Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/
Once a month, the government releases the Employment Situation, also known as "the jobs report." No other piece of economic data is as consistently relevant for the bond market and, thus, interest rates.
For most of the past year, the normal correlation between jobs and rates was on hold. That makes sense, of course. Initial lockdowns completely obliterated the labor market and we've been waiting to see how it would recover and how it would be reshaped ever since.
In the past 1-2 months, the bond market has finally shown some willingness to react to economic reports. Notably, last month's exceptionally strong jobs numbers put obvious upward pressure on rates. Because of that, anticipation was high for this week's report....(read more)
Mortgage rates moved lower today, bringing the average lender to the best levels since late February. Despite the milestone, the day-over-day movement in rates has been pretty mild. Most lenders are making changes that are only noticeable in the form of upfront costs (aka "points") as opposed to rates themselves. If we use upfront costs and rates to extrapolate an "effective rate," the average movement has been 0.01-0.02% on any given day.
Rates have been more likely to move lower vs higher in the past 6 days, but that creates some risks in and of itself. Market participants who trade the securities that underly mortgage rates tend to shy away from additional buying once these winning streaks get to be more than 7 days long....(read more)
Mortgage rates were mixed today, depending on the lender. On average, rates were unchanged and remained very close to their lowest levels in nearly 2 months. The bond market (which most directly impacts day-to-day rate movement) was calm. Both of today's important economic reports came in weaker than expected, but close enough to forecasts to prevent significant volatility. Beyond that, questions remain about just how ready the bond market may be to react to economic reports in general (historically one of the quintessential reaction functions in financial markets).
If bonds aren't quite ready to link back up with economic data yet, it would be an issue of timing and priorities. Several Fed speakers reminded us today that we're still a long way from even being able to assess the post-pandemic economy (one of the reasons they plan to keep rate-friendly policies in place until further notice). As such, bonds/rates might react to near-term economic data with less enthusiasm than normal....(read more)
Are you thinking of buying a rental property as part of your investment strategy? Here are a few things you need to think about.
Real estate can be an excellent part of anyone's investment strategy. However, before you buy your first house, condo, duplex, or apartment building to rent out, you need to have a good idea of what you're getting into.
Here are three things to be aware of before jumping into real estate investing -- and an alternative investment you could use instead.
The income can be inconsistent
When you buy just one investment property, you are effectively putting all of your eggs in one basket, just as if your entire portfolio consisted of stock in one company.
While owning an investment property can certainly be lucrative, it leaves you vulnerable to certain risks.
For example, if you buy a $100,000 investment property, you should be able to earn $1,000 in rental income per month, based on the general rule that properties should rent for about 1% of their value. However, what if you need several months to find your first tenant? Or what if your tenants stop paying rent and you have to evict them (which could take quite a while)?
If such a situation occurs, not only will your investment produce no cash flow, but you're still stuck paying for things like the mortgage, property taxes, insurance, and maintenance.
Do you really want to deal with tenants and maintenance?
The first mistake I made when I bought a rental property was underestimating how much work can be involved in dealing with tenants.
Finding quality tenants can be a challenge in itself, but the real issues tend to come up after they move in. For example, if your tenant is late on rent, do you really want to chase people down to find out what's going on? Do you have the first clue of what to do if you need to evict a tenant? And what if they are making too much noise, letting other people live there, or are violating any other part of the rental agreement?
Don't forget about maintenance and repairs. If you manage your rental property, be prepared for the phone to ring in the middle of the night if the tenants have a plumbing issue.
If you don't want to handle these situations, the alternative is to hire a property manager. This should cost you about 10% of the rental income you bring in. This can be well worth it, but it will cause your profits to take a serious hit.
Make sure that you account for "all" the costs
Speaking of the cost of a property manager, you might be surprised at how much it really costs to own a rental property.
In the example cited earlier involving a $100,000 rental property, let's say you put 20% down on the house and collect $1,000 in monthly rent. By financing the other $80,000, you can expect your monthly mortgage payments to be about $392 at today's rates, which might sound like an incredible profit margin. However, when figuring out the cash flow of your investment property, make sure to account for property taxes, insurance, maintenance costs, and property management.
These costs will vary based on your location and the condition of the property, but could easily add $500 or more to your monthly expenses. Also, bear in mind that many jurisdictions charge much higher property tax rates on investment properties, so make sure you take this into account as well.
you're getting into
I'm not trying to talk you out of buying an investment property. In fact, if you do it right, buying an investment property can produce cash flow and build equity, creating wealth over time without a huge initial investment.
However, just like with any other investment, you need to make sure you know exactly what you're getting into and prepare for all the costs and the risks involved. If these seem like too much trouble, there is no shame in looking into alternatives, such as real estate investment trusts.
Buying an investment property can be a great opportunity.
Whether it be a house, cottage, farm, condo, or plot of land, buying real estate is traditionally a sound and profitable investment, offering both rental income and capital gains. The most obvious advantage of buying any income property is having other people pay off the debt on your investment property. And with interest rates low, there's no time like the present to jump in.
To buy an investment property you will need sound financing information and flexible loan options. When choosing a lender, loan rates are not always the most important. Because investment property mortgages are subject to specific governmental requirements, mortgages are constantly changing. It's a good idea to consult with a mortgage specialist at i Want a Better Mortgage who can bring experience and training to the table, helping you make an informed decision about your investment property mortgage options.