BUSINESS

Wednesday, Ma

y 6, 1992 — Norih Shcre Nows - 47

5 OEE SY WE FEO XE

Know your real estate investment limits

HOME VALUES and prices
may rise and fall. But barr-
ing a full-blown depression
or total economic collapse,
real estate still remains one
of the major ways to invest.

Michael

DOLLARS AND SENSE

Some areas experience more
growth than others. (‘‘What are
the three most important tips
about buying real estate?’’ ‘‘Loca-
tion, location and location.’’)

And nobody can predict the
future. Perhaps demographic
trends signal the end to some of
the rapid price increases many
regions have experienced in recent
times. ;

But people need places to live.
So a new book like Making
Money in Real Estate, The Cana-
dian Residential Investment
Guide, by. Douglas Gray
(McGraw-Hill, $19.95), is always
welcome. .

Gray, a lawyer who specializes
in real estate and commercial law
(his six other books include Buy-
ing, Owning & Selling a Con-
dominium), lists both the advan-
tages and disadvantages of putting
money into real estate.

Advantages: Low risk (‘‘if you
buy prudently and with knowl-
edge’’), low starting capital, skills
that can be learned, part-time in-
volvement, leverage (using other
people’s money to increase the
gain on your investment), appre-
ciation, equity buildup, inflation
hedge, income potential, tax ad-
vantages, attractive return on in-
vestment, increasing demand for
land. :

Disadvantages: Subjective feel-
ings (‘‘basing decisions on emo-
tion rather than on sound
preparation, knowledge and ob-
jective assessment’’), tack of Hi-
quidity, extended holding period,
time expenditure, potential high
risk, lack of accurate com-
parisons, exposure to government
control.

Whether you are buying a prin-
cipal residence or an investment
property, use Gray’s master
checklist to help you profit per-
sonally as well as financially.

I've come up with the following
key points based on his 117
guidelines:

@ Note the pros and cons of in-
vesting in real estate as they relate
to your situation.

@ Understand what affects real
estate prices and cycles to find the
best times to buy and seil.

@ Learn about real estate through
newspaper features, the real estate
ads, courses, seminars, books and
free publications like Royal
LePage’s Survey of Canadian
House Prices, Canada Mortgage
and Housing Corp. Your local
real estate board and individual
realty companies also provide
useful literature.

@ Review your personal financial
Situation — income and expenses,
assets and liabilities, percentage of
debt in relation to your assets,
percentage of debt payments in
telation to your income. How
large a mortgage can you get?

What additional debt and pay-
ments would you feel comfortable
carrying?

@ Write down your expected fi-
nancial figures (as listed in the
previous item) by year for the next
five years. If this projection car-
ries you into retirement, your
margin for error is far less than if
you still have regular and proba-
bly extra income irom work. How
much risk can you {and your
partner) tolerate?

@ Learn about analyzing property
values, and the appropriate rules
of thumb to help you relate value
and rental income.

@ Will you manage the property?

Might a family member live in
part of the property in exchange
for management duties? Find out
what services a professional prop-
erty manager provides — and the
cost.

@ Choose the right type of in-
vestment property for your situa-
tion.

Examples: a place whose rent
covers all expenses; a place you
have to subsidize because you ex-
pect the value to appreciate more
than your after-tax costs; a place
in your neighborhood where you
hope an adust child and family
will live,

@ Choose your advisers — real-

tor, building inspector, lawyer,
accountant, insurance broker,
banker, possibly mortgage broker.
@ Decide the form of legal own-
ership of the property — especial-
ly important if partners are in-
volved in the purchase.

@ Visit various areas to decide
where you want to buy; consider
both personal and financial fac-
tors.

Be prepared to compromise
(What I want I can’t afford —
and what I can afford { don't
want’). Write down the criteria
the property must meet, in order
of priority.
@ Do your

research. Analyze

your prospective property. Have it
inspected. If the place doesn't
make sense financially — purchase
costs, expenses — don’t buy it.
@ Shop around to find the most
flexible financing at the best rates,
and choose your approach. A low
down payment could leave you
cash for other purposes; some
people feel more comfortable with
less debt.

@ Plan how you will negotiate the
purchase. Know your limits and
stick to them.

@ Know the tax rules and keep
careful records. Monitor your in-
vestment(s) so you know when
you should consider selling.

EXPERIENCE IS —

PRICELE

Right from the start, your
architect designs to your bucdiget,
while keeping a keen eye on build-
ing codes, construction costs, and
municipal by-laws that will impact

on your

‘broject.

An architect bas years of
education and practical experience
to belp you make the best decisions,
to negotiate with builders and
suppliers, and to oversee your pro-
ject. Du ring construction, you'll

also ben

efit from your architect's

on-site expertise.
Working with an architect

protects your investment and will
often enhance the value of your

property

. Ask an architect... their

experience ts priceless.

To contact an architect who will best under-

stand you

rv requirements, call or write:

Architectural institute of British Columbia
103 - 131 Water St, Vancouver, BC\G6GB4M3
Phone 683-8588