How to Buy Your 1st Investment Property

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Understanding Your 5 Property Classes Infograph

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Property-Classes-Infograph-Final

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Financing for Real Estate Investors in 2015

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How to Reduce Vacancy

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How to Conduct Due Diligence

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Steps to Close on Your Rental Property

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Atlanta, GA Turn-Key Homes

 

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What’s Driving Low Interest Rates and When Will They Increase?

Janet Yellen Testifying in Congress

Good news for home buyers this week as the Federal Reserve decides to keep their internal borrowing rate at 0-.25%. The key verbiage used was that the Fed will not raise their internal borrowing rate for at least the next 2 Fed meetings.

Much was laid out on Feb 24th by our Federal Reserve Chief Janet Yellen as she testified to Congress a forward stance on monetary policy. Many believed she would give some specific guidance on raising the federal fund rate by summer but instead she noted clearly that the Fed will not hike rates for at least the next 2 fed meetings. Still, some hawkish remarks (rates will rise sooner than later) were made as Janet Yellen stated the Fed could still raise their fund rate at “anytime” and is closely monitoring wage growth, GDP and inflation. The key note on inflation is that the Fed would like to see a path to 2.00% inflation before raising rates and we are simply not there yet. Overall, the Fed Chief’s testimony was dovish (conservative approach on when to rise rates), further pushing market expectation on our first federal fund rate hike to late 2015.

For much of 2014, interest rates for a traditional 30-year fixed mortgage had been riding in the low to mid 4.00% range but took a dramatic downturn in late December and continued falling to the lows we saw in mid-2013.   Let’s recap: The last time rates were in the 3% range for a 30-year fixed mortgage the Fed was purchasing 85 Billion per month in Bonds (QE3 – Quantitative easing program – 3rd round) which created an artificial market for low rates and made it easier to justify mid to high 3% mortgage rates. The Fed announced their plan to taper back (end the bond buying program) in January of 2014 with the program concluding in October of last year.  The logic here was when the Fed backs out of the market there would be little demand for mortgage bonds at current levels and rates would have to go up, but that didn’t happen. In fact, they have gone down to the lows we saw before the Fed announced their plan to stop QE3. It is apparent now more than ever that all hands point to the Federal Funds Rate as a determinant on when, and at what pace, US interest rates will rise.

In the meantime, bonds will continue to be a safe haven for investors (large hedge funds, banks, Foreign Central Banks, etc.) when equity markets take a beating due to poor economic data and issues overseas (Example: The EU debt crises, Russia and the Ukraine etc.). Key economic reports on US Labor growth, Gross Domestic Production (GDP) and US Inflation are the main drivers for ebbs and flows (rates trading up and down within specific trading averages) for US mortgage rates.

Interest rates today are trading near their 50 day moving average and no other significant economic data will be released this week. Currently interest rates are in the high 3% range for a primary residence and in the low-mid 4.00% range for investment properties, down nearly half of a percent from Q-1 of 2014. If you are looking to purchase or refinance, NOW is the time. Rates will not stay this low moving into 2016 and cash flows due to the low rate environment are ideal right now as rates tend to follow a higher trend moving into summer.

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Solo 401(k) – The Ultimate Retirement Plan

 

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TEXAS Multi Family Units with High Cash Flow

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