Tag Archive for: 2024 predictions

2024 Real Estate Investing: Are High Interest Rates Worth It?

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2024 Real Estate Investing: Are High Interest Rates Worth It?

Today we are going to discuss real estate investing and whether or not it’s worth paying high interest rates in 2024. Over the past few years there has been a huge shift in the market. The banks are swimming upstream in search of the best and investors are having a difficult time qualifying for financing. While many people may run away from investing right now, this is actually the best time to jump in. Those who do will benefit greatly when rates go back down. What do you need to do to ensure success? Let’s take a closer look.

1. Focus on the lower end of the market.

With interest rates being so high right now, it is important that you focus on the lower end of the market. What do we mean by the lower end of the market? These are homes that are in the $300K range as opposed to $500K or above. It is important to keep affordability in mind as well if you are flipping a property. Affordability is key because someone will need to be able to afford to buy the house when you are finished. 

2. Create a good product to guarantee a sale.

Especially for those who are fixing up properties, it is crucial that you have a nice fixed up property to sell. It is more likely that a fixed up property will sell, as opposed to one that needs work. In today’s market there is an inventory shortage for investors and a growing demand for properties. If you are at a good price point and have a good product, then you will win in this real estate game.

3. High interest rates now will create cash flow later.

Keep in mind interest rates and how they will affect your monthly budget. Properties that will at least break even, or better yet cash flow, will create wealth in the near future. Predictions are indicating that rates will come back down later this year. When they do, more people are going to jump into the market. Many people have been waiting on the sidelines for things to go back down. By buying now, you will be ahead of the crowd with a property that is worth more, thus creating more cash flow! 

4. Do it correctly to prevent being upside down.

It is a great time to jump in! If you can buy something low and make it work now. Then when rates go back down, you are creating that wealth.

Purchase Price Overpaid  Two years from now Equity 
A few years ago $350K $100K $325K to $350K $0
Today $250K $0 $325K to $350K Created equity

5. What is a good property?

In order to succeed in this market it is very important that you buy good properties. What is a good property? It is one that is not on corners, busy streets, or near a commercial area. A good property on the other hand is one that is in culdesac or near parks. These types of properties are what you should be focusing on to ensure success. 

6. Why should I get into real estate when others are running away?

All of the negativity out there is keeping people out of the market an driving away those who have been in real estate for awhile. In years past there were some really good deals available and it was easier to qualify for lending. Nowadays, the banks are swimming upstream in search of the best of the best. This decrease in competition creates the perfect opportunity for new investors to begin their real estate investment journey. 

7. Set yourself up for success!

As a new investor you need to make sure that you set yourself up for success. Those who stand out to lenders and have more buckets of money will set themselves up for success. Real estate investing is all about using other people’s money in order to create wealth. Contact us today to find out more about getting your lending buckets set up!

There is going to be less real estate investors and less money out there. However, there are going to be more deals than there were before. These deals will have better margins and will create a greater opportunity for wealth in the future. Contact us today to find out more!

Watch our most recent video about 2024 Real Estate Investing: Are High Interest Rates Worth It?

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A is for Effort in 2024 Real Estate Investing

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A is for Effort in 2024 Real Estate Investing

It is going to be a different market this year compared to years past. Rates are going to flatten out and everything will be changing. Rates are expected to hover between 6% and 7% this year. Predictions are also indicating that the Fed is going to lower their rates starting in May. Until then, this first quarter is going to be a little tougher for the consumer until we see that shift in rates. It is critical that real estate investors take the time to do more research in order to find the best deal. Those who do will receive an A for effort in 2024.

Look at more homes and do more research.

If you are going to be investing in this market, then you need to be willing to look at more properties. It is important to remember that you will need a 15% to 20% discount from where you were buying it a year ago. You will need to put in a little more effort and work. Those who look at 100 homes compared to 10 homes will find good properties. By spending 2 to 3 hours a day looking at properties, you will be successful in 2024.

Go smaller

In this market there is a shortage of homes compared to the number of people looking for properties. In order to find the more affordable properties, you will have to go smaller. What do we mean by smaller? The property would be less square footage or a smaller price point. In some cases both the square footage and the price point will be significantly less than they would have been a few years ago. By expanding your search area, you will find greater affordability. This might mean that you are looking into smaller communities in other states to find the best deals. 

