Do Interest Rates Matter for Real Estate Investing? - Clayton Morris Explains

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Interest rate is only one factor in deciding if a deal makes sense. If you can find a great property for the right price, you have enough money for a down payment, and the returns are good, why would you let one number discourage you? Consider how those other numbers, like price and returns, impact the deal as a whole. Having a slightly higher than desired interest rate shouldn’t impact the overall merit of the deal. In fact, the interest rate is far less important than other factors, like returns.

Rates aren’t likely to fall much more. I know a lot of people are holding out for rates to go down, but we’re not likely to see much variance over the span of the next year. Most analysts are forecasting that rates will hit around 6% around the end of 2024. If you’re holding out for rates near pre-pandemic levels, you could be waiting years, if not decades.

Refinancing later is always available. I know a lot of people don’t like when I say this, but it’s true, you can always refinance down the road. If for some wild reason, rates do reach record lows again, you could refinance your property. Banks, specifically your hometown local banks, are always looking to do business. If they can lock you in for another 30 years with a refinance, they’re happy to do so. Refinancing is very common in the mortgage industry, so just remember that tool is always available to you as long as you are willing to pay closing costs in exchange for a lower interest rates.

Prices are rising soon. As mortgage rates begin to trend down, prices will climb. This is inevitable. The question then becomes, what is more important to you: a lower rate or a lower price? In my opinion, the price is more important. Like we discussed, you can change the rate at a later date. The price is fixed, and buying sooner allows you to lock in equity when prices go up.

Timing. Remember that market conditions are only one piece of the investing puzzle. The more important thing to consider is this: is it the right time for YOU to invest? This is what really matters at the end of the day. Consider your personal goals and your timeline and let that be your guiding factor.