Interest Rates – That Little Topic Minneapolis Duplex Owners Keep Forgetting

For a decade now we’ve been hearing about the impending increase in interest rates. Whenever we’ve been told they’re going up they’ve either gone down or stayed the same.

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.