Buy now to get an unheard-of rate for a 10-year mortgage

There’s a brilliant reason to get into our expensive and quite possibly weakening housing market right now.

A 10-year mortgage is now available for under 4 per cent. You can thank the banks for this unheard-of rate. In the past week or so, competition between them on mortgage rates has gone nuclear.

Have you caught all the warnings about how the house that you can afford now because mortgage rates are so low will crush you when borrowing costs rise? With a 10-year mortgage, you’ve got long-term cost certainty. “This is a fantastic opportunity for somebody to lock in and have peace of mind for 10 years without worrying about a renewal,” said veteran mortgage broker Vince Gaetano of MonsterMortgage.ca.

Now, about the housing market. Numbers released Monday show average prices are down almost 3 per cent since April, even after ticking a bit higher last month. At a conference last week, some of the country’s top bankers talked as if a cooling in the market is a done deal.

Price-wise, patience will very likely be rewarded in the housing market: Prices could easily decline enough to make a difference to buyers – especially in markets like Vancouver and Toronto.

But low mortgage rates also have a big impact on affordability, and that’s a point that supports buying now if you plan to live in your house for a good long while and can afford the costs of home ownership while meeting your savings obligations.

Low is a word that may actually undersell what’s happening in the mortgage market right now. Last week, Bank of Montreal announced a 2.99-per-cent rate for five-year fixed-rate mortgages amortized over 25 years or less. That’s the lowest rate on record for this type of mortgage.

Other banks announced a special rate of 3.99 per cent for seven years, a deal that Vancouver mortgage planner Robert McLister said was not as good as the BMO offer despite providing two more years of rate certainty. “There’s no question in my mind that the five-year rate would work out better,” said Mr. McLister, editor of the Canadian Mortgage Trends blog.

It’s a different story with a 10-year mortgage for 3.99 per cent, which became available late last week from online bank ING Direct. According to the RateHub.ca website, 10-year rates as low as 3.84 per cent can be had through lenders working with mortgage brokers.

A 10-year mortgage at less than 4 per cent “creates a much more interesting conversation,” Mr. McLister said. Monster Mortgage’s Mr. Gaetano said that when the cost of locking in for 10 years gets as cheap as it is now versus the five-year term, “you have to pounce on it.”

Not too long ago, Mr. Gaetano was one of many experts who believed variable-rate mortgages were superior to all fixed-rate options. But while the banks have been highly competitive on fixed-rate mortgages lately, they’ve pretty much ruined the variable-rate option by cutting way back on discounting.

You can get a variable-rate mortgage today for 2.8 to 3 per cent at best, which is darn close to the cost of locking in for four or five years right now, and you’ve got zero rate certainty. Every time the prime rate rises in the next several years, so will your borrowing costs. “The variable-rate party’s over,” Mr. Gaetano said. “Those products are dinosaurs.”

Let’s get back to the housing market for a moment. The biggest support for prices right now are the low mortgage rates we’ve been talking about here. When rates rise, that support crumbles. Things could get ugly.

Why consider buying now? Because you can borrow money at 3.99 per cent or a bit less for 10 years. It’s like freezing time at the exact best moment ever to finance the purchase of a house. If the price of your home declines, it’s bound to be on the rise again a decade from now. Meanwhile, you’d have the chance to put a decade’s worth of salary increases to work in ramping up your payments and making periodic lump-sum payments.

One hitch with 10-year mortgages is that you won’t likely get the best rates from the big banks. Mr. Gaetano said the banks don’t much like 10-year mortgages because they can’t easily securitize them, which means packaging them up to sell to investors. That means you’ll may need to visit a mortgage broker or check out ING Direct.

Note: You can play around with various mortgage rate and house price scenarios by using our online mortgage payment calculator.

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Here's how rates on 10-year mortgages compare with other terms:

Source: RateHub.ca, MonsterMortgage.ca

Globe and Mail

Real estate bubble in 2012? Nah, it's starting to float back to Earth - Guest Blog

As global housing markets coughed and sputtered in 2011, Canada's barrelled ahead, even turning a few nervous heads along the way.

In fact, recently the Economist branded Canada one of the nine countries where “home prices are overvalued by about 25 per cent or more,” and among the four where prices are in line with those in the United States "at the peak of its bubble."

Is there really a cause for alarm? Are we doomed to ride this white-knuckled rollercoaster in 2012? Probably not, according toBenjamin Tal, deputy chief economist of CIBC.

"The housing market of tomorrow will not be as exciting as the housing market of yesterday,” he said in an interview.

While the current real estate market is overshooting, with home prices far higher than than they should be, we shouldn't expect a crash either, he explains. As long as interest rates remain relatively low and subprime mortgages kept at bay, the most likely scenario is that the market will plateau.

“Prices are already softening, housing starts aren’t in the sky, MLS [multiple listing service] activity is starting to soften, so it suggests the market is already starting to level off, and that’s what we need,” he said.

How will a more relaxed real estate market affect new homebuyers, investors and renovators in 2012? Here are Mr. Tal's predictions:

1. First-time home buyers

• Affordability and interest rates will be the major concerns in 2012. Prices will continue to be expensive, especially in urban centres like Vancouver and Toronto, since interest rates are likely to remain low for the time being.
• But rates won't stay low forever, which is why you should estimate mortgage payments based on interest rates that are 2 or 3 percentage points higher than current interesst rates, and if you cannot afford that, get a smaller mortgage and buy a less expensive house.
• Expect an end to bidding wars, or at least a temporary ceasefire. New home buyers will have the luxury of time in terms of looking at properties without being rushed into decisions. That’s the positive. The negative is that prices continue to be drastically higher than they were five or 10 years ago.

2. Investors and flippers

• If you’re in it to flip it – meaning you buy a home hoping the price will rise by just doing minimal changes – those days are over.
• In some pockets of the country, you may even see prices go down.

3. Renovators

• The cost of renovations will not increase significantly so long as interest rates remain at their current level, so it’s a good idea to take advantage of this time to finance these projects.
• For those looking to take on a second mortgage, remember to make sure you’re equipped to finance them if interest rates creep up.
• Variable-rate mortgages are still a good option for those who are able to withstand fluctuations in the market and "ride the ups and downs without getting a stomach ache."

Shannon Murree is a Licensed Ontario Sales Representative with RE/MAX Chay Realty Inc Brokerage in Barrie and conducts business in the Barrie real estate market. She has many Barrie real estate listings and considered a local geographical specialist of where to invest in Barrie Homes for Sale and offers tenant placement and Property Management.  Visit her website for more information about Barrie real estate or Barrie Home Rentals

Real Estate Investing in property: a young person’s game?

You buy a duplex, get a mortgage, find tenants and collect monthly rent cheques. What could be easier?

With stock and bond markets spinning their wheels, many Canadians are looking for alternative places to park their money. And while buying an investment property might seem like a good way to diversify, you should do your homework before jumping into the housing market.

“Real estate investing is not for everyone,” says Vancouver-based Don Campbell, president of the Real Estate Investment Network.

“You cannot do it sitting in your basement in your pyjamas, like you can when you trade stocks. When you buy a property, immediately upon getting the key, you are running a business.”

