My Barber owns an Investment Condo

By Ben Myers

One of the most ignorant comments I read from folks campaigning against real estate investment and investors is “My barber owns an investment condo”, or “My cab driver last night told me he owns two condominiums that he rents out”. This is, in their opinion, surely a sign that the market is overheated or about to crash. Their insinuation of course is that these people are poor, uneducated, likely overleveraged, and/or have allocated too much of their net worth to residential real estate.

I learned a long time ago not to stereotype people, put them in this narrow box, or assume based on their occupation how much money they have.

Perhaps these uninformed folks should read “The Wealthy Barber”! That barber or cab driver could very well own that company or even several other businesses, be a wise and shrewd investor, have inherited a hefty sum of money, been offered the condo at a bargain basement price, or simply be someone with a higher risk tolerance. As the old saying goes, never judge a book by its cover.

I’ve spoken to many REIN members, both blue collar and white collar, rich and not as rich, but they all have something very important in common – they want to get educated about real estate investing. The only thing REIN is selling is education. I’ve never seen them plug a new home community or recommend a specific investment strategy and I’ve yet to hear them discuss what the appropriate occupation is for someone that buys a high-rise condo. Market trends, tax implications, property management ideas, government regulation, legal opinions, renovation recommendations, mortgage decisions and alternative financing options…these are the only tools the potential real estate investor should know before making a decision to buy.

Part of my education as a real estate market analyst involves speaking with unit investors, chatting with developers, conversing with sales brokers, and learning from lenders. With every passing year I get a better understanding of real estate statistics, macro-economic drivers in the housing market, and micro-level influencers of demand. However, one of the biggest revelations I’ve made after 15 years is that real estate markets are extremely difficult to predict and forecast. If you’re sitting around waiting to purchase real estate when the market crashes, you might be waiting a while. If your retirement plan revolves around only buying condos when the market is hot and flipping them six months later for a big profit, you might be disappointed. Instead of trying to predict market highs and lows, think long-term hold and have a strategy and contingency plan in place if the housing market takes a turn for the worse.

I certainly can’t tell you how much risk you should be taking with your hard earned income, but I know a lot of folks in the late 20s and 30s that are Senior Vice Presidents, Executive VPs, Presidents, CEOs and owners, and many of them got there by taking much more risk with their money than I personally would have been comfortable with. Many of these folks have placed large bets on real estate because they live by the philosophy that people will continue to come to Canada, and because these new Canadians need places to live, they are going to invest in fantastic locations where they believe people want to live.

I think this is a great starting philosophy to adopt for real estate rookies before learning the fine grain details of investing in properties from the REIN experts and members. Don’t base your investment decision on media spin or how many condo units your plumber has.

Many of the urban condo markets in major cities in Canada have taken turns being hot and cold in recent years, but you can avoid being hurt by short-term market fluctuations by taking a long term investment approach since downturns are rarely predictable. I’m a fan of both active and passive real estate investing, but I’ll reiterate again: educate yourself on the pros and cons of both and ask a lot of questions. Take advice from people who have invested in real estate, not people who have not. If someone tells you their barber owns a condo, don’t roll your eyes and agree that the market is doomed, get their phone number and ask for their advice.

Fortress Real Developments partners with residential and commercial builders across Canada, and Ben assists in evaluating both the market conditions and projects that Fortress is active in. Follow his blog posts and commentary on the Canadian Housing Market at www.fortressrealdevelopments.com/news or follow him on twitter at @BenMyers29

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