August 27, 2025 • 23 mins
When interest rates skyrocket, many would-be real estate investors retreat to the sidelines. But what if today's challenging market actually creates unique opportunities for those with the right strategies?
The most successful real estate investors understand that wealth-building isn't about timing the market perfectly; it's about implementing proven strategies that work in any environment. As we explore in this episode, making money on the buy remains the fundamental principle that separates profitable investors from those who struggle, regardless of interest rates.
House hacking emerges as a particularly powerful approach in today's market. By purchasing a multi-unit property and living in one portion while renting the others, investors can dramatically reduce their housing costs while building equity. We share real-world examples from Northwest Arkansas where buyers are cutting their effective housing payments in half through this strategy, even with today's higher mortgage rates.
Seller financing represents another compelling opportunity that thrives when traditional lending tightens. We dive deep into how these deals are structured, from interest rates and down payments to balloon terms and refinancing strategies. Brian Wagers shares his personal experience with seller financing, including how he successfully refinanced multiple properties within 18 months.
For those willing to put in extra effort, aging listings and properties with motivated sellers offer exceptional value. The current market stalemate has created situations where sellers who initially overpriced their properties are now becoming increasingly realistic about values—presenting opportunities for disciplined investors to negotiate favorable terms.
Whether you're just starting your real estate journey or looking to expand an existing portfolio, these time-tested strategies provide a roadmap for building wealth even when conventional wisdom suggests waiting for rates to fall. Join us as we explore how to thrive as an investor in today's market, without relying on speculation or unsustainable projections.
Want to continue building your real estate knowledge? Subscribe to our podcast and connect with us on social media for more insights, market updates, and investing strategies, tailored to Northwest Arkansas.
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Episode Transcript
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Speaker 1 (00:07):
Welcome to Northwest Arkansas Investing Podcast, your
go-to source for real estateinvesting in Northwest Arkansas.
Speaker 2 (00:13):
With your seasoned investor just starting out.
We bring you expert insights,market trends and practical
strategies to help you buildwealth through real estate.
Speaker 3 (00:20):
From buying and selling to property management
and long-term investmentplanning.
We cover it all so you can makesmart, informed decisions in
this fast-growing market.
Let's dive in.
All right, welcome back toNorthwest Arkansas Investing
Podcast.
I'm here with Brian Wagers andhim and I are getting to talk
through.
We just finished up in ourepisode on the Northwest
Arkansas market update, now thatwe're at the midway point here
(00:43):
at the end of July, and now wewant to dive into episode two
and kind of just talk throughsome investing strategies that
we still see that are working ina high rate market that's
continued to stall out as far asmarket or as far as rates go,
and what kind of continue towork.
(01:04):
And I think you know, when youlook at real estate business
overall and the real estate as a, as an investment overall,
those that are that are the mostsuccessful.
I think this is a very general,general thing to say, but you
know it's a long term game.
It's it's years and years of ofwaiting and working and
(01:24):
optimizing and adding value.
And I think that's what youknow at the end of the day, if
you're going to be successful inthe real estate business,
whether it's brokering, whetherit's investing you know you're
going to need to be doing dealswhen rates are high and you're
going to be needing to do dealswhen rates are low and kind of
understanding what works in both.
(01:46):
And, uh, this is our first time,obviously, um, brian, you're a
little bit older than me, butwe've, uh, you know, we've
almost only known, uh, themarket to go up and rates to be
pretty low.
And now we're we've kind of hada few years here of of higher
rates, um, and what that lookslike in the market and how it
affects the market and howsellers will stall out and how
(02:09):
expectations need to change.
And so I know we've got a fewideas here on kind of trends and
investing strategies that we'veseen work.
But talk me through a couple ofideas or thoughts that you have
on that you've seen work inkind of a high rate environment.
Speaker 2 (02:29):
Yeah, I like how you approach that and there is money
to be made in any market.
And we saw, like you said, youknow, yeah, we may not have been
investing in real estate at the, you know, 2008 or anything
like that, but saw what happenedand right now, I think,
strategies that will work.
(02:50):
Right before this episode wetalked about days on market.
So what I've seen, you know, onthe commercial real estate side
.
You know someone may have wentout with a deal expecting to get
X amount of dollars $10 millionand they hit the market.
(03:10):
Brokers told them we can tryand see what we get.
They installed, nothing reallyhappened and they didn't sell
and maybe that deal was worth $7million or maybe $8 million,
and seeing it not trade fizzleout for a couple of months, and
circling back with them andseeing where they're at and if
they're more realistic and a lotof times I like to make an like
(03:33):
, be pretty quick about where itmakes sense for me Um, but I
think there's opportunity inthese people, that, in these
sellers that you know, maybethey're getting more antsy to
sell, maybe they need to movetheir capital somewhere else.
The best seller is a motivatedseller.
That motivation can be a hugerange of motivation and how
(03:58):
urgent it is can range, but Ithink there's good opportunity
in there.