Kurt Rosentreter, a chartered accountant and certified financial planner at Manulife Securities Inc. in Toronto, says the decision to buy an income property should be based on two factors: Once you subtract your mortgage and operating costs, will the property generate a steady monthly income? Secondly, will it appreciate in value?

Looking back, investment properties have by and large been financial winners, says Mr. Rosentreter. “In previous years and in most major cities, property values have doubled and the rental income is higher.”

But that trend may not continue. Interest rates have been sitting at record lows for some time now, fuelling a massive run-up in housing prices across Canada.

Mr. Rosentreter is concerned about what will happen to investment property owners saddled with large debt loads when interest rates inevitably rise. “If you are taking on a 20-year mortgage and interest rates hit 5 per cent, could this be a disaster for you?”

Moshe Milevsky, a finance professor at York University’s Schulich School of Business, says surging housing prices have created the potential for a huge downside. “The run-up has been great for anyone who joined this party a few years ago, but latecomers should beware.”

In his opinion, property investors are as vulnerable to economic shocks as those who choose to buy stocks. “If the unemployment rate spikes or real estate prices collapse, both of which happened in the U.S., then your income property investment will run into difficulties as well,” Mr. Milevsky says.

Some people view income properties as pillars of their retirement and financial plan, says Mr. Rosentreter. “They have heard all the good things – that you can raise the rent alongside inflation, that real estate values rise, and so on.”

What they fail to consider is their age. “If you are 55 and buying it with a full mortgage, it will never be a pillar of anything because you will be carrying debt through most of your retirement,” he says. “You need to buy these things young, or not at all.”

John Turner, the director of mortgages at Bank of Montreal in Toronto, says it all depends on how long you intend to hang on to your income property.

“If your time horizon is short, it might be risky and not worth it. But for the folks that are thinking long-term and looking for diversity in their investment portfolio ... in my opinion, real estate is a sound investment.”

His advice for anyone considering becoming a landlord is to sit down with a financial adviser and see how what kind of role real estate can play in your overall portfolio. Crunch the numbers and figure out the tax and estate planning repercussions.

“You need to factor in maintenance, insurance and taxes,” Mr. Turner says. “You need to look at how much you need to put down and your costs, then figure out what your rate of return will be over the next five to 10 years.”

Mr. Campbell says the key to buying a successful income generating property is picking the right region – somewhere with looming job and population growth. “You really need to know where people are moving, where the jobs are.”

In Ontario, Kitchener, Cambridge and Hamilton are all good places in which to buy – as are Halifax and Winnipeg, he says. Edmonton and Calgary will be the big winners in the next few years, he adds.

Toronto and Vancouver, meanwhile, are riskier because it is more difficult for investors to generate a steady cash flow, Mr. Campbell says.

As for running the property, he believes hiring a property manager is the way to go, regardless of the cost. “If you manage them yourself, it can drive you crazy. Much like owning a small business, you hire a property manager to run your business and factor that cost into your budget,” he says.

“The real money is not made in the 7 per cent of the rent that you pay the property manager; the real money is made in finding good quality properties to add to your portfolio.”

Credit to Don R. Campbell of REIN

ROMA LUCIW

Globe and Mail Update

Shannon Murree is a Licensed Ontario Sales Representative with RE/MAX Chay Realty Inc Brokerage in Barrie and conducts business in the Barrie real estate market. She has many Barrie real estate listings and considered a local geographical specialist of where to invest in Barrie Homes for Sale and offers tenant placement and Property Management.  Visit her website for more information about Barrie real estate or Barrie Home Rentals

Why Hire A Property Management Company?

First of all, if you're not sleeping at night and experiencing worry about tenants, well that's your first reason. If you're here reading "Why should I hire a rental property company" then you're looking for a way out and "peace of mind”. Not only can it be a daily intrusion while you focus on your job, or other business, family and personal time, it does make it challenging and difficult to even take vacations. If something goes wrong and you're away or not available, what are you going to do?

Owning a rental property can be very demanding at times and most especially if you are a first time landlord and honestly, don't have any experience of know what you're doing. It's important to be educated so you can properly manage your property manager (and for liability reasons should know). Have you asked yourself any of these questions:  

• How much should I rent my property out for?
• Should I do a lease and if so, for how long? What should it say?
• Do I collect first and last month’s rent?
• Do I collect a security deposit?
• Do I collect a pet deposit?
• How do I do a credit check on the tenants?
• What if my tenants don't pay - what do I do?
• I can just change the locks, right?
• How do I start eviction proceedings?
• How do I gain access to the property if I need to do repairs?

These are just some of the questions that may arise when you purchase a rental property. If you hire professional property management inc. You can avoid all of these questions and concerns. Our team also has a local team and contractos to handle the repairs and maintenance on your rental property. This will leave you free to do what you need to get done. The goal is that all you have to do is collect your monthly income from the tenants.

So hire professionals to handle that peace of mind for you and also have the experience and knowledge to take care of your business.

Shannon Murree is a Licensed Ontario Sales Representative with RE/MAX Chay Realty Inc Brokerage in Barrie and conducts business in the Barrie real estate market. She has many Barrie real estate listings and considered a local geographical specialist of where to invest in Barrie Homes for Sale and offers tenant placement and Property Management.  Visit her website for more information about Barrie real estate or Barrie Home Rentals

Are You Confidently Moving Forward? Or Are You Stuck In A Rut? – Guest Blog Philip McKernan

Are You Confidently Moving Forward? Or Are You Stuck In A Rut? – Guest Blog Philip McKernan

How to Become Lucky In Real Estate Investing

People that invest in real estate are just "lucky". It's just like a lottery and requires no skill, time or education. Those that have success in real estate investing just happen to have a natural talent and gift. There are no books available, no online resources, and quite simply, just a natural talent....oh yeah and they've always been successful, they have never made a mistake or had a bad situation or experience. They also know that right now with all the "housing crisis", it's a really bad time to invest in real estate right now.

Ok, real estate investing maybe isn't quite like the above paragraph states and yes, embellished quite a bit. The truth is, real estate investing does take time, effort, analyzing, educating, networking, disciplines and fundamentals. It's a matter of breaking down into steps, making a plan, little "tweaks" and adjustments as needed but most importantly following through.

So, in the real estate investing "game", there are many essential steps needed in order to be a successful real estate investor. Want to achieve success...are you doing what it takes? 

1.Understand the language of real estate investment, how to budget and analyze. This means to have a working knowledge of the basics. Don't have to be a mathemetician but do need to work with numbers so you can analyze properties. (Investing isn't just multi-family/apartment buildings but can be single family homes too). There are spreadsheets available to make this process easier for you but this skill helps you determine whether a property is an asset and how it will cashflow.

2. Keeping yourself surrounded by experts. The "lucky" real estate investor builds a team and gets to know the community of real estate experts in the City in which he is looking to invest , thereby familiarizing himself with the city itself.This is all about networking and studying the people who may wind up as members of the team of investment experts which he will hire to assist him in the location and evaluation of real estate

3. Keep a watchful on the real estate market. The investor should study up on various cities and see what the experts say about them, but additionally evaluate them for himself. He should study his own city twice as ardently, if that is the he is planning on investing there. He should get to know the economy and learn which areas are more and less profitable. He should learn what the rents in his marker and decide if a piece of property located in that area would assist him in reaching his financial goals. The investor should also as many pieces of property as he can with his team of experts, even if he is not actually ready to buy.

