Through these market downturns, what I observed was that home prices remained quite stable in Canada. At the same time, Dr. Bruce Firestone asked me to look at a real estate investment opportunity for my clients that involved direct ownership of residential real estate in Ottawa with full property management. The targeted annualized cash yields were between 5-6% which seemed modest; however there was direct equity participation on the sale of the home that would likely bring double digit total returns.
After analyzing the opportunity and completing my due diligence, I ultimately recommended to a couple of my high net worth clients that we invest in the project, which we subsequently did. The project was a four year investment which seemed reasonable and I felt that it would help diversify their portfolios.
The property we acquired did not go without challenges in that the original tenant had some health issues and had to leave and the next tenant failed on their rental commitment and we had to evict them. This was done seamlessly through the property management team and required no action from our investors.
Despite these challenges, the model worked perfectly. We sold the home in September of 2013. Our investors doubled their money with an annualized return of 25.6% on an absolutely hassle-free basis. Despite all of the volatility in the markets, we were able to secure both cash-flow and capital appreciation for our investors.
In the last several years I’ve been working extensively on mortgage structures and alternative investments that I believe will help meet investors income requirements and preservation and growth of capital objectives. While I am not suggesting equity markets should be ignored, I believe it is the successful diversification of these asset classes that will lead to investor success.
-Dr. Pierre Maranger
While clearly we cannot expect 25.6% annualized returns, real estate affords us the opportunity to create both solid cash flows and capital appreciation with investments secured against real property.
If you would like to find out more about these investment opportunities, please feel free to contact me. We will also be hosting a series of seminars and I would be most pleased to forward the schedule as we move forward.
Scott Devries, B.A., CIM, FMA
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