TODAY’S RATES & HOUSING NEWS
Mortgage interest rates have stayed neutral to slightly higher over the past 7 days as we head into FED week.
Average interest rates across the country rose .09% on a 30 Year Conventional Loan to 6.99%.
Below are average interest rates in the U.S. from Mortgage News Daily.
Below is Green Home Loans rate sheet today.
We can go lower than these rates depending on how you want to structure costs.
Everyone is expecting the FED to raise the Federal Funds rate on Wednesday.
What is more important is the information the FED gives on a possible 2nd rise in September.
How the FED telegraphs their next move will likely move interest rates market more than the 25 bps rise that most experts are predicting.
Here is an article taken from a webinar with Fidelity and former FED Chief Ben Bernanke on his expectations of future FED moves.
REAL ESTATE VOTED BEST INVESTMENT
Why does America love investing in real estate so much?
Ask this question and you will hear a variety of responses:
- Appreciation
- Cash Flow
- Tax Advantages
- Leverage
Leverage is the key for most real estate owners and investors.
If you buy $100,000 of stock – you need $100,000 to buy it, thus this $100,000 can not be used
for other investements during that time.
If the stock goes up 5% per year over 5 years, the stock would be worth $127,628 after 5 years.
The investor’s cash on cash return would be 27.6% over a 5-year period.
Investment of $100,000 made the investor $27,628.
Most homeowners use financing / leverage to buy real estate.
If you buy a $100,000 rental property, you may finance $80,000 – thus you are only using $20,000 of cash + costs and prepaids on a $100,000 investment.
For this example, let’s say the investor contributed $25,000.
The property goes up 5% per year and the property is worth $127,628 after 5 years – the same number as the stock.
The investor is getting the full appreciation on a $100,000 investment even though they have only provided $25,000 in cash.
They contributed $25,000, and made $27,628 – or 111% on their money over a 5-year period.
What if this same investor bought 4 investment properties with $25,000 each = $100,000 the same cash needed to buy stock in the above example.
The investor would have invested $100,000 and made $110,512 – 4 times higher than the stock.
This is the power of using leverage to invest in real estate which can lead to scaling your wealth faster.
