Interest Rates Are High. Should You Still Buy Short-Term Rentals?
Higher interest rates are making short-term rental deals harder to find, but that doesn't mean opportunities have disappeared. In this episode of Cash Flow Positive, Kenny Bedwell breaks down how rising borrowing costs are affecting returns, why buying now and hoping to refinance later can be risky, and how investors can protect themselves by looking beyond cash flow alone.
Kenny also explains the difference between real and fake forced appreciation, why improving a property's underlying residential value matters, and how the beginning of the year can create opportunities for investors willing to negotiate. Rather than sitting out the market because interest rates are high, learn how to evaluate individual deals, understand the risks, and adapt your strategy to the conditions in front of you.
Key Takeaways
- How rising interest rates affect returns: Even a half-percentage-point increase can significantly reduce cash-on-cash returns and turn an attractive deal into a marginal one.
- Why you shouldn't rely on refinancing: Rates may eventually fall, but there's no guarantee of when. Buying a property that only works if you can refinance soon leaves you exposed if conditions don't improve.
- Why the deal matters more than the market: Instead of ruling out entire markets because of interest rates, focus on the numbers, the property's potential, and the risks involved.
- Cash flow isn't the whole picture: A property that depends entirely on rental income can become vulnerable when revenue drops unexpectedly. Having appreciation potential and multiple exit strategies provides more flexibility.
- Real vs. fake forced appreciation: Adding expensive short-term rental amenities doesn't necessarily increase a property's underlying residential value. Improvements such as adding bathrooms, increasing liveable square footage, and upgrading kitchens can offer more durable value.
- Think about your exit before you buy: Cash-out refinancing can increase debt and reduce cash flow. Consider what happens if revenue declines or you need to sell the property.
- Use seasonality to your advantage: January and February can present negotiation opportunities on properties that have been sitting on the market, although inventory may be more limited.
- Understand cause and effect: Higher interest rates can shrink the buyer pool and leave properties on the market longer. Investors who understand these dynamics can identify opportunities instead of automatically sitting out.
About the Host
Kenny Bedwell is the host of Cash Flow Positive and founder of STR Insights, a data platform for short-term rental investors. Through data-driven investing and successful short-term rentals, Kenny has replaced his W-2 income with cash flow and shares practical insights to help other investors pursue similar financial freedom.
Important Links
- Want us to find the deals for you? https://strinsights.com
- Instagram: @kenny_bedwell
- YouTube: Cash Flow Positive
- LinkedIn: Kenneth Bedwell
Cash Flow Positive is an original podcast hosted by Kenny Bedwell.