And then on the moreresidential side, putting an
offer that makes sense on theseaged listings.
You know you hear it all thetime like listings on there,
just submit an offer.
Maybe they're more motivated.
Maybe look at the olderlistings.
I know there's strategy ingoing to expired listings.
(04:21):
So same thing in commercialreal estate.
You know, maybe it's not evenlisted anymore.
Speaker 3 (04:25):
So checking to see if they, if they sold um
absolutely no, I agree, I thinkI think the biggest thing is, uh
, in any market is making moneyon the buy right, and that's
that's really kind of the.
The uh main thing is aninvestor.
That that, I think, is one ofthe more important things.
Getting into a deal, more thanoptimizing and more than being a
(04:46):
great operator, is making moneyon the buy and buying it right,
because you can't.
You've seen too many time andtime again here in the last few
years of guys that just didn'tbuy it right and prayed for, you
know, crazy rent appreciationsor you know hoped for something
to happen that you know it washistorically you to happen, that
you know it was historically.
You know kind of a.
(05:08):
You know something differentthat you know rents went up 20%
and obviously historicallythat's not typical and they
continue, you know projected forrents to continue at that rate
or something along those lines,and now found themselves in
situations where they had togive up the property, you know,
and stuff like that, or saw it aloss, and so I think just
(05:29):
something that can continue tokeep in mind.
But some one of you know a fewstrategies.
I think that that we've seennumber one.
We've talked about it time andtime again.
This is easy for thoseinvestors that are smaller and
maybe don't have any sizeportfolio, or maybe they have
one or two units and are willingto kind of move around and
(05:52):
sacrifice a bit.
But house hacking and so buyinga multi-unit building or even
buying a single family home andliving in one of the units or
living in one of the rooms andrenting out the other rooms, you
and I both experienced this atsome point in our life you with
a single family home, me as welland so I think you know as we
(06:15):
look at, for instance, I've gotsome duplexes for sale in
Biddenville and you know mostfolks can't really make those
numbers work because prices haveexceeded where rents.
You know most folks can'treally make those numbers work
because prices have out exceededwhere rents.
You know rents haven't caughtup to where the prices are, I
guess.
And so so from an investorstandpoint, unless you're
(06:36):
putting more than 25% down, it'sgoing to be tough to make the
numbers make a lot of sense overtime.
And so a lot of you know a lotof the buyers that we've had in
this neighborhood, with rateswhere they are, are able to kind
of take advantage of sellercredits and are able to take
advantage of lender credits, getinto a property like this at
you know a less out of the quitea bit less out of their pocket
(06:59):
and and kind of be able to workand optimize the property, maybe
add some value with newcountertops or whatever, and
then continue to push rents overtime to eventually be able to
move out and cash flow or sellit in a few years and roll that
into the next property.
I mean, I know you haveexperience with that as well.
(07:21):
Was that something that youwere thinking about when you
were first getting started andwas that something that you were
able to sell and then roll intoa better opportunity that
helped you continue?
Speaker 2 (07:32):
I did do a little bit of a house hacking when I first
got started with you know, Irented out a room to my
girlfriend and now wife and babymama, and to one to one of her
friends too.
So she was paying rent and herfriend was paying.
It was just a house.
So I think there is opportunitythere, like on those times
(07:52):
where you're okay with theequity and you you're placing
your money as long as it's, youknow, for me it was still a
utility of I'm living in it andgetting in it.
So so I think for the duplexes,yeah, it depends if it's as an
investment or someone who'sbuying it for a first time home
and they're okay.
I think it just depends on theinvestor's situation too, like
(08:14):
what they're like you kind ofmentioned on their strategy, are
you?
Is it most times first timehome buyers that are going in
there, or more investor types ora mix?
Speaker 3 (08:28):
It is first-time homebuyers for the most part,
but it's been interesting.
I mean, we've sold 12 to 13 ofthose duplexes in the past few
months, past three or fourmonths, and 60% of the buyers
have been, you know, living onone side and renting out the
other.
So it's not, you know, aninsignificant amount of people
that are doing this and lookingto do this, and for most people
that takes a payment.
You know that can easily beover $2,000 a month.
(08:50):
Uh, in buying their first hometo you know, when you can
supplement that with rentalincome from the other side of
the duplex or whatever it may be, um, to something that you know
you basically would be gettingif you were to be renting
somewhere which is $1,200,$1,500 a month somewhere in
there.
How much are they renting outone of those sites In that
(09:12):
neighborhood specifically?
It'd be anywhere between $1,200, $1,500, depending on the size
of it Versailles.
So it's something that somebodycould get in know, as they live
in it, they can have besupplementing at least half of
their mortgage.
And then you know, as rentscontinue to rise, as they
continue to add value over time,then eventually they can move
(09:35):
out and be making some cash flow, and so I think it's a strategy
that can be used in any market,and any rate market especially,
and one that's just kind of aneasy low barrier to entry
opportunity, especially in todaywhere there's, you know, we're
up 20 to 30 percent in inventoryyear over year and sellers are
(09:59):
getting a little bit antsy, likewe've talked about, and are
willing to offer more credits.
