The sky is obviously falling – every paper is filled with doom and gloom headlines! Job cuts, house prices falling, and the increase in foreclosures. And the blogging world is full of doom and gloom for the real estate market.
But, is the sky falling? And more importantly – does it REALLY matter? I’m not going to argue that there hasn’t been a weakening. And, while I am still young, I am not foolish enough to say that we aren’t in for some tougher times. I agree that the market has turned into a Buyer’s market and that you should be more cautious about buying any real estate right now.
BUT – I also feel this is the time to start window shopping. As investors, now is the time to begin to more closely watch the market, and in particular, focus on a location or two to really spend your time getting to know. What’s going to emerge in the next up swing of the cycle as THE place to live?
What can you do now, to be ready to pounce on good deals in a year or two? Start doing your research:
- Follow the listings: How many listings are for sale in a price range you feel comfortable buying (or you can afford)? For example, if I like what the plans are for development or changes in James Bay area of Victoria, B.C. and I feel it would be a good area to invest in at some point I will start tracking the listings (and sales figures if you can get them) for that area. In August of 2008, maybe there are 250 properties listed for sale in the $300,000 to $350,000 range that I can potentially afford. In another few months, I will check the listings again, using the same search criteria. When you start to notice there are fewer new listings hitting the market and more sales are happening, then it’s time to make your move! I will also note down the addresses of certain properties that I am really interested in. You’d be surprised how often you’ll see the same house come up on MLS in a slow market. Sellers often take it off and put it back on repeatedly trying to keep the listing fresh looking (as the listing notes when it was posted on the site for sale).
- Track Rent Rates: While I am tracking this information, I would also track rent in those areas and on similar properties. Often in a declining property value market, rents stabilize and often increase as there are more people renting vs. buying. Thus, the supply and demand economics kick in. More renters equals more demand equals less supply (of rental units). This can often push rents up, thus making the properties potentially cashflow better (especially in a declining property value market).
- Evaluate your money and financing options: Finally, over the time I am researching the market and watching for deals, I am also looking at my down payment and financing options. How much money do I have for my down payment? What are the financing options I have? I do all this now to get ready for, potentially, a quick purchase when I see a great deal.
So, even if the sky is falling on the housing market in Canada, I’m not detered from real estate. In fact, I am getting ready for the shopping season. I am getting ready so I can spot properties in my target areas that have been on the market for 6-12 months and have had several price reductions. When the prices line up with rental rate changes I will be getting very serious about buying!
Real estate investing is simple but it’s not easy. It’s about patience and perserverance. And, it’s also about not about listening to the newspapers and, instead, doing your own research to make decisions based on the fundmentals of an area and of a property.
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