According to Vive Funds, rising interest rates are a double-edged sword, keeping renters renting on one side but making investments costlier on the other.
Vive Funds, a Dallas-based real estate investment firm specializing in curating opportunities for high-net-worth investors, is seeing the effects of rising interest rates on multifamily investing opportunities. The Federal Reserve has spent much of 2022 raising interest rates in an effort to curb inflation; rates rose 75 basis points in November 2022 alone. Rising interest rates are a double-edged sword for multifamily investors, says Vive Funds: renting will increase, but investing will be more expensive.
As interest rates rise, single-family home purchases will decrease, with high interest rates making even “starter homes” significantly more expensive. The reduction in homebuyers leads to an increase in renters. However, rising inflation and high interest rates encourage consumers to “batten down the hatches” and conserve money. Investors face more expensive borrowing as well, which discourages businesses from investing. In 2022 alone, this reduced investment in the economy saw a 1.6% decrease in US GDP.
“Unemployment rates could also tick upward, which might increase delinquency. However, multifamily investor holds are from 5 to 7 years, so over this long period, any unemployment-led delinquencies rising will be short-term and will be overcome,” explained Veena Jetti, founder of Vive Funds.
Vive Funds, a market leader in multifamily investing, says the current interest rate environment will cause issues for home buyers but could be good news for multifamily investors. As interest rates continue to rise, buyers are shut out of the single-family market. “This unique scenario will be positive for the multifamily investment market; with more renters, rent will stabilize or increase, leading to an increase in multifamily asset values,” said Jetti.
87% of investors recognize inflation is unsettling, but Jetti insists that both novice and experienced investors should embrace a long-term perspective instead. “Sure, investors can sit the market out until things are better, but where will they invest their money? Choosing government securities offers minimal returns.”
“Under uncertain economic conditions, it is better to invest in asset-backed investments like multifamily with a long hold period. By the time these investments reach maturity, inflation will have cooled,” concluded Jetti.
Vive Funds has seen best-in-class returns in hot investment markets like Dallas and Atlanta. With 431+ investments and historically 100% of preferred monthly returns met, Vive Funds’ unique approach to multifamily investing offers long-term security in a tumultuous market.
For more information, please visit https://vivefunds.com.
About Vive Funds
Vive Funds was launched to fulfill our mission of carefully curating high-quality real estate investments. Our innovative strategy and our detailed process drive our core value of investor-centric projects. Vive has developed a rich network of global business partners to make early and transformational investments in assets that have the potential to do great things.