Secrets of the Canadian Real Estate Cycle E-Book

Don R. Campbell

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2012

Beschreibung

Canadian real estate investors often hear about real estate cycles, yet very few people can describe what they are and how to actually use them to one's advantage. The Canadian Investor's Guide to Secrets of the Real Estate Cycle will show Canadian investors the ins and outs of the various phases of the real estate cycle, such as boom, slump and recovery, in order to equip them with the knowledge to make practical and informed decisions about their portfolios.

Written by Canada's top-selling real estate investor and author Don Campbell and Kieran Trass, a leading expert on real estate cycles, the book will drill down into the various causes that affect real estate trends, such as local and global economics, population migration, employment levels, affordability of rental housing, real estate listings and other factors, to provide a scientific basis for assessing current trends and where those trends are heading. Complete with charts, checklists, and real-life stories, The Canadian Investor's Guide to Secrets of the Real Estate Cycle will be an indispensable guide for all investors.

Leseprobe

Contents

Cover

Testimonials

Title Page

Copyright

Habitat for Humanity®

Introduction

Part I: Key Message: The Real Estate Cycle: Your Key to Strategic Investing

Chapter 1: The Strategic Investor Mindset

Mindset Matters

The Strategic Investor's Point of Reference

Strategic Investors Seek the Neutral Zone

Chapter Summary

Chapter 2: What Is the Real Estate Cycle?

The Phase Determines the Tactics

The Three Phases of the Real Estate Cycle

Moving Forward: Cycle Predictability

Real Estate Cycle Exceptions

Statistics and the Real Estate Cycle

Chapter Summary

Chapter 3: Market Predictability and the Real Estate Cycle Clock

The Real Estate Cycle Clock

The Stages of Each Phase in the Real Estate Cycle

Chapter Summary

Chapter 4: Key Drivers of the Real Estate Cycle

What Are Key Drivers?

The Categories of Key Drivers

Key Driver Patterns

Key Driver Patterns in Action

Chapter Summary

Chapter 5: Beware the Market Influencers of the Real Estate Cycle

What Are Market Influencers?

The Classic Market Influencers

Chapter Summary

Chapter 6: The Boom Phase

Prime Time for Real Estate

What Happens during a Boom Phase?

At the Beginning of the Boom Phase

In the Middle of the Boom Phase

At the End of the Boom Phase

Chapter Summary

Key Drivers in the Boom Phase

Chapter 7: The Slump Phase

Warning: Market Slowdown!

At the Beginning of the Slump Phase

In the Middle of the Slump Phase

At the End of the Slump Phase

Chapter Summary

Key Drivers in the Slump Phase

Chapter 8: The Recovery Phase

The Market Swings Back

At the Beginning of the Recovery Phase

In the Middle of the Recovery Phase

At the End of the Recovery Phase

Chapter Summary

Key Drivers in the Recovery Phase

Part II: Key Message: Putting the Real Estate Cycle to Work in the Canadian Market

Chapter 9: Critical Transition Points: Toronto—Boom to Slump

Making Sense of a Market in Transition

A Market in Transition: Boom to Slump

Key Drivers

Strategic Market Analysis

The Media Clues

Fear and Greed among the Herd

Chapter Summary

Chapter 10: The Toronto Market: Focus on Key Drivers

Analyzing a Market: Toronto

Key Drivers of the Current Toronto Real Estate Cycle

Chapter Summary

Chapter 11: Critical Transition Points: Calgary—Slump to Recovery to Boom

Making Sense of a Market Trending Upward

A Market in Transition: Slump to Recovery

Key Drivers

A Strategic Market Analysis

Chapter Summary

Chapter 12: The Calgary Market—From Hindsight to Foresight

Analyzing a Market: Calgary

Key Drivers of the Calgary Real Estate Cycle

Chapter Summary

Part III: Key Message: Learn the Strategic Real Estate Investor Way

Chapter 13: Setting Goals like a Strategic Real Estate Investor

The Link between Goals and Priorities

Why Do You Need a Business Goal?

