As an individual in his middle years, I have to confess to a somewhat dubious history of investment. My occasional dabbling in the stock market achieved results varying from mediocre to miserable. Undoubtedly, there are people who have had considerable success with stocks, but invariably they admit it takes time and dedication to stay current with market trends.

Looking for capital growth from bank accounts is only for the ultra-conservative. Rates are so low, you often feel like the proverbial tortoise in a race against the hare of inflation, and the hare is winning!

I have had some success though. Looking back, my first big capital gain came from the sale of a home I bought when I got married. A few years later this was followed by another healthy profit from my second house. Then, some years later, I again picked up another lump sum from my third house. Now I think you know where I’m going with this, so let’s talk some more about investing in real estate. After all, it seems to work for most of us… or does it?

Nearly 20 years ago I was living in Vancouver. During a conversation with the manager of the company I worked for, he stated bluntly that he would never again purchase real estate. He had lost money on a home he sold during the 1980s and was as negative about purchasing property as it was possible to be. Looking back, I sometimes think it would be interesting to visit with that individual again and get his thoughts about the following 20 years of soaring Vancouver house prices.

Certainly, as with any commodity, real estate prices can go down, but historically, it has been proven that prices usually double every 10 years. My parents bought the UK house I grew up in for a little over $6000; today that house would be worth over $600,000. So I think we can all agree on one thing – real estate appreciates and is a good solid investment in the long term.

When my clients ask if it’s the right time to buy, I tell them it is always the right time to buy, especially if you are buying your primary home. The more important question is when to sell. If we are talking about the home you live in, the issue is largely out of your hands. You will sell when you get a job transfer, need more space, or want to downsize. The prevailing market conditions are important only when you are trying to move up the ladder. Presumably, you will then want a more expensive home, so in an appreciating market, it makes good sense to move before the gap widens between your existing property and your dream home. The situation is a little different for those investing in real estate solely for a profit.

If you have an aversion to risk, then you won’t get far in life, at least financially. It doesn’t matter whether your first entrepreneurial venture involves starting a humble hot dog stand, or a high flying international airline, there is no guarantee of success. In fact it is common knowledge that four out of every five new business ventures fail within a couple of years. However, with real estate investing, there is no logical reason why you should fail at all. Most people want a quick flip and there is nothing wrong with that. But if the market softens, you may have to wait longer before finding a buyer. Your profit may be reduced, but ultimately, all houses sell.

The worst case scenario is that the obtainable selling price does not exceed the purchase price. What to do? Well, in this case you have the option of Plan B. You change hats, and become a landlord for a year or two. People have to live somewhere, and if they are not buying houses, they have to rent, which in turn creates a reduction in rental property and pushes up rental prices. You may well find yourself with a nice little profit over and above your mortgage costs.

Time will bring the market back, along with the value of your investment, as it always does. It is just a matter of patience. This can not always be said when playing the markets. That red hot mining stock you bought could fizzle and die, along with your money, but your real estate will always be there. It is a tangible asset and for most of us, the best investment we will ever make.

If you are interested in buying or selling real estate, or would like to search Lethbridge MLS homes for sale, please view, or contact Allan Miller of Sutton Group Lethbridge at (403) 329 0479.

Published in: on March 17, 2008 at 7:42 pm  Leave a Comment