How to Buy Multifamily When Interest Rates Are High

Stop waiting for the market to fix your underwriting

The most expensive position in real estate right now is “waiting for rates to come down.” I hear it constantly: investors sitting on capital, watching listings, telling themselves the deal will pencil once the Fed moves.

I do not run my portfolio on rate hope, and I have said so publicly on my podcast more than once. The question I ask is never “what will rates be next year?” It is “does this deal pencil today?” If it only works at a rate that does not exist yet, it does not work. If it works at today’s terms, then every future rate improvement is margin — upside you did not pay for.

I have been investing for 20 years across 200+ transactions, and I operate 125 doors today in Tampa, Florida and Northeast Pennsylvania. I have bought in cheap-money markets and expensive-money markets. Here is what two decades teaches you: rates change which buyers can compete, not whether deals exist. And right now, the buyers who cannot compete are leaving. That is not a problem for you. That is the opportunity.

What high rates actually do to the market

Follow the mechanics. Higher rates cut what every leveraged buyer can pay for the same income stream, because the same NOI supports less debt. That shrinks the buyer pool. A thinner buyer pool means listings sit longer. Listings that sit produce two things you can use: price cuts and motivated sellers.

A seller who lists a property in this environment is not testing the water. Marketing a building is work, and doing it into a thin buyer pool while carrying the asset is the behavior of someone who wants out. The longer a listing sits, the more that motivation compounds — and unlike the seller, you can see the days on market.

In our own acquisition pipeline, we track every multifamily listing in our target markets: days on market, price history, broker, and the milestones where seller psychology shifts. We do not chase new listings at ask. We watch, we let time do the negotiating, and we open conversations when the marketing time says the seller is ready to have a real one. That discipline costs nothing. It just requires you to run acquisitions as a system instead of an impulse.

The operators-versus-landlords divide shows up before you even own the building. A landlord asks “can I afford this at today’s rates?” An operator asks “what does today’s rate environment do to the person on the other side of this negotiation?”

Buy on basis: the only protection that doesn’t expire

Every financing structure, every negotiation tactic, every rate scenario sits downstream of one number: your basis — what you are all-in for versus what the asset is worth stabilized.

This is where I point you to our Vine Street deal in Scranton, Pennsylvania, which I broke down fully in my BRRRR article. Twelve units. We were all-in for $1.12 million — a $280,000 purchase and an $840,000 renovation. Post-stabilization, it appraised at $2.3 million. That spread — over $1,170,000 in equity created through execution — is what protects a deal in a high-rate market. When your basis is roughly half of stabilized value, the deal survives a higher refinance rate, lower proceeds, a slower lease-up, all of it. When you buy at retail with thin margin, the rate environment owns you.

High rates make basis discipline easier, not harder, because the competition that used to bid deals past their fundamentals needed cheap debt to do it. They are gone. The price the market will bear is drifting back toward what disciplined buyers will pay.

Structure the debt around the business plan, not the rate

Here is the mistake I see most: investors shop for the lowest rate the way they shop for the cheapest contractor, and both mistakes cost the same way — later, and bigger. In a high-rate market, the structure of your debt matters more than fifty basis points of price. Four rules I run:

Match the debt to the plan. A value-add deal needs debt that survives the renovation and lease-up timeline. High-interest bridge debt turns ordinary construction, inspection, and leasing delays into liquidity stress — and delays are normal, not exceptions. Use bridge capital only when the timeline, reserves, exit, and contingency can absorb slippage. Where a local bank offers construction-to-permanent financing, take that conversation seriously: it removes a hard maturity from your schedule and rolls you into long-term debt without a forced refinance event. Debt should support execution, not punish delay.

Build the relationship before you need it. Community and regional banks in smaller markets underwrite the operator as much as the asset. Clean books, verified operating numbers, and a portfolio you can explain in five minutes get you structures the rate sheet never shows. This is another reason operating discipline pays: lenders finance stability, not stories.

Know your coverage headroom. Before you sign anything, know how far NOI can fall before you breach your debt coverage requirement. In a high-rate market that headroom is thinner by default, so you either buy more margin at acquisition or you carry more risk every month you own it. I go deeper on this in a coming article on DSCR — for now, the rule is simple: if you do not know your headroom, you do not know your risk.

Ask the seller to be the bank. In a thin market, seller financing and structure concessions move from long shot to live option. A seller who has carried a listing for months is often more flexible on terms than on price — and terms are frequently worth more than price. A seller carry at below-market cost of capital can do for you what the Fed will not.

Negotiate the structure, not just the number

Price is one lever. In this market it is often the weakest one, because a fatigued seller may be anchored on a number for reasons that have nothing to do with the asset. The stronger levers: financing terms, as above; timeline — a clean, fast, certain close is worth real money to a tired seller, so be the buyer who has done the work and can perform; and contingencies converted into diligence you actually complete, because certainty is currency when the last two buyers fell through.

And verify everything before you rely on it. The rent roll, the collections, the expenses — reports are not reality; verification is reality. In a high-rate market your margin for inherited surprises is thinner, so the diligence standard goes up, not down.

The stress test still decides it

Before you sign, run the same test I put at the center of the BRRRR article. Rents 5% below plan. Vacancy at 10%. Expenses up 10%. The renovation 20% over. Stabilization six months longer. The refinance rate higher, or proceeds lower, than you modeled. Then the only question that matters: does the property make less money, or does the deal break?

A deal bought on basis, financed to match its business plan, with liquidity to survive six to twelve months of surprises, does not break — it just makes less money for a while. That is a deal you can buy in any rate environment. An operator does not need perfect predictions. An operator needs enough margin, liquidity, and control to survive being wrong.

High rates did not change that standard. They just started enforcing it.