How will the interest rate hike impact multifamily investing?

Good question.

The most impacted assets will be Core market assets and value-add investments, given that these are typically financed variable-rate debt, and are most likely to be the product type adversely affected.

Investors could confront substantial negative leverage that would make fulfilling debt service obligations a hurdle, said David Scherer, co-CEO of Origin Investments. “The build-for-rent (BFR) sector may be one of the greatest beneficiaries of the current rate hike, and the cumulative increases that have taken place,” he said.
“There are literally millions of current renters and want-to-be-homeowners that are trapped. They have been priced out of buying their first homes. BFR creates the same housing dynamic without the financial burden.”
The underlying multifamily fundamentals are still good, Carhart said. Though rent increases are expected to moderate, overall demand for housing is robust. “A lack of affordable housing will also continue to drive demand in that space,” she said, noting that higher mortgage rates and lack of affordability in single-family will benefit multifamily.
Doug Prickett, senior managing director, research and investment analytics with Transwestern, agreed. Demand in the rental market should remain strong with the alternative for-sale market becoming less affordable, he said. But at the same time, new supply may slow due to the increasing cost and declining availability of construction financing.

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I hope that helps and good luck with your investing!

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