In the latest episode of Real Investor Radio, Craig Fuhr and Jack BeVier discussed the shifting landscape of DSCR Rental Loan rates and why now is a critical time for real estate investors to make moves. With fluctuating rates and a sluggish real estate market, those waiting for better conditions may miss the boat.
Here’s a breakdown of their insights and why you should consider taking action sooner rather than later.
The Waiting Game and Rising DSCR Rental Loan Rates
Many investors have been on the sidelines for months, hoping for the Federal Reserve to make significant cuts to interest rates. Although the Fed implemented a 50 basis point cut on September 18, it didn’t have the impact many expected on DSCR loans. DSCR rates are tied to the five-year treasury bond, which has actually risen from 3.47% to 3.9%, the highest it’s been all year.
For investors who waited for rates to drop, the opportunity to secure more favorable terms might have passed.
Short-Term vs. Long-Term Rates: What You Need to Know
While short-term rates have come down, long-term yields tied to DSCR loans haven’t followed the same trend. The five-year treasury bond is influenced by factors beyond the Fed’s short-term rate cuts.
Many investors mistakenly believe that lower short-term rates will automatically lead to lower long-term rates. However, long-term rates may remain stable or even rise, regardless of what happens with short-term rates.
This misconception has caused some investors to delay refinancing, when they could have secured better terms earlier.
Sluggish Market Conditions Are a Warning Sign
The real estate market itself hasn’t responded dramatically to rate cuts, with activity remaining low even after mortgage rates dipped a few months ago. Investors trying to sell properties might be chasing a declining market, gradually lowering prices without success. Holding on to these properties through the winter could lead to unnecessary carrying costs.
Instead, pivoting toward renting properties might be a smarter strategy. By refinancing into DSCR Rental Loans and turning slow-selling properties into rental income, investors can maintain cash flow and avoid further losses.
This strategy also prepares investors to take advantage of better buying opportunities down the line.
Volatility in the Bond Market Signals Risk
The bond market, which tends to look ahead, is reflecting some caution due to the current political and economic environment.
The five-year, 10-year, and 30-year treasury bonds have all risen in recent weeks. However, shorter-term treasury bonds, like the two-year, have remained stable. This suggests that bond investors are pricing in future risks—uncertainty around inflation, the upcoming election, and geopolitical factors.
For real estate investors, this could mean that long-term rates will stay elevated, despite the Fed’s efforts to reduce short-term rates.
Why You Should Act Now
The real estate market and bond yields are sending a clear message: waiting for rates to drop may not be the best strategy. Investors need to be proactive, either by refinancing properties or converting slow-moving sales into rentals. By doing so, they can maintain cash flow, preserve liquidity, and be in a stronger position to capitalize on future buying opportunities.
Dominion Financial Services offers a DSCR Price-Beat Guarantee for Long-Term Rental Loans – act now to secure the best deal. Visit DominionFinancialServices.com/Rental-Loans to get started.
