This past week, The U.S. Federal Reserve increased interest rates by 0.25% to 0.75% in what was a long expected move. And while most people view higher interest rates as a negative thing since it means you’ll pay more to borrow money, it can actually mean good things for the real estate investment sector. The Short Sale Gal Kristine Zelazo, founder of The Bird Dog Program, will explore precisely how increased interest rates can be a good thing for real estate investors!
How Did Interest Rates Get to Where They Are Today?
To fully understand interest rates and how they are connected to the economy, it helps to understand where interest rates have been in recent years.
Today’s interest rate is still comparatively low when you look at the historical record. The early 1980s saw interest rates topping 20%, while the late 1980s and early 1990s saw rates around 10%.
For nearly a decade, starting in the late-2000s, interest rates were near zero due to the poor economic conditions. In December 2015, the Federal Reserve announced the first interest rate hike in almost ten years, bringing the near-zero interest rate to .25%. Since then, it has increased two additional times (including this most recent rate hike) to the current interest rate of 0.75%.
The Federal Reserve reportedly plans to increase interest rates three more times in 2017, ultimately arriving at a rate of 1.5%. The plan is for rates to reach 2% in 2018 and then increase to 3% in 2019.
How Do Higher Interest Rates Benefit Real Estate Investors?
Higher interest rates are actually quite beneficial for real estate investors, particularly those who purchase short sales, foreclosures, bank-owned homes and other distressed properties. The cost of borrowing money is higher, so this results in a reduced number of buyers — that means less competition.
Consider these points:
• Many real estate investors deal primarily in cash. Cash buyers do not experience any impact from interest rate hikes, but their competitors — buyers who are borrowing money with a home loan — are impacted in a negatively. Over time, this can reduce the number of non-cash buyers, effectively reducing the number of people competing for the property you’re seeking to buy.
• Some real estate investors are qualified to offer in-house financing to buyers. Those who offer financing can justify higher interest rates, which means a greater profit. Other hard money lenders who lend to others in the real estate industry (and beyond) can benefit in a similar way.
• Higher interest rates mean there are more renters. If you’re seeking to buy and hold real estate, then now is a great time to make your move. Higher interest rates mean that a larger number of people will be unable to afford a home loan. This increases the number of renters, making rental properties more profitable for investors who opt to maintain rental holdings instead of selling.
These are just some of the many ways in which real estate investors can benefit from higher interest rates. So don’t allow these latest interest rate hikes to deter you; now is a great time to get involved as a real estate investor!
Ready to Get Started in Real Estate Investing With The Bird Dog Program?
If you’re getting started in real estate, consider working with a real estate investing mentor like The Short Sale Gal, Kristine Zelazo. Getting started in real estate investing can be somewhat challenging, but when done right, you can stand to make significant profits. You’ll have lots of advantages in this regard when you enter into a joint venture and work with a real estate investing and short sale expert like Kristine Zelazo.
Here are some answers to commonly asked questions in The Bird Dog Program FAQ.
Based in Florida, Kristine works with bird dogs, investigators, buyers and sellers. She is an experienced negotiator. So if you’re an investor seeking to get started involved as a bird dog, want to start buying short sales and need a great mentor or wish to pursue a short sale transaction for the sale of your property, turn to Kristine Zelazo, the Short Sale Gal!
Click here to learn more about The Bird Dog Program, click here or call Kristine at 800.664.0616, x802.