How the September 2018 Fed Rate hike affects real estate investors

By October 5, 2018Lending

When the federal government raises interest rates, real estate investors get nervous. It’s easy to understand why. Each time the Fed Reserve ratchets up the interest rate, it cost more to finance a property.  On the surface, the outlook for real estate investors doesn’t look rosy. So far the Fed has boosted the interest rate seven times since late 2015. Some experts think another two or three hikes are still possible for 2018. It’s also possible that the Fed will raise interest rates as many as three more times in 2019.

All’s Not Lost

In spite of the rising interest rates that theoretically make it more expensive to finance your latest property, it’s a good idea to take a look at the bigger picture.

  • Rising interest rates = a booming economy

Because the Fed is trying to keep a rein on inflation, they’ve turned to inching up the interest rates by small increments. This strategy reflects a strong economy that’s likely to offset any increase you’ll experience when it comes to borrowing money.

  • Keep your eye on your strategy

The United States had a long run of near-record low interest rates that was one of the longest in history. It’s inevitable that the pendulum would swing the other way at some point. While no one can predict when a downward spiral in the economy will occur, there are no signs that it will be nearly as dramatic as the one the country experienced in 2008 and 2009.

Private money lenders are a hard-working bunch of go-getters who constantly strive to increase their wealth. It makes perfect sense that they would handle the servicing of their loans by using the same financial system they’ve always used. For many, that defaults to Excel files.