Anyone Else Changing How They Price Deals Now That Rates Are High?
Michael P McKeownPro Member
Real Estate Agent · Tampa FL · Member since 2025 · 7 posts · 3 votesAnyone Else Changing How They Price Deals Now That Rates Are High?
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
10moQuote from @Michael P McKeown:
I’ve been running numbers on distressed properties lately, and it feels like high interest rates are forcing everyone to get way more dialed in on how they underwrite. A lot of investors are still pricing deals the old way, but the holding costs and rehab timelines hit way harder now.
What I’m noticing is that the real difference-maker isn’t always the price you lock the house up at—it’s how fast you can get in and out of the project. If your rehab drags or permitting slows you down, the carrying costs eat your spread quick. But if you can keep the project tight and predictable, you can actually pay a little more and still beat out other buyers.
Funny enough, the heavier fixers with clear scopes of work are making more sense to me than the “easy” cosmetic flips. At least with the big rehabs, you know exactly what you’re touching and how long it’ll take. The simple flips are the ones where timelines stretch because everyone and their cousin thinks they’re a bargain hunter.
Curious if anyone else is shifting their underwriting because of rates, or if sellers in your market have finally started adjusting to reality.
Time has always been a much bigger factor. But I want to point at that interest rates are not high, they are at the norm which is why us old folks say real estate is a difficult business. People could have been in a coma the past five years and made $ in real estate, that is no longer the case and like any business you need to manage it properly and understand financials, risk and where things are headed. Many fly blind because they take some guru course and think they can become an expert. Think of every profession out there, what profession can you become very knowledgable in after doing it for a weekend or even doing a full cycle transaction once.
7e investments53 Reviews
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- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes10mo
Quote from @Michael P McKeown:
I’ve been running numbers on distressed properties lately, and it feels like high interest rates are forcing everyone to get way more dialed in on how they underwrite. A lot of investors are still pricing deals the old way, but the holding costs and rehab timelines hit way harder now.
What I’m noticing is that the real difference-maker isn’t always the price you lock the house up at—it’s how fast you can get in and out of the project. If your rehab drags or permitting slows you down, the carrying costs eat your spread quick. But if you can keep the project tight and predictable, you can actually pay a little more and still beat out other buyers.
Funny enough, the heavier fixers with clear scopes of work are making more sense to me than the “easy” cosmetic flips. At least with the big rehabs, you know exactly what you’re touching and how long it’ll take. The simple flips are the ones where timelines stretch because everyone and their cousin thinks they’re a bargain hunter.
Curious if anyone else is shifting their underwriting because of rates, or if sellers in your market have finally started adjusting to reality.
Time has always been a much bigger factor. But I want to point at that interest rates are not high, they are at the norm which is why us old folks say real estate is a difficult business. People could have been in a coma the past five years and made $ in real estate, that is no longer the case and like any business you need to manage it properly and understand financials, risk and where things are headed. Many fly blind because they take some guru course and think they can become an expert. Think of every profession out there, what profession can you become very knowledgable in after doing it for a weekend or even doing a full cycle transaction once.
7e investments53 Reviews I would take it back even further than Chris did. Basically, if you bought real estate anytime from 2010 through covid, you made money because the market was constantly rising. Now that it has finally normalized, we're seeing who actually knows how to flip houses, and who made money entirely due to once in a lifetime market conditions.
Also there are no "easy" cosmetic flips. The lipstick on a pig days are over. Buyers are much more picky now, they aren't buying dated, overpriced junk with new appliances and a fresh coat of paint.
I see countless emails from wholesalers with properties that only "need" 10-20k. Sure, it may need 10-20k to be livable, but it needs a full 80k rehab to resell. Those 12" white ceramic floor tiles and jalousie crank windows aren't going to cut it anymore.
- 10moDoug SmithPro MemberLender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
Lender in Tampa here. I see people over-leverage and carrying costs eat them alive. Too many people want to put very little down and then can't understand why their carrying costs eat up profit.
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes10mo
Rates are at the lowest point they have been the last 3 years and even slightly below what is considered historical normal. 2.75% was NOT normal.
Time to market is huge, not only it cuts your holding cost, but also your opportunity cost. Get it done and move to the next.
A full rehab will take about 500-700 man hours. In theory, that's 4 people working 40 hour weeks for 4 weeks. If your rehab takes longer, then it is because of the idle time in between.
- Real Estate Agent · Tampa FL · Member since 2025 · 7 posts · 3 votes10mo
Fair points across the board—and I agree with the broader takeaway that rates aren’t “high” in a historical sense, they’ve normalized.
What I was really getting at is that the normalization has removed the margin of error that masked weak execution for a long time. When cheap money and rapid appreciation were doing the heavy lifting, inefficiencies in rehab management, leverage decisions, and timeline control didn’t always show up in the final numbers. Now they do.
From what I’m seeing locally, the operators still doing well aren’t winning because of rate arbitrage—they’re winning because they understand time-to-market, realistic scope, and capital structure. Whether rates are 6% or 8%, idle days, permitting drag, and over-leverage compound fast.
Totally agree that this environment is separating people who know how to run a real estate business from those who benefited from an unusual cycle.
- Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes9moNot that I'm old. heh heh, but when I started out rates were 8% before they went to 9% before they went up from there. Therein is why I learned to buy with creative finance. When you don't have to put a large down payment and pay origination points and all of the things that go with using a bank, it brings your entry costs into line. For a simple example, if I can take over a loan that someone has paid down for a couple of years it's equal to being handed $50,000. I show that on my spreadsheet.
Quote from @Michael P McKeown:
I’ve been running numbers on distressed properties lately, and it feels like high interest rates are forcing everyone to get way more dialed in on how they underwrite. A lot of investors are still pricing deals the old way, but the holding costs and rehab timelines hit way harder now.
What I’m noticing is that the real difference-maker isn’t always the price you lock the house up at—it’s how fast you can get in and out of the project. If your rehab drags or permitting slows you down, the carrying costs eat your spread quick. But if you can keep the project tight and predictable, you can actually pay a little more and still beat out other buyers.
Funny enough, the heavier fixers with clear scopes of work are making more sense to me than the “easy” cosmetic flips. At least with the big rehabs, you know exactly what you’re touching and how long it’ll take. The simple flips are the ones where timelines stretch because everyone and their cousin thinks they’re a bargain hunter.
Curious if anyone else is shifting their underwriting because of rates, or if sellers in your market have finally started adjusting to reality.
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