There's more of an opportunityto get in for little to no money
, uh, outside of your downpayment.
Speaker 2 (10:08):
so I think I think it's a strategy to kind of keep
in mind yeah, in commercial realestate it's called owner
occupied, you know, where theowner or one of the business
owners has owns a owns thebuilding and one runs their
business out of all that arepart of it.
Yeah, you know.
So I think there's opportunity.
A lot of commercial real estateinvestors do that here, where
(10:30):
they have a business out of partof it.
I love it.
Speaker 3 (10:34):
I love it.
So, and then kind of talkingthrough other strategies, you
know something else that Ithought about as far as an
investing strategy that worksand that continues to work in a
high rate market, for me, uh andI've seen this personally
recently would be sellerfinancing.
I don't know, brian, you haveexperience with that when you
(10:54):
were first starting to buyapartment complexes.
But, um, to me, working on adeal right now hopefully we'll
get to talk more about in thecoming months that um, you know
owner is willing to do sellerfinancing and, uh, you know,
historically, you know he, hewants that around a six to 7%
rate.
(11:14):
Um, I think we're going to endup somewhere in the low sixes on
the rate, but you know that's apretty historical, historically
good return for somebody thatit will be pretty.
I mean, it will be completelypassive for this owner.
He doesn't want to take a bigtax hit right now and he wants
to continue to make income butnot have to manage the tenants
and stuff like that.
(11:35):
And so I know you have donethis as well.
Seller financing in a high ratemarket.
What does it feel like thatthere's a better opportunity for
seller financing in a high ratemarket.
What does it feel like thatthere's a better opportunity for
seller financing than you know,for rates were low.
Yeah, I think so.
Speaker 2 (11:48):
Yeah, because of the stalemate in the market, one for
one, you know that they're notgetting as much as what they
thought they were going to getfor the price, and because the
next person is going to have toborrow.
You know now 8%, you know 7, 6,8%.
So if they can finance it, itmakes more sense for the
investor and they can get closerto their purchase price.
(12:09):
You know, and seller financinghas a ton of other benefits
outside of that, you know,depending on how you're
structuring that, where you're aleverage point.
But I think it's a greatstrategy in a high rate market,
especially when they can't goout and borrow for their next
deal either.
So they are okay being the bankin those scenarios.
(12:30):
So, yeah, I think that's agreat point and I think in a
high rate and for seller financespecifically, I think it does
make more sense in a high ratemarket.
But, just like any market, youstill want to have the same
strategies.
You want to buy right.
You want to make sure you'rebuying at what makes sense today
, you're not speculating toomuch, but you also have to have
certain assumptions on rentgrowth, expense growth, total
(12:54):
income growth.
You know it can be frustratingfor some because it feels like
we are working a lot harderright now and, you know, maybe
not moving the needle as much,but you know, I think the market
will reward those who are, youknow, continuing to push when
(13:15):
the needle isn't moving as much.
So you know I can um be harderto make deals work, harder to
transact, transact.
But it also weeds out, you knowhigher.
You know a strategy is keepkeep going, because in a high
rate market it weeds out peopletoo, like people that want that,
wanted to come in and findingout how hard it is, or you know
(13:37):
how to navigate it too, sothat's another benefit.
Speaker 3 (13:41):
Yeah, agre, agreed, curious too.
On seller financing, I thinkit's a great point to continue
to expand on, because, althoughit seems like something a little
bit harder to do nowadays, it'snot impossible and there's
still, I think, a lot ofopportunity out there for
sellers that just simply want totry to move the tax liability
(14:02):
out a little bit and maybe it'staking less of a hit now and
spreading it out years to come.
I've seen guys out therethat'll sell or finance
something with no balloon andpay a ridiculous price but at a
low rate that they're able tostill make work with the numbers
.
I've seen guys only be willingto do a two-year balloon on
(14:27):
their seller finance note.
How did you structure thosedeals for you back in the day?
Speaker 2 (14:32):
Yeah, and there's a bunch of different ways to do it
.
If they're going to replace thebank, if they're going to
supplement the bank, it alldepends there.
I did a five-year balloon.
That's great.
If you can have them not, do aballoon, five-year balloon
that's great.
If you can have them not do aballoon, you might want someone
to.
They might say I'll give you atemporary uh seller credit for
(14:52):
two years, 18 months, threeyears, you know, I, I, but I
paid them all off in 18 months,like all my seller financing
deals.
So I reef well, didn't pay themoff, but I refinanced out of
them within 18 months or on myfirst several.
I still have one seller financethat the seller is still in
(15:14):
actually.
But yeah, that's how Istructured it.
I did five-year balloon.
They actually came up with thedown payment.
They were okay sitting insecond position.
So some of them will not wantto be okay sitting behind the
bank because then they're atfully leverage.
