Interest Rates effect on Home Values?

[Mallikarjun Reddy Pateel]

if you're Purchasing 10-30 Year Buy & Hold Multifamily do you factor in Future Interest Rates? what happens to the property values when Interest rates rise? do they worth more or less? I just can not get my head around it. 

[David Brent]

Great question.  And there are tons of articles about this- and they can be really confusing. In short, rising interest rates increase the cost of capital, making mortgages more expensive for potential buyers, and likely putting downward pressure on prices.  Rising rates also increase costs for businesses, reducing their earnings and putting downward pressure on stocks.  Some investors may shift from stock to real estate and provide some upward pressure on prices.  So I can’t find a simple answer as it’s only one piece of puzzle- as supply and demand have huge impacts.

Anyway, the good news is if you are really holding for 10-30 yrs, you don't have to worry about this (too much). You only care about ‘property values' when you sell 10-30 yrs from now. Until that time, your focus should be on income/cash flow/NOI…