When you're trying to build wealth, real estate investments make a lot of sense. But are you aware of current interest rates? How they're trending can impact your next move.
Read on to learn how to factor mortgage rates into your real estate investment strategies!
Consider Current Mortgage Trends
Trying to build a real estate investment portfolio means paying attention to home loan rates. You don't want to approach buying or selling blindly.
Failing to consider rates means you might be paying more for a property or struggling with vacancies. Waiting to buy a new property until mortgage rates are lower, for instance, can mean you'll:
- Pay more for a home
- Face more competition
- Make more concessions
In general, you can expect that rates will fluctuate. While you may get a low-interest mortgage one year thanks to economic measures from the Federal Reserve, the same may not be true the next year.
Understand How Rates Affect Property Values
Higher home loan rates can hurt property prices. That's because fewer people will be interested in buying, which decreases demand. Sellers will need to price their properties accordingly.
If you're hoping to add another property to your portfolio, you may be able to negotiate a better deal when the competition is lower. If your budget is able to handle a higher interest rate, you could refinance later.
On the other hand, when rates are lower, you'll help your bottom line. Just be sure you don't get into a bidding war that escalates the purchase price too much.
Look into Refinancing
Are you in a period with low interest rates? It's worth the effort to pursue refinancing existing home loans. You may be able to:
- Lock in a lower rate
- Shave thousands of dollars off your expenses
- Set your budget up for new purchases
Especially if you bought a home during a time with higher rates, start the conversation about refinancing. And when you're wondering how to finance a home you're interested in purchasing, you'll want to talk with lenders. Searching for best mortgage rates 2024 online can help you pinpoint lenders with the best rates and options.
Evaluate Your Cash Flow
Finally, don't overlook your cash flow when making any investment decision. Higher interest rates can trigger cash flow problems. You'll spend more taking care of mortgage debt, and that can take away from an income stream if you're renting a property.
Always look at your operating expenses for any existing properties. For example, you may have significant HVAC repairs on the horizon. Or you could incur costs related to marketing or accounting that hurt your margins.
Don't take on new properties unless you're confident that your budget will be positive. You may need to increase rental rates if that's not the case.
Pay Attention to Mortgage Rates
Mortgage rates can affect your cash flow when you're buying new properties. Pay attention to current trends and property values. And look into refinancing when rates are low.
At PMI Green Country, we have the real estate expertise to help you make informed investment decisions. From accounting to tenant screening, we can work to maximize your returns. Contact us today to learn more!
