When is the best time to complete a real estate transaction?

By: Mark Frentz
www.akerahomes.com
mfrentz@akerahomes.com

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The typical real estate cycle

The typical real estate cycle goes up and down with higher highs each cycle as well as higher lows so that the market appreciates over an extended period of time. In a typical market there is usually a complete cycle every 10 years or so, but this is an average over many years. I often hear investors talking about making sure to buy when everyone else is selling and sell when everyone else is buying and I'd like to speak to this for just a short time. I've blogged in the past about how there is no 'good' or 'bad' market in real estate. When the market is appreciating quickly it is a sellers market and when depreciating quickly, a buyers market. I don't disagree with the investors who desire to purchase in a down trend and sell in an uptrend, but I also have a slant I would like to posit in order to help you think in different ways when thinking about real estate.

The best time to purchase real estate

When is the best time to purchase real estate? I'm glad you asked. As I just mentioned... I don't disagree that a great time to purchase real estate is when the market has fallen or is falling. The problem with this idea, however, is that spawns innumerable prospectors, not investors, because nobody knows when any market is at a low. When you begin to take on the mindset that you must get the best possible deal when the market is absolutely at its lowest, you will start to take unneeded risks because you are thinking about how to make money in the same was as people typically make money on the stock market (buy low and sell high). Few people tell you about the commissions for real estate agents or lawyers fees that go into purchasing and selling a property (just like a brokerage helping you with stock transactions). Because of these extra expenditures many investors don't make as much as they think they are making. If you miss the low by a bit and miss the high by a bit and give a ton of money for the transaction, then you aren't making as much because there is less room for error. 

My 'deep thought' for today is to suggest the best time to purchase real estate is when it is cash flowing; when it makes risk-adverse sense to do so. Read my former blog on cash flow as the #1 criteria you need to look at when purchasing real estate. If it's cash flowing, there isn't a bad time to purchase real estate because it will take care of itself. Even at the peak of a market if I buy something that cash flows well and hold it for 10-30 years, I'll do extremely well no matter what happens in a market (barring WWIII of course). Forget about timing the market perfectly and start investing! Find a great deal today and then purchase it instead of wasting your time procrastinating while all the good deals are taken by clearer thinking investors. This is one reason I don't typically find property on the MLS system. There is too much competition on the MLS and all the fantastic deals have 10 offers within 24 hours. The highest bid often wins out and the place that was listed at 20k less than fair market value is now sold for 20k more than fair market value (that isn't the kind of deal I get excited about). Having said what I just did, there are times when using the MLS system does make sense, and many times when using real estate agents make sense. Know when these times are and use them to your advantage.

The worst time to sell real estate

By far the worst time to sell real estate is when you have to sell. There really is no argument about this among savvy investors. When I look to purchase real estate from someone else I'm usually looking for someone that needs to sell her/his property quickly because I know I can negotiate a better deal. This isn't the only type of deal I do, but why would I not maximize my time by simply looking for the deals with the greatest potential. I never want to be in a place where I am over-leveraged or in a tough spot and then must give my property away for any reason. 

What is the solution? If you know me, you know what I'm about to write. Two words: CASH FLOW! If you have good cash flow, you should never be in a place where you need to sell your property because it is not only taking care of itself, it is also contributing to your income.

Conclusion

Start thinking like an investor who will have long term wealth instead of only short term gambles that sometimes pay off. Real estate is very forgiving and you can make a ton of mistakes and still do well, but why tempt risk by taking so much of it on? Go out and find a cash flowing property today. I know of many cash flowing properties that could be bought right now even in Calgary's strong current market. If you need help contact someone, but don't make the mistake of never doing what you need to in order to take care of your and your family's future.

Happy investing!

If you would like to learn more about investing in real estate please contact me at the email address listed at the beginning of this article or go to my website at: www.akerahomes.com/investing-in-real-estate.html

Renovating for a sale

By: Mark Frentz
www.akerahomes.com
mfrentz@akerahomes.com

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Renos: boon or bain for a sale?

I have met many families who have invested thousands of dollars into their house only to discover they aren't able to sell the property for what they expected. The true experts in the area of which renos build in equity and which actually cost more than they are worth are realtors who do high volume. There are many realtors out there, but extremely few who see enough business to offer expert advice any day of the year. I recently interviewed Andrew, a realtor who does high volume in Calgary and is able to give advice you can rely on when preparing to sell your house and make extra money when you do without putting too much work into the project. His contact information is below if you are in need of a competent agent.

It is easy to spend money in renovations, but while costs add up quickly, many people put $50,000-100,000 and 6 months of time into a renovation project only to see their property value increase by only $30,000-60,000. Remember, just because you like what you are doing to the property doesn't mean everyone else will. I encourage you to read the following tips and put them into action before selling your house.

What you should stay away from

Going overboard - When you are in a neighbourhood with houses all worth $300,000, but install every upgrade imaginable, it doesn't fit. Match the upgrades you are putting in with the area of the city and house. The reason you cannot add a lot of value to your house when installing granite and hardwood everywhere is that there is a maximum amount a family will pay in most neighbourhoods.

Not doing enough - This is the opposite of the first statement. If you live in an area where every house is worth more than $1 million, then not to put in granite and hardwood would be a mistake. If your house is outdated and falling apart, then let a developer purchase your house and tear it down. If you want to reno the house, then put in the upgrades that those wanting to buy it will value.