The Strategic Investor Stress Test

Overcoming Common Barriers to Goal Achievement

Chapter Summary

Chapter 14: The ABC Strategy: How Strategic Investors Plan for the Real Estate Cycle

Get Your Strategy Straight

The ABC Strategy

Chapter Summary

Chapter 15: Investment Tactics throughout the Cycle

Avoid the One-Tactic Trap

How to Choose a Tactic

Learn the Golden Rule: Always Make Money on the Buy

Acquisition and Exit Tactics throughout the Cycle

Chapter Summary

Chapter 16: Tactics and Risk Management

Managing Risk throughout the Cycle

Chapter Summary

Chapter 17: Tactics and Financing

Money Makes the Deals Go ′Round

Chapter Summary

Part IV: Key Message: Canadian Strategic Real Estate Investors

Chapter 18: Investor Profile: Michael Lawson

Michael Lawson: Learning from the Best

Through the Eyes of a Strategic Real Estate Investor: The Five Essential Elements

Chapter 19: Investor Profile: Bryon Howard

Bryon Howard: Living and Learning

Through the Eyes of a Strategic Real Estate Investor: The Five Essential Elements

Chapter 20: Investor Profile: Tony and Jo-Ann Peters

Tony and Jo-Ann Peters: Creativity Is Key

Through the Eyes of a Strategic Real Estate Investor: The Five Essential Elements

Chapter 21: Investor Profile: Chris Black

Chris Black: Keep your Eye on the Prize

Through the Eyes of a Strategic Real Estate Investor: The Five Essential Elements

Chapter 22: Are You a Strategic Real Estate Investor?

Assess Yourself

Strategic Investor Checklist

Best Wishes on Your Strategic Journey

Appendix: The Key Driver Scorecard

Acknowledgements

About the Authors

Other Contributors

REIN—the Real Estate Investment Network

Strategic Real Estate Solutions

Index

Testimonials

This book is a game changer—it completely shifted my way of thinking! Never have I understood the Real Estate Cycle in such depth as I do now; or realized all of the tactics to be used at different times of the cycle and NOT during others. If you are at all considering real estate as an investment vehicle, or if you are a long-term investor—in fact, especially if you are a long-term investor—this book is a must read. It's time you become a student of the Real Estate Cycle and build wealth like the pros!

—Jim Sicotte, Canadian real estate Investor

I've yet to find a book that clearly demonstrates the correlation of economic fundamentals and the real estate cycle. Secrets of the Canadian Real Estate Cycle: An Investor's Guide simplifies a complex subject and, better yet, provides readers with practical steps to become a strategic and profitable investor during all phases of the cycle.

—Randy Bett, realtor, investor and author

What a timely book! As soon as I read the first chapter I knew this would be a “must-read” book for every real estate investor. Many investors are overly cautious post-boom and are often paralyzed by a fear of not wanting to repeat the mistakes of the past. This book teaches you about the real estate cycle and provides invaluable tools that enable you to evaluate any market at any time. Successful investing requires you to have the ability to make decisions that you are confident about. The tools taught in this book will give you that confidence.

—Peter Kinch, real estate entrepreneur and financing expert, author, educator, speaker and investor

I've been a real estate lawyer for 35 years, focusing on the investment side. One thing my clients have never seemed to understand is that real estate goes up and real estate goes down. You make money by having the courage to buy when real estate is at the depressed part of the cycle. You lose money, or certainly don't make as much, when you follow the herd in the buying frenzy at the top of the boom. Where was this book when I was trying to explain this to my clients? What an invaluable tool for any real estate investor who's trying to understand how the market really works. Congratulations on creating an extremely useful research and reference work. I will be recommending it to all my clients, experienced and just starting out.