4.The investor should learn how to negotiate, and how not to negotiate . Many have incorrect notions about dealing with sellers. These people are under the impression that the purpose of each and every negotiation is reach a closing by any means necessary, and to strongarm the seller into ceding to his demands. If the purchaser is able to work the numbers to his advantage, and the seller will accommodate his terms of sale, then the purchaser should go ahead with the purchase . If this is not true, the {buyer should walk away. 'The ABCs of Real Estate Investing,' by Ken McElroy states that the investor should go into every negotiation assuming he will walk away in the end.

5. Take care of your properties. This means precisely what it sounds like. Do repairs, renovations, cleaning, as required to the property and if new to real estate investing, hire a property manager/tenant placement specialist in that Geographic Area to fill the vacancies. Make sure you're familiar with local Landlord/Tenant legalities. Remember, this is not your home but what kind of tenants do you want to attract? The location and condition of your property will attract a certain tenant profile

This description represents a simplification of the process, however these five simple steps show that anyone can learn how to win in the real estate business. There is really nothing mysterious about it. Oh yeah and it's not really as intimidating as you may think. If you want to be "lucky" in real estate, give our team of experts that are in the trenches and do it everyday. They'll make sure to get you in the right direction.

Shannon Murree is a Licensed Ontario Sales Representative with RE/MAX Chay Realty Inc Brokerage in Barrie and conducts business in the Barrie real estate market. She has many Barrie real estate listings and considered a local geographical specialist of where to invest in Barrie Homes for Sale and offers tenant placement and Property Management.  Visit her website for more information about Barrie real estate or Barrie Home Rentals

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Chasing The Almighty Dollar And Doing It Alone Can Both Be Financial Health Hazards

(Guest Blog by Don R. Campbell of the Real Estate Investment Network)

When you’re getting involved in a business as serious as real estate investment, the utmost care must be taken to ensure you don’t flop – the negative result can be very expensive. Avoiding the most common mistakes sounds like the obvious thing to do, but too many folks shrug these off as “That would never happen to me” situations. I’m committed to success for every single person who reads this blog and with this first post in the series I intend to give you the tools you need to jump the most-known hurdles without skipping a beat.

With the recent release of my new book “Real Estate Joint Ventures” I’ve decided to give you a sneak peek into the book with the 20 Real Estate Joint Venture Landmines you must avoid. Stay tuned over the next four weeks as I lay out the most common problems investors face when dealing in joint ventures, and give you the critical “evasive actions” you can take to rectify each one.

Click here to purchase a copy of “Real Estate Joint Ventures” 

Click here for Part Two of the 20 Landmines series.

Landmine #1—Going it alone: You fail to build a real estate dream team

This landmine is all about the foundation you need to generate successful joint-venture deals in real estate. If you try to develop your business without a quality team behind you, you are doomed to fail.

Evasive action

Recognize that your role as the real estate expert on these deals means you must put together the team you’ll lead. The team’s success hinges on your ability to foster quality relationships with these individuals, every one of whom should have experience in real estate investing.

The Real Estate Dream Team

- Real estate agent
- Lender and mortgage broker
- Lawyer
- Accountant
- Bookkeeper
- Property inspector
- Construction and renovation tradespeople
- Property manager
- Prospective money partners

Landmine #2—Letting your team down: You forget the win-win equation

Every member of your real estate dream team should be able to expect to be involved in a win-win relationship with you. What does that win-win relationship look like?

- Your real estate agent brings you sound deals because she knows what you’re looking for. In return, she trusts that you won’t sabotage a deal and cost her a well-earned commission. So if a deal doesn’t interest you, you let her know so she can shop it to another client.
- Your bookkeeper keeps your records up to date because he knows what you expect and that you won’t burden him with last-minute requests for information unless it’s absolutely necessary.
- Your renovation expert delivers solid quotes and quality work because he wants in on your next project.
- Your property manager takes care of regular maintenance, but makes sure you know where money is being spent.
- Your money partners like the return they’re getting from their relationship with you and they tell others about it.

Evasive action

These win-win relationships can be complicated, since some roles on your team may be filled by more than one expert and there may be times when you need to draft someone new to your bench.

The key is respect. Recognize that each of the individuals on your team will expect a win-win relationship with you. In the vast majority of cases, that win-win will have a financial component: these people are helping you make money and vice versa.

To have an endless supply of JV money for your deals, you need to keep the best on your team. Take care to offer something other investors do not and never forget that you want the members of your team to make money as a direct result of their relationship with you.

JV Investor Insight: Develop a win-win mindset

Sophisticated JV investors know they can make money investing in real estate. They bring others into their deals so they can profit from deals that make money for their partners first. Look at your team members and ask yourself: how can I help them? To bring them onside, answer the question: what’s in it for them?
Under promise and over deliver by finding out how you can help them out!

Landmine #3—Staying too close to home: You choose the wrong partners

This problem is a lot more common than a lot of people realize. When you’re new to JV investing, it’s easy to talk about potential deals with other investors. But no hockey team needs more than one goalie on the ice during a game, and no real estate investment dream team needs a bench of real estate experts!

Evasive action

To avoid this landmine, take an inventory of what you have to offer and be mindful of what it tells you in terms of what you have and what you need. Are you the real estate expert? Do you also have experience with renovations? Is that experience hands on or managerial? Do you know where to find investment properties with great potential for cash flow and appreciation? How are your legal or tax accounting skills?

If you’re putting together your first real estate investment dream team, stock up on people whose skills are different from your own. What kind of investments do you want to pursue? Who can help you do that?

JV Investor Insight: What are you waiting for?

Sophisticated investors take the time to figure out who they need on their real estate investment dream team. Taking a multi-faceted approach to their deals, they look at what they need and when they need it, and then identify the individuals who can help them do that. If you won’t buy a single-family home without a property inspection, what are you waiting for? Line up that inspector before you make your first offer. Similarly, if you don’t like what your mortgage broker offers, find someone else you can work with.

Landmine #4—A lack of confidence: You don’t believe someone would want to invest with you

Remember the principles of JV wealth attraction? Sophisticated real estate investors attract money partners by practicing the seven principles of attraction: abundance, expectancy, imagination, giving, decisiveness, expertise and resiliency.

If these principles have you scratching your head, pick up a copy of Real Estate Joint Ventures: The Canadians Guide To Raising Money And Getting Deals Done. It walks investors through the details of wealth attraction.

Evasive action

Novice real estate investors often struggle with this landmine. They may do the work required to build a great support team, then struggle with how to bring money partners on board. More often than not, the real problem is a lack of action! No one is knocking at your door because you haven’t asked anyone over!

Change that by setting up meetings with people from your Level 1 contacts. Call relatives, friends and business colleagues and arrange a time to talk to them about your real estate investment business. Take a list of specific topics you want to cover—and link each topic to a principle of wealth attraction and tell them how your business generates win-win investments for you and your money partners.

