Are Higher Rates Making Investors Smarter… or Just Slower?
Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes
Are Higher Rates Making Investors Smarter… or Just Slower?
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Doug SmithPro Member
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votesWhat I see killing people are operating costs more than rates (insurance, taxes, etc). The period between 2009 and 2022 was abnormally low for rates, but take that period out and rates are actually pretty low historically. The insurance and real estate taxes, on the other hand, are really squashing yields.
22 Replies
- 5moBryce JamisonPro MemberRental Property Investor · Mebane, NC · Member since 2015 · 494 posts · 439 votes
For me the higher rates mean there's less properties that makes sense. This means more time looking for houses, more offers, and more negotiating. I keep saving during this longer buying cycle, so I have a bigger emergency fund and / or can put more down on a property which allows me to expand the buy box.
I'm also starting to lean more towards long term appreciation plays. I'm okay with a property that's only cash flowing a few hundred bucks a month if I have reason to expect higher than average appreciation.
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4moThat makes a lot of sense.
Quote from @Bryce Jamison:
For me the higher rates mean there's less properties that makes sense. This means more time looking for houses, more offers, and more negotiating. I keep saving during this longer buying cycle, so I have a bigger emergency fund and / or can put more down on a property which allows me to expand the buy box.
I'm also starting to lean more towards long term appreciation plays. I'm okay with a property that's only cash flowing a few hundred bucks a month if I have reason to expect higher than average appreciation.
I like the approach of using this slower cycle to build reserves and expand your buy box—that’s probably the part a lot of people overlook right now.
And leaning into appreciation plays seems to be where a lot of the more disciplined investors are heading, especially if the deal still at least covers itself or stays close.
Curious how you’re getting comfortable on the appreciation side—are you mainly basing that on specific areas you feel strong about, or broader market trends?
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
Quote from @Bryce Jamison:
For me the higher rates mean there's less properties that makes sense. This means more time looking for houses, more offers, and more negotiating. I keep saving during this longer buying cycle, so I have a bigger emergency fund and / or can put more down on a property which allows me to expand the buy box.
I'm also starting to lean more towards long term appreciation plays. I'm okay with a property that's only cash flowing a few hundred bucks a month if I have reason to expect higher than average appreciation.
That’s a solid approach, Bryce.
Using the slower cycle to build reserves and stay active instead of forcing deals is probably what’s keeping a lot of people out of trouble right now.
And leaning into appreciation plays makes sense too, especially if the deal can at least stay close to breakeven. It feels like a lot of the investors still moving right now are thinking more long-term and less about squeezing every dollar out of the initial cash flow.
Out of curiosity, when you’re looking for those appreciation plays, are you focusing more on specific pockets you believe in, or broader trends you’re seeing across your market?
- 5moDoug SmithPro MemberLender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
What I see killing people are operating costs more than rates (insurance, taxes, etc). The period between 2009 and 2022 was abnormally low for rates, but take that period out and rates are actually pretty low historically. The insurance and real estate taxes, on the other hand, are really squashing yields.
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
Quote from @Doug Smith:
What I see killing people are operating costs more than rates (insurance, taxes, etc). The period between 2009 and 2022 was abnormally low for rates, but take that period out and rates are actually pretty low historically. The insurance and real estate taxes, on the other hand, are really squashing yields.
That’s a really good point, and honestly doesn’t get talked about enough.
Rates get all the attention, but they’re at least somewhat predictable. The operating side has been a lot harder to pin down lately, especially with insurance and taxes moving the way they have.
And I agree with you on the rate perspective too. When you zoom out, it really was that 2009–2022 stretch that was the outlier, not where we are now.
It seems like that’s what’s catching people off guard: deals that looked fine on the debt side end up getting squeezed on the expense side instead.
Are you adjusting for that more upfront now when you underwrite, or is it something you’re stress testing after the fact?
