Real Estate Finance And Investments: Risks And Opportunities Pdf Download Reasons Not to Invest in Real Estate

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Reasons Not to Invest in Real Estate

Insolvent companies are leaving many Canadians without retirement security. In April 2003 Air Canada sought bankruptcy protection, citing mounting losses and a $1.3-billion shortfall in its pension fund. A study in November 2004 showed that 60 percent of Canadian pension plans do not have enough money. If the company goes bankrupt before the fund is paid, its employees, at the end of their working lives, pay the price.

From 2020 to 2030, when the older baby boomers will be 64 to 74, America’s elderly are projected to face an income shortfall of at least $400 billion, including at least $45 billion in 2030 alone.

The purpose of this special report is to confront you with the facts that lie ahead for the rest of our financial lives. This is not meant to be ‘doom and gloom’ information; However, there are many statistics that prove that everything is not as good as it is reported.

A study conducted in 2001 found that more than 300,000 Canadians aged 65 and over are still working. 57 percent were 65-69 years old and 17 percent were 75 years or older. So my question to you is not when do you plan to retire, but more importantly, how do you plan to retire?

By understanding the underlying fundamentals you can make an educated decision about what to do with your money. By being fully educated about what really drives the market, we can make informed decisions about how to invest our money instead of investing blindly. Let’s look at an educated…

While reading the morning newspaper we briefly notice some of the headlines. “Interest rates skyrocket overnight!” One reads. We read further and note that the Bank of Canada recently raised interest rates by another 25 basis points. What does it really mean? For the uninitiated you may hear comments like “Sure glad I’m not in the real estate game now! Have you seen what happened to interest rates?” or “The bubble is going to burst! Get out!” Why these ignorant responses? First of all, a 25 basis point increase isn’t exactly sky-high. To prove this, let’s look at the numbers for hard facts.

Borrow $100,000 at 5% amortized over 25 years. We have a monthly payment of $584.59 for this loan. If the rate goes up from .25% to 5.25% we now have a payment of $599.25. That’s only a $14.66 increase in our monthly payment, which is hardly sky-high.

Mortgage payments aren’t the only ones affected by increases in prime rates. A rise in interest rates goes hand in hand with inflation and rising real estate prices. This ultimately means that you are building enough equity in your property.

This release titled ‘Reasons Not to Invest in Real Estate’ aims to educate you that the headlines are not always true. You need to care deeply about what the article is communicating.

A study commissioned by TD Waterhouse found that two-thirds of non-retirees are stressed about retirement investments, mainly due to uncertainty or a lack of money. But of the remaining third, those who said they were not stressed said they planned to work until the traditional retirement age of 65.

So if we can educate people on how to become sophisticated investors, I believe we will help reduce their uncertainty and lack of money, at which point these people will enjoy the retirement they deserve.

As you may well know, real estate has over time proven itself as the primary choice of the wealthy to invest their money. In this way, 90% of the rich have reached their position. So, why is there resistance from people to invest in this way? The fact is, real estate may prove to be the path of least resistance to retirement.

No place in Canada shows that the retirement crisis has been better than Hamilton, Ont. From 1999 to 2004 alone, more than half a dozen companies went bankrupt with underfunded plans. Hundreds of people who lose their jobs lose much of their pensions, and it’s not just the smaller players who are at risk. Stelco, one of the largest steel companies in North America, is currently in bankruptcy protection. In fact, the pension plan at Stelco’s Hamilton plant is worth a staggering $660 million. In Hamilton alone, 11,000 people have pension plans left.

Some economists say a rise in interest rates or a rise in the stock market could help many Canadian funds, if not in the black, close to it, but any of that would be too late for people who already have little left. To demonstrate the lifetime of the work.

Many people now believe that pensions are a relic of the past. Pensions became widespread at a time when life expectancy was much lower than it is today. A company can pay its former employees until their death, which is shortly after retirement. Older baby boomer women who turn 65 today have at least a 25 percent chance of living to age 92, and a 10 percent chance of living to at least age 97. So now, most of the institutes cannot pay the pension. People expected to live into their mid-80s or longer!

Many baby boomers realize that they won’t be able to retire at 65. Some of the more optimistic say they will probably work until they can no longer work. But this is not an intelligent plan, as 25 percent of those over 65 are physically disabled, either permanently or temporarily!