What happens if it goes back tothe bank?
(15:37):
Then their equity is like theirseller financing portion is, so
they have more risk if they do.
That Just depends on.
Some might want you to put inyour own equity too and pair
that with their seller financing, which was is pretty common,
and some, like you say, are justabout.
You know, hey, we're going todo just like a bank, I'll give
(15:59):
you 6%, you know, and there'slittle interest if they're doing
the full loan.
Having, you know, offering themsix percent is pretty nice
because, uh, what they can seehow much they're getting, and
just interest alone on thosepayments.
If you're able to amortize that, amortize that at a 30 year, 25
year, um, but for me, I Ididn't have it amortized, I just
(16:22):
interest only on your interestonly, yep, and then you could
pay them per.
And you know that's alsoanother part that you have to
hash out.
If you're going to pay them aset a month amount, you know, if
it's a cash, cash flowing deal,if it's, uh, if it doesn't have
cash flow, so you want tofigure that out too.
Speaker 3 (16:42):
As far as what they're paying them, I don't
know what your, what your dealis, uh, yeah cash flowing deal
yeah, should, should cash flow,it will cash flow from day one,
but, uh, but it'll be interestonly 24-month balloon, um, but
yeah, it's kind of a set.
It's not amortized, amortizedover any particular amount of
(17:02):
years.
It's kind of a set percentageand amount that'll be paid every
month.
Yeah, and then, of course, justa down payment up up front.
So I think some of the downsideof that is like you know, this
one in particular will require apretty good amount of of, uh,
upfront cost, you know, torenovate the units and and, uh,
they're pretty tired.
But I think there'sopportunities out there so he's
(17:25):
going to be the bank yeah, he'lljust be the bank for it yeah,
um, how free.
Speaker 2 (17:30):
How much are you putting?
Are you proposing to put down?
I?
Speaker 3 (17:33):
mean it'll be 200 to 250 somewhere in there.
So uh, for yours, thoughcurious on the uh, you know,
refinancing in the first 18months, was that because you got
the property, you operated itwell enough to be able to get it
to a point to refinance andkind of restructure and it made
more sense with the bank?
Or were you able to use thebank's funds to do more
(17:56):
renovations or what did that?
Speaker 2 (17:58):
Yeah, I would say that's a big part of it.
I was able to forceappreciation but also market
appreciated also where interestrates went and made sense.
So it was a combination ofbeing able to like it.
I wasn't expecting to do ituntil three years so I knew I
could.
I was expecting three years.
I would force appreciation, getin there, do the CapEx work and
(18:21):
fix it up and have enoughequity to pull him out.
I knew there was enough equityon the buy to like.
I knew my LTV was so muchhigher than my you know actual
costs going in so I I knew therewas a good buy.
You know, obviously some ofthat had to come from
renovations and the seller.
(18:43):
Financing deals do make like.
Especially if there's a balloonon it.
It makes a lot more sense on abig value, a value-add deal.
You know, if it's not avalue-add deal then I'd be
careful about having a balloonon there because who knows how
like if you're not doing any biglifts, how long?
You know you're putting like alot of that's on the market
(19:04):
right you know so yeah, that'smaking help for that absolutely.
Speaker 3 (19:09):
But yeah, I think all that to market, you know.
So, yep, yes, we can help withthat Absolutely, but yeah, I
think all that.
To say, we, you know, we wantedto talk through a couple
investing strategies that wefeel like will still continue to
work in a high rate market likewe are in right now, and we
have no crystal ball on what'scoming.
But we know that our presidentis definitely pushing for lower
rates.
But we know that our presidentis definitely pushing for lower
(19:29):
rates.
I think it makes a lot of sense,with the inflation numbers that
we're seeing, not to getpolitical hey, release the files
.
But I think, at a minimum, youknow, with the new group that
will come in after Powell andthem, which I think they're out
at the beginning of next yearit's the end of their term Then,
(19:53):
uh, I think we're certain tosee some sort of change.
So I think, just something tokeep an eye on for early next
year.
Um, other good things thatwe're seeing right now bonus, a
hundred percent bonusdepreciation is back.
A lot of great things with thenew tax bill for real estate
investors that, uh, that we arenot CPAs but we'd love to get
into at some point as time goeson.
But overall, I think thesentiment is just continue to
(20:17):
make sure that you're makingmoney on the buy, and you know
there will always be ways tomake money in a high rate market
, low rate market, even in aslow market, and so continue to
plug away in a high-rate market,low-rate market, even in a slow
market, and so continue to plugaway.
And Brian, any final thoughtsthere?
That's right.
Speaker 2 (20:33):
You know there's a lot you can speculate on, but
there's also a lot under control, Absolutely.
Speaker 3 (20:40):
Well, thanks for listening and tune into our next
podcast.
We're going to be talking aboutwhere growth is going
infrastructure expansion andthat'll lead us right into our
next podcast.
