Interest rates are still at relative lows while at the same time property values continue to increase. That might create some urgency for some who are thinking about real estate. In particular, is it time to sell the current home and move into a new one? Or maybe you might think of buying an investment property and renting it out. That’s certainly a big decision but there are some advantages each have to offer.
When you buy a new primary residence the down payment requirements are lower compared to a rental. Interest rates are also a bit better, typically anywhere from 0.25% to 0.375% lower compared to a rental property. But really, making a move means more than just rates and terms. Are you downsizing? Need a bigger home with a growing family? Moving to a new school district? These are the primary decisions home buyers need to make, less so about rates and terms.
However, when considering a rental property, interest rates are very much a consideration. Real estate investors tell you that if a property doesn’t cash flow each month it shouldn’t be on your list. However, if a property does provide a monthly cash flow, then it might. Investing in real estate today means owning an asset that increases in value over time and makes a profit for you each and every month. What other asset class can make that claim? Rental property purchases do ask for a slightly larger down payment and of course the rates are a bit higher, but by running the numbers you can determine if an investment property makes sense to add to your portfolio.