Perhaps this goes without saying, but the last couple of years have been… hectic. Thanks to a global pandemic leading to massive economic shutdowns as a means of avoiding a catastrophic public health event, times have been tough for a lot of home and business owners. Monetary policy has been at the forefront of the pandemic, with the Federal Government taking several measures to avoid economic hardship or collapse for the United States and its citizens. Thanks to these actions, a perfect storm has been created that allows real estate investors to lock in excellent financing rates on long-term rental loans for properties that they intend to hold.
Mortgage Rates are Historically Low
One of the off-setting actions that the Federal Reserve took in the beginning of the Covid-19 Pandemic was to cut the federal funds rate. By doing this, banks are more easily able to borrow funds from the Federal Reserve at low rates, which in turn allows for them to offer loans at lower interest rates.
The Federal Funds rate is currently lower than it was in the immediate wake of the 2008 Subprime Mortgage Crisis, which had previously been the lowest that the rate had been set at in its history. As a result, interest rates for 30-year mortgages are at their lowest point, which makes financing real estate much more affordable in the long term. By locking in a 30-year fixed rate investment mortgage, you could be paying as low as 3.75% interest even ten years from now when interest rates may be back up at 5, 6, or even 7%. The long-term juice from purchasing or refinancing now is beyond worth the squeeze.
The Housing Market is Expected to Remain Strong
While the economy at large has seen some significant highs and lows since 2020, the housing market in particular has been rather resilient. This is due in large part to a disparity between current supply and demand, as the demand for housing inventory is much larger than what’s currently available. As of September, it was estimated that the US is short over 5 million homes, which is an increase of about 1.4 million homes since 2019.
With ongoing supply chain issues and building supply shortages, it seems that this supply and demand issue is bound to continue which will keep housing prices high with few reasons to believe that there will be a sudden dip in the foreseeable future. Locking in long-term financing on an asset at its current value (and at a super low interest rate) is likely to be a wise move as real estate values continue to increase.
The Rental Market is Likely to Remain Competitive
With a strong market for buying and selling homes, rental properties are an extremely attractive investment right now. Overall economic conditions have made it difficult for many Americans stuck with student or medical debt to save enough money to put a down payment on a house. Since 2000, renter-occupied households have grown by about 29% according to analysis of Census data. The rental market isn’t showing any signs of going away any time soon.
In competitive markets, market rent levels can increase substantially in relatively short periods of time. If you have properties that you believe are likely to experience these increases in value over time, then locking in a low mortgage payment now will ensure that your cash flow is far greater in the future.
Looking for a 30-Year Rental Loan?
If you’re a landlord seeking to grow your portfolio or refinance into better rates and lower payments, Pimlico Capital is here to help! We offer 30-year fixed rate rental loans with rates as low as 3.75%, and leverage up to 75% for cash-out or 80% rate & term refinancing. Visit our rate calculator now if you have a property in mind and get a quote within 2 minutes!