Today history was made in the mortgage arena when the interest rate for a 30 year fixed mortgage fell to an all time low of 4.49 percent, the lowest since Freddie Mac began tracking the rate way back in 1971, which begs the question, is now the time to buy rental property as an investment? Really the answer all lies in your own personal credit situation.
What seems to be happening, at least in the South Florida area in which I live, is that the majority of those who are buying anything real estate wise are investors, but also investors who pay cash. So the fact that interest rates are so low really doesn’t have all that much of a bearing on whether or not investors are buying, but it does make you think that maybe the average person could buy rental property as an investment.
If you have great credit and you meet all the requirements of the banks, then this may in fact be a great time to buy rental property as an investment. Certainly you can’t buy a home anymore and hold it for a month only to flip out of it for a tidy profit as you could a few years ago, but if there are renters in place then a property could really pay off for you in the long run.
It all comes down to raw numbers. If you can rent out the property in which you are interested in for more than the mortgage will cost you, then yes, it is a good investment. That said though, be sure that your credit is sparkling and that you have the required amount of money to put down on the property that the bank will want because this housing disaster has brought about a change in the way money is lent for properties.
Gone are the days of interest only loans that are approved with a quick glance and little more than a handshake. Now banks are requiring proof of income, proof of assets, and a down payment. This is how it should be though and when it is all said and done it is for the protection of both the banks and the consumers.
Of course if you are the typical South Florida investor then these historic rates are of little consequence to you. However, if you are someone who was able to avoid the housing crisis and keep your credit in check, then this could be one of the biggest opportunities of your life. Rates may never again get this low; then again, they may go lower. One thing is for sure though, if you can find a good rental property to invest in and have always had a yearning for being a landlord, then right now may be a great time for you to get your feet wet and begin your life as someone who invests in rental properties.
Source: Alan Zibel, The Associated Press, Mortgage rates hit low of 4.49 pct, Google.com
Wells Fargo, Application Process Overview – Wells Fargo Home Mortgage, WellsFargo.com