—Barry McGuire, real estate lawyer, author and investor

The beauty of this book is that it not only makes a convincing case for a predictable and repeating cycle of boom, slump and recovery, it also gives you the tools to determine which part of the cycle your own market is in. Then you learn what tactics to use to strategically and successfully grow the value of your real estate portfolio at any point in the cycle.

—Giselle Portenier, award-winning documentary filmmaker, journalist and real estate investor

Powerful, groundbreaking methods—a must read! As an investor and developer, Secrets of the Canadian Real Estate Cycle: An Investor's Guide provides a vital guideline to make critical investing decisions.

—Rob Haberman, real estate investor/developer

Copyright © 2011 Don R. Campbell, Kieran Trass, Greg Head

REIN™ is a registered trademark of the South Pacific Education Corporation.

REALTOR® is a trade mark of the Canadian Real Estate Association.

Real Estate Cycle Clock™ is a trademark owned by Kieran Trass.

All rights reserved. No part of this work covered by the copyright herein may be reproduced or used in any form or by any means—graphic, electronic or mechanical without the prior written permission of the publisher. Any request for photocopying, recording, taping or information storage and retrieval systems of any part of this book shall be directed in writing to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright license, visit www.accesscopyright.ca or call toll free 1-800-893-5777.

Care has been taken to trace ownership of copyright material contained in this book. The publisher will gladly receive any information that will enable them to rectify any reference or credit line in subsequent editions.

The material in this publication is provided for information purposes only. Laws, regulations, and procedures are constantly changing, and the examples given are intended to be general guidelines only. This book is sold with the understanding that neither the author nor the publisher is engaged in rendering professional advice. It is strongly recommended that legal, accounting, tax, financial, insurance, and other advice or assistance be obtained before acting on any information contained in this book. If such advice or other assistance is required, the personal services of a competent professional should be sought.

Library and Archives Canada Cataloguing in Publication

Campbell, Don R.

Secrets of the real estate cycle: an investor's guide / Don R. Campbell, Kieran Trass and Greg Head.

Includes index.

Issued also in electronic formats.

ISBN 978-0-470-96471-2

1. Real estate investment—Canada. I. Trass, Kieran II. Head, Greg, 1972– III. Title.

HD316.C3165 2011                   332.63′240971                   C2011-901783-0

ISBN 978-0-470-96471-2 (cloth); 978-0-470-95261-0 (ePDF); 978-0-470-95268-9 (Mobi); 978-0-470-95269-6 (ePub)

Production Credits

Cover Design: Ian Koo

Cover Photo Credit: iStockphoto/Thinkstock

Interior design: Natalia Burobina

Typesetter: Thomson Digital

Editorial Credits

Executive Editor: Don Loney

Production Editor: Pauline Ricablanca

John Wiley & Sons Canada, Ltd.

6045 Freemont Blvd.

Mississauga, Ontario

L5R 4J3

www.wiley.com

Habitat for Humanity®

100% of Don R. Campbell's and Greg Head's royaltieswill be donated to Habitat for Humanity.

Introduction

Harness the Power of the Real Estate Cycle

Strategic real estate investors are made, not born.

—Christine Ruptash

Beginner or Veteran—Strategic Investing is Key

Whether you have yet to make your first real estate investment or you already have a multi-million-dollar portfolio, this book is for you. Secrets of the Canadian Real Estate Cycle: An Investor's Guide gives experienced investors the opportunity to re-evaluate and improve their current approach through an innovative perspective based on the real estate cycle. That same information gives new investors the luxury to launch their portfolios while being able to “see the forest for the trees” before their investing journey even begins. Regardless of the state of your portfolio when you start reading this book, we intend to help you take your investing to a more advanced level by enabling you to fine-tune your decisions based on valuable information about the realities of the real estate cycle.

