Managing Interest Rate Risk

[Greg L.]

Nearly all of my rentals are financed with commercial loans that balloon in 7 years. I have a very good interest rate of 4.75% and with a 25 year amortization. All of these loans will balloon around the same time as I just recently refinanced two of the buildings and will be closing on another one later in the month. I've generally purchased properties that had the potential to generate additional NOI and I've managed them such that I've forced quite a bit of equity, however, my main focus is cash flow. My concern is what level interest rates may be at 7 years from now and the best way I can manage that risk. My thought is just to pay down the mortgages as much as I can. Commercial loans are a fact of life if you play in this space. How are you guys managing interest rate risk associated with them? Also, how much do you think interest rates will rise? It seems to me that there's a hard limit on how far they can rise without tanking the entire economy given the level of public and private debt as well as the impact on financial markets. I realize that the Fed doesn't control all of that however.