Interest Rates and Your Rental Property

We have been enjoying historically low interest rates for about these past 6+ years.  I mean historical.  If you are reading this and you are 35 and under you need to know it’s not your God given right to have interest rates at or below 5%.  These rates are going to go up.  It’s really just a matter of time.  In fact, I’m surprised they are still so low.

When interest rates rise it negatively impacts your rental property purchases.  Don’t worry. The income property you have now, if it’s on a fixed, conventional loan, won’t change.  But your purchase of additional rental property will change.  With higher interest rates you’ll have to buy the rental property at a lower price or get higher rents (or a combination of the two) in order to receive the same rates.  And that is not always possible.

Then 10% cap rates become 9% cap rates, and so on.

Now is the time to keep buying rental property if you can afford  it.  My guess is, it’ll be decades more before we see rates this low again.