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- The outlook for real estate investors has changed dramatically in the last year.
- Mortgage rates are at their highest level in 20 years.
- This means investors need to be more conservative, says Mike Webb.
The outlook for real estate investors has changed dramatically in the last year.
Mortgage rates soared above 7% as the Federal Reserve (Fed) took drastic tightening measures to curb the highest inflation in 40 years. As a result, house price growth has slowed dramatically, with some cities experiencing month-on-month declines in house prices.
According to the S&P CoreLogic/Case-Schiller US National Home Price NSA Index, which aggregates 20 US cities, home prices fell month-on-month for the second straight month in August.
All indications suggest that the Fed will likely continue its hawkish stance in the coming months, keeping interest rates higher for the long term barring a significant economic downturn. This is bad news for homebuyers, sellers and investors who expect low interest rates. This usually works as a housing price boon. The less the buyer has to commit to interest payments in their monthly budget, the more they can commit to the property of their home. .
With house prices falling and mortgage rates continuing to rise, is it worth investing in real estate? Maryland-based firefighter and real estate investor has acquired a portfolio of 35 units. Mike Webb said in a call Wednesday that investors are still buying properties because they have to play the hand they are given.
He gave three tips for new investors to keep in mind as they start investing.
3 tips for new investors
The first is what they should do take a deal conservativelyThat means your monthly mortgage payments and other expenses are covered by your rent payments. One thing investors can do to be cautious, he said, is to assume that rents could fall significantly in the future, say 20%.
Webb, who co-founded MDWVHomebuyer.com and helps run the First Responder Financial Freedom podcast, said: , Said. “What if it goes flat, what if he’s actually down 10-20%?”
Second, Webb said Keep creative fundraising strategies in mind. With mortgage rates so high today, one of the ideal strategies is to take over the debt and acquire the property.This is when the seller hands over their property and mortgage to the buyer. Because the mortgage is older, it may have a lower interest rate than a newer mortgage. Interest rates on 30-year fixed mortgages are currently at their highest levels in 20 years.
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“We will seriously consider the possibility of possible debt,” he said. “If you could just sit there and quit your job, move, whatever the situation or motivation, find one of these people… perhaps the tools in your toolbox would be very valuable.” It will be..”
He added: “There will be more opportunities for creative fundraising.
There are several ways to find these deals, attend real estate meetups or read educational materials such as podcasts and books, he said.
Webb also said he would keep in mind that he could always refinance to a lower interest rate if interest rates fell in the future.
Finally Webb said Watch out for home flipping The economy is cooling due to declining housing prices and increasing layoffs. Home flippers are already having a tough time due to the impact of rising interest rates on demand.
“If you’re just starting out, it may not be the time to try to flip ten houses at once,” says Webb. “Markets are going down and interest rates are going up. This is seasonally late coming into the fourth quarter.”
Even the pros are having a hard time flipping homes right now. Redfin recently followed in Zillow’s footsteps home by ending his flipping business.
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