300. How to Make Deals Pencil with Today’s Interest Rates | Investors Round Table

Key Takeaways:

Explore alternative financing options like bridge loans, floating rate loans with rate caps, assumable debt, and seller financing to make deals work in the high interest rate environment.

Underwrite deals conservatively, stress-testing for debt sensitivity and ensuring NOI durability. Focus on realistic rent growth and expense assumptions.

Plan for longer hold periods of 7-10 years, as the 3-5 year flip mentality may not work in the current market.

Look for distressed opportunities, especially properties facing debt maturities that are forcing owners to sell or refinance on unfavorable terms.

Consider value-add opportunities, especially in newer vintage properties from the 2000s, as they require less capital expenditure compared to older 1960s-1970s properties.

Tighten expense management and focus on value-add improvements to boost NOI, as rent growth alone may not be enough.

Be conservative in underwriting, build in buffers, and focus on the long-term rather than short-term market fluctuations.