It doesn’t matter whether you are already a multimillionaire with investments all around the globe or you are simply looking for your first investment property; there are a few things you must know before you leap.

The 3 Pillars of Successful Investing

1. Exit Strategy

Before you sign a contract, before you wire a deposit and even before you do any due diligence – you need to have an exit strategy. Don’t get in if you don’t know how you are going to get out. You may never want out but you should have a game plan and know your options should you need to.

2. Diversity

Every accredited investor ought to know that they need to diversify their investments. It doesn’t matter how well a certain asset, sector or stock is performing, never put all of your eggs into one basket. Fortunately, the beauty of commercial real estate investments is that they normally offer built in diversity by way of multiple tenants. This way you are never counting on one single person to pay your rent – a very dangerous situation to be in.

3. Protect Your Capital First

There are all types of wild foreign investments and businesses to get into which promise dazzling returns but if you lose your capital you are done. A recent research study found Canadians investing at home have seen their returns far outperform those overseas. There is no such thing as 110% risk free investing but you should make sure the risk equals the potential for return.

Everything Works in Cycles

If you’ve been around long enough, you know everything works in cycles. Commercial real estate will always come back after fluctuations and continually appreciate in the long term but there will be fluctuations along the way. Fortunately cash flow, earned appreciation and tax advantages enable accredited investors to make money in commercial real estate in any market.

Right now there are great opportunities to be had among multifamily properties in Ontario, Alberta and British Columbia. What is best to get into at any given moment depends on a variety of factors including population migration, world economics, jobs and of course everyone’s favorite – politics.

Know Your Strengths

It doesn’t matter how sophisticated of an investor you are or how much money you have made, no one knows absolutely everything about everything. There is definitely a place for commercial real estate in all Canadian’s portfolios but just like the stock market you may be better off investing in those sectors you know the best.

For most accredited investors in Canada this means housing, usually multi-family apartment buildings. You live in it, you’ve rented, maybe bought a home, you run into people every day who rent. A next step for some accredited investors is retail strip malls and local shopping centers. It doesn’t matter whether you are in Edmonton, AB, Toronto, ON or Vancouver, BC or even if you are lucky enough never to have to shop yourself any more, you pass by shopping plazas all the time.

Know Your Weaknesses

It sometimes takes a stronger and wiser person to be able to admit their own weaknesses. You may be the best selector of investments in the word and know how to perfectly time your entry and exit but how are you at property management? Or perhaps time and not being patient with 2 am calls from tipsy tenants who’ve locked themselves out isn’t your strong suit. You don’t have to announce them, just recognize them and where you can capitalize on outside assistance.

Choosing an Investment Partner or Adviser

Parkhurst Asset Corp has an experienced executive team with a, proven track record of assisting accredited investors realize above average returns through stable investments. It isn’t about getting rich tomorrow. The firm’s investments are selected for their long term profitability, seizing the right moments of opportunity to enter and maximize security and growth, with a focus on limiting leverage and protection from liability for investors above all else.

Take a look around the website and you’ll find an opportunity to invest with Parkhurst that suits your portfolio and if you discover a like-minded team of professionals then take the next step and enquire about how you can join the ranks of the many other accredited investors the firm has helped to achieve their financial goals.

Only by recognizing, understanding and timing these 5 factors will real estate investors hit their maximum potential returns.

1. Appreciation

While rapid appreciation may be one of the sexiest aspects of investing in commercial real estate, no investor should be buying based upon speculation alone. However, the appreciation of commercial real estate in Canada has steadily tracked well above inflation, ensuring consistent, positive growth in real time money. Despite recessions and market fluctuations those involved in real estate investing in Canada have seen an 83% rise in property values since 1998.

2. Earned Appreciation

Earned appreciation is actually one of the most powerful advantages that commercial real estate investment offers, especially for owners of apartment buildings. Earned appreciation means the ability to manually drive up the value of a property in any market. This includes adding upgrades, renovations and even re-purposing property. With multiple tenants under one roof, multifamily property investors often see the biggest returns on their improvements compared with industrial real estate or single family homes.

