Four Phases of the Real Estate Cycle

Canadian Real Estate prices have been rising steadily over the past few years, especially in the Greater Toronto and Vancouver areas. Bidding wars have become common place, and it’s easy to get caught-up in the hype of a red hot real market. Many families looking for a new home feel pressure to act fast, due to the fear of being priced out of the market. While it may seem that prices will continue to rise indefinitely, the truth is that prices for Real Estate are well documented to be cyclical and have four distinct phases. The first phase of the Real Estate cycle is Recovery. This begins when excess construction from the preceding recession stops, and demand growth for real estate begi

Having Trouble Purchasing Property in a Competitive Market? Check out these tips.

Investing in Real Estate in a Competitive Market can be challenging. It is common to have multiple offers on most appropriately priced properties, and it becomes increasingly important to craft your offers in a way they stand out from the rest. Off course offering more money is the easiest solution, but there are other things you can do to improve your chances of purchasing that next investment property. Write a personalized hand written letter to the seller. This helps bring out the human factor of the offer. Explain why their home is special and why you want it. Keep you inspection conditions as short as possible. Usually five days is sufficient. You can also do inspections before ma

Real Estate Investing in a Holdco: Pros and Cons

A holding company or Holdco for short is a corporation whose sole purpose is to hold assets. Generally, there are two benefits and or reasons why people want to hold assets in a corporation. Firstly, there is limited liability. So if you’re sued as the landlord a corporate structure can help protect your personal assets. Secondly, there are income tax benefits. You can take excess cash from the company in the form of dividends, which receive preferential tax treatment relative to most other forms of income. Though the above reasons are compelling to start a holding company, note that most lenders will still require a personal guarantee. This means you can’t benefit from corporate prote

Is Portfolio Diversification a good thing?

Conventional wisdom is that diversification in a portfolio is a good thing, and is a common mantra according to modern portfolio theory. Financial advisors will often preach the benefits of having a “well diversified portfolio”. That said many famous investors such as Warren Buffet and George Soros have created wealth through concentrated strategies not diversified strategies, and their approach has been supported by several empirical studies. According to Buffet: “Diversification is something that people do to protect themselves from their own stupidity.” - Warren Buffet What Buffet means is that due to a lack of intelligence and expertise to make large investments in just a few business

The Canadian Bond Market and Principles of Bond Investing

Fixed income investments can be a great way to provide a floor for you investment portfolio and to preserve your capital. One popular way of investing in fixed income is through the bond market. The size of the bond market in Canada as of December 2014 was $2.4 trillion (face value) and to give some perspective the size of the TSX at that time was $2.511 trillion (market cap). Though the bond market is very substantial it doesn’t get nearly as much press as the stock market, and it remains a mystery to most people. Below is an explanation of some of the fundamental concepts about bonds as well as the risks. When you are buying bonds you are buying debt or an IOU. Essentially you are len

Be a Value Investor

Value investing is the concept of purchasing investments at a price that is below their intrinsic value. Modern analysis involves projecting free cash flow, discounting cash flows by the risk free rate to determine the value of the company, and then dividing the value of the company by the number of outstanding shares to determine what the price of a share “should be”. Ideally the price paid for the stock should be less than this with a margin of safety to allow for estimation error. The risk free or hurdle rate used will be subjective, but should generally be what can be achieved in the market with little to no risk. Of course, this is not the only factor to determine a suitable investme

Conventional Vs Collateral Mortgages: What you need to know.

In 2014 banks became required to disclose general information on collateral mortgages on their website. This was due to confusion on behalf of consumers as well as widespread negative media coverage. So what exactly is the difference between collateral and conventional mortgages? Below is what you need to know. With a conventional mortgage the amount of the actual mortgage is the same as the amount that is registered on your home. Therefore, if you purchased a 100k home and got an 80k mortgage then the amount registered on title would be 80k. Meanwhile with collateral mortgages the amount registered on title can go up to 125 percent of the property value. So in the case of purchasing a


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