Interest rates are climbing again—and for many buyers, that feels like a giant flashing sign telling them to stay on the sidelines. But is that how a real estate investor should look at it? In this episode of The Moneyball Real Estate Show, Kevin Clayson and Steve Earl address the elephant in the room and explain why higher interest rates don't necessarily eliminate the opportunity in real estate. Yes, higher borrowing costs can reduce monthly cash flow. But they can also push other buyers out of the market, motivate sellers and builders, create opportunities for concessions, and give disciplined investors more negotiating power. Kevin also makes the case that interest itself isn't necessarily the enemy. Leverage allows investors to control an income-producing asset while potentially benefiting from rental income, principal reduction, appreciation, inflation protection, and tax advantages. The question isn't simply, "What is the interest rate?" It's: "What does the entire investment look like?"
Higher mortgage rates increase the monthly payment, which can certainly squeeze a traditional long-term rental.
But real estate has multiple potential sources of return:
Looking at only the mortgage rate can cause an investor to miss the larger picture.
Steve explains that a $50–$150 monthly swing caused by rates can feel substantial on a long-term rental producing only modest cash flow.
But when a property strategy is generating significantly more monthly income, that same change can become less material to the overall investment.
One of Kevin's central ideas:
"The interest rate is a gift, not a curse."
Why?
Because financing allows an investor to put up a fraction of the property's total purchase price while a lender provides the majority of the capital required to acquire the asset.
Kevin pulls an unexpected lesson from Ghostbusters: there's a scene where the characters discuss financing a property at an 18% interest rate. It's a funny reminder that investors have operated—and built wealth—through dramatically different interest-rate environments over time.
When a rental property is occupied and generating rent, the property's income helps cover expenses including financing costs.
That changes the way an investor may think about borrowing compared with a consumer financing a personal expense.
This is one of the strongest arguments in the episode. Higher rates often discourage would-be buyers.
Fewer buyers can mean:
less competition → more motivated sellers → stronger negotiating power.
Steve explains that they've already seen builders and sellers become more flexible when fewer buyers are competing for their properties.
Someone purchasing a primary residence understandably cares enormously about rates because a higher payment can reduce how much home they can qualify for.
An investor looks at a different equation:
What does this asset produce relative to what it costs me?
That distinction is central to the episode.
If higher rates reduce demand, sellers may become more willing to negotiate:
So a higher financing cost may sometimes be partially offset elsewhere in the transaction.
Kevin sums up the mindset shift beautifully:
Instead of:
"The sky is falling."
Ask:
"Opportunity is knocking. Am I going to answer?"