15 Key Considerations Before Getting Started In Real Estate - Forbes - Canada News Media
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15 Key Considerations Before Getting Started In Real Estate – Forbes

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Diversifying your income is the mantra of a lot of wealthy people today. With the potential profitability of the real estate market and the abundant training resources available, many people consider this profession to be the ideal side hustle.

The internet and digital learning have made the field very approachable. Hundreds of training programs offer meetups, coaching, seminars and podcasts that can help potential real estate professionals find their niche and become profitable. However, before settling on real estate as a potential income-earning investment, there are a handful of considerations that you should keep in mind. Fifteen experts from Forbes Real Estate Council discuss what those considerations are.

Photos courtesy of the individual members.

1. Educate Yourself

Just start educating yourself. Search and go to local meetups in your community. Attend your local real estate investment club or REI group. Talk with others, learn what path they took and find out what is working or not working for them. Learn from a distance and learn from others. – Aaron Marshall, Keyrenter Property Management

2. Utilize Free Resources

There are endless free resources out there that you can really extrapolate great value from a simple Google search. YouTube is an unbelievable resource to watch experts talk about different topics. There is also the option of taking free courses on Youtube from schools like MIT to learn real estate and finance from the greatest minds in the world. – Ari Rastegar, Rastegar Property Company

3. Plan Your Work

Your real estate career will only be as great as your plan. Jumping into real estate without a plan is akin to jumping into the deep end without knowing how to swim. You’ll do anything to stay afloat without thinking it through. It is essential to plan, prepare and execute. Lack of any of these actions may result in missed opportunities and missed goals. – Cheryl Abrams, Re/Max United Real Estate

4. Stick To The Fundamentals

Making the jump to real estate investing requires the same focus that you would bring to investing in any asset class. Understand and focus on the fundamentals. How do I minimize risk? Is the real estate project delivering a competitive current return? Is that return sustainable? In answering these questions, you will develop a sense as to whether you should make the investment. – Mark Tiefel, Capital Equity Group, Inc.

5. Find A Mentor

Find a mentor or join a team. This will give you exposure to the industry and expedite your learning curve. In addition, be committed to making this a career. Too many people get into real estate part time, but it takes a true commitment to build a career. Attend every class and conference you can in the early parts of your career. Listen for those nuggets that will move you forward. – Kofi Nartey, The Kofi Nartey Group – Compass

6. Research Options

The first step to investing in real estate is to decide if you want to be a passive or active investor. If you want to keep your day job and invest your money, look into real estate investment trusts or crowdfunding. On the other hand, if you want a career change, consider flipping properties or becoming a landlord. Decide how much time and money you want to invest and then research your options. – Joe Houghton, RE/MAX Results/The Minnesota Property Group Team

7. Determine What Fits Your Lifestyle

Diversifying your income with real estate investments is a great way to generate additional revenue. One of the most important considerations is determining whether it’s a right fit for you. Do your research to learn about the different investment types, whether they are long or short-term investments and then determine which one best fits your lifestyle. – Michelle Risi, Royal LePage Connect Realty

8. Provide Unique Value

One consideration to make when entering the market is assessing your ability to understand what the industry is lacking and filling this void to bring unique value to your clients. This is essential when you’re new to the business. It’s also important to leverage your network and work with your peers who operate in the same market and possess a deep understanding of its specific nuances. – Cody Vichinsky, Bespoke Real Estate

9. Understand Your Local Market First

First of all, making a jump into real estate is a broad jump. Whatever discipline you choose (investor, realtor, developer, etc.) the key is market knowledge. Real estate is a hyper, local market-driven industry. What’s happening in Waco, Texas is not the same an hour south in Austin. Understanding your local market is the first step prior to being able to direct efforts toward one area. – Giuseppe Piccinini, JP And Associates REALTORS

10. Take It One Step At A Time

Anyone wanting to jump into real estate investing needs to focus on dedicating time to learn a facet of it first. New investors tend to get so overwhelmed with all the different strategies and types of real estate investing that they get sidetracked when trying to find their niche to start off with. Commit and focus on one strategy, master it and move to the next level of investing. – Nancy Wallace- Laabs, KBN Homes, LLC

11. Focus On Expenses, Not Income

There are two ways to build wealth: make more money or keep more of what you make. The single most important piece of advice I can give is to plan your taxation and expenses before you make money and not try to fix a problem after. Meet with an experienced CPA that understands taxation and expenses prior to starting and plan for your best case scenario. Hard work gets it, planning keeps it. – Blake Plumley, BluWater Capital LLC

12. Find A Niche You Know

Peter Lynch, who ran Fidelity’s Magellan, the largest mutual fund at the time, said, “Invest in what you know.” That’s great advice for real estate. Many of the most successful people who either invest or sell real estate have a niche where they are the experts. Where is your deep expertise? Connect that knowledge to real estate and you’ll increase your chance for success. – Kevin Hawkins, WAV Group, Inc.

13. Set A Clear Goal

Millions can be made and lost in real estate, and your success comes down to three things: understanding your goals, doing your due diligence and learning from someone more experienced than you. When you’re looking to learn, pay close attention. Not everything is what it appears to be in real estate, and that relates to both people and properties. Most importantly, never stop learning! – Dani Lynn Robison, Freedom Real Estate Group

14. Befriend An Attorney

Learn the ins and outs of real estate law to benefit from its extensive value proposition. A lot of money can be made when deals are structured correctly, and having knowledgeable attorneys in your network can be a huge benefit. – Saurabh Shah, InstaLend

15. Attend A City Meeting

Go to a city meeting about a proposed development, feel the pulse of the room, get a sense of citizen attitudes toward real estate, learn the zoning and introduce yourself as someone who can answer their questions. It’s amazing how few real estate agents do this. It’s so simple, makes an impression and puts you in front of potential clients. – Ari Afshar, Compass

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Why It Might Not be right To Buy Bridgemarq Real Estate Services Inc. (TSE:BRE)

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Bridgemarq Real Estate Services Inc. (TSE:BRE) stock is about to trade ex-dividend in 4 days time. You will need to purchase shares before the 30th of January to receive the dividend, which will be paid on the 28th of February.

