“REAL ESTATE”
Before leaving for Canada a word of advice was given to me by a Member
of Parliament friend who had recently returned from a tour through the
Dominion. “If you meet a Real Estate man,” he said, “and he wants to
talk to you, get into the next street as soon as you can.” I bore the
warning in mind, but the difficulty that presented itself in Canada was
that there are not enough next streets in the whole Dominion in which to
take refuge from the Real Estate man. He has his offices in every street
of every town and almost in every village. His windows are decorated
with maps and plans showing districts of new towns and suburban
districts of the older towns ripe for development. Facts and figures
about the unequalled opportunities are put before you in ways more
enticing than are those of a London company promoter. You are told how
the population has increased within five years from 5,000 to 17,000, and
it is bound to increase in a sort of geometrical progression. You are
advised to “get in early,” secure “snips,” and your fortune is made. You
may be a shy fly and decide to keep out of the spider’s parlour, but
that does not save you. In the entrance hall of your hotel, with its
great windows like those of an hotel or boarding house front at Ostend,
the Real Estate man, the picture of prosperity, evidently feeling that
all is for the best in the best of all possible worlds, is smoking his
Havana. In the affable manner which the Canadian shares with the Yankee
he gets into conversation with you without introduction and without
encouragement. How can you resist a man so stuffed with interesting
information, so genial and so pleasant? He asks you if you have been in
“our city” before, what you think about the city and the Province, how
long you have been in Canada, when do you propose to return to the Old
Country, are you on pleasure or on business bent, and if on business,
what business? Having taken such a friendly interest in you, you
naturally reciprocate the interest and inquire in what line your affable
friend is. “Real Estate, sir,” he says, “and if you want to be put on to
a good thing you have hit on the right man, sure.” He dives into his
pocket or opens his dispatch case and out comes a plan of an estate
showing hundreds of lots in a chequer a yard and a half or two yards
square. He tells you that you have to be careful when you deal in Real
Estate, for there are mighty cute men in Canada, and before you can say
“snap” they have you. He, of course, as you have gathered from his
conversation, does his business on purely philanthropic principles. So
pleasant a man could not deceive you. He is soon pointing out the
choicest bits on his map and telling you, as a friend rather than as a
seller, that if you want half-a-dozen, or a dozen, or a score of lots he
can let you have the cream of the bunch at a giving-away price. “They
are real snips, sir, you can take it from me. I know what I am talking
about. I have it on the best authority that the C P.R. is going to make
that town a divisional point, or is going to connect up with the
Canadian Northern or the Grand Trunk. It is going to build a two million
dollar ‘deepo’ there and arrange a freightage shed that will astonish
creation in that part of the country. Do you know, sir, that I sold six
lots there three months ago at $10 a foot”—which means foot
frontage—“to a friend of mine, and when I saw him only last Thursday he
told me he had just refused $20 a foot for those lots. Now I can let you
have these lots at $12 a foot, and you can take my word for it that
within three months you will either have sold them for double the amount
or you will have come to me for another dozen or score of lots. They are
going just like hot cakes.” You wonder why a man with such gold mines in
his possession should be willing to part with them at all.
It is not only Real Estate men, however, who talk Real Estate. Everybody
talks it. In the hotel, at the street corner, in the departmental store,
on the railway, you hear Real Estate, Real Estate, Real Estate all the
time. It is a subject of the most thrilling and never-fading interest to
the Canadian. You meet men everywhere who have been dabbling in lots,
and to a certain extent they confirm the Real Estate man’s rosy pictures
of the money to be made out of this form of speculation. A man not a
year out from England told me, for instance, that he had bought four
lots at $300 a lot and within six months had refused $2,500 for them.
Real Estate has become not only a Canadian business, but a Canadian
pastime, rivalling baseball and pool in its capture of the imagination
and the absorbing interest that its votaries take in it.
