Will rising interest rates affect fix and flip?

Posted by Shawn Bhakta on Wednesday, March 2, 2022 at 1:29 PM By Shawn Bhakta / March 2, 2022 Comment

Fix and flip and rising interest rates. Will the rising interest rate affect fix and flip? Welcome to Wealthy Wife.

We all know that in the beginning of 2022, the interest rate for financing a home is rising a little bit, but it is on the rise.

So if you are doing a fix and flip, is that going to affect your end value? And my opinion is it will because majority of the fix and flip investors are doing it in an affordable neighborhood. Why? Because that's the sweet spot. In an affordable neighborhood, the homes sell faster than in a luxury neighborhood and that's where the most of the fix and flips are happening.

Now, what happened? A primary home buyer or a first-time home buyer, when they buy a home, they care for the monthly payment. They don't care really how much the value of the home is because that's the lender's job to give them a qualification. But the number one thing they care for is how much the monthly payment will be. Including principal, interest, insurance, and taxes.

So if the interest rate goes up, what happens? They qualify for less because the monthly payment also will go up because of the interest rate. So that is going to affect the resale value of a home. So my suggestion will be when you are buying a fix and flip right now, make sure you have enough profit margin, enough meat on the bone. Because if you are buying something with a very thin profit margin, you may lose out. You may either lose or not make enough money and a profit at the end. So at this time, be very careful when you're buying a property because if the interest rate goes up, the monthly payment goes up, the people can't afford the high price of a home.

So that's the message for today. Thanks for watching Wealthy Wednesday. Hopefully this information is going to help you with your next fix and flip. Give me a call if you have any questions. My name is Shawn Bhakta from Remax Presidential. I do investment actively, so I'll be glad to help you. Thank you.