Embrace the Rise
Embrace the Rise: Why Rising Interest Rates Shouldn’t Scare You Off from Investing in Real Estate
The mention of rising interest rates is enough to turn out blood cold…but instead of all the doom and gloom that’s across the media in relation to this, I’ve decided to give you some confidence, and let you know why it shouldn’t be so worrying for you.
While interest rate hikes may seem intimidating, they shouldn’t discourage you from considering real estate investments. In fact, rising interest rates can actually bring you some unique opportunities and benefits.
These are some reasons why I think this is the case…
- Stability and Long-Term Growth: Real estate is known for its long-term stability and consistent growth potential. While rising interest rates may affect short-term market dynamics, it’s crucial to focus on the bigger picture. Real estate investments, particularly over extended periods, have historically shown resilience against interest rate fluctuations. Remember, real estate is an asset that appreciates over time, and it can be used as positive force against inflation, providing you with a stable and growing investment portfolio.
- Demand for Rentals: Increasing interest rates can impact homebuyers’ affordability and lead to a rise in the rental market. As potential buyers face higher borrowing costs, they may choose to postpone homeownership and opt for renting a bit longer instead. This increased demand for rentals can work in favour of investors. If you’re looking to buy an investment property right now, and it’s managed well, you’re likely to see higher rental yields, which will offset any concerns related to interest rate increases.
- Negotiation Power: When interest rates rise, some buyers may step back from the market, creating opportunities for other investors. A decrease in competition can provide you with increased negotiation power when purchasing properties. Sellers may be more willing to negotiate on terms, purchase price, or even offer incentives to close deals. By keeping a close eye on the market and being prepared, you can capitalise on these advantageous conditions to secure properties at more favorable terms.
- Portfolio Diversification: Real estate investment offers an excellent avenue for diversifying your investment portfolio. While rising interest rates may affect other asset classes like stocks or bonds, real estate has the potential to perform differently. By diversifying into real estate, you can reduce the overall risk exposure of your investment portfolio, mitigating the impact of rising interest rates on your wealth.
- Types of mortgages: Just like houses, home loans can come in all shapes and sizes. With interest rates rising, it gives you the perfect opportunity to make sure you’re getting the best suited option for you and your goals. You can choose between variable, fixed rate, principal and interest, or interest only. There are refinancing offers, reward points offered, cash backs, and lower interest rates offered when you’re looking to refinance. Obviously there could be different fees associated with any change in mortgage, so please speak to the professionals. My point here is, don’t just take the first mortgage offered. Do your research and look at your long term results.
Rising interest rates shouldn’t be viewed as something to stop you from purchasing. new home or investment property, but rather as an opportunity for informed decision-making. By focusing on the long-term stability of real estate, the potential benefits of increased rental demand, and the advantages that come with negotiation power, you can navigate the market with confidence. Remember, proper research, understanding market dynamics, and working with experienced professionals will help you to make confident investment choices and reap the rewards of real estate, even in the face of rising interest rates.
Contact me if you’d like to discuss this further or to get a referral to one of my industry experts.
