How to invest in a high-interest rate and high inflation market

For the first time since 2009 – mortgage rates have hit 5.1%. We’re already noticing a slowdown in some markets though, with days on market and inventory increasing.

I see this market trend playing out in a few different ways…

1. Luxury homes ($1M-$3M range) will probably have a price drop up to 10% in some areas as early as this summer.

2. First-time home buyers will most likely be long-term renters until affordability comes back down. This could push rents even higher as we still have a low supply and an even higher demand.

3. Cap rate compression is happening in multi-family properties and commercial lenders are pulling back. Commercial appraisers are being conservative right now and not as aggressive in using proforma rents and expenses. Expect to bring more money down and prepare for low appraisals.

4. Newer investors who have not experienced a recession will pause for 3-6 months, allowing for less competition and better terms.

🧐What does this mean for investors like you us?

It means it’s time to double down on our investing strategy. 📊

Interest rates are only temporary. They go up, then they go down. When interest rates go up, I use HELOCs. When rates go down, I secure long-term debt at a lower rate.

Ultimately, higher interest rates haven’t changed my strategy, and they shouldn’t change yours either.

So I recommend staying cautiously optimistic.

Underwriting with higher interest rates, higher vacancy rates, average rent appreciations, and overall, making 1-5 offers a week on value add opportunities in high-growth markets with inbound population growth.

That’s been my approach so far.

And I’ve got to say, I’m enjoying the lack of competition. 😎

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