Will rising mortgage interest rates really have an impact on real estate wholesalers?
We all know that interest rates have to go up. We’ve enjoyed sickly sweet low mortgage rates for a long time and while predictions of increases really haven’t become a reality until now, real estate investing pros and the public can’t be fooled into a false sense of security.
Rates recently hit a 12 month high and are expected to keep rising. The markets will demand it, bankers need it and while not all will be pleased about paying more in interest, it will mean higher yields on savings and more fuel for economic growth.
No one expects interest rates to soar out of control in the short term. However, historical cycles suggest that double digit rates could well be on the horizon within the next decade.
For real estate wholesalers this may not seem like much of a concern. After all, most of those flipping houses only use leverage for extremely short periods of time, and if you aren’t holding the debt you won’t be paying interest on it. Plus, access to more loans and easier borrowing is probably a welcome tradeoff for most investors flipping homes.
We are already seeing this with lenders and mortgage brokers becoming the most aggressive we’ve seen in almost a decade. This is especially true of hard money lenders and commercial mortgage brokers offering blanket funding and bridge loans. Just hop on LinkedIn or get on a few lists and you’ll probably be bombarded with lenders looking to make loans today.
With this said, it is still critical for investors and especially wholesalers to remember that rates are a factor when it comes to resale. Higher rates will affect both retail borrowers and buy and hold investors. While this doesn’t mean you will see any dip in volume or interest, you made to moderate prices to compensate for this.
Finally, remember to use this trend in rising rates as motivation to get more buyers to pull the trigger now, and fuel to move more units right away. With these rates, there is still time to get into the wholesale business.