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Why Investors Win & Consumers Lose During High-Interest Rates

Investors win during high interest ratesHigh-Interest Rates make Winners of Rental Home Investors & Consumers Lose

Real estate prices are greatly affected by interest rates because they determine how much people can afford to pay for a home. The rise of mortgage rates this year has slowed the housing market's rebound for consumers. Rental property owners will be pleased to know this, keep reading to learn more.

When interest rates are low, home prices are high because people can afford to borrow more money. The problem is that when interest rates go up, as they have been recently, home prices usually fall because people can't afford to borrow as much money. This is why investors tend to do well when interest rates are high and consumers tend to do poorly.

Rental property owners benefit from high-interest rates in two ways. First, when home prices fall, there are more renters because people can't afford to buy a home. This increases the demand for rental properties and allows landlords to charge higher rents. Second, when mortgage rates go up, it becomes more difficult for landlords to refinance their properties but the savvy investor knows the workaround for this, the DSCR loan with no ratio. For some investors, this means that they are more likely to stay put and continue to pay the higher interest rate with the ability to charge higher rent to make up for it rather than selling the property and taking a loss.

Key Takeaways:

  • If you're an investor looking to buy a rental property, now is a good time to do it. 
  • The rental market has remained robust in recent years, as rising rates and decreasing vacancies have protected landlords from getting into financial difficulties.
  • To make matters worse for average consumers versus investors, the cost of borrowing has risen significantly in recent years. This is a significant concern for potential buyers as their purchasing power will be greatly reduced if rates continue to rise.
  • Rising mortgage rates force many would-be homeowners to rent instead.

An increase in renters is good for investors

The rent-versus-own decision will swing back and forth, and the influences on rates are still complicated and ever-changing. Owners who are currently renting out their homes can anticipate continued strength as mortgage rates rise over time. As it becomes more difficult to purchase a home, rental housing providers can expect strong demand and high payments from tenants.

Bad for consumers, and good for investors.

This might be viewed as bad news for sellers and prospective consumer homeowners, but it's excellent news for investors in the rental home markets. In certain markets, such as the vacation rental industry, house values, and inventory levels are shifting in favor of investors.

DSCR no ratio loans open doors for investors.

We're anticipating a decline in home prices by about 10 percent in the majority of markets during the fourth quarter. The main reasons for this are lower offers and homes being put back on the market at cheaper prices. Where the average consumer is being pushed out of the market, rental home investors using DSCR loans with no ratio see this opportunity as a gold mine.

Smart investors don't hesitate.

Current strategies for consumer homebuyers and sellers open the market for investors. With mortgage rates rising and home prices falling, consumers are unsure whether they should buy or sell a house. Those who hesitate, lose; while the savvy investor scoops up all the good deals with a growing rental market caused by the hesitant consumer.

Regular investor rental income beats long-term consumer buy-and-hold sales.

While consumers are holding out to get top dollar today, they end up stuck with a home for the foreseeable future. Smart sellers are making minor concessions rather than risking holding property to sell at a loss later. They are looking at the home they live in as a long-term investment instead of investing in homes that pay regular income. Potential consumer home buyers must decide whether to wait for prices to drop or buy now and lock in a mortgage before rates rise even higher.

The future of the savvy investor.

Many people want to buy something when rates are low, particularly those in not-so-great financial shape. Investors on the other hand know that they can use DSCR loans with no ratio, not having to use a W2, which allows them to qualify for loans based on the potential monthly income to profit on rentals immediately, and when rates drop further they know they may always refinance later.


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About Rental Home Financing:

Rental Home Financing, as the best mortgage lenders we originate rental home loan products and cash out refinance investment property loans as the best investment property refinance lenders. Commercial blanket loans are available with a commercial purpose to suit your needs.

Also, as DSCR loan specialists, we are currently authorized to make such loans in most all areas of the United States. Specific circumstances will determine whether we have the ability approve/close portfolio rental home loans in your state(s). When you are ready to get a mortgage for rental property, we are ready to serve you.

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