Here’s How You Can Profit in Real Estate Investing With Rising interest Rates
The real estate industry is always changing. Some factors that impact the industry are harder to predict than others, and rising interest rates are among the hardest to forecast for most investors. But should rising interest rates concern you if you’re looking to make a profit in real estate investments? The answer is, “Not necessarily.” In fact, there are multiple ways you can still make a profit in real estate investments even when interest rates start to rise. Let’s delve into the various strategies that can help you profit in a market with rising interest rates.
First, it’s essential to understand why interest rates and real estate investments are interconnected. The interest rate established by the Federal Reserve directly affects borrowing costs, and as borrowing costs increase, the cost of owning and investing real estate also goes up. In a market with rising interest rates, your focus should shift from finding properties with low-interest rates to identifying properties that provide a more considerable cash flow. You can achieve this in multiple ways.
One way is to invest in properties that benefit from a growing economy such as commercial or industrial real estate. Rental property appreciation and an increase in cash flow can offset and overcome any interest rate increases. Additionally, commercial real estate provides favorable cash flow margins that can be beneficial in a market with rising interest rates. As more companies invest in commercial real estate, their demand and the value of your commercial property increase.
Second, you can shift your focus to short-term investments. Investing in quick fix & flips, wholesaling deals, or house flipping are short-term means to profitably invest in real estate in a rising interest rate environment. These strategies can allow you to make quick profits and move on to the next project while minimizing losses that could be incurred if interest rates continue to increase.
Third, a real estate investor must leverage their investment. You can utilize leverage to negotiate better deals, increase your returns, and maximize your profits. In a rising interest rate environment, borrowing costs will increase, and the value of your investment portfolio will also increase so long as you invest in the right markets.
It is easy to get caught up in the panic of rising interest rates, but as a real estate investor, it’s essential to remain calm, stay vigilant, and shift your strategy using the above-discussed approaches. By investing in commercial real estate, focusing on short-term investments, leveraging your investment, and not waiting out rate hikes, you can still make a profit in real estate investments even in a market with rising interest rates. Always remember that real estate is a long-term investment that requires a lot of patience, research, and diligence. With these strategies and the right partnerships, rising interest rates should not stop you from investing in profitable real estate deals.
If you’re looking to fund your real estate investments, FlipCo Financial has the funding for every type of investment you can get into. We help hundreds of investors with their residential and commercial investments every month. Our team of experts will give you the right guidance in the loan that is best for you. Contact our team here at FlipCo for more info on our hard money loans or check out our events page for our next networking event.