Mortgage Payments Up Over $800 From last year - Why It Matters

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As investors we are usually looking for one of two things, sometimes both. 1. Cash flow or 2. Appreciation and if you can get both, that's a bonus. Keep in mind that Flips require appreciation to be profitable and are very highly taxed leaving you with much less profit.

Now that properties have become so expensive in most of the country and mortgage rates have hit 6%, the combination makes it very difficult to cash flow on most properties in the major markets. Keep in mind that for a very long time 8% was considered to be an average mortgage rate. But, at that time, houses cost quite a bit less. 

And once you buy, don't expect houses to continue going up enough to cover your costs of purchase. Remember that selling the property is very expensive, 9% in some markets. Traditionally, you have to keep a house for about 5 years to recover your costs of buying and owning. We are going back to those times. Fast rising prices is over for now, maybe for the next few years.

You make your money on the "buy" side, not the "sell" side. You have to "buy right".

For those of you new to the market that are "going to buy a house and retire on the appreciation a year later", it must come as a shock that it can't be done in any market, let alone with today's prices and rates.

So realistically, what is the course of action from here?

Since I have never put 20% down and borrowed money from a bank to buy a property, someone else will have to address that strategy, if it still exists.

I've always either taken over someone's mortgage to buy their house, used owner financing, used wraps & lease options, & land contracts. That's something I'm quite experienced with and I think we are heading back into that type of financing. 

Banks are going to tighten credit and at some point credit will dry up.

Does that mean a housing crash? I don't think so. We need another 5 million properties to even out the market. Demand is high, but costs are higher. You have to earn a lot more money today to qualify for a loan at 6% than at 2.5% and people aren't motivated enough to find a way to increase their income.