How to balance cash flow and high interest rates?

[Axel Meierhoefer]

I am a residential real estate investor who has always believed in the SFR market up to fourplex. Yes, I have started pivoting towards built-to-rent (BTR) in 2022 and going forward. Still, the main goal of my investing and that of my mentoring clients is cash flow to generate a passive income flow that ultimately leads to reaching the Time Freedom Point at which one has the choice to exchange time for money (JOB) or live your passion regardless if it makes any money.

In 2022 we have all seen the FED increasing interest rates and along with it, mortgage interest rates have gone up a lot.

I wonder what the BP community thinks about the future of interest rates, especially for financing our residential property investments and what you would do or accept regarding cash flow. In the past we used the 1% rule, which is increasingly hard to meet. For BTR, I am willing to accept performance above 0.8%, but what are you willing to accept and where do you think interest rates will be in 6 months, 12 months, and 18 months from now?

Just for those of you who wonder, I have toyed with interest-only loans or ARM financing, but so far haven't done it yet. Maybe you will comment on that too as part of what you're willing to accept to maintain cash flow/performance.