Variable Rates going to 2%!

[housingrental]

A great post Thomas


QUOTE (thomasbeyer2000 @ Oct 5 2009, 04:56 PM) indeed !

Real estate is heavily scewed to work UPFRONT: educate yourself, find the area, find the micro-location in a city, find a property, negotiate a deal, find a decent mortgage broker, find a decent lawyer, find an accountant, get the mortgage, find a property manager, do the right initial improvements, find JV partners .. MOST WORK IS UPFRONT (90% or so) .. but then it is downhill from there !

Similar to an airplane: 90% of the fuel is burned on the first few kilometers to get it to 30,000 ft .. then soaring / gliding for the next 1000 km .. then a bit more work / fuel for landing !

Some properties I (co)own provide thousands of dollars per month cash-flow plus mortgage paydown plus at least some inflationary appreciation .. with perhaps 1-2 h / month now .. but most of the heavy lifting happened 4-6 years ago !!

You reap what you sow !!

So, sow away big time now .. and reap lots later !!!

It`s not a "get rich quick scheme" .. it`s a "get rich for sure" game if set up properly with win/win for team members, investors and yourself !

 

[fumbrunner]

QUOTE (luckyluciano @ Oct 5 2009, 07:40 PM) Wise words! I have definitely planned on it. And planning on prices adjusting down 10-20%. Although I thought this party should have slowly ended in 2005. But the stimulation just kept on coming. Sometimes I feels the policy makers must have a big plan to inflate us all out of this. Then I realize they are now officially out of bullets with BOC rate at .25% and billions & trillions in stimulous. Oh well! Only time will tell)i

I`m glad your crystal ball is working so well. Mine is a little bit more cloudy. BTW, there are significant differences between the US market and the Canadian Market. Remember, the weakness of the US dollar is a boon for the Canadian dollar particularly when oil and commodities are high (ie in inflationary times), which puts significant pressure on our manufacturing (ie exporting) sector. That causes a moderation in the Canadian economy. I think you are way off on your interest rate projections, but everyone is entitled to their opinion.

 

[Nir]

QUOTE (thomasbeyer2000 @ Oct 5 2009, 02:56 PM) It`s not a "get rich quick scheme"

perhaps, but I would add it can definitely be a "get passive income quick". and
when you have the passive income who cares if they call you rich or not!? ha ha

 

[greg12]

QUOTE (luckyluciano @ Oct 5 2009, 01:06 PM) IT JUST KEEPS GETTING HOTTER AND HOTTER! HOW HIGH CAN SHE GO? RBC just announced variable rates at 2.10%.

Judging by the hike in the Australian prime rate, are the banks here maybe reducing rates in anticipation of central bank rate increase?

 

[Goodstuff]

QUOTE (greg12 @ Oct 6 2009, 11:37 AM) Judging by the hike in the Australian prime rate, are the banks here maybe reducing rates in anticipation of central bank rate increase?


Why would a bank reduce rates in anticipation of a central bank rate increase? Makes no sense. It would be the opposite. They`d raise rates in anticipation, if anything.

Lucky, I find it funny that you feel so sorry for the people buying the big expensive houses, but not sorry enough to stop them and forego the commission. If you really want to help your fellow man then lower your commission. That`ll put more money in their pockets for the down payment.

People are buying houses because they see it as a better alternative to renting. It allows for more freedom, pride of ownership, eventual ownership outright, and a hedge against inflation. Everyone has to live somewhere. Best solution is to buy a place. Yes, their payments might increase down the line if interest rates go up, but if interest rates go up it means the economy has recovered and inflation is back. Thus, they will likely be making more money and just might be able to afford the new payments anyway. And they`ll be way ahead because their house price has most likely kept pace with inflation.

There are honest, caring real estate agents and there are those that seem to be just in it for the money and nothing else. They`re easy to spot. I hope you can look in the mirror and say to yourself that you are the former.

 

[greg12]

QUOTE (Goodstuff @ Oct 6 2009, 06:36 PM) Why would a bank reduce rates in anticipation of a central bank rate increase? Makes no sense. It would be the opposite. They`d raise rates in anticipation, if anything.
Banks discounting their variable rate does not mean your interest rate will go down. They do this to maintain their spread and stay competitive.

Hypothetical example:
Central bank Prime = 2.25%
RBC`s rate = Prime+0.10 = 2.35%

RBC changes rate to Prime - 0.15 = 2.10%
Central bank increases prime to 2.50%
Consumers` effective rate becomes Prime - 0.15 = 2.35%

It usually makes no sense for banks to make their variable rate more expensive in concurrence with the central bank`s increase in prime.

