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Thursday, August 03, 2006

Edmonton Real Estate Investors Changing Formulas

The following is an article from "The Business Edge" News Magazine. I have taken out some parts not relevant to the Edmonton area. Overall the point is that its not too late to invest in Edmonton real estate, but you have to do it with a plan that makes sense.

Investment niches attract growing interest
By Joy Gregory - Business Edge
Published: 08/03/2006 - Vol. 6, No. 16

...Even with Calgary's residential market hitting record highs earlier this summer before taking a bit of a break from its frenzied pace, investors like Madeleine Ficaccio of VEA Group Inc. say the Alberta real estate investment market is good, albeit more complicated than a year ago...whose company wholesales properties under contract and buys, holds and manages properties with joint venture partners.

A strong market with high housing costs also prompted another change in focus. While she and her husband/business partner Dan still target properties with positive cashflow, Calgary investors used to be able to find properties that delivered mortgage paydown, cashflow and equity appreciation.

In Calgary's current market, you can focus on paydown or cashflow, but it's tough to get both, says Ficaccio, whose company uses interest-only financing to make higher-priced revenue properties work.

Because their business focuses on cashflow, they look for properties with additional income (basement suites and garages) and multiplexes with at least four units.

With a growing list of investors now coming to VEA with their money and their deals, VEA is also pursuing larger deals. One U.K.-based client wants her help finding deals worth $10 million-plus. He tells Ficaccio that his research says Alberta is "probably the strongest place in the world to invest your money right now."

Others seem to agree. Ficaccio's list of people she regularly contacts with news of potential deals has stretched to 600 e-mail addresses, one-quarter of which are from outside Alberta. A growing number also seek information on what some consider to be Alberta's hottest market, Edmonton, where VEA already has some investments.

Tyler Uzelman, a partner in Edmonton-based real estate investment firm Libertas Holdings Inc., says the company holds 45 revenue properties with 35 investors, about 25 per cent from Ontario.

Libertas deals with single-family homes, and while they welcomed investors with $15,000 a couple years ago, today's market demands minimum investments of $25,000 to $30,000.

Like Ficaccio, he warns against thinking the current market is too hot for newcomers. "There's a big perception out there that to become a real estate investor, you have to get the deal.”

Libertas, on the other hand, goes after the properties they want.

"We're not flippers. We don't buy real estate and sell," says the former financial planner. Instead, Libertas takes a buy-and-hold approach that's about long-term wealth creation, a strategy that's heavily dependent on what the investment business calls quality tenants and quality properties.

Using figures from the Edmonton Real Estate Board, Uzelman predicts today's market hasn't reached its peak. Nor are today's price increases unprecedented. Between 1966 and 1982, a period also characterized by dramatic economic growth, the average single-family home in Edmonton went from $11,516 to $96,380, an increase of 736 per cent.

From 1999 to now, the price has moved from $113,245 to well over $250,000, a figure Libertas expects to keep rising.

Lower housing prices elsewhere in Alberta are attracting investment dollars out of Calgary and Edmonton, too. Ficaccio has property in Red Deer and markets in several smaller centres. Uzelman's group targets Edmonton and area, although they recently looked at a place in Lethbridge.

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