3. Cash Flow

Capital appreciation is great but selecting an investment which also throws off positive cash flow every month too is even better. No one wants to wait until they are in their 60s to retire anymore. Passive income from real estate holdings can allow investors to retire far younger or use this income to re-invest and diversify into other real estate investing opportunities in Canada. However, it is critical to understand the huge difference between buying single family properties and becoming a hard working landlord and the truly passive limited partnerships and professionally managed commercial properties offer.

4. Leverage and Mortgage Reduction

In spite of seeing some investors in other countries who borrowed wildly and irresponsibly drown themselves in debt, leverage is not a bad thing. It simply needs to be approached with common sense. If you buy at the top of the market with 125% financing and negative cash flow you are going to be in trouble as things correct themselves.

On the other hand, those utilizing smart borrowing tactics and especially borrowing at today’s attractive mortgage interest rates, investors are still able to enjoy large spreads and benefit from growth on the entire amount of an investment – not just the cash they put in.

Truly savvy investors often use leverage even when they have cash in order to receive better protection and take advantage of tax write offs.

After all, you are going to have tenants paying off your loans for you anyway. In 10, 15 or 20 years your tenants will have paid off your mortgage debt leaving you with a free and clear property which either offers more cash flow or the ability to tap equity and expand your holdings.

5. Taxes

One of the top reasons real estate investing in Canada is so popular with wealthy and accredited investors, particularly commercial real estate, is the many tax deductions which can essentially cancel out any taxes due.

Those correctly structuring their investments are able to take advantage of deducting mortgage interest, the cost of renovations and improvements, depreciation and receive returns tax deferred or tax free (depending on the financial vehicle through which you invest).

Putting Them into Play

No matter how hot the opportunities appear, before investing in commercial real estate in Canada make sure you and your partners have realistic expectations of appreciation, recognize potential earned appreciation opportunities, have accurately calculated cash flow and are aware of the most advantageous structure for minimizing tax liabilities.

If you are interesting in joining other like-minded investment partners to own your share of cash flowing apartment buildings in Alberta, contact Parkhurst Asset Corp today at 1.888.317.3337 or visit www.ptrust.ca

We get an extra day this year to contribute to our RRSP accounts. The deadline is today – Wednesday, February 29, 2012.  Remember, you don’t need to have the funds invested in a product the bank or institution wants to sell you. You merely need to have the funds transferred into a registered account by the deadline to be eligible for the tax deductions. Here are a few common questions answered on RRSP’s related to real estate.

The debt vs. RRSP dilemma

Should you pay down your mortgage or contribute to your RRSP? The question answered here.
Financial Post Article here…

RRSPs can house a mortgage

Many often wonder what they can invest in through their RRSP or TFSA. Here’s some examples.
Financial Post Article here…

More Positive News on Alberta Real Estate

In a media world too often filled lately with economic crisis, European economic potential collapse, instability, and fear, we like to stay focused on positive opportunities. Here’s a few we see.

BMO Capital Markets special report on Canadian housing market

Will Canada’s Housing Boom, Forge On, Fizzle Out, or Flame Out?

“Bottom Line: Expect the housing boom to cool rather than crash. Look for home sales, starts and prices to be roughly flat in 2012 across most of the country, with strength in Alberta contrasting with continued weakness in British Columbia.” See the full special report on our blog here…

Alberta will ‘reign supreme’ in economic growth – Article…

Western provinces lead the country in growth – Globe & Mail Article…

B.C. and Alberta growth lead to rise in West – National Post Article…

AB incomes grow as well as jobs. Beating CAN avg. – ATB Article…
Which province do you think beat AB?

Making money investing in real estate

The 5 profit centers of real estate – what should be basics, but are often forgotten by many. Article here…

Share this with those you know that are thinking of investing in real estate, or are having challenges with rental properties they currently own directly. May be time to consider selling and investing their money with Parkhurst – the power of group investment in larger more profitable deals.

Want to receive this valuable information in your inbox? Just signup to our email list in the box above to the right.

This special report on the state of the Canadian real estate market in 2012 prepared by BMO Capital Markets answers some very important questions for many Canadians.

