In the past 10 years, I've had the pleasure of working with some very smart people. When I say smart.. I mean "Founder of Company" type Smart". For whatever reason, I seem to attract a lot of entrepreneurs into my client fold. I've enjoyed amazing discourses about politics, technology, entertainment and ofcourse business over the years while condo or house hunting and interestingly enough, many of these clients have not entered into a purchase when they've required my services. Everyone else seems to... but not these buyers. Why? What makes it different for these particular clients? How are they programmed and what can we learn from these buyers? Here is a list of 5 reasons why real estate doesn't fall high on the investment ladder for some of my brightest clients:
1. Its Sexy but not that sexy:
Real Estate has seen a lot of appreciation over the past 15 years. But that being said, there is very little that is "entrepreneurial" about chugging along at 6-7 % (or 12%) appreciation year over year. Sure, there's many ways to creatively finance, and there's innovative ways to improve CAP rates, but if you've just sold your startup after 22 months of non stop, pedal-to-the-floor hustle... you may be thinking buying real estate and holding just isn't sexy.
2. Time is Money and Real Estate takes Time:
Buying real estate is not a way to take $100k and make $1 Million in 2 years. Real Estate Investing rewards those who are patient. If you're a super innovative business type, you may look at returns on real estate like and ask yourself... "what else can I do in the next 12 years".
3. Scarcity Value on properties
Buying a condo in the downtown core has little or no scarcity value. If you were buying a condo, you'd have to be aware that there will be more, and more, and more condos along the way. Housing is a different animal, but still not scarce in some respects.
4. Looking for a Needle and Swimming Upstream
If everyone's doing it... it can't be right? And if Everyone's doing it... that ship must have sailed? Many of my entrepreneur type clients want something different. Buying a great buy-hold property seems to be a current investment flavour in the GTA and hence, not loved by the ultra creative entrepreneur.
5. Teach my something I don't know
Entrepreneurs want me to earn their business. Give them something they don't know. They want to be mesmerized by a market opportunity that is not readily available... or, well... pass.
6. Bubbles Burst
Many bright business types owe me a drink at a bar. Since 2010 I have defended the real estate market in the GTA and every year I've spoken to savvy investors who would never invest in the current market. Since 2010 I've also helped people change $60k in equity to $500k in equity. I myself, have experienced great wealth building in that very same period. There's no bubble. There is a soft landing. That being said, convincing those who disagree with me cannot easily be done.
The market is strong based on many economic factors including immigration, lending rates, population growth, employment, workforce capability and infrastructure investment. We must be aware of rising debt loads yes... but real estate is the best investment.
If you're thinking about investing in real estate, get off your butt and do it! 10 years later, look at what you have and you won't be unhappy!
Thinking about a move... I'd love to connect!