- Real estate investor Todd Baldwin isn’t interested in taking out a mortgage right now because interest rates are high.
- Millionaires are in the unique situation of being able to pay in cash should the right deal occur.
- To combat higher interest rates, consider “home hacking” to reduce your mortgage payments.
Seattle-based real estate investor Todd Baldwin his investment strategy is not necessarily conventional.
“A lot of real estate investors would disagree with me, but I personally wouldn’t pay more than 6% interest on anything,” he told Insider in November, citing rising mortgage rates. was asked about Breaks 7% in the week ending 21 October 2022“If the deal is over 6%, I’m willing to pay in cash. Hopefully I get a discount.”
Baldwin is in the unique situation of being able to pay in cash if the right deal is made. In 2021, he earned over $1.5 million From real estate sales, wholesale transactions, and rental income. The insider showed a copy of his seller’s statement and payment from the tenant confirming these details.
Baldwin said he sold five properties last year, including his first home, which he bought for $506,000 in 2015. That he sold for $875,000. So just one property got him a valuation of nearly $370,000.
At the time, he and his wife Angela agreed it was a wise time to sell.
Purchasing power is shrinking now that interest rates are so high, he explained. In 2020 he will pay at 2% interest rate, which is similar to the $350,000 home he bought today at 7% interest rate. ”
He believes that if he had sold his house this year, he wouldn’t have been able to sell it for the same price.
The only real estate-related purchase he made this year was a 2.5-acre piece of land he bought in August for $735,000, he said.
He and Angela are currently doing a “house hack,” converting a two-story house into a three-story house to live in for free, and are planning to build their dream home on the lot over the next few years. increase.
real estate wholesale He kept busy in 2022 as well. He made 5 of his trades and made over $1 million in revenue. He said it’s one of his most efficient ways to make money.
Baldwin isn’t the only investor who’s been hesitant to buy an investment property right now, an insider spoke to recently.
Investor Stephen Ying, 27, who has purchased nine properties in Birmingham, Alabama, over the past two years, said: he is not currently looking for a deal because of rising interest rates.
“I’m not market aggressive,” he told Insider in October. “The interest rate is too high. I can’t make money the way I want to make it.”
Yin is very price sensitive and always conducts in-depth analysis when evaluating a rental property. He provides the property’s purchase price and financing prerequisites (including down payment, loan initiation fees, and interest rates), expected monthly rent, and operating costs (property taxes, lawn care, insurance, and maintenance).
With current interest rates, “I can still make money,” he explained. .”
Yin has no plans to expand its portfolio until interest rates fall or home prices fall significantly.
experts say there is No sign of interest rates going down by the end of the yearHowever, spring and summer 2023 could be a good time to buy. Economists predict U.S. house prices could fall as much as 20% next year The Mortgage Bankers Association said interest rates could fall in the first half of this year.
Baldwin understands that not everyone has easy cash if they want to invest now. Consider hacking your home to combat high interest rates, he said. . He thus stepped in the door when he purchased his first property in 2015.
“If you want to be a homeowner but can’t pay because of interest rates, consider finding a roommate,” he said. increase. This will offset your mortgage and potentially allow you to live for free. Thanks to this strategy known as “house hackingBaldwin not only lives for free, he makes a profit just by living in his own house.
“I know having a roommate sucks,” he said. “I did it for five years. But that decision made me a millionaire and now I’m free to do what I want.”