Strategic investors are made, not born, and their long-term success is earned, not granted. Prospering as a real estate investor means working hard and making well-timed decisions, and has remarkably little to do with luck. This underscores the fact that strategic real estate investment is no get-rich-quick scheme. Although there are times during the real estate cycle when investors can accumulate significant wealth relatively quickly, strategic investors never confuse those short-term periods with a new natural order. Like all investors who follow a proven system, strategic investors invest for long-term wealth creation. They make money when there's money to be made, but they also know the cycle will always shift, and they prepare for that shift accordingly. In sum, their knowledge of the real estate cycle, combined with a deeper understanding of what cycle shifts mean and when they will occur, positions these investors to make more money, more often.

Keeping It Real

How do they do that? Strategic real estate investors follow a system that's rooted in the real world of real estate investment markets. These investors recognize the fallacy and risk of shortcuts. They understand that it takes time to accumulate wealth from real estate investment and they approach the process as a grow-rich strategy rather than a get-rich-quick scheme.

As you read this book, you will learn that the real estate cycle has a distinct and predictable progression that strategic real estate investors recognize and use to their advantage. The cycle may stall or speed up—but it never goes backward or stops. This makes knowledge of the real estate cycle one of the “Five Essential Elements of the Strategic Real Estate Investor.” Strategic real estate investors harness this knowledge of the real estate cycle to understand how it impacts real estate values as it progresses through the natural phases. You will see how experienced strategic real estate investors take the complex idea of the real estate cycle and break it down into decipherable—and then predictable—parts. The end result is a more sophisticated approach to investment decisions.

As we reveal the secrets of the real estate cycle and your understanding deepens, you will see how powerful emotions such as fear and greed are unleashed at specific points in the cycle. Strategic real estate investors use that information to help them understand the role those emotions play in the marketplace. The emotional turmoil leads less strategic investors to hold on to properties they should sell and to sell properties they should hold on to, with strategic real estate investors reaping the benefits of those ill-advised decisions.

Working knowledge of how the real estate cycle progresses will show you how to maximize market returns and reduce risk by investing wisely and according to a plan. But this book makes it clear that an understanding of the real estate cycle is only one of the Five Essential Elements of the Strategic Real Estate Investor. These investors also possess a mindset that is focused on reality rather than emotion, are clear about their goals to invest for cash flow and equity appreciation, and follow an investment strategy that helps them adopt the right tactics that will make them money at every phase of the real estate cycle. You really can avoid the emotional chaos that plagues the portfolios of less strategic real estate investors—and this book shows you how.

Good luck, and good strategic investing.

Part I

Key Message

The Real Estate Cycle: Your Key to Strategic Investing

To swim a fast 100 meters, it's better to swim with the tide than to work on your stroke.

—Warren Buffet

Beginning in 2006, real estate values started falling in many countries around the world. It was not the first downturn in real estate, nor will it be the last. Yet this decline, like every one before it, appeared to take millions of homeowners, investors and developers by surprise, leaving many in financial ruin. Once again, we were reminded of the cyclical nature of the real estate market and the fact that fortunes are made and lost over the course of a cycle. In real estate, creating and sustaining wealth is highly dependent on the individual investor's knowledge of how the real estate cycle works.

It is surprising that even some of the most experienced investors are unable to read the real estate cycle. Experienced, but non-strategic, these investors lose much of their real estate wealth unnecessarily. Indeed, history is littered with examples of formerly successful real estate investors who failed to respect the cycle, or disavowed it altogether, which cost them real estate wealth that was the product of hard work and sweat equity.

Conversely, history also shows examples of investors who have learned how to grow and sustain wealth through the entire cycle of boom, slump and recovery. Known for the purposes of this book as strategic real estate investors, these individuals invest with a purpose and use the momentum of the real estate cycle to help grow their wealth. They make money while the market is on the rise, and they also profit during a falling or flat market. They have a distinct mindset compared to other investors, all because they base their goals, strategies and tactics on the realities of the real estate cycle.

