Julian Zottola

Interest Rates and Real Estate Investing: What Every Investor Needs to Know Interest rates are one of the most powerful forces shaping real estate markets. For investors, even small changes in rates can significantly impact acquisition strategies, cash flows, and long-term returns. Understanding how to navigate shifting rate environments is essential to building and protecting wealth in real estate. Why Interest Rates Matter for Investors Financing Costs Most acquisitions are financed with debt, which makes the cost of capital a critical factor in returns. A 1% increase in borrowing costs can drastically reduce cash-on-cash returns, especially in deals with thinner margins. Valuations Cap rates often move in tandem with interest rates. When rates rise, investors demand higher returns, which pushes cap rates upward and property values down. Conversely, low-rate environments tend to compress cap rates, boosting asset prices. Investor Demand Higher rates reduce affordability, cooling buye...