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Mortgage Minute with Ken Melber Highlands Residential Mortgage

Question: I hear interest rates are going down. Should I purchase my beach house
now (seasonal short-term rental) or wait for interest rates to come down?

In the 25 years I’ve been lending at the beach, I’ve learned nobody knows for certain
what interest rates or property values are going to do (on a regular basis). We can use
the information we have available now and make decisions based on the latest
predictions. In the current economic landscape, with fluctuating interest rates, market
uncertainties, and world conflicts, potential investors might be inclined to wait for a more
favorable interest rate environment before making a purchase. There is not a simple
answer, and everyone’s goals and financial situations are different. However, here are
a few reasons to consider buying an investment property now, rather than waiting for a
hypothetical future where interest rates might be lower.

1. Inflation Hedging


Real Estate is historically known as an effective hedge against inflation. As inflation
rises, typically, so do property values and rental incomes, providing investors with a
protective shield against the eroding value of money. Waiting for interest rates to
decrease might seem prudent, but in an inflationary environment, the cost of waiting
could exceed the benefits of lower interest rates. The value of properties historically
increases in the long run, potentially outpacing the savings from a future drop in interest
rates. By investing now, you lock in the current prices and benefit from the appreciation
of your assets as inflation rises. If your projections work on today’s numbers your cash
flow should only get better if rates drop. If possible, it is important to get a loan without
a prepayment penalty, therefore decreasing your refinancing costs if rates do drop.

2. Rental Income

Investment properties generate rental income, which can provide a steady stream of
revenue regardless of the interest rate environment. This income can help offset
mortgage payments and other property-related expenses, making the investment
financially viable even in higher interest rate periods. Peak rental season is almost here
so purchasing now you get the advantage of peak summer rental season. By waiting for
lower interest rates, you miss out on potential rental income that could have been
accumulated during the waiting period, diminishing the overall return on your

3. Market Timing Is Unpredictable

Timing the market perfectly is nearly impossible, as interest rates are influenced by a
complex interplay of global economic factors, central bank policies, and unforeseen
events. Waiting for interest rates to come down can result in missed opportunities, as
other market dynamics, such as a surge in summer real estate demand and could lead
to increased property prices and reduced inventory. By entering the market now,
investors can capitalize on current opportunities instead of speculating on future market
conditions. Moreover, real estate investments are typically long-term; the impact of
initial interest rates can be mitigated over time, especially if rates drop in the future and
refinancing becomes an option.


While the prospect of lower interest rates in the future is appealing, it is important to
weigh this against the immediate benefits of investing in a beach property now,
including inflation protection, peak summer rental season, and the unpredictable nature
of market timing. The decision to invest should be based on a comprehensive analysis
of current market conditions, personal financial situation, and long-term investment
goals. Simply, if your numbers work at today’s interest rates, they should only get
better if rates drop.

Ken Melber
Highlands Residential Mortgage
RMLO# 218878