Contact us at The Cash Flow Company if you have any questions or would like to find out more about investing in 2024. 

Today we only reviewed 2 out of the 5 key steps. Watch our most recent video to discover more about 2024 Real Estate Investing and the 5 Key Steps to Succeed.

 

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Why You Need to Avoid Bad Properties in 2024

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Why You Need to Avoid Bad Properties in 2024

2024 is going to be a different market compared to years past. Rates are going to flatten out and everything that we have seen will be changing. Predictions indicate that the Fed is going to lower their rates to 6% or 7% starting in May. That is why real estate investors need to avoid bad properties! In an earlier post we discussed the 5 key things that real estate investors need to do in 2024 in order to succeed. Avoiding bad properties is one of the most important key things that real estate investors need to focus on. So what makes a property a bad property? Let’s take a closer look. 

What do we mean by bad properties

When the market is going, then every property sells. This includes properties on corners, busy streets, overlooking commercial properties, and even the ones that are next to big apartment complexes. These are the properties that are normally going to take a hit and sit on the market for a longer period of time. As the market changes, buyers will have more choices. They will also become more selective because of the cost. In order to be successful, real estate investors need to buy good properties that are in good areas. Take your time and do the comps in order to avoid bad properties in 2024! 

Contact us at The Cash Flow Company if you have any questions or would like to find out more about investing in 2024. 

Watch our most recent video to discover more about 2024 Real Estate Investing and the 5 Key Steps to Succeed

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2024 Real Estate Investing: Why Should I Invest?

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2024 Real Estate Investing: Why Should I Invest? 

2024 is going to be an excellent year for real estate investing. Whether you are a new investor who is just starting out, or a seasoned investor who is looking to decrease your inventory, there is no better time than now. Today we are going to answer the question “why should I invest”. We will not only look at how things have changed over the years, but we will also discuss how the real estate community is changing in this current market.

New real estate investors

For new real estate investors there is no better time to get into the game. There are more deals coming out and more foreclosures. This is due to the fact that many people are becoming overwhelmed by debt and needing to give up their properties. New real estate investors will see 5% to 10% more homes available to them this year!

Investors are leaving the community

We are seeing more investors leave this community. The changes in the market over the past few years has caused everything to tighten up. The banks are swimming upstream to find the best of the best and lending has become harder to obtain. Many investors are not willing or able to continue in this current market We are seeing less people who are sticking around and even fewer who know what they are doing. As a new investor, the competition is going to be better for you, thus creating better deals.

If they are leaving? Why should I step in and take over?

By having less investors, it creates more properties and better deals for the people who are sticking around. For the first time in a long time, there are better deals, as well as better margins on deals. To put it another way, there is “more meat on the bone” with more properties coming up. Real estate investing is like anything else. Not everyone will be successful every time. There are a lot of people who do succeed and make a lot of money in real estate investing. 

What deals should you expect? 

In 2024, you are going to find better deals, including 60% to 70% LTV. There will also be more opportunities for you to succeed than there were two years ago. A few years ago there were more people bidding on properties. When there are too many people bidding, they become overzealous and crazy. This creates overbidding and causes properties to become less profitable. By having less investors in 2024, you will have more properties available, resulting in better deals for people who are sticking around.

What is the biggest hurdle you will face?

The biggest hurdle that you are going to face is finding money. Over the last 10 years, real estate investors have had big pools of money available to them and the rates kept going down. In today’s market, you will need to be prepared and ready for anything that lies ahead. In taking the time to set yourself up properly, you will have the opportunity to create the wealth and income you want. 

Now is the time to buy!

Now is the time for you to invest in real estate. This is the opportunity for you to take advantage of not only more deals, but more profitable deals in this market. As a new investor, you need to be able to jump in when other people are getting out. Here at The Cash Flow Company we can help walk you through the steps and ensure that you are on the path for success.

Watch our most recent video 2024 Real Estate Investing: Why Should I Invest? to find out more!

