How the Fed’s Rate Hike Affects Investors

Surviving The Storm:

Interest rates are going up! The Federal Reserve hiked rates once in 2015, once last year and again this month. That’s not all. The Fed expects to raise rates at least twice more this year. While the Fed doesn’t set mortgage rates, it is closely linked to the housing market so interest rates are going up. What does that mean to investors? Let’s look at the bigger picture, one that includes an unpredictable government.

Trump was elected on campaign promises to ‘drain the swamp’ and run the country like a business. While his promises appear beneficial, the investment community is wondering how unpredictable the future is. Trump is not used to a bi-partisan environment. He is accustomed to taking big risks that may result in huge success or epic failure. While there are checks and balances in place, their ability to halt epic failures is largely unproven. The result for American people is uncertainty – not an ideal environment for investors.

To real estate investors, higher interest rates means a higher cost of doing business. If you’re borrowing to buy real estate, your cost of doing business just went up and is expected to go up more later this year. If you’re thinking of buying real estate or buying more, NOW is the time!

Considering that the stock market remains unpredictable with CEO's selling off shares at a record pace, and returns on savings investments are not catching up, real estate is still one of the best investments. When you’re not sure when the storm will hit, or how big it will be, having real estate in your investment portfolio will help you sleep at night.

Two things to help weather the storm

• Keep enough emergency cash in reserve for six months of living expenses.
• Buy low-priced rental properties in stable growing cities in the Midwest – priced in the $40-60k range. Because, when the you-know-what hits the fan (and it will), you don’t want to take a bloodbath on property values. You’ll be generating rental income even if middle-class Americans lose their homes (again) and need a place to live.

When you own
REAL property, it can’t be manipulated by uncertain and changing government policy. Even in a future with higher interest rates, you can continue to produce regular passive income! Buy now before interest rates go up again.