One thing many prospective Minneapolis duplex owners don’t consider when thinking about selling their duplex is the impact interest rates could have on the value of their property.
Right now, many are thinking they’ll wait to sell until the market is even better. For some, that is defined as 2005 values.
The problem with that rationale is right now, mortgage interest rates for both duplex owner occupants and investors are at historic lows. Many are getting 30 year fixed rates in the range of 3.5-4 percent.
In the single family home market, conventional wisdom states that a one percent rise in interest rates impacts a buyer’s ability to borrow by $10,000. So, if the rates rise by one percent, a buyer who may have qualified to purchase a $200,000 duplex can now only afford to pay $190,000.
This impact, in my opinion, is even greater on duplex buyers.
The reason is a one percent rise in interest rates on a $200,000 loan will reduce cash flow on that property by $2000 a year.
That makes many properties less attractive to the buyers in today’s market, because the return on their investment dollar isn’t as great.
With interest rates predicted to remain low through the end of the year, it’s a great time to be both a Minneapolis duplex seller and a duplex buyer!