Mortgage interest rates have taken real estate investors on a wild ride over the last five years. We’ve gone from historic lows to a multi-decade high, followed by a slow settling into a new normal. As 2025 comes to a close, many investors are asking the same question: How do you invest confidently when mortgage rates are easing but still elevated?
Let’s answer that question by addressing:
- How mortgage rates have changed since 2020
- Where rates stand now at the end of 2025
- How experts predict rates will change in 2026
- How today’s rate environment affects investment returns
- How to invest in real estate successfully under current market conditions
How Interest Rates Have Changed Since 2020
2020 will live in infamy as the start of the pandemic. Interest rates were already low at the beginning of 2020, at around 3.5-3.75% for a standard 30-year fixed-rate mortgage. Over the next year, they would plummet to just 2.65% as COVID-19 triggered a short but severe recession.
Unfortunately, interest rates at historic lows helped drive inflation to levels not seen since the early 1980s. To fight inflation, the Federal Reserve increased federal funds rates, which resulted in higher mortgage interest rates. In 2022 alone, mortgage rates rose from around 3.2% to over 7%. Naturally, the market stagnated as buyers’ purchasing power declined, and pre-2022 sellers were “golden-handcuffed” to their low interest rates, preventing them from selling their homes.
In October 2023, interest rates peaked at around 7.8%. They’ve been working their way down since, but it’s been a slow, two-steps-forward-one-step-back process.
Today’s Interest Rates and the Resulting Market Conditions
In December 2025, rates are hovering around 6.25%. Many of today’s buyers are too young to remember when mortgage rates averaged double-digits in the 1970s and 80s, so today’s rates feel high, despite being below average for the last 50 years.
Because the rate feels high (and because home prices have skyrocketed due to the low interest rates of the 2000s and 2010s, as well as factors like too little new construction and senior homeowners aging in place), fewer buyers are financially able to enter the market. And many homeowners aren’t willing to give up their low interest rates by selling, further constricting inventory.
The result is a stagnant market.
Interest Rate Forecast for 2026
The general consensus among real estate and finance experts is that rates have stabilized, but may continue trending downward in 2026, albeit very slowly. Some analysts believe rates will dip below 6%, but even this isn’t a sure thing. Your best bet is to expect rates to sit in the 6-7% range over the coming year.
How Today’s Interest Rates Affect Real Estate Investors
Today’s mortgage rates shape investment strategy in a few key ways:
- Cash flow may be tighter. With the higher cost of borrowing eating into margins, today’s investors need to be more aware of controlling property expenses, increasing resident retention, and looking for ways to add value to properties.
- Debt structure matters more. Fixed-rate loans offer long-term stability, and if rates fall, they can often be refinanced to the lower rate (though there is a cost to originate the new loan). Adjustable-rate mortgages (ARMs), on the other hand, may appeal to investors who expect rates to fall over the next five years, as the rate will automatically adjust based on changing market rates (following the low-rate introductory period).
- Affordable housing demand is through the roof. With interest rates contributing to the high cost of homeownership, buyers are desperate for more accessible housing options.
How to Invest in Real Estate When Mortgage Rates are 6% or Higher
Higher mortgage rates mean you need to prioritize real estate projects with:
- Stronger margins
- Smart debt leverage
- Extremely high demand from renters and/or buyers
Here are a few strategies for investing in real estate projects that meet these requirements.
1. Multi-Family Built-to-Rent (BTR) Development
Built-to-rent (BTR) is when you construct a new property with the intention of renting the units rather than selling the building upon completion. In markets with high renter demand, this can be a smart move even when interest rates are high because the margins are often so impressive.
Building a new property from the ground up helps to ease housing shortages by providing much-needed inventory while also creating strong return potential through the value-add of new construction. New developments typically enjoy increased tax benefits, like lower property tax assessments and accelerated depreciation. You can also tailor your new building to current renter preferences for your local market to increase renter demand and rental rates.
