High Rates, Real Discounts: Why 2026 Is a Buyer's Market for Rental Investors

This month one client went under contract on a newly renovated four-bed, two-bath in Kansas City at $255,000. The lender's appraisal came back at $300,000, and the seller is also paying a credit that takes the quoted rate from about 8.5% to 7.125%. Later in this article I'll show you a second Kansas City deal, because I have the full lender term sheets for that one and you can see exactly what the seller's money buys.

Higher rates hurt, and I'm not going to pretend otherwise. But they also push a lot of buyers out of the market. The sellers who can't wait are the ones I'm seeing pay to get out, and if you can carry today's rate, or get the seller to buy it down, that's the trade on offer.

What have mortgage rates done in 2026?

They went down, and then they came back up.

This is not what I predicted at the start of this year. I said out loud that we would probably finish the year at around 6%. And for a lot of the year it looked like I'd be correct. Then America bombed Iran, oil prices spiked, inflation picked up, and mortgage rates jumped.

So the long and the short of it is, I was wrong.

First, in February, the average 30-year fixed rate dipped to 5.98%, according to Freddie Mac's weekly survey.

By September 24 it was back at 7.03%.

On September 16, the Federal Reserve raised its benchmark rate by a quarter point, to 3.75% to 4%. It was the first increase since July 2023. The median September projection was consistent with roughly one more quarter-point increase by year-end, although Fed projections aren't promises.

Those are rates for US homeowners with strong credit. As a foreign national with no US credit, you pay more. I've shown you what the foreign national premium looks like, and it moves with the market.

Here's the clearest way I can show you how fast it moved. I got quotes from the same direct specialist lender, for the same borrower profile and 70% LTV structure, three months apart:

Up to three quarters of a point in one quarter. On a $129,500 loan that's roughly $45 to $65 a month. If you want the full picture of what DSCR rates run at and why, I keep that page updated daily, and I've written separately about where the forecasters think rates go next. I'm not going to guess here.

There's a second force at work here too, and it's seasonal. Realtor.com's 2026 Best Time to Buy report names the week of September 27 to October 3 as the best week of the year for buyers. It projects up to 31.9% more listings than at the start of the year, with buyer competition, measured by listing views per property, historically about 30% below its annual peak.

The useful idea behind their report is that prepared buyers may recover on price and negotiating room some of what they're losing to the rate. That's exactly what I'm seeing happen right now, with one condition I'll come to.

Is it really a buyer's market everywhere?

No. Nationally it's a record, but national market stats are just headlines. The record is mostly the Sun Belt.

Redfin counts a buyer's market as one where sellers outnumber buyers by more than 10%. In August 2026 there were about 1.53 million sellers in the US market and about 972,000 buyers. That's 57.9% more sellers than buyers, the biggest gap since their records began in 2013.

But look at where it sits:

So Kansas City only just qualifies, and Cleveland is balanced. That fits what I see on the ground. It also fits why I buy in Kansas City in the first place. Homes are still affordable there relative to many large metros, and owner-occupier demand gives me a broader resale market than I'd have in an investor-heavy neighborhood.

It's one reason I prefer the boring Midwest. Lower house prices don't eliminate volatility, but I would rather own in a market where ordinary local incomes can still support ordinary houses. Texas and Florida have had much bigger swings recently. Kansas City and Cleveland have been less dramatic. I like boring, and I like plodding.

Redfin makes another point I think is important. A buyer's market doesn't mean prices will fall, because most homeowners have plenty of equity and few are under pressure to sell. Most sellers in my markets aren't desperate, and they don't have to be.

So who is?

Who is actually discounting right now?

In my experience, it's the sellers who are paying interest on short-term money.

That's mostly flippers and house builders. A flipper usually buys and renovates with a hard money loan, which is fast, expensive and short. I've compared how hard money works against a DSCR loan, and the point for this article is simple. The clock runs every month the house doesn't sell.

Their margins were already thin. ATTOM's Q1 2026 flipping report put the typical gross margin at 25.4%, up only slightly from 24.7% the quarter before. That 24.7% was the lowest since 2008. And that's gross, before renovation, financing, holding and selling costs. Missouri was also one of the four states with the highest share of flips.

