Should You Wait Until Rates Drop to Invest in Real Estate?

Should you wait until rates drop to invest in real estate? In this video, you'll discover what role interest rates should play in your overall investing game plan, including when to accelerate, when to slow down and when to pause your real estate investing activities altogether.

Should You Wait for Rates Drop?

Good question! But when are rates going to drop? Well, no one really knows. Human beings are terrible predictors of the future. In fact, just a few months ago, most experts forecasted that mortgage rates would be much lower than they are right now. The reality is, rates might not drop and they could even go up. So, if rates don’t go down much, or they stay the same, or even go up some, what does that mean for investing in real estate? That’s a better question, but let’s take it a step further. What you should be asking is whether interest rates should be the deciding factor when investing in real estate. The short answer is no; there are more important factors to consider than current interest rates. Let’s look at some of the most common investing strategies and how interest rates factor in.

Quick Flips

First, where a lot of investors get started: quick flips. When you’re buying with the target to resell quickly, interest rates don’t matter much because you are in and out of the deal so fast. Your focus is on your discounted purchase price and the location and local market, especially if inventories are low there. There are always buyers looking for homes, even when interest rates have historically been twice as high as they are today.

Major Rehabs

Next, major rehabs. This is where investors who are looking for bigger paydays focus. Overall, we don’t recommend you tackle a major rehab. Leave them to the gamblers out there that want to take on extensive projects. They oftentimes end up yielding less money in the end than if they just sold it quick as-is, as Phil explained in his video: Biggest Mistake with Fix and Flip Houses.

Long Term Rentals

Then you have the patient investors that look to hold long term rentals. While the debt service cost does impact net cash flow, or more simply put, the size of your mortgage payment does play a role in how much you make each month, there are so many other considerations that dictate whether or not a rental property is worth the investment. These include the gross income, taxes, insurance, maintenance, and management. As Devin recently shared in his video: Why Invest in Multifamily Real Estate, rental rates are very high, inventory is low, and even with rates at more than 7% for multifamily, they can still cash flow very well, depending on the property.

Creative Real Estate Investing

Finally, more and more investors want to learn creative real estate investing. The fact is, interest rates are not all that critical for creative real estate investors either. Buying with creative terms can allow you to get into a deal with little to no money down, and Subject To purchases in today’s market often include mortgages with very low interest rates. But that’s certainly not a requirement. The real questions come down to:

• Can I purchase with equity? (which impacts how long you may decide to hold the property)
• Can I add value and generate a fast profit?
• Will the property cash flow? (no matter the interest rate and other expenses)

These can be great opportunities if you know how to find and analyze them. If you’re new to Subject To check out my video: Subject To Real Estate Explained Step by Step.

Always Be Looking for Deals

No matter what kind of investments you prefer or find coming your way, the key is to always be looking. There are always investment opportunities, in any market, because some sellers must get out of their property. For some it’s job loss or job relocation, for others marriage or family changes, inheritance, tax bills, and foreclosure, just to name a few. But of course you need to know where to find these opportunities and that’s what we specialize in no matter what market cycle we may be in and where interest rates may be.

For instance, when Covid hit, we never skipped a beat. In fact, our apprentices made a fortune because we just continued our disciplined approach: always looking for deals! If you’re not always looking, you’re making a HUGE mistake. Always be looking for deals!

What’s Holding You Back?

If you’re currently waiting on the sidelines, what’s really holding you back?  Is it that you’re waiting for rates to drop, or is there something else?

More Money? Do you think you need more money to invest? In our experience, that’s not an obstacle. If you’re willing to put in the hard work, we can mentor you down the path to success, step by step!

More Information? Perhaps you think you need more information? That’s often an excuse as well. But could you be stuck in analysis paralysis? In fact, you might be drowning in too much information. It may just be that you need a mentor!

More Time? Or could it be you think you’ll have more time in your schedule in the future? Well, I’ve got some unfortunate news for you: you won’t. To prove it, just think back on your life. Is your life more hectic now than it was before? For most people, it absolutely is. So, if you’re waiting for a better time in your life to invest, you’ll just keep waiting. Instead, think of it this way: if not now, WHEN? It won’t be in the next life; this is the time!

The Best Time to Buy

As you can see, interest rates should NOT keep you from investing! It’s been said that the best time to buy investment property is 5 years ago. Where were you 5 years ago? Where will you be 5 years from today if you don’t start investing? Despite where interest rates may be, the time to decide to improve your future is now. Will you really have more time for a change later? Or will it be too late? The money isn’t the obstacle and opportunities abound if you’re ready to take action!

Every Successful Real Estate Investor Has a Mentor

Real estate is the best investment that exists and can allow you to succeed no matter the market and no matter the interest rates. All it takes is your commitment and the right mentoring. Every successful investor has a mentor! If you want to achieve success without reinventing the wheel, and take your life to the next level, text FREEDOM to 305-315-8030 or apply to our Apprentice Program here: Freedom Mentor Apprentice Program.