On Wednesday, October 26th, we had the pleasure of having Maria Moisseeva, Sauder ‘08 Graduate and Relationship Manager at Bank of America Merrill Lynch, speak to 60 students eager to learn about what it takes to make good investments in real estate. Her extensive experience as both a brokerage professional as well as investment advisor resulted in what we felt could not have been a better introductory learning experience for our student attendees!
If you missed it, here are some key points we took away:
1. More than we realize, real estate comprises of more than homes and buildings. It comprises of any land that can be owned - malls, airports, islands, agricultural fields, forests, and so much more. Real estate can be owned by individuals, families (Bosa, Grosvenor, Beedie...), corporations/businesses, pension funds, insurance companies, REITS (Real Estate Investment Trusts), the Government, etc.
2. Some reasons to invest in real estate:
- It can be a long-term investment that provides annual cash flows on top of capital appreciation. Where do these annual cash flows come from? Tenants who rent/lease the land from you, and everyone needs to use land for one reason or another.
- All things equal, land value appreciates over time. Land is a scarce resource, and active management and redevelopment can provide many value-add opportunities.
- Real estate generally has an inverse relationship with interest rates and other markets, diversifying an investor’s portfolio.
- Real estate has relatively less market volatility than other asset classes. Why? Real estate provides an income stream that more stable than the up’s and down’s of stock market prices.
“It is a comfortable feeling to know that you stand on your own ground. Land is about the only thing that can’t fly away.” - Anthony Trollope
3. What to look for in an investment can be as simple as thinking, “what would I look for if I were buy a property?” Neither a cookie-cutter nor exhaustive list, some criteria real estate investors may consider:
- Location, location, location. What neighbourhood is it in? Are there transportation links? What uses and amenities currently/will surround this property?
- Market Conditions: interest rates, government regulations (recently, the 15% Foreign Buyer Tax, or the new Ottawa Mortgage Regulations), market cycles, currency strength, etc. These could all impact your investment returns or opportunity cost of capital.
- Property Conditions. How occupied is the building? Who are the tenants, what are they paying, and can they continue to pay their rents? Is there redevelopment potential on this property?
- The Management Team. Often underestimated, a property management team with the right expertise can increase the value of your property multiple times over!
4. The biggest difference between commercial and residential real estate transactions involves the complexity of the deal. Commercial transactions can involve hundreds of people, boards of directors, and a whole lot of other real estate functions: brokerage, leasing, law, asset management, property management, development, finance, appraisals, architecture, engineers, marketing, accounting, consultants, research…. you get the idea. This can result in very different timelines and transaction costs, and may be a big decision-making factor.
Maria also did an appraisal activity with the students on an actual Vancouver Property by getting us to discuss what important factors we would consider in deciding its value (and therefore our investment decisions).
The workshop was a huge success and we hope you learned from it whether it is more residential or commercial investing that entices you. For any further comments/questions, feel free to shoot us an email at email@example.com.
We look forward to seeing you at our Real Estate Office Crawl Event (Thursday, Nov 24th), where we present you an opportunity to visit some of Vancouver’s most beautiful and sustainable office spaces and the impressive professionals/companies behind them. UBC REC Members Only - don’t forget to purchase your membership HERE!