Increasing Mortgage Rates and Real Estate Investing

Property Management Blog

If you are an aspiring real estate investor and inspired by success stories of your friends, you may be a little disappointed to see interest rates increasing and construction costs going up with each passing year. However, as real estate becomes costlier, rents are also touching the roof, making it a perfect time for investors to buy rental income properties. Many new investors are confused whether it is really a good time for them to take a plunge in the real estate industry or stay away.

Economy is staring at the next downturn

Experts say that the real estate market in the U.S follows a cycle of 7 years. If one takes the year 2011 as the beginning of the new cycle after the recession of 2008-9, he sees that the cycle has already come to an end in 2019. Surprisingly, there are no indications of an impending recession in the real estate market and the unemployment rates around the country are also lying low. Inflation rates are also very low. It is only the mortgage rates that are increasing but even they are barely past the historical low levels that were achieved in the last few years.

Realtors are speaking truth for the moment

Regardless of the prevailing conditions in the real estate market, what you will hear from the brokers these days is buy now before it is too late. Aren’t this what real estate agents have been telling their clients all these years? However, it seems they are right for the moment. This is because you can still buy a home at the prevailing prices before they climb to a new high. Also, despite interest rates having increased a little bit, you can still get low mortgage rates and get them locked for the next 25-30 years. You enjoy low rates even if market forces jack up these rates in future. If you find interest rates going down, you always have the option of refinancing your mortgage. Buying a home is still considered best bet against inflation and an economy that is giving out confusing signals.

For investors, owners of properties are more important than buyers. Giving the conflicting signals of the economy, many owners are reluctant to sell their homes. More and more homeowners are staying put in their homes as they know buying another home will not be easy for them. These homeowners are aware that they can save some cash by selling only if they downsize as selling to buy a bigger home can prove costly for them.

Investing in rental income properties can be profitable for you

If you are interested in real estate investing, the best scenario can be seen in rental income properties. This is because rents are increasing across all major housing markets. However, experts are sounding alarm bells even for rental income properties saying investors should go for them provided they generate positive cash flow from day one. Renters are complaining about rising rents, but they will continue to live in rented homes as they do not have any other option.

If you are a flipper, this is certainly not a very good time for you. However, if you are experienced and know how to get rid of a property after renovating it, fixing and flipping can still be a profitable method of investing for you.

No matter what, the next cycle of economy is going to start soon, and it is better for you to have your capital freed up once this cycle touches its lowers point. You can make the most of the recession by investing in distressed properties.

If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.

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