• inflation hedge: land appreciation is 4% higher than inflation; paying with inflated dollars later
• equity: the portion of your original house price on which you no longer owe
• land demand: many communities have slow growth or no growth policies

• macro economic cycle, local busienss cycle, community cycle
• causes: developers are entrepreneurials and driven by short-term planning;
• sustained recession is a good time to buy
• different types of properties could be at different stages of cycle
• normal cyclke are 5-8 years, in some cases 10-12 years

A geographic area will typically go through a series of stages, phases, and plateaus over time.

1. For example, the normal stages are development (growth)
2. stabilization (maturing, plateauing)
3. conversions (from apartments to condos)
4. improvements of existing properties
5. decline of improvements (deterioration)
6. redevelopment (tearing down of older buildings and new construction, with more efficient use of space).

• stages of cycle
• interest rate: higher interest, lower price
• tax: municipal property taxes, property taxes, speculator's tax
• rent control: disincentive to investor real estate activity
• population shift: location with attractive business, employment, tourism, retirement opportunity will attract immigrants
• vacancy level: low vacancy can force people to buy home; high vacancy reduces investor confidence
• location
• land availability: dependent on zoning restriction, natural shortage, limit on dev
• public perception and fomo
• politics and policy
• seasonality

• buy properties that are easy to maintain and high in demand: SFH, condo, duplex, triplex, fourplex; avoid apartment building
• attempt to make a low downpayment; offset a low down payment with:
  • vendor-take-back mortgage
  • high-ratio financing
  • second mortgage
• strive to break-even cashflow; avoid debt servicing of the property; should cover all expenses: mortgages, repair, maintenance, allownce for vacancy, condo fees, taxes, property management
• rely on professionals at all time for peace of mind: lawyer, accountant, financial planner, building inspector, appraiser, contractor, realtor, property manager
• never pay more than fair market value unless there are other collateral benefits to you
• keep rent at market maximum; manage expenses at market minimum
• three month contingency reserve fund for unexpected expenses or vacancy
• buy within 4 hours driving distance from where you live
• principle of pyramiding; on systematic basis
• consider tax benefits, consult lawyer and tax accountant, don't fall for tax shelter; rule-of-thumb: property should be invest-worthy without counting for its tax benefits

• single family home: usually start with this, then
  • buying a new house
  • buying resale house
  • buying a lot and building a house
• condo
• property for renovation
• recreational property and retirement home: most susceptible to economic downturn, considered luxury
• time-share property
• multi-unit dewlling: duplex, triplex, to eight-unit building
• apartment: complex management, for experienced investor only
• raw land: most speculative and risky

• Appraisal Institute of Canada: www.aicanada.ca
• Canadian Association of Home and Property Inspectors: www.cahpi.ca
• Canadian Home Builders’ Association: www.chbi.ca
• Canadian Mortgage and Housing Corporation: www.cmhc-schl.gc.ca
• The Royal Architectural Institute of Canada: www.raic.org

knowledge is power; more specific knowledge, better investment decision

• newspaper: The Globe and Mail, The National Post (subscription fee is a 100% tax-deductible expense)
• courses and seminars: the CMHC site at www.cmhc-schl.gc.ca. Check out the Web site for the Canadian Homebuilders’ Association at www.chba.ca
• books
• trade shows
• internet
• Statistics Canada: Statistics Canada research data and analysis, or contact Statistics Canada directly (www.statcan.ca)

• Real Estate Survey of House Prices: www.royallepage.ca
• Municipal Planning Department: This department should be able to advise you if there is a development planned in the community of interest to you
• Economic Development Department: Purchasing a residential property near a future growth area could enhance your financial return
• Municipal Tax Department
• Municipal Police Department: check crime rate
• Municipal Fire Department: check fire frequency
• Local Homebuilders’ Association: which areas of the community have high growth
• Remodelling Contractors: Contact at least three contractors and ask which areas of the community appear to have a high percentage of remodelled homes

• location: school, cultural attractions, shopping centers, recreational facilities, work, transport
• noise: distance to highway, driveway, parking lots, playground, garage doors, elevators, garbage, heating plant
• privacy: sound insulation, distance to common area
• price
• common elements and facilities
• parking
• storage
• qualities of construction materials
• design and layout
• neighbors: children age, age of adults, employment
• management: esp. for condo and apartment
• property taxes
• rental situation: look for high rental demand
• Local Restrictions and Opportunities
• Media Perception of the Area
• Geographic area Stage of Development
• Economic Climate:
• employment: closer to employer, lower turnover, better resale value
• demographic: population, age average, type of employment, income level, family size, ethnicity, marital status
• size and shape of lot
• transportation
• topography: is the land flat
• appearance
• crime rate
• services in community: shopping, churches, playground, parks, schools
• climate
• unattractive features: odours, lack of light, lack of street lighting, unrepaired roads, open drainage ditches
• convenient proximity: within 4 hours of your principal residence
• reason for sale:

The higher the percentage of owner-occupiers, the better the chance that there will be more pride of ownership and therefore more responsible treatment of common elements and amenities.

• market comparison approach: often used for single-family dwellings; keep sales dates as current as possible;
  • may estimate by average price per unit
  • or income per square foot
• cost approach: calculate the cost by buying the land and constructing the house; adjust for estimated useful life
• income approach: present worth of future cash flow
  • capitalization ratio (CAP rate): the rate of return used to derive capital value
    • higher risk means lower CAP rate, lower price to pay
  • net operating income (NOI): after all expenses but before taxes; does not take into account financing or mortgages
  • gross income multiplier (GIM): no mortgage payment or operating expense
  • net income multiplier (NIM): after all operating expenses, allowances for vacancy, before mortgage
  • internal rate of return: annualized return accounting for sale, capital gain, closing costs on sale, legal fee, real estate commissions, mortgage penalty if applicable (adjust for inflation)