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2024 Real Estate Investing: 5 Key Steps to Succeed

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2024 Real Estate Investing: 5 Key Steps to Succeed

Today we are going to discuss the 5 key things that real estate investors need to do in 2024 in order to succeed. It is going to be a different market this year compared to years past. Rates are going to flatten out and everything that we have seen in red from the National Association of Realtors, the Mortgage Brokers, and Fannie Mae will be changing. They are expecting rates to hover between 6% and 7% this year. Predictions indicate that the Fed is going to lower their rates starting in May 2024. However, the first quarter is going to be a little tougher for the consumer until we see that shift in rates. Just to clarify, consumers are those who are renting or buying. 2024 is the year that you are going to succeed and get better deals! Let’s take a closer look at the 5 key steps.

1. Build a cushion

Over the past 6 months, we have seen that for the mid to higher level properties you are going to have to build a 15% to 20% cushion. Due to affordability, you will need to build a cushion to make sure that you aren’t overpaying. Here at The Cash Flow Company, we are advising people to go back and look at the last 3 months of sales to see where they are heading. Make sure to watch what price you’re buying things at. This will ensure your success when you sell, refinance, or even if you keep the property as a rental.  

2. Look at more homes and do more research.

If you are going to be investing in this market, then you need to be willing to look at more properties. It is important to remember that you will need a 15% to 20% discount from where you were buying it a year ago. You will need to put in a little more effort and work. Those who look at 100 homes compared to 10 homes will find good properties. By spending 2 to 3 hours a day looking at properties, you will be successful in 2024.

3. Go smaller

In this market there is a shortage of homes compared to the number of people looking for properties. In order to find the more affordable properties, you will have to go smaller. What do we mean by smaller? The property would be less square footage or a smaller price point. In some cases both the square footage and the price point will be significantly less than they would have been a few years ago. By expanding your search area, you will find greater affordability. This might mean that you are looking into smaller communities in other states to find the best deals. 

4. Don’t buy bad properties

When the market is going, then every property sells. This includes properties on corners, busy streets, overlooking commercial properties, and ones that are next to big apartment complexes. These are the properties that are normally going to take a hit and sit on the market longer. As the market changes, buyers will have more choices. They also become more selective because of the cost. In order to be successful, you need to buy good properties that are in good areas.

5. Open up where you are getting your funding from

Investors need to start looking for peer to peer lenders to help fund their next deal. Here at The Cash Flow Company we have been using peer to peer lending since 2008. There are a lot of people right now who have money and are looking for something to do with it. As an investor you can make 2024 easier, better, and more profitable than ever before. A peer to peer lender provides an easy and cheap funding source no matter what amount is needed. These lenders can help with a down payment, fix and flip project, or even fund repairs for rental properties.  

Contact us at The Cash Flow Company if you have any questions or would like to find out more about investing in 2024. 

Watch our most recent video to discover more about 2024 Real Estate Investing and the 5 Key Steps to Succeed

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What Rates Should Investors Expect in 2024?

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What Rates Should Investors Expect in 2024?

Now is the time to look at what rates investors should expect in 2024! I have been in finance a little over 35 years, and working with real estate investors for 24 years. While experience isn’t exactly a crystal ball, it does help guide investment decisions and identify market trends. We saw real estate predictions come to live in October of 2023 when rates did improve. As we begin to prepare for 2024, it is important that we follow the trends from Fannie Mae, NAR, and the Mortgage Brokers Association. Let’s take a closer look at the trends and what they mean to real estate investors.

What are some things to look for in 2024?

First and foremost we are going to see a more stable market. Let’s start by taking a look at Fannie Mae and focusing on the conventional rates specifically. Conventional includes people who are buying properties, flippers, and those who are refinancing a rental property. Fannie Mae predicts that rates will be between 7% and 7.6%. NAR on the other hand is more optimistic and anticipating rates to fall between 6% and 7%. We have already seen a shift and are hopeful that the rates will continue to follow this pattern! 

What about the Fed?

Nowadays the Fed is saying that they think inflation is under control, and in turn they are going to stop raising rates. However, this doesn’t always mean that it reflects 1:1 in the real estate world. In an investor’s world, there are all kinds of loans, which are all affected by different economic conditions. Rates will be better, but they will be volatile. This means that there will be months when rates are up, and months when rates are down. It is dependent on economic information, wars around the world, and the possible impact of 2024 being an election year.

