Here’s why new regulations from the FHFA will affect real estate investors.
The Federal Housing Finance Agency (FHFA) recently announced some new regulations that will affect our market. Specifically, it deals with multi-family properties, second homes, investment properties, and similar real estate. A lot of my clients have been asking me how the new changes will affect them, and today I’ll be answering that question.
In a nutshell, Fannie Mae and Freddie Mac will begin limiting the number of investment mortgages that they’ll purchase. For investors, this will make it cost more to secure financing for investment properties.
Typically, banks ask for a 20% down payment on investment properties. Now, they may ask for 25% to 30%. The changes will also cause interest rates to rise from the low 3% range to the low-to-mid 4% range. The bottom line is these changes will negatively affect a buyer’s return on investment.
I believe prices will begin to level off for sellers, as there will be fewer qualified buyers in the market and they will have less purchasing power. If you do decide to sell in the future, these factors will ultimately affect your cash-out profit.
The bottom line is these changes will negatively affect a buyer’s return on investment.
If you’ve been on the fence about selling, my advice is to jump into the market as soon as possible. Now is the best time to sell in order to maximize the price of your property. Otherwise, you could be waiting five to 10 years for another good opportunity. For buyers, it still all comes down to the numbers. You need to look at the cash flow and return on investment. Interest rates, which are hovering around 4% for a 30-year loan, are still fairly good.
If you have any questions about these changes or would like more information, feel free to reach out to me. I look forward to hearing from you soon.
CEO, Multi-Family Property Exchange, LLC 1-888-48-MULTI
Realtor, LUX realty North Shore 978-922-1000