Don't Let 8% Rates Stop Your Rental Portfolio Growth

**SPEAKER_1** (0:00)
College football is back, so Hilton called on me, the superstition concierge, to make your fan rituals a reality. Need a room to match your lucky number? We got you. Wanna make sure our team doesn't wash your lucky jersey? Ooh, that smells lucky.
Hilton's unmatched hospitality can keep up with any superstition. Even a marching band wake up call at 555 in 55 seconds. Hit it! When you need a team that will do whatever it takes on game day, it matters where you stay. Hilton, for the stay.

**Michael Zuber** (0:30)
All right, folks, we are in a global environment of higher rates. We are also in a season of risk being repriced. What does that mean for housing? It means higher rates. It means potentially seven, and heaven forbid, even 8% mortgage rates aren't out of the question. But here's the deal. If you are a savvy real estate investor, this kind of supply demand imbalance unlocks something that the seasoned investors use as a specific tool to get deals done today.
Beth, you and I both know what this is, but hit them with it. What is the thing that the savvy investor does in an environment like this?

**Beth** (1:09)
We look for opportunities for seller financing.

**Michael Zuber** (1:14)
Tell me more. What is seller financing? Let's assume they don't know what it is, but what is seller financing? Yeah.

**Beth** (1:19)
So seller financing is where the seller is the mortgage holder rather than the bank. And the beauty of it is that you get to create whatever terms work for you.
And so TYLG, Ty, one of the best things I have take aways I had from him when we were chatting about this at one of the One Rental At A Time events was he was, one of his ways of explaining it to the seller is you become the, you go from being the landlord to the lien lord. And I like that term, the lien lord. So, the best thing about seller financing is, again, you can find out what's important to you and what's important to the seller. And it's a mistake that a lot of investors make, that they go straight in to interest rate. Interest rate is not usually the most important thing to the seller. So, when you're meeting with a, this is almost always an off market thing, where you're meeting with a seller, or you know somebody who's thinking about selling potentially, or the typical seller with seller financing is somebody who's a tired landlord, they're burnt out, they're tired of the tenants, they don't want to deal with vacancies, somebody trashed their house or unit again, they don't, it's costing too much, the taxes, yada yada, they're tired of it. They want to have the income, but they don't want to have the property and the responsibilities that come along with that.

**Michael Zuber** (2:55)
Yeah, you brought up two things there that I think are really important. The second one is people get into being landlords because they see passive income. They're doing it for some reason. And yeah, in my second book, Fifteen Conversations With Real Estate Millionaires, the most meaningful chapter to me was a 70 or 75-year-old woman who was basically selling her units on seller financing. So she would maintain income. Also, she would delay taxes. Let's not forget that she'll delay taxes, depreciation recapture and the like. But that's secondary. She wanted income. Actually, the first thing you brought up, I want to hit again, and you said a lot of newbie investors hit the seller with interest rate first. I have said this many times. I never talk about interest rate. I actually talk about payment.
Because again, I'm talking to a landlord, very likely, and I'm like, hey, your lease is three grand. Well, you know that you can't operate a building like this for less than 50% expenses. So I can't have my total payment, meaning mortgage interest in taxes more than 1,500. Now, these are just ballpark numbers. You need to learn your market, your buy box. But that's the conversation I have. And then once I get them to agree to the payment, then all we got to do is figure out purchase price and the down payment.
And the payment's already set.
And by doing that, you often get below market interest rates.

**Beth** (4:23)
Exactly, and so I have three properties that are finance or seller financing right now. And I've done probably, I think, five in my career. So not a ton, but enough to know my way around it. But first, you have to assume that the seller doesn't know what seller financing is.

**Michael Zuber** (4:41)