Rates Just Dropped Below 6% — What This Means for Real Estate Investors

Hello and welcome back to Multifamily Strategy. I'm Christian, your channel host. Uh, I just set up in the upstairs studio. If you guys are like, why is Christian 5 minutes late to the live? Or if you're watching afterwards, then I guess this doesn't matter at all to you. But if you're on the live right now, you're like, hey, wait a second, Christian's late to his own live. Uh, yeah, my computer upstairs died, so I'm on my laptop right now. So welcome to the little FaceTime camera. However, what I am going over today is going to be, I think, really interesting and really helpful if you're investing in multifamily, you're wondering what's going to happen here in 2026. This is pretty big. So I'm going to go get into my notes here that I did prepare. But if you're wondering why I'm not looking right into the camera, it's— camera's down here. It's super annoying. So welcome to Christian's laptop. You guys are going to get a heck of a live here. So here's the big deal. Rates hit a 3-year low this week. I am very excited about this. It's been a slow, steady slog down. And yes, it's been a new low every time they decrease interest rates. They did get to their lowest. We actually just saw rates on residential just dip below the 6s, which is a really, really, really good place for us to be. Now, this has some negative implications if you're doing creative finance and some positive if you are, if you know other ways to take out a deal. So I'm going to talk about what this looks like in creative real estate and what it means in the market in general, as well as my portfolio. So generally speaking, what happens when interest rates fall, it hurts the creative investors a little bit. Reason being is your ability to negotiate off terms kind of disappears because now you have great conventional debt products. It's pretty common that we see the seller motivation drops. So some of the things that you're, you know, where it's like, hey, I was able to get these great terms because someone was married to a price, well, now it's more attainable to actually get sellers their pricing because your cost of debt drops. It makes a huge difference because the number one detail that matters in a deal is the debt service coverage ratio. That's the money that you have to pay your obligations and pay yourself. If you're servicing less debt, it is a massive swing on what some deals can do. If you want some of the quick math, I'll pull up my calculator here on my phone. But like, let's say for example, on a few of your multi-family buildings, uh, your interest— you can pull another $2,000 off your interest with a lower interest rate. Okay, well, that's $24,000 a year lower expenses. That means a lot to your property. Now, in terms of value to you or what you could afford, every $24,000 you save in a market like Moses Lake or Stevensville traditionally have been 6 or 7 cap markets— call that a cap rate of 7. So $24,000 a year divided by 0.07, right there instantly your deal is $340,000 more affordable. That actually makes a pretty big difference. If you're talking multi-hundred thousand dollar swings, your ability to negotiate on price or offer people closer to what they wanted just a few years ago is now suddenly possible. Creative finance, seller motivation drops, uh, they're gonna start favoring conventional buyers again, so some of that urgency is going to start drying up and evaporating. That being said, when I first started using creative finance like my first ton of deals, about 17 deals, rates were in the 3s and 4s for most of that time period. So if you're like, oh my gosh, they're going to eliminate my ability to use creative finance, not even close. It's just the huge motivation to be able to push some of these through. Financing is now just less urgent. This is overall good news. A lot more deals are opening up. If we actually look at deal volume we're seeing more and more deals done. In fact, right now, purchase applications with lending— I just took a note on this— they're up 12% higher than a year ago this exact time. So people are sending in more offers, buyers are receiving more, but this means that our sellers are receiving more offers. This does mean that that endless buyer market we've been in could be drying up. So if there's a time to start getting into the game, I think it's now. If you buy now interest rates should still continue to drop slowly a little bit through the, uh, through the year. And I'm going to mention the elephant in the room with the Iranian conflict that's happening right now. I don't care where you land politically on this at all. This is not a political channel, this is a real estate channel. If you think that oil and war don't affect real estate, you're insane. So I'll give you the, the short term on this. Short term, what we typically see, uh, during wartime is we usually see a rate drop. We want to keep the economy stimulated. If this becomes a drawn-out conflict, which is not looking like it's going to be a long-term thing, uh, at least not like the prior Iranian war, things in the past. However, if it gets drawn out, it's going to have some ongoing and continued negative effects on oil pricing, which