A plausible solution is to increase your financial intelligence and generate cash flow through smart investments that make you money regardless of the state of the economy. One option is to become a real estate investor. To do this one must understand the underlying fundamentals of what drives the market. This enables us to invest with comfort and minimal risk.

To invest in real estate, many of us have to step outside our everyday ‘comfort zone’. Real estate investors alone account for four percent of total real estate purchases. This means that out of every 100 homes sold, only four are buying investment properties.

This statistic shows that most people are either unwilling to invest in real estate or prefer to stay in their ‘comfort zone’ regardless of the financial consequences. I believe the latter rings a strong truth for many people.

Most of us know that new model is sitting in the storage room when we buy electronics from the store. Due to rapid and major technological developments, the world is now moving faster than ever before. We must understand and be aware of the fact that what has worked in the past, such as retirement plans and pension funds, are no longer a safe solution for our retirement.

Change scares many. That’s why it’s important that we always remember to distance ourselves from those who don’t understand the underlying fundamentals and surround ourselves with people who understand that change is inevitable.

By taking a diligent approach to market fundamentals combined with strategic actions outside of our comfort zone, we are better able to control our financial freedom.

A deeper look at how supply and demand affects real estate prices will reveal some of the fundamentals we need to look at. For example, a record number of floods in Alberta from October to December 2005 increased the population by 25,100, or 0.76 percent, to 3.3 million, the strongest increase for the final quarter of any year, and above the 0.14 percent increase. For the country as a whole. With this extreme influx of people we are able to foresee a reduction in housing supply while demand remains high.

No market in Canada shows a better gap in supply vs. demand than Vancouver’s high-rise condo market. Here in August 2006 alone, the demand for high-rise condos was 4,700 units. In the following 24 months, developers plan to build another 13,300 units. This is almost three times the current demand, and reveals a potential oversupply of units.

In contrast, Alberta’s population growth in the last quarter of 2005 was more than five times the national average. Its strong economy lured thousands of Canadians from other provinces and territories, seven of which actually saw their populations decline.

This strong migration is a major source of housing demand. In 2005, BC recorded a net gain of 4,527 people from other provinces. While this number is below the level recorded in 2004, it is a significant achievement as a strong pull from Alberta gained 42,000 people from the rest of Canada.

Due to increased demand and limited inventory, home prices in Calgary increased by more than 50 percent from 2005 to the second quarter of 2006. Now that vacancy rates are close to zero, renters are lucky enough to be able to build a home in advance of the rent increase.

Alberta’s population explosion is due to a large shortage of skilled workers and an overabundance of well-paying jobs. A government report released in June 2006 said Alberta needs 86,000 more workers over the next decade to deal with its acute labor shortage. Within the next decade, it is predicted that Alberta’s oil sands will generate more than 100,000 new jobs and billions of dollars in royalties and taxes to various levels of government, not to mention billions more in dividends to investors.

Alberta’s shortage of rental units is reflected by extremely low vacancy rates, low unemployment and high demand for housing, ultimately leading to very predictable results in the market. Sharp rise in property prices, high construction cost which in turn leads to rise

Increasing resale home values, and, more importantly for investors, rents for their properties.

On a daily basis we hear many reasons not to invest in real estate:

“I’m very busy and I don’t have time”

“I can’t be bothered to solve tenant problems”

“I’ll get rich some other way – like the lottery”

“I’ll do it – tomorrow”

“Interest rates are rising and this bubble is about to burst”

The point is: these are not reasons, but excuses. Excuses allow us to come up with justifications that support our underlying purpose, which is, subconsciously, to stay within our comfort zone and away from change. Our subconscious exists to protect us; Yet the very element of working in our security is actually destroying our potential for economic freedom.

Even if the clock ticks ominously, now is the time to focus on investing. For retirees suffering from a lack of pension funds, real estate investment is a small step compared to the available options. By investing in real estate, we look at what the headlines are saying.

Ultimately you want to live the life of your dreams, but you’ll never get there if you don’t commit to taking the actions you need to take today, to get to where you want to be tomorrow. Real estate will get you there, you just need to commit and learn the basics.

Please contact us for comments related to this article or download the free article in.pdf at http://www.oasisproperties.net/Report.

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