See the full report in pdf here…

“Bottom Line: Expect the housing boom to cool rather than crash. Look for home sales, starts and prices to be roughly flat in 2012 across most of the country, with strength in Alberta contrasting
with continued weakness in British Columbia.”

Inflation in the U.S. increased a seasonally adjusted 0.2% in January, for a 12 month, unadjusted rate of 2.9%.   Core inflation for 12 months stands at 2.3%.

Initial jobless claims in the U.S. dropped to a new cyclical low of 348K in the second week of February, nearly 20K below expectations.

And Canada’s international securities transactions report indicates an on-going appetite for Canadian assets.  In December foreigners acquired $4.7B worth of securities, including $2.1B in bonds.  Foreigners purchased a total of $95.6B worth of Canadian securities in 2011, down from $117.4B in 2010.

From Chris Minor, Senior Manager, Commercial Mortgages E: Find him here…

View the full newsletter from Parkhurst Asset Corp here… and if you’d like to receive this valuable market information right to your inbox, be sure to join our e-mailing list by subscribing on the right. 

Benjamin Tal on outlook for 2012

Here are notes from the event.  Benjamin Tal is the chief economist for CIBC World Markets and viewed as one of the top experts on real estate in Canada.  Here are his thoughts on Europe, China, the US recovery, and the impact on Canadian real estate.  Excellent information!

See notes from the event here…

Don Campbell on 2012

Don is another top expert that we follow closely as an active member of REIN.  Here are his thoughts on the market moving forward – ignore averages, ignore stats, be aware of key influencers, always invest based on cash flow, “buy green” & the four Fs.  See the full blog here & contact us today for how to invest for as little as $10,000 to capitalize on this market.  Read the full article on Don’s blog here…

Why we’re buying in AB and not the US or other foreign markets

High uncertainty, low growth the outlook for international real estate.  The year 2012 is shaping up to be a challenging time for real estate companies, headlined by the “wildcard” of the European debt crisis, China’s decelerating growth and continuing weakness in the U.S., according to Graeme Eadie, vice-president of Real Estate Investments with the Canada Pension Plan Investment Board (CPPIB)

RENX.ca article here…

Multi-family a safe haven real estate investors

Rather than single-family residential property, the hot ticket these days is multiple-family dwellings. At a luncheon for financial analysts with the Edmonton CFA Society, Eric Bonnor, senior vice-president with Brookfield Asset Management in Toronto, quoted from the publication Emerging Trends in Real Estate 2012, a survey of 950 real estate executives. Edmonton Journal article here…

REMINDER….. all cell phone numbers are being released to telemarketing
companies and you will start to receive sales calls.
YOU WILL BE CHARGED FOR THESE CALLS

To prevent this, go to the following web-site for Canadian Telephone
Numbers:  www.lnnte-dncl.gc.ca

It is the National DO NOT CALL list. It will only take a minute of your
time.  It blocks your number for five (5) years.

I see china slowing down, but I see the government responding in a very quick and appropriate way.  US economy is moving in the right direction.  We will outperform most economies, but still low growth of 2%  Yield like reits will enjoy the benefit of uncertainty in that the BOC will not want to change rates.

INTRODUCTION AND PRESENTATION BY BRYDON CRUISE – BROOKFIELD – NOTES:

TOTAL $32B market cap for securitization of real estate in canada.  Brydon suggests there is room to grow this internationally.  In Germany for example, there was an IPO with a 35% discount to NAV for the launch of an offering.  Just not a very mature market yet.  In other words, there is huge room to grow for real estate securitization in the rest of the world and particularly in Europe.

In Canada, while we account for about 2.5% of the World’s GDP we have been very active in foreign markets and have been making 12% of the trades globally.  $5.7B of total capital raised for canadian reits/recos in 2011 – 25% of transaction activity occurred internationally and was deployed outside Canada.  Foreigners have not been buying in canada to the same degree – mostly we presume because they are dealing with issues on their own soil.