is going to make real estate more expensive. It's going to increase operating costs. It's bad for the entire supply chain. In the short term, it usually keeps downward pressure on interest rates. So if it's resolved quickly, real estate should do slightly better. Like, we should see nominal but tangible effects in real estate over the short term. But all these things economically, uh, with just the current trends, market conditions, and just global economic picture, we're looking at continued downward pressure on rates. We should see things continue to get more and more affordable. Real estate should be a little bit hotter this year than it was last year, is basically what we're saying. I don't think there's gonna be some sweeping, amazing, like, hey, because all this is happening, you need to buy real estate right now. I do think in general, though, it is a good time. What I would focus on learning right now, if I was like, how do I take advantage of this next market cycle? Here's what I put all my, all my attention into. Creative finance, good to know, super helpful. If that tool is going to become slightly less valuable, how do you get bank debt to take out bigger deals? If you don't have the qualifications, you don't have the money. If you're going to play with a little less creative finance, how could you creatively take out the deal? So I'm going to be looking at structures like, hey, how do we get into joint ventures where I'm going to have someone fund my deal and I'm going to find other people who have the qualifications? So I'm going to still find the same deals, the same opportunities, but now they work with bank debt. If you play this correctly, some creative finance channels or some real estate investors like, oh my gosh, the game is going to get harder for us. For me, I think this opens up the playing field. Now, in addition to creative finance, things are going to start working in bank finance again. If you can close a deal creatively financed or conventionally financed, and you can negotiate either side of that— follow our rules of deal first, then find the debt product, which is now opened up, and then equity— there's still the same amount of people, arguably a little bit more, who have money, who want to make money in real estate. If you've ever struggled to find deals in your market, guess what? So have they. You find the opportunity, you now have the product. That is all real estate is. If you are a real estate investor and you're playing beyond the money you have, the widget that you are selling, your business, is a real estate deal. If you're finding the deal, you have all the value. Now there's just more debt products total to take out. You're going to have more volume, and I think we're going to see this across the market. You can still compete with the same people with the same strategies. With or without having the money today, you need to know how to get creative on the equity structures. My tip to everyone, I talk about it often on this channel, but understand how options, buyout options, work with partners. File LLCs after you're under contract for property. Find your deal, find the debt product that's best for it, build the team to qualify for that debt product, and attach an option contract to your operating agreement that gives you terms in which you can buy out that partner in the future. Make sure that when you refinance the property, the cash-out refinance is enough to buy out the partner. It's basically, if you're from single-family or small multifamily, it's basically the BRRRR method. We're going to improve the property, we're going to operate the property, and when we get to cash-out refinance, instead of returning the capital to us— remember, we may not have actually put money into the deal or have less money in the deal— we're using that capital as the buyout for the partner. So now we own the building, the real estate buys the real estate, You can do this conventionally. You don't need creative finance to do that. In fact, more often than not, I end up doing that on bank finance deals. So this is good news. Rates are coming down. That means values are going up. It's a great time to already own real estate. This next year, I think 2026 here, going into 2027, these are going to be the big years to really focus on taking off your portfolio and bringing it to the next level. Also just looking through the notes here. If you guys have any questions, you're always able to ask throughout this. Also notice for Instagram, I'm a little bit uncentered on the screen, so I apologize, uh, Instagram people. This might be a little bit better. Kimberly, uh, says hello. Kimberly, good to see you. Kimberly's in the mentorship group. Always good to see, uh, always good to see members of the, uh, Multifamily Strategy Mentorship here as well. But yes, uh, feel free to ask questions as we go along. Now back to my notes. So overall, this is, this is what I'm excited about. With rates at their lowest 3 years and trending down, I expect to be doing a similar video. That's even better news next year, saying rates have continued to drop and now they're at their 4-year low. I think this is going to be really good. But again, know that this means more competition is entering