Is the interest ever going to come down?

Question

Hi BP Community,

I’m planning to buy my second turnkey property, but I’m a but hesitant because the lenders are on par for rates and no one is giving any fixed rates right now until they hit underwriting. The down payment would be 20-25% since it’s an investment property and I was given rates about 5.75-6.1. Are these the avg. rates for investment proeprties nowaways? Do you think the rates will ever go down again once inflation ends or are they still going to stay around those rates or climb up higher? Thank you guys in advance for your knowledge and suggestions!

Steve Donovan · Answer

Hello @Cheza M.  I agree with the others who have said that rates will remain high for the near future, in fact the Fed has suggested several more increases in the Fed Rate yet this year, so rates will likely increase from current level.  That said, when evaluating potential investments, find out when rents were last increased if tenants are already in place, and how the current rent compares to market rates in the area of the property.  Rents have been increasing so quickly and at such a high rate recently, that you may find out your property has some rent runway in front of it.  Knowing that you can increase rents can make a considerable difference when evaluating properties even in these times of higher interest rates.  A good place to determine appropriate rent level is www.rentometer.com where you can get a limited number of queries for free, or pay for the PRO version and get unlimited with additional information.  Best of luck in your investing future!

Steven Foster Wilson · Answer

I think it is wise to always plan for the worst and hope for the best. I do not feel like I would wait around to see if they do or not. The only things I have regretted was not buying different properties because I thought there might be something better. When I look back now, it was a great deal and I missed out.

Erik Estrada · Answer

@Cheza M. Hey it sucks that rates are going up and now we are stuck battling for an 8th of a percent in rate difference. It is a lot like deciding between two gas stations that have a slight difference in price. While I think rates are going to level off to a new normal eventually, I firmly believe that you should consult with someone that does not give you false promises. Rates aren't guaranteed unless they are locked. Also would you choose cheaper gas over quality gas that will save you from  headaches on the road?

Seth Young · Answer

It is predicted to increase even more this year according to the fed!

Jeff Copeland · Answer

Rates for investment properties have always been about a point higher than what you see advertised for owner occupants, and rates are still historically very low.

There is no indication of rates coming down in the foreseeable future. If you wait for rates to come down before investing, you could be waiting years, and they still wouldn't get much lower than they are now.

Dave Skow · Answer

@Cheza M. there  are plenty of  lenders  able to  offer a  rate lock  on a  30 yr fixed  rental property loan BEFORE underwriting ....the present rates are in the  5.5%-7% range for  rental loans ......dont hold  your  breath  for these to improve anytime soon .....historically  speaking - rates are  still low .....but  obviously nothing like the past  several years  ( which was  very unusual )

Is the interest ever going to come down?

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