We're going to be talking aboutwhere growth is going
infrastructure expansion andthat'll lead us right into our
next podcast with TylerOverstreet, with City of
Biddenville.
So thanks again for your timeand appreciate you listening
Awesome guys.
Speaker 1 (20:56):
Talk to you soon.
Again, thank you guys fortuning in.
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Speaker 2 (25:31):
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Speaker 3 (26:30):
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way, and if you're interested insponsoring the show, visit
nwainvestingcom to get in touch.
Thanks for listening and we'llsee you next time.
Welcome to Northwest Arkansas Investing Podcast, your
go-to source for real estateinvesting in Northwest Arkansas.
Speaker 2 (00:13):
With your seasoned investor just starting out.
We bring you expert insights,market trends and practical
strategies to help you buildwealth through real estate.
Speaker 3 (00:20):
From buying and selling to property management
and long-term investmentplanning.
We cover it all so you can makesmart, informed decisions in
this fast-growing market.
Let's dive in.
All right, welcome back toNorthwest Arkansas Investing
Podcast.
I'm here with Brian Wagers andhim and I are getting to talk
through.
We just finished up in ourepisode on the Northwest
Arkansas market update, now thatwe're at the midway point here
(00:43):
at the end of July, and now wewant to dive into episode two
and kind of just talk throughsome investing strategies that
we still see that are working ina high rate market that's
continued to stall out as far asmarket or as far as rates go,
and what kind of continue towork.
(01:04):
And I think you know, when youlook at real estate business
overall and the real estate as a, as an investment overall,
those that are that are the mostsuccessful.
I think this is a very general,general thing to say, but you
know it's a long term game.
It's it's years and years of ofwaiting and working and
(01:24):
optimizing and adding value.
And I think that's what youknow at the end of the day, if
you're going to be successful inthe real estate business,
whether it's brokering, whetherit's investing you know you're
going to need to be doing dealswhen rates are high and you're
going to be needing to do dealswhen rates are low and kind of
understanding what works in both.
(01:46):
And, uh, this is our first time,obviously, um, brian, you're a
little bit older than me, butwe've, uh, you know, we've
almost only known, uh, themarket to go up and rates to be
pretty low.
And now we're we've kind of hada few years here of of higher
rates, um, and what that lookslike in the market and how it
affects the market and howsellers will stall out and how
(02:09):
expectations need to change.
And so I know we've got a fewideas here on kind of trends and
investing strategies that we'veseen work.
But talk me through a couple ofideas or thoughts that you have
on that you've seen work inkind of a high rate environment.
Speaker 2 (02:29):
Yeah, I like how you approach that and there is money
to be made in any market.
And we saw, like you said, youknow, yeah, we may not have been
investing in real estate at the, you know, 2008 or anything
like that, but saw what happenedand right now, I think,
strategies that will work.
(02:50):
Right before this episode wetalked about days on market.
So what I've seen, you know, onthe commercial real estate side
.
You know someone may have wentout with a deal expecting to get
X amount of dollars $10 millionand they hit the market.
(03:10):
Brokers told them we can tryand see what we get.
They installed, nothing reallyhappened and they didn't sell
and maybe that deal was worth $7million or maybe $8 million,
and seeing it not trade fizzleout for a couple of months, and
circling back with them andseeing where they're at and if
they're more realistic and a lotof times I like to make an like
(03:33):
, be pretty quick about where itmakes sense for me Um, but I
think there's opportunity inthese people, that, in these
sellers that you know, maybethey're getting more antsy to
sell, maybe they need to movetheir capital somewhere else.
The best seller is a motivatedseller.
That motivation can be a hugerange of motivation and how
(03:58):
urgent it is can range, but Ithink there's good opportunity
in there.
And then on the moreresidential side, putting an
offer that makes sense on theseaged listings.
You know you hear it all thetime like listings on there,
just submit an offer.
Maybe they're more motivated.
Maybe look at the olderlistings.
I know there's strategy ingoing to expired listings.
(04:21):
So same thing in commercialreal estate.
You know, maybe it's not evenlisted anymore.
Speaker 3 (04:25):
So checking to see if they, if they sold um
absolutely no, I agree, I thinkI think the biggest thing is, uh
, in any market is making moneyon the buy right, and that's
that's really kind of the.
The uh main thing is aninvestor.
That that, I think, is one ofthe more important things.
Getting into a deal, more thanoptimizing and more than being a
(04:46):
great operator, is making moneyon the buy and buying it right,
because you can't.
You've seen too many time andtime again here in the last few
years of guys that just didn'tbuy it right and prayed for, you
know, crazy rent appreciationsor you know hoped for something
to happen that you know it washistorically you to happen, that
you know it was historically.
You know kind of a.
(05:08):
You know something differentthat you know rents went up 20%
and obviously historicallythat's not typical and they
continue, you know projected forrents to continue at that rate
or something along those lines,and now found themselves in
situations where they had togive up the property, you know,
and stuff like that, or saw it aloss, and so I think just
(05:29):
something that can continue tokeep in mind.
