Uh-oh. The interest rates are rising. THIS type of house will keep appreciating. 

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So. You and I both know that interest rates are going up. This raises questions: is it good to buy a house right now or not? Home values have been going up like they’re on steroids over the past decade or so, and obviously, no one wants to buy something at the peak of a bubble if those values are about to all go down. Especially not with a high-interest rate. 

But even with all the hype around interest rates, there is still one type of house that won’t really be affected and will keep appreciating. 

There’s more than one type of house? 

Yep, my general breakdown of houses goes like this: 

  • Expensive houses that are highly leveraged
  • Cheaper houses that you pay off quickly 
  • Very cheap houses that you rent out as “low-income housing” – read more about why I advise against this
  • Apartment buildings
  • And multiplex homes where you actually live. Read more about duplexes, quadplexes, and house hacking

Where am I going with this? 

The value of housing with big mortgages will swing around way more with increasing interest rates. 

That means if you have a $5M apartment building that doesn’t yield much in terms of monthly cash flow, the value of that place will plummet as interest rates rise. That’s what’s happening to apartment buildings in my area. They’ve barely broken even in 2019 and now interest rates have tripled. No one wants to buy a money pit, so they drop in price. 

In the other hand, houses in the $100K range don’t really need a mortgage for many people – and investors like to buy those up in cash – interest rates be damned! 

Here’s an example of the Zillows price estimator in Cleveland – a city known for below-average home prices. 

Look! The rising interest rates had no effect on home values whatsoever. 

Now let’s look at San Francisco – known for its high home prices. Blamo! Huge drop. 

Why would anyone want a cheap house right now? 

  • Owning rentals is still awesome. All the reasons why investing in real estate is known to be great are especially powerful right now, and my favorite reason is that your return on investment is automatically inflation-adjusted. 
  • Did he say inflation-adjusted? Rental prices are one of the drivers of inflation, so owning a home mortgage-free (or nearly so) automatically calibrates your income to inflation. It’s almost as safe as owning farmland right now. 
  • Safety?! That’s right, these homes will still grow in value when everything else is down. Just from personal experience, I’ve had an uptick in buyers interested in my $100K homes when interest rates shot up. 

So what do we do with this information? 

  1. You can play it safe and buy the “good investment” of today – those $100K-ish houses. Don’t stress about inflation or mortgage rates. You will still make about 12% per year on your investments (around 8% rental returns, and 4% appreciation as an estimate.) 
  2. You could also shoot for the moon and sell everything that’s doing well and buy the faltering houses – I’m talking about the super-pricey ones with big mortgages since they’re going down in value. 

I would recommend option number 1 if you’re in or close to retirement and don’t want to mess around with your money. Go the safe route. 

And go with option number 2 if you’re bringing in a healthy income and have enough money to cover any rocky years that a multi-million dollar house might create. 

That’s what I’ve been up to. 

I’ve discussed this before, but I’m buying and selling houses this year on turbo-speed. I’m selling two of my houses in the $100K range so that I can buy a $1M+ home at a discount. 

Is this luck or smarts? 

I’ve been scared of inflation for years, and I really think that the inflation problem will be a multi-decade issue that will bite everyone at some point. 

Because of this, I’ve been buying cash-flowing houses for years. They’re invulnerable to a crash and give me money. 

But I’m jumping ship. If everyone wants what I have, I’m happy to sell it off and then buy some big-ticket houses “on sale.” 

Wait, if inflation is a multi-decade issue, isn’t your decision dumb? 

Maybe. But a sale is a sale! 

In any case, I have a plan, and I’ll let you know how it all pans out right here on this blog. 


  • The type of house that will keep appreciating even with interest rates going up are homes in the $100K range since they can be bought without a mortgage. 
  • That said, I’ll be selling off my homes in that category to buy some big-ticket houses since they’ve gone down in value.

Interest rates going up.

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2 thoughts on “Uh-oh. The interest rates are rising. THIS type of house will keep appreciating. ”

  1. Thanks for the post, I wrote one about single-family homes recently as well and I think you’re spot-on about prices. The only problem with smaller, cheaper homes is the competition to buy them. As you mention, any homebuyers in this category will be competing with all-cash offers from BlackRock et al.

    But question for you: if interest rates stay high, why buy leverage real estate now? My take is that it’s best to wait for a while for Fed rates to stabilize/fall and then try to purchase. My prediction is that expensive single family home values will continue falling substantially for the near future and rates will continue to rise. If you’re a value investor, that’s a bad formula.

    • The equation for the timing is simple.
      Real estate investors (for multi family rentals etc) are people like you who are quite into finance. You think this is the wrong time to buy, so they do too. Therefore, I have no competition. I think once rates start going the other way people will start to pile back in so then it’s too late.

      Plus, real estate is a long term game, so the extra interest I pay over a few years is temporary. Guaranteeing a somewhat low price is forever. 🙂


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