the market, means more debt products are available. It means creative finance is going to move a little bit slower. Uh, but what I'm really excited about is that the, the 6%, uh, it just seems to be where we're kind of leveling out. I think commercial is going to follow this next. So right now, residential rates sub-6, just barely. Uh, we're still seeing for commercial multifamily 6.2, 6.3, 6.4, uh, for average interest rates. That's going to continue to push down. If we can get into the 5s this year, I think that's going to open up a lot of the deals that have been stuck on market for a while. So you're probably still going to see a lot of volume. The people who bought at 3% and have been bleeding the property along as long as they can, banks are starting to call notes due. So you're seeing cheaper debt than we had, but you're still going to see some of those deals hitting the market as well. So all in all, if you are a buyer, this is all overwhelmingly positive news. 2026 should be better. I think that whole saying they had going on, survive through '25. We made it through 2025. I don't think we're in, you know, we haven't entered the new golden era of real estate, but we're actually seeing a pretty good setup going into this year. I remain highly optimistic, especially if you're in a market that has growing population. All right. Question from Oscar here. What's your book going to be about? Oh, there we go. Um, so the book— and we've mentioned MMA on here. I love, uh, I'm really happy now that the pay-per-view era is over. I can watch my, uh, watch my UFC here on Paramount Plus. It's an amazing, amazing time. Uh, but, uh, what's the book gonna be about? So I have an upcoming book. It's called, uh, well, I'm not gonna give away the title quite yet, but it's going to be on creative finance and creative real estate. So not just one or the other. It's not just like, hey, here's the debt products. It's what are the sustainable ways that you can actually buy deals and the different creative clauses that we use. Every single chapter in this book, I've used an actual real-world example. So you can actually like, here's a concept and here's how it was applied. It's all me, my mentees, or my mentors and literal deals and lessons that they learned. So every single chapter, practical application. We go into seller financing, we go into the Hommel hack, we talk about acquisition strategies, uh, when you negotiate with the broker, when you go direct to seller. All of these strategies are in here, and I'll actually show This is how these deals came together. Here's the ins and outs of the deal and how you can use this skill to make a bunch of money. And in fact, you can actually go through and see the millions of dollars that the strategies have made and tally it up as you go chapter to chapter. So I'm very excited. That is officially in editing. So we're working on the, the COVID artwork is being worked on. My editor is going through the book right now. It goes to formatting and then it will be available on Amazon and anywhere that you buy books. So, uh, very excited for that. We should be done with the first round of edits and draft cover on April 30th, so look for that, uh, June and July, more to come out as that moves along. Also, you know, we're in a buyer's market. Do you think it stays a buyer's market over the next 6 months? Yes. Um, and I do love that he's doing deals either way. So here, here's a strategy that this, uh, they teach us in college. It's one of the only strategies in college that I actually thought make a lot of sense. I still do this today. Uh, if you buy one deal at one point in time, you are betting on the market. You are betting that, hey, I'm buying at the right time, it's going to go well. If you're always buying, it's called dollar cost averaging. You're just always putting money into the market over time. We know this for a fact. Real estate goes up. They continue to print money. We still have scarcity, especially in growing markets. Now, while U.S. population is actually in a slight decline right now, we typically also trend up in population. So As scarcity increases, as money supply increases, we keep printing it, uh, value of real estate continues to go up. So the strategy is invest all the time, always be buying. If you're always buying, you're now betting on real estate going up, not just on one project at one point in time, which is a much safer investment strategy. That being said, there are definitely buyer's markets and seller's markets. I think through 2026 is going to be the transition year. So next 6 months, yeah, we're still buyer's market. Uh, but less and less as rates go down, uh, sellers are going to consistently have more negotiating power because ultimately, uh, higher prices are going to start working again. So, uh, expect to have more deals at the market and less price flexibility as a lot of the deals that are getting listed here over the next 6 months to a year, they're going to be people who are trying to get a price. They pulled the deal off the market as rates skyrocketed and they're finally getting back to where they could exit where they wanted. So expect a little bit more resistance to your price negotiations, but still absolutely doable. And