Effective June 16th, the Fed raised interest rates 0.75 %.in an effort to reduce inflation. This is the largest raise since 1994, and will have an effect on every type of borrowing, from real estate and autos to personal loans and construction loans.

As a multi family property owner, what effects will this rate hike have on you?

REFINANCING If you need to refinance your property, because of a balloon payment or to pull cash out, it will be more expensive. Also, with your current income, the loan amount the building will qualify for will be less, so it may cause you to move cash from savings or even to sell your building.

CONSTRUCTION FINANCING If you were planning to add on to your building or maybe add an ADU, there may not be enough available cash based on your net operating income. You may have to put that project on hold for a while. However, cost of funds may cause some competing properties to stay in their present, condition, needing repairs. It may cause other projects, not yet financed, to not get started at all.

TENANTS PURCHASING HOMES Here is an area where you may have an advantage. With it becoming more difficult to qualify for a new home or condo, tenants will most likely stay where they are- in your building.

We are seeing a slow down in the residential real estate market, which has been going through the roof with values skyrocketing and multiple offers. Industry leaders don’t expect as much of an effect on the multi family segment with properties cash flowing,  so that is good. Be sure to raise you rents, where it is allowed, every year so that you increase your cash flow, and don’t fall behind– because even where there is no moratorium, there is still statewide rent control. We are experiencing multiple offers, many all cash, on our listings. So, if you are thinking of selling or exchanging, now is still a good time to do so.

What we at PRS PROPERTIES CAN do for you, is give you a good idea what your current multi unit property is worth in todays market as compared to other similar properties. We can review your profit and loss statement and suggest changes that may allow you to get a higher value than you may have thought. We can help you to get the maximum value for your property, should you decide to sell.

We currently have a number of investors who are looking for “off market” properties and we have put together many, many transactions which involve properties that are not listed for sale. Many buyers prefer to buy “off-market” buildings because they feel that they are getting something not available to the general public. If you are thinking of selling, give us a call.