Investors: How to Get a New Construction Property with a Starting Rate of 2.75%

[Robert Rahner]

Hey BP Community,

I'm a local Real Estate agent in Bend, Oregon, and I just wanted to share some info that could be helpful. I'm seeing a unique, time-sensitive opportunity for SFR investors that directly addresses the current interest rate environment. If you've been on the sidelines due to financing costs, this is something you need to be aware of in your search area. Often I see the loan payment as what is killing Cash Flow. Possible Solution...

FYI if you are thinking about purchasing SFR, think new construction. For a very limited time, nationwide builders are offering aggressive incentives NOW that include temporary rate buydowns with a final fixed rate as low as 5.75%. National Builders include Lennar and DR Horton for example. Rates can Vary.

Here’s the breakdown of how this works and why it’s a powerful strategy:

• Year 1: Your rate is 2.75%. This is your cash flow multiplier. A lower initial rate means a significantly lower monthly payment, which boosts your first-year cash-on-cash return. It's a fantastic way to build a financial cushion while your property gets rented out and stabilized.
• Year 2: Your rate is 3.75%. Your monthly payments remain well below the current market rate.
• Year 3: Your rate is 4.75%. Your monthly payments remain well below the current market rate.
• Year 4 and beyond: The rate is fixed at a fantastic 5.75% for the life of the loan.

Why this is a smart move for investors:

1. Solve the High-Rate Problem: You're not just hoping for rates to drop; you are strategically locking in a rate that is already below the market average.
2. Cash Flow Certainty: This program allows you to model your cash flow with certainty, knowing exactly what your payments will be over the first few years.
3. Appreciation & Equity: You can start building equity and benefit from potential appreciation in the market while enjoying a subsidized rate. When the buydown period ends, you'll be locked into a highly competitive long-term rate.
4. Low-Maintenance Asset: New construction means minimal unexpected repairs or capital expenditures in the coming years. This simplifies management and protects your returns.

This incentive is part of a final push by builders to close out their fiscal year at the end of September and it requires using a their specific preferred lender, sometimes seller credits are also still available.

Feel free to comment below or send me a DM for a list and a detailed analysis on what this looks like for a typical deal.

To your success,