There is money to be made out of Real Estate—endless money, profits
that grow as Jonah’s gourd grew, if you only understand the game. “If
only!” But there is the rub. You want to be the man on the spot with
access to all sources of information, a man with sound judgment who can
forecast developments in the near future, if you are to dabble in Real
Estate without getting your fingers badly burned. Or if you are not the
man on the spot you should know the man on the spot and be thoroughly
convinced that he has the judgment and is straight, or you should deal
only with a company or agency of unblemished reputation—a reputation of
not taking wild-cat risks, but of buying only where there is a
reasonable prospect of increased increment and selling at a fair rate to
customers who will be content with a reasonable profit—the word
“reasonable” to be interpreted in the Canadian sense. With such provisos
there is perhaps no form of investment which will yield such large
profits in so short a time as investments in Canadian Real Estate. It is
gambling, of course, as much as speculation in futures on the Stock
Exchange or the buying and selling of shares in industrial concerns with
rapid vicissitudes is gambling, but after all the Real Estate business
is playing an important part in the economic development of Canada. The
Real Estate men are champion “Boosters,” the most enterprising and
effective publicity men of the towns and districts where the lots lie.
There are plenty of honest Real Estate men who have found that honesty
pays, because clients for whom they have made profits come to them again
and introduce their moneyed friends to them.
The peculiarity of the Real Estate business in Canada is the undoubted
incredible increase of unearned increment due to the miraculous growth
of towns and the continual opening up of fertile country. In the new
towns of Canada the Single Tax system lends itself to the Real Estate
man’s activities. A town site is surveyed by the municipal surveyor. It
is cut up into thousands of lots which are registered. The rateable
value of the lots is estimated, and the purchaser of each lot purchases
it with the obligation of paying the rate on the assessed value as soon
as he takes possession, whether he builds on it or not. The Real Estate
man carefully studies the municipal map. He estimates the value of the
lots for himself. He collects all the information available as to the
directions in which the town is likely to spread from the centre. He
finds out, as far as possible, what are the probabilities of railways
coming to the town. He decides to take a batch of lots—50, 100, or 250.
The process is so simple and so free from legal technicalities and costs
that he soon finds himself in possession. The municipality wants a rate
income, and in the early years of its existence favours the Real Estate
man or anybody else who will risk taking the lots and begin contributing
the rates upon them. The Real Estate man, having secured his block of,
say, 250 lots, has his map drawn with the block coloured and issues the
map, probably with a booklet designed to demonstrate that his lots are
the snippiest of all the snips in that town. Having to pay the rates and
to pay quarterly instalments on the price of the land beyond the rates,
if the municipality puts a value on the lots, it is to his interest to
dispose of them as speedily as possible. He does not want to build, and
certainly he does not want to go on paying those rates and instalments
on unproductive land. He sets a value on the lots. If for houses of
about 25 to 30 feet frontage and a depth, say, of 120 feet, the value
may be $10 to $20 per foot frontage. He disposes of them at this price
to new-comers and others wanting to build their houses or to men
desirous of having a little fling in the way of a speculation in
unearned increment. It is these speculators on increment out of whom the
Real Estate man relies to make his main profit. A few lots are sold at
$10 and $12 a foot to be paid in one payment down, and the rest in
quarterly instalments spread over three, four, or five years. A man
buys, say, half-a-dozen lots and pays his first instalment. The
agreement is signed then and there in the Real Estate man’s office, and
the transaction is entered and a trifling fee paid in the Land Titles
Office of the municipality. The whole thing may have been discussed,
agreed upon, the deed signed, and the transaction legally concluded
within an hour. The purchaser has got his half-a-dozen lots at $300 each
and has paid a twelfth of the price. The first instalment may have
exhausted the whole of his available money. His hope is that before the
next instalment is due he will re-sell to a purchaser and make $5 or
more profit per foot out of the purchaser. The second buyer is also a
speculator in increments. He pays his instalment with the same hope of
selling at a satisfactory advance price before the second or third
instalment becomes due. So it goes on. It is all right if you are one of
the early purchasers and get rid of the lots according to your
expectation, but if the speculation fever is very high and the
expectations as to the future of the town or the district of the town in
which the estate is situated are too rosy, the lots are sure, within a
limited time, to be forced up to a selling price far beyond their
intrinsic value, and a too sanguine buyer at last will find himself in
possession of them and have them left unsaleable upon his hands. As it
was put to me by a shrewd man very familiar with the business, “It is
the last man who will get the pinch.” If you go in for Real Estate
speculation you must take care not to be the last man.
