Duplex Owners Enjoy The Sun

It may be the coldest winter in memory, but most Minneapolis and St Paul duplex landlords are extraordinarily sunny when I speak with them.

And why not? After all, vacancy rates and interest rates are extraordinarily low, meaning rents are high and the cash flow is terrific.

The one thing many of them forget is what goes down, must go up.

No, I didn’t get that backwards.

Vacancy rates are not a constant. At some point, the economy will rebound. And when that happens, many tenants will decide to become homeowners.

This will force vacancy rates up, which will cause things like concessions to attract tenants (think first month free), and lower rent.

As the economy improves, we are also likely to see the Federal Reserve raise interest rates in an effort to slow inflation. This will reduce the affordability of many income properties, as well as reduce cash flow.

With smaller returns, investors will begin to leave the marketplace. And as demand for investment properties slows, prices with rise less aggressively, and may even decline somewhat.

Let’s hope warm sunny days are in all of our futures. But it’s always wise to bring an umbrella.