Will rates ever go back down to 5%

In looking back at rates in 2023, we did see them pop up over 8%. However, real estate investors are optimistic that rates will go back down to 5% in the New Year. Many are asking when can we expect the rates to decrease? The decrease will continue to be seen in the conventional rates, which are tied to the 10 year treasury. What is the 10 year treasury? It is a bond issued by the United State Government that guarantees repayment of the money plus interest in 10 years. Even though the Fed dropped their rates and then raised them, the 2024 interest rate prediction is that rates will drop again in May. While they may not go down to 1:1, investors will see a significant decrease. 

In conclusion.

2024 expected rates indicate that real estate investors will see a decrease in the upcoming year. This will create more affordability and financing for buyers, as well as an opportunity for investors to sell some of their inventory. As rates go down, it will create wealth, income, and more opportunities. While we don’t have a crystal ball to predict the future, we can utilize trends and  experiences to guide us towards success. 

Here at The Cash Flow Company we have created a weekly mortgage report to keep you up to date on current changes and trends. 

Email us at info@thecashflowcompany.com to receive the weekly mortgage report updates or look for it on our website at www.thecashflowcompnay.com. 

Watch our most recent video to find out more about 2024 Interest Rate Predictions and the Investor Mortgage Report

 

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Key to Succeeding in Today’s Real Estate Market

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Key to Succeeding in Today’s Real Estate Market

The key to succeeding in today’s real estate market is consistency. If you are consistently looking at properties, finding lenders, and doing things correctly, then you will set yourself up for success. Things have changed dramatically compared to 10 to 12 years ago. Back then, there was a whole generation of investors who had an easier time navigating the market. They had lower rates, property values increasing, and lenders were throwing money at everyone. Nowadays, everything is tightening up. Lenders are disappearing, and those who are still lending are becoming more selective. It is imperative that investors stand out in this market and set themselves up correctly. In doing so, investors will get the best deals and set themselves up to win. 

How the market works

When interest rates go up, people can no longer afford to buy properties. The decrease in home sales results in a plateau or even a decrease in property values. Predictions are saying that rates will go back down to 5.5% in 18 months time. When they do, people will once again be able to afford to buy properties. As things loosen things up, there will be a wave of people coming into the market and buying properties. Investors who set themselves up in this market will win in the future.

Let’s look at an example

A property that you purchased a few years ago for $400K would now sell for $350K in this current market. When the wave comes back in 18 months to two years, that same property will be selling for $450 to $500K! That’s a great return. During these cycles, many people start running away and stop buying properties. These are the times when smart investors come in and buy. If they are able to hold onto it until rates improve, then they will in turn reap the benefits of the better rates and generate greater cash flow.

Customer success story

In 2010 I helped someone buy 10 homes in a year, without him putting any money in. Back then, the properties were cash flowing $500 per month because he had bought them at such good numbers. Fast forward to 2022. He only owes on 3 of the properties and has paid off the other 7. They have all increased in both the property value and rent by 3x and even 4x on a few of the homes. In only one year he set himself up for the rest of his life. This is all because he bought when everyone else was running away. 

In conclusion

Remember that consistency is the key to succeeding in this market. From finding properties, to locating lenders, and setting things up correctly, consistency will create success. This is the best market to get deals in. When rates go back down, which they will, it will create a wave of people coming into the market and buying properties. Now is the time to get ahead of the wave of success. In doing so, you will be able to take advantage of lower rates, increase your property value, and most importantly create cash flow.

Contact us today to find out more about the changing times and what you need to do to get ahead of the wave.

Watch our most recent video to find out more about the Key to Succeeding in Today’s Real Estate Market

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How High Interest Rates Impact Real Estate Investments

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How High Interest Rates Impact Real Estate Investments

Today we are going to paint a picture of how high interest rates impact investments for those who fix and flip properties or have rentals. Our goal is to show how rates, credit scores, and LTV can affect your ability to not only qualify for a loan, but also cash flow on the property. We all know what is happening with the Fed and how it is impacting us, but what does that look like on paper? The example that we are reviewing today will provide an excellent visual of how everything plays a role in the real estate game. DSCR is the product we are using today because it is one of the most popular out there.