This strategy works on three fronts:

1. It makes you narrow down your business focus.
2. It gives you important practice with face-to-face meetings with prospective JV partners. (Every time they ask a question you can’t answer, you get a new opportunity to find out information you can use to cement your reputation as a real estate “expert.”
3. It targets your message to the most important members of your Level 1 contacts. These people are the most likely to invest with you—and now you’ve told them exactly why they should do just that!
 
Meetings like this typically lead your Level 1 contacts to tell others in their own “inner circles” about what you’re doing. In other words, they will start to tell other people how your deals can help them, too.

Landmine #5—Chasing the money: Desperation scares potential investors

A lack of confidence must be balanced by realism. Potential investors will not be won over to your deals if you seem desperate for the money, or too confident about what you can do with it. Some real estate investors do this full time. Others balance their property portfolios with full- or part-time jobs. Regardless, never underestimate your role as the real estate expert and always conduct strict due diligence on the deal and your partner.

Because bad news travels fast, avoid getting into situations where a deal will fall through if your money partner reneges and never let JV money go to anything other than an agreed-upon deal.

Evasive action

Put a solid Plan B in place. You do not want to lose a deal because a partner reneges. Nor do you want to close a deal that doesn’t meet your basic goals (cash flow, mortgage pay down and appreciation) just because you’re afraid you might lose a particular investor.

Learn the art of negotiation that practices the win-win approach. When necessary, walk away from a deal. If you can’t come to an agreement, move on. You want to be flexible and still be able to do business on your terms. Remember your role as the real estate expert. When a prospective partner wants to elbow in on decisions that should be yours to make, think about what letting them do that will mean down the road. If you are the real estate expert, you want to own that role in your own deals.

JV Investor Insight: Seek the right partner 

Do not sell yourself short. Novice investors sometimes feel pressured to “prove” themselves and may be tempted to give away more than they should just to make a deal work with a particular money partner. Stick to your guns. If the deal is good, you will find the right money partner (or swing it on your own). Don’t give away the store to keep the front door.

Click here to purchase a copy of “Real Estate Joint Ventures”

#Barrie - New GO station is ready to go! Allandale Waterfront GO Train Station!

New GO station is ready to go

‘Anything that’s more convenient would make a big difference and make it easier to be picked up’

There might be a few less cars on Highway 400 during the Jan. 30 morning commute to the Big Smoke.

Train service will begin from the new Allandale Waterfront GO Station, giving commuters to the GTA who live in the northern part of the city and beyond another option to get to work.

Located at Gowan Street and Essa Road — and joined at the hip to the Allandale train station — the new station will be in a more central location than the Barrie South GO Station, which opened in December 2007.

Carly Heltzenr has been riding the rails since September and goes to the University of Toronto. She will probably utilize the new facility.

“Anything that’s more convenient would make a big difference and make it easier to be picked up,” she said, adding she likes taking the train.

“It’s good. It gets me where I need to go and it’s always on time.”

Ridership has been steadily increasing in the four-plus years that the Barrie line has seen trains chugging to Union Station in Toronto and back during the week.

In April 2008, ridership was estimated at about 560 passengers per day boarding at the Barrie South GO Station in the morning en route to Toronto.

In order to meet the growing demand, GO Transit added two new trains to the Barrie line last September.

Today, there are about 700 passengers boarding here each morning.

GO Transit/Metrolinx officials have been working with Barrie Transit to provide a full public transit link for commuters and a parking area has been developed.

A 20-metre pedestrian underpass tunnel will also allow commuters and local residents to walk from parking areas along Gowan Street and under the tracks to the GO station platform, which will be located southeast of the old station.

The line carries about 7,500 passengers every day and while there are long-term plans to add full service to the line, it will only extend to East Gwillimbury.

credit for article -

By Ian McInroy - Barrie Examiner

Shannon Murree is a Licensed Ontario Sales Representative with RE/MAX Chay Realty Inc Brokerage in Barrie and conducts business in the Barrie real estate market. She has many Barrie real estate listings and considered a local geographical specialist of where to invest in Barrie Homes for Sale and offers tenant placement and Property Management.  Visit her website for more information about Barrie real estate or Barrie Home Rentals

Guest Blog: Don R. Campbell - If A Property Appears To Be Immune To The Real Estate Cycle, It’s Likely Not The Norm

With the constant changes in the real estate market, you have to stay on top of all the information that is being distributed across the country. ‘Secrets of the Canadian Real Estate Cycle’ is designed to turn myth into fact and help you understand exactly what is going on around you. A calm perspective is your best ‘chance of survival’ amidst media noise and market changes, so take the chance and be enlightened.

I’m happy to present part three of the series unveiling chapter two of my latest book ‘Secrets of the Canadian Real Estate Cycle.’ You have to consider all the facts in real estate, so now is your chance to get a head start on the masses.

Real Estate Cycle Exceptions

As noted earlier, there are a few exceptions to the rules of the real estate cycle. First, some properties within a city or region may continue to command a premium irrespective of what is happening in the real estate cycle of a nation. These properties are likely to have some sort of serious “X factor.” Perhaps they have historical significance or a combination of uniquely superior attributes. Speaking in terms of real estate investment fundamentals, these are likely to be the best properties situated in the best locations on the best streets in the best neighbourhoods of a city. Whatever the reason, these properties (and the investment deals that involve them) are largely immune to the phases of the real estate cycle.

Another exception involves the emergence of specific localized hot spots. Regardless of the real estate cycle phase a nation, region or city may find itself in, these hot spots can defy the real estate cycle’s impact on prices in the region in which they are situated.

These hot spots emerge for a number of reasons, including the rezoning of land to allow more population-intensive developments to be constructed (therefore effectively increasing land values), or proximity to significant new projects planned for an area. Such new projects can include new infrastructure resulting in the creation of numerous employment opportunities, major transportation improvements like light rail rapid transit development, or a significant increase in the level of public amenities available. But strategic investors should be forewarned: these hot spots will eventually be subject to the real estate cycle because they will reach a level relative to surrounding or similar locations.

Exceptions to the cycle can also emerge as a result of culture shifts driven by lifestyle demands. The impact on real estate values can be positive, negative or both. One example of a culture shift is when baby boomers seek new lifestyle opportunities or abandon previous lifestyles. This could increase real estate values in favoured new lifestyle locations and reduce real estate values in former hot-spot locations. Again, such exceptions to the real estate cycle will eventually complete their adjustment to the culture shift and will then follow the real estate cycle once again.

Statistics and the Real Estate Cycle

Real estate investment is a numbers game, and no discussion of the real estate cycle could be complete without a review of how real estate–related statistics are reported and how we need to view them in order to better understand which phase the cycle is in.

As strategic real estate investors, we want reality, not fiction. That is problematic because most real estate statistics are presented in way that serves a predetermined purpose or that lacks context. And make no mistake: the strategic investor needs to take a hard look at the numbers. We want to make sure we understand what they tell us. We seek context.

Click here for Part One.

Click here for Part Two.

Click here for Part Four.

Secrets of the Canadian Real Estate Cycle will give you insight into the economic fundamentals that you may not have realized before. Make sure to look out for the next post in this series, coming out next week. Good luck and happy investing!

