Maybe we’ve gotten numb. But if you’re paying attention, you’ll notice the national media is predicting the federal reserve will increase rates in March.
So what’s a quarter point? Well, four quarter-point increases in a year equals a one percent increase in interest rates. Rates are still low, so no big deal, right?
Wrong. A one percent increase in interest rates translates to $3000 on a $300,000 mortgage.
When it comes to duplexes and other small investment properties, that can change what was a cash flowing property into a bad investment in the eyes of any prospective buyer literally overnight.
An investment property with a negative cash flow only appeals to a handful of buyers. Most want to put money in their pocket every month. So to offset higher interest rates, they will most likely want to pay less for a Minneapolis duplex.
That means one of two things; prices will either flatten out or, perhaps even decline a little for the numbers to still work.
The Federal Reserve is scheduled to meet March 20-21.
If you’re thinking of selling this summer, or perhaps even next year, you may want to pay special attention to the news.
After all, a quarter of a point in interest could cost you thousands.