Can you still cash flow with 6-7% mortgage rates?

When mortgage rates climbed from 3% to nearly 7%, many new investors assumed the game was over. Properties that cash flowed beautifully in 2021 now show negative returns. The math changed, and it felt like the window had closed.

Here is the truth: higher rates did not kill real estate investing. They just raised the bar for deal analysis.

Properties still cash flow in 2026. But finding them requires understanding your numbers, not guessing or hoping. The investors who succeed today are the ones who analyze more deals with better tools.

What rates actually look like in 2026

Before diving into analysis, let's establish the current landscape.

Loan Type	Current Rate Range
30-year fixed (primary residence)	6.0-6.5%
Investment property loans	6.5-7.5%+
DSCR loans	6.5-7.5%+

Investment property loans typically carry a 0.5% to 1.0% premium over primary residence rates. Some lenders charge even more. When you see headlines about "rates dropping to 6%," remember that investment properties often sit 0.5-1.5% higher.

This is not a reason to panic. It is a reason to analyze carefully.

How interest rates affect your cash flow

Let's look at a real example. Consider a $300,000 property with $2,200/month in rent and typical expenses.

At 4% interest rate:

Monthly mortgage payment (P&I): $1,146
Estimated monthly cash flow: $454

At 7% interest rate:

Monthly mortgage payment (P&I): $1,596
Estimated monthly cash flow: $4

Same property. Same rent. Same expenses. The only difference is the interest rate, and it swings cash flow by $450/month.

This is why rate assumptions matter so much. A deal that looked great at 4% might barely break even at 7%.

The metrics that matter at higher rates

When rates are higher, certain metrics become more important than others.

Debt Service Coverage Ratio (DCR)

DCR tells you whether your rental income covers your debt payments. It is calculated as net operating income divided by annual debt service.

1.25 or higher: Most lenders require this minimum. It means your income is 25% more than your debt payments.
1.0 to 1.25: Tight margin. Less room for vacancies or unexpected repairs.
Below 1.0: Your income does not cover your debt. The property loses money every month.

At higher rates, your debt service increases, which pushes DCR down. A property that showed 1.4 DCR at 4% might show 1.1 DCR at 7%. Both might cash flow, but the margin for error shrinks significantly.

Break-Even Ratio

Break-even ratio shows what percentage of potential rent you need to cover all costs.

At 4% rates, a property might break even at 65% occupancy. At 7% rates, the same property might need 85% occupancy to break even.

When your break-even ratio is high, a single month of vacancy can wipe out several months of profit.

Cash-on-Cash Return

Cash-on-cash return measures your annual cash return divided by total cash invested.

Higher rates reduce cash flow, which directly reduces your cash-on-cash return. A property showing 10% CoC at 4% rates might show 4% at 7% rates.

The question becomes: is 4% cash-on-cash acceptable for your goals? For some investors, yes. For others, they need to find better deals or adjust their strategy.

Three ways deals still work in 2026

Higher rates make investing harder, not impossible. Here are the strategies that work.

1. Buy at a lower price

The most direct way to improve cash flow is to pay less for the property. A $300,000 property at 7% might not cash flow. The same property at $260,000 might work fine.

This means:

Negotiating harder on purchase price
Finding motivated sellers
Looking at properties that need cosmetic work
Exploring markets with lower price points

2. Find higher rents relative to price

The 1% rule (monthly rent equals 1% of purchase price) is hard to achieve in most markets today. But properties at 0.8% or 0.9% can still work if expenses are low.

Focus on markets and property types where rents are strong relative to prices:

Midwest markets like Indianapolis and Kansas City
Southeast markets with population growth
Small multifamily properties (2-4 units) where rent stacks up
Properties with value-add potential for rent increases

3. Put more money down

A larger down payment reduces your loan amount, which reduces your monthly payment.

At 7% interest:

20% down on $300,000 = $1,596/month P&I
25% down on $300,000 = $1,496/month P&I
30% down on $300,000 = $1,396/month P&I

That extra 10% down payment ($30,000) saves $200/month in debt service. It might be the difference between negative cash flow and positive cash flow.

The tradeoff: your cash-on-cash return decreases because you have more capital tied up. But if the alternative is a deal that loses money, more down payment can make sense.

What a realistic deal looks like in 2026

Here is an example of a property that works at today's rates.

Property details:

Purchase price: $220,000
Down payment: 25% ($55,000)
Interest rate: 7%
Monthly rent: $1,800
Monthly expenses (taxes, insurance, maintenance, vacancy): $450

The numbers:

Monthly mortgage (P&I): $1,098
Total monthly costs: $1,548
Monthly cash flow: $252
Annual cash flow: $3,024
Cash-on-cash return: 5.5%
DCR: 1.23

Is 5.5% cash-on-cash exciting? That depends on your alternatives and your goals. It beats a savings account. It builds equity over time. And it provides tax benefits that improve your real return.

The point is: deals exist. They just require more careful analysis and realistic expectations.

The danger of waiting for lower rates

Some investors are sitting on the sidelines, waiting for rates to drop back to 4%. This might be a long wait.

Fannie Mae projects rates will hover around 6% through 2026-2027. Even if rates drop, they are unlikely to return to pandemic-era lows anytime soon.

Meanwhile, investors who buy today at 7% have options:

Refinance later if rates drop significantly
Build equity while others wait
Lock in prices before they rise further

The best time to invest is when the numbers work, not when rates hit some arbitrary target.

How to analyze deals quickly at any rate

The biggest advantage you can have in today's market is speed. Investors who analyze more properties find more deals that work.

The old way: spend two hours building a spreadsheet for each property. Get exhausted. Analyze three properties per week. Miss opportunities.

The better way: enter property details once and see all the metrics instantly. Analyze a property in 60 seconds. Review ten properties in an afternoon. Find the ones worth pursuing.

CrescoRealty calculates DCR, cash-on-cash return, break-even ratio, and cash flow automatically. You can adjust the interest rate and immediately see how it affects every metric. No spreadsheet formulas. No second-guessing your math.

Key takeaways

Investment property rates are 6.5-7.5%+ in 2026. Plan for this, not the primary residence rates you see in headlines.
Higher rates shrink your margin for error. Pay close attention to DCR and break-even ratio.
Deals still work through: lower purchase prices, higher rent-to-price ratios, and larger down payments.
Waiting for lower rates has a cost. You miss opportunities and equity building while sitting on the sidelines.
Speed matters. Analyzing more deals helps you find the ones that work at today's rates.

Try it yourself

Enter a property you are considering and see how the numbers look at current rates. Adjust the interest rate up or down to see how sensitive the deal is to rate changes.

Ready to analyze your first deal? Get started free and see your numbers in under 60 seconds.