Provided courtesy of: http://www.mortgagenewsdaily.com/consumer_rates/
In the past 2 decades, there have been 6 months where mortgage rates rose at least 50 basis points. February 2021 was one of them. Moreover, it was one of only 2 of those months where rates rose without obvious provocation from a significant new, unexpected motivation (the last time that happened was December 2010. The other months were associated with 2013's taper tantrum, the 2016 presidential election, and the market dislocations in March 2020 as covid panic surged).
In other words, it was a really bad month for rates--so bad, in fact, that it has increasingly made sense to look for some relief simply because things don't tend to stay that bad for that long. Of course, if there's an exception to how rapidly rates "usually" spike, it has every right to occur after rates have spent an unusually long time prodding a record number of consecutive all-time lows, but it's fair to hold out some hope of reprieve nonetheless. Even if we assume the best possible economic outcomes in the months and years ahead, February's pace feels a bit overdone....(read more)
Rising rates have been on the menu for months, but the drama kicked into a higher gear this week.
Maybe you heard about this? We've certainly been discussing it in recent newsletters (especially last week's). The rising rate narrative hit the mainstream this week as it was widely credited for doing damage to the stock market.
Perhaps you even caught one of Thursday's many mortgage rate headlines citing the spike in Freddie Mac's weekly mortgage rate survey. Freddie reported a jump in 30yr fixed rates from 2.81 to 2.97, their biggest in nearly a year.
Unfortunately, Freddie was low last week and they're WAY low this week. This is a common problem when things are this volatile. Although their survey is published on Thursdays, most of the responses are in by Monday....(read more)
Mortgage rates WISH they were still at 2.97%--the number conveyed today by Freddie Mac's weekly survey. Freddie's data is accurate when it comes to capturing broad trends over time, but can really fall short when the bond market is experiencing elevated volatility.
To say that bond market volatility has been elevated recently is an understatement of extreme proportions. Things are happening that haven't happened in years. Some measures of volatility rival the March 2020 panic surrounding covid, only this time, there's no catalyst other than the market movement itself.
Today was by far the worst of the bunch when it comes to this most recent spate of...
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.