Archive for January, 2010

9 Reasons Why People Invest In Real Estate

Wednesday, January 27th, 2010

As prepared by Neil Uttamsingh, based on his experience as a real estate investor and in no particular order.
1) Status

I have seen some people invest in real estate, and continue to invest in real estate over many years, in order to ’show off’.  They invest because they feel that the more properties they have, the more other people will be impressed.

2) Fear of Poverty

People invest in real estate because they are afraid of poverty.  They might be afraid that if they do not invest in real estate, that they will end up in a difficult financial situation down the road.  As a result, because they are afraid of poverty, this gives them the motivation to pull the trigger and invest in real estate.

3) Increased Net Worth

People invest in real estate because they want to increase their net worth.  Said differently, people invest in real estate because they want to become ‘rich’.

4)  They are opposed to the financial markets

I have seen some people that hate investing in the financial markets.  As a result, investing their money in real estate is the only other option for them. It is either real estate, or stuffing their money underneath their mattress.

5) People want to buy things

Some people are motivated to invest in real estate because they want to purchase material things.  The cash flow provided through real estate investment allows people to buy the things that they want.

6)  They want to go on vacation

Some real estate investors that I know are motivated to invest in real estate, because it allows them to go on regular vacations.  They use the cash flow, or the appreciation from properties to pay for their trips and vacations.

7)  Trying to find a sense of self worth

Some people do not know what their purpose is in life.  They feel that they have no direction, or no guidance.  As a result, I have seen some people invest in real estate, and obtain direction through these actions.  They have become more focused and they feel that they have a purpose in life.

8 ) A sense of competition

Some real estate investors have a competitive nature.  They invest in real estate, and try to acquire as many properties as they can, as a personal challenge.

9) Follow the crowd

People invest in real estate because they see others doing it.  They watch from a distance and come to the conclusion that it cannot be too difficult to do.  As a result, they jump feet first into the real estate investing game by watching others and just by simply following the crowd.

Posted in Real Estate | No Comments »

7 Secrets To Small Business Success

Wednesday, January 27th, 2010

Each year, Profit Magazine publishes its list of Canada’s Top 50 Fastest Growing Companies.  Last year, Ian Portsmouth, Editor of Profit, took it upon himself to find out what these fast growing companies had in common in order to determine how to build a successful small business in Canada.  The following is a list of Ian’s findings:

Secret #1 – Steal the Best Ideas: Find great tactics and strategies outside your own industry and incorporate them into your business.  Think of companies that you love doing business with in both your business and personal life.  What are they doing to get and keep your business?  How can you incorporate that into your business?

Secret #2 – Be Like Advil: Relieve someone’s pain better than anybody else does.  The fastest growing companies are agile – they can make decisions and respond to customers’ needs quickly.  Capitalize on your size to compress decision making.

Secret #3 – Seek Trusted Advisors: 50% of the fastest growing companies have advisory boards comprising of entrepreneurs and executives from many fields.  Join peer-advisory groups such as Entrepreneurs’ organizations, Women Presidents’ organizations, etc.

Secret #4 – Find and Keep the Best: 86% of the fastest growing companies offer staff individual performance bonuses and 48% engage in profit sharing

Secret #5 – Export Like Crazy: Fast growing companies are always on the look out for new markets and opportunities.

Secret #6 – Beg, Borrow, but Don’t Steal: Be creative in finding the capital you need to grow.  The fastest growing companies use a wide variety of capital including personal finances, banks, leasing companies, factors, suppliers, employees and bartering.  Remember, Cash is King.  Rapid growth can spell disaster if undercapitalized.

Secret #7 – Get Lucky: Exponential growth requires a few lucky breaks but Canada’s top entrepreneurs create their own luck.  When surveyed about their success, they attribute 96% of their success to persistency and a positive attitude

Posted in Business Financing, CASB Management Group Inc. | No Comments »

Bankruptcy Made Easy? Are you part of the problem?

Wednesday, January 27th, 2010

If I hear another cute radio commercial promoting how bankruptcy could be the solution to stopping annoying creditor calls or to consolidate debt into “one easy payment” I believe I am going to pull out what’s left of my hair.

How irresponsible – not to mention immoral – to council clients to simply shirk their responsibilities and essentially screw over the people that have provided them financing. But Bruce you might be thinking, bad things can happen to good people. Can’t we give them a fresh start? Who are they really hurting? Only the big corporations who can afford the losses?

The problem I have with these bankruptcy “professionals” is their view that a short term gain is in the best interest of their clients. (It is certainly in the trustee’s best interest). What about the long term pain? What happens when they want to purchase a home at some time in the future? It’s funny but bankruptcy with all the negative stereo types attached to it is actually not the worst option for the client.

 A bankruptcy will show on a client’s credit bureau for seven years after filing and six years after discharge, but lenders will generally give favourable consideration to clients who have spotless re-established credit for two years post bankruptcy discharge,  in effect clients are given a second change. Declare bankruptcy a second time however and it remains for 14 years on the credit bureau and lenders will have little interest in dealing with these clients. Make no mistake, bankruptcy is a poor solution and should be avoided.

