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What Still Works When Mortgage Rates Stay High
Roger Blankenship
January 15, 2026 • Estimated Reading Time: 5 minutes
Higher mortgage rates don’t kill deals.
Bad assumptions do.
Rates matter, but they’re only one variable in a deal. Investors get into trouble when they treat today’s rates as temporary annoyances instead of fixed constraints that must be underwritten honestly.
If you want cash flow in a higher-rate environment, here’s what actually works — and what doesn’t.
Stop Underwriting Like Rates Will “Come Back Down”
The fastest way to kill cash flow is to assume future refinancing will save a deal that doesn’t work today.
That’s speculation, not investing.
Underwrite at today’s rate, plus a margin. If the deal doesn’t cash flow now, it doesn’t cash flow. Future rate cuts should be upside — not part of the base case.
If a deal only works after a refi, it doesn’t work.
Buy Price Matters More Than Ever
When rates were low, investors could get sloppy on price and still survive. That cushion is gone.
Higher rates compress margins, which means:
You must buy deeper
You must negotiate harder
You must be willing to walk more often
No financing structure fixes overpaying. Price is the first line of defense for cash flow.
Use Shorter Debt Intentionally (Not Automatically)
Long-term fixed-rate debt is comforting, but it isn’t always optimal.
In some cases, shorter-term or adjustable debt can improve cash flow — if it’s used intentionally and conservatively. That means:
Lower leverage
Adequate reserves
Clear exit options
The mistake isn’t variable rates. The mistake is pretending rate risk doesn’t exist.
Revisit Seller Financing (Seriously)
Higher rates change seller behavior — even if sellers don’t realize it yet.
Seller financing can:
Reduce interest rates
Improve cash flow
Allow flexible terms
Replace banks entirely
Many sellers care more about price, taxes, and certainty than they do about interest rate spreads. Investors who know how to structure these conversations have an edge when conventional financing is expensive.
Focus on Rent Reality, Not Pro Forma Optimism
Higher rates punish optimistic rent assumptions.
If rents must rise significantly for cash flow to appear, the deal is fragile. Conservative rent underwriting — based on current market rents, not projections — matters more than ever.
Cash flow that exists on paper only exists until the first vacancy.
Control What You Can Control
You can’t control interest rates. You can control:
Purchase price
Financing structure
Leverage
Operating efficiency
Exit flexibility
Investors who stay profitable in higher-rate environments aren’t smarter. They’re more disciplined.
The Takeaway
Higher mortgage rates don’t end cash flow investing.
They end casual underwriting.
When I bought my first home, with good credit, my interest rate was 17%. That wasn’t a mistake — that was the market. When I started investing, hard money loans routinely ran 15% with five points paid up front. That wasn’t unusual either. No one sat around waiting for rates to come down. We learned how to make deals work inside the reality we were given.
We lived by a simple rule:
If I can borrow money at 15% and earn a 40% return on it, how much should I borrow?
The answer, of course, is as much as I responsibly can.
Rates are just another input. They don’t decide whether a deal works — your numbers do. You can bake today’s rates into your underwriting, structure around them, and still prosper. Or you can wait for “normal” to return and watch opportunities pass you by.
Stop worrying about where rates are going. Start making offers that work where they are.
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