Federal Reserve’s Effect on Real Estate: Explained For Normal People In this video, I am going to show you how the Federal Reserve monetary policy & fiscal policy effect real estate prices and how to go about operating our business on a day to day basis. Monetary policy is how the Federal Reserve (the fed) affects the whole economy on a daily basis, especially commercial real estate. But the big three who get affected the most are you/me, the banks, and the Federal Reserve (the fed) lead by Jerome Powell. Now the way this works is that Federal Reserve (the fed) loans money out to the banks, where you and I secure loans and put our savings into. So the federal interest rate is the rate at which banks are lending money from Federal Reserve (the fed) lead by Jerome Powell. Now right now the current federal interest rate is at 0. But that is NOT the interest rate that we would get from our local bank, that is the interest rate that banks borrow from Federal Reserve (the fed) lead by Jerome Powell. Let’s put this into an example of how interest rates work for real estate investing, real estate, and banks for you and I. Let’s say you and other individuals are looking to buy commercial real estate, especially an 8 unit apartment. For commercial real estate investing, now will the interest rate effect the real estate investing strategy as far as cashflow? Yes. And the lower the interest rates, the lower the mortgage payment. And the interest rates not only affect your mortgage payment, but also the cost of commercial real estate. Now, what happens if the interest rates are really low? That means we can make a higher offer for the commercial real estate property to maintain our cash flow goals. So what happens when the interest rates are a lot lower? Those people who are into commercial real estate investing, all can get the same interest rates, so the competition for the price of the property is very high. And with lower interest rates, there is significantly higher competition because more people will be looking to get into commercial real estate investing. Typically when we see demand go up for commercial real estate, properties will be worth more. Now every time that the Federal Reserve (the fed) lead by Jerome Powell, interest rates go up or down, the value of the commercial real estate will go up and down. Now that you know how interest rates from the Federal Reserve (the fed) lead by Jerome Powell, you can analyze deals better for commercial real estate investing.