Cheers,
Don

Shannon Murree is a Licensed Ontario Sales Representative with RE/MAX Chay Realty Inc Brokerage in Barrie and conducts business in the Barrie real estate market. She has many Barrie real estate listings and considered a local geographical specialist of where to invest in Barrie Homes for Sale and offers tenant placement and Property Management.  Visit her website for more information about Barrie real estate or Barrie Home Rentals

Don R. Campbell of Real Estate Investment Network - The Real Estate Cycle Is Equivalent To A Broken Record

‘Secrets of the Canadian Real Estate Cycle‘ is designed to give you an in-depth and technical look into what is really happening with our real estate markets. I use ‘markets’ as a plural because there is no single real estate market in Canada.

It may seem that way with how the headlines on our national news sources read, but let me assure you that real estate in our country is as vast and differing as the geography that stretches from coast to coast. Averages don’t do us much good when what we’re really looking for is a microscopic view.

With all that in mind, here is part two of my four part series as I share the second chapter of ’Secrets of the Canadian Real Estate Cycle‘. Don’t hesitate to take a few notes and really think about what is written here.

Moving Forward: Cycle Predictability

Our research indicates that the real estate cycle is predictable because it follows a basic pattern. This pattern was the subject of a book written almost 80 years ago by the grandfather of the real estate cycle concept, Homer Hoyt. In “100 Years of Land Values in Chicago”, written in 1933, Hoyt analyzes the movement of Chicago’s land values, and notes that a recurrent succession of causes and effects impacted on these values during the hundred years from 1830 to 1930.

Hoyt concluded that a real estate cycle certainly existed, and he was the first to identify some of its consistent key drivers. Generally speaking, he noted that key drivers, such as population growth, often initially created increased demand for real estate. Increased demand was followed by a sharp rise in rents, which resulted in increased land values because of the greater financial returns available from buildings. Hoyt then observed significant increases in the construction of new buildings as a result of higher margins being achieved by construction firms. Finally, too much new construction produced an oversupply of real estate that eventually resulted in rent reductions and subsequent real estate price erosion. This pattern is still in evidence in real estate markets today, and is possibly even more apparent now, due to the ready availability and quality of statistical data.

The Cycle Is Predictable, Its Duration Is Not

Strategic real estate investors have often heard the phrase, “But this time it’s different because . . .” to justify why a current boom should last longer than a previous boom. They understand that the basic principles of the real estate cycle always remain the same, and many have used this knowledge to increase their financial net worth while minimizing their investment risks. The real estate cycle provides many telltale clues that clearly indicate what is in store for the real estate market.

The following graphs show the distinct pattern of the real estate cycle in several countries from the mid- to late 1980s. They reveal varying degrees of real estate price growth, but the three stages of the real estate cycle can still be seen in each country.

Some experienced investors reviewing these graphs may cry foul. They may recognize that one nation’s real estate cycle does not reflect what happened in their city or region during a particular time period, and they would be correct. These graphs represent national findings and may be out of sync with more local markets. Fear not. Our later discussion of key drivers will help you identify real estate cycle phases as well as market anomalies created by what we call market influencers (rather than key drivers) in your local market.

The graphs show that the most extreme house price growth is recorded in the UK (graph 2.2) and Australia (graph 2.3) during the late 1980s when house price inflation peaked in those countries at around 35 per cent per annum. Both of these countries then experienced a long slump phase. In contrast, the United States (graph 2.4) and Canada (graph 2.5) experienced a smaller rate of residential price growth (which peaked in the late 1980s), followed by a much shorter slump phase than what occurred in the UK and Australia.

While the data are not sufficient to draw a strong conclusion, it appears that periods of very strong house price growth may well result in an extended slump phase. Moreover, while the duration of each phase may differ from cycle to cycle, strategic investors recognize a larger truth: the cycle itself does not change.

Graph 2.2: UK House Price Index (% Change), 1984–2010

Graph 2.3: Australia House Price Index (% Change), 1987–2010

Graph 2.4: U.S. House Price Index (% Change), 1988–2010

Graph 2.5: Canada House Price Index (% Change), 1984–2010

Cycle Duration

While the duration of a complete real estate cycle has not proved to be consistent, it has typically lasted anywhere from seven to eighteen years. The longevity of each real estate cycle obviously varies depending on the state of the key drivers for each country. Smaller economies can experience faster cycles, and this may well be due to the increased volatility and limited inertia of the key drivers of the real estate cycle in those economies.

Click here for Part One.

Click here for Part Three.

Click here for Part Four.

Secrets of the Canadian Real Estate Cycle will give you insight into the economic fundamentals that you may not have realized before. Make sure to look out for the next post in this series, coming out next week. Good luck and happy investing!

Cheers,
Don

“Average” Does Not Convey Excellence – The World Of Real Estate Is No Exception (Guest Blog Don R. Campbell)

We live in a world of headlines that pump national average house price, average number of housing starts, and the average household debt. The most important thing to remember about all these average numbers is that they don’t mean much in the grand scheme of things. When it comes to investing in real estate, an average house price is the equivalent of taking the average temperature of every patient in a hospital, determining that it works out to 98.6 degrees and making the statement that everyone is in good health – it’s just not accurate. ‘Secrets of the Canadian Real Estate Cycle‘ will give you the insight you need to do the digging and look beyond the ‘average’ headlines.

If you have not yet read ‘Secrets of the Canadian Real Estate Cycle‘ yet, here’s your chance to get a sneak peek at a key chapter in the book. Search for the knowledge that will propel you forward and always make sure you’re looking to see ‘What’s Behind The Curtain’.

Measuring Real Estate Values: Averages Don’t Matter

Another area of confusion with real estate statistics concerns the way values are measured. Real estate values are measured in various ways throughout the world, including by averages, medians and varying forms of indexes. Some of these measurements produce an inaccurate indication of what is actually happening to real estate values.

It is surprising how often less reliable data, such as averages or median sales prices, are quoted as a representation of what’s happening in a real estate market. These figures can easily present a distorted view. For example, when there is a disproportionately high level of sales activity of superior real estate in an area in a given period, it may appear that values in that area are increasing purely because the average and/or median price will look higher than it had previously. Prices for such “superior” real estate may have actually decreased, but this may not be represented by the average or median figures.

Conversely, such a period may be followed by a high level of sales activity of inferior or lower-priced real estate in the same area. That may seem to indicate that values in the area are decreasing purely because the average and median sales prices are lower. In reality, that period may have been characterized by a few sales of superior real estate, so while the average and median figures indicate that values are declining, they may actually be increasing.

To obtain more accurate information on real estate value trends, we suggest using one of two methods.

1. Indexes: Indexes that are calculated from repeat sales of similar single-family homes, such as the S&P/Case-Shiller Home Price Indices used in the United States, are considered by many economists to be the most accurate way to represent a market’s overall real estate values. Until 2008, Canada was without a nationally recognized house price index. Fortunately, Teranet, in alliance with the National Bank of Canada, created an index that dates back to 1999 for the metropolitan areas of Vancouver, Calgary, Toronto, Ottawa, Montreal and Halifax.