The Making of a Strategic Real Estate Investor: The Five Essential Elements

The ability to invest strategically is not a skill that most investors possess. The good news is that it is a skill that can be learned. As the real estate cycle changes, strategic investors are able to make decisive and proactive decisions. Where less strategic investors react to cycle shifts, the strategic real estate investor continues to follow their strategic system because he or she knows how to use the momentum of the real estate cycle to create wealth. Through their own investing experience, as well as through coaching and mentoring thousands of other investors, the authors of this book have observed first-hand the makeup of a strategic investor. As shown in the figure above, a strategic investor's approach to investing in real estate consists of five essential elements, with each element building on the foundational strength of the previous one.

The Five Essential Elements of the Strategic Real Estate Investor

Although the Five Elements of the Strategic Real Estate Investor are best expressed as a pyramid, with “mindset” forming the foundation, we stress that strategic investors use all five elements holistically. That is, each level is interdependent. First, strategic real estate investors require the right mindset, which leads them to actively research and learn about the real estate cycle. Building on that foundation, they set their goals and strategy in conjunction with the cycle and, finally, choose their tactics. That final step is critical as it implies that strategic investors take real market action.

Here is a closer look at what each level of the strategic investor pyramid tells us, and an explanation of how this book will help you use that information in your own business. (Learn more about the pyramid and strategic investing in Part III.)

Mindset: It is no accident that mindset is the essential base element of the strategic investor pyramid. Mindset is the foundation for understanding real estate cycles, and strategic investors have a very distinct mindset: they think differently than other investors. They think strategically. As you read this book, you will learn how to think and invest strategically.

Real Estate Cycle: Investors who are serious about using the real estate cycle to their advantage must acknowledge that the cycle exists, and commit to understanding how it works. Strategic investors learn what drives the cycle and the proven theory behind its movement. Kieran Trass is an international real estate cycle expert and has spent the last 20 years dedicated to the subject. This book uses his methodology and provides his proven process to help you determine the position of your local market in the overall cycle. You will learn how to identify the critical transition points in the cycle through case studies of Canadian cities. We also provide you with specific examples for Calgary and the Greater Toronto Area so you can see how the cycle works in real market conditions.

Goals: Most investors are objective-oriented and take the time to set goals. Strategic real estate investors also set goals, but do so with the cycle in mind. Secrets of the Canadian Real Estate Cycle: An Investor's Guide will teach you how to set realistic objectives that correspond with how the investing environment changes throughout the cycle.

Strategy: Some business people, including real estate investors, like to talk about various money-making “strategies.” Strategic investors use only one strategy to create and sustain wealth through entire real estate cycles. It is known as the ABC Strategy, and this book will teach you what it is and how to use it.

Tactics: The strategic investor does not confuse tactics and strategy. Strategy informs the master plan. Tactics are the steps you take and tools you use to achieve the goals in your master plan. The investment tactics employed by strategic real estate investors will vary depending on the stage of the real estate cycle. You will learn a variety of tactics, along with the optimal times to use them throughout the cycle.

What Lies Ahead

Think Strategically (or Stay Home)

There are hundreds of books that teach you how to invest in residential real estate, and it's likely you have already read a few of the better ones. Some of those books mention the existence of the real estate cycle. But very few are dedicated to the real estate cycle itself, and even fewer combine information about how the cycle works with solid information about how to use that information to become a strategic real estate investor. This book is different. It will teach you about real estate cycles, provide in-depth information about all of the essential elements required to become a strategic investor and show you how you can acquire those skills.

By the end of this book you will be thinking strategically, and better yet, you will be investing strategically. And, when you do, you will be reducing your risk and increasing your results.

Chapter 1

The Strategic Investor Mindset

Reality is determined not by what anyone else says or believes, but by what the evidence reveals to us.

—Alan Hale

Mindset Matters

Real estate investors, strategic and non-strategic, often define themselves as entrepreneurs interested in the creation of long-term wealth. While similarities between these two types of investors do exist, the mindset of strategic investors bears a closer look. Before we tackle the ways a strategic investor uses the real estate cycle to guide investing, let's look at what it means to have a “strategic mindset” and why it is so very important to success.