But some one of you know a fewstrategies.
I think that that we've seennumber one.
We've talked about it time andtime again.
This is easy for thoseinvestors that are smaller and
maybe don't have any sizeportfolio, or maybe they have
one or two units and are willingto kind of move around and
(05:52):
sacrifice a bit.
But house hacking and so buyinga multi-unit building or even
buying a single family home andliving in one of the units or
living in one of the rooms andrenting out the other rooms, you
and I both experienced this atsome point in our life you with
a single family home, me as welland so I think you know as we
(06:15):
look at, for instance, I've gotsome duplexes for sale in
Biddenville and you know mostfolks can't really make those
numbers work because prices haveexceeded where rents.
You know most folks can'treally make those numbers work
because prices have out exceededwhere rents.
You know rents haven't caughtup to where the prices are, I
guess.
And so so from an investorstandpoint, unless you're
(06:36):
putting more than 25% down, it'sgoing to be tough to make the
numbers make a lot of sense overtime.
And so a lot of you know a lotof the buyers that we've had in
this neighborhood, with rateswhere they are, are able to kind
of take advantage of sellercredits and are able to take
advantage of lender credits, getinto a property like this at
you know a less out of the quitea bit less out of their pocket
(06:59):
and and kind of be able to workand optimize the property, maybe
add some value with newcountertops or whatever, and
then continue to push rents overtime to eventually be able to
move out and cash flow or sellit in a few years and roll that
into the next property.
I mean, I know you haveexperience with that as well.
(07:21):
Was that something that youwere thinking about when you
were first getting started andwas that something that you were
able to sell and then roll intoa better opportunity that
helped you continue?
Speaker 2 (07:32):
I did do a little bit of a house hacking when I first
got started with you know, Irented out a room to my
girlfriend and now wife and babymama, and to one to one of her
friends too.
So she was paying rent and herfriend was paying.
It was just a house.
So I think there is opportunitythere, like on those times
(07:52):
where you're okay with theequity and you you're placing
your money as long as it's, youknow, for me it was still a
utility of I'm living in it andgetting in it.
So so I think for the duplexes,yeah, it depends if it's as an
investment or someone who'sbuying it for a first time home
and they're okay.
I think it just depends on theinvestor's situation too, like
(08:14):
what they're like you kind ofmentioned on their strategy, are
you?
Is it most times first timehome buyers that are going in
there, or more investor types ora mix?
Speaker 3 (08:28):
It is first-time homebuyers for the most part,
but it's been interesting.
I mean, we've sold 12 to 13 ofthose duplexes in the past few
months, past three or fourmonths, and 60% of the buyers
have been, you know, living onone side and renting out the
other.
So it's not, you know, aninsignificant amount of people
that are doing this and lookingto do this, and for most people
that takes a payment.
You know that can easily beover $2,000 a month.
(08:50):
Uh, in buying their first hometo you know, when you can
supplement that with rentalincome from the other side of
the duplex or whatever it may be, um, to something that you know
you basically would be gettingif you were to be renting
somewhere which is $1,200,$1,500 a month somewhere in
there.
How much are they renting outone of those sites In that
(09:12):
neighborhood specifically?
It'd be anywhere between $1,200, $1,500, depending on the size
of it Versailles.
So it's something that somebodycould get in know, as they live
in it, they can have besupplementing at least half of
their mortgage.
And then you know, as rentscontinue to rise, as they
continue to add value over time,then eventually they can move
(09:35):
out and be making some cash flow, and so I think it's a strategy
that can be used in any market,and any rate market especially,
and one that's just kind of aneasy low barrier to entry
opportunity, especially in todaywhere there's, you know, we're
up 20 to 30 percent in inventoryyear over year and sellers are
(09:59):
getting a little bit antsy, likewe've talked about, and are
willing to offer more credits.
There's more of an opportunityto get in for little to no money
, uh, outside of your downpayment.
Speaker 2 (10:08):
so I think I think it's a strategy to kind of keep
in mind yeah, in commercial realestate it's called owner
occupied, you know, where theowner or one of the business
owners has owns a owns thebuilding and one runs their
business out of all that arepart of it.
Yeah, you know.
So I think there's opportunity.
A lot of commercial real estateinvestors do that here, where
(10:30):
they have a business out of partof it.
I love it.
Speaker 3 (10:34):
I love it.
So, and then kind of talkingthrough other strategies, you
know something else that Ithought about as far as an
investing strategy that worksand that continues to work in a
high rate market, for me, uh andI've seen this personally
recently would be sellerfinancing.
I don't know, brian, you haveexperience with that when you
(10:54):
were first starting to buyapartment complexes.
But, um, to me, working on adeal right now hopefully we'll
get to talk more about in thecoming months that um, you know
owner is willing to do sellerfinancing and, uh, you know,
historically, you know he, hewants that around a six to 7%
rate.