Bridgemarq Real Estate Services’s next dividend payment will be CA$0.11 per share. Last year, in total, the company distributed CA$1.35 to shareholders. Calculating the last year’s worth of payments shows that Bridgemarq Real Estate Services has a trailing yield of 8.8% on the current share price of CA$15.27. If you buy this business for its dividend, you should have an idea of whether Bridgemarq Real Estate Services’s dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.

Check out our latest analysis for Bridgemarq Real Estate Services

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Bridgemarq Real Estate Services distributed an unsustainably high 120% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 104% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect – but we’d generally want look more closely here.

Cash is slightly more important than profit from a dividend perspective, but given Bridgemarq Real Estate Services’s payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.

Click here to see how much of its profit Bridgemarq Real Estate Services paid out over the last 12 months.

TSX:BRE Historical Dividend Yield, January 25th 2020

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s encouraging to see Bridgemarq Real Estate Services has grown its earnings rapidly, up 64% a year for the past five years. Bridgemarq Real Estate Services’s dividend was not well covered by earnings, although at least its earnings per share are growing quickly. Fast-growing businesses normally need to reinvest most of their earnings in order to maintain growth, so we’d suspect that either earnings growth will slow or the dividend may not be increased for a while.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Bridgemarq Real Estate Services’s dividend payments are effectively flat on where they were ten years ago.

To Sum It Up

Is Bridgemarq Real Estate Services an attractive dividend stock, or better left on the shelf? While it’s nice to see earnings per share growing, we’re curious about how Bridgemarq Real Estate Services intends to continue growing, or maintain the dividend in a downturn given that it’s paying out such a high percentage of its earnings and cashflow. It’s not that we think Bridgemarq Real Estate Services is a bad company, but these characteristics don’t generally lead to outstanding dividend performance.

Want to learn more about Bridgemarq Real Estate Services’s dividend performance? Check out this visualisation of its historical revenue and earnings growth.

If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

 

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The US Federal Reserve Has Canadian Real Estate Back In Bubble Territory – Better Dwelling

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Canadian real estate buyers are still feeling exuberant about the market. The US Federal Reserve Bank of Dallas‘ (Dallas Fed) exuberance indicator shows expectations are still high in Q3 2019. The index measures explosive price growth, that’s detached from fundamentals. Expectations are much lower than they were in 2017, but are still above critical levels.

Exuberance Index

The exuberance index is the tool the US Federal Reserve developed to track housing bubbles. The indicator measures buying behavior in contrast to income developments, and looks for explosive dynamics. That’s what econo-nerds call unusually fast rising prices. A rapid increase in price is usually due to emotion, which is a detachment from fundamentals.

Emotional premiums tend to not stick around very long, since they’re volatile. Events such as policy, recession, or employment can quickly deflate expectations. As a result, when buyers are grounded in reality by one of these events, the premiums can disappear. This is more commonly referred to as a correction or crash, depending on how fast it happens.

Efthymios Pavlidis and the Dallas Fed developed an index to track exuberance. They publish two sets of numbers – an exuberance indicator, and a threshold value. If the indicator rises above the 95% critical threshold value, buyers are acting exuberant. If the indicator stays above the threshold for more than 5 quarters, the market is said to be exuberant. It’s complicated, but not at the same time.

Canadian Real Estate Buyer Exuberance Is Back

Canadian real estate buyer expectations have cooled down, but they’re still elevated. The Dallas Fed has buyers in Q3 2019 at a level 3.1% lower than the previous quarter. The most recent quarter is also reading 12.6% lower than the same quarter last year. The only quarter lower in the past few years, was in the beginning of last year – when the market was cooling down. That was very brief.

Canadian Real Estate Buyer Exuberance

An index of exuberance Canadian real estate buyers are demonstrating, in relation to pricing fundamentals.

Source: Federal Reserve Bank of Dallas, Better Dwelling.

Exuberance is much lower than it was at the recent peak, but it’s still very high. The indicator has fallen 63.2% from the most recent peak in Q2 2017. If you consider the Q1 2019 drop below the threshold a blip, this is the 19th quarter of exuberance. Remember, the market is declared exuberant after 5 consecutive months above.

Confused? That’s because the Canadian real estate market is very confusing right now. After twelve consecutive months of rapid price acceleration, expectations lowered for a quarter. Literally 4 days after that quarter ended, Canada announced a policy reigniting enthusiasm. The size of the program is small, but the message is big – the government will try to bolster prices. If 12 quarters of exuberance set the prices they’re willing to try and preserve, what’s another few quarters?

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US Real Estate Getting Hot

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(New York)

After about three years of being a laggard and worrying investors that a recession may be coming, US real estate looks to be turning the corner. Not only have home sales been rising, but new mortgage data looks very encouraging. Home lenders extended $2.4 tn in new home loans last year, the most since 2006. That figure is a whopping 46% increase from 2018. One economist from Freddie Mac described the situation bluntly, saying “When a large and cyclical part of the economy—housing—is starting to improve, it’s a good sign for the economy at large”.


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