Type of property Purchase price Appraisal 

average 

rents in area 

 Amount down Financing 

30 year loan

 Fees

Taxes

Insurance

HOA

 DSCR 

(LTV) 
Rental $250k $1,950 20% 80%

($200K loan) 

 $300 75%
Credit Score DSCR rate Payment amount 

principle and interest

 Payment amount plus fees  Cash flow 

based on appraisal 
Client 1 680 9.75% $1,718 $2,018 -$68.00
Client 2 720 8.99% $1,608 $1,908 +$42.00
Client 3 780 8.75% $1,573 $1,873 +77.00

What about Conventional and Fix and Flips?

This example is also representative of a conventional, and fix and flips as well. In a nutshell, the more you pay on interest, the less properties you can handle. 

What is the appraisal?

An appraisal determines the average of rents in the neighborhood and uses this amount in the underwriting. The amount can change depending on if you have a couple years of history with rents that exceed the determined amount. The increasing rates are making it extremely difficult for properties to hit the expected rent amount.

What is the DSCR rate?

DSCR rates are determined based on your LTV. A credit score below 680 typically lowers the LTV from 80% to 75%. Therefore, you would need to put in more money up front on each purchase. If you’re looking at a DSCR with a credit score of 679, you will either be declined or it will flip you into a non ratio DSCR. Which means that your rates are going to be higher. Is a DSCR loan right for you? Visit our website to find out more.

The power of credit scores.

Your credit scores not only affect your rates, but they also will impact your cash flow on the property. Do you need to raise your credit score in order to qualify? We can help you get your credit scores back on track with our 911 loan. Contact us today to find out more. As credit scores go up, you will be able to capture more monthly income and create wealth.

How do rates affect cash flow?

As rates continue to rise, your payments are going to increase as well. This in turn causes your cash flow to suffer, and in most cases it will be a negative. Cash flow positive on the other hand, means that there are going to be more properties available for more investors. So keep your eye out for this change!

Rates are decreasing!

Over the past three weeks rates have been decreasing. We may be at the peak right now and many are predicting that rates are going to significantly drop in 2024. It is imperative that you stay up to date and keep track of current trends. We have created a Weekly Investor Mortgage Report for you! Reach out through our website or email to find out more.

Keep increasing your leverage!

In real estate investing leverage is the key to success. It is what makes your wealth and creates your income. By using banks, other people’s money, and filling your leverage buckets, you will set yourself up for success.  

In Conclusion.

I wanted to paint this picture so you can understand how 3 different people compare side by side on the same property. Investors can either be denied or approved just based on their credit score, or where the markets are. While being denied is discouraging, it is important that you understand why you didn’t qualify and why properties are not cash flowing right now. If you want to impact where you are and where you are going in the New Year, then check out our website. We have a lot of ways to positively impact your credit, as well as a weekly newsletter. We are here to help you get on the path to success. 

Watch our most recent video to find out more on How High Interest Rates Impact Real Estate Investments.

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Why You Should Buy Rental Properties Now

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Why You Should Buy Rental Properties Now

Investors are asking why they should buy rental properties with interest rates being so high. While no one has a crystal ball to see the future of interest rates, there is a market trend that many seasoned investors follow. They buy when rates are high, and then refinance when the rates drop again. In doing so, the seasoned investors put themselves ahead of the game. Consequently, by already having a property in hand, it takes the pressure off not having to rush into deals when rates drop. You too will be able to take advantage of the lower rates without scrambling to find properties. Below is an example of how cash flow is being affected by the current interest rates. Our focus is on the future. The ultimate goal is to buy now in order to create optimum cash flow later. 

DSCR Loan

Today we are going to dive into an example illustrating why purchasing rental properties now will increase your cash flow in just a few years when using a DSCR loan. What is a DSCR loan? A DSCR loan are loans focused on the rents from a rental property and the credit worthiness of the borrower. While the increasing interest rates are making it harder for investors to qualify for a DSCR loan, those who are able to find good properties will in turn set themselves up for success when rates go back down.  

