2. Retail Sales Trends

Why is measuring retail sales so important to analyzing long term trends in Real Estate? Retail sales increases (above the National averages) show the more money people spend on retail goods indicates a long term confidence in the market and economy, plus as people earn and spend more it has a direct correlation on the housing market. Due to affordability and confidence in the future, we compare retail sales growth to the national numbers: the higher the growth vs. the national numbers the more likely the housing prices will be increasing in that area for the long term:

Retail sales increases based on a recent Bank of Montreal report (ending October 2006)

-- 2006 Actual --

CAN. . . . . . . . (6.8%)

BC . . . . . . . . (6.7%)

AB . . . . . . . . (16.5%) *** Above National Growth

SK . . . . . . . . (6.3%)

MB . . . . . . . . (5.9%)

ON . . . . . . . . (4.9%)

QC . . . . . . . . (5.0%)

NB . . . . . . . . (5.8%)

NS . . . . . . . . (6.7%)

PE . . . . . . . . (4.3%)

NF . . . . . . . . (3.3%)


*** only one market in Canada exceeded the national average. This is a very healthy number to look at, but what is more interesting to note is the forecasted growth in retail sales for the next four years. BC and Nova Scotia also show strength in this indicator.


-- 2007 Forecast --

CAN. . . . . . . . (6.2%)

BC . . . . . . . . (6.3%)

AB . . . . . . . . (12.0%)

SK . . . . . . . . (5.6%)

MB . . . . . . . . (5.5%)

ON . . . . . . . . (4.9%)

QC . . . . . . . . (4.9%)

NB . . . . . . . . (5.1%)

NS . . . . . . . . (5.6%)

PE . . . . . . . . (4.3%)

NF . . . . . . . . (3.8%)


The short term forecast indicates the pace of retail sales growth in Alberta is bound to slow somewhat but will still be double the National average and significantly outpace all other provinces in the country. BC will still show strength in 2008 - 2010

-- 2008 - 2010 Forecast --

CAN. . . . . . . . (5.5%)

BC . . . . . . . . (6.0%)

AB . . . . . . . . (8.0%)

SK . . . . . . . . (5.0%)

MB . . . . . . . . (5.0%)

ON . . . . . . . . (5.0%)

QC . . . . . . . . (4.8%)

NB . . . . . . . . (4.6%)

NS . . . . . . . . (4.5%)

PE . . . . . . . . (4.4%)

NF . . . . . . . . (4.3%)


Personally, we feel this is a conservative forecast for 2007 - 2010, but it still gives you some great insights into where the economy is heading.


As mentioned earlier, this is one of the key indicators of the direction of the residential housing market... study this fundamental and keep your eye out for opportunities.

====================================
4. Renovation Secrets

*** Borrowed from Tip # 63, '97 Tips for Canadian Real Estate Investors'***

"Put Your Renovations to Work" (it's not as easy as most think!)

Factor renovations into your investment plan -- and make sure you finance the work with profit in mind.

We all know renovations can make you money, we’ve all heard the stories. However there is also a danger in just jumping into a renovation's project with out following a system. The rules around renovating a rental suite are substantially different than renovating your home. In your home emotions are allowed to run wild, you choose colors, textures and counter tops based on your personal taste. In a rental property this can not only drive the budget beyond hope, it can also make your property un-rentable.

With your rental suite, you must treat renovating like a business, remove your personal preferences and replace them with what would best draw in your target renter profile and still be cost effective. A whole book could be written on this subject, and as a matter of fact a wonderful Canadian specific system is available for investors looking to know exactly which renovations to do and which ones to avoid at all costs. It is titled “Renovations Secrets for Investors” and you can read more of the details at:

CLICK HERE

Make sure the renovation financing won’t eat away the profit from that new kitchen – or flush the cost of a new bathroom down the drain! When estimating the cost of the renovations make sure you add a 50% buffer as there will inevitably be issues that arise. Remember to be honest with your banker. Presenting an honest reno budget is further evidence of your willingness to do the extra 10%.

-- The LOC option --

A Line of Credit (LOC) may be the best way to finance a home renovation that costs less than 75 percent of the home’s value. An LOC can be registered as a second mortgage, leaving the first mortgage in place. But Canada’s chartered banks can’t lend a homeowner more than 75 percent of the value of a home without having it insured. Those premiums can add a significant cost to a renovation project and must be factored into your business plan. (A 2 percent insurance premium on a loan of $90,000 would cost a borrower $1,800.)


