TL;DR - When interest rates rise, investors can get spooked. But higher rates lead to less investing competition, more time to navigate deals, and motivated sellers because of a buyer’s market. Focus on your buy box and you’ll find great real estate deals on favorable terms.

Interest rates are rising — this is a fact.

And while we understand the reality of the present, that doesn’t make the pill any harder to swallow.

You may have been gearing up to buy your first real estate property…

Only to realize you couldn’t afford the increased mortgage rate.

This is what the real estate market will look continue to look like for the foreseeable future.

But that doesn’t mean you have to despair!

Rising interest rates are actually more beneficial to you than you think.

The Initial Reaction to Rising Interest Rates

The first thing that happens when interest rates go up is people get spooked.

They see their potential monthly mortgage payments increase and think, “I can’t afford that! I’ll have to wait until rates go down again.”

Or even worse, they get denied a mortgage that they were already pre-approved for.

So instead of capitalizing on the opportunity in front of them, investors miss out on a ton of good deals.

But here’s the thing…

Waiting is the worst thing you can do.

When interest rates go up, the pool of potential investors shrinks considerably.

People either get discouraged by all the bad news coming out or get stuck in their own heads.

This creates a chance. A chance to make money.

It’s simple economics — when demand is lower than supply, the number of options increase for investors.

Real estate operates in tandem.

The number of property buyers decreases while the number of property sellers stays the same or increases

This creates an imbalance in the market, which presents an opportunity.

The real estate market is always changing. If you wait to buy when rates are low, you may find that the perfect home for you has too much competition for it to be affordable.

If you act now, you can snag a great deal on a property that will appreciate in value as rates continue to rise.

It’s all about timing — and you don’t want to wait too long.

The Benefits of Rising Interest Rates

So, we’ve established that waiting to buy is not a good strategy.

Waiting only delays your wealth and prevents you from scooping up great deals.

But how can investing in real estate as interest rates are rising be a good thing?

Well, let’s break it down.

Less Competition

As we went over before, there’s less investing competition when rates increase.

One of the reasons for this is that it becomes more expensive for people to borrow money from lenders. Instead of a 3-4% mortgage interest, the rates are more in line with 5% and greater. This leads to mortgage payments that people can’t afford.

When the majority of the population doesn’t have the means to pay for such a mortgage, there won’t be as many buyers.

On top of this, people get scared by the constantly terrible news that comes out. “The market’s horrible and it’ll never come back!” Etc., etc.

With fewer investors in the market, you’ll have more negotiating power when it comes to price and terms.

More Time

What’s been the worst part about the real estate market recently?

Choose from: the lack of workers and resources, the artificially high prices, how it’s been a seller’s market.

The worst of all? How quickly deals came and went.

You’d find an awesome property that fit your criteria and budget. You’d call the seller and:

“Sorry, we’ve sold already.”

Nothing deflates your sails more than that.

Now imagine a buyer’s market.

The sellers are the desperate ones. No one’s buying property. There is more supply than demand. And you have all the time in the world to find the best deal for you.

Now it won’t be like taking candy from a baby or anything.

But you’ll have plenty of time to breathe, relax, and think before pulling the trigger on a deal.

Motivated Sellers

You can also take advantage of sellers who are desperate to offload their property quickly.

Homeowners who need to sell fast are often willing to accept terms that are more favorable to the buyer.

So while the price of the property may still be high, you’ll be getting great terms on the deal.

With the real estate market becoming a buyer’s market, there will be plenty of sellers who are eager to sell to whoever comes along.

If you’re patient and do your homework, you can find some great deals in a rising interest rate market.

Cash Flow Potential

Imagine finding a property that cash flows in a market where interest rates are spiking up.

Even though your mortgage payments are steeper, you’re managing to get a profit each month from your property.

Now you hold onto that property until if/when rates go down in the future.

You’ll be able to refinance your loan to a lower rate and your cash flow will explode!

Rising interest rates seem like bad news at first. But if you know how to take advantage of the market, they can actually lead to great investment properties.

Don’t wait to buy — the best deals will go fast! Use this market to your advantage and snag some great properties on favorable terms.

Focus On Your Buy Box

The key to remaining calm during this period of real estate unrest is to focus on your “buy box”.

Your buy box is the specific qualities you’re looking for in an investment.

A person who wants to invest in single-family homes in Detroit wouldn’t need to worry about the housing market of multi-family homes in Los Angeles.

You need to understand what your buy box is — what location you want to buy in, what type of property you want to invest in, etc.

Once you do this, your target is set.

The only time real estate news should matter to you is when it affects your buy box market.

Otherwise, it isn’t relevant. Because real estate is largely a local game. What’s happening in the Midwest probably isn’t happening in the deep South.

Focus on your buy box and find some awesome deals.

Because even when interest rates reach their peak, you’ll be able to navigate your market and make some money.

Happy hunting!

How We Can Help You

Does investing in real estate sound intriguing to you? Would you like to learn more? We’d love to be of value!

At Undoor, we pride ourselves on teaching new and experienced investors how to maximize their gains with minimal stress. Our goal is to help you fall in love with real estate and real estate investing. What we’re most passionate about is maximizing investment gains for people like you.

Do you want to get key insights and advice that’ll help you get ahead of the game? Don’t hesitate to contact us for any and all real estate wants or needs.