Investing in real estate is a move that many are looking to make in 2022. One roadblock to this plan is the projected rise in interest rates after years of record lows and unprecedented selling booms. Hearing that interest rates are likely to rise may be enough to have some prospective investors opting to wait it out, however now is still an excellent time to buy real estate.
Interest rates may rise, but don’t count yourself out
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After years of extremely low interest rates, it’s no surprise that word of an increase might have you second guessing whether now is the right time to buy. However, interest rates are just one piece of the real estate puzzle. While they are something that you want to keep an eye on, especially if you already have a mortgage or other loans, there are other factors to consider when it comes to buying real estate.
Years long low rates are on our side
Historically low interest rates that have lasted several years indicate that even if the interest rate goes through 4 quarter point increases over the next year, rates are still significantly lower than they were in the 1980s and 1990s. Although housing prices themselves were quite a bit lower during those years than they are now, especially when looking at hotspots like the GTA and Vancouver, the interest rate was about 10 times what it is today.
Housing prices are a significant factor
When it comes to buying real estate, whether you are looking to buy a home to live in yourself or as an investment property to flip or rent out, the price you’ll pay for the unit is a more significant factor than the interest rates you’re looking at.
Even if you buy a home at a higher interest rate, you aren’t locked into that rate. You can always refinance your mortgage down the road when interest rates lower again. However, the price you’ve paid for the property isn’t something that can ever be changed. So, when it comes down to it, the purchase price is more important than the interest rate at the time of purchase.
Investing in real estate as an income opportunity
If you are new to real estate investment and aren’t sure what direction you’d like to go in, buying something that can be used as a rental unit is a great way to generate income, pay off your mortgage and build equity on your purchase. If you have made a plan to deal with all the costs associated with owning a rental property, you will be well prepared to start earning a return from your real estate investment.
Real estate is still a safe investment
Real estate continues to be a fairly safe and risk-free investment opportunity. With the housing market booming in Canada, especially in areas like Toronto, houses are appreciating in value quite quickly. Often real estate is a long-term investment opportunity that feels more like a waiting game however recently homes in the Toronto area are seeing appreciation even one month to the next. This indicates that investing in real estate is still a safe move, especially if you can get in to some up-and-coming areas such as those just outside of the GTA.
Real estate is often a much safer and low maintenance investment strategy than investing in the stock market mostly thanks to it not being as susceptible to short-term fluctuations. Additionally, with real estate, you end up with a tangible asset that can then be rented out to generate an income while you are waiting for the market to pay off.
When it comes down to it, while there are some fluctuations in home values over the years, it has never actually declined. This offers some comfort to investors playing the long game.
Even with rising interest rates real estate is a great investment
Although rising interest rates may have you worried about what’s to come in the real estate investment game, there really is very little to fear. With the interest rates as low as they have been, even a small rise over the next year will keep rates much lower than we’ve seen in the past.
