Are High-Interest Rates Stopping You?

[Jeff Campbell]

The current high-interest rates have made it a lot more challenging for the average or new investor. To be honest I completely stopped buying for a few months when the low rates I was getting approved for more than doubled. 

Currently, I am using private money (friends and family) that offered to help and I am paying them off over a five-year period with a great rate for them which is much higher than they are getting in their current investments. These deals do not cash-flow for the the first five years, but after the fifth year the property is paid and I am cash-flowing for the remainder of the time that I own the property. I really like the idea of having my properties paid for after five years and keeping out of having to use balloon-type and long-term loans. 

This will not work in a lot of markets because of the price point for the investments are too high but a lot of the markets that have lower price points it will. It will also not work for you if you have to have cash flow the first five years. 

What are you doing to not sit on the sidelines and keep moving forward with your investing even when is as high as those rates your mom and dad told you about when they were growing up? 

[Taylor L.]

I have 2 main concerns about zero cash flow for 5 years:

- Opportunity cost: what if, during that 5 year period, rates change or you find a cash flow opportunity? Having that money locked up for so long with no cash flow means you're probably missing out on a lot of other options that do produce cash flow.

- Zero cash flow means risk: what happens if and when a big repair bill comes due? Or you have a vacancy? Zero cash flow implies that you can't build a repair reserve to prepare for difficult times. someone tried this without having a cash reserve in the bank, they could suddenly find themselves in need of cash in a hurry.

I totally agree with not sitting on the sidelines. It's tough to make deals work today, but it can be done.