Not all real estate investing is the same
Article by Michael Dominguez, Canadian Real Estate Wealth, June 18, 2014
“We all know the expression, those that do not study history, are doomed to repeat it. I look back to the American real estate crisis that hurt so many real estate holders.
The investors in the U.S. in the mid-2000s that focused on cash flow in their investments, rather than appreciation, found that even though the value of their investment dropped, their cash flow remained solid. In fact, some found cash flow actually improved, as the new stream of renters (people that lost their homes) increased rental demand, thus allowing rental amounts to stay strong and in some cases, increase.
Fast forward five years and look at the Canadian market. I see so many investors jumping into the new condo builds in Toronto. I have asked a number of the investors what kind of cash flow they are generating.
The cash flow, including maintenance fees, for those new builds Toronto condos are well into the negative side. This means that each month, in order to maintain the property, they need to take money out of their own earnings, to sustain the property.”
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