Low Interest Rates vs. Possible Price Declines

[Charles Worth]

With rates set to rise eventually (though I have thought that for years) I am interested in the opinion of investors regarding the trade-off between being able to buy at the extremely low rates vs. the strong possibility that the negative relationship between rates and prices will push down asset prices.

In other words today you can buy at strong returns in many markets on a rental basis partially because rates are so low. However, as rates rise fewer natural demand homebuyers (i.e. not investors) will be able to afford higher prices thus pushing down pricing. So does the probable falling prices offset the strong cash on cash returns that an investor can get today on a levered investment?

On the flip side, B or C properties that are favored by investors could see higher rents that landlords need to make a purchase thus pushing up rents and increasing COC returns even if appriciation is muted.

[Neil Aggarwal]

I don't try to predict the market.  If it is a good deal today, buy it.