High Interest Rate’s Can Impact Net Profits

Learn how high interest rates impact net profits.

Being a real estate investor has its challenges. These have been magnified by higher interest rates. It is good to follow people in the industry that have different perspectives on the market. Some great resources are as follows:

• Peter Schiff – https://schiffradio.com/
• Robert Kiyosaki – https://www.richdad.com/about/rich-dad
• Bigger Pockets – https://www.biggerpockets.com/
• Charles Dobens – https://www.multifamilyinvestingacademy.com/Hear-From-Attorney-Charles-Dobens

These are just a few that we follow. Keep track of Zillow, BlackRock, and other large corporations. They are usually ahead of the curve, creating the curve, or throwing a curveball. 

Current Fix and Flip Rates

Real estate investors have seen rates climb from the low 5% range to as high as 12%. This makes it much harder to turn a profit and throws off most investment formulas. Housing prices have not fallen as fast as the increase in costs. Inflation is impacting the “rehab” area of real estate investing. 

This is a double strike.

But there still is money to be made. The key is to prepare for acquisitions ahead of time. Improve personal and business credit to qualify for the lowest possible terms. If you invest using an S-Corporation or Limited Liability Company, you can access unsecured business credit under your business EIN (employer identification number). 

This provides access to more working capital. 

Point to Lower Rates

Some lenders charge points on real estate investing loans. There are also points applied to lower interest rates. Private lenders use points frequently along with brokers and consultants. 

According to the United States Consumer Finance Protection Bureau “Points, also known as discount points, lower your interest rate in exchange paying for an upfront fee. Lender credits lower your closing costs in exchange for accepting a higher interest rate. These terms can sometimes be used to mean other things. “Points” is a term that mortgage lenders have used for many years.”