common cents safe and secure real estate investing As the New Year begins,
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many Canadians review their investment choices and options along with recent earnings (or lack thereof, unfortunately). This can often be confusing as the number and complexity of investment products continues to grow. However, it is important to keep in mind some simple by Phil Wooster questions that can help direct your choices: First Island Financial • Ask yourself if you are comfortable Services Ltd. with the overall safety of your principal? What risk factors will affect its security and earnings? • Are the earnings sufficient given the risk undertaken? How do your earnings compare to expected returns? Are the expected returns valid for several prior years and economic cycles? • How do you realize your gains and actually get paid? What are the requirements and fees to convert your principal or earnings back to cash? • What is the experience and track record of the seller? Do they have a vested interest in your long term investment success? If you had trouble answering the above questions, a prudent alternative may be investing in secured real estate via mortgage investments offered by a reputable and experienced manager. Your money is hard earned and while part of an investment portfolio can be earmarked for higher risk and potentially higher return (or loss) investments, it is always conservative to maintain the bulk in lower risk investments that can still provide above average returns for the long term. Investing in secured real estate can achieve this goal if done properly. In general, real estate values in Victoria and the South Coast tend to remain relatively stable. Values may dip in certain product sectors or locations during sluggish economic cycles, but overall risk can be managed effectively by a knowledgeable manager. The larger the market, typically the more stable it is and the easier it is to sell and recoup invested funds. Smaller markets tend to drop first and recover last in difficult economic times, a fact which an experienced manager will guard against. Investments in residential real estate can also aid in waiting out a slower market by providing rental revenues in the interim. A professional mortgage investment manager will protect both principal and earnings by minimizing risk through prudent lending criteria (1st place mortgages), diversification of product type/location and continual careful due diligence. This includes knowing the specific market values/rents, the developer’s track record and credit history, the number of proposed or completing projects in the area, the general absorption rate (for multiple unit projects) and whether the construction cost budget is adequate. Overall, when done properly through a qualified manager, real estate investments can be a safe and secure investment to provide above average returns for the long term. For more information visit www.firstisland.com.
Published on Jan 30, 2013
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