Are you feeling nervous, excited, uncertain, confused, or a combination of all these emotions now that more layoffs have been announced, a new government is about to take office and oil supply is hitting all-time highs?  Join the rest of Alberta homeowners.

I checked with Environment Canada, the sky isn’t falling.  I’ve seen worse in terms of housing market less than a decade ago (the year 2008).  Of course, many homeowners and prospective homeowners are all in different situations.  Your specific situation could mean the difference between saving thousands and costing you thousands of dollars.  
Here is a quick rundown of what you may want to know:

Should I Sell?

This is an easy answer:  depends.   Upsizing or downsizing?   If you are wanting to sell a smaller home and buy a bigger house then you might consider waiting until late summer or fall 2015.  Conversely, if you want to downsize, consider listing very soon.  On the same topic though, don’t buy until you have an offer.  It could take you over half a year by the time you think about listing to the time your buyer takes possession.  Call me to discuss your situation and why I think this way. 

If I lose my job, what do I do?

If you have at least 6 months of savings, low debt, and a good mortgage in place, congratulations, you aren’t the norm and you will likely ride the storm.  If you aren’t that lucky person then you may need to look at the equity in your home.  If you have a mortgage coming due for renewal in the next 15 months then you need to consider refinancing NOW (call me).  If you are locked into a mortgage for longer than 15 months then there are other great mortgage options to consider to ensure you have access to your equity in the event you need it.  Perhaps even selling your home is an option.  Selling your home is an option if you don’t have a lot of equity and no savings.  Talk to me before you make that rash decision though. 

I have a lot of debt, what are my options?

Debt reduction will be very important in the year ahead.  If you have debts and are considering downsizing your home then selling might be a good option to reduce debts and payments (but careful, the costs might actually make it a poor decision once you take everything into consideration).  If you have a really good long-term, low rate mortgage in place, there are fantastic lines of credit or alternative mortgage options available.  In many cases, these alternative mortgage options save people thousands in interest costs.  Furthermore, for those faced with a reduced income, an alternative mortgage can also dramatically improve your monthly cash flow.  As mentioned before, if your first mortgage is up for renewal in the next 15 months you need to talk to me ASAP.  Your window to refinance to consolidate debt is closing fast.  I mean really fast!           

I want to buy my first house, should I?

Do you have a job and a steady income?  If so, yes.  If not, maybe not.  Income is everything these days when it comes to obtaining your first mortgage.  You could have a solid net worth but a small income and you would be less likely to get a mortgage than someone with no assets, high debt, but a large income.  Crazy I know!  Also, refer to my comments on waiting until summer for prices and supply to be more in your favour.  If you are wondering if renting is still better than owning…..NO, you can’t just look at the cost of monthly rent vs. the cost of homeownership.  You need to look at opportunity cost and long-term benefit.  When you look at the internal rate of return of owning vs. renting, regardless of the market, you are almost always better off buying if you can afford it.  Call/email me to discuss and where to start. 

To sum it up, if you have a mortgage coming up for renewal in the next 15 months then you should talk to me about it.  If you are panicking, relax, the sky isn’t falling.  If you think home prices aren’t going to fall more, you need to discuss with me.  If you are wondering about selling a home in this changed housing market, I can give you the cold hard facts.    

You have a specific question so just send me an email or call me and we can talk about it.  403.701.7766 or william@wrref.ca.


William Charlton

Oh wow, my house price drop predictions might come earlier than previously thought!   In Calgary, homes sales have plummeted by over 35% below the 10 year average.  There are nearly 2,600 active listings detached listings pushing the market quickly from a sellers’ market to a near buyers’ market. 

That escalated quickly.   I had predicted in previous posts a market correction heading into the summer.  These price drops may come much sooner.  Buyers are sitting on the fence looking for bargains, while sellers are rushing to list their homes.  If you are downsizing then I suggest you move quick!  If you are upgrading then waiting might not be too bad as lower priced real estate will drop less than the higher-end homes.  If you are renting and looking to get into home ownership then you might want to talk to me in the next month or two.  Either way, brace yourself for a rough real estate market in the coming months.

For more info or if you have questions or comments please let me know.

