With interest rates ever-increasing, you may succumb to sticker shock after just one look at the rental market and the state of modern mortgages. Real estate investment may not a cheap way to go, but it can be extremely profitable, especially in today’s economy. Let’s dive a little deeper on the topic of interest rates and how they can affect your long-term real estate investment goals.
First, it’s important to keep in mind that rental properties are highly profitable in their own right. Rather than simply purchasing and living on the property themselves, landlords are actively turning a profit by renting it out to qualified tenants. This practically guarantees a tidy sum of money every month that can supplement their income. And not only are landlords actively renting out their property, but by holding on to it over a period of several years, they are allowing the property to naturally appreciate in value. If you’re smart about the time and effort you put into your investment, most properties increase in value with enough time and patience.
Second, as interest rates increase, many potential buyers will be dissuaded by the high prices. There are plenty of people who simply can’t afford a mortgage in this economy. Lack of interest creates less demand, which lowers the overall property value. As a landlord, you now have the opportunity to come in and negotiate with the seller. Perhaps you can persuade the homeowner to lower the overall price or settle for a lower down payment. High interest rates with low demand create the perfect opportunity for landlords to get a good price on the property of their choice.
Finally, the potential buyers who were scared away by high interest rates may be more open to renting. This puts you in the perfect position as a rental landlord. With increased demand for rental space, this is the ideal opportunity to increase rent and still offer competitive monthly prices. Even as property value continues to fall with increasing interest rates, you can rest assured that your investment’s capitalization rate is keeping you in the black.
There’s a lot to know when it comes to the real estate market and property investment. Talley Properties has over 40 years of property management experience in the Charlotte region, and we take pride in sharing our knowledge with clients. If you would like to learn more, or if you want to partner with us to maximize your return on investment, we encourage you to reach out. Contact us today!