- Property Manager · Houston, TX · Member since 2026 · 23 posts · 21 votes5mo
Honestly, I think I’m seeing both, but probably more hesitation overall. Higher rates have definitely forced people to analyze deals more carefully, which isn’t necessarily a bad thing after the run we had the last few years.
At the same time, I do think some investors are getting stuck waiting for the “perfect” deal or perfect market conditions, and those rarely exist. Meanwhile, disciplined investors who understand their numbers and long-term strategy are still moving when deals make sense, even if the margins are tighter than before.
From what I’m seeing operationally, the people doing best right now are the ones underwriting conservatively, planning for realistic expenses/vacancy, and focusing on long-term sustainability instead of hoping the market bails them out. On the property management side, many people are breaking even or losing a little since they are unable to refi at the rates they got in the past. But that's better than vacancy or trying to sell in a tough market!
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
Quote from @Alexander Graff:
Honestly, I think I’m seeing both, but probably more hesitation overall. Higher rates have definitely forced people to analyze deals more carefully, which isn’t necessarily a bad thing after the run we had the last few years.
At the same time, I do think some investors are getting stuck waiting for the “perfect” deal or perfect market conditions, and those rarely exist. Meanwhile, disciplined investors who understand their numbers and long-term strategy are still moving when deals make sense, even if the margins are tighter than before.
From what I’m seeing operationally, the people doing best right now are the ones underwriting conservatively, planning for realistic expenses/vacancy, and focusing on long-term sustainability instead of hoping the market bails them out. On the property management side, many people are breaking even or losing a little since they are unable to refi at the rates they got in the past. But that's better than vacancy or trying to sell in a tough market!
That’s a really balanced take, and it lines up with what we’ve been seeing too.
It does feel like the market could be forcing people back to fundamentals. The ones who know their numbers and can live with tighter margins are still moving, while others are stuck waiting for something that probably isn’t coming.
And your point on operations is big. Breaking even or even taking a small loss short-term to avoid vacancy or a bad sale isn’t ideal, but it’s a very different mindset than a few years ago when everything had a cushion.
It almost feels like the edge right now isn’t finding “home run” deals; it’s just managing risk better than the next person.
Out of curiosity, when you’re looking at deals today, are you leaning more conservative on your exit assumptions or more on the expense side?
- Property Manager · Houston, TX · Member since 2026 · 23 posts · 21 votes4mo
Quote from @Frank Ransom:
Quote from @Alexander Graff:
Honestly, I think I’m seeing both, but probably more hesitation overall. Higher rates have definitely forced people to analyze deals more carefully, which isn’t necessarily a bad thing after the run we had the last few years.
At the same time, I do think some investors are getting stuck waiting for the “perfect” deal or perfect market conditions, and those rarely exist. Meanwhile, disciplined investors who understand their numbers and long-term strategy are still moving when deals make sense, even if the margins are tighter than before.
From what I’m seeing operationally, the people doing best right now are the ones underwriting conservatively, planning for realistic expenses/vacancy, and focusing on long-term sustainability instead of hoping the market bails them out. On the property management side, many people are breaking even or losing a little since they are unable to refi at the rates they got in the past. But that's better than vacancy or trying to sell in a tough market!
That’s a really balanced take, and it lines up with what we’ve been seeing too.
It does feel like the market could be forcing people back to fundamentals. The ones who know their numbers and can live with tighter margins are still moving, while others are stuck waiting for something that probably isn’t coming.
And your point on operations is big. Breaking even or even taking a small loss short-term to avoid vacancy or a bad sale isn’t ideal, but it’s a very different mindset than a few years ago when everything had a cushion.
It almost feels like the edge right now isn’t finding “home run” deals; it’s just managing risk better than the next person.
Out of curiosity, when you’re looking at deals today, are you leaning more conservative on your exit assumptions or more on the expense side?
Yeah, I honestly think that’s the reality of today’s market. A few years ago people had a lot more room for error. Now if your numbers are tight and something goes wrong, you feel it pretty quickly.
