House Hacking: When Interest Rates Are High

Today we will talk about buying your house hacks - when interest rates are high, and the economics of how high rates effect your house hack properties - when buying and renting


So when interest rates soar - there tends to be a decrease in the number of home buyers - entering the real estate market. 

With higher mortgage rates - affordability becomes an issue for the average buyer.

As a result - there becomes a shift in economics of the housing market. 

The pool of potential buyers shrinks - but the need for housing doesn't just go away.

Everyone needs a place to live - so those people who would've otherwise been buying, are forced to result to renting.

So with that, we go back to ECON 101 - supply and demand 

When fewer people can afford to buy due to high interest rates - the demand for rental properties go up.

The increased demand with limited or equal supply - creates a competitive rental market environment.

Landlords and house hackers - are often on the better end of the stick - as this demand surge in rentals naturally brings that rental price up. This also reduces vacancy.


Another factor contributing to higher rents - is the large percentage of homeowners - who bought with those low interest rates in recent years.

A lotttt of people purchased homes - when interest rates were much lower than they are today.

Naturally, these homeowners aren't likely going to give up that rate - which also leads to a reduced supply of homes for sale.

Those people who might've otherwise wanted to sell this year - are now "stuck" in that home with the lower rate.

So if there's low supply and demand in the housing market to purchase - the demand will go elsewhere, which is the rental market.



Now here's how house hacking takes advantage of both

With the combination of purchasing a primary residence - and then renting out other bedrooms or units - your housing costs will drop substantially.

Your house hacks bring in the best of both worlds

You get the benefits of loan paydown, home appreciation, - and tax advantages as the homeowner/landlord, - and also the upside in the rental market when demand is high

Plus, if you are living in a unit or bedroom and renting the others out, - that rental income will offset a chunk of your monthly living expenses - until you move out and it begins cash flowing

So either way you'll have lower living expenses than you would just by purchasing - and living in the home, or renting


So to sum this all up - higher rates bring higher demand into the rental market, which results in higher rental prices. It's not like a consumer product, like milk or something - where if milk gets expensive you have other alternatives to go to.

Everyone needs a place to live! The reverse example of this is when interest rates were very low - people opted to buy instead of rent because rates were low.

 The rental market felt that, and home prices showed that too by taking a huge jump (as you know)

So to wrap this up - this why house hacking is the best way to buy investment properties, in that you get the best of both worlds. High rates typically mean rental prices will naturally trickle up - and low rates will naturally drive the demand to buy, resulting in home appreciation.

There's no better combo out there, I'm tellin ya!









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