Rates and Cash Flow

Real Estate Agent · Cleveland, OH · Member since 2024 · 55 posts · 37 votes

Mortgage rates are up about a full point from a year ago. What does that actually do to a rental in Cleveland?

Take a $98K property with 20% down. At 6.3%, the principal and interest payment is about $485 a month. At 7.25%, it’s about $535. That’s roughly $50 a month, or about $600 a year.

It isn’t nothing, but it’s very different from what the same move does on a $400K or $500K property. When your purchase price is low, a rate jump shows up as a small dent in your cash flow, not a crisis.

That’s one reason we keep investing in Northeast Ohio, we still have a cushion.

What are you seeing on your numbers?

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Chris ColtonPro Member

Investor · San Antonio, TX · Member since 2026 · 126 posts · 52 votes

Good way to look at it. I see the same thing here in San Antonio. On a lower priced house, a point on the rate moves the monthly payment by a small amount, so it does not kill the deal by itself. What I watch more is the payment against the rent, and whether the seller is open to terms that make the payment work. The rate matters, but the price and the terms around it matter more.

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Chris ColtonPro Member
Investor · San Antonio, TX · Member since 2026 · 126 posts · 52 votes
2d
Good way to look at it. I see the same thing here in San Antonio. On a lower priced house, a point on the rate moves the monthly payment by a small amount, so it does not kill the deal by itself. What I watch more is the payment against the rent, and whether the seller is open to terms that make the payment work. The rate matters, but the price and the terms around it matter more.
210-756-9075
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Dan Duenas
Lender · Irvine, Orange County · Member since 2026 · 79 posts · 46 votes
1d
Cash flow on a short-term rental lives or dies on the income basis, more than the rate — and that's the part to nail down first.
On DSCR, the property's rent is what qualifies you, not your personal income — no tax returns, no W-2s, no pay stubs, and your DTI doesn't cap how many you can hold. For Airbnbs specifically, some DSCR lenders will underwrite the STR income off AirDNA projections or 12 months of management history; others will only count long-term rent. Same property, same rate environment, very different answer depending on which income basis your lender uses — so ask that before you shop rate.
On the refi feeling high: run the ratio, not the feeling. Take the rent (STR or long-term, whichever your lender counts), subtract PITI plus real expenses — vacancy, management, cleaning, utilities — and see what's left. If the ratio and the LTV are strong, the rate usually follows. If they're thin, no rate will save the cash flow.
One timing note: if you're planning the next purchase, do the refi first. It locks the payment in and keeps the new debt from muddying the next deal's numbers. Happy to run your numbers if you want a second set of eyes — Dan
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Ryan BrownPro Member
Real Estate Agent · Louisville, KY · Member since 2022 · 114 posts · 40 votes
1d
The dollar impact is a useful way to frame it. I’d also look at that $50 as a percentage of the cash flow left over—not just the mortgage payment. If a property clears $200 a month after expenses and reserves, that’s a 25% reduction in the cushion.
Lower purchase prices help, but a roof replacement or HVAC repair doesn’t necessarily get cheaper just because the house costs less. I’d want the deal to work at today’s rate with realistic maintenance, vacancy, and capital expenditure reserves, and treat any future refinance as a bonus.
On your Cleveland deals, what monthly cash flow are you targeting after those reserves?
[email protected]502-889-0122
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Aiden AvtgisBusiness Member
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Real Estate Agent · Cleveland, OH · Member since 2024 · 55 posts · 37 votes
1d
I agree, and that's a good point. That $50 can definitely make a difference depending on how much cash flow the property is generating to begin with. And you're absolutely right about maintenance costs. A roof or furnace doesn't care what you paid for the house!
As far as cash flow, I generally like to see somewhere in the $250–$300 per month per unit range after expenses and reserves, but I wouldn't call that a hard minimum. It really depends on the property, its condition, the amount invested, and my long-term strategy. For me personally, a lower monthly cash flow, not a negative cash flow, is worth it to me for a long-term investment gain vs monthly income.
I definitely agree that the numbers need to make sense at today's rates. I wouldn't want to rely on a future refinance to make a deal work.
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Stacy RaskinBusiness Member
Lender · Member since 2022 · 1k+ posts · 531 votes
14h
I explain this a lot to investors that the rate matters a lot less when financing less money. A monthly payment goes up about $70 a month for a $100K loan when a rate goes up a full point such as from 7.5% to 8.5%. That's a very different situation for a $500K loan for when a rate increases the same amount from 7.5% to 8.5% and the monthly principal and interest payment goes up about $348. These are not current rates but just to show a math example of how rate impacts cash flow differently depending on the loan amount.

It's a reason why investors are still making money in the current interest rate environment in many markets including Ohio.

There's also ways to use seller credits for DSCR loan programs which can bring the rate down and help pay for buyer closing costs. The options for seller credits depend on the loan amount and loan program. Many buyers are finding sellers willing to negotiate due to it being a buyers market in many real estate markets currently. Happy to connect to discuss further.
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