{"id":167783,"date":"2024-02-20T16:23:00","date_gmt":"2024-02-20T23:23:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=167783"},"modified":"2024-03-20T10:04:32","modified_gmt":"2024-03-20T16:04:32","slug":"investors-stop-worrying-about-rates-in-2024","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/investors-stop-worrying-about-rates-in-2024","title":{"rendered":"Investors: Stop Worrying About Interest Rates\u2014Here\u2019s Why Right Now Is the Time to Buy"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC5222443096\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><em>This article is presented by Ridge Lending Group. Read our&nbsp;<a href=\"https:\/\/www.biggerpockets.com\/blog\/editorial-blog-guidelines\" target=\"_blank\" rel=\"noreferrer noopener\">editorial guidelines<\/a>&nbsp;for more information.<\/em><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The year 2024 can feel like a confusing space to inhabit for rookie investors. You have the cash, you have the plan, and you\u2019ve done your research. There remains one big issue: Interest rates that are currently much higher than the historically low rates we had pre-2022.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019ve done your research into investment financing, you know that investors pay even higher mortgage interest than regular homebuyers (typically between 0.75% and 1.5% higher). Right now, that is a daunting prospect, with regular mortgage rates still hovering just under 7%.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It may seem like a prudent choice to wait until the much-promised rate cuts, which many real estate experts predict will begin sometime in the summer of 2024 onward. But what if we told you that waiting is a bad idea despite current rates? Moreover, what if we told you that mortgage rates don\u2019t matter all that much if you\u2019re investing in real estate?<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Here are five main reasons why.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">1. Current Mortgage Rates Don\u2019t Reflect the Value of Your Loan Over Time<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">When you take out a mortgage on your investment property, ask yourself: Will your mortgage loan be worth the same in a year? How about in five, 10, or 15 years?&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The answer is a definite no. Inflation inevitably means that the dollar devalues over time, so the amount of money you borrow in 2024 will actually be worth less as time goes on. There are online tools and apps that can help you calculate the true value of your mortgage loan over the fixed 30-year term (QJO Investment Tool is one and will tell you how much you will actually pay over time). Trust us, you\u2019ll be surprised.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">When you see that your mortgage loan depreciates over time (unlike the value of your investment property), you will start to worry less about current interest rates. That seemingly horrendous current 8% just won\u2019t be that big a deal once you\u2019re past the five-year mark.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And we haven\u2019t even touched on property appreciation yet. We\u2019re just talking about the gradual devaluation of the loan.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">2. Real Estate Investing Pays Off in the Long Run<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Real estate investing is all about playing the long game. Even if you\u2019re planning on flipping and selling properties, we\u2019re still not talking about a get-rich-in-a-week scheme.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The fundamental fact that makes real estate a great investment is that it appreciates over time.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">You have a tenant repaying your interest and your loan. Eventually, you sell at a profit. It\u2019s as simple as that. Even if home values begin going down in the coming years, they are so high at the moment that, short of a catastrophic event, real estate will continue to be a profitable investment for the foreseeable future.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The idea here is not to repay the mortgage as quickly as possible, which is what you would want with your own home. You want the opposite: a long-term commitment and the maximum resale value.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">U.S. properties are consistently growing in value year over year. Depending on where you\u2019ve invested, home values are still going up by as much as 9%.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The mortgage interest really can\u2019t trump that. An interest rate difference between 0.25% and 1% can work out to be as little as $10 per month, depending on the type and value of your loan. That is vastly insignificant in comparison with the final profit you will make due to appreciation. And don\u2019t forget that as your rental property appreciates, your rental income will appreciate, too.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">3. There\u2019s Absolutely No Guarantee Rates Will Go Down Substantially This Year&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019re waiting for interest rates to go back down to the sweet 4% they were pre-2022, you might be waiting a very long time. While rates are widely predicted to come down at some point in 2024, this could mean only a modest cut. The likelihood of rates reducing below 6% before the end of the year remains low.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In fact,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/money.usnews.com\/loans\/mortgages\/mortgage-rate-forecast\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">most economists think<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;rates won\u2019t go below 6% before 2025.<\/span><strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/strong><span data-preserver-spaces=\"true\">This is in line with what historically has tended to happen to rates: They go down much slower than they go up.