Plus, by holding the completed property as an in-service rental for at least 12 months, you qualify for favorable capital gains tax rates on the sale, rather than paying higher earned income rates.
2. Value-Add Projects
Value-add projects are real estate investments in which you add value, typically through renovation or refurbishment of a distressed property. Many investors automatically think of flipping houses when they hear “value-add.” And while fix-and-flips are one example, they aren’t the only option. You can add value to existing multi-family buildings to command higher rental rates, for example. Or add an ADU (accessory dwelling unit) to your primary residence to create passive rental income.
With value-add projects, you’re forcing appreciation rather than relying on low borrowing costs for profit margins. While you might not be able to resell quickly in a stagnant market, adding value puts you in a strong position to qualify for refinancing at lower rates if rates dip in the future.
3. Tenancy-in-Common (TIC) Conversions
Tenancy-in-common (TIC) is a form of property ownership in which multiple buyers purchase an undivided interest in a real estate asset. This is common in markets like San Francisco, which have large historic homes that modern buyers can’t afford. Essentially, you divide the property into individual dwelling units, then sell the property to multiple buyers who will own the entire property together and live in their own units. From the buyer’s perspective, this is similar to living in a condo, but instead of owning your unit, you have an undivided ownership interest in the whole building, with a right to reside in your unit.
This strategy works well in high-value, low-inventory markets because it creates affordable homeownership opportunities that are in such high demand. By selling to a group of owners in a TIC structure, investors may earn 10-20% more than if they were to sell the same building to a single investor-buyer to be used as a rental property.
4. Section 8 Affordable Housing
Section 8 is a government-subsidized housing assistance program designed to help low-income renters (including veterans, senior citizens, struggling families, and the differently-abled) cover their monthly rent expenses.
Investing in building (or converting) multi-family structures for Section 8 housing not only helps make housing more accessible for those with the greatest need, but it can also generate stable returns. You can set fair market rental rates, collecting up to 70% of each unit’s rent from HUD (the US Department of Housing and Urban Development) and the remaining percentage directly from the tenant. Because the program is in such high demand, the renters are usually model tenants who pay rent on time, follow the community rules, and remain in the units long-term. Lease-up is typically fast, and vacancy losses are generally very low.
This high demand, low turnover, and comparatively low property expenses make this a good option when interest rates are moderate.
5. Real Estate Syndication
Real estate syndication is when multiple investors pool capital to fund a specific project. The project could be nearly anything, including the multi-family BTRs, value-adds, TIC conversions, and Section 8 opportunities just discussed. Pooling funds from multiple investors helps keep investment minimums low and allows you to access high-value projects without shouldering the financial burden alone.
Each syndication project is professionally managed by a real estate sponsor, so your returns are completely passive. This also allows you to leverage the experience and resources of the sponsor to reduce risk and increase return potential!
The Benefit of Investing in Syndication with Gatsby in Today’s Environment
Gatsby Investment is a leading real estate syndication platform with an established track record of providing exceptional returns to investors.
Investing with Gatsby gives you an edge in today’s market in several important ways:
- Our team of real estate analysts explores hundreds of potential deals each year, bringing you only the opportunities with the best return potential.
- We track market trends to help you capitalize on changing market conditions.
- Our relationships with local lenders help us secure favorable interest rates.
- By working with the same builders and suppliers, we control quality while securing lower bulk-pricing rates.
- We take care of every detail for you, so you get to enjoy all the benefits of investing in real estate without any of the time or hassle associated with traditional direct ownership.
- Because we have so many investors, you can buy into a multi-million dollar deal with as little as $25,000.
- You can lean on our expertise for real estate investment success without any prior investment experience!
You certainly don’t need to wait for interest rates to decline before investing in real estate. In fact, you don’t need to navigate today’s interest rates alone. Simply choose from Gatsby’s pre-vetted investment opportunities and put your real estate portfolio growth on autopilot today!