I’m really more on the property management side working with investors, so my view naturally comes from seeing what happens after the property is actually operating day to day. Most of the pain points I see come from people underestimating expenses, vacancy, turnover, maintenance, insurance increases, or assuming rents will keep climbing fast enough to bail them out.
So I’d probably say people are leaning more conservative on the expense side right now. You can always adjust your exit strategy later if the market improves, but bad operational numbers hit immediately.
The investors I see doing well right now usually aren’t chasing flashy deals. They just buy carefully, manage risk well, and stay patient.
- 5moDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Frank Ransom:
Feels like higher rates are making people think more, but also hesitate more.
Some of the deals I’ve seen move lately weren’t perfect; they just got taken by someone who didn’t overthink it.
I'm not at all saying be reckless, but it does feel like that window between “this works” and actually moving is getting wider.
Are you seeing more discipline right now or more hesitation?
Judging by the increasing number of posts of deals that appear to have virtually zero chance of generating a return that justifies the risk, I would state neither.
The most recent such post I saw had a $100k rehab that projected less than $15k profit (not even including holding costs or purchase/closing costs). Then after the rehab, at 0% LTV it projected less than a 5% return from cash flow.
I have been on this site quite a few years (maybe 10 years) and I have never seen as many posts of purchases where the numbers seem to make no sense. I do recognize that there may have never been more properties that do not make sense as investments, but there is no reason to make stupid purchases.
These posts point to RE investors need to think more and hesitate more.
Good luck
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
Quote from @Dan H.:
Quote from @Frank Ransom:
Feels like higher rates are making people think more, but also hesitate more.
Some of the deals I’ve seen move lately weren’t perfect; they just got taken by someone who didn’t overthink it.
I'm not at all saying be reckless, but it does feel like that window between “this works” and actually moving is getting wider.
Are you seeing more discipline right now or more hesitation?
Judging by the increasing number of posts of deals that appear to have virtually zero chance of generating a return that justifies the risk, I would state neither.
The most recent such post I saw had a $100k rehab that projected less than $15k profit (not even including holding costs or purchase/closing costs). Then after the rehab, at 0% LTV it projected less than a 5% return from cash flow.
I have been on this site quite a few years (maybe 10 years) and I have never seen as many posts of purchases where the numbers seem to make no sense. I do recognize that there may have never been more properties that do not make sense as investments, but there is no reason to make stupid purchases.
These posts point to RE investors need to think more and hesitate more.
Good luck
That example you gave is a spot-on illustration! Taking on that level of rehab for such a thin return leaves almost no margin for error. You just can't want to be involved in the market that badly.
Do you think this is mostly newer investors forcing deals right now, or are you seeing more experienced investors start to stretch a bit given how the market’s been?
- 4moDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Frank Ransom:
Quote from @Dan H.:
Quote from @Frank Ransom:
Feels like higher rates are making people think more, but also hesitate more.
Some of the deals I’ve seen move lately weren’t perfect; they just got taken by someone who didn’t overthink it.
I'm not at all saying be reckless, but it does feel like that window between “this works” and actually moving is getting wider.
Are you seeing more discipline right now or more hesitation?
Judging by the increasing number of posts of deals that appear to have virtually zero chance of generating a return that justifies the risk, I would state neither.
The most recent such post I saw had a $100k rehab that projected less than $15k profit (not even including holding costs or purchase/closing costs). Then after the rehab, at 0% LTV it projected less than a 5% return from cash flow.
I have been on this site quite a few years (maybe 10 years) and I have never seen as many posts of purchases where the numbers seem to make no sense. I do recognize that there may have never been more properties that do not make sense as investments, but there is no reason to make stupid purchases.
These posts point to RE investors need to think more and hesitate more.
Good luck
That example you gave is a spot-on illustration! Taking on that level of rehab for such a thin return leaves almost no margin for error. You just can't want to be involved in the market that badly.
Do you think this is mostly newer investors forcing deals right now, or are you seeing more experienced investors start to stretch a bit given how the market’s been?
