February is over, and with it fades the buzz of investment month in Canada.
Brokers talked stocks, banks posted easy-to-follow spring-boarding RSPs and GICs remained the safe way of keeping safe.
The simplicity is wonderful.
Gaze at a few tastefully designed pamphlets, slide some money across a polished desk and presto – the investment requirements are done for the year.
Then it’s back to work for another 12 months, 60- to 70-hour weeks with nary a day of rest, in hopes of piling up a higher stack of coins for next year.
Amazingly, astute business people across the country invest in their own homes in much the same nonchalant manner – running their toes through an assortment of carpets until one feels just right.
Financing is often more a decision of the family banker than the family itself, and the business side of home ownership is often dismissed as if a house holds no more keys to the future than the purchase of a red SUV. Warren Buffett did not become the wealthiest of the wealthy through reading marketing pamphlets. He promotes research, challenging investors to understand the companies their money is driving forward.
Real estate investment is no exception. Stellar returns on the purchase of personal residences and investment property is possible only through education (or blind luck).
“A little knowledge is a magnificent thing in the hands of the motivated,” says retired British Columbia financial planner Fraser Smith in his new book, The Smith Maneuver.
His thesis espouses the virtues of making your mortgage tax deductible – an altogether stimulating concept that deserves an interview with the author and a full column’s exploration.
There is a plethora of views on the merits and dangers of real estate.
Best-selling author Robert Kiyosaki loves investment real estate, but calls your personal residence a liability because it takes money out of your pocket on a monthly basis.
Author Robert Allen, in Multiple Streams of Income, says: “Owning your own home is the first building block in your empire.”
The following is a brief look at what Canadian real estate gurus have advocated over the last several years:
Boom, Bust and Echo, How to Profit from the Coming Demographic Shift, by David K. Foot (1996).
Though not strictly a real estate book, the popularity of economist Foot’s work served as a warning to real estate investors through the late 1990s.
He spoke of a real estate meltdown – a shift from the traditional growth of the industry. “. . . if you’re a real estate investor, unless you pick your spots brilliantly, you’re not going to make any money.”
It’s easy to look back and see the flaws in his research, considering a blindfolded investor could have stuck a finger on the map of Canada seven years ago, made an average purchase in the designated community and profited quite handsomely on that property if sold today. The book is too narrow in its approach to be used as an investment guide, but offers a conservative perspective that provides balance to the optimistic consensus.
The Strategy, A Homeowner’s Guide to Wealth Creation, by Garth Turner (1997).
A former minister of national revenue, Turner predicted that Canadians’ preoccupation with risk avoidance would result in many missing the boom he believed would sweep the nation from the late 1990s through at least 2010.
His advice? Buy smart and take the equity of your home and invest it in the stock market. Ouch.
Ironically, he quotes stock trader Andy Sarlos (from his book Fear, Greed and the End of the Rainbow, also published in 1997) saying: “We are in the last leg of this bull, and no one can say how far it will go because we are in the midst of craziness. This sort of thing – telling homeowners to ‘suck the equity out of your home and play the market’ – proves how insane it actually is.”
This book is a mix of traditional real estate advice and progressive thoughts, i.e. buy the worst house on the best block, but apply as small a down payment as possible – and don’t use your RRSPs to do it.
Seeing your home as a tool to generate wealth (with Canadian-specific application) is the payoff for wading through the misguided predictions of this book.
Have Your Home and Money Too, by PJ Wade (1999, second edition).
Futurist Wade calls herself The Catalyst. She writes a polite book, telling her reader not what they must do, but what they may do.
This is not a book packed with graphs and numbers. It deals more with the emotions behind potential choices – and with the choices themselves, specifically the reverse mortgage and its many variations.
Motherly, holistic and very Canadian . . . if that’s OK with you.
Forget about Location, Location, Location, by Ozzie Jurock (2000, revised edition).
The West Coast’s prince of realtors shoots from the hip in this tradition debunker.
Jurock claims the public is always wrong, unless, it can be assumed, that public is following his recommendations.
This book slides past principle residence ownership straight to the world of investment real estate, and if you’re investing, read this book.
Don’t expect a lot of footnoting and theoretical research – it’s hands-on stuff. And there’s enough timeless technique here to make it a recommended item many years from now. House Rich, Your Home as Your Best Investment, by Howard Turk (2002). Someone had to pounce on Foot’s book and pummel it. Well, Toronto real estate lawyer Turk is the one to do it.
His book starts by declaring why Foot was wrong, wrong, wrong and why real estate is, and will continue to be, right, right, right.
Turk has transacted a lot of deals from the legal side, and he offers up defendable advice – at least for the time being. Well-documented and classy, this crisp read is the one for the real estate novice who wants to make qualified choices in home purchase and ownership.
Next week’s column will delve into the land sales in and around Edmonton. The last major piece of raw land available in Terwillegar was just sold by Alberta Infrastructure to D.I.A. Holdings Ltd., a group of local investors. The 239.5-acre parcel went for $11.2 million, well over list price.
It’s a sign of the times.