The Power of a Mentor
Have you ever struggled with a project, relationship, job, opportunity, or even life? If you are normal you will answer yes to several if not all of these questions. Somehow though, you made it through, with help from a boss or co-worker, a friend, or even your parents.
Problems are a fact of life. How you deal with them defines who you are. Same with opportunities, how you handle these can also define where you end up in life. It could be an investment decision, a job transfer to a new city, a change of companies, or even getting married. The hardest part at the time is trying to make the right decision. Sometimes it is easy, but often it is a true challenge. So what’s a person to do?
Well no matter what the challenge, you‘re probably not the first person to be in that situation. Someone else has gone through similar circumstances and this can be a tremendous chance for you to learn from their experiences. If you are worried about relationships, seek out someone who has a great relationship and ask advice. Many successful people are more than willing to talk about their “secrets” for success. The same can be found with successful people in business, although if they are direct competitors they may not want to share quite as much! If you are looking at stock investments wouldn’t you rather get advice from someone with a history of great investments? Yet people tend to buy stocks more commonly on “hot tips”.
If you are about to start up a new business, would you prefer to make new challenging discoveries about the complexities of a new business, or are you better off getting advice and support from a person with experience? This advice and support, or mentoring, can take years off of your learning curve, and open your eyes before you jump to far into the deep waters.
Experience is a great teacher, so why not learn from experienced teachers? Many people will think they can do it on their own, but if you look at all the self made millionaires or business people out there, most of them had someone of experience who mentored them, or who they modeled themselves after.
This topic came to mind after getting two emails in the last few months from people who I am mentoring in the Real Estate Investing business. I always try to help people who are looking to learn, but it seems many of the people just starting out already know more than I do. Just ask them, they will tell you.
Now I cannot take full credit for their success, but I like to think I helped push them along a bit faster than if they were alone. By utilizing my experiences it helps them to move along faster and reduce the learning curve, also my successes help reinforce to them that you really can become successful through Real Estate. In turn it also helps push me forward as their successes reinforce to me I am also on the right track and it also pressures me to ensure my guidance is helpful. A rewarding experience for all involved.
If you don’t currently have any mentors, I highly encourage you to find one or more to help you elevate your life, your job, or even your business. We have several mentors we look to for guidance and it’s great that we have been able to pass this on.
Prime Rate Hikes
The Bank of Canada has just announced an increase of .25% to its Prime Rate, so how does this affect Real Estate and your investments? For many of you there are two key areas, mortgage rates and Lines of Credits, so I will touch both of them separately.
With the increase in the Bank of Canada Prime Rate you will see many of the banks now increase their rates on mortgages by .25% as well. If you currently have a fixed rate mortgage this won’t affect you unless you are due for renewal shortly. If you have a variable rate mortgage though, your payments will be going up. To put this in perspective, if you have a $300,000 mortgage currently at 6% and it is now adjusted to 6.25% your payments will increase from $1,919.42 per month all the way up to $1,964.22 (based on 5 year term, 25 year amortization period). Yes, almost $45 whole dollars per month!
For the majority of the people this shouldn’t have too large of an impact on their lifestyle and realistically most variable mortgages can be as much as a whole percentage point lower than the 6.25% rate. This projects out to an even lower dollar increase per month. If you are currently shopping for a new mortgage, the same issue arises where your payments will be a bit higher per month now. This works out to be about $15 increase per $100,000 of mortgage. Once again, this shouldn’t affect someone to much, and if it makes things tight, they may have been over buying.
If you currently have a Line of Credit (LOC), this too will be affected by the Prime Rate increase. If your LOC is secured by equity in your home most banks were sitting at 6% and will be raising this to 6.25% effective immediately. If you are currently accessing $10,000 of your LOC over a year this works out to be $25 more in interest. In the grand scheme of things this also shouldn’t affect anyone too severely.
If you are currently investing with us using an LOC this works out to be an extra $52.08 of interest per year you will be paying on a $10,000 LOC. For a real world example, we currently have one investor who is loaning us $40,000, from their LOC, over a six month term and we are paying them 15% interest per annum. At 6%, they were receiving a 9% return on their money, money that was otherwise just sitting locked in their house. With the increase in rates they now will be receiving 8.75% on a safe secure Real Estate investment.
In dollar amounts, instead of making $300 per month, they will only be making $291.67. Yes a whopping $8.33 a month difference, but more importantly a consistent return on money that was previously just stuck in their home not being used. So as you can see by this, it also didn’t have much of an effect for most people. By the way, if you live in Calgary and have owned your home for three years or more you could be sitting on a considerable amount of equity that you could be putting to work for you.
The overall effect of the Prime Rate increase isn’t too horrible when it is broken down. It will have an affect mostly on those who are unaware of the actual numbers and fall victim to the fear of an increase, and to the people who are barely able to afford their homes now.
What does the future hold for the Prime Rate? Some are forecasting another small increase again in September, but the long term picture is for them to drop down again to their previous level within a year or two, so don’t panic and think this is the beginning of a huge increase in rates. The likelihood of us seeing double digit mortgage rates in the near term is quite unlikely as this will curtail any economic growth in any area of Canada except possibly Alberta and that will be simply disastrous for the current government. So those types of increases are not only economically unsound, but also political suicide, and you know how politicians value their jobs!
If you would like more information on how some of these aspects interconnect or simply want more information on any of the above topics feel free to email me at bill@housez.ca. If I get enough questions, it may even end up as one of next months topics!
In Closing
We have just gone through a major change in our lives by moving into a new home and neighbourhood after 11 years in the same place. After all of the turmoil involved with packing, change of addresses, new drivers licenses and moving our office we are still reeling. I guess this is the other side of the fence that we don’t normally fall into as we never move into the houses we normally buy.
Thankfully my wife Karen was more than up to the task and she thankfully took over about 95% of the packing and organization of all this. Without all of her hard work we might still be wading through boxes. If you are moving in the near future, you might want to email her for some tips as she made this pretty easy on me!
It was just Stampede time here in Calgary, so a big YAHOO to all of you who aren’t from around these parts, and have yourself a great summer!
Regards,
Bill & Karen Biko
KatSid Housez Inc.
www.housez.ca
Calgary, Alberta
Tel: 403.870.4663
Fax: 403.203.1753
