Every seller asks me about interest rates. “Shouldn’t I wait until rates come down to sell?” And I understand the logic. Lower rates mean cheaper financing for buyers, which means buyers can pay more, which means higher prices. Makes sense on paper.
But here’s why I think that logic is flawed for most sellers.
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Cap Rate Stability: Check whether your asset type has actually repriced or held stable in the current rate environment. -
Carrying Cost Reality: Calculate your annual carrying costs (taxes, insurance, maintenance, utilities). That’s real money sitting on the table every month you hold. -
Interest Rate Trend: Understand that nobody can predict rate direction. Waiting is speculation, not strategy. -
Cash Buyer Advantage: Consider whether a straightforward sale to a cash buyer is more valuable than the uncertain upside of waiting for rates to change.
The waiting game doesn’t always work
Rates have been elevated for a while now. People have been saying “they’ll come down soon” for two years. Maybe they will. Maybe they won’t. Nobody knows. And every month you wait, you’re paying property taxes, insurance, maintenance, and dealing with tenants. Time has a cost.
Market Timing Rarely Works
Sellers tell themselves, ‘I’ll wait for rates to drop and get a 10% price bump.’ Usually it doesn’t work out that way. When rates drop, more sellers appear, supply increases, and you still have to compete. Meanwhile, you’ve paid another 6-12 months of carrying costs. If the fundamentals of your building are solid today, they’re likely still solid in 6 months. Sell based on your situation, not on rate predictions.
The other thing: when rates do come down, more buyers enter the market. Which sounds good for sellers. But it also means more sellers enter the market. The supply of buildings for sale goes up at the same time. So the net effect on pricing isn’t as dramatic as people assume.
How rates actually affect my offers
I buy with cash. No financing contingencies. So my offers aren’t directly tied to interest rates the way a leveraged buyer’s would be. I underwrite based on cash-on-cash returns and cap rates. When rates are high, levered buyers offer less (because their debt service is higher). That means less competition for me. Which is actually good for sellers who want to deal with a cash buyer because I don’t have to outbid a bunch of leveraged investors.
In a low-rate environment, there are more buyers, more competition, and prices go up. But so does the frenzy. Buyers waive due diligence. Deals fall apart at the last minute. Sellers get caught up in bidding wars that don’t materialize. It’s exciting but it’s not always better for the individual seller who just wants a clean deal.
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What I’m seeing in the Carolinas right now
Industrial and flex cap rates have barely moved despite higher rates. Multifamily in Charlotte has seen some softening in the upper end but bread-and-butter apartment buildings are still trading reasonably. Land values in Charleston have held because construction costs are so high that existing buildings are more attractive than building new.
The asset types that got hurt by rates are the ones that were priced to perfection in the low-rate environment. Trophy office buildings. Class A apartment deals with razor-thin yields. Those have repriced. But the kind of stuff I buy, small-bay flex, contractor garages, neighborhood retail, modest apartments? The values have been remarkably stable.
My take
Don’t try to time the market. If you have a reason to sell, sell. If you don’t, hold. But don’t hold just because you think rates will drop and your building will magically be worth 20% more. That’s speculation, not strategy.
Seller takeaway
Want to know what your property is worth in today’s rate environment, not in a hypothetical future scenario? Call Roth Capital at 704-600-3839. We’ll run the numbers based on real current market data.
If you want to know what your property is worth right now, in today’s rate environment, call me. I’ll give you a number based on real data. 704-600-3839.
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