Impact of inflation

[George Ganis]

I would like help thinking through the impact inflation will have on my buy and hold returns, specifically when financing with an adjustable rate mortgage.

I am thinking about bundling some SFRs into one package and refinancing so I can pull out as much of my investment as possible. It appears that most lenders that offer these loans provide only variable rate loans, so I am concerned about how inflation will impact my bottom line over the long run.

When inflation does rear its ugly head again and ARM rates increase, do you think the incremental mortgage payment can be completely offset with inflation adjustments to rents?

I am trying to think through the sensitivity inflation will have on both pieces of the equation. What impact will a 1% increase in the rate of inflation have on my ARM – will the rate increase by 1 point? I am trying to figure out if a 1% increase in rents will cover that incremental cost so net cash flow does not take a hit over the long haul.

It would be great to get some insight from some loan experts.