Shafiq Hirani explains that choosing between fixed and floating rates depends on your building's breakpoint, the rate at which it stops covering debt service. With a floating rate at 5.75% and a breakpoint around 6.5%, you have only 75 basis points of cushion. If that margin makes you uneasy, a fixed rate may be worth the cost.
The question is not, is floating cheaper today? Of course it is. The question is, at what rate does my building stop covering its debt at the level my lender requires? On this building, that breakpoint is right around 6.5%, which means an owner taking floating at 5.75% has about 75 basis points of room. That is not very much. If you are comfortable with that, floating may be right. If that makes you uneasy, you have your answer. Do not choose between fixed and floating by comparing today's rates. Choose by finding the rate at which your building stops covering its debt, then ask honestly how much room you have. Certainty has a price. Sometimes it is worth paying. If that gave you a clearer way to decide, like and subscribe. And tell me in the comments, are you fixed or floating right now, and how much room do you actually have? That is a conversation worth having out loud. The Refinance Navigator Checklist includes the worksheet to find your own breakpoint. Link below or scan the code. Next is the biggest decision most apartment owners ever make. Do you pull the cash out or do you sell? The numbers are not close and they surprise almost everyone. I am Shafiq Hirani, MBA, CCIM. I have taken both structures on my own buildings And I can tell you the right answer is not the same for every owner, but there is a right way to decide. Like and subscribe if this is useful. It puts this in front of the next owner facing the same choice.
