I was born in the late 1950′s and missed the Great Depression that my parents talked about. I was 25 years old when the recession of the 1980′s hit. I lived through the 80′s down turn as one of the victims, and I survived.  Albertans referred to the recession of the 1980′s as “Trudeau’s Rape of the West”, caused by the National Energy Program (NEP), intended only for the benefit of the east. Oil had gone from $3 per barrel in 1973 to $35 in 1981 and projected to be $70 by 1985. Additional taxes were placed  on oil to benefit the poor easterners who bought expensive foreign oil instead of domestic oil and those taxes were not totally removed until the Mulroney era 7 years later. 

Albertan appear to have conveniently forgoten that the price of oil peaked at $37 per barrel in 1982 and dropped to $10 per barrel by 1986. The oil industry was destroyed! The United States was in recession from 1980 to 1983. Chrysler was bailed out by the US government. Inflation, fueled by the rapid increase in oil prices was 11.5% in 1982. Canadian 1 year mortgage rate interest rates peaked at 18% in 1982.  
 For many Albertans, the 1980′s recession broke many good people, including people within my Father’s circle of friends, and it has taken many of them 15-20 years to recover from those dark days. Bankrupcty was one way out. Suicide was another, but I don’t know of anyone who took that route. 

In 1982, I was a 4th year apprentice carpenter running a $5 million job with 100 trades on site. In 1983 I was reduced to searching the carpenters union job board with 2,000 guys in line ahead of me. That was one of many reasons I made the move from construction to the property management industry.  

During the first half of the 80′s house prices had dropped, and many were worth less than the mortgage owing, leading to some interesting slang: dollar dealers, jingle mail, capped buildings and see-through buildings. 

• Dollars dealers were buying houses for $1 and renting them out until the bank took over. 
• Banks were the proud recipients of jingle mail when the keys were returned to the bank in the mail. 
• Capped buildings were new construction projects just canceled, and the doors were locked and the site abandoned. 
• See-through buildings were newly completed buildings, and you could see right through the building, because no tenants had moved in. 

It was a good time to be a receiver-manager. 

Nu West Developments, Texaco Oil, Dome Petroleum,  Gulf Oil, WW Arcade, Imperial Lumber, Woodward’s Department Stores, Northwest Trust and Continental Bank, are but a few old established companies that disappeared from Alberta. 

Hospitals, schools, government, grocery stores, funeral homes and pawn shops proved to be recession proof jobs. (I’ve never met a teacher who has been laid off.) 

I learned a number of lessons from the recession. Here are 11 of them:

1. The Sun will rise up tomorrow, and the day after, and the day after that. Life goes on. People are born, live and die, regardless of the economy.
2. Personal guarantees can come back to bite you on the ass. Asset protection is critical.
3. Any interest rate under 10% is heavenly and the banker’s secret to avoid foreclosure.
4. Cash flow is critical. Undeveloped land is does generate any money in rent.
5. Residential rentals are always in demand. (Unless you are in a one industry town)
6. Rental turnover can drain your cash reserves.
7. Fantastic deals become available. That very expensive lake lot sold at 1\3 of the old price. Be prepared to jump on the bargains.
8. Don’t drive your new BMW to the wage negotiations. 
9. The market will return to normal. You just have to be patent.
10. Stop looking and brooding over your net worth statement or balance sheet. If you can breathe, you have  the ability to change your life and situation.
11. The strong survive, the weak die. It better to be the strong guy than the dead guy.

  In my next few posts I will go over some strategies for today’s recession that will help you through the rough spots that are coming.

If you property manager isn’t licensed, your money isn’t safe.

Many people don’t realize that property managers need to be licensed by the Real Estate Council of Alberta (RECA). When you’re considering a property manager, take the time to check your property manager’s licensing status. You can do this on RECA’s website.

If you’re in a Joint Venture (JV) Partnership as the Real Estate Expert and you use a non-licensed property manager you can be held liable for any losses. Working with professionals is an important part of your Real Estate Investment Business.

What license does a property manger need?

A property manager holds security deposits from your tenants. To be able to hold security deposits for someone else, they need a Broker’s Trust Account. Only a RECA certified broker can hold security deposits and rents from your tenants. There can also be a staff of property managers working under the broker, and they must be licensed as associates.

You need to check that your property management firm has a registered broker in good standing. You should ask them at the outset, but you should also do your own due diligence.

How Do I Use RECA to check on my Property Manager?

We’re going to start by checking out our friend Barry McGuire of the Ritchie Mill Law Office. He’s a lawyer and doesn’t have or need a real estate license. We shouldn’t be able to find him.

1. Go to the RECA website, www.reca.ca.

2. You want to click on Consumers and then we’re going to find the license search link in the top right.

To go straight to the search function click here.

3. Now there’s three options to search: last name, brokerage name and location. There are also some wildcard options if you’re not quite sure where you’re looking.

We’re going to start by searching for McGuire. Put the name in the first box and click the little globe button.

4. You’re going to get a result like this one below. You’ll notice there are no entries matching Barry McGuire or the Richie Mill Law Office. If Barry was claiming to be a property manager, we’d have a pretty big red flag.

5. Now we’re going to do the same thing again for myself (Brent Davies). We’re also going to use the wildcard function. Because some people spell Davies without the ‘e’ (Davis) we’re going to search for both of them by using the % wildcard. There’s an explanation of how to use these on the RECA search page.

The search result you will see will have a listing on it like this:

6. The second listing down is William Brent Davies. It tells you he is the broker for Davies Management & Realty, and his license is valid until September 2009. Your property management company must have a broker listed for that company, and they must have a little green circle next to them. The other options are a grey or black circle, and those should raise some red flags. If they’re not listed at all, they need to prove to you that money will be handled through an authorized broker’s trust account.

Other possible red flags that your Property Management firm might not be licensed:

- Mailing address is a post office (P.O.) box.

- Requesting payments (cheques or money orders) in a personal name or a name different than what’s on the license or management agreement

- Advertisements in a different name. This property manager is in a grey area and may be playing for multiple teams.

Where else should I look?

It’s also a great idea to check the Better Business Bureau (BBB). Good property managers also tend to be good corporate citizens. Make sure your property manger can provide good references, interacts with you in a professional way and is properly licensed.