Real estate investing can be one of the most lucrative investment strategies. However, with higher interest rates on the way and a world of obstacles, many turn away from real estate investment in favor of other outlets for profit. Despite this, real estate still remains one of your best bets when looking to invest so long as you know what to keep an eye on.
Interest Rates
Interest rates are often looked at as the enemy of real estate investment, but if you know how to play your cards, the interest rates don’t matter all that much.
It’s true, as the Fed raises interest rates to counteract inflation, you are presented with more obstacles as a real estate investor, but this should not discourage you from moving forward with your goals. Higher interest rates mean long-term holds and rental loans are more affected. However, the opportunity arises for short-term holds to generate a lot of profit.
Think Short Term
Buying heavily-distressed properties at a below-market value and holding them for a short period of time renders interest rates virtually irrelevant. This is how savvy real estate investors can outplay the market that is before them.
Other challenges that arise in long-term investments are fees like the Homeowners Association Fee (HOA Fee). These fees exist on properties such as condos and present immense challenges in markets like the ones we find ourselves in currently. It is best to entirely avoid properties that require these fees currently.
Michael Mikhail—CEO of Stratton Equities— bought his first property at 19 years old with a 24 percent interest rate. Being so young, it was hard to get approved, but he was able to do so with a property that was significantly below market value.
Rising Demand
Since 2020, there has been a rising demand for housing due to extended low-interest rates, but with rates being hiked, the value of homes will drop. This means the investment playing field will be rife with competition.
Because we find ourselves in unique times when it comes to the housing market, traditional lenders are not all that suited to provide viable loans to investors. In other words, traditional lending methodology sets you up to fail in this current climate.
Anyone Can Invest
It is true that anyone can find their way into the world of real estate investing. No degree is required and work experience is irrelevant. Still, especially now, many might find themselves discouraged from entering the market.
It is fine to be skeptical, but knowing the situations at hand and how to counteract them can set you up for profound success. With traditional lenders not being all that suitable for current trends, you might want to look at private money to start your real estate investing journey.
The best way to stay ahead of the investing game and a step ahead of your competitors is to consider other options like non-qualified mortgage loans (NON-QM).
Private Lenders
Private lenders like Stratton Equities are NON-QM lenders that specialize in efficient and flexible mortgage lending. Professionals who are experienced with real estate investing assess current economic situations and develop a method that can help investors to maximize their profits.
Banks, credit unions and traditional lenders are not all that suitable for real estate investment. Especially with interest rates hiking up, using traditional outlets to fund your journey can result in a loss.
Traditional loans, like a Debt Service Coverage Ratio (DSCR loans) measure an investor’s ability to repay a loan factoring in current trends. The combination of this and inflationary measures means that qualifying for this type of loan can be rather difficult.
With rental value going down and interest rates hiking upward, DSCR loans are unsuitable for the average investor. Short-term financing methods like bridge loans or hard money loans, which are guaranteed by the property itself, are easy to get approved for because they don’t look at the monthly cost of mortgage taxes and insurance when qualifying.
Real estate investing is a tricky game in the world’s current economy, but playing your cards right can result in maximum profit. It is not a time to be discouraged from real estate investments but rather a time to learn alternative measures you can take to build your financial portfolio into something bigger than it currently is.
