Rising interest rates, falling property values, uncertain rents. Added together, these can make any investor nervous and reluctant to buy more properties. However, all of these factors can also mean it’s the perfect time to continue investing. I’ve worked with small and large real estate investors, and here are three reasons why I think it’s a good time to be cautious, but not necessarily a time to be scared.
In real estate investing circles, it’s the most asked question these days: “In a rising interest rate environment, do I buy a rental property?” As a lender, who clients often turn to for advice, I’ve been attending conferences, webinars and reading a lot of articles to “get smarter” on the topic. Unfortunately, I can’t give you a definitive answer, but I can give you a few things to consider that really resonate with me…
Just like banks who provide mortgages for people buying a home to live in, most private lenders, who finance real estate investors, require an appraisal on a property before making a loan. The appraisal is used to protect the lender – it helps them evaluate if it’s a good deal for the investor and the appraised value is also usually used to set the maximum loan amount. I have been doing appraisals for private lenders for over 10 years. During that time on many occasions the appraisal has differed significantly from the borrower’s estimate of value. Often times this is because the investor does not fully understand how appraisers select the comparable sales used to value the property. If you understand these three things about appraisals, it will help you evaluate your deals…
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