(11:14):
Um, I think we're going to endup somewhere in the low sixes on
the rate, but you know that's apretty historical, historically
good return for somebody thatit will be pretty.
I mean, it will be completelypassive for this owner.
He doesn't want to take a bigtax hit right now and he wants
to continue to make income butnot have to manage the tenants
and stuff like that.
(11:35):
And so I know you have donethis as well.
Seller financing in a high ratemarket.
What does it feel like thatthere's a better opportunity for
seller financing in a high ratemarket.
What does it feel like thatthere's a better opportunity for
seller financing than you know,for rates were low.
Yeah, I think so.
Speaker 2 (11:48):
Yeah, because of the stalemate in the market, one for
one, you know that they're notgetting as much as what they
thought they were going to getfor the price, and because the
next person is going to have toborrow.
You know now 8%, you know 7, 6,8%.
So if they can finance it, itmakes more sense for the
investor and they can get closerto their purchase price.
(12:09):
You know, and seller financinghas a ton of other benefits
outside of that, you know,depending on how you're
structuring that, where you're aleverage point.
But I think it's a greatstrategy in a high rate market,
especially when they can't goout and borrow for their next
deal either.
So they are okay being the bankin those scenarios.
(12:30):
So, yeah, I think that's agreat point and I think in a
high rate and for seller financespecifically, I think it does
make more sense in a high ratemarket.
But, just like any market, youstill want to have the same
strategies.
You want to buy right.
You want to make sure you'rebuying at what makes sense today
, you're not speculating toomuch, but you also have to have
certain assumptions on rentgrowth, expense growth, total
(12:54):
income growth.
You know it can be frustratingfor some because it feels like
we are working a lot harderright now and, you know, maybe
not moving the needle as much,but you know, I think the market
will reward those who are, youknow, continuing to push when
(13:15):
the needle isn't moving as much.
So you know I can um be harderto make deals work, harder to
transact, transact.
But it also weeds out, you knowhigher.
You know a strategy is keepkeep going, because in a high
rate market it weeds out peopletoo, like people that want that,
wanted to come in and findingout how hard it is, or you know
(13:37):
how to navigate it too, sothat's another benefit.
Speaker 3 (13:41):
Yeah, agre, agreed, curious too.
On seller financing, I thinkit's a great point to continue
to expand on, because, althoughit seems like something a little
bit harder to do nowadays, it'snot impossible and there's
still, I think, a lot ofopportunity out there for
sellers that just simply want totry to move the tax liability
(14:02):
out a little bit and maybe it'staking less of a hit now and
spreading it out years to come.
I've seen guys out therethat'll sell or finance
something with no balloon andpay a ridiculous price but at a
low rate that they're able tostill make work with the numbers
.
I've seen guys only be willingto do a two-year balloon on
(14:27):
their seller finance note.
How did you structure thosedeals for you back in the day?
Speaker 2 (14:32):
Yeah, and there's a bunch of different ways to do it
.
If they're going to replace thebank, if they're going to
supplement the bank, it alldepends there.
I did a five-year balloon.
That's great.
If you can have them not, do aballoon, five-year balloon
that's great.
If you can have them not do aballoon, you might want someone
to.
They might say I'll give you atemporary uh seller credit for
(14:52):
two years, 18 months, threeyears, you know, I, I, but I
paid them all off in 18 months,like all my seller financing
deals.
So I reef well, didn't pay themoff, but I refinanced out of
them within 18 months or on myfirst several.
I still have one seller financethat the seller is still in
(15:14):
actually.
But yeah, that's how Istructured it.
I did five-year balloon.
They actually came up with thedown payment.
They were okay sitting insecond position.
So some of them will not wantto be okay sitting behind the
bank because then they're atfully leverage.
What happens if it goes back tothe bank?
(15:37):
Then their equity is like theirseller financing portion is, so
they have more risk if they do.
That Just depends on.
Some might want you to put inyour own equity too and pair
that with their seller financing, which was is pretty common,
and some, like you say, are justabout.
You know, hey, we're going todo just like a bank, I'll give
(15:59):
you 6%, you know, and there'slittle interest if they're doing
the full loan.
Having, you know, offering themsix percent is pretty nice
because, uh, what they can seehow much they're getting, and
just interest alone on thosepayments.
If you're able to amortize that, amortize that at a 30 year, 25
year, um, but for me, I Ididn't have it amortized, I just
(16:22):
interest only on your interestonly, yep, and then you could
pay them per.
And you know that's alsoanother part that you have to
hash out.
If you're going to pay them aset a month amount, you know, if
it's a cash, cash flowing deal,if it's, uh, if it doesn't have
cash flow, so you want tofigure that out too.
Speaker 3 (16:42):
As far as what they're paying them, I don't
know what your, what your dealis, uh, yeah cash flowing deal
yeah, should, should cash flow,it will cash flow from day one,
but, uh, but it'll be interestonly 24-month balloon, um, but
yeah, it's kind of a set.
