Investing in Red Deer Real Estate

Last month we posted an article on why now is the perfect time to buy a home in Red Deer, in spite of the past year’s economic challenges. However, we know that many of you have someone in your ear, whispering all sorts of propaganda, telling you to wait for the economy to return to its glory before investing in local real estate. Their assertions may be well intended, but alas they are not backed by accurate information. Yes indeed, there are numerous myths and suburban legends that have long hampered the potential for real estate investors to make a wise and well-timed decision. Today, we tackle those myths as they apply to our great Central Albertan city.

The 4 Myths About Real Estate Investment in a Slow Economy – Dispelled for Red Deer Investors

Myth #1 – Investors Are Wise to Wait for Economic Recovery

This is the biggest myth and the culprit of the most misguided decision in regards to real estate investment. Waiting for full economic recovery will do nothing more but raise the cost of buying your property. If the hesitation comes from wondering whether or not the economy will indeed return to form, you simply need to look to the region. Red Deer’s economy is driven by the energy sector. Prices may be down now, but will certainly come back up again. In fact, industry trends show that when the price of oil has experienced sharp declines a consistent pattern of rapid, not slow, recovery immediately follows. The fact is, the city will once again return to boomtown status. When it does, the cost (listing price, concessions, and interest rates) of buying your investment property will be higher, and you will have missed out on what may be a once-in-a-lifetime opportunity.

Myth #2 – Your Have Fewer Prospects for Monthly Rental Income

This couldn’t be further from the truth. There are numerous scenarios that create opportunity to generate increased monthly income from your investment property during an economic downturn. For one, energy sector executives may have bought beyond their means. During the slow down, they do not have the cushion to ride it out. They sell their property, and seek rental accommodations. This practice is more common than you may think and creates a demand in the rental market. Then there are those less-seasoned laborers that are brought into the energy sector to replace tenured executives who have moved on to other opportunities. These entry level executives are more cautious, and are not quite ready to buy, further increasing the demand for rentals. All of a sudden, your investment property (if you made the right decision to get in at the right time) now becomes a hot commodity and a big source of monthly income, for you.

Myth #3 – Vacation Property Purchases Are Frivolous During an Economic Downturn

If you desire a vacation property for your real estate investment portfolio abiding by this myth is another mistake. A slow economy has no real impact on the interests of outside parties that travel to a given region. The landscape, amenities, and experiences remain unchanged. In fact, when the oil prices are low travel to the region can increase due to lower fuel costs (air and road). Visitors also know that they will receive extra special attention when putting their money into an economy that needs the boost. All of this adds up to another great opportunity to earn income from a Red Deer real estate investment – your vacation property rental. Look to areas surrounding Red Deer for lucrative vacation property investment opportunities, such as found along the waterfront of Sylvan Lake and Gull Lake.

Myth #4 – Short Term Holds Hedge Risk if History Repeats Itself

Wrong. If you’re looking to invest in Red Deer real estate don’t get caught up in the mentality that a recession will return soon after the economy bounces back. Those that do only option for short term mortgages, looking to get in and out. But this opens yourself up to more risk, the kind that is bad for your portfolio. Your goal should be to finance with a long-term, fully amortizing, fixed-rate mortgage. Avoid balloon payments, variables, and short term loans. The assumption, is that you’re looking to build real wealth after inflation, thus a wise strategy is found within the loan. By accepting balloon or variable options you accept interest rate risk that could ruin your real estate investment in the future. Your goal should be a long-term hold that delivers cash in-hand in the present. This cash flow will increase as inflation rises while at the same time delivering moderately leveraged equity growth to build real wealth post-inflation and economic crisis.

Ready to talk about your next Red Deer real estate investment? Call the Dusty Smith Real Estate Team at 403-347-0744 or contact us here anytime.