CHART: STABILITY OF THE INDEX SPREAD

Spread over the GOC 10-year and the yield of the REIT index was at a minimum in June 2007 (.4%) and a maximum in March 2009 (10.7%).  Currently the spread is at 3.3%

REITS have been growing their cashflow more than their dividends.  REITS have done a good job of holding their dividends stable while cashflows have increased and as a result their payout ratios have been reduced to below 90% (below the dividends), thus eliminating some of the concerns of a few years ago regarding the dividends REITS were issuing in excess of cash flows. A healthy place to be.

CHART: HISTORIC CLASS A TORONTO OFFICE – current cap rate is 5.9%; current debt is approximately 3.8% and the spread is approximately 2.1%

If I have a worry it is interest rates.  Spreads and Margin are pretty vulnerable to changes and have kept our system healthy.  Rates are forecasted to rise, and managers should act accordingly.

BENJAMIN TAL – CIBC WORLD MARKETS NOTES 

I spent 2 hrs with BOC yesterday – and they have no clue. Everyone is uncertain.  More uncertain than usual. “The real measure of intelligence is what you do when you don’t know what to do”.

“So what do you do, you don’t take chances”

Monetary policy will be extremely conservative as a result.  With possible reductions in interest rates.

EUROPE

In Europe, Greece will default.  They will not call it a default.  But if you bought Greek debt you will call it a default.  Italian financing requirements for italy is $790B euro by 2015.  ECB will start printing money eventually.  But before that you will see more blood.  ECB is not in favour of quantitative easing.

Possible Outcomes:

1. Eurozone collapse.  Germany can not allow.  Germany needs the Euro more than the Euro needs Germany.  60% of exports go to Eurozone.  If Eurozone falls it will kill this exporting machine called Germany.

2. Smaller Eurozone – without portugal, greece – if Greece exits, migration etc… nobody wants this, and it is unlikely.

3.  Eurobond – ECB buying eurobonds to allow some time.  Between now and then, it will be extremely volatile. The euro will go down.  They will start printing money in a different way then they have been, perhaps more like Bernanke.

CHINA

China is slowing down.  Because it wants to slow down.  Until now, inflation was 6-7%.  China can shift/stop policy so quickly.  Real estate bubble in China is softening.  BC Lumber exports to China is at a 34 month low.  In 2008 China’s infrastrucutre stimulous was double the size of Obama’s.

Much of the first round of infrastructure investment money was borrowed by Special Investment Vehicles.  A lot of leverage.  From here on in, the government is ensuring that lending is secured on the basis of the project and not on the basis of the government.

We are all SO dependant on China. If china goes to hard lending – we are in a huge global recession. However, the Governent in China can react so quickly and they are already moving towards soft lending. In the next 6 months I would be defensive on commodities due to the Chinese situation.  Thereafter, probably not. With respect to Gold, it will continue to shine during all of this global uncertainty.  But at one point gold will be crushed when it no longer becomes comfort food.  Gold is ok.. for now.

USA

I can spend 2 hrs telling you how bad things are in the US.  But I am starting to see some interesting things.  This american consumer is de-leveraging at a phenomenal rate.  They have ALMOST brought household debt to disposable income levels to the historical trendline.  US credit card charge off rates almost back “to normal”.

US Employment – Obama – despite all of the unprecedented stimulous, QE, and investment unemployment actually got so much worse than it was previously.  Unemployment went to 10% and resulted in a very severe economic recession.

Economics 101 will tell us something: If the unemployment rate doubles, lower wages should come in to place and counteract.  HOWEVER this is the first recession ever, that wages DID NOT GO DOWN.  2/3 of the jobs that were lost in the recession were manufacturing and construction.  Can you really re-shift this expertise to other tasks?  You can’t.  Obama can spend as much as he wants but the structural change in unemployment can not be solved that quickly/easily.  All of the jobs created in the recovery WERE ALL MEN – men suffered the most.  Investment rising far faster than employment.