It's not amortized, amortizedover any particular amount of
(17:02):
years.
It's kind of a set percentageand amount that'll be paid every
month.
Yeah, and then, of course, justa down payment up up front.
So I think some of the downsideof that is like you know, this
one in particular will require apretty good amount of of, uh,
upfront cost, you know, torenovate the units and and, uh,
they're pretty tired.
But I think there'sopportunities out there so he's
(17:25):
going to be the bank yeah, he'lljust be the bank for it yeah,
um, how free.
Speaker 2 (17:30):
How much are you putting?
Are you proposing to put down?
I?
Speaker 3 (17:33):
mean it'll be 200 to 250 somewhere in there.
So uh, for yours, thoughcurious on the uh, you know,
refinancing in the first 18months, was that because you got
the property, you operated itwell enough to be able to get it
to a point to refinance andkind of restructure and it made
more sense with the bank?
Or were you able to use thebank's funds to do more
(17:56):
renovations or what did that?
Speaker 2 (17:58):
Yeah, I would say that's a big part of it.
I was able to forceappreciation but also market
appreciated also where interestrates went and made sense.
So it was a combination ofbeing able to like it.
I wasn't expecting to do ituntil three years so I knew I
could.
I was expecting three years.
I would force appreciation, getin there, do the CapEx work and
(18:21):
fix it up and have enoughequity to pull him out.
I knew there was enough equityon the buy to like.
I knew my LTV was so muchhigher than my you know actual
costs going in so I I knew therewas a good buy.
You know, obviously some ofthat had to come from
renovations and the seller.
(18:43):
Financing deals do make like.
Especially if there's a balloonon it.
It makes a lot more sense on abig value, a value-add deal.
You know, if it's not avalue-add deal then I'd be
careful about having a balloonon there because who knows how
like if you're not doing any biglifts, how long?
You know you're putting like alot of that's on the market
(19:04):
right you know so yeah, that'smaking help for that absolutely.
Speaker 3 (19:09):
But yeah, I think all that to market, you know.
So, yep, yes, we can help withthat Absolutely, but yeah, I
think all that.
To say, we, you know, we wantedto talk through a couple
investing strategies that wefeel like will still continue to
work in a high rate market likewe are in right now, and we
have no crystal ball on what'scoming.
But we know that our presidentis definitely pushing for lower
rates.
But we know that our presidentis definitely pushing for lower
(19:29):
rates.
I think it makes a lot of sense,with the inflation numbers that
we're seeing, not to getpolitical hey, release the files
.
But I think, at a minimum, youknow, with the new group that
will come in after Powell andthem, which I think they're out
at the beginning of next yearit's the end of their term Then,
(19:53):
uh, I think we're certain tosee some sort of change.
So I think, just something tokeep an eye on for early next
year.
Um, other good things thatwe're seeing right now bonus, a
hundred percent bonusdepreciation is back.
A lot of great things with thenew tax bill for real estate
investors that, uh, that we arenot CPAs but we'd love to get
into at some point as time goeson.
But overall, I think thesentiment is just continue to
(20:17):
make sure that you're makingmoney on the buy, and you know
there will always be ways tomake money in a high rate market
, low rate market, even in aslow market, and so continue to
plug away in a high-rate market,low-rate market, even in a slow
market, and so continue to plugaway.
And Brian, any final thoughtsthere?
That's right.
Speaker 2 (20:33):
You know there's a lot you can speculate on, but
there's also a lot under control, Absolutely.
Speaker 3 (20:40):
Well, thanks for listening and tune into our next
podcast.
We're going to be talking aboutwhere growth is going
infrastructure expansion andthat'll lead us right into our
next podcast.
We're going to be talking aboutwhere growth is going
infrastructure expansion andthat'll lead us right into our
next podcast with TylerOverstreet, with City of
Biddenville.
So thanks again for your timeand appreciate you listening
Awesome guys.
Speaker 1 (20:56):
Talk to you soon.
Again, thank you guys fortuning in.
I'm going to go ahead and listsome sponsors off here.
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(21:19):
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(21:41):
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They're a local company.
They do great work,specifically Kayla Phillips.
I can speak personally on thissponsor because I use Kayla for
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It's been two, three, fouryears now and Kayla and I have
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Our next sponsor is from BlackBranch Mortgage, specifically
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(24:15):
Colton and I personally dobusiness together and he's a
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Want to invest in real estateor purchase a home but feel like
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Speaker 2 (25:31):
Special thanks to one of our sponsors, who I've
worked with personally onmultifamily commercial loans as
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People's Bank works withentrepreneurs, investors, deal
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Speaker 1 (26:19):
If you enjoyed the show, make sure to give us a
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Speaker 2 (26:24):
Don't forget to connect with us on Instagram,
facebook and LinkedIn for morereal estate insights and behind
the scenes content.
Speaker 3 (26:30):
Have a question you want us to cover, send it our
way, and if you're interested insponsoring the show