When Investing in Real Estate You Only Know What You Know

When Investing in Real Estate You Only Know What You Know

When you hear somebody say that he or she is a legend in their field, software billionaire, Bill Gates, may come to mind. Hockey legends are Gretkzy, Howe, and Orr, and music legends are Elvis, Michael Jackson, Mozart, and Sinatra, just to name a few. But what about Paul McCartney, one of the four members of the Beetles? The Beetles sold more recordings all time—more than any other artist ever. McCartney and his fellow band members changed the world of music forever and most music critics would argue that they are the greatest band that has ever existed. Their first hit song was in 1962 and by 1964 they had become international stars. Fast forward to 2015… McCartney now has 50 years as being one of the most influential artists of all times; yet when Kanye West, a legend in the Hip Hop music industry, collaborated with McCartney to write a song about Kanye’s daughter, Kanye’s fans questions who this newcomer, McCartney, is. The moment the single was released, Kanye’s fans began to respond on Twitter about the amazing song, how awesome Kanye is, and questioning who this unknown Paul McCartney is. One fan tweeted, “I don’t know who this Paul McCartney is, but Kayne is going to give this man a career w/ this song.” More tweets shared this revelation: “Kanye has a great ear for talent and this Paul guy is going to be huge.” Kayne’s fans did not know what they did not know. The fans did not know that Kayne was collaborating with the “Legend” of music!

These fans not knowing what they did not know did not cost them restless nights of sleep or thousands of dollars of lost investment money; it probably did not even cost them any embarrassment. I assumed that they would have just shrugged it off as whatever. However, this attitude applied to investing in Real Estate can cause many a sleepless night, severed partnerships, and financial loss. Too often in my twenty-four years of helping investors, I have unfortunately seen this scenario play out: investors making decisions on investments where they have limited knowledge and understanding.

An investor’s knowledge and understanding on the specific location, property type, bylaws, regulations, zoning, market cycles, GST implications, tenancy act, are just a few areas that are crucial in making a good decision. Without researching, mentoring, and experience one can quickly find themselves in the situation where they don’t know what they don’t know and end up making a poor decision or missing out on an opportunity. I have found this to be true in my own real estate investing career. There have been opportunities that I missed because I wasn’t knowledgeable on a specific zoning or wasn’t aware of municipal changes that were coming down the pike. Over the years I have realized that I must be a lifelong learner. I must find individuals that will mentor me, research until I fully understand, and then put myself in situations where I am forced to act out what I have learned. Through this process of self-induced vulnerability, I begin to know what I previously did not know.

The majority of investors that read this monthly newsletter are incredibly knowledgeable, bright, and intelligent. You are students of the game, if you were not, you would not be reading this article. However, I would challenge each one of you that there are areas in your investment world that you may not fully understand, there may be voids in your investment peripheral. Areas that you have little knowledge of. Having this knowledge lowers risk and increases opportunities of success. It may be the study of cap rates, cash flow models, market trends, agreement for sale purchases, fix and flip tips, development costs, or even creative writing for tenant ads. Whatever the case may be, knowledge is power and what you know will make a difference in your investing because when investing in real estate you only know what you know.

January 2016 was another record month for sales volume in the Greater Vancouver and Fraser Valley. The record low inventory of homes continues to drive the market. The Fraser Valley in January of 2015 had 6250 homes (Single family, Townhome, Condo)  on the market, Today there is 4069, a 35% drop in inventory. However, it is the single family home that is in such a huge demand in the Fraser Valley. In January of 2015 there were 3091 homes for sale; however in January 2016 there were only 1762 homes for sale. That is a whopping drop of 43% drop! The super low inventory is the cause of multiple offers on almost every property that hits the market today.

It is a great time to buying down in the market for the empty nester.  They are selling their large homes at inflated prices and buying down into a condo market that has barely seen an increase in values over the last 8-10 years. If I was and empty nester, I would be cashing out of my large home and reinvesting the profit into positive cash flowing properties. Make sure you spoil your sweet heart on the 14th and don’t hesitate to call me for all your real estate questions and needs and remember when in investing in real estate you only know what you know.

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By Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com

STR (Sell Through Rate) Formula = Sales ÷ Active Listings + Failed Listings + Sales  ​