Doing a job that lacks finishing - If you paint your house and install new flooring, but cheap out on light fixtures and light switch and electrical outlet covers by not installing new fixtures and covers you are telling the potential buyers you are cheap and they will question the other work you have done. Light fixtures don't have to be expensive and covers are extremely inexpensive. For a few dollars they will match the new paint and flooring. Paint finishing is also important... Often it is worth hiring a professional because a smudge on the ceiling or floor will scream "Quickly and poorly done job! Stay away!"

Few people want a home that needs a lot of work - Even handy people don't necessarily want to live in a continual reno project. You may know someone who does, but don't confuse these individuals with the general public. Don't do nothing unless you want to attract companies who demolish houses and put up a much more expensive infill.

What you should always consider doing

Focus on cosmetic upgrades -  People purchase a house on emotion. This means they will buy a house they can see themselves living in. If everything looks good, it will leave a family with a good feeling.

The importance of lighting cannot be overemphasized - Without spending a lot of money, you can upgrade all the lighting so the house is bright when a potential buyer comes for a walkthrough. While it may be a good economic investment to purchase 8 watt bulbs, make sure they put out the same amount of light that older 100 watt bulbs do. Economic light bulbs have been coming down in price and it is worth the small difference in cost to have buyers fight each other and drive up the price of a house they all really like. Bright lighting makes a huge difference.

It is difficult to over-upgrade some homes - If you live in a high-end area of the city, spend the time and money to upgrade everything to suit the houses around you. Why will someone buy your house with laminate when they can buy another with hardwood? Again, this is for high-end homes.

Focus on labour intensive, but inexpensive renos - I've already discussed light switch and electrical covers as well as light fixtures, paint, and flooring. These are the three areas you should always begin with. After these three areas the rest is up to you, but consider talking to a real estate agent before doing the work. Most will be happy to give you sound advice, but remember to consult only realtors who are selling at least a couple of houses each month. Many realtors survive on a few deals each year and won't be seeing enough houses to give up to date information.

Use quality paint - Don't use the most expensive paint money can buy, but don't cheap out, either. Good quality paint will look good and be easier to apply. Also, use neutral colours. Even if you have impeccable taste in matching colours there will be a limited amount of people who will truly appreciate (and therefore pay for) your taste. There are people out there who talk about emphasizing living space by painting certain walls a different way. While it is true this can help, keep in mind that you are appealing to a wide range of people in most cases. Keep things neutral and hire a professional photographer and stager and you will be much better off than colour matching and then staging things yourself. Bold colours tend not to sell as fast or for as much as neutrally done homes.

What rooms are most important to focus on?

Great question to ask yourself before you begin a project. The rule of thumb is while bathrooms and kitchens are the most expensive to reno, they can also be done relatively quickly if done properly and make a big difference to resale value. People often buy a house for the kitchen, bathroom, or master bedroom. Don't reno everything if the existing rooms are fine, but if they need work anyway it may be time to think of a larger project. Remember that, as stated previously, you can make a big difference by focusing on inexpensive accents. Painting existing cabinetry and installing new doorknobs and hinges will be noticeably appreciated. If you are not going to redo flooring and paint throughout the house, you are probably shooting yourself in the foot by renovating the kitchen and bathroom.

More general rules of thumb

Match you renovations with your marketplace - I've mentioned this already. Always ask yourself: why is someone purchasing this place and what will they expect? If you live in Calgary... Granite doesn't fit Falconridge or the properties!

Steps to success that are logical - Start with new paint and flooring, next move to kitchen, bathroom, and master bedroom, and lastly renovate the entire house. Never focus on one bedroom without repainting the house. Remember there is a natural progression that you should focus on.

Get an expert opinion first - Before any renos, get an expert opinion of what your pre-renovation value is, what the post renovation value will be, and what the cost of renovations will be.

Overestimate your costs and time and underestimate the improved value - If the reno still makes sense after these considerations, then it may be a great idea to go ahead with your plans. If it no longer makes sense, then you simply aren't valuing your time better spent elsewhere; like a week long trip with your family for time together:)

Time the sale of your home - Understand local market trends. Know that people will typically pay more for a house in the spring than at other times. This is due to supply and demand. Most families want to be settled before a new fall school term and few want to move in the middle of winter. The best time to purchase a house is usually winter (if price is a key consideration) while the best time to sell is April-June.

Last words

The focus of this post is on renovating your home before you sell it. If you want to renovate a house for your own enjoyment you may not want to follow much, if any, of this post's advice. My parents recently renovated their house in a lower end neighbourhood of the city. They will never get the money out of the house when they sell it, but that's not why they renovated. Their purpose was to make the house fit their desires for the next few decades. In this case I have zero problem with what they did. A home is not only a basic human need; it can also be a place of comfort to go to when you need space or rest in some way. Always ask yourself: What is the purpose of this renovation? It isn't a bad thing to enjoy where you live.

Sometimes it is best to simply sell your house quickly without any, even needed, renovations. This seems to go against former advice given in this post, but if you are in a down trending market, you can easily lose money with each passing week of renovations. Again, this is a great reason to consult a local realtor who knows the market well before you plan renovations.

Want more information or help with your home?

If you would like more tips from Andrew before you sell your home or are in need of a competent real estate agent, you can contact Andrew at: andrewfrentz@shaw.ca and/or 403-483-3092.

If you would like to learn more about investing in real estate please contact me at the email address listed at the beginning of this article or go to my website at: www.akerahomes.com/investing-in-real-estate.html