Getting back on the forum after a while & looking at purchasing a rental this year.
Interest rates have gone up quickly so far in 2021 and it seems this could continue, driving up mortgage rates. I am wondering what impact people expect this to have on the rental market (particularly SFH/Condo/2 family).
My first thought was, lock in low borrowing rate & inflation hedge by owning rental real estate -- double win. However there might be an argument that as rates go up, people's ability to afford a home goes down, which could well reduce selling prices & increase cap rates. After all it seems the market has been very hot recently due to low rates & covid.
For someone who thinks mortgage rates are going up, and is looking to buy a rental -- would you act quickly to lock in a low rate, or wait to see if increasing rates / slowdown of covid cause the market to cool off and give a better overall entry point?
The general rule is that the longer you wait, the more you miss out on price appreciation and wish you would have bought sooner. Even though interest rates are slightly increasing, the Fed said that they don't plan on raising rates for at least a year.
If you wait longer for prices to come down, you are going to pay more interest. If you buy now, you are locking in a lower rate and paying a high price. However, if you buy now, your home will start appreciating right away and before interest rates are high, you will already have some equity built from appreciation.
Look at Brandon Turner's last instagram post. He said "In 30 years from now, am I going to complain about what happened in 2021 to my real estate if it does drop a bit? Nope. I'll be millions richer."
Hi Justin, congrats on preparing to buy a rental this year! I don't know exact your details about your market, but it sure feels so damn hot that even if interest rates increase some that won't be enough for it to turn into a market where lots of deals can be found. I would recommend if you're ready to buy then start the hunt now. Know your numbers and what properties would make sense for what your financial goals are and then stick to those numbers. Work closely with your lender so they can run numbers on a particular property with current rates and make your offers from there. Hope that helps and good luck!