A wide range of women in the real estate investment game gathered in Vancouver April 27 to hear pearls of wisdom from Don Campbell, senior analyst at the Real Estate Investment Network and Canada’s foremost real estate investment author and adviser.
Campbell’s address to the Women Investing in Real Estate (WIRE) Meetup was characteristically packed with no-nonsense, sometimes eyebrow-raising, tips for those wishing to succeed in real estate investment. He summarized advice nuggets that he wished somebody had told his younger self when he started out investing in property.
Here are five of the many highlights of his presentation.
1. “Interest Rates Don’t Matter”
Campbell’s first piece of advice was to embrace inevitable change and use it to your advantage – such as changes in interest rates, which don’t materially affect house prices. In fact, he said, they often mean a stronger economy and therefore potentially higher rental yields, as well as an increase in renters overall.
“Rising interest rates make zero difference to the market,” observed Campbell, pointing out that as long as rental incomes cover expenses, buy-and-hold investors have nothing to fear from economic fluctuations over the long run.
2. “The Mantra ‘Location, Location, Location’ is Baloney”
The public is too easily swayed by popular beliefs – such as location being everything – and media hype about unaffordability and market bubbles, said Campbell. People need to “stop drinking the Kool-Aid,” he asserted, adding that there are many myths in real estate and it is essential for investors to forge their own path.
“All that matters is rental yield, not property value – where your renters are coming from, getting ahead of the next demographic or economic wave to strategically position yourself to maximize those opportunities,” said Campbell.
He added that there is “no place for averages except in text books”, and that reports citing average house prices were skewing those prices upwards because of luxury transactions. (More on this here.) Campbell noted that real estate markets are large and can’t be represented by averages: the west of Vancouver commands a much higher price than the east, so if you are buying in one or the other markets, the average is irrelevant.
3. “The Demand Curve for Micro-Condo Rentals will Drop in 10 Years”
Investors snapping up units in the current wave of cheap micro-condos will have a problem renting them out in 10 years’ time, Campbell claimed.
He said that the massive demographic currently interested in renting micro-condos is the large Millennial generation, who in 10 years’ time will be starting families and wanting to move to bigger homes. That will result in a drop-off in interest in small units, he said.
“My advice if you own a micro-condo? Sell it now,” Campbell added.
4. “Densification is Averaging You Out”
Campbell told the audience that densification of assets is highly overrated and often prevents investors from reaching their financial dreams. He quoted US billionaire Warren Buffet, who advises, “Put all your eggs in one basket and protect that basket.”
For real estate investors, that means it’s not wrong to invest all your money in one type of real estate or one region, as long as it is done strategically at every stage.
5. “No ‘Should’s Allowed”
There is no such thing as “you should do this” in real estate investing, concluded Campbell. As long as the investor’s approach is based on a sound long-term strategy, where, when and how to invest is up to the individual.
There are no wrong answers, he told the audience.