Fed Cutting Interest Rates: What It Means for Real Estate Investors

The Federal Reserve is set to lower interest rates to bring inflation down to its target of 2%. With this move, real estate investors and homeowners alike will feel the effects. While it can present some opportunities, it also comes with certain challenges depending on where you are in your real estate journey. Let’s dive into what this change means for you.

1. Why the Fed's Decision Matters

The Fed’s goal to reduce inflation by lowering interest rates has significant ripple effects throughout the economy, especially in real estate. When news hit the market that rates would drop, refinances surged 35%—a testament to how even a small reduction can make a big difference in monthly payments. Whether you’re a homeowner or investor, refinancing at a lower rate can save you $60 to $100 a month, depending on the loan size.

2. Rising Housing Prices on the Horizon

While lower interest rates may ease the financial burden for many, they will also likely cause housing prices to rise. As more people rush to refinance or buy homes at lower rates, the increased demand will drive up prices. For real estate investors like me, this is a positive—our property values are expected to go up. However, for those just starting their real estate journey, it could make it harder to find affordable deals.

3. Strategy Shift for Investors

In light of this potential market shift, I’ve had to reassess my strategy. Recently, my team and I had a “pruning conversation,” where we reviewed our portfolio to decide which properties have appreciated enough in value that it makes sense to sell. With roughly $1 million in equity across several single-family properties, I’m planning to consolidate that into larger, more manageable investments, such as RV parks or multifamily properties. These kinds of assets tend to require less day-to-day management than multiple single-family homes.

4. For New Investors—A Mixed Bag

If you’re just starting out, this interest rate cut presents both opportunities and challenges. Traditional strategies like the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method may become more expensive as housing prices rise. On the flip side, creative financing strategies like seller financing or "subject to" deals can help you bypass traditional lending and get into real estate with little to no money out of pocket. There are still deals out there—whether it’s a property with 2% or 3% interest rates directly from sellers—but you need to act fast and network smartly.

5. Long-term Outlook for Investors

As we move toward 2025, I anticipate interest rates to stabilize in the 4% range. That’s when I plan to refinance many of the properties I’ve owned for 5 years, potentially unlocking $2-3 million in cash. This will allow me to invest further in other areas of the real estate space, such as lending to fix-and-flippers through my upcoming lending business.

For those of us already in the game, the future looks bright. For those looking to break in, don’t be discouraged—there are creative strategies that can still get you deals.

What You Should Do Next

If you're looking for ways to invest, start by networking! Join communities like Pace Morby's FREE Facebook group, "Creative Finance with Pace Morby," where you can connect with other investors actively doing deals.

Whether you’re taking over a property with low interest rates or using creative financing, there are plenty of opportunities to grow your real estate portfolio despite rising prices.

As always, I’ll keep you updated on what’s happening with the Fed, and I’ll be sharing insights on properties I’m selling and the reasoning behind it. Stay tuned for more.

Stay Connected,

Tim