Lower Interest Rates Are Coming: Are You Ready?

Discover how to strategically position yourself for lower interest rates and the next phase of the commercial real estate cycle.

In this video, you’ll gain three key insights to help you prepare for the coming interest rate drop:

• What high interest rates have created in today’s buyer-seller dynamics
• The mindset reset required to capitalize on falling rates
• Three actionable steps to strengthen your position and close more deals

With over 25 years of experience navigating rate cycles, we’ve seen this pattern unfold before. The investors who succeed are those who prepare early—before the headlines and bidding wars begin.

The Problem: Current Market Dynamics

Higher interest rates have paralyzed the market and the deals. Consider this example: a $1 million commercial property with a 25% down payment. That leaves $750,000 to be financed.

At 3.25%, the monthly mortgage payment is roughly $3,200, or $40,000 annually. Today, with rates around 7%, that same loan costs $5,000 per month—$60,000 annually. That’s a $20,000 increase in debt service, driven solely by interest rates.

This has created three major consequences:

1. Buyers are on lockdown—Many view the market as broken and are hesitant to move forward.
2. Sellers are on lockdown—They’re sitting on 2–4% mortgages. Selling means stepping into a 7% rate, and the math doesn’t work.
3. We’re in a deal desert—CBRE reports a 30–45% drop in transaction volume last year—driven by this exact dynamic.

That’s a dramatic slowdown and this is the market landscape we’re operating in.

Why Waiting for Lower Rates Is a Mistake

Now that we’ve identified the problem, let’s address the common reaction: waiting. Many investors are holding back, hoping interest rates will drop before they act. There’s over $2 trillion in dry powder—capital sitting on the sidelines from pension funds, private equity firms, and high-net-worth individuals. As interest rates begin to decline, capital will re-enter the market, competition will intensify, and pricing will shift rapidly. Psychologically, people will believe real estate is “back.”

Here’s what happens next:

• Bidding wars return—When bidding wars start, irrational money floods the market.
• Prices skyrocket—Demand surges, values climb.
• Cap rate compression begins—As cap rates drop, property values rise.

For example, if you buy at a 6.5% cap rate and the market compresses to 6%, the same property will be valued higher, meaning you’ll pay more simply due to market psychology.

Positioning Yourself Ahead of the Interest Rate Shift

When interest rates drop, capital becomes cheaper and market activity surges. Buyers re-enter with urgency. Sellers, sensing renewed demand, list properties but at higher prices. Within days, the best deals are gone. This market shift isn’t hypothetical—it will happen.

This is why waiting is a mistake. In 25 years, I’ve never seen perfect conditions. They don’t exist. Here’s what every new investor must understand: if a deal makes financial sense today, even with elevated interest rates, it’s likely a home run when rates fall. So, the strategy is simple: don’t wait for rates to drop. Buy now if the numbers work. Then, when rates drop, be ready to strike again—because the next wave of competition will be fierce.

Get Your Mind Ready: Preparing for Lower Interest Rates

This business—commercial multifamily investing— is mental game. After 25 years, I’ve seen this cycle play out multiple times. When interest rates drop, everything changes fast. The investors who succeed are the ones who are mentally prepared before it happens. To help you prepare, I use the acronym READY:

R – Reset Assumptions

There’s no such thing as the perfect deal. Every deal has two sides: the actual numbers from the seller, and your pro forma. If the deal only works based on your projections, don’t do it. It must work reasonably on both sides.

E – Expect Elastic Outcomes

Don’t box yourself in. Don’t fixate on a specific cash flow, cap rate, or cash-on-cash return. Consider all three together. I’ve created masterclasses on each—watch them. These concepts are critical for what’s coming.

A – Avoid Anchoring

Don’t anchor to what the seller paid years ago. Whether they bought it for $100,000 or got it from a bank, it doesn’t matter. Focus on what the property is worth today.

D – Define Your Buy

If you can’t define what you want to buy, you won’t find it. Is it a small multifamily? A mixed-use building downtown? An RV campground near your favorite spot? That clarity prepares you for the final step.

Y – Yes to Speed

When rates drop, the market moves fast. If a deal pencils out: if it meets your goals for cash flow, cap rate, and return, make the offer. Don’t wait. If you hesitate, it’ll be gone.

3 Action Steps to Take Now

Here are three practical steps that will help you prepare for the next wave of opportunity:

1. Build Your Financial War Chest

• Check your credit score—Aim for 680–700. If it’s lower, use Credit Karma or a credit repair service.
• Make your money accessible—Is it tied up in stocks or retirement accounts? Get clarity.
• Set aside reserves—The day you close is the day something breaks. Be ready.
• Learn creative financing—If you lack reserves or have credit issues, this is essential. Watch my video on creative financing: Creative Financing for Multifamily Beginners

2. Build Your Dream Team

Your minimum team includes:

• A real estate agent—start reviewing deals to build skill.
• A mentor—someone who’s been there and can guide you.
• A property manager—your eyes and ears on the ground.
• A lender—start early. They’re often the bottleneck in transactions.

3. Master Your Market

• Choose a city—not a state. Pick one city within your state.
• Identify 3–4 submarkets (neighborhoods) that are most affordable.
• Study sales comparables for 5–20 unit properties. You’ll need this for deal evaluation.
• Know the market cap rate—Understand the range for your area as it determines value.
• Research rents for typical one and two-bedroom C-class units.

Anchor yourself. Stay focused on this submarket and become an expert here before expanding. What you learn locally can be applied elsewhere, even out of state.

Every Successful Commercial Real Estate Investor Has a Mentor

Get your mentor here:  Commercial Property Advisors Protege Program

If you have any comments or questions, text PETER to 833-942-4516.