interest rates go up
- Thread starter Pump
- Start date
- Joined
- Oct 10, 2007
- Messages
- 4,733
It is possible but is it likely that interest rates will be 5% higher in the next five years?
Yes your numbers should still work with higher interest rates. 5% higher though? This might limit your potential investments so significantly that none might be suited. Your level of risk tolerance will determine what margin of safety you need.
Yes your numbers should still work with higher interest rates. 5% higher though? This might limit your potential investments so significantly that none might be suited. Your level of risk tolerance will determine what margin of safety you need.
- Joined
- Dec 5, 2007
- Messages
- 2,880
QUOTE (Pump @ Feb 7 2010, 09:02 PM) what is everyones options if interest rates go up 3-5% over the next 5 years? when the mortgage has to be refinanced? do the numbers still work? should we take that into consideration when putting in an offer?
McDonald`s will always hire but maybe look back where does that pessimism come from?
In today`s environment it sounds like asking: what will everyone do when there are bombs over Canada?
stay home.
McDonald`s will always hire but maybe look back where does that pessimism come from?
In today`s environment it sounds like asking: what will everyone do when there are bombs over Canada?
stay home.
QUOTE (housingrental @ Feb 7 2010, 09:16 PM) It is possible but is it likely that interest rates will be 5% higher in the next five years?
Yes your numbers should still work with higher interest rates. 5% higher though? This might limit your potential investments so significantly that none might be suited. Your level of risk tolerance will determine what margin of safety you need.
well 3-5% i think has to be a reality we might be facing since these are record low reates - ever... won`t last forever
Yes your numbers should still work with higher interest rates. 5% higher though? This might limit your potential investments so significantly that none might be suited. Your level of risk tolerance will determine what margin of safety you need.
well 3-5% i think has to be a reality we might be facing since these are record low reates - ever... won`t last forever
- Joined
- Aug 30, 2007
- Messages
- 13,881
QUOTE (housingrental @ Feb 7 2010, 09:16 PM)
It is possible but is it likely that interest rates will be 5% higher in the next five years?..
of course it is possible .. but unlikely .. today 5 year mortgage rate is slightly below 4% .. will it be 9% .. possible but very UNLIKELY !
Stress test your asset to at least a 6 or 6.5% interest rate .. if it does not cash-flow then you are too levered !
Are you too levered ? read on here: http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-10823-When_are_you_too_levered_.html
50 Year house price view: http://myreinspace.com/rein_members_only1/Members-Only_Discussion/81-6621-50_Year_Calgary_House_Price_View.html
More difficult lending environment: http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-6908-More_difficult_lending_environment_.html
50 year bond rates: http://myreinspace.com/search/rein_members_only/Members-Only_Discussion/81-9705-51446-50_Year_View_on_Interest_Rates_in_Canada.html#51446
It is possible but is it likely that interest rates will be 5% higher in the next five years?..
of course it is possible .. but unlikely .. today 5 year mortgage rate is slightly below 4% .. will it be 9% .. possible but very UNLIKELY !
Stress test your asset to at least a 6 or 6.5% interest rate .. if it does not cash-flow then you are too levered !
Are you too levered ? read on here: http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-10823-When_are_you_too_levered_.html
50 Year house price view: http://myreinspace.com/rein_members_only1/Members-Only_Discussion/81-6621-50_Year_Calgary_House_Price_View.html
More difficult lending environment: http://myreinspace.com/public_forums1/Real_Estate_Discussion/62-6908-More_difficult_lending_environment_.html
50 year bond rates: http://myreinspace.com/search/rein_members_only/Members-Only_Discussion/81-9705-51446-50_Year_View_on_Interest_Rates_in_Canada.html#51446
- Joined
- Oct 22, 2007
- Messages
- 1,191
[quote name=`ThomasBeyer` date=`Feb 7 2010, 09:31 PM` post=`78514`]
of course it is possible .. but unlikely .. today 5 year mortgage rate is slightly below 4% .. will it be 9% .. possible but very UNLIKELY !
Stress test your asset to at least a 6 or 6.5% interest rate .. if it does not cash-flow then you are too levered !
...
/quote]
But don`t be too hard on your stress test. Because, if inflation and interest rates are both up according to this gloomy scenarion, then
rents are probably up too!
of course it is possible .. but unlikely .. today 5 year mortgage rate is slightly below 4% .. will it be 9% .. possible but very UNLIKELY !
Stress test your asset to at least a 6 or 6.5% interest rate .. if it does not cash-flow then you are too levered !
...
/quote]
But don`t be too hard on your stress test. Because, if inflation and interest rates are both up according to this gloomy scenarion, then
rents are probably up too!
QUOTE (gwasser @ Feb 7 2010, 10:42 PM) QUOTE (ThomasBeyer @ Feb 7 2010, 09:31 PM)
of course it is possible .. but unlikely .. today 5 year mortgage rate is slightly below 4% .. will it be 9% .. possible but very UNLIKELY !
