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If you are a landlord or an open minded homeowner trapped by higher interest rates, think again. The side effect of higher interest rates are not created equal.
Not all segments of the market are created equal. Income property is particularly sensitive to rates because it typically trades based upon cash flow. Single occupancy or owner occupied properties typically trade based upon individual demand. With that said, our data is starting to show this stark contrast.
Multi family has nearly 10 months more inventory than we did this time last year. Our supply has doubled and prices are only up by 1%. When comparing that to single occupancy homes, condos and townhomes, we have about half a month more of inventory, supply is up by about 25%, but pricing is also up by about 10%.
So what’s the takeaway? Especially if you are a landlord and you’ve had a significant increase in the value of your property, you might have the opportunity to take those gains, negotiate on an upleg, generate more money and or reduce the effect of vacancy.
For example, I have one client who’s property has probably increased by about 150% and it generates about $12,800/month. However, for only 20-25% more for another property, they would generate closer to $35,000/month. That’s more than a 150% gain in monthly rental income!!
For you open minded homeowners, it could be that you get a much better value on your next property because you’re ok with becoming a landlord. In some cases, secondary units are detached AND some cities even afford you the opportunity to add more ADU’s and continue to increase your income!!
The last note, given that income property is very strongly correlated to interest rates, as rates come down, income property owners ought to expect continued and even more accelerated growth!!