Many on the successful RE investors from before the rate increases (q2 2022) are not investing in San Diego RE. Many of the ones that are still investing in San Diego RE have pivoted from buy and hold to flips.
it is mostly less experienced investors that I see making what appear to be high risk RE investments. Reasonable underwriting (not stating the buyers are doing reasonable, or any, underwriting) seems to show poor return. Even with modest rent growth and appreciation, it will take a long time to produce a decent return for the effort and risk of residential RE.Higher rates are not making many RE investors smarter or more cautious (moving slowly).
Good luck
- Rental Property Investor · Philadelphia, PA · Member since 2021 · 778 posts · 504 votes4mo
@Frank Ransom - I think the investors who consistently underwrite are also likely staying in touch with a few lenders to be up to speed on lending terms. One should know generally interest rates they can get on a loan type for their investment... And, if you're off by 25 or 50 basis points it should completely kill the deal, but if it does it probably wasn't a great "deal" to begin with. I agree that operating expenses have been more of a variable to contend with lately - consensus seems to indicate that rates will remain near where we are for a while. Good Luck!
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
Quote from @Greg Kasmer:
@Frank Ransom - I think the investors who consistently underwrite are also likely staying in touch with a few lenders to be up to speed on lending terms. One should know generally interest rates they can get on a loan type for their investment... And, if you're off by 25 or 50 basis points it should completely kill the deal, but if it does it probably wasn't a great "deal" to begin with. I agree that operating expenses have been more of a variable to contend with lately - consensus seems to indicate that rates will remain near where we are for a while. Good Luck!
That’s a great point.
Being dialed in on lending terms really does separate people right now. If a 25–50 bps move kills the deal, it probably wasn’t strong enough going in.
And I agree on the expense side, that’s where it feels like more of the uncertainty is lately. Taxes, insurance, maintenance… those have been harder to pin down than the debt in some cases.
Sounds like you’re approaching it the right way though, tight underwriting, staying close to lenders, and not forcing deals.
Out of curiosity, have you adjusted how you’re underwriting expenses recently, or are you just building in a wider margin for error?
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes4mo
Housing affordability is at record lows. The government increased the money supply (and inflation) by a massive 40% while household income only gradually increased. The median age of first time homebuyers is 40 years old and the median for all buyers is a whopping 59 years old. We are way beyond hesitation...many people simply cannot afford to buy.
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
Quote from @Mike Dymski:
Housing affordability is at record lows. The government increased the money supply (and inflation) by a massive 40% while household income only gradually increased. The median age of first time homebuyers is 40 years old and the median for all buyers is a whopping 59 years old. We are way beyond hesitation...many people simply cannot afford to buy.
That’s a strong point and it definitely shows up in what we’re seeing on the ground.
Affordability being stretched like this really changes the dynamic. It’s not just about hesitation anymore like you said, it’s a shrinking buyer pool.
Fewer people being able to buy puts more pressure on exits, can lead to longer hold times if something misses the mark, and leaves less room for error on pricing.
It also explains why some investors are either demanding stronger margins or shifting strategies entirely.
Curious how you’re looking at it from your side, does this feel like it’s setting up more opportunity on the buy over time, or does it make you more cautious overall with where things could head?
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes4mo
@Frank Ransom Curious how you’re looking at it from your side, does this feel like it’s setting up more opportunity on the buy over time, or does it make you more cautious overall with where things could head?
For the past few years, people have not wanted to buy or been able to afford real estate; so, they have invested in the stock market instead...and it's up over 100%.
- Huntsville, AL · Member since 2018 · 578 posts · 864 votes4mo
In Huntsville, we have noticed that investors that are currently buying are either accepting negative cash flow or are putting more than 30 to 40% down to make it work.
Recent example - sold a property recently for multiple reasons - loan was due and the numbers were not great at a higher interest rate, desire to recapture equity from previous rehab, as well as the area had seen a slight drop in rental amounts since we last rented the property. The individual that bought it was an investor - who then rented it out for less than we had. I estimate the investor must have put at least 40% down to make the numbers work to be at least cash flow neutral. Very different mindset then we use for investment properties for sure.
