When mortgage interest rates increase, demand within the housing market tends to decline. This often means that investors will not earn their maximum potential if they choose to place houses on the market. There are several ways an investor can still earn a profit even with increasing mortgage interest rates.
Investors can rent their homes instead of placing them on the market. Many individuals and families are choosing to rent instead of purchase a home due to the added expenses of owning a home. Renters can avoid extra fees and expenses, which include home owners association fees, higher utility bills, property taxes, home owners insurance, and mortgage insurance. The rental market has grown recently due to individuals relocating more than in previous years.
Investors can offer potential buyers a rent-to-own option. This is a great option for individuals who desire to own a home but want to wait until mortgage interest rates decrease. Investors can have tenants enter into a rental agreement with the option to purchase the home at the end of a specified amount of time. If the renter decides to purchase the home, the income generated from rent will go toward the down payment of the home.
If investors do not want to place their homes on the market instead of renting them, it is important that they invest in homes with desirable locations. Despite the increase in mortgage interest rates, the demand of homes in desirable locations will remain steady and even increase. The decline in supply of homes in desirable areas tends to make demand increase even more. Investors can also place homes in desirable locations on the market for a higher price than homes in less desirable locations. Factors to consider when investing in a home are the school system, the home's proximity to a body of water, and the reputation and stability of the neighborhood.