With mortgage rates experiencing their most dramatic swings in recent memory, turnkey real estate investors are rightfully concerned about how these changes impact their bottom line. 

While rates have retreated from their 2023 peaks at ~7.7%, they remain substantially higher than the historic lows of 2020-2021. For passive investors building wealth through single-family rentals, understanding this relationship between interest rates and investment returns isn't just academic...it's essential for making smart portfolio decisions.

Some economists and experienced real estate investors think they know and most will not like the news they have.

I was recently in Los Angeles at a dinner with a group of investors and investment service providers and at one point the conversation turned to the current housing market.  The dinner was sponsored by MOR Financial and one of the partners was recounting an advertisement he had heard earlier in the week.  The advertisement was from a mortgage lender and they were promoting a brand new product they had for home buyers...the 5/1 ARM.  For anyone not familiar with the terminology, that is an adjustable rate mortgage that has an artificially low interest rate for the first year and then can increase by 1% each year for the next 5 years.  Traditionally, an offering like this is tied to the LIBOR, which coincidentally has nothing to do with the housing market.