Example:

$250K DSCR Loan 
Time Frame Percentage Expected Payment Change Over Time
Couple years ago 3.75% $1,158
Now 9% to 11% 

(depending on LTV)

 $2,011 $853 

Payment Increase 
In the Future 7% 

(you refinance $2,011 principle)

 $1,663 $348

Cash flow increase 
The Optimus  5%

(Looking if it dropped from 9% to 5%)

 $1,342 $669 

Cash flow increase 

What is a “good property” to buy now?

My suggestion for investors is that they need to find something that has good equity and at 25% to 30%. As long as it is breaking even, then in a year or two when rates go back down, you will be able to refinance to increase your cash flow without buying another property. The more affordable the homes are, the bigger the market becomes. The good news is that buyers are going to start buying again, and the values around you are going to increase. While no one can predict that the interest rates will go back down to 2.5% for owner occupied and 3.75% for investors, there are indications that interest rates will drop in 2024. 

What else can you do to succeed in this market?

You’re not alone! There are a lot of people who are questioning if they should buy now. Navigating this market can be overwhelming for many investors. By doing your research and investing wisely, you will not only increase cash flow, but create generational wealth as well. I will be doing a follow up video that will further show you the effect that interest rates have on cash flow. This will include a look from the buyers side, and how the market is going to push up your values. 

Watch our most recent video about why rental properties fail to cash flow and how you can set yourself up for success by investing now.

Do you have questions about DSCR loans or how you can create generational wealth? Contact us today!

 

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2024 Interest Rate Predictions – Investor Mortgage Report

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2024 Interest Rate Predictions – Investor Mortgage Report

2024 is fast approaching! Now is the time to look at 2024 interest rate predictions and discuss the importance of the investor mortgage report. I have been in finance a little over 35 years, and working with real estate investors for 24 years. While experience isn’t exactly a crystal ball, it does help guide your investment decisions, as well as identifying trends. Real estate investors saw a prediction come to life in October of 2023 when rates did improve. As we begin to prepare for 2024, it is important that we follow the trends from Fannie Mae, NAR, and the Mortgage Brokers Association. Let’s take a closer look at trends and what they mean to real estate investors.  

What are some things to look for in 2024?

First and foremost we are going to see a more stable market. Let’s start by taking a look at Fannie Mae and focusing on the conventional rates specifically. Conventional includes people who are buying properties, flippers, and those who are refinancing a rental property. Fannie Mae predicts that rates will be between 7% and 7.6%. NAR on the other hand is more optimistic and anticipating rates to fall between 6% and 7%. We have already seen a shift and are hopeful that the rates will continue to follow this pattern! 

What about the Fed?

Nowadays the Fed is saying that they think inflation is under control, and in turn they are going to stop raising rates. However, this doesn’t always mean that it reflects 1:1 in the real estate world. In an investor’s world, there are all kinds of loans, which are all affected by different economic conditions. Rates will be better, but they will be volatile. This means that there will be months when rates are up, and months when rates are down. It is dependent on economic information, wars around the world, and the possible impact of 2024 being an election year.

Will rates ever go back down to 5%

In looking back at rates in 2023, we did see them pop up over 8%. However, real estate investors are optimistic that rates will go back down to 5% in the New Year. Many are asking when can we expect the rates to decrease? The decrease will continue to be seen in the conventional rates, which are tied to the 10 year treasury. What is the 10 year treasury? It is a bond issued by the United State Government that guarantees repayment of the money plus interest in 10 years. Even though the Fed dropped their rates and then raised them, the 2024 interest rate prediction is that rates will drop again in May. While they may not go down to 1:1, investors will see a significant decrease. 

A closer look at mortgage rate changes.

The government seems to be wanting to spend more and more money, which results in a deficit. In order to create a deficit and pay for it, the government has to issue more bonds. As a result of the government issuing more bonds, investors will want a better rate. This in turn affects mortgages because 3% is added to the 10 year treasury to create the mortgage rate. Just like a stock, these rates are continuing to change. Real estate investors might not see as big of a dip in the 30 year mortgages while the fed funds are dropping.  However, we might see a greater impact on the ARMS. Whether it is the 3, 5, or 7 year ARM, we are expecting them to go down in 2024. Just to clarify, ARMS stands for Adjustable Rate Mortgage. As of now, the 5 year ARM and the 30 year fixed both have similar rates with only .25% difference. I think next year will present a bigger spread for adjustable rates over fixed rates.