Now put yourself in that seller's position. If you were paying interest every month on a finished house you couldn't sell, how long would you hold out for full price?

That carrying cost creates a reason to negotiate that an owner with no debt and no deadline may not have. The same pressure shows up in the national numbers. Redfin found sellers gave concessions in 44.7% of US sales in August 2026, the highest August share since at least 2020. A concession can be repairs, closing costs, or money to buy down the buyer's rate. And 15.8% of homes sold had both a price cut and a concession.

I'd grade my own evidence here as anecdotal. I can tell you who is calling me with discounts, but I can't tell you how many of them there are. Both of the deals in this article came from sellers carrying short-term money. Neither is a trend on its own.

As an aside, big housebuilders have been using rate buydowns and other incentives heavily for some time. I think that's one reason new construction has remained competitive even when headline mortgage rates made the monthly payment harder. In my experience, the monthly payment is more important than the sticker price to most homebuyers.

What does a motivated-seller deal look like on paper?

Here's another deal I'm looking at right now, with the full lender term sheets, because this is where the discount turns into something you can measure.

It's a renovated single-family rental in Kansas City. It rents for $1,850 a month. The appraisal came in at $199,000 and the agreed price was $185,000. That's $14,000 below the lender's appraised value before we'd touched the financing. If you've never read an appraisal, here's how I read the appraisal that set that number.

The lender quoted two loan sizes, 70% and 75% of the price, with three options on each. Each option trades more upfront cost for a lower rate:

One thing to notice. The 8.49% option at 75% isn't a "no points" rate. It already carries 2.175% in points. At the bigger loan size, even the worst rate costs money upfront.

The cash to close includes the down payment, lender fees and about $7,800 of other closing costs and escrows. Those figures include the lender charges, escrows and other closing items on this particular quote.

That $14,000 gap between price and value is the part a seller can't take back. What I did next was use some of it.

This is exactly what I do in sourcing properties for my clients. The discount is only half the job. The other half is knowing what to do with it.

Is a price cut or a rate buydown worth more to you?

On monthly payment, the buydown wins on these term sheets, by about four to one.

Moving from the 70% option 1 to option 3 costs $2,995 more upfront. Here's what that same $2,995 of seller money does, spent two different ways:

That's roughly four times more off the monthly payment.

So instead of a lower price, we can ask for a slightly higher contract price with a credit handed back. The seller is giving up part of that higher price as a credit at closing. I've written about the rules on seller credits, including what they can and can't pay for, so I won't repeat them here.

The difference on this deal is where the money comes from. On that earlier deal there was no gap between price and value. Here the appraisal leaves room above the price, so the credit sits on value that's already there.

Here's the restructure I modeled: a $195,000 contract with a $10,000 seller credit. The existing $199,000 appraisal gives room to model it, and economically the seller is still giving up $10,000 of the $195,000 price. Whether the lender will approve that structure depends on its seller-concession and underwriting rules, so this is a modeled restructure until the lender re-quotes it.

The question I now ask is not "How much discount can I get?" It is "What use of the seller's dollar produces the best result for this particular loan?" Sometimes that's price. Sometimes it's closing costs. On these quotes it was the rate.

Against the cheapest option as quoted, the restructure needs about $3,800 less cash, at a rate three quarters of a point lower, for about $19 a month less. Less cash, a lower rate and a lower payment, all at once.

There's a cost, and I want to be clear about it. The loan is $7,000 bigger. You're borrowing a little more against the same house to get there. At 69% of appraised value that doesn't worry me, but it's a lever, and I've pulled that lever too far before.

Two honest limits on the numbers:

1. $10,000 doesn't quite cover everything at the lowest rate. About $1,400 is left for the buyer. On the same assumptions, covering all of it would require something around a $196,500 contract and up to roughly $11,500 of credit, subject to the lender approving the structure and the actual allowable closing costs. Write it as "up to", because any credit above your actual costs is lost.
2. You can't use the whole $14,000. A $199,000 contract with a $14,000 credit would go over the closing costs, and past the seller-contribution limits on several foreign-national DSCR programs I work with. Those limits are program-specific; several are around 6%.

