Last modified on January 15th, 2019
By Elizabeth Millar
At the November 2018 meeting, the Federal Reserve reaffirmed they plan to continue gradually increase the target rate, since the economy is strong and the labor market continues to improve.
While the committee reached consensus about gradual increases, some expressed concerns about risks and timing. The current environment is fluid. The labor market is tightening and trade conflicts with China have some sectors planning layoffs in the coming months. Possible inflationary pressure also causes some uncertainty.
So, as we wait for the next bump in interest rates, what should you be doing as a rental property manager?
Plan For Better Days Ahead
Higher interest rates may price some young adults and first-time home-buyers out of a competitive marketplace, meaning they will continue to rent for the foreseeable future. This means property managers may be able to slightly increase lease tiers – providing your property is well-maintained and offers comparable amenities and services as your closest competitors.
Plan For Business as Usual
On the other hand, slight increases may not be significant enough to push mortgage companies to tighten lending policies, or investors to change their spending patterns. In this case, rental property activities may remain fairly stable.
Higher interest rates directly or indirectly affect everyone in the housing market. Mortgage costs rise, refinancing is more expensive, and uncertainty has a negative impact on home sales, which could mean rental managers see an uptick in traffic.
Plan For Expansion
At least for now, the latest Fed adjustment should not be a huge concern for property managers. In fact, this may be the perfect time to focus on growth and expansion.
Tom Burns, Principal at Presario Ventures, recently wrote a piece for Forbes, explaining how busy professionals can leverage real estate specialists to create retirement wealth. Burns said,
“We can leverage other people’s time, knowledge, connections, and experience. This is how a doctor like me, or a lawyer, engineer or CPA, can invest in real estate without disrupting his or her career — or leaving retirement planning for someone else to manage . . . The real estate world is also populated with its version of specialists, all of whom have the expertise you can leverage to create a passive income stream.”
Leverage your specialist connections. Ask real estate brokers to introduce you to rental property owners. Ask your property management software service representative to help you get the most out of the functionality of your system. Ask your marketing professional to create campaigns that drive traffic to your property.
Then, you can be the leverage for owners and investors looking for someone to manage their passive revenue stream.
What is your plan if the interest rates skyrocket or the bottom falls out of the housing market? Success seems to be all about leverage.
This is a really good article. Showing the flip sides of the coin of what might happen after interest rates have risen is very helpful to explain to clients who are leasing their properties. Thanks for posting.