CHAPTER VII
“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.