Are Low Interest Rates Bad for Turnkey Investors?

[Steven W.]

I know that the subject line sounds ridiculous, but hear me out. After having talked to lots of turnkey sellers over the last week or so, it's clear that they price their properties at a sweet spot that will allow buyers to earn say $250-$350 cash flow per month (often, it's not clear whether that figure takes into account repairs and vacancies). So, I assume they take their purchase price, add the rehab costs, and then price the turnkey to fit into that paradigm, which of course depends on the interest rate that an investor would pay.

Five years ago, I bought some turnkey properties when rates were at 6.875 to 7 percent. Not as attractive, one might think, but the cost of the property to the investor factored in the higher interest rate. A couple of years later, I was able to refi and thus reap the benefits of the lower interest rates (instead of the turnkey operator benefiting from them).

I'm pretty doubtful that over time, folks are going to be able to refi a 4.25% loan, since the chances of rates dropping 1-2% seem at least to be slim and none.

So, does any of this make sense? 

Steven