How ya'll Dealing with 7% Rates ?

Question

How ya'll feeling about rates going up over 7%?

You dealing with it, or still praying they're gonna go back down to the 3's?

Diana Khan · Answer

@James Wise, I’ve seen investors adjust more than stop buying altogether. The conversations have become a lot more about purchase price, seller credits, reserves, and whether the property still makes sense with the payment we know we have today. One thing I really try not to do is make a deal depend on rates coming back down later. If the numbers work at today’s rate and a refinance becomes available down the road, great. I’d rather have that be a bonus than the thing that has to happen for the deal to work.

Jules Aton · Answer

I started when rates were in that range and we just included it in the calculations. Here is hoping things get back to the 5% range. I have sat out when prices were inflated in the past, started buying again in 2008 and paid cash for my last two properties 2025 and 2026 neither of which may be practical if RE is someone's bread and butter. The last 5 years have allowed lazy, sloppy folks to think they are RE geniuses. The true businessmen/women will be fine.

Erik Estrada · Answer

I have seen many deals in the midwest work at a high 7 to 8% rate. Back in late 2023 the rates were creeping up to 8%..

Nicholas L. · Answer

@James Wise

below is an exhaustive description of my strategy and how it's evolved

lower rates: BRRRR

higher rates: BRRRR

Aiden Avtgis · Answer

We’re just figuring it out because that’s really the only option. 😂 There’s no guarantee rates are going back to the 3’s and they could go higher than they are now.

Rates are definitely a factor, but they’re only one piece of the puzzle. Purchase price, rents, cash flow, financing terms, and the overall deal all matter. If the numbers work, you find a way to make the deal work. I like to get creative when putting deals together, looking at all sides of it. I wouldn’t make rates the make-or-break factor for sure.

Jay Hinrichs · Answer

rates are only going into the 3's if there is another great financial crisis and if that happens many investors will get wiped out before they can even borrow at 3% I think folks have to realize 5 is probably the floor with 6 as average like it was pre GFC..

James Wise · Answer

Very true.

JD Martin · Answer

🤣🤣🤣 I like it !

Ryan Thomson · Answer

There's inventory out there right now with 2.75% to 3.5% FHA and VA loans that are fully assumable. Not sub-to, not creative financing gray area. The lender signs off, the buyer qualifies, the rate transfers. Legal and clean.

I closed 7 of these in one quarter in Colorado Springs. On a $450k home with a $380k assumable balance at 2.75%, the payment is around $1,550/mo vs $2,850/mo on a new loan at 7%. That's $1,300/month the buyer keeps. Every month. Forever.

The equity gap (purchase price minus loan balance) is the piece people get hung up on. You cover it with cash, a second, or seller credits. On the example above, $70k gap on a $450k home is still a much better position than a new loan at 7% with 20% down.

Investors are using these to house hack, BRRRR with built-in equity, or just get into rentals that actually pencil. The cashflow math changes completely when your rate starts with a 2.

Every FHA and VA loan originated before 2022 is potentially assumable by law. There's more inventory than most people realize.

If you're buying in a market where VA and FHA buyers were active in 2020-2021, the deals are there. They just take 45-90 days to close and most agents don't know how to work them.

Happy to run numbers on a specific property if you want to see if it makes sense.

Igor Ganapolsky · Answer

Honest answer - I stopped caring about rates about a year ago when I shifted to buying properties at tax deed auctions down in South Florida. Everything at auction is cash, so the rate conversation literally doesn't apply. You're competing on who can close cleanest and fastest, not who has the best financing.

That said, I get that most people can't just go all-cash. What I've noticed is that the rate environment has actually created an opportunity on the auction side. A lot of financed buyers have pulled back, which means less competition for those of us writing cash checks. The properties going to auction right now are the ones where owners couldn't adapt - tax liens, estate issues, code violations. The distress is real.

Diana's point about not making a deal depend on rates coming back is spot on. I underwrite everything at today's cost of capital. If rates drop and I need to hold paper later, that's gravy. But the deal has to work at 7% or better.

The biggest adjustment for me was accepting that the easy money era of 3% rates created a lot of bad habits. People were throwing offers at anything and making it work because the payment was cheap. Now you actually have to find real value - which honestly is how this business worked before 2020 anyway.

How ya'll Dealing with 7% Rates ?

How ya'll Dealing with 7% Rates ?

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