2. Moving Average: Using the average Multiple Listing Service (MLS) prices reported monthly, economists calculate and trend the 12-month moving average. The 12-month moving average helps normalize the data and remove the month-to-month volatility described above.

Chapter Summary – Put the Cycle Secrets to Work

The real estate cycle is an irregular but recurrent and predictable succession of causes and effects that the real estate market experiences with resultant impacts on the creation and destruction of real estate wealth.

The cycle moves through three phases: boom, slump and recovery. Market influencers may contribute to its progress, or to temporary aberrations. Key drivers, on the other hand, always propel the cycle forward through predictable patterns. The duration of the phases changes depending on key drivers.

Efforts to interpret point-in-time statistics during any phase of the real estate cycle are complicated by a lack of context. The end result is statistics with little meaning, resulting in confusion. Strategic investors in pursuit of reality avoid this confusion by using key drivers to track the real estate cycle. They know the cycle is predictable in terms of its progress, and unpredictable in terms of its duration. That does not distract them from informed action based on what the key drivers tell them to do.

Click here for Part One.

Click here for Part Two.

Click here for Part Three.

Secrets of the Canadian Real Estate Cycle will give you insight into the economic fundamentals that you may not have realized before. Make sure to look out for the next post in this series, coming out next week. Good luck and happy investing!

If you’d like to experience my all-new economic research and real estate investment strategies live and in person, the ACRE™ Live Program will be in Edmonton on October 15^th and 16^th, and in Vancouver on November 5^th and 6^th. Hope to see you at one of these fantastic events!

Cheers,
Don

Thanks to Don R. Campbell is a Canadian-based real estate investor, researcher, author and educator. He is president of the Real Estate Investment Network™

If you're looking to invest in Barrie or Orillia Real Estate - contact Shannon Murree, Sales Representative, RE/MAX Chay Realty Inc Brokerage who only works with real estate investors and offers property management.

*not intended to solicit anyone with any written agency agreements.

Guest Blog: Don R. Campbell - Never Break The Final 30 Feet Rule When Investing In Real Estate

Never Break The Final 30 Feet Rule When Investing In Real Estate

As I walk the Final 30 Feet once again, I reflect back on how a comedian made all the difference in the world for my business and real estate ventures, and more importantly, how it will make a difference for you.

Wow, it seems everyone I bump into this summer has an opinion on the real estate market: It’s a bubble; there are too many condos; there are not enough condos; it’s going to collapse; it’s a great opportunity; it’s better to rent than buy… and on and on.

As I write this I am sitting on the patio of the local Starbucks (supposed to be prepping for a meeting) and I overhear a conversation at the next table. The subject? No, not the weather or hockey - it’s real estate again. As I listened I both chuckled at the mistaken myths they were sharing AND was a little saddened as they were making big decisions based on these often repeated myths.

With candor, one young 20-something is sharing her enthusiasm/opinions on real estate. In just 5 minutes she included:

• “You won’t believe the deal I can get on a time share in the Okanagan – for only $80,000 I get two weeks a year at NO CHARGE. That’s like a free holiday every year! The rest of the year it is rented out. Too bad it isn’t by a ski hill but summer should be great!”

 

• “Downtown Vancouver is not that expensive – my friend has a 380 square foot condo and only pays $1,400/month rent.”

 

• “My friend really wants to get a place in the states ‘cause (sic) the dollar is so strong – I told him it was a great idea and that a bunch of us should pool our money then share the profits ‘cause there is no tax as a Canadian down there.”

From the gist of the conversation it was clear than no-one at that table had any experience with even one real estate transaction, yet they were speaking in declarative statements as if their comments were written in stone. They say confidence is good, no matter how mis-informed – I disagree.

This one young lady’s declarations were so strong, her friends were accepting them as real estate gospel (even those substantially older than her). She even stated clearly that she hadn’t ever bought a property, but had read a “Ton” (sic) on it so she knows how it works.  Although not lacking in confidence, what she lacks is what I call The Final 30 feet experience.  Missing this critical piece to the success puzzle makes her confident declarations and opinions so very dangerous.

You’re right, a few people having a conversation about real estate is not overly “dangerous”. We all have to find our way in the world by making mistakes and learning from them. However, it does get dangerous when I start to hear misinformation and opinions coming from people calling themselves ‘real estate experts’ who also lack The Final 30 Feet experience.

The Final 30 Feet Experience

My understanding of The Final 30 Feet all began while listening to Buddy Hackett (veteran comedian) warning a young and upcoming comic on how to deal with the mountains of advice that TV executives, promoters, friends and family will give her as she builds her comedy career.  Buddy’s advice was simple yet profound: “Listen politely, smile and allow them to feel helpful… then turn around and seek out and take advice only from those who have walked The Final 30 Feet.”

The obvious follow-up question was: “What do you mean the Final 30 Feet?” When I heard the answer, I saved it and have used it ever since. Buddy said:

“Only take advice from those who have walked the final and most important 30 feet from backstage to alone in front of a mic with nowhere to hide. Then, and only then, will you know the advice comes from reality and not theory. They’ll understand the emotions, the work it takes to get it right. They’ll have made the mistakes and created the laughs, not just read about how to do it.”

This truism can be transferred into any business, career or investment decision. He is, in essence, saying that there are enough unexperienced pretenders out there who can and will steer you wrong (even if they are confident that their opinions are correct). Be very careful to choose advisors whom have The Final 30 Feet experience with the subject you need input on.

Back to the conversation at Starbucks. I’m sure that young lady thought she was repeating truths; she wasn’t deliberately misleading her companions. However, without having bought, owned, managed or experienced a lot of real estate transactions in all market conditions she truly didn’t have The Final 30 Feet of experience – standing alone with the emotions and realities.

Book theory, number analysis, charts and graphs mean very little if you haven’t experienced what it really takes to be a great investor. Books, friends and ‘experts’ can give you theories, math equations, opinions and analysis, but in the end theories are just that – theories.  Veteran investors know there is no theory when you are in the trenches making real life decisions.

That is why Buddy Hackett’s Final 30 Feet advice has served me so very well as I built my business and real estate portfolio into what it is today. I continually sought out people who had already achieved what I wanted to achieve, who had solved the problems I wanted to solve, and who had made the mistakes I wanted to minimize. I let the inexperienced share their theories and opinions, I politely smiled, then quickly moved on.

So as you move forward in your real estate, your investments, your life, please keep the Final 30 Feet rule in mind. If someone has real life provable experience (both good and bad) in a subject you need answers on, seek them out for advice. What you will find is that those with the Final 30 Feetexperience are often more difficult to find than the empty theorists (who have never left ‘back-stage’, leaving them with lots of time to post, share and pontificate). Let these empty theorists have their say. This is your cue to smile, turn on your heel, and speak to those who have taken that critical 30 foot walk. Your business, your real estate and your ‘future you’ will thank you for it.

Guest Blog: Don R. Campbell - Never Break The Final 30 Feet Rule When Investing In Real Estate

Never Break The Final 30 Feet Rule When Investing In Real Estate

As I walk the Final 30 Feet once again, I reflect back on how a comedian made all the difference in the world for my business and real estate ventures, and more importantly, how it will make a difference for you.

