If you’re in the real estate investing game, you’re probably wondering, “Will interest rates go down in 2024?” The 2023 market has been tough, but good news is on the way!
2023 has been an interesting year for investors as we’ve faced exceptionally high interest rates. At times, this has been stressful, but how can we use this information to help us prepare for the next year of opportunities?
Currently, rates are between 7% to a little over 7% for people looking to buy an owner-occupied property with a 30-year fixed mortgage.
The Fed has nearly reached their max which means lower rates are coming! And not just on housing; credit cards, student loans, etc. will all start seeing lower interest rates.
This is great news, but how does it impact you in real terms?
How Interest Rates Effect Real Estate Investing
As interest rates go down, you’ll have the opportunity to increase your cash flow just by refinancing or being smart with your purchases.
The lower the interest rate, the more money goes into your own pocket in each deal.
But how does the math work?
If you’re looking at your finances, and you can afford $2,000/month in payments, here’s the breakdown:
- In total, you can afford $2,000 a month in payments
- Subtract $100 for taxes
- Subtract $100 for insurance
- TOTAL: Investor can afford about $1,800/month that goes towards the mortgage
Now, let’s run that through different interest rates.
Even though you can afford only $1,800/month towards a mortgage, the interest rate significantly changes the loan amount. This in turn changes the types of property you can pursue:
Even a change from a 7% to a 6% interest rate results in an 11% increase in the price of a home you can afford.
As interest rates go down, more people can access what’s on the market.
If you’re in real estate investing, having homes ready to flip in 2024 to meet that pent up demand as interest rates drop can make a huge difference for you.
Make a Game Plan
Even though rates are still high, based on these evidence-based real estate market predictions, you should start buying and getting properties ready to flip by the end of this year.
Real estate markets move quickly, so you’ll want to be ready for those falling rates when the market demand spikes.
If you’re wondering why should I buy when interest rates are so high? here’s the deal: If you buy right now when interest rates are high, you can cash flow them as rates fall. This makes your properties more valuable when you flip them, and cash flow is going to increase.
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