From a finance perspective, how does investing in a high rate environment work?

[Alex Silang]

So my area has sub 6% cap rates. If I'm borrowing at 7.5%, is that value destruction (unless appreciation is really good)?

Each deal is different of course. But unless you get a value-add property, purchasing real estate really doesn't make much sense in this environment?

[Alan F.]

Quote from @Alex Silang:

So my area has sub 6% cap rates. If I'm borrowing at 7.5%, is that value destruction (unless appreciation is really good)?

Each deal is different of course. But unless you get a value-add property, purchasing real estate really doesn't make much sense in this environment?

 Rates aren't high, the great moderation was poor fiscal policy. Real estate investing should reward value add, not subsidized leverage.