William Charlton

Many books and articles have been written on ‘how to be a successful real estate investor'.  However, after spending the past decade working with hundreds of real estate investors, I’ve seen far more failed investors than I have truly successful ones.  So I gave it some thought as to why real estate investors fail.  Here are my observations:

During the 2005-2006 Alberta real estate boom, home prices were rising double digits monthly.  ANYONE could make a money buying real estate and selling for a profit just by simply buying a house for asking price and by the time they took possession it had already appreciated.  These people fall into reason #1.

1) They Got Lucky in a Good Market.  These people became speculators and not real estate investors.  They bought in after watching a half hour TV show.  They didn’t take the time to obtain valuable real estate education.  They didn’t have an understanding of the changing market conditions, what makes a good deal vs. what makes a risky deal.  They didn’t know which properties to avoid or how to refinance and rent the property to create cash flow in a down market.  After making a lot of money in the great market of 2005-2006 they continued to buy property in 2007 until, suddenly, the price of their fully priced home started to fall before they could sell it.  They were speculators with no backup plan.  They were buying property without rental cash flow potential and buying property in bad locations.  They had early, easy success but started to overextend themselves.  Most lost everything.  A few lucky speculators who happened to own good lower priced property were able to rent out the property to make the mortgage payments, but still faced hard financial times.  As a mortgage lender, the investors I watched lose the most money had owned property they couldn’t rent to cover mortgage payments (homes valued over $600,000) and/or owned property away from transit and jobs (rural, small towns, acreages, high-end homes outside of a city’s core etc.).  Write this down and revert back when you start to see home prices start to depreciate – you’ll quickly see what I am talking about! 

We are in another really good market in Alberta and I am seeing it again.  Investors buying marginal deals just barely squeaking out a profit or not cash flowing their rentals.  The market is masking their poor purchases.  This leads to reason #2:

2) Too Emotional.  After thinking about the strong real estate investors I’ve worked with, I tried to figure out some of their common traits.  The #1 trait I always come back to is emotion.  The very best remove emotion from their real estate transactions.  To them it is strictly business, strictly numbers, and all a matter of fact.  They don’t do marginal deals.  They don’t settle for weak numbers.  Top real estate investors do extensive due-diligence on the economic and market conditions.  They inform themselves on what makes a good deal and a bad deal in a specific niche buying area.  They immerse themselves in the values and specs of homes in a particular area.  Then, they decide on a number that works for them to purchase a home and a price and spec of the renovations they need for a house in that particular area.  If their offer isn’t accepted, they move on.  If they don’t get financing, they move on.  If their inspector indicates a problem, they move on.  They don’t waste time figuring out if it is a good deal after finding the house, they already know before they find the house.  Successful investors enter a deal without emotion because they have done their research and now it’s just numbers to them, just a transaction at this point.  This also separates them from any competition because they can act fast when an opportunity arises.  In nearly every instance I have dealt with a failed real estate investor, they struggle with removing emotion from their deals because they have spent too much time thinking about all the possibilities after they found the deal.  Real estate investors who aren’t successful can always be found desperately trying to make a marginal deal work, spending hours trying to convince lenders or appraisers that they have a great deal.  This is often found with a first-time investor.  They’re excited to get into their first deal so they try and make things work.  Advice to any struggling or first-time investor, delete your emotion, focus your energy on the next opportunity.

Speaking of focusing energy, successful real estate investors stick to what they know and understand.  They don’t waste energy chasing 2nd or 3rd ventures unless they are already independently wealthy.  Many unsuccessful real estate investors fail because they went beyond their vocation or had their hand in too many different cookie jars.  Leading to reason #3:

3) Not Staying within Their Plan.   On the top of mind, I immediately think of at least 3 ‘former’ successful investors.  These investors made really good money in real estate.  Then perhaps a form of attention deficit disorder set in.  One particular real estate investor, who bought and held residential homes, decided to get into land development and commercial building with no previous experience in these categories.  Huh?  He saw the big money other developers were making and said, “I can do that”.  It proved, as it almost always does, to be a disaster.  As problems arose, focus and energy was pulled away from his successful residential portfolio.  As further issues mounted, equity started to be eroded from his successful residential portfolio to pay for mistakes in his other ventures.  Soon he was left with nothing even though he had been a very successful residential real estate investor.  Words of advice from some of the best investors, ‘stick to what you know’.  The turtle usually wins over the rabbit when it comes to real estate investing.  Warren Buffet has a great quote, “I don’t look to jump over 7-foot bars: I look around for 1-foot bars I can step over”.  In my experience, the most successful real estate investors have very boring business plans and very boring real estate portfolios.  If you have overly exciting plans with elaborate ways to achieve them, you’ll likely fail.  Stay within your limits, stay true to your plan, take it slow, and be boring. 