Wow, it seems everyone I bump into this summer has an opinion on the real estate market: It’s a bubble; there are too many condos; there are not enough condos; it’s going to collapse; it’s a great opportunity; it’s better to rent than buy… and on and on.

As I write this I am sitting on the patio of the local Starbucks (supposed to be prepping for a meeting) and I overhear a conversation at the next table. The subject? No, not the weather or hockey - it’s real estate again. As I listened I both chuckled at the mistaken myths they were sharing AND was a little saddened as they were making big decisions based on these often repeated myths.

With candor, one young 20-something is sharing her enthusiasm/opinions on real estate. In just 5 minutes she included:

• “You won’t believe the deal I can get on a time share in the Okanagan – for only $80,000 I get two weeks a year at NO CHARGE. That’s like a free holiday every year! The rest of the year it is rented out. Too bad it isn’t by a ski hill but summer should be great!”

 

• “Downtown Vancouver is not that expensive – my friend has a 380 square foot condo and only pays $1,400/month rent.”

 

• “My friend really wants to get a place in the states ‘cause (sic) the dollar is so strong – I told him it was a great idea and that a bunch of us should pool our money then share the profits ‘cause there is no tax as a Canadian down there.”

From the gist of the conversation it was clear than no-one at that table had any experience with even one real estate transaction, yet they were speaking in declarative statements as if their comments were written in stone. They say confidence is good, no matter how mis-informed – I disagree.

This one young lady’s declarations were so strong, her friends were accepting them as real estate gospel (even those substantially older than her). She even stated clearly that she hadn’t ever bought a property, but had read a “Ton” (sic) on it so she knows how it works.  Although not lacking in confidence, what she lacks is what I call The Final 30 feet experience.  Missing this critical piece to the success puzzle makes her confident declarations and opinions so very dangerous.

You’re right, a few people having a conversation about real estate is not overly “dangerous”. We all have to find our way in the world by making mistakes and learning from them. However, it does get dangerous when I start to hear misinformation and opinions coming from people calling themselves ‘real estate experts’ who also lack The Final 30 Feet experience.

The Final 30 Feet Experience

My understanding of The Final 30 Feet all began while listening to Buddy Hackett (veteran comedian) warning a young and upcoming comic on how to deal with the mountains of advice that TV executives, promoters, friends and family will give her as she builds her comedy career.  Buddy’s advice was simple yet profound: “Listen politely, smile and allow them to feel helpful… then turn around and seek out and take advice only from those who have walked The Final 30 Feet.”

The obvious follow-up question was: “What do you mean the Final 30 Feet?” When I heard the answer, I saved it and have used it ever since. Buddy said:

“Only take advice from those who have walked the final and most important 30 feet from backstage to alone in front of a mic with nowhere to hide. Then, and only then, will you know the advice comes from reality and not theory. They’ll understand the emotions, the work it takes to get it right. They’ll have made the mistakes and created the laughs, not just read about how to do it.”

This truism can be transferred into any business, career or investment decision. He is, in essence, saying that there are enough unexperienced pretenders out there who can and will steer you wrong (even if they are confident that their opinions are correct). Be very careful to choose advisors whom have The Final 30 Feet experience with the subject you need input on.

Back to the conversation at Starbucks. I’m sure that young lady thought she was repeating truths; she wasn’t deliberately misleading her companions. However, without having bought, owned, managed or experienced a lot of real estate transactions in all market conditions she truly didn’t have The Final 30 Feet of experience – standing alone with the emotions and realities.

Book theory, number analysis, charts and graphs mean very little if you haven’t experienced what it really takes to be a great investor. Books, friends and ‘experts’ can give you theories, math equations, opinions and analysis, but in the end theories are just that – theories.  Veteran investors know there is no theory when you are in the trenches making real life decisions.

That is why Buddy Hackett’s Final 30 Feet advice has served me so very well as I built my business and real estate portfolio into what it is today. I continually sought out people who had already achieved what I wanted to achieve, who had solved the problems I wanted to solve, and who had made the mistakes I wanted to minimize. I let the inexperienced share their theories and opinions, I politely smiled, then quickly moved on.

So as you move forward in your real estate, your investments, your life, please keep the Final 30 Feet rule in mind. If someone has real life provable experience (both good and bad) in a subject you need answers on, seek them out for advice. What you will find is that those with the Final 30 Feetexperience are often more difficult to find than the empty theorists (who have never left ‘back-stage’, leaving them with lots of time to post, share and pontificate). Let these empty theorists have their say. This is your cue to smile, turn on your heel, and speak to those who have taken that critical 30 foot walk. Your business, your real estate and your ‘future you’ will thank you for it.

Shrinking Margins and Rising Profits – An Article From Peter Kinch, Mortgage Expert

RBC led the charge last week to cut back on the discount they were offering off of the prime lending rate for Variable Rate Mortgages (VRMs). Up until last week, it was common for borrowers to get Prime less 0.75% or 0.80 % or in some cases even up to Prime minus 0.90%. With the Prime lending rate at 3%, this could mean an initial rate as low as 2.1% in some cases. But alas, that was last week and now the majority of lenders are offering Prime – 0.5% or less. In effect, they have made the VRMs a little less attractive than they were a week earlier.

So why did all the lenders follow suit and increase the cost of taking a VRM in today’s market? Well the official reason that was put forth by the banks was that there was a lack of liquidity in the markets and the cost of borrowing had increased. Now of course, we’ll all have to take their word on that since the average Canadian does not have access to the inner workings of a chartered bank and the true costs of borrowing that they incur. But I do know one thing for certain, given the limited exposure that I have, and that is the fact that many lenders have been grumbling for months about the lack of profitability on the Variable rate mortgages with such high discounts.

In the meantime, what seems to have been lost in the conversation was the fact that the bond yields have been steadily dropping all summer long. This in turn, led to an increase in the profitability on long term rates. So while most of the country’s media focused on reporting about the fact the Bank of Canada (BOC) will not likely be moving rates soon, no one was drawing attention to the fact that the banks’ profit margins were steadily rising as the bond yields dropped. Lenders were making significantly more profit on a 5 year term than they were selling variable rate mortgages with full discounts.

So let me ask you a simple question; if you were running a business that had two products and one of them was very profitable and one of them broke even or even lost money, which would you promote? The end result is that banks would like you to take a five year fixed rate mortgage and are now making it more attractive for you to do so.

 BY THE NUMBERS – Changing Spreads and Changing Guidelines

Talking about the price of a 5 year mortgage and the spread on the bond yields can be very confusing for the average Canadian. Since most people don’t understand it the media tends to avoid writing about it. As such, some glaring discrepancies go unreported and questions remain unasked.

 Let’s start with some basics:

• A bond yield and a bond price have an inverse relationship. Don’t worry about trying to understand that – you simply need to know that if the bond price goes up, the bond yield goes down and vice versa.  
• Canadian banks and lenders use the bond yields to determine their ‘spread’ aka profitability.
• They like to keep the spread between a certain range. For example; 5 years ago the spread would be between 90 and 130. That means you take the 5 year mortgage rate (say 4%) and subtract the current 5 year bond yield (say 2.95) and the difference should be between 90 and 130. If the difference is below 90, then that is a signal for banks to raise rates. If it is above 130, then they would lower rates. In the above example 4.00 – 2.95 = 1.05 so that would indicate the rate is within the ‘comfort zone’ and therefore not likely to move.

