The current downswing in mortgage rates isn't just good for homeowners refinancing.

It's also opening up all sorts of new opportunities for small investors to acquire rental property at rates and prices they haven't seen in years.

Conventional 30-year fixed rates for people with good credit looking to buy and occupy single family houses dropped below 5.5 percent earlier this week.

But what about financing for investors who've been waiting for the right moment to pick up a condo or townhouse or one-family rental -- especially in markets where there's lots of short-sale and REO property to choose from at super-low prices?

Didn't investor money dry up late in 2007 during the credit squeeze -- and didn't it come with high rates when it finally began to flow again?

Absolutely. It did dry up and get expensive, but check out where investor money is priced right now: Would you believe as low as 5.75 percent for 30-year fixed with a 10 percent downpayment and full documentation, provided the loan amount is under $417,000?

Mortgage broker Ralph Stephenson of Pacific Mortgage Services in Murrells Inlet, South Carolina, says the current formula in his shop works like this: Investors buying rental condos or single family houses can either opt for a 5.25 percent fixed rate and pay 1.5 to 2 points, or they could fold those points into the rate at 5 and three quarters percent.

Stephenson cautions, however, that underwriting rules for investors can get very sticky -- especially if an applicant already owns a bunch of rental units. Generally banks get balky if an investor is already carrying 10 or more other properties.

They worry about rental cash flows taking a hit if there are unexpected or prolonged vacancies.

Unlike owner-occupied units, investor rental properties -- even when they're being bought at bargain-basement prices -- have to make economic sense in 2008. They need to cash flow.

But then again, with investor rates as low as they are, in many markets that could be easier to achieve than it was last year or in 2006, when property prices and the cost of financing were higher.

Bottom line: As the saying goes, "Carpe Diem, " or "Seize the day!"

Published: January 25, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.