Let’s dive into some numbers!

$300K loan
What rates were  What rated dropped to What buyers can afford to buy now Cash flow created on rental properties
7.5% 6.75% $323,500 $150

The lower rate of 6.75% not only increases the amount a buyer can spend on a property, but it can also create cash flow on rental properties. This is great news for flippers, as well as investors. Those who have a $300K loan on a rental property now have a $150 cash flow because of the rate decrease. Every time the rate drops it helps the real estate market. The lower rates create more affordability, and increases the amount people are able to both spend and buy. By combining the high demand for properties and lower rates of 5% or 6%, investors will have the ideal conditions to create cash flow in 2024. 

How is the Fed affecting bank loans?

A lot of investors go to banks for rental loans or fix and flip loans. As rates drop, it will have a greater effect on investors because Fed funds affect prime. Fed funds are controlled by the Fed and dictate what banks can borrow from the Fed or other banks. The fed funds are currently at 5.25% to 5.5%. Banks then add 3 points to that in order to create their lending base number for short term loans or 1 to 2 year bridge loans. Some lenders even have a prime -1 or prime -2 for their real estate products, it just depends on the lender.  To clarify, prime, also known as the Wall Street Journal Prime Rate, is the most common benchmark that lenders use when setting their interest rates. 

What are basis points and how do they affect you?

There are predictions out there that the Fed might drop from 75 basis points, down to 200 basis points in the next year. What is a basis point? A basis point is the same as a percentage point. For example, for every 1% there are 100 basis points. So 50 basis points is equal to .5%. You will hear that a lot in the economic world. Just keep in mind that it’s a percentage of a point. As stated before, rates will be volatile in the upcoming year. It is important that you track the basis points along the way because they will make a big difference when you are trying to sell something. The basis point trends can be found on our weekly mortgage report and are available on our website. It will be updated weekly in order to make sure everyone is informed on current trends.

Keep an eye on DSCR.

Here at The Cash Flow Company we will be keeping a close eye on DSCR, as well as private mortgage loans. We will see how the rates are impacted by upcoming changes, and track the trends in our weekly mortgage reports. Just today we discovered that rates dropped .25 of a point across the DSCR lenders that we work with.Thankfully we are starting to see where rates are going back to the 7% range instead of 8%. This drop is great for investors! Every .25 of a point it drops, means there is more cash flow for you, as well as more opportunities to qualify for properties. The real estate world is going to open up again as rates keep dropping. We are working hard daily to make sure you get the best rates out there.

How will private rates be impacted?

The private money lenders borrow money from either banks or other institutions. A lot of their money is based on either the Fed funds or prime, then they add to that. The amount that they add on is the margin or profit they receive when lending out to someone else. Private rates were in the 7% range and 8% range. Today these percentages have increased to 11% and even 13% for some private lenders. This increase is affected a lot by prime, and prime is affected by the changes that the Fed makes. As rates drop, you should start to see the cost of private money loans on your flips, as well as the BRRRR’s come down as well. 

In conclusion.

The 2024 interest rate predictions indicate that real estate investors will see a decrease in the upcoming year. This will create more affordability and financing for buyers, as well as an opportunity for investors to sell some of their inventory. As rates go down, it will create wealth, income, and more opportunities. While we don’t have a crystal ball to predict the future, we can utilize trends and  experiences to guide us towards success. 

Here at The Cash Flow Company we have created a weekly mortgage report to keep you up to date on current changes and trends. Email us at info@thecashflowcompany.com to receive the weekly mortgage report updates or look for it on our website at www.thecashflowcompnay.com. This will go over some economic data, the best DSCR rate, and what current rates are for conventional so you don’t run the risk of overpaying. If you are going to be a real estate investor, then you need to know where financing is going. Not only for yourself, but for potential buyers as well. We are here to help! 

Many of our customers want to know what the rates would be for their situation, credit, or properties. We can put together a personal report for you. This can then be used for your portfolio, or for when you are buying a property. Contact us today to find out more!

Watch our most recent video to find out more about 2024 Interest Rate Predictions and the Investor Mortgage Report

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