With the recent downturn in the Edmonton real estate market, many people are thinking that buying investment property in Edmonton is a bad idea. Why buy a product that is dropping in value, right?

The recent influx of investors into the Edmonton housing market has shown us that it's not for everyone. You have to handle it right; and do it systematically. Here's some advice from 2 of the smartest real estate investors in the world...

"I buy property for the monthly income. The periodic property gains are secondary. Because my properties have positive cash-flow, I am less concerned by down turns and less dependent on upswings to make a profit." - Robert Kyosaki, author of Rich Dad's Prophecy

This caption, in a nutshell, defines how savy real estate investors around the world make a lot of money. it's also the ideology that allows them to weather the bad markets and profit in the good ones.

Basically, these people buy investment property that they don't have to put money into every month. The rent covers the mortgage, maintenance, and other expenses. The investor will even increase their down payment to get the monthly payments to where they want to be. This way, if the real estate values drop... the investor is still making a profit from the property and can afford to "Weather the storm". Likewise, the investor doesn't have to worry about the value going up to turn a profit. That's not what it's about for them.

"I buy property with the intention of never selling it." - Walter Sanford, World Reknowned Real Estate Investor and Trainer

Almost as important as cash-flow, the type of property that you buy can be crucial. Buying a property with the intention of selling it right away will allow you to overlook certain aspects of the home, such as maintenance and cash-flow. But if you're buying it to keep it forever you start to worry about things like a 5 year plan of maintenance and what the neighborhood will be like in 20 years.

As a real estate investor myself, I buy Edmonton investment property only when these 3 questions are answered with a "YES."

1. Will it cash-flow right away?

2. Will I still want to own this in 15 years?

3. Would I sell this to a client of mine?

Question 1 is obvious. I want a monthly income from this property. In fact, I often put more than 20% down on the property to make it cash-flow in a positive manner. I would rather buy a $300,000 property with 35% down and a positive cash-flow than buy a more expensive home with less down payment and a weaker cash-flow.

Recently people have been buying the most expensive property possible, regardless of the cash-flow position of the property. They do this because a home worth more will show a higher return on property value increases. This is great... so long as the market goes up for them. It's a risk, and one I'm not willing to take anymore.

Question 2 comes straight from Walter's suggestions. I am only looking at rental property that will be still be good in 15 or 20 years. This means that I'm looking at newer homes, or condos with solid financial plans. I want to have an investment in 15 years... not a "tear down". I find that the condition of the property is a bigger issue for me now, which means I'll probably inherit fewer problems with the property.

Question 3 is my own. This forces me to take an objective view of the home. If it's not good enough for my clients, then it's not good enough for me. I take a great deal of pride in getting my clients the best home possible for their specific price point; but can easily forget to do the same for myself. So if I won't put a client into the home... then I won't buy it for myself. For your own "measure" ask yourself this: Would you let your own mother rent it from you? (This assumes that you like your mother!)

In a nutshell, here's what you should be looking at when buying an Edmonton property for investment. Buy a property that will sustain itself so that you aren't supporting it out of your own pocket every month. This will reduce your stress when your personal circumstance changes. Buy it with the intention of owning it long term. This will get you a higher quality property because you'll be more selective about deficiencies and possible problems.

Finally, don't stress about the property value on a month-to-month basis. If you follow the guidelines above, you'll be making money every month in the form of money in your pocket. In 20 years you'll have a nice piece of real estate that HAS GONE UP IN VALUE SIGNIFICANTLY and has no mortgage on it. Retirement anyone?