The head of a great Canadian financial corporation said to me, “There is
plenty of money to be made out of Real Estate if you can trust the man
you deal with, but my advice to all my friends is to avoid as far as
they can long-range Real Estate speculation. It is safer to put money
into good industrial investments. The profits may not be so quick or so
great, but there is much less risk.”
Several Real Estate men were perfectly frank in describing to me the
dangers of Real Estate investment by men not in the know dealing with
Real Estate men in whom they have not the fullest reason to put
confidence. “The thing,” said one of them, “may look all right on the
map. The map shows you that the lots for instance, are within two or
three minutes of the post office or the Town Hall. So they are, but you
want to know just where the post office or the Town Hall is in its
relation to the business and the best residential quarters of the town.
It may be that the location of the post office was fixed when the
township site was first laid out. It was expected then that the town
would grow from the post office location as a centre, but for some
reason or other it has not grown all round the post office, but has
spread away, say, east and south and has not spread north and west. The
lots shown to you on the map may be north or west of the post office and
not be worth $10 a foot, whereas if they were at an equal distance east
or south they would be worth $25 or $30 a foot. Or the post office in
those infant days may have been given to somebody by a bit of
favouritism and been located just where it is because the man happened
to have a lot there, without regard to the public convenience at all,
and it is now practically stranded. Again, the Town Hall, by the same
mysterious tendencies of growth, may be three or four hundred yards out
of the profit-making centre and the lots shown to you may be in a
comparatively unprofitable area. You want to know such matters as these
to be quite sure that you have got the real snips.”
The Real Estate man has certainly nothing to learn in the art of pushing
his wares and prevailing on customers anxious to get rich quick. Every
self-respecting Real Estate man has his automobile in which “to run”
inquirers “round.” It is a very good automobile, has probably cost him
$2,000 or $3,000. It runs as smoothly as an automobile can on such roads
as they have in and around the new growing cities and the new suburbs of
the older cities. As you are being run to the estate where the most
attractive snips are to be shown you the Real Estate man tells you
marvellous stories of profits made out of lots purchased on an estate
just this side of the one you are going to. “Only three years ago, sir,
that estate was laid out. Lots were sold at $13 a foot, and to-day the
men who have got them would not take $50 a foot for them. There is no
reason whatever why our estate should not do as well and even better,
for the C.P.R. is putting down a station right in the middle of it, and
already the municipality has determined to run its street car track
right through the estate to such and such a bit of lake-side or river or
wood that is the favourite summer outing place for the citizens.” You
are so interested and the car runs so smoothly that you seem to be on
the estate in no time. You see the lots. It is impressed upon you that
if you miss this opportunity you will regret it all your life, and
unless you are amongst the “once bitten twice shy” you are almost
persuaded. The Real Estate man completes the persuasion by telling you
“We are only seven minutes here from the Town Hall.” You think seven
minutes is almost next door to the Town Hall. You decide to buy and are
driven back to the Real Estate man’s office with mind full of happy
anticipation of the profit you will make when selling time comes next
spring. It is only afterwards, when you meet a citizen of the town, a
commercial traveller or some other frequent visitor who knows the
distances, that you learn the Real Estate man was quite right when he
told you the estate was only seven minutes from the Town Hall, but he
forgot to tell you that it was also seven miles which the automobile had
covered in the seven minutes. During my time in Canada I was offered a
good score of “snips,” and was tempted to regret that I was not moneyed
man enough to take advantage of them. Perhaps, if I had had the money
and had secured possession of the lots, I should by now have reaped 50
per cent. on the investments—perhaps I should have had the lots still
on my hands and been cudgelling my brains to find the means of keeping
up the payment of the instalments.
