Investing in Real Estate Through Rising Interest Rates: A Contrarian Playbook
November 2022. Real estate investors are panicking. The Fed has raised rates from 0% to 4% in less than a year. The "easy money" era of 2020-2021 is over. Deal flow has dried up. Everyone is sitting on the sidelines.
This is exactly when I started deploying capital aggressively at Wisrem Trading.
Rising interest rates don't kill real estate opportunities—they create them. Here's the contrarian playbook that's worked for us.
The Panic of 2022: Why Everyone Was Wrong
Let me paint the picture of late 2022:
Market sentiment:
The consensus view: "Wait for prices to fall further before buying."
What actually happened: The best opportunities came in Q4 2022 and Q1 2023, before most investors got comfortable again.
Why Higher Rates Create Opportunity
This goes against intuition, but higher interest rate environments create better deals for several reasons:
1. Reduced Competition
The reality:
What this means: Less competition = better negotiating position
At Wisrem, we acquired 8 properties in Q4 2022 with an average 15% discount from Q2 2022 comps. The same properties would have had 20+ offers six months earlier. We faced 1-2 competing bids.
2. Motivated Sellers
Higher rates create motivated sellers:
Overleveraged investors:
Developers:
Corporate relocations:
3. Recalibrated Expectations
During low rates (2020-2021):
During high rates (2022-2024):
4. Focus on Fundamentals
Low-rate environments let poor investments work. High rates force discipline.
What worked in 2020-2021:
What works in 2023-2024:
This separates amateurs from professionals.
The Contrarian Playbook
Here's how we've approached real estate since rates started rising:
Strategy 1: All-Cash Purchases for Maximum Leverage
The conventional wisdom: "Never buy all cash, leverage is how you build wealth."
The contrarian approach: All-cash purchases during high-rate environments create multiple advantages.
Why it works:
Advantage 1: Negotiating Power
Advantage 2: Option to Refinance Later
Case Study: Phoenix Multi-Family (2022)
Purchase: $2.1M all-cash, December 2022
Two years later (2024):
Strategy 2: Buy Distressed from Overleveraged Investors
Many investors bought in 2020-2021 with bridge loans, expecting to refinance. When rates spiked, they couldn't refinance at sustainable rates.
Where to find them:
What to look for:
How to approach:
Example: Dallas Rental Portfolio
Backstory: Investor bought 4 rentals in 2021 with bridge loans, planning to refinance. Rates spiked, can't refinance at positive cash flow.
Our offer: $940K for all four (20% below market)
Current status:
Strategy 3: House Hack with Low Down Payment
For those without all-cash capital, owner-occupied financing still offers good rates (even in high-rate environment).
The approach:
Example: Denver Duplex (2023)
Purchase: $450K duplex
Two years later:
Strategy 4: Seller Financing for Win-Win Deals
When rates are high, seller financing becomes attractive for both parties.
The pitch to sellers:
The benefit to you:
When this works:
Example: Colorado Mountain Property (2023)
Deal structure:
Impact:
Strategy 5: BRRRR in High-Rate Environment
Buy, Rehab, Rent, Refinance, Repeat—but modified for high rates.
The adjustment:
Why waiting works:
Example: Atlanta Value-Add (2023)
Purchase: $180K all-cash (distressed property)
Renovation: $45K (4 months)
All-in: $225K
ARV (After Repair Value): $295K
Current status:
Plan:
The Math: Making High Rates Work
Let's compare the same property at different rate environments:
Scenario: $300K rental property, $60K down (20%)
Low Rate (3.5%, 2021):
High Rate (7%, 2023):
The conventional conclusion: "Returns are terrible, don't buy."
The contrarian insight: But you're buying at a 15-20% discount because of reduced competition.
Adjusted high-rate scenario ($255K purchase, 15% discount):
Plus you have $45K in instant equity from the discount.
Where to Invest in a High-Rate Environment
Not all markets perform equally when rates rise.
Markets to Target:
1. Strong Job Growth Markets:
2. Markets with Housing Shortages:
3. Markets with Diversified Economies:
4. Lower-Price Markets:
Markets to Avoid:
1. Markets That Surged 2020-2021:
2. Single-Industry Towns:
3. High-Cost, Low-Rent Markets:
##The Mistakes to Avoid
Mistake 1: Waiting for Perfect Timing
The trap: "I'll wait until rates come down."
The reality: By the time rates drop, prices have already risen and competition has returned.
The better approach: Buy good deals now, refinance later.
Mistake 2: Ignoring Cash Flow
The trap: "It'll appreciate, I can handle negative cash flow."
The reality: Negative cash flow in a high-rate environment is much more dangerous. You're bleeding capital with no safety net.
The better approach: Only buy deals that cash flow from day one.
Mistake 3: Over-Leveraging
The trap: "I'll use 90% financing to maximize my leverage."
The reality: High leverage + high rates = danger zone. One tenant missed payment and you're in trouble.
The better approach: Use 70-75% max leverage, or buy all-cash and refinance later.
Mistake 4: Chasing Appreciation
The trap: "This market will appreciate 10% annually."
The reality: In high-rate environments, appreciation slows. Buy for cash flow, consider appreciation a bonus.
Mistake 5: Skipping Due Diligence
The trap: "It's discounted, so I should jump on it."
The reality: Properties are discounted for a reason. Some are good deals, some are money pits.
The better approach: Inspect everything. Walk properties. Run conservative numbers.
The 2024-2025 Outlook
Where do I think we're headed?
Interest Rates:
Property Prices:
Rental Demand:
Recommendation: Be aggressive in 2024. This window won't last forever.
Your Action Plan
If you have capital:
Step 1: Identify 3-5 target markets
Step 2: Build local relationships
Step 3: Underwrite conservatively
Step 4: Act decisively
Step 5: Plan for refinance
If you don't have capital:
Option 1: House hack with low down payment
Option 2: Partner with capital
Option 3: Seller financing
The Bottom Line
Rising interest rates didn't kill real estate investing—they just separated the amateurs from the professionals.
The easy money era (2020-2021) made everyone look like a genius. Rising rates (2022-2024) revealed who actually knew what they were doing.
At Wisrem Trading, we've deployed more capital in 2023-2024 than in the previous five years combined. Why? Because:
1. Less competition = Better prices
2. Motivated sellers = Better deals
3. Forced discipline = Better properties
4. Future refinancing = Better longterm returns
The next 12-18 months represent the best real estate buying opportunity since 2010-2012.
The question isn't whether to invest. It's whether you'll have the courage to act when everyone else is afraid.
*The best time to buy real estate is when everyone thinks it's the worst time to buy real estate.*