Mortgage rates are currently around 7%. What does this mean for you the investor who is looking to buy and hold?
It means that capital is going to cost you more money. And sellers, particular those who are represented by realtors, are not concerned with your capital costs. So how do you navigate this market?
The listing prices are based on past numbers, more specifically comparable properties that have sold. Defining the listing price of a home is a reactive process for realtors and non-investor sellers. Realtors base the price on past comps. Then sellers may be willing to adjust based on days on market.
As an investor, you make decisions based on current scenario and the anticipated impact on the market in the future. So one way to entice the seller and realtor is to offer the list price if they let you control the terms. This works well when both the seller and realtor are motivated. Terms include repayment period, interest rate, and fees. How do you control the terms?
You can control the terms in creative financing solutions such as seller financing, subject to, private lenders, etc. Controlling the terms is easier when the seller is willing to finance the property.
- Seller-Financing Trends from Note Investors: https://noteinvestor.com/notes-101/owner-financing-2021/
- Texas Housing Insight from the Texas A&M Real Estate Research Center: https://www.recenter.tamu.edu/articles/technical-report/Texas-Housing-Insight
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