6 Keys to Predicting Whether a Town Will Boom or Bust: Lessons I Learned From "Real Estate Investing in Canada" by Don R. Campbell
When I first started getting interested in real estate investing, I read quite a few financial books for inspiration and practical advice. Among them, "Real Estate Investing in Canada" by Don R. Campbell stood out for its straightforward approach and actionable insights.
One chapter, in particular, caught my attention and has helped me with tangible advice: "How to Tell if a Town Will Boom or Bust: The 12 Keys that Unlock the Vault." This topic is very important because success in real estate hinges largely on location. Selecting the right area ensures not only good returns but also a secure investment.
At CMI, our focus is on pinpointing promising locations through diligent research into provinces, cities, and neighborhoods. Here are six key factors from Don R. Campbell's list that stood out to me:
Mortgage Interest Rates: “Lower mortgage rates will help drive value up and keep an investor’s expenses down, but this positive effect is offset by the increase in the vacancy rates as more renters will become homeowners. If you’re buying and flipping properties, low interest rates are good for your business. If you’re buying and renting, then a little increase in interest rates can prove to be a very good thing over the long term of your investment.”
Increase in Average Income: “If a town’s average income is increasing faster than the provincial average, real estate prices will do the same. We are looking for a town that will outperform the rest of the marketplace. As people earn and spend more money, the value of real estate in that town will increase. Be wary of towns where demand is driving values upward, while the average income is remaining flat or decreasing. This often happens in towns that are attracting a lot of retirees. The town may be a good short-term investment, but without an increase in average income, increases in real estate values will not be sustainable over the long term due to affordability constraints. People can only afford so much of their average income to pay their monthly housing costs.”
Increased In Migration and Demand: “Analyze both components of in-migration. 1) immigration: people from other countries moving into the area and 2) intra-migration: people moving from other parts of Canada into the area. Look for areas where people are moving at a rate faster than the provincial average. They are in high demand because of an increase in jobs or easier access to jobs and are gaining a reputation as a great place to live. Watch for major announcements of new jobs or major new businesses moving to an area.”
The Ripple Effect: “When a specific area has a boom in prices, the real estate in the surrounding areas follows. This also works on a micro scale. When a neighborhood is re-developed or goes through gentrifications, the older untouched neighborhoods near it also increase in value. Look for these redeveloping areas and then purchase in areas surrounding them where it is still possible to find good properties at great prices before the positive boom ripple affects the area.”
Local, Regional, and Provincial Political Climate: “You’re looking for a business-friendly environment with minimal taxation (both income and property) and with a fair landlord and tenant law structure.”
Transportation Expansion: “Transportation equals accessibility; accessibility means population inflow; population inflow means higher demand; higher demand equals increased property values and lower vacancies. Commuting and access times are critical to a town’s fortunes. The majority of Candians have historically waited until the transportation improvement is complete and then they start thinking about moving to an area. The sophisticated investor waits until the project is actually started (announcements can be reversed) and then takes action. Transportation improvements can include- highways, rail, rapid transit, and even expansion of scheduled airline service.”
These insights, alongside other considerations, are invaluable when evaluating potential investment locations. "Real Estate Investing in Canada" has helped my approach, prompting thorough due diligence before any investment decision at CMI.
Thank you for reading!
Rachel
