Interest rates play a central role in real estate cycles.When rates fall, buyers benefit.When rates rise, leverage becomes more expensive—and returns can compress.But for one group of participants, higher rates can create opportunity: private real estate lenders.
How Rising Rates Impact Property Investors
In a higher-rate environment:
- Monthly payments increase
- Buyer demand softens
- Price growth slows
- Refinancing options become limited
For investors purchasing property today, this often means returns rely more heavily on appreciation that may or may not materialize.
That introduces uncertainty.
Trust Deeds Benefit from the Same Conditions
Trust deed investors operate on the opposite side of the transaction. Instead of paying higher rates, they earn them.
As market rates increase:
- Yields on private loans tend to rise
- Short-term lending becomes more attractive
- Capital is compensated for risk
When structured conservatively, trust deeds allow investors to earn income without needing prices to rise.
Risk Control Through Structure
One of the key advantages of trust deed investing is structure. Well-underwritten trust deed investments typically include:
- Conservative loan-to-value ratios
- Defined loan terms and exit strategies
- Collateral secured by real property
- Legal remedies in the event of default
Rather than forecasting future prices, lenders focus on current value and borrower performance.
Closing Perspective
In markets where appreciation slows, returns often shift away from ownership and toward capital providers. Higher interest rates may challenge buyers—but they can create meaningful opportunity for disciplined lenders.
