more house than you need for your current family dynamic.

When investing in real estate we only think about the numbers: will it cash flow? What is the repairs needed? What is the common expense ratio for this area? (more on these in another article to come) Think of your house as an investment even if you live there, that thing should cash flow if you ever moved out and rented it.

3. Speak to a mortgage broker (or call our team for advice) on how to set up your mortgage for success both today and tomorrow. There are many features of a mortgage to consider past the interest rate – which is all that most buyers think about after watching ads/seeing posters for 0.99% interest rates (there are many strings attached to those!)

4. Dreaded penalties for breaking the mortgage early – which is generally 5 years, but it does not have to be there are 1,2,3,5 year and even 10 year mortgage terms that you can get to suit your goals over the long term. Also lines of credit or HELOC for short that have 0 penalties to pay them off early, and blended mortgages which are a combination of the 2 that are ideal for flipping houses. Also, how many payments you make per month is up to you bi-weekly can save you tones of interest over the life of the mortgage. Talk to the broker about these items

5. Many mortgages are no longer assumable after the regulators changed the rules many years ago, some still are which could be a great option for a home buyer both investors in real estate and retail home buyers alike – you need to ask and confirm. Always ask for a mortgage to be portable, this can save you lots of money in penalties – better to have the option when you need it because it cannot be added to a mortgage after the fact.

6. Bankers work with the tools that they have, and their list might not give you everything that you need to build the mortgage ideal for you. Get a second opinion at the very least – if you were told today you had cancer and only 6 months to live wouldn’t you get a second opinion from another doctor? OF COURSE YOU WOULD! Do the same with your mortgage your making a 5 year deal on terms and a 25-30 year commitment with that bank, for pete’s sake get it right from the start

If you have any questions about real estate financing, private money, how to invest your RRSP’s in mortgages and play the same game the banks do – contact our team to book a discovery call.

To you success,

Tim Reid

-respect the hustle

Lessons to Learn from a 1.7B business failure

I have read the gory greek tragedy that became of quibi which was an app that raised troves of silicon valley cash before going under. The idea could have had legs, but it all came down to operations and lack of business systems that caused a lot of the grief. The team has to work together as is very well detailed in the book good to great by Jim Collins, not only do you need to get the right people on the bus but make sure they are all in the right seats – which in turn creates a cohesive team that will work together toward the common goal or vision for the company.

The lack of business systems and how important they are you can read more about in the article that inspired this post by rich dad Robert Kioysaki original via this link

What business systems in real estate do you feel are the most important or you might need help with? Contact us today to book a discovery call and let’s chat real estate.

To you success

Tim Reid

-Respect The Hustle.