HAVE A SOUND BUSINESS PLAN Even with rising interest rates, increasing rents all over the country can help you realize your ideal cap rate on new properties while also providing a boost to your NOI on the properties already in your portfolio. In the short term, higher interest rates and a nationwide inventory shortage may force some buyers to pay more for a property. As underwriters tighten their lending standards, having a sound business plan will be beneficial in increasing the likelihood of securing lender-backed financing. Due diligence and an openness to investing in areas where you do not live can be impactful in helping you find potential deals. Relying on local experts to provide accurate purchase and rental information becomes even more important. There will be a window of opportunity for the prepared investor to capitalize and acquire potential properties to create a portfolio or to bolster their existing one.
INVEST IN REITS With inflation at its highest since 1982 and the Producer Price Index (PPI) at the highest since its inception in 1902, the U.S. Federal Reserve has made its intentions clear: it will hike interest rates and implement efforts to reduce its balance sheet to curb inflation. Although rising interest rates increase the cost of borrowing, investors can actually profit from their rise. Two industries that may benefit from rising interest rates are commercial real estate and mortgage real estate investment trusts (REITs). Despite the general rule that REITs will underperform with rising interest rates, the historical data doesn’t back up that assumption. Hence, buying real estate for quicker capital appreciation or investing in REITs for a steady, more liquid income stream will help to realize profits from a rising interest rate environment. If you’re feeling the pressure of rising interest rates, remember that rates aren’t going to dramatically increase all at once, so there is time to plan your investment strategy wisely.
AS UNDERWRITERS TIGHTEN THEIR LENDING STANDARDS, HAVING A SOUND BUSINESS PLAN WILL BE BENEFICIAL IN INCREASING THE LIKELIHOOD OF SECURING LENDER- BACKED FINANCING.
BUYING REAL ESTATE FOR QUICKER CAPITAL APPRECIATION OR INVESTING IN REITS FOR A STEADY, MORE LIQUID INCOME STREAM WILL HELP TO REALIZE PROFITS.
Samantha Whitehouse Berkshire Hathaway HomeServices Birmingham, MI Connect with the Whitehouse Team
Rob Scahill J.W. Reedy Realty Chicago, IL Connect with Rob
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