Investment Property Interest Rates – March 2024 Update

What are investment property interest rates in March 2024?  That answer depends on several factors as interest rates can vary depending on your situation.  The overall economy, your personal credit and experience and type of loan and property all matter.  One major distinction is whether your property is a rental property or a property in need of rehab.  Rental properties that are in good condition typically have lower rates.  Types of loans for rentals include conventional loans or DSCR Loans.  Interest rates for properties in need of rehab (for fix and flips or the BRRRR Method) are going to be higher.  Here are the ranges of investment property interest rates to expect right now in March 2024:



Current Conventional Loan Interest Rates for Rental Properties


Interest rates for investment properties that use conventional loans are currently on average approximately 7.000%.  Conventional Loans are loans that are underwritten based on the rules and guidance of government-sponsored agencies.  These include Fannie Mae and Freddie Mac and have strict qualifying rules.  They are based primarily on borrower credit and income rather than the investment property.


Conventional Loans for rental properties generally track the 10-Year Treasury Bond.  Meaning, as treasury bond yields move up or down, the interest rates on conventional rental loans will follow.  The “spread” refers to the difference in rates between the 10-year treasury and conventional loan mortgage rates.  It is generally higher for conventional mortgage loans to reflect the higher risk of mortgages vs. government debt.  Typically, the “spread” between the 10-year treasury yield is between 150 and 200 basis points (1.5% to 2.0%).  However, in March 2024, the spread is elevated, currently just under 300 basis points!


We recommend visiting sites such as to track conventional loan mortgage rates.


Current DSCR Loan Interest Rates for Rental Properties


Interest rates for rental properties that use DSCR loans are currently on average approximately 7.750%. DSCR Loans are loans from private lenders that are based primarily on the investment property rather than personal credit.  While the current average rate is around 8%, there is a larger range for DSCR loan rates.  DSCR Lenders are originating loans as with rates as low as 5.99% and some as high as 10.00%.


DSCR Loan mortgage rates generally track to the 5-Year Treasury Bond.  Similar to conventional loans, there will be a spread which reflects the higher risk of rental property mortgages.  Since DSCR Loans are not subsidized by government-sponsored entities, this spread is generally higher than for conventional loans.  Typically, the spread for DSCR Loan rates is between 300 and 400 basis points (3.0% to 4.0%).


However, there are multiple ways that borrowers can get the lowest DSCR Loan rates.  The three biggest factors that determine DSCR loan mortgage rates are LTV, DSCR and Credit Score.


LTV refers to “Loan-To-Value” Ratio.  It is the ratio of loan amount to the value of the rental property.  Generally, the lower the LTV ratio, the lower the interest rate will be.


DSCR refers to “Debt-Service-Coverage-Ratio.”  It is the ratio of rental income to expenses.  The higher the DSCR, the lower the mortgage rate will be.  To get the best DSCR loan rates in March 2024, the investment property should have a DSCR ratio over 1.25x.


Credit Score is also important in determining the interest rate on DSCR loans.  Good credit can lower your DSCR Loan interest rate drastically.  Someone with a credit score over 760 for example will likely have an interest rate 2-3% lower than someone with a 620 credit score!


In addition to LTV, DSCR and Credit Score, additional factors determine investment property interest rates when using a DSCR Loan.  These additional factors include prepayment penalty provisions, loan purpose and interest-only structure options.


Generally, DSCR loans with higher and longer “prepayment penalties” will have lower rates.  A classic DSCR loan prepayment structure is “5/4/3/2/1.”


5/4/3/2/1 refers to a 5% penalty if prepaid in year 1, 4% if prepaid in year 2, 3% if prepaid in year 3, 2% if prepaid in year 4 and 1% if prepaid in year 5.  Then, assuming it’s a 30-year mortgage loan, any prepayment made in the last 25 years of the term would have no associated penalty.  Typically, a loan with such a prepayment structure will be over 100bp lower in interest rate than an equivalent loan with no penalties!



DSCR Loan Buy Downs


A final method of getting the lowest interest rate on rental property with a DSCR Loan is to “buy down” the rate.  This refers to paying additional fees at closing.  This is a one-time cost that results in a lower interest rate over a 30-year term.  These fees care also called “Closing Fees” or “Points.”  Generally, for every additional “point” (1% fee) paid at closing, lowers the DSCR loan mortgage rate by 0.50%!


We recommend contacting a DSCR Loan specialist directly to track DSCR loan interest rates!



Current Hard Money Interest Rates for BRRRR and Fix and Flip Investors


Hard Money Loans are loans used for properties in need of a quick renovation.  Typically, investors will take a hard money loan when embarking on a fix and flip project or when doing the BRRRR strategy.  While these loans have higher interest rates, they are typically interest-only and have short duration (generally 3 to 9 months).  Interest rates for investment properties with hard money loans are on average 12.000%.


While mortgage rates for rental properties secured by conventional or DSCR loans generally follow treasury yields plus a spread, this doesn’t apply to hard money loans.  Hard Money Loans have more stable interest rates and don’t move as much.  Hard Money rates are typically based on the lender offering the loans and the borrower’s experience.


Additionally, Hard Money lenders with nationwide platforms and long track records can generally offer the lowest interest rates.  In contrast, hard money lenders with less of a track record and reputation can have hard money investment property rates as high as 18%.


Additionally, for highly experienced borrowers with a sterling track record of BRRRR or fix and flip deals get the lowest hard money loan rates.  Current hard money loan interest rates for the most experienced flippers are as low as 8.9%!


We recommend contacting a Hard Money Loan specialist directly to track Hard Money loan interest rates!



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