-- The PPIL option --

A Purchase Plus Improvements Loan (PPIL) is used when buying a home where improvements are necessary to add value to the house. PPILs are also good for renovations. The key? They must add value to the house. PPILs can save you money because lenders will let you borrow based on the post-renovated value. That negates the 75 percent rule -- and saves the insurance premium.

-- What do you need to do? --

1. Calculate real costs.

..... Determine the pre-renovation value of your house and the cost of the renovations.

2. Get an appraisal

..... Have the property appraised as-is and request that the appraiser also provide you with an “After Renovated Value” in the appraisal. Take both of these to your banker or mortgage broker. Many banks will give you the mortgage based on the post-renovated value. The catch? The renovating cash (a cash holdback) will be held in trust or by the bank, until the renovations are done. Once that happens, the holdback is released. Make sure you use a veteran investment property Mortgage Broker to get this deal properly set up.

-- KEY INSIGHT:--

A failure to calculate accurate renovation costs is one of the main reasons greenhorn investors don’t turn a profit when re-selling renovated properties. Fixing a basement up in a single family home is a bad investment for most properties. You won’t recoup this $25,000+ in the increased value of the home. However, that money spent on the above-ground floors, especially the kitchen, bathroom and light fixtures will give you an immediate return on your investment. Remember, always follow a proven system, like the Renovations Secrets Program mentioned above.
CLICK HERE

The small subtleties make all of the difference. Never guess what the renter or next purchaser wants – go with the facts. You can and should learn from the mistakes of others. Make sure your plan for the property covers the added costs of the borrowed funds used to complete the renovations.

Stay tuned for next month for some further insights into the art of the 'Renovation'.

6. Final Thoughts

You will be hearing a lot of opinions on your local Real Estate market over the next 6 months. Because unsophisticated investors respond emotionally to media headlines, many of these opinions are bound to be negative. This happens every time, but a focus only on the market fundamentals allows you to cut through the emotions & opinions and get right to the truth.

For instance, in August 2004 when everyone was running away from the Calgary market, those of us who followed the 12 fundamentals knew that it was an amazing time to buy, and we did. Since that time (25 months later), while others ran around yelling the 'sky is falling', sophisticated REIN™ members calmly bought and have seen the average prices increase by over $5,997/ month ($199/day)!

The 'chicken littles' are back again in November 2006. While they throw around fear, you and I will be buying and in 2 years from now, you and I will look like financial geniuses. They once again will completely miss out because they just don't pay attention to the fundamentals. Sitting on the sidelines is the easy way to nothing. And as Donald Trump says "Nothing is easy... but who wants nothing".

Once again, congratulations to all the action takers who attended the last ACRE System in Edmonton, we have just gone through the hundreds and hundreds of thank-you cards and email notes... I wanted to share a couple of notes we have just received:

"From a professional standpoint-- I have been a licensed Realtor for 6 years and have been working with investors a fair amount in the last 3 years. I learned more in the last 2 days than in those 6 years when it comes to investment properties and tools that will not only save me time & make me money but also service my clients 110% better which is so important to me... On a personal side-- I get to build my Personal Belize instead of wandering and working so hard and ending up with such a small percentage in the end, or even knowing which way to go. I now have a focused path to achieve my own dreams and the ability to make them happen, thank you so much... Maui here I come" Kirsty Lloyd, Edmonton, Alberta.


"Prior to learning the ACRE System I let emotions get in the way of the deal and walked away from many good deals. This system has taught me to run the numbers, eliminate emotions and base my decisions upon solid fundamentals, while running my Real Estate like a business" Stan Neufeld, Thorsby, Alberta.

These are just a couple of the hundreds of stories we received in the past few weeks, we would love to add your story to the growing list of people who have used Real Estate to alter the course of their futures.

If you would like to view some of the amazing pictures taken at the recent ACRE System program in Edmonton please follow this link and enjoy all the smiling faces:

--View Pictures --

Focus on the fundamentals, keep emotions out of your decisions, and enjoy the results in just a few short years.

Sincerely,

Your REIN™ Team

P.S... As earlier mentioned the last ACRE System for 2006 was completely sold out with a significant waiting list. You can still order the completely brand new updated ACRE System Home study program for $200 off the current price... as a note, remember the price is going up in January, but we're holding off until then. So if you are sitting on the fence you may want to get the new updated version before the price increases.
CLICK HERE

P.P.S... OOPS almost forgot to mention, the latest version of our Alberta Top Investment Towns report (as featured on the front pages of National Newspapers in the last few weeks almost every newspaper) is now ready for general release. This report is now over 84+ pages long, complete with all the research you will need to make a confident decision on this region's long term economic viability... to order this hot off the press report go directly to:

MORE DETAILS to read all the details.