Real Estate Investing in a High-Interest Rate Environment

Higher interest rates have reshaped the real estate landscape in Canada. Gone are the days of cheap leverage and ultra-low monthly payments. For investors, this shift requires a new mindset—one focused on fundamentals, creativity, and adaptability.

Whether you’re actively growing your portfolio or waiting for conditions to improve, it’s critical to understand how high-rate environments affect deal-making and profitability.

How Interest Rates Impact Real Estate Investors

When interest rates rise, borrowing becomes more expensive. This leads to:

• Higher monthly mortgage payments

• Lower cash flow margins

• Reduced buying power

• Slower appreciation in some markets

For many investors, deals that made sense two years ago no longer cash flow under current rates—especially in expensive markets like the GTA or Vancouver.

What Types of Deals Still Work?

In a high-rate market, not all strategies are off the table. The key is to focus on deals that create value or offer above-average yields. Consider:

• BRRRR Deals: Buy, Rehab, Rent, Refinance, Repeat strategies that force appreciation and build equity quickly.

• Student Rentals: High rent per square foot and strong demand in university towns.

• Multifamily Properties: Economies of scale and shared operating costs improve efficiency.

• Off-Market Properties: Direct-to-seller deals often come with better pricing and more room to negotiate terms.

Creative Financing to the Rescue

When traditional bank financing doesn’t make sense, investors can still get deals done using alternative methods:

• Vendor Take-Back Mortgages (VTBs): The seller carries part of the financing, often at a favorable rate.

• Private Lending: More flexible terms and faster closings—ideal for short-term holds or flips.

• Joint Ventures: Partner with someone who provides capital in exchange for equity and shared returns.

  
  

These tools can help investors reduce out-of-pocket expenses and keep moving forward—even when bank rates feel limiting.

Mindset Shift: From Appreciation to Cash Flow

In a hot market, investors often bet on appreciation. In a high-rate environment, that’s a riskier play. The focus now shifts to strong, reliable cash flow and value-add potential. This means analyzing deals more conservatively, stress-testing mortgage scenarios, and avoiding razor-thin margins.

Cash reserves are also more important than ever. Vacancies, repairs, or refinancing delays can be costly if you’re over-leveraged.

Final Thoughts

High interest rates may slow some investors down, but they don’t have to stop you. Smart, adaptable investors still find deals—they just look different than they did a few years ago.

At Greenell Capital, we help investors navigate changing market conditions with clarity and strategy. Whether you’re sourcing creative financing or refining your deal analysis, our team is here to help you thrive—no matter the rate environment.