 

[Goodstuff]

QUOTE (greg12 @ Oct 7 2009, 11:14 AM) Banks discounting their variable rate does not mean your interest rate will go down. They do this to maintain their spread and stay competitive.

Hypothetical example:
Central bank Prime = 2.25%
RBC`s rate = Prime+0.10 = 2.35%

RBC changes rate to Prime - 0.15 = 2.10%
Central bank increases prime to 2.50%
Consumers` effective rate becomes Prime - 0.15 = 2.35%

It usually makes no sense for banks to make their variable rate more expensive in concurrence with the central bank`s increase in prime.

?????? Huh?
I think it would make all kinds of sense for a bank to make their variable rate more expensive at any time, whether the central bank raised rates or not.
If I was going to lend someone money, I would most assuredly want to charge them as much interest as possible. Banks aren`t in the business of lowering their rates to make borrowers happy.
They would only do it because the competition has lowered theirs. They would never do it otherwise, for any reason. That would be stupid.

Am I missing something here?

 

[luckyluciano]

Sorry, been busy selling houses in this crazy market! Sure, someone could own rooming houses and or student rentals and use a PM. It`s just not for me.

QUOTE (housingrental @ Oct 6 2009, 11:49 AM) Hi Lucky, Why not respond to my previous post ? You seem to have prejudiced opinions without base.

 

[luckyluciano]

Most of us can do the cashflow math at a given interest rate. Obviously, when I asked for details I did not mean calculate the math for me. What we eagerly want to know is what type of a property has a current market value of $230k and a gross income of $30k/yr.

QUOTE (tbarcier @ Oct 5 2009, 09:10 PM) I still think you are out to lunch, but whatever, everyone is entitled to their opinion. As far cash flow goes, its pretty basic. If the interest rate I was paying right now was 6% I have positive cash flow. More in depth example property was bought for 230,000. Income is 2500 per month. Expenses 800. and that`s taxes, utilities, PM, insurance. So for giggles lets just say this was 100% financed at 6% the mortgage would be around 1400 with fees leaving 300. Make sense? Basically this property will cash flow up to 8%. It`s not some big mystery, it`s done everyday.

 

[luckyluciano]

You don`t need a crystal ball, just a little cognitive ability or google. BOC lennding rate was 4-5% just 2 years ago, 2007.

QUOTE (fumbrunner @ Oct 6 2009, 11:56 AM) I`m glad your crystal ball is working so well. Mine is a little bit more cloudy. BTW, there are significant differences between the US market and the Canadian Market. Remember, the weakness of the US dollar is a boon for the Canadian dollar particularly when oil and commodities are high (ie in inflationary times), which puts significant pressure on our manufacturing (ie exporting) sector. That causes a moderation in the Canadian economy. I think you are way off on your interest rate projections, but everyone is entitled to their opinion.

 

[luckyluciano]

Why don`t I reduce my commission? Why don`t you reduce your rent/cashflow/net income, this way they can save for a down payment on a house ?
So you feel you are smarter than the banking monopoly in Canada? In the last 30 days they lowered variable rates yet increased LOC rates and today they raised 5 year rates. They know the colour of the underwear you are wearing right now. Makes no difference if it makes sense to you or not! They know what you are doing. By the way, for those of you that may not know.....as of 1 week ago, National still had LOC at prime! Not that they will remain that way!

QUOTE (Goodstuff @ Oct 6 2009, 09:36 PM) Why would a bank reduce rates in anticipation of a central bank rate increase? Makes no sense. It would be the opposite. They`d raise rates in anticipation, if anything. Lucky, I find it funny that you feel so sorry for the people buying the big expensive houses, but not sorry enough to stop them and forego the commission. If you really want to help your fellow man then lower your commission. That`ll put more money in their pockets for the down payment. People are buying houses because they see it as a better alternative to renting. It allows for more freedom, pride of ownership, eventual ownership outright, and a hedge against inflation. Everyone has to live somewhere. Best solution is to buy a place. Yes, their payments might increase down the line if interest rates go up, but if interest rates go up it means the economy has recovered and inflation is back. Thus, they will likely be making more money and just might be able to afford the new payments anyway. And they`ll be way ahead because their house price has most likely kept pace with inflation. There are honest, caring real estate agents and there are those that seem to be just in it for the money and nothing else. They`re easy to spot. I hope you can look in the mirror and say to yourself that you are the former.