<\/span><strong><span data-preserver-spaces=\"true\">&nbsp;<\/span><\/strong><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Think about all the months you could be getting rental revenue from your investment while building equity and having that loan repaid. Moreover, the sooner you buy your first investment property, the sooner you\u2019ll be able to sell at a profit and diversify your portfolio by buying other properties.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">4. When Rates Do Come Down, You\u2019ll Be Competing With Regular Homebuyers&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Right now, home sales activity is at a 28-year low. That\u2019s actually pretty good news for an investor. It\u2019s not that there aren\u2019t any properties on the market; it\u2019s just that not as many people are buying.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">And why aren\u2019t they buying? They\u2019re waiting for interest rates to come down. If you can afford to invest in real estate now, you will have far less competition for affordable properties than you will once buyers feel more confident and create a feeding-frenzy environment.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">5. Higher Interest Rates Aren\u2019t Always a Bad Thing From a Tax Perspective<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Again, you have to remember here that as an investor, you\u2019ll sometimes have to think differently from a homeowner.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">From a homeowner\u2019s perspective, there\u2019s no benefit to higher mortgage rates whatsoever, as the interest just eats further into their earnings. But if you are an investor, the mortgage interest is, in fact, tax-deductible as an expense on your rental income. If you need improved cash flow, those tax deductions from higher interest rates could provide it.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Conclusion<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">At the end of the day, mortgage rates will affect you differently, depending on how much you\u2019re able to put down on your investment property and the local real estate market.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019re not sure how much consideration the rate should be given on a particular deal, it\u2019s time to schedule a call with&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/ridgelendinggroup.com\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Ridge Lending Group<\/span><\/a><span data-preserver-spaces=\"true\">. We have an extremely diverse menu of loan options for anyone looking to purchase property for themselves or as an investment. Our clients&#8217; success is obviously at the center of all that we do, and we believe that the free education we provide emphasizes our commitment to them and their financial freedom.&nbsp;<\/span><\/p>\n\n\n\n<div class=\"wp-block-group border border-gray-200 p-6 rounded-md has-slate-50-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n    \n  <div \n    id=\"segemnt-view-event-block_ccaf192be2ed7da4b265933867d23799\" \n    class=\"  \"\n    x-intersect:enter.once=\"\n      analytics.track('DoorLoop Blog Sponsor View', {\n        referrer: 'https:\/\/www.biggerpockets.com\/blog\/investors-stop-worrying-about-rates-in-2024',\n              })\n    \">\n    \n  <\/div>\n  \n\n\n<h3 class=\"wp-block-heading has-text-align-left mt-0\"><strong>This article is presented by Ridge Lending<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"995\" height=\"1024\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/BlueGoldFull-995x1024.png\" alt=\"\" class=\"wp-image-167776\" style=\"width:321px;height:auto\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/BlueGoldFull-995x1024.png 995w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/BlueGoldFull-292x300.png 292w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/BlueGoldFull-768x790.png 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/BlueGoldFull-1493x1536.png 1493w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/BlueGoldFull-1990x2048.png 1990w\" sizes=\"auto, (max-width: 995px) 100vw, 995px\" \/><\/figure>\n\n\n\n<p>Ridge Lending Group is a second-generation mortgage company specializing in investment real estate nationwide with an emphasis on education. We have an extremely diverse menu of loan options for anyone looking to purchase property for themselves or as an investment. Our clients&#8217; success is obviously at the center of all that we do, and we believe that the free education we provide emphasizes our commitment to them and their financial freedom.\u00a0 From the extensive educational outlets, live events, videos, one-on-one strategy planning, and more- our clients are empowered with the information and direction necessary to achieve all their investing goals.<\/p>\n\n\n\n<div id=button-custom-event-block_c38a79ca942e92d372b8419424e95f60 class='button-custom-event'>\n      <a href=\"https:\/\/ridgelendinggroup.com\/\" x-on:click=\"window.analytics.track(&#039;Sponsored Blog CTA Click&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/investors-stop-worrying-about-rates-in-2024&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\" rel=\"noopener\">Learn More About Ridge Lending Group<\/a>\n  <\/div>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\"><\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Now that the new year buzz has settled and the reality of persistently high mortgage rates has set in, how should investors react?<\/p>\n","protected":false},"author":613726,"featured_media":167786,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7383,7119,7402],"tags":[],"class_list":["post-167783","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-biggerpockets-daily","category-traditional-loans"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/167783","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613726"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=167783"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/167783\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/167786"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=167783"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=167783"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=167783"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}