The most important derivative lesson for Economics students from this recession will be The ongoing renaaissance in the US manufacturing sector.  The sector has been expanding for the past 20 months.  For the first time these manufacturers have an emerging market.  The consumers in the emerging markets are big enough to make a huge difference (China.. etc). What these new emerging consumers want is not Junk.  They want quality and a brand name.  Competition is based on QUALITY and not COST.  Penetration in these markets by North American firms is 20%

Previously manufacturing was to produce products that suited needs of a highly-leveraged US consumer.  IT HAS BEEN TURNED THE OTHER WAY.  And it is allowing North American Manufacturing to compete in a big way. FIRST RECESSION EVER WHERE INVESTMENT IS RISING FASTER THAN EMPLOYMENT.  Investment has not created any jobs AND the fastest growing export from US to China is TOYS!!! We thought all of the toys in the world were made in China!

CANADA

We have to be a bit careful with economic data.  40% of GDP over the last ten years has been the government.  Can’t last forever.  Must be replaced.  Hasn’t been the consumer.  Has been business investment.  Business investment is the real pioneer of this investment cycle.  Moving away towards leverage into business expansion.

Composition of growth more important than growth itself.  Have to go even deeper: we must talk about debt.  The debt to income ratio in canada is rising and it is rising faster.  Everyone is talking about it.  However, The debt to income ratio is meaningless.  You are comparing the stock of debt to the flow of income – it is not apples to apples.

Consumer Credit is now rising at the slowest rate since 1992.  Mortgages rising at slowest rate since 2001. SO, Debt to Income is rising and credit is decreasing.  So, its not the debt story.  It is the income story and incomes have not been rising.

There are 7 countries with higher Debt to Income ratios than Canada.  Many of them are AAA economies.  So this alone may not be a concern. What might be a concern is that 1/3 of borrows in Canada are heavy borrowers.  This group is increasing.  Older people are taking on more debt as well. We need to pay attention to this group, and thankfully most of our banks are.

The big question: “To what extent is this country sitting on a real estate bubble?”

There is no doubt in my mind that house prices in this country have overshot.  In order to crash, you need a huge increase in interest rates or a subprime situation.

INTEREST RATES:  I’m convinced that this central bank will not increase rates in the foreseeable future – simply because when you don’t know what to do is that you don’t take chances.  This Bank is very strong compared to predecessors and they do not want to take risks.  This central bank is not going to change rates anytime soon.

SUBPRIME: Debt is slowing down.  Prices will be falling.  Prices stagnating a little.  10-15% price softening – but not a crash unless the ratios of highly leverage buyers continues to rise closer to the point where interest rates will be increased.

CASH: There is so much corporate and indiviudal cash.  $35B of extra cash looking for direction.

BANK OF CANADA HAS INDICATED WE ARE AT RECORD HIGH DEBT BUT THAT WE HAVE RECORD HIGH CASH. Can’t we just write a cheque?  Problem is that people with the cash are not the same people with the debt.

Majority of the people with the cash are over 55 yrs and this is the nature of the demand of the REIT market – the search for demand and the search for yield.  This is not a linear recovey.  The first half was BOC, government, second half has been private and business investment.

SUMMARY:

I see china slowing down, but I see the government responding in a very quick and appropriate way.  US economy is moving in the right direction.  We will outperform most economies, but still low growth of 2%  Yield like reits will enjoy the benefit of uncertainty in that the BOC will not want to change rates.

Don R. Campbell of the Real Estate Investment Network on Global TV in BC talking about the 2012 real estate market. We like how he plants the seeds to the ‘average’ Vancouverite regarding investing in real estate in Alberta. Cash flow is king, and apartment building investments are one of the first to benefit from in migration. Research shows the average new Albertan rents for the first two years before 80% of them buy a home and stay longer term.

It has been a busy year in 2011.  In a market climate with global uncertainty, occupy movements, major world economies being debt downgraded, and volatility in equity markets, the majority of investors in the world today are looking for stability and security.  Canadian commercial investment real estate has attracted a lot of interest and markets have been very active.  Foreign investment has been flooding into Canada, and certain asset classes and cities in Canada are receiving the lion’s share of this direct foreign investment causing some overheating and drop on returns for investors as the demand for a safe place to put their money is highly competitive.

Where does this leave you? The investor looking for your opportunity in the current investment climate, knowing that times like these provide rare opportunities to capitalize.  How can you take advantage and know where to put your hard earned capital?

Continue reading full article here…