Low Interest Rates Make for Great Long Term Investments

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If you are one of the lucky ones who happen to be in the process of locking in an interest rate over the last week or two, you probably saw that rates are way down.  In fact, rates on 15 year fixed mortgages as well as 5 year ARMs hit record lows last week. As a real estate investor, these types of interest rate dips remind me how important it is to use this unbelievable opportunity to invest in long term rentals.

If you’re like me and on every real estate guru mailing list under the sun, you’ve seen a lot of hype in recent years about different types of real estate investing. Most of these “hot new strategies” have something to do with wholesaling, referrals, assignments, note-buying, etc.  While I’m sure that many of these techniques are perfectly legitimate, it’s interesting how little I hear about good old fashioned long-term real estate investing.

If there was ever an ideal market for buy and hold real estate investing, I would venture to say that now is the time. Aside from the fact that home prices are at rock bottom, I’m not sure we’ll ever see interest rates this low again. One of the great things about a 15 year or 30 year fixed mortgage is the fact that it’s FIXED! This means that while housing prices begin to recover and rents rise, you’re mortgage payment stays the same.

So many new investors get into real estate investing and expect to see immediate cash flow and huge returns. For those investors, it can be quite unnerving when unforeseen expenses cancel out all of the cash flow for a given year. I try to coach investors all the time to keep the long term perspective when investing in residential properties. For most investors who are able to buy and hold during this downturn, the real returns are going to be 10-15 years down the road.

I don’t think anybody would disagree with the notion that housing prices, interest rates and rents will all increase at some point in the future. However, that 15 year fixed rate mortgage you were able to lock in at 3.75% will not! Ten years from now when that property is renting for $300 more than it’s renting for today and your knocking down principle at an incredible clip, do you think you’ll be glad you invested back in 2011? I think so.

About Author

Ken Corsini

Ken Corsini G+ is the host of the Deal Farm Podcast (on iTunes) and has 10 years of full-time real estate investing experience. His company, Georgia Residential Partners buys and sells an average of 100 deals per year and has helped hundreds of investors around the country make great investments in the Atlanta market. Ken has a business degree from the University of Georgia and a Master Degree in Building Construction from Georgia Tech. He currently resides in Woodstock, Georgia with his wife and 3 children.

5 Comments

  1. I believe you are dead on, there have been some great oportunities in the last several years and with real estate prices to remain relatively flat for the next several years it is a great time for the buy and hold investor with a focus on cashflow. With the FOMC announcing a target rate lock for 2 years, it does signal slow growth for the economy but also a stable loan rates for the next 2 years. I base this on the predicatable correlation of the FED target rates to treasury rates, 87% correlation even on the 30 yr bond. The FED is truly the treasury bond markets whipping boy….

  2. Everything has started to increase nowadays and it’s even getting higher. If you are an investor you should always look for a long term investment and be wise about your investment to stay long and be successful in the industry.

    • Teyona –
      Can you back up your statements here with some facts? What is the everything you’re referring to when you say “everything has started to increase nowadays and it’s even getting higher”?

      Also, what about those investors who are aiming for short term returns like rehabbers? The goal of flipping is for short term gains. Are you saying that these flippers don’t have a chance of long-term success in the business?

      Or – are you just talking in generalities here?

      I’m guessing you’re someone’s VA – am I right?

  3. I agree; last week I was able to secure an 30-year fixed rate investment loan south of 5%. These are unprecidented timesand I really believe that 5-10 years down the line, I’ll be glad I made a move during this window of opportunity.

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