Do Your Investments Profit Even When the Market Corrects Itself?
This past couple of weeks we had two big events. The first and more important event was potty training our 2-year-old twins. As with real estate, you sometimes have to get your hands dirty to get the job done. I was peed on dozens of times and the house seemed like chaos at times, but we got through it. Although they weren’t successful on this go around, we are on our way and the kids are closer to being able to not need diapers anymore, this step alone will be a huge milestone for us! (Note: the attached picture is not a true representation of what potty training looks like 🙂 ).
The other event was the launch of our investor meetup in Vaughan. We had a great turn out of both experienced and novice investors coming out to learn, share and network on Starting out in Real Estate Investment. Our next meetup will be March 22nd at 7pm and we will be covering how to legally add a second suite to an existing home or investment, which is almost becoming a necessity for investing in today’s hot market. We will have special guest Andy Tran from www.suiteadditons.com join us to dive into this topic. He is regarded as an expert on additional suites in Canada, and wrote the book Legal 2nd Suites: A Beginners Guide. Please RSVP at www.meetup.com/VaughanREIC or our group on facebook to join us.
Now on to investing. Many people ask us how we get the growth rates that we do in real estate. We dove into the topic of leverage in our previous post “Real Estate Leverage is like Compound Interest on Steriods!”. In this post we outlined how using leverage in real estate requires only a +1%/yearly growth rate in the housing market to match a +7%/yearly growth rate in traditional investments such as stocks and mutual funds. This makes sense over the long-term health of our investments however does not go into the ups and downs of the housing market.
The property price only has bearing on an investment when you buy and when you sell the property, the time in between does not impact your returns as long as your properties are rented and expenses are covered. With a low single digit vacancy rate across southern Ontario, an immigration rate of double the USA per capita, and land that is becoming scarce (lake on one side, green belt on the other), it doesn’t look like demand for affordable housing will go down. When an investment property is purchased using the fundamentals of cash flow, this means that every month after ALL expenses are paid on the property, the investor still profits regardless of market ups and downs. In fact, just by profiting each month and having our tenants paying off our mortgage, we look to at least match traditional investment returns of +6 to +8% annually, without taking into account housing appreciation. This type of investing, ensures we profit each month, and also allows us to set up our investments to not have to worry about market fluctuations but rather continuing to profit through market corrections and choose to sell when we want to rather than with downturns in the market. For more information on how market corrections could be positive for real estate investors, check out our previous blog “If you Invest in Real Estate, a Housing Correction could be a Great Thing!”. If we then factor in average house appreciation of say +5%, then the expectation for +25%/yearly Return on Investment is not unrealistic.
Visit us at www.mkproperties.ca and our page MK Investment Group on facebook or LinkedIn to learn more about how we invest in real estate to profit in both an increasing or decreasing housing market. Or contact us if you would like to learn how we are providing double digit returns for our partner’s and clients year over year.
If you live in the GTA, we have started the Vaughan Real Estate Investors Club – a meet up run by investors for investors. If you are just starting out, or a seasoned pro, come out to Learn and Network with others like you. Click the link above to go to our site on meetup.com or visit our page on facebook. We look forward to connecting in person. Our Next Meetup is on March 22nd, where we will tackle adding a second suite to your investments.
Martin Kuev is a full time Real Estate Investor, Realtor and Investment Coach. He has worked for some of the most respected and well-known global organizations including Coca-Cola, Kraft and Nestle. With a multi-million-dollar real estate portfolio and team he built over the past decade, he left the corporate world to have the flexibility to spend time with his family, continue with his real estate investments and help others build their long-term wealth.