I tried to fight the Fed once. The Fed won.

With the Fed concluding its two day meeting today, I’m reminded of a personal lesson and a broader truth: no one really knows where interest rates will be in six months, a year, or six years from now (despite what the dot plot shows). 

My wife and I own a small apartment building in downtown Annapolis, MD. We closed in early July of 2022 right as inflation was surging and the Fed started hiking rates.

Remember the word “transitory”? 

The Fed attributed the inflation to supply chain disruptions from COVID that would quickly resolve. They held strong with transitory, until it wasn’t.

A few days before closing, our lender hiked the interest rate on our loan by 2.25%. It was a commercial loan so there wasn’t a rate lock like with a traditional mortgage. I was pissed and convinced it was an overreaction.

They offered me a floating rate option at the original rate. I took it, betting inflation was transitory and hikes would moderate.

Then the Fed raised rates another 4% in short order. “Transitory” was quickly erased from their vocabulary.

I ended up on the wrong side of that bet, financially and psychologically.

Fortunately, we bought right, and my wife crushed the rehab, lease-up, and management. It has still been a triple, but it could have been a homerun. Some before and after pics for your viewing pleasure. 

Life, business, and especially real estate investing are messy. You learn by doing and the only way to do that is to be in the game. 

Oh, and one more thing: don’t fight the Fed!

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