Now let’s look at the way things are today: 

• Today’s 5 year bond yield (at the time of writing and subject to change daily) is 1.66
• A typical 5 year published mortgage rate is 3.59%
• 3.59 – 1.66 = 1.93

Now based on the numbers that were used 5 years ago by the chartered banks a spread of 1.93 would be .63 over the comfort zone – aka very profitable – and a signal to lower rates (arguably to as low as 2.96% for a 5 year term). However, lenders are no longer using the same model for spreads. In fact, due to (and I quote) “the uncertainty in the bond market is forcing a wider than normal margin until investors see some stability return” – the current range that lenders are going by is 1.75 and 1.95.

As such, the spread of 1.93 for today’s interest rates is actually at the high end of the comfort zone, but still within range. Some lenders are offering a quick close special of 3.39% which puts the spread at 1.73 and therefore out of the comfort zone. As such, any increase in the bond yield will result in those rates increasing Not decreasing.

Suffice to say, it would appear that the banks are making significantly more profit on 5 year mortgages today than they did 5 years ago. But having said that; they also experienced the global credit crunch of 2008 and saw first hand the impact to global banks when liquidity in the markets disappeared. And although we complain about the profitability of the chartered banks, it was this very fact that has made them the envy of the world when their counter-parts in other countries suffered. With ongoing credit and financial issues in Europe and the United States, perhaps the Canadian banks are wise to shore up their coffers while they can.

In the meantime, the more investors flock to safe harbours amidst turmoil and uncertainty in the global markets, the more bonds they will buy. The more they buy bonds, the higher the price goes and as such, the lower the bond yields go. Now, whether this will translate into lower mortgage rates for you is yet to be determined. And while we could argue that the long term rates could go even lower or in fact that they should be lower, they are still the lowest they’ve been in a lifetime.

So whether you choose to take a variable with a lesser discount or today’s low long term rate – one thing is certain: rates are low – if you have a mortgage or you’re planning on getting one – take advantage of these low rates today and accelerate your debt reduction. Stability will eventually return to the markets and investors will eventually shift back to equities and when that happens, bond prices will drop, yields will rise and so too will your long term rates. In the meantime, enjoy them while they’re here.

Happy Investing.

Guest Blog by Don R. Campbell - Multi-Family Investing - Trade Houses for Buildings - Was Monopoly Right All Along?

Multi-Family Investing – Trade Houses For Buildings… Was Monopoly Right All Along???

Discover the differences between investing in Multi-Family properties and Single Family Homes

There are 4 very important differences between investing in Single Family homes and Investing in Multi-Family properties, and these differences are described below:

Difference #1 – Trial & Error

You can ‘attempt’ to invest in single family homes, and if you make mistakes they are, in most cases, not very costly (on the grand scale). In fact, ‘attempting’ to invest in single family properties is how you learn the process.

With multi-family properties, the universe is not very large. This means that there are substantially fewer players in the game (realtors, bankers, vendors, investors). There are also not nearly as many properties. What this means is that you will earn a reputation in your target market very quickly and this reputation (right or wrong) will precede you as you attempt to enter into transactions and look to close your deals. So you will need to be prepared and knowledgeable about your market BEFORE you make your first offer. And more importantly you will need…

Difference #2 – Money

In 99% of cases involving multi-family investing, you will require a substantial amount of liquid investment capital and a strong net worth statement. This can come from a combination of you and a joint venture partner or from yourself alone.

With single family property investing, it is quite easy to find the money AFTER you have found the deal. In fact, some of these transactions require little or no money to complete. In addition, when investing in a single family condo or house, the down payment and closing costs are quite low. This is very different from the multi-family investing world – you have to multiply the complexity.

Due to the tighter time lines in doing your due diligence and the approval process, it is extremely difficult to start hunting for a financial partner after you have found a building.

Meaning, in order to keep your reputation and to ensure that you are getting the best deals possible, you will need to have all of your partners and finances arranged up front. You (and your partner, if there is one) must have your Sophisticated Investor Binder in place, you must know your financing ability, and you must know that you can close on the property on time. If you do not and you end up failing to close on a couple of properties because you really didn’t have your financial ducks in a row, you will be hard pressed to see another good deal come across your plate in the future.

Now some good news:

Difference #3 – No Real Limit

Often, when investing in single family properties, an investor will hit the ‘financing wall.’ This artificial wall is created by lending institutions and is put there to limit their ‘risk’ with each investor. These rules have changed within the past 18 months and have become tighter, so being up to date is critical. It is a basic financial calculation that tells them when they believe you are at your limit for borrowing and it doesn’t matter how good the property is that you are bringing them.

If you’d like to hear an audio interview with and investor who has seen these profits by building a portfolio of over 1,200 properties, click here.

The good news is that when investing in multi-family properties, the wall is not in place. The lenders look mostly at the financial performance and potential of the building, with the lender being secondary to the equation. As long as the property fits their system, you stand a good chance to get your approval. There isn’t any artificial wall – it is completely a financial transaction. Which leads to…

Difference #4 – Business Transaction

With single family homes you are often dealing directly with someone who lives in the property and has an emotional attachment. The sale of the property is often one of the largest financial transactions they will ever undertake, and most don’t have very much experience in the ‘business side’ of real estate.

When dealing with the majority of multi-family vendors and more experienced realtors, you will find that the discussions follow a more business-like pattern. Numbers are the key elements in the transaction and your ability to justify your offer and your terms will all boil down to business and the discussion of what is reasonable and what the banks will finance. There are many more prevailing facts available in the multi-family investing world which help to reduce risk.

Conclusion

These are just four of the many key differences between investing in single family homes/condos and multi-family investing. Each style of investing has its pros and cons, each has its risks and rewards. It is often stated that an investor should really complete between 7 and 10 single family transactions before they even attempt multi-family investing. This will give the investor the foundation of knowledge, confidence, and relationships from which to build a successful multi-family portfolio.

If you’re worried about how the recent changes in Canadian mortgage rules will impact your real estate investing…looking for a safe, proven way to make the banks work for you…or even just ready to take your game to the next level…

Then it’s time to consider a jump into multi-family investing.

Multi-family investing is one of the fastest, safest ways to accelerate your portfolio for huge monthly cash flow and massive profit pay-outs — even in tight lending climates like ours — if you know how to do it right. Be sure to visit the ongoing real estate discussion on Canada’s Premier Real Estate Community and Discussion forums >> www.myREINspace.com.

If you think Multi-Family investing is the right means to boost your long-term wealth strategy, be sure to check out all the details on REIN™’s Multi-Family Investing Bootcamp coming up on June 18 & 19 at the International Centre in Toronto. Cheers!

Guest Blog by: Don R. Campbell - Real Estate Education, Researcher, Investor & Best-Selling Author of:

Real Estate Investment Network™

a division of Cutting Edge Research Inc.