Today, let’s look at another investment sector -- real estate --that bears little resemblance to the world of mineral exploration and development. With people looking into real estate investing courses via Roofstock, this industry will continue to grow and of course, we'll need qualified real estate agents to help us out with our housing needs.
We’re not talking about flipping houses here in Vancouver, but about a business that works on a larger scale, searching for opportunities wherever they may be, and then developing those opportunities for maximum potential when the cycle turns.
To help us sort it all out, I am pleased to introduce my friend of 20 years, Mr. Joe Genest, a real estate analyst and entrepreneur. Joe is the son of the late, great Rick Genest, executive vice president at Polygon Homes, and like his dad, Joe is honest and smart.
The two of us were in Atlanta 10 days ago to view the real estate syndication business of the Strand Corporation.
I asked him to share some thoughts here...
…Tom - Thank you for the introduction. I can always count on you for a plug when you owe me something!
As a native of Vancouver, I am all too familiar with the local complaint that real estate in this city is far too expensive in relation to wages and economic growth.
But there are a number of cliché factors at play here, such as foreign investors paying above market values (Mainland Chinese) and geographical constraints such as our proximity to mountainous regions, the Pacific Ocean, and the Agricultural Land Reserve.
The truth is that land is scarce here, and as land becomes scarce -- coupled with immigration and foreign investment --the disconnect between supply and demand is accentuated. Since we’re in a continuing demand situation, the price of real estate should continue to move upward -- if not spectacularly, then at least steadily.
For that reason, I believe Vancouver real estate should generally be viewed as a safe harbour, but not a place for investors seeking outsized returns.
For those returns investors will have to look farther out, and perhaps take more risk. This is what brought me to the “Capital of the South” – Atlanta, Georgia – with Tommy and the Strand Corporation.
To give a bit of background, Strand’s mandate is to invest in apartment buildings early in cycles, enhance their properties with active management, and sell later in the cycle, when the trade becomes more crowded.
Strand has bought and sold over 7000 units in Atlanta. In a deal, they look for immediate cash flow, acquisition cost below replacement cost, favorable financing terms and of course, a good location.
Why the US and Atlanta?
Well, it has a number of the right things in place, such as:
- Consumer confidence in the home ownership market in the United States is at all time lows;
- The affordability of owning your own home in the United States has been much more difficult since the recession of 2008;
- Employment and economic growth is very strong in Atlanta compared to other major metropolitan regions in the United States;
- The price of real estate in Atlanta, from a Vancouverite’s perspective, is very affordable;
- Americans will ALWAYS need a place to live.
There are risks inherent in everything, including Atlanta apartment buildings, but I’m quite comfortable with Strand because of their track record and reputation for prudence.
Of course if the world falls off a cliff, these deals won’t be insulated. This would be the “we’re all gonna die!” scenario.
Investors with any questions can contact me at joe.genest@colliers.com
Joe Genest, principal at Bevrick Holdings Ltd, is focused on the acquisition and disposition of Multi-Family Apartment Rental Buildings within suburban markets of the Metro Vancouver region. You can reach him by email: joegenest9@gmail.com
So Joe, who knows this scene pretty well, expects capital preservation and modest growth with his investments in Vancouver, and is working hard to find better yields in other markets like Atlanta.
Sounds like a good strategy to me. And let’s not worry too much about that cliff.
Dislcaimer: The opinions expresses herein are NOT investment advice.