| A Warm Welcome to Our Regency Property Managment & Real Estate Clients & ‘Hello Again’ to all Previous Readers – from Kathy Berner & Paulo Shikanai … Let’s Talk About Real Estate! I would like to take this opportunity to welcome and say a big hello to all of the Regency Property Management & Real Estate clients that may or may not know who I am. Some of you may have met my husband, Paulo Shikanai in the past, and may be wondering whatever happened to him and who am I. We are the owners of Regency Property Management and Real Estate and although we have handed over many of the daily operations of our company to our extremely well-trained and capable staff, Paulo and I are still very active in overseeing the success of our client’s rental properties.The purpose of this monthly newsletter is to keep our clients more informed about Regina’s current market conditions and to stay connected with all of you. From our experiences, real estate investors are the most well-connected, like-minded and positive people who take action when the market conditions are right – so let’s stay connected and keep informed about the market.As a side note, I’m not sure if all of our Regency clients know this, but Paulo and I bought a dive resort on the island of Roatan in Honduras on January 1, 2015. It’s a 25-room boutique hotel with 5 –star PADI dive shop and an awesome steak house/pizzareia restaurant. I won’t get too much into that now. Stay tuned for future newsletters to learn more about our dive resort and how we invested in Roatan. For now, I would like to talk about the Real Estate Cycle and how that applies to Regina investors.Last weekend I read Secrets of the Canadian Real Estate Cycle by the founder of the Real Estate Investment Network (REIN), Don Campbell. This book contains valuable information for all investors, regardless the size of your portfolio and regardless of where you hold your investments. I highly recommend picking up a copy, getting out your highlighter pen and learning everything you can about the predictable and reoccurring real estate cycle. The name of the book indicates that this cycle is only characteristic of the ‘Canadian’ Real Estate Cycle but the concepts in this book would apply to all developed counties that have first-world government regulations. I will summarize Don Campbell’s major points , but it’s definitely worth a more in-depth study. The Boom: I think it’s pretty easy to recognize the boom phase. You’ll notice everybody talking about the value of their home – even if they are not an investor nor thinking about selling. Real estate agents love booms because they don’t have to ‘sell’ real estate – they just fill orders. Demand is high. Supply is low, which ultimately causes rental rates to increase, and vacancies to go down. As Don Campbell says in his book, “it’s like a party that you wish would never end”, to which I add; especially if you work in a real estate-related industry or you’re a property owner. In-migration is on the rise during this phase so unemployment rates decline and construction costs are high. Typically, this is when an influx of new investors hit the market, buying their first rental property even though property prices are at their highest. There is a feeling of optimism and misguided belief that values will continue to climb forever. There are stories that it is possible to ‘get rich quick’ (and some do) … until the slump hits. The Slump: The slump: a very misunderstood phase. Many cannot recognize this phase at its onset because they are looking for an instant crash, which is not necessarily the way it happens. The decline can be so gradual or even a flat line that uninformed real estate investors don’t believe it is happening until they hear about it on the media. This is a tough phase for investors, real estate agents, mortgage brokers and property managers alike. The first signs of a slump are falling rental rates and climbing vacancy rates. CMHC releases national and regional reports every fall and spring, but we here at Regency Prop. Mgmt & Real Estate know what the Regina numbers are doing, with almost 100% accuracy, at least 9 months before these reports are released because we are living it in real time. This (inevitable) transition from boom to slump phase is always a challenging time for us as property managers because it becomes difficult to explain to owners why it is becoming more difficult to re-rent their property and why they need to (possibly) upgrade their product with a bit of a renovation or rejuvenation. So it can be double-edged sword with income decreasing and expenses increasing. The best way to deal with the slump phase is to accept it and strategize accordingly. Property owners should understand this cycle, expect the changes and always be prepared for the worst case scenario. For savvy investors, IT’S WHEN THE REAL MONEY IS MADE, as it is a time of hidden opportunities that are not easily recognized by the non-strategic investor. It’s a time to remember this basic principle: THE MONEY IS IN THE BUY! The Recovery: Recovery is an exciting time, especially for those investors who bought during the slump phase. The signs of recovery are visible, but only to those who know what they are looking for. So what are the signs of the recovery phase? The first sign is that the value of the property starts to outpace the rental rates, so it appears as if the property does not ‘cash-flow’. The second tell tale sign is that the number of people per household will start to increase as rising rents begin to impact the affordability of renting. Both of these signs were clearly visible from 2005 to 2007 in Regina, right before our big real estate boom. It’s true! I remember it like it was yesterday. Where exactly do I (Kathy) think Regina is in the real estate cycle – this fall of 2016? I believe Regina is just entering the end of the of the slump cycle. That is; we are in the homestretch of a flat line slump, but I have to admit, I have no idea how long it will take to enter the beginning of the boom phase. Rents are still depressed from what they were 2 years ago. The vacancy rate is holding out between 5 and 6% (for about the past 18 months). However, as long as the rental unit is renovated and competitively-priced, it usually re-rents within the month. Tenants are getting fussier, demanding a better product for less and causing more headaches for us at the Rental Board , but the truth is, everything re-rents if it is updated. Regina’s Recent Statistics and Real Estate Facts: In Regina, the total number of real estate transactions are up +4% in the past 12 months, and the average home price increased by +0.7% (from $318,543 to $320,644). The number of available listings on the market declined by -7% and the average DOM (days on market) remained the same at 42 days. It was a slightly more optimistic market, but, the truth is, 2016 was largely unchanged from 2015. This is why I state that Regina is approaching the end of the slump phase, but I have no definite insight as to how long the end of the slump phase will last. The good news is that we are one year closer to the beginning of a boom, since we know with 100% certainty, that the next phase is the boom phase. The other good news is that there is still time to take advantage of Regina’s lower real estate prices in the upcoming winter months. Our Personal Opinion: Real Estate will always be Paulo’s and my choice for investing for long-term wealth. With perseverance and a strong ‘WHY’, Paulo and I have lived, breathed and sweated real estate for the past 20+ years. It was slow-going and frustrating at times, but we wouldn’t trade our choices for anything in the world. At Regency Prop. Mgmt & Real Estate, we have the most knowledgeable and trained real estate agents who understand investing, creative financing techniques and this predictable and repeatable real estate cycle. We truly feel like we are the experts when it comes to investment properties because we have extensive hands-on experiences and insight that many real estate agents may not have. If you are interested in hearing more, give Pat Abel (real estate agent/real estate investor), or myself, Kathy a shout if you have any questions or comments about investing in Regina. We truly are here to help, as YOUR SUCCESS IS OUR SUCCESS! Until next time, take care. We’ll be in touch! by Kathy Berner |
