What's up, guys. Hey, skyrocketing interest rates got you stressed? Well, in this video, I'm going to show you how to secure those elusive low interest rate loans. Even in today's market, you're going to discover techniques that could save you up to 5% on your interest rate by watching this video. All right, let's get started.
If you're investing in real estate, I've got two strategies you need to keep in the back of your pocket when it comes to finding low interest rate loans. I talk to investors all the time who say, "Listen, I want to get started in real estate investing, but I just can't afford a 9% interest rate loan to buy investment property." Well, here's a newsflash. There are loans out there where you don't have to settle for 9% or 8%. You can actually find deals where your loan rate can be as low as 3%. Now, how do you do that? I'm going to break it down because there are two specific types of deals I'm talking about here.
The first one has to do with new investment property. The issue for real estate investors now is that there aren't many people selling real estate. When you do find a deal, they're asking ridiculous prices, which drives your cap rate down. However, if you consider buying new property, there are a lot of builders with inventory not moving as fast due to rising interest rates. This makes new construction a great investment opportunity. Most people think I'm nuts when I suggest new construction, but there are reasons to consider it. You have lower CapEx expenses, and it can also lower your insurance costs. New houses are built to the highest code standards, making them less risky for insurance companies.
The more important point is that these builders are getting involved with builder forward commitment loans. If you haven't heard about this, it's crucial to research it. Builders are going to lenders with an FHA program, saying, "I want to buy down the points on the loan." This way, the buyer doesn't have to face an 8% or 9% loan rate but can get a rate as low as 5% or even lower. When selling property, the most you can give in concessions is 2% off the deal. However, buying down the interest rate with these loans happens before entering negotiations with the buyer, so it doesn't count as a concession against the seller. This helps move inventory.
I've talked to many investors using this strategy. So, if you're looking to start investing or already investing, consider finding new builds and asking if they have a builder forward commitment loan and what the interest rate will be. You might get a better deal.
The next strategy is for existing properties, focusing on assumable loans. Most are familiar with Freddie, Fannie conventional loans which are non-assumable, but USDA, FHA, and VA loans are all assumable. To assume these loans, you'll need to engage in a house hacking strategy, meaning you'll have to move into the property.
A great hack is finding a duplex with an existing FHA loan at, say, 3.5%, and assuming that loan. Research the loan on the property and approach the seller about assuming their loan. You'll have to undergo the underwriting process with FHA, USDA, or VA. But as long as you qualify, you can take over the loan at the current interest rate. The seller is relieved of the loan burden, making deals more approachable.
These are two strategies you should consider as a real estate investor to secure lower interest rate loans: new construction and existing property house hacking. Remember, in real estate, as long as you buy right, you're likely to make money.
All the best with your investing. Hey, guys, if you like this video, be sure to smash the like button. And if you're not yet a subscriber, subscribe to the channel so you'll get an update every time we release a new video on asset protection or tax issues surrounding investing.
https://www.youtube.com/watch?v=eqqQ7URJ6OU
The current challenge for real estate investors is the scarcity of sellers. But, there's an untapped opportunity in new construction. Why new construction? Here are a couple of reasons:
Builder Forward Commitment Loans are the game-changer here. Builders are buying down loan points, allowing you to secure rates as low as 5% or less. This pre-negotiation step doesn't count as a seller concession, making it a powerful tool to move inventory.
Turn your attention to properties with assumable loans like USDA, FHA, and VA loans. The key here is house hacking - you'll need to move into the property. For example, find a duplex with an existing FHA loan at a low rate, like 3.5%, and assume it. This approach lets you tap into lower rates from previous years.
Remember: In real estate, buying right almost always ensures profitability.
More Notes:
All right, so now I want to get to the thing about being an investor and finding low interest rate loans right now. Everyone tells you there are no low interest rate loans for real estate investors, but as you know, as you told me, they're out there, there are 5% loans. You just need to know where to look to find these deals. Can you share with us how a real estate investor can find a 5% loan in today's market?
I know it sounds unbelievable, but yes, it exists. I am helping a lot of builders with those loans. The loan product is called a forward commitment program. The builder and developer initiate it. This program has been around for over 15 years. Earlier this year, it was completely changed. It wasn't very popular with builders due to carrying costs and expensive terms. The program allows builders to incentivize a block of money. They can say, "I've got $3 million worth of closings coming up in the next 90 days and I want to incentivize the rate on that $3 million for my prospective buyers." By incentivizing the rate, builders are paying points to drop the rates on these investment properties. This has a profound impact on cash flow, going from market rates of 7.5% to about 5.5%.
This program is utilized by many builders and developers. The clients, us as investors, need to find builders and developers working with this program. You can't just call in and get this program; it needs to be set up by a builder. The end client, me as the investor, we're just coming into a conventional 30-year fixed. There's nothing special about it. The builders paid 5, 6, 7 points to bring the rate down dramatically.
We're in a unique position with high rates, and sellers are feeling it. Real estate is still robust, prices have gone up nationally. People sitting on the fence, waiting for rates to drop, should realize that when rates drop, there will be a surge in buyers, driving up house prices. There is inventory now and an opportunity to participate in the housing market. You can refinance in the near future. With this program, you can get rates in the fives today for properties available with select builders and developers.