I have no fucking clue what is going to happen with rates, but below is how I manage/think about them:

  • For floating rate deals, we have a consultant that we use to actively manage our interest rate risk via caps, corridors, swaps, etc. 
  • For fixed-rate deals, the rate risk you are taking is in your exit cap assumptions.  For example, f you are underwriting multifamily exits at 4.0% cap rates (I am) then you are basically underwriting rates staying flat/moving lower during your hold period.  Nothing you can really do about this; it is just the risk we take.  Be mindful of your overall leverage.
 

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