Real Estate Tips |6 min read

How to Take Advantage of Rising Interest Rates and Cash in on Real Estate

When you think of rising interest rates, there’s generally a negative connotation–especially if you’re looking to buy or invest in something. However, investors can still maximize profits despite high interest rates. Want to learn how? Read along as we go over the current interest rates, where they’re headed, and the best ways to invest right now. 

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Contents of This Article:

Where are Interest Rates Now?

It’s obvious that inflation has made an appearance over the past year or two, which caused prices of nearly everything to rise. Additionally, the tools being used to offset the massive inflation rates are directly correlated to rising interest rates. 

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That said, mortgage rates are increasing at astronomical levels, which impacts the ability to obtain housing. In fact, this year, we’ve seen some of the largest interest rate hikes in decades. In October, the average rate for a 30-year fixed-rate mortgage surpassed 7% for the first time in 20 years. 

In turn, fewer people are jumping at the opportunity to buy real estate right now. After all, there’s simply less space in the market for people who cannot afford high interest rates. As a result, many homebuyers are waiting for the market to settle before getting a mortgage. 

Ultimately, throughout this year and last, we’ve seen high inflation rates and rising interest rates. But what’s next? Let’s see where interest rates are headed. 

Where are Interest Rates Headed?

Since August, mortgage rates have steadily increased. That said, there’s a slim chance that they’ll be down over the next month or so. In fact, they’ll likely remain around the same or even slightly higher. 

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If you’re looking more long-term, interest rates will eventually go down. However, it’s hard to determine an exact timeline. Interest rates tend to increase when inflation rates are high, which is exactly the case right now for US investors. 

Although it’s never a positive factor, rising interest rates aren’t the worst problem for investors to run into. So next, let’s discuss how to take advantage of rising interest rates and dive into real estate.

How to Take Advantage of Rising Interest Rates

Typical homebuyers might not see the value of investing amid high inflation and interest rates. However, investors may have opportunities to take advantage of high rates and invest in real estate. But how?

Despite higher borrowing costs, investors can benefit from high interest rates in some ways. That said, there are a few reasons why rising interest rates can positively impact real estate investing. For one, fewer people may qualify for mortgages when rates are high, so the market for rental properties is bound to increase as people search for more affordable housing. 

Additionally, higher rates may force housing prices to decrease. However, our current market has several factors keeping home prices high. For instance, supply chain issues, the effects of COVID-19, and other factors make it a unique market for investors

How Do Rising Rates Affect Investors? Pros and Cons

Overall, interest rates can have both positive and negative effects on investors. Read along as we go over the pros and cons. 

Benefits of Rising Interest Rates

  • Potentially Better Returns- When you purchase properties in major metropolitan areas, you have a better chance of earning significantly higher returns. 
  • High Rental Demand- Considering the current high mortgage interest rates and general inflation, fewer people are able to purchase homes. In turn, more people are looking for shorter-term solutions, creating higher rental demand. 
  • Tax Benefits- Any real estate investor can benefit from tax deductions and write-offs. Generally, you can write off some rental business expenses like repairs, maintenance, mortgage interest, and more. 

Disadvantages of Increasing Interest Rates

  • Harder to Find Financing- When interest rates rise, affordability decreases, making it harder to find reasonable financing for your investment. 
  • Expenses Increase- With higher interest rates, you will pay more for your mortgage. When you put this together with the effects of inflation, costs can rapidly increase for investors. 

Tips for Maximizing Profits Despite Rising Rates

As we know, high interest rates aren’t always a bad thing for investors. Several great solutions exist for investors who want to make moves despite high interest rates. So next, let’s go over how to take advantage of rising interest rates and maximize profits. 

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  • Plan Ahead
  • Pay Off Debt Quickly
  • Use a Hard Money Loan

Plan Ahead

Planning is important for any type of investment. Whether you’re investing in real estate or stocks, it’s crucial to have a plan and stick to it. When it comes to real estate investing, you’ll want to look into the best time to invest, which properties to invest in, and come up with suitable loan options. How are you going to fund your investment, and is right now the best time to invest? You need to consider these decisions before diving into any investment project. 

Pay Off Debt Quickly

Whether you have credit card debt or a mortgage loan, when interest rates are high, try to pay it off quicker than usual. Paying off more than you need to on your loans or credit cards can reduce how much extra money you’ll pay through interest. 

Use a Hard Money Loan

If you want to escape the technicalities and qualifications of a traditional bank loan, consider looking into hard money loans. Hard money loans are short-term, non-conforming loans that don’t come from lenders like banks. Instead, hard money loans come from people or private companies that accept real estate as collateral. That said, if you don’t pay back the loan, you could lose your investment property. 

How Hard Money Loans Can Help You Invest

Now that we know a little about hard money loans, you may be wondering–how can I use one to invest in real estate? The first step is researching Maryland hard money lenders and finding one that will suit your financing needs. 

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Compared to a traditional bank loan, it’s generally easy to qualify for a hard money loan. Additionally, the process of obtaining a hard money loan is much quicker and easier than a traditional mortgage. You can usually receive financing within 30 days, and most hard money lenders expect to receive the entire loan amount, plus interest, within one to five years. 

Remember that hard money loans aren’t the best solution for every investor. After all, most hard money lenders charge high-interest rates and may require a large down payment to secure the loan. However, they’re great for investors who don’t meet traditional mortgage loans’ requirements or prerequisites. 

Find a Hard Money Lender Near You

If you’re thinking about exploring hard money loans and want to learn more, start by finding a local hard money lender. The best way to learn more about loans and how they can benefit you is by speaking with a local Maryland hard money lender. 

If you’re looking for a lender to fund your next investment property, contact one of our local Maryland hard money lenders today. Our qualified professionals can help answer any loan questions and bring your investment goals to life. So, if you want to learn more about hard money loans in Maryland and how to get one, contact Maryland Hard Money Lenders today.

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