of course, every deal is unique. So while there's market conditions, each property, each owner, there's still tons of opportunities out there. The percentages that you talked about— by percentages, I assume we mean interest rate percentages. Talk about, does that include 100 units or more? 100 units or more is actually a little bit less expensive than the conventional, uh, conventional debt products. So today, uh, my last loan, uh, conventional loan was, I was direct through Fannie Mae, so it's agency, but like conventional products on larger buildings, we came in at 5.2%. So they're about a point lower as you get larger buildings. Uh, they're very great, uh, question if I'm, if I'm understanding the question right. It's the right question. Um, we're seeing 6s for like small to mid-sized multifamily. So assume like 5 to 30 units, 5 to 50 units, you're probably seeing interest rates in the low 6s, high 5s. As you get a little bit larger, you might get into the mid to low 5s, uh, for general interest rate for what we're seeing today's market conditions. And again, things change, but everything that we're seeing politically and just economically All of these things are providing a short-term downward pressure on interest rates. And of course, the Fed's making some potential moves. And so we'll stay tuned. It should be a pretty dynamic year, but I think real estate will probably see about what we expected— slow and steady rate drops, uh, continuing through the year. If you're planning on refinancing, you have debt in the 7s, you're probably about the time where it's time to start talking to the lender. Get new debt product in place. And that seems to be the questions there on Instagram. I do have a question from Richie here. Do you have some sort of course I can join to get my first multifamily deal? Oh, I do. We have a whole mentorship. You can check it out at multifamilystrategy.com. We have a huge community of people who are buying deals all over, uh, just all over the country and out of the country. I have Canadians who've actually been really successful too. Um, so multiple countries that have been successful in the primary US. Uh, but yeah, check that out. We have, uh, regional meetings. We meet 3 times a week. Uh, but that's all multifamilystrategy.com. I actually have some of the mentees are actually here on this, uh, on this live right now. Um, if you want to dip your toe and kind of learn some of this and figure out like, hey, how do I get free calculators, community, go to school.com, S-K-O-O-L.com, and go to Multifamily Strategy Community, completely free. Never charged, never will charge to be part of that community. About 3,000 investors doing the same thing that you're doing here, learning real estate and getting in the game. If the goal is to get plugged in, dip your toe in there. Of course, like and subscribe to this channel. Uh, tons of information here, tons of community on the school community. If you're looking for specifically mentorship and coaching, uh, 3 live calls a week, one-on-one support, a full— you know, there's about 350 video course All those tools are available there as well, if you would, if you would like. And an endorsement from Kim, who is one of those members. Thank you, Kimberly. Kimberly, best class ever, very informative. I appreciate that very much. And it's a good note for us to end on here. As usual, it is Wednesday. So in about 30 minutes, I'm going to go ahead and run a webinar here on Creative Finance.. So if you're also, I'll add this like a last shameless plug. If you're looking to get into the game and you're looking for a community to join, I'll probably talk a little bit about it on the backend. But what you're gonna learn on this webinar is all meat and potatoes on creative finance, on creative equity structures, which is what I talked about here. Like how do you partner and get conventional bank debt as rates come down? This is a fantastic time to take advantage of that. I'm gonna talk about it on the webinar. I'll talk about some other strategies that I've used to actually make hundreds of thousands of dollars while I'm increasing my income. That you can copy like one-to-one. I'll even show you deal examples how to do that. So that is multifamilystrategy.com/workshop. Um, the spots are limited, but I think we still have a few. There were quite a few registrants, so, uh, if you haven't yet, I can have up to 500 people in that meeting. Uh, we have, we have a little over 500 people registered, which means we'll probably have like 450 show up. So, uh, still a couple spots for that. So if you're watching this right now Uh, that starts in about 35 minutes from when I'm filming this, so I would love to see you there. I run it, uh, every once in a while though, so if you happen to be watching the recap of this and you missed that webinar, uh, still check out that link, multifamilystrategy.com/workshop, and the next available one should show up, uh, most likely. So appreciate you all very much. Thanks for putting up with my laptop here as my upstairs computer died. I did not want to move the entire studio down here, so Thanks for bearing with me. I hope this was helpful and everyone have a fantastic week. I'll see you guys next Wednesday.