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
Quote from @Michael S.:
In Huntsville, we have noticed that investors that are currently buying are either accepting negative cash flow or are putting more than 30 to 40% down to make it work.
Recent example - sold a property recently for multiple reasons - loan was due and the numbers were not great at a higher interest rate, desire to recapture equity from previous rehab, as well as the area had seen a slight drop in rental amounts since we last rented the property. The individual that bought it was an investor - who then rented it out for less than we had. I estimate the investor must have put at least 40% down to make the numbers work to be at least cash flow neutral. Very different mindset then we use for investment properties for sure.
That’s really interesting, and honestly, it lines up with what I’ve been hearing in a few other markets too.
Taking on negative cash flow or putting 30–40% down just to break even is a very different approach than what most investors were doing even a couple of years ago. Especially in your example, where rents actually came in lower than before, that’s not something you’d expect someone to lean into unless they’re very confident on the long-term side.
Seems like some buyers right now are prioritizing equity preservation or appreciation over immediate returns.
Are you seeing most of those buyers come in with that long-term mindset, or does it feel more like they’re just trying to stay active in the market despite the numbers?
- Specialist · Houston, TX · Member since 2026 · 31 posts · 19 votes4mo
That’s really interesting, and honestly, it lines up with what I’ve been hearing in a few other markets too.
Taking on negative cash flow or putting 30–40% down just to break even is a very different approach than what most investors were doing even a couple of years ago. Especially in your example, where rents actually came in lower than before, that’s not something you’d expect someone to lean into unless they’re very confident on the long-term side.
Seems like some buyers right now are prioritizing equity preservation or appreciation over immediate returns.
Are you seeing most of those buyers come in with that long-term mindset, or does it feel more like they’re just trying to stay active in the market despite the numbers?
- Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes4mo
Quote from @Frank Ransom:
Feels like higher rates are making people think more, but also hesitate more.
Some of the deals I’ve seen move lately weren’t perfect; they just got taken by someone who didn’t overthink it.
I'm not at all saying be reckless, but it does feel like that window between “this works” and actually moving is getting wider.
Are you seeing more discipline right now or more hesitation?
I think higher rates exposed deals that were already thin.
The investors doing well now aren’t necessarily moving slower, I think they’re just underwriting the boring stuff more diligently: insurance, taxes, vacancy, capex, exit price, and how long they can afford to hold if the resale or refi takes longer than expected.
- Investor · NY · Member since 2026 · 121 posts · 42 votes4mo
Higher rates is just the new reality for the time being people that expect rates to go back to 4% in the near future are just not living in reality. I would like the rates to stay like that for the next few years until I can accumulate enough more properties before so like that I’ll be ready for the next cycle to refinance after appreciation.
I believe that if investors stop looking back at the 5 years ago reality and start looking for good opportunities in the current Reality environment they will be much more successful. - 4moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votesI think it’s honestly a mix of both right now. The better investors I know are definitely being more disciplined with underwriting, reserves, and deal structure because rates exposed a lot of bad deals that only worked in cheap debt environments. At the same time, I also see a ton of hesitation and analysis paralysis, especially from newer investors waiting for the “perfect” setup that probably doesn’t exist. Some of the deals that are getting done right now aren’t home runs, but they’re solid enough and the buyers understand that long-term wealth usually comes from time in the market more than perfect timing. I’ve also noticed that people who stayed active through higher rates are getting sharper because they’re forced to focus on fundamentals instead of speculation. There’s definitely a wider gap now between recognizing a workable deal and actually pulling the trigger on it.
Quote from @Frank Ransom:
Feels like higher rates are making people think more, but also hesitate more.
Some of the deals I’ve seen move lately weren’t perfect; they just got taken by someone who didn’t overthink it.
I'm not at all saying be reckless, but it does feel like that window between “this works” and actually moving is getting wider.
Are you seeing more discipline right now or more hesitation?
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