Stress test your asset to at least a 6 or 6.5% interest rate .. if it does not cash-flow then you are too levered !
...
But don`t be too hard on your stress test. Because, if inflation and interest rates are both up according to this gloomy scenarion, then
rents are probably up too!
this is what really drives my question i guess... can we pass this long to the renters? (in ontario)
of course it is possible .. but unlikely .. today 5 year mortgage rate is slightly below 4% .. will it be 9% .. possible but very UNLIKELY !
Stress test your asset to at least a 6 or 6.5% interest rate .. if it does not cash-flow then you are too levered !
...
But don`t be too hard on your stress test. Because, if inflation and interest rates are both up according to this gloomy scenarion, then
rents are probably up too!
this is what really drives my question i guess... can we pass this long to the renters? (in ontario)
- Joined
- Aug 30, 2007
- Messages
- 13,881
QUOTE (Pump @ Feb 8 2010, 06:26 PM) But don`t be too hard on your stress test. Because, if inflation and interest rates are both up according to this gloomy scenarion, then
rents are probably up too!
this is what really drives my question i guess... can we pass this long to the renters? (in ontario)
let`s not confuse COST and REVENUE in any business !
Of course I`d love to charge $2000/suite .. but when the market allows $800 I`d charge that ! In Ontario, a left of center (socialist) not-have province of Canada the rent growth is controlled .. to less than 2% in 2010. Good for long term tenants, not so good for people looking to rent or landlords.
rents are probably up too!
this is what really drives my question i guess... can we pass this long to the renters? (in ontario)
let`s not confuse COST and REVENUE in any business !
Of course I`d love to charge $2000/suite .. but when the market allows $800 I`d charge that ! In Ontario, a left of center (socialist) not-have province of Canada the rent growth is controlled .. to less than 2% in 2010. Good for long term tenants, not so good for people looking to rent or landlords.
- Joined
- Oct 27, 2009
- Messages
- 1,210
QUOTE (ThomasBeyer @ Feb 8 2010, 08:55 PM) Of course I`d love to charge $2000/suite .. but when the market allows $800 I`d charge that ! In Ontario, a left of center (socialist) not-have province of Canada the rent growth is controlled .. to less than 2% in 2010. Good for long term tenants, not so good for people looking to rent or landlords.
A very important thing to keep in mind. I strongly agree.
A very important thing to keep in mind. I strongly agree.
QUOTE (Rickson9 @ Feb 8 2010, 08:07 PM) A very important thing to keep in mind. I strongly agree.
that is my concern, if rates go up and i can`t pass along the cost to the tenant... i better make darn sure the price i pay for the building gives a very good return
when someone moves out, can you up the rent?
that is my concern, if rates go up and i can`t pass along the cost to the tenant... i better make darn sure the price i pay for the building gives a very good return
when someone moves out, can you up the rent?
QUOTE (Rickson9 @ Feb 8 2010, 08:07 PM) A very important thing to keep in mind. I strongly agree.
that is my concern, if rates go up and i can`t pass along the cost to the tenant... i better make darn sure the price i pay for the building gives a very good return
when someone moves out, can you up the rent?
that is my concern, if rates go up and i can`t pass along the cost to the tenant... i better make darn sure the price i pay for the building gives a very good return
when someone moves out, can you up the rent?
- Joined
- Sep 4, 2009
- Messages
- 100
This is why paying down/off debt is a prudent strategy. It`s not the sexiest plan nowadays, since growing one`s personal debt has been the selfi-righteous trend for the past 10 years or so. Just because one hasn`t experienced rates rising significantly since investing in Real Estate does not mean it can`t or won`t happen. The old money wealth I am fond of and associated with is a result of large Equity rather than maximum leverage.
- Joined
- Aug 30, 2007
- Messages
- 13,881
QUOTE (Pump @ Feb 8 2010, 07:36 PM) when someone moves out, can you up the rent?
yes .. if the market supports it !
yes .. if the market supports it !
- Joined
- Aug 30, 2007
- Messages
- 13,881
QUOTE (luckyluciano @ Feb 9 2010, 06:21 AM) This is why paying down/off debt is a prudent strategy. It`s not the sexiest plan nowadays, since growing one`s personal debt has been the selfi-righteous trend for the past 10 years or so. Just because one hasn`t experienced rates rising significantly since investing in Real Estate does not mean it can`t or won`t happen. The old money wealth I am fond of and associated with is a result of large Equity rather than maximum leverage.
THREE WAYS to make money in real estate, like a good meal:
Appetizer: cash-flow
Main course: mortgage pay down
Dessert: value appreciation
A main course (only) diet will make you a millionaire too !
THREE WAYS to make money in real estate, like a good meal:
Appetizer: cash-flow
Main course: mortgage pay down
Dessert: value appreciation
A main course (only) diet will make you a millionaire too !