I guess the real question this week as not if the Bank of Canada was going to lower prime, but by how much.

I was surprised in December when they dropped the rate by 0.75 Bps, but then even more amazed when I heard that the US Fed Reserve dropped their rate to 0% (or as everyone keeps pointing out 0-0.25%). Japan also announced a drop from 0.3% where it’s been for… well as long as Greenspan was head of the Fed, down to 0.1%. Can we say it can’t go much lower? BoC has some room, but I’m betting we wont see rate reductions any time soon, but new incentives. What, is anyone’s guess.
Carney was harping on the Canadian banks to lower their prime and follow the lead that the BoC was setting. Well, they followed suit. Just like he asked them to. To the letter of the law you might say. Even announcing the same day they were dropping the same 50 Bps… But no more than that. Guess they’re comfortable with their spread of 2%, thank you very much. Gotta love living in an ultra-conservative country.
Are the banks still trying to send a message? Well, this would be the third such message of it’s kind. I don’t think the message is getting through to Carney or the BoC. I think the banks are still a little short for cash on hand.
Of course the rest of us are looking at the bank profits…. oh yes, don’t kid yourself, they are still making huge profits, just not as much as they have been. It seems their loses, not from mortgages, are still fairly substantial. Of course they could care less what John Q. Public thinks. Their primary concern is for their shareholders. They must maintain profitability in order to be able to declare dividends. This is a capitalist world we live in.
TD I think made a wise move to raise some capital by issueing $200M in preferred shares at $25 a share. Now for the big question, what are they going to do with the capital? Sit on it like everyone else is these days? Well let’s all hope they use it to kick start some kind of economic incentive, like the BoC is hoping for by lowering rates. Surely this will be enough cash on hand to get back to business as usual.

On the commercial side of things, I must say the magic number this week has been 65%. I can’t get any lender to break through this barrier. Simply there is no commercial money and everyone is ultra-risk adverse. I’m still trying to figure out why they also seem apposed to insuring with CMHC and thus reduce the risk.

Speaking of CMHC. They seem to be riding their high-horse these days. I had one deal appraised by an ACI, very conservative value put it at $700K. CMHC said “NO”, it’s only worth $500K. Go away.

I have another deal. Custom built house. Appraised 2 years ago at $850K. CMHC says prove it. We have a value of $120K (cost of the land). Can’t possibly be worth that much. Fortunately they’ve conceeded to paying for the appraisal or I think my client was going to hit the roof (so to speak).

So, ya. The more deals I do these days the more I keep finding “new” limits from the strangest places.

It’s really hard to set customer expectations when the floor you were standing on suddenly moves.

Hopefully everyone enjoyed their holidays. Turkey, stuffing and all the fixings.

Happy New Year. Anyone still have any resolutions they haven’t broken yet?

I personally prefer to set (S.M.A.R.T.) goals rather than resolve to quit something or start doing something and then have life come around and slap you silly and you forget about your resolutions.

For me step 1 is invest in yourself. I was hoping to invest in some extra sleep over the holidays, but darn it if the (business) phone would’t stop ringing. “I’ve got time over the holidays. Can you meet me?” Or “I just found an investment that cashflows. I need a mortgage in 4 days.”

Hm. Decisions. Decisions. Sleep or earning a commission… sleep… earn. Hm. I can only conclude that my “giving” is starting to turn into receiving… just when I was about to relax. I’ll relax next year I guess. Is that a resolution?

Someone even sent out an article. “How to survive the down market.” The gist of it was “invest your time with potential customers. Do the right thing, not the thing that makes you the most.” Well, I couldn’t agree more. The only problem of course is I was looking for some quick tips on things I should be doing that I’m not already doing. I read it and smiled. Guess I’m on the right track after all.

Step 2. Invest in others. Well everyone I met with over the holidays got as much time as I could give them or at least as much time as they could stand listening to me while I poured as much information into them as I could. I’m sure a couple walked away and when “tilt, information overload”.  Hopefully they took what info they needed.

Step 3. Is there a step 3? Of course there is. Invest in those closest to you. Well, when I wasn’t answering the phone or doing up an application it was GAME TIME. What games you ask? (Mwa, ha ha!) Did I mention that we have a closet of games? Closet doesn’t really do it justice. Let’s say floor to ceiling 3 feet wide catalogue of games to choose from our gaming closet. Everything from Cashflow to Careers. Gee, even got some new games for Christmas. Go figure. I thought we had them all? WRONG.

The majority of people I was talking with over the holidays were all of like mind. We want to invest in our first…RENTAL property. What a better time to invest in real estate! Yes, please ignore all the F.U.D. in the news these days. You’d think the world was coming to and end.

Let’s see. Rates are down. Prices are down. Vacancies are also down to less than 2%. That normally translates to higher rents but that takes a few months down the road. Higher rents means better cashflow. In the end, that’s what it’s all about. Positive cashflow on your rentals. Pay off the mortgage & live off your investments.
As I’ve been telling all my investors, what are you waiting for? BUY! Of course, it still needs to cashflow, don’t just buy for the sake of buying. But what an opportunity to get started in the real estate market. They’re not always easy to find. I think I just stumbled upon one myself. Little diamond in the rough. Shh. Don’t tell anyone.
As some wise investor told me, always buy on the down cycle. Don’t wait for it to hit bottom. You’ll always be second guessing yourself.  Down. Yep. That pretty much sums up today’s market. I don’t think the US is finished, but holy makerel we got to be close to the end.

Let’s hope Obama has got “the new deal” for the new millenium.