Great Real Estate Investing Strategy To Use In Current Market
Recent price increases in Great Toronto area made impossible finding good cashflowing deals and we at CFP Group made a strategic decision to look elsewhere – in markets that provide growth yet are still inexpensive. We currently focus on Arizona and some Tier 2 and Tier 3 cities in Canada.
When evaluating the market we always look at the parameters such as population growth, unemployment, supply and demand, and many others.
But prior to discussing the real estate investing strategy we currently use, I want to share my view on where we stand in the real estate economical cycle:
Every market, including real estate, has cycles. And there are four stages in each cycle: Expansion, Recession, Recovery and Oversupply. A famous saying is: Buy Low / Sell High; as you can see on the picture above, we are not in a Buy Low territory. In fact, we might be soon closing on a peak of the market. While nobody knows how much time we still have for the prices to go up (I personally anticipate 2-4 years depending on the area but of course no one as a crystal ball), it does not look it is a great time to buy. However, when everything is rosy – most people will continue buying.
This is exactly what happened in USA in 2003 – 2007 when everyone was buying houses with zero downpayments and teaser mortgages (Expansion) – until 2008 came and the cycle quickly switched to Oversupply and then a deep Recession. Similar activity took place in Southern Ontario where in 2016 people were buying house like there was no tomorrow; then the Provincial Government got involved and the prices crashed.
There are not many buyers in Toronto these days but it is a totally different picture in USA – where economy is in a great shape and buyers are back. At a prices much higher than just a couple of years ago.
So, if many people are willing to buy now and to pay healthy prices, why not to sell something to them? Sell what you might say, I don’t even own any real estate? Well, this is actually what we have been doing in the past 12 months – we are participating in a new construction projects, creating a real estate product that can be sold to the end buyer at a significant price – allowing us to make profits in the process. And the entry participation price for such projects is much lower than buying a physical real estate asset.
Here are the projects we participate these days:
42 Units, Phoenix, Arizona. A project is currently being sold
16 Units, Scottsdale, Arizona. A project is currently under construction
14 Units, Phoenix, Arizona. A project has started in June
30 Units, Phoenix, Arizona. A project starts in August
23 Units, Saskatoon, Saskatchewan. A project starts in July – August