Canadian Real Estate: What To Look For In A Partnership
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What qualities should Canadian real estate investors look for in potential investment partners before committing their hard earned capital?
The Edmonton Journal's Gary Lamphier recently stated that sensationalist stories of housing busts and household debt in Canada are "largely overblown", and attributed these statements to media outlets desperately craving to hold on to their readership.
From analyzing recent data, including the Toronto real estate market that is still reportedly a "seller's market" despite previous fears, it seems Lamphier may well be right. At the same time, Edmonton is seen as a significant future development location.
Unfortunately, as real estate markets continue to grow, there is always the opportunity for wild speculation. This can be seen with the recent Platinum Equities disaster, as many unassuming real estate investors lost countless sums of money by blindly leaping at promises of huge returns, with little due diligence. Before you commit to any investment opportunity or partnership, here are some of the things that must garner your attention:
1) Track Record
This is especially important when getting into an investment partnership with a third party manager. What proven successes do they have, as short-term gains are easy to claim and achieve. Have they been in the industry long enough to show their value and proven investment returns throughout all the phases of the real estate cycle?
2) Alignment with Goals and Values
Is the project promoter and other potential partner's goals and values in alignment with yours? In other words; are they just looking for fast money, with a short term game plan, or are they more interested in the big picture and long term success?
3) Dedicated to Quality
Canadian real estate investors should value a commitment to quality in their partners. There can be fiscal dangers from going over the top or being too flamboyant, but the quality and care a firm puts into its work says a lot. Have they invested in a reasonably good website and taken the time to provide key information about projects they have been involved in? What types of projects are they involved in and what types of tenants are they leasing income investment properties to?
4) Extensive Expertise
It can be relatively easy to generate income and profit from a real estate investment in an appreciating economy, but it takes a veteran with experience to profitably steer an investment through everything a market can bring over the long haul. One sign to look for here is whether the promoter is only involved in one opportunity in one market and then may do anything to get it done versus being engaged in multiple developments in different areas over time and thus is likely promoting a specific opportunity because it really is the best available.
5) Is Motivated to Protect Your Interests
Look at how the partnership or investment vehicle will be structured. Do the organizers have sufficient motivation to see it succeed and will it continue to be profitable overtime?
These are just a few of the things you need to consider before investing your capital in any investment opportunity. Failure to heed this advice could lead your investment returns to unnecessary peril.