If you want to run both structures on your own deal, my free DSCR loan calculator will do it for you.

The way I think about it is this. You can refinance a rate. You can't refinance a purchase price.

Why not wait and refinance when rates fall?

Because you might wait a long time, and leaving early costs money.

Many of the foreign-national DSCR loans I see use a five-year stepdown prepayment penalty, often something like 5%, 4%, 3%, 2%, 1%, although structures vary by lender and loan. I've written about how to work out whether a buydown pays for itself. The short version, on these quotes, is that it pays back much faster than it used to:

In June, buying the rate down took over six years to pay back. In September, on these sheets, it took 18 to 45 months. That's three quotes, not a rule, and I can't tell you it will hold. It's one reason I now ask for the full set of options on every quote.

And the Fed has just moved the other way. The Fed doesn't set mortgage rates directly, but its September move is another reason I wouldn't build the deal around an assumed near-term refinance. Rates may fall, and you can refinance a DSCR loan later if they do. But I wouldn't build a purchase around it.

My rule? Buy the deal that works at today's rate and treat any future refinance as a bonus. If the seller will pay for your rate, even better. The June quotes I compared on a similar Kansas City house are a good reminder of how quickly "today's rate" changes.

Which discounts should you walk away from?

Most of them, honestly.

We've owned as many as 124 rental properties at once. By 2022, many of them were the cheapest houses I could find, about $80,000 bought and renovated, in the worst neighborhoods I could buy in. They all looked like bargains. When the problems hit at the same time, my cash flow went from about $30,000 a month positive to about $60,000 a month negative. I didn't buy badly on price. I bought badly on neighborhood, and that one is on me.

A cheap house in a heavily renter-dominated D class area can leave you with a much thinner owner-occupier resale market. That's exactly what happened to me. A discount on that house isn't equity. It's just a low price for a hard asset to own.

The second trap is the cosmetic flip. New paint and flooring over a 60-year-old furnace, old wiring and original plumbing. That's why I pay more for houses where the major capital components have either been replaced or their remaining life is documented clearly enough for me to price the risk, and the finish is good enough to compete for good tenants. It pushes the big costs years into the future, and it's a premium I'm happy to pay.

So a discount doesn't change my checks. It adds to them:

• An inspection, and a report I've actually read, not just a summary.
• A lender's appraisal, ordered by the lender, not a number the seller hands you.
• The seller's own numbers, checked against something outside the seller. I've set out how I check them myself.

And if the seller won't allow an inspection or an appraisal, that's your answer. I've listed the situations where I tell clients not to buy, and "the seller wouldn't let us look" is near the top.

How do you get ready to catch one of these deals?

Be the buyer who can close.

In my experience, a motivated seller cares about certainty as much as price. A buyer who can close on time is worth a lot to them. So the preparation happens before you find the house:

1. Get pre-approved first. I start every client on the pre-approval checklist, so the lender already knows who they are.
2. Have your money in place. Funds that are easy to document and trace are one of the things that can slow a foreign buyer down if they aren't organized early.
3. Know your full cash number, down payment, fees and reserves, before you make an offer. I break down how much cash a foreign national DSCR loan really needs.

One of my clients, Ronald, bought two Kansas City rentals from his home in Ottawa. You can see how that worked, from start to finish.

Here's the shortcut I use. Before you negotiate a credit, ask the lender to quote the full set of options on that exact property. Then you know what each dollar of seller credit buys, and you can ask for the right number.

If you want the checklists in one place, they're in my foreign investor starter kit.

The bottom line

I think this is an unusually interesting time to be a prepared rental buyer. I don't say that because the whole market is cheap. It isn't. And I don't say it because rates are about to fall. I got that prediction wrong once already this year.

I say it because high rates have removed buyers, while some sellers still have to sell. When those two things meet on a house I wanted anyway, I can negotiate on more than price. I can negotiate the financing too.

If you can close, and you're buying the right house, a seller-funded buydown can effectively pay part of the cost of waiting for lower rates. That's the trade I'd take.

Remember, none of this is certain. You can't control rates, and you can't control which sellers call. What you can control is the house, the street, and being ready. Those shift the odds in your favor, and that's all investing ever is.