Are You an Investor or Speculator?

[Jeff Tallard]

 I come across a lot of investors that are buying property with notes that adjust in 5 to 7 years.   They are currently borrowing in the low 4% range.   My question for these investors is; have you evaluated what your cash flow will look like if your mortgage rates rise substantially?  

Is it possible that if the economy weakens that your rent increases might not be what you projected?   

I would strongly encourage those with adjustable rate loans to take a serious look at how their investments might turn out if interest rates rise substantially and rents remain flat.  

It's a lot of work owning and managing investment real estate and you can put in a lot of time and not necessarily make any money if you don't get the proper financing in place.  Hoping that interest rates remain low is  speculating not investing.  

 In our early years when we had more adjustable rate loans we would shorten the amortizations wherever possible.  By paying down more principal it reduced the risk that higher interest-rates  presented.  

Just some food for thought.