In Moose Jaw one of the three or four drunken men whom I saw in
Canada—the drunken woman, I am told, is happily an unknown figure in
the Dominion—was going along the main street repeating joyously “I’ve
got some lots, I’ve got some lots.” Let us hope he had secured them
before he had taken the liquor, otherwise he might wake up sober and
find he was amongst those who had burnt their fingers.
It is not only in home or business sites, however, that the Real Estate
man deals. There is a vast amount of Real Estate business done in
“acreage,” as the Canadian calls agricultural land. A man or a company
secures 10,000, 15,000, 20,000 or 50,000 acres of unbroken prairie. This
is divided into farms. The usual map is produced showing the position of
the farms. The railway line in actual existence or in contemplation is
seen striking through the estate. There are three or four or
half-a-dozen stations shown along the line within the boundary of the
estate. You are told that the Canadian Northern or the Canadian Pacific
Railway is going to make one of the stations a divisional point—you are
further told that all around the region towns are springing up and other
towns are certain to be started in a year or two. Every farm on the
estate will be within three or four miles of a railway. These farms can
be had at the giving-away price of $20 an acre to be paid for by $2 an
acre down now and the remainder in instalments covering five or ten
years. I was offered my choice in Toronto of as much as I liked to take
of a 25,000 acre estate in Manitoba. The Real Estate man spread out his
map before me and earnestly impressed upon me the quite exceptional
“snip” that this acreage proposition was. I could not do better than to
snap up some farms for myself and persuade my friends in England to do
likewise. I am afraid that the half-hour of that Estate man was wasted,
for reasons into which I need not enter. Now the proposition may have
been all he stated it to be. A number of Anglo-Canadian combines have
purchased such properties and divided them up into farms of from 25 to
500 acres, and men who have taken the land are fully satisfied with
their bargains. On the other hand, the same speculator, not knowing much
about acreage values, might easily get badly burnt over acreage. As a
practical Canadian farmer said to me: “The land may look all right on
the map and the visitor who does not know farming—especially the
Englishman who does not know Canadian farming—may think it looks all
right when he is taken over the estate; but the practical Canadian
farmer has sharp eyes and wants to be assured that the thing is as good
in reality as it looks on the map. You may buy a farm, for instance, and
find that the land is stony and dry and that a lot of money will have to
be spent in irrigation if crops are to be raised out of it. On the other
hand, you may find that it may be low-lying and swampy, and that even
more money will have to be spent on draining the land if it is to be any
good for farming. Or it may be covered with trees that want stumping
out, or the good surface soil may be very shallow and ten years of
cropping will exhaust it, or there may be a dozen other things that will
depreciate the value of the land.” Again there is that danger of
“long-range speculation.” The projected railway may never become a
reality. The station within four miles of your farm may exist only in
the imagination. You may have to cart your stuff not four miles, but
seven or ten miles, and the extra cost of cartage and of labour will
considerably reduce the margin of profit. You may be fifty miles from a
populous town which offers a market for produce other than wheat, and if
you want to succeed in Canada it is well not to put all your eggs into
the wheat basket, but to have dairying, chicken and egg-raising, and
market gardening as other resources. No English farmer ought to buy land
until, in the company of an experienced Canadian farmer, he has
thoroughly examined it and studied its capabilities. The English
investor, knowing nothing about Canadian acreage values and still more
ignorant about the actual value of lots offered to him on this
particular acreage investment proposition, should not risk his money
without expert advice from the district. Such expert advice is usually
to be had, though of course it has to be paid for, but no money is
better spent than that spent in gaining such knowledge.
This chapter on Real Estate is written in no unfriendly spirit to the
Real Estate men. I am convinced that many of those whom I met, both
those dealing in town sites and those dealing in acreage, were men of
sound judgment and good commercial honesty; but business is business,
and the principle in the minds of a large number of the Canadian Real
Estate men generally is _caveat emptor_—“let the buyer keep his eyes
skinned—my business is to sell. I have to make my profit—it is the
buyer’s business to take care that he makes his. If the land is not what
he expected that is his look out—he must find somebody else as simple
as himself to relieve him of it.”
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