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The biggest mistake you can make in 2013

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Guest | 31 Jul 2013, 10:16 PM Agree 0

“It’s tempting because prices are still rising across much of Canada and there is a sort of scarcity of good investment properties to buy even at a price where you cannot cash flow,” Shanna McFarlane, author of Top 5 Secrets to Maximum Profits in Minimum Time, told CREW. “But you have to be able to cash flow the property immediately otherwise you may struggle to mkeep the property and price appreciation isn’t guaranteed.”
It’s caution that an increasing number of investors are throwing to the wind as they face heightened competition for a limited number of small multifamily properties not only in major centres but across much of the country. Those escalating prices mean some are buying with the full knowledge that mortgage and other expenses will eclipse rental revenues.
They’re making that commitment with the hope that market capitalization and increasing demand will continue to raise property values.
But with tighter lender underwriting across the mortgage sector and the threat of rising interest rates, that strategy may backfire, said McFarlane, who counts hundreds of doors in her own expansive portfolio, although most were acquired at a low point in the market.
Some investors are anticipating a return to that kind of bearish market for Canadian real estate if the central bank opts for a more rapid escalation of interest rates spurred on by a stronger U.S. economy.
But that remains speculation for now, with McFarlane asking investors to keep their eye on cash flow.
  • al | 03 Aug 2013, 12:10 AM Agree 0
    Too many investors place way too much importance on cash flow. With over 50 doors myself, I know first hand, the disadvantages of buying a property purely based on cash flow. I've done it.
    Cash flow properties typically require more work, management, time and money. Based on my own experience, properties that break-even, or provide a slight cash flow, end of being a better buy. Not only for appreciation, and income.
    While appreciation may not be in the cards for a few years, rental investing is generally a long term hold investment anyways....
  • rosie | 06 Aug 2013, 12:41 PM Agree 0
    Its up to you to decide whether you are going to invest this year or not. But anyways, thanks for your insights about the real estate sales slowed. I know it will cope up soon. There are a lot of strategies to make your real estate sales go higher.

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