Investment Strategy with Today's Interest Rates

Buying & Selling Real Estate
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Investment Strategy with Today's Interest Rates

AJ P.
New to Real Estate · Bryn Mawr · Member since 2023 · 19 posts · 25 votes

Hey everyone, as I'm sure you all know, it's hard to find properties that cash flow (or really even come close to 0) with the traditional 20% down and 7% interest rate that we currently have. The only way real estate investing seems to make sense in my mind now is to use as little debt as possible and then hope in a couple years that rates are down and then you can refinance to get your equity back for additional properties. I'm very intrigued by a property that is in a great neighborhood and will appreciate very strongly, but using any sort of financing on it the cash flow return is deep in the negatives for a couple years even though the ask price looks like a good deal compared to other houses around. Does anyone have any advice or thoughts on what I've shared? Not sure how accurate my mindset is and if I need to be thinking about things differently here. Thank you!

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Marc Greger
Lender · FL · Member since 2024 · 16 posts · 6 votes
2y
Quote from @Eric Gerakos:

Instead of fighting the high interest rates as a borrower, take advantage of them by being a lender. Conservative LTV first trust deeds are currently paying over 9% and generate good cash flow when buying doesn't make sense.

Yes that´s another wonderful alternative, I invest in notes as well, got no tenants & no toilets and with those interest rates a return, where I don´t need to buy real estate for cashflow. Sure if you need to use opm or buy for tax reasons or believe in appreciation, that´s another story, that´s why we always have to ask ourselves why buy that real estate. 

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  • Marc Greger
    Lender · FL · Member since 2024 · 16 posts · 6 votes
    2y

    Hi here some ideas: 
    - You could increase your down payment, yeah that su... but anyways...
    - Try to find off market deals for way cheaper (e.g. using hard money, then refi into a rental loan)
    - Try to find properties where the owner will finance a big part of it and you get only a small loan with higher interest rates for the down payment.
    - Get a property subject to where you take over payments for a loan with lower interest
    feel free to reach out and discuss some ideas

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  • Eric Gerakos
    Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
    2y

    Instead of fighting the high interest rates as a borrower, take advantage of them by being a lender. Conservative LTV first trust deeds are currently paying over 9% and generate good cash flow when buying doesn't make sense.

    0Reply
  • Marc Greger
    Lender · FL · Member since 2024 · 16 posts · 6 votes
    2y
    Quote from @Eric Gerakos:

    Instead of fighting the high interest rates as a borrower, take advantage of them by being a lender. Conservative LTV first trust deeds are currently paying over 9% and generate good cash flow when buying doesn't make sense.

    Yes that´s another wonderful alternative, I invest in notes as well, got no tenants & no toilets and with those interest rates a return, where I don´t need to buy real estate for cashflow. Sure if you need to use opm or buy for tax reasons or believe in appreciation, that´s another story, that´s why we always have to ask ourselves why buy that real estate. 

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @AJ P.:

    Hey everyone, as I'm sure you all know, it's hard to find properties that cash flow (or really even come close to 0) with the traditional 20% down and 7% interest rate that we currently have. The only way real estate investing seems to make sense in my mind now is to use as little debt as possible and then hope in a couple years that rates are down and then you can refinance to get your equity back for additional properties. I'm very intrigued by a property that is in a great neighborhood and will appreciate very strongly, but using any sort of financing on it the cash flow return is deep in the negatives for a couple years even though the ask price looks like a good deal compared to other houses around. Does anyone have any advice or thoughts on what I've shared? Not sure how accurate my mindset is and if I need to be thinking about things differently here. Thank you!


     Have you considered shifting to be a private lender? When rates are high you can charge higher rates, offer short term loans (12 months) and have some liquidity and make a decent return

    7e investments53 Reviews
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    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    2y
    Quote from @AJ P.:

    Hey everyone, as I'm sure you all know, it's hard to find properties that cash flow (or really even come close to 0) with the traditional 20% down and 7% interest rate that we currently have. The only way real estate investing seems to make sense in my mind now is to use as little debt as possible and then hope in a couple years that rates are down and then you can refinance to get your equity back for additional properties. I'm very intrigued by a property that is in a great neighborhood and will appreciate very strongly, but using any sort of financing on it the cash flow return is deep in the negatives for a couple years even though the ask price looks like a good deal compared to other houses around. Does anyone have any advice or thoughts on what I've shared? Not sure how accurate my mindset is and if I need to be thinking about things differently here. Thank you!


     Find better deals. I just did one with 35k down on a 120k prop. Rent is 1800 a month, 10% 30 year note. about 500 a month cash flow, not terrible . 

    1Reply
  • AJ P.
    OP
    New to Real Estate · Bryn Mawr · Member since 2023 · 19 posts · 25 votes
    2y

    Wow, 1800 rent for a 120k property is great Where is this property?

    0Reply
  • Colin McMahon
    Lender · Miami · Member since 2022 · 99 posts · 18 votes
    2y

    Hey Aj!

    I understand your concern with today's market. Real estate is a long game, and getting a good asking price when the demand isn't as competitive because most people have similar thoughts to yours - might be worthwhile to take on the investment. I would also be happy to run the numbers over with you to ensure accurate cash flow projections. Feel free to reach out and I'll send a DM to connect. 

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