When a real estate investor doesn’t have a plan or goal they usually fail because of reason #3:

4) No Real Estate Education or Network.  Investors often fail when they don’t take the time to educate themselves through local network groups, books, seminars, etc.  Most successful real estate investors have a strong network and mentors in their lives, always learning from others.  Less successful investors try and do everything on their own and don’t take advice or criticism well.  With hundreds of ways to structure deals, fix problems, find deals, renovate homes, etc., an investor just starting out can benefit from finding successful investors or lenders who can provide guidance.  I’ve found that many investors come from a special background strength, but lack skills in another area.  For instance, a trade person might be able find and renovate great property, but lack deal structure or financing expertise.  This trade persons success is often determined on whether they sought help with the lacking skills or if they tried to do it all themselves.   Investors often fail when they don’t develop a strong team around them to help them with the areas they are not experts in.  Successful investors have a strong, go-to team of lenders, realtors, lawyers, trades people, etc.  Unsuccessful real estate investors are often found trying to do everything on their own.  Unsuccessful real estate investors often end up spending $10 to save $1, they trip over dimes to collect pennies from the ground.  When an investor spends all their energy and efforts on every component of a property deal, the next opportunity is passing by.   Smart investors educate themselves on how to maximise their wealth and portfolio efficiencies.  They learn how to delegate specific components of the deal.  Real estate investors who fail always lack understanding of two critical concepts:  cost of doing business and opportunity cost.  Words of advice, educate yourselves on these concepts and develop a strong network to help with your business plan.

In summary, if you are just starting out as a real estate investor or you haven’t turned a profit on your deals; get educated, get focused on making this a real business by using numbers not emotion, and stick to your plan and expertise. 

There are many other tips and observations I have witnessed over the years, feel free to contact me if you have a questions.  

Happy Investing,

William Charlton

william@wrref.ca

What you need to know:  House prices will gradually soften as 2015 progresses (more pronounced summer/early fall 2015).  It's obviously hard to place a number on the price decline, but 10% drop isn't out of question.  As a result, a better selection of homes will be available for you by summer 2015.  If you are upgrading your house, you might benefit by waiting a few more months.  If you are simply selling your home and not buying, or you are buying a house equal or less value to your home (downsizing), then you may want to consider listing in the next month or two, don’t wait.  If you are worried about breaking your current mortgage as a result, call me. 
Don't panic though, as per my previous blog, the downturn is not the same as 2009.  Lenders are still lending, migration isn't negative.    

‘The more you know’

William Charlton

December 1, 2014
An increase of new listings and a decrease in sales compared to the same month last year has Calgary's real estate market trending toward a balanced market.  Buyers can expect to enjoy a larger selection of homes to choose from in the New Year and also see prices stabilize across most categories.  Those thinking of selling their home should consider doing so very early in 2015 as lower oil prices could soon affect jobs in Alberta.  While a drastic drop in real estate prices isn't expected (as what occurred in the 2008/2009 market and oil price collapse), it will certainly move the market closer to a balance or buyers’ market.  Better to get ahead of the curve.  Buyers, read into that as you will.  

Feel free to add your own comment, opinion or simply ask a question.

Happy Holidays

William Charlton  

I was wrong. Early summer 2014 I had estimated the market would have increased active listings and lower sales - helping the supply levels increase.  As you can see from the attached graph, the single family housing market in Calgary remains 'tight' and sales remain high.  The graph illustrates how close the top and bottom lines have become over the past 6 years, in layperson terms, there is little supply available for people to buy a house.  November and December active listings and sales typically are lower, so we won't see a widening of this graph or an easing of the tight supply until the new year.  Stay tuned.....