So what is worse than a bankruptcy? A credit proposal. The problem with a credit proposal is that lenders treat them like a bankruptcy but there is generally no quick resolve and discharge, so the proposal remains on the credit bureau for a much longer period of time. It is in effect, a bankruptcy that never ends.

So what is worse than a credit proposal?  A power of sale judgement.  Clients that default on their mortgage payments will ultimately have power of sale procedures taken against them. This stays on the credit bureau for seven years as well. The reason this is poorest solution is that number one, lenders don’t want to lend to clients that have screwed them over personally (or another financial institution.) The second reason is that this process, in most cases, is 100% avoidable by simply listing the home for sale. Duh.

I am amazed at the number of power of sale properties that are listed every day with clients walking away from equity. Properties that cannot be listed and sold through traditional methods can be sold privately and often provide the client the possibility of remaining in the property as a tenant, with an option to repurchase the property at some point in the future. Does that not sound like the best solution for all concerned?

If you are faced with the prospect of a client approaching power of sale, a credit proposal, or bankruptcy  ask yourself this question. Are you part of the problem or part of the solution? Give us a call. We can help.

 

We welcome your comments.

Posted in Mortgages, Rant, Real Estate | No Comments »

Bank of Canada backs off housing bubble talk

Monday, January 11th, 2010

 

I see that the Bank of Canada has backed off their earlier position in respect to mortgage rates as per my previous blog.

In a speech in Edmonton, bank official David Wolf ruled out increasing interest rates to discourage mortgage lending.

Wolf, an adviser to bank governor Mark Carney, said that in the central bank’s view it is premature to be talking about a housing bubble in Canada.

“We see the housing market requiring vigilance, not alarm,” he said.

He added that even if the bank was convinced housing prices were getting out of hand, raising interest rates would be too blunt an instrument, since it would mean cooling off all economic activity.

“We would, in essence, be dousing the entire Canadian economy with cold water, just as it emerges from recession,” he said in a speech delivered on behalf of deputy governor Timothy Lane, who could not travel to the Alberta capital for personal reasons.

“As a result, it would take longer for economic growth to return to potential and for inflation to get back to target,” he added.

Wolf said the bank considers the current hot market to be a phenomenon based on temporary factors, such as pent-up demand from the recession, and low mortgage rates. Moreover, he noted with starts below long-term demographic requirements, the number of houses on the market is still declining.

Better ways to cool market

Wolf, a former chief economist with Merrill Lynch Canada, said there are better ways to cool the housing market.

Finance Minister Jim Flaherty has also mused about such measures, including raising the minimum down payment requirement above five per cent, or reducing the maximum length a house can be amortized from the current 35 years.

The bank has been highlighting for months the danger of Canadians getting in over their heads in purchasing homes, warning that buyers should ensure they don’t take on too much debt.

The bank’s worry is that homeowners with large mortgages that are manageable now with interest rates at record lows won’t be able to afford their monthly payments once interest rates start rising, as is expected later this year.

On the economy as a whole, Wolf said the bank believes the economic recovery is still dependent on government support and that “growth drive by the private sector has yet to materialize.”

Notes from the speech were posted on the bank’s website.

With files from The Canadian Press

Posted in Mortgages, Real Estate | No Comments »

Are you ready for higher mortgage rates?

Thursday, January 7th, 2010


December was a vibrant month for real estate sales in London and I have to admit being taken by surprise. Are we not facing record unemployment rates and a huge trade deficit? Perhaps the unemployment benefits have not yet expired? Low interest rates, the rush to beat the Harmonized Sales Tax (HST) and of course people like me, qualifying buyers that can’t qualify at their local bank branch, have added to the stimulus, but what happens when interest rates increase, as Finance Minister Jim Flaherty has suggested in the third quarter of 2010? He is also considering reducing amortization periods and increasing the down payment required on homes if the housing market shows excessive demand.
The Chamber of Commerce is already predicting a 3% increase in the prime rate by the end of 2011. What would that mean to buyers and those needing to refinance? At today’s prime rate of 2.25% it would cost $1,275 to carry a $300,000 home with an amortization of 25 years and a 5 per cent down payment. By comparison, a 5.25% mortgage rate would mean the $300,000 home would now cost $1,745 every month, or an additional $470 per month. That’s a lot of extra money to be shelling out, especially if you’re not expecting rate increases. Not only will mortgage rate increases reduce the number of potential buyers able to qualify,  rate increases of this magnitude will create a greater supply of homes for sale, that owners quite simply, no longer can afford. Some analysts estimate as many as 10 per cent of households risk losing a home if the Bank of Canada rate rises to just 4.5 per cent. So how does this all affect you? Will the housing market collapse? Just how bad will it be? Will you be searching for a new career?
The cost of carrying a mortgage will absolutely shoot higher in the next few years. Nothing is more certain, so let’s get you prepared. On the other hand I see nothing in our future that suggests a rapid increase. Our dollar will be at par, so manufacturing will still be suffering. The U.S. economy will continue to be a mess, with wars to fund and a massive deficit. What exactly is Jim Flaherty seeing as this economic boom that will require higher interest rates to control inflation?
Please let me know your thoughts as your insights would be appreciated. Also there is no need to change careers, as the sharp realtors do just fine in every market… as do the sharp money guys.

 

 

 

 

Posted in Mortgages, Real Estate | 4 Comments »