Do Interest Rates Really Matter To An Investor?

I hear a lot of people making a big deal about interest rates when it comes to borrowing money for a project. Personally, I would not spend much time worrying about interest rates, especially in a property you are buying for the purpose of selling. Keep in mind during the Clinton administration, interest rates were somewhere between 7-12%, and yet people still made a lot of money in sales. During the Bush administration, interest was slashed almost to zero, and people coming in at that time were complaining about 4-5% interest rates.

Unless you plan on keeping the property long term, a half or quarter of percent up or down in interest is somewhat meaningless to the outcome of your bottom line. And even if you do plan on keeping it long term, take the higher rate to get into the project, so as long as you know you can refinance it down to a reasonable rate in 6 months to a year. A high rate of interest for six months to a year should not deter you from a good deal. Why pass on the chance to make several thousand dollars over something that’s really only going to amount to several hundred at best?

Personally, I think talk on interest rates is something that makes for good banter, but not really important in the long run. You have to realize that in order for you to make money, the lender has to make a little bit off you too. You are not in the same business as your lender, so, of course, shop around. You are not obligated to jump on the first thing that comes along or accept ridiculous terms. But consider you are working one project that you hope to make an average profit of $35,000.00 on. Are you really going to pass on $35,000.00 to save what amounts to $500-600.00 in the course of a year? Your lender’s angle is that they are trying to make thousands of loans like yours. Figure $500.00 x 1,000 loans = $500,000.00. That’s where your lender makes their money. Keep your lender happy by thinking volume and bringing them more deals to close.