By: LendVer Staff –
In recent months, and especially since the Fed’s September rate cut announcement, mortgage rates for investment residential properties have been steadily decreasing, presenting an attractive opportunity for real estate investors. Many investors have been sitting on the sidelines waiting for rates to come down. Now, lower rates mean reduced borrowing costs, and more sellers anxious to list their properties while the market is heating up. It’s getting easier to locate and finance 1-to-4 unit residential investment properties to fix-and-flip, buy-and-hold for rental income, or even construct from the ground-up.
Reasons for Rates Lowering
Several factors have contributed to the decline in mortgage rates for investment properties. Most notably, the Federal Reserve’s reduction of the benchmark rate by 50 basis points in September had a direct correlation to the rates most lenders charge. Additionally, with more inventory coming on the market and more potential buyers and property investors, lenders are competing to attract borrowers once again and offering more favorable terms such as rental property mortgage rates starting at 6.375% for qualified applicants.
Benefits for Real Estate Investors
Lower mortgage rates translate to lower monthly payments, increasing the potential for higher cash flow from rental properties. This also improves the long-term return on investment (ROI) as investors can secure property at lower financing costs, spend more fixing them up to generate higher returns, and access larger loan sizes. For those considering refinancing existing investment property loans, or constructing investment residential property—now may be a favorable time to do so.
What Investors Should Consider
While dropping rates are a positive development, investors should carefully assess their financial position, property value trends, and market conditions before investing in real estate. Many speculators are projecting further rate cuts in the coming year, so locking into a fixed-rate loan may not be the best move at this time. Additionally, current political, economic, and global conditions are worth considering when investing in property, as they can directly affect the long-term success of a real estate project.
However, with rates continuing to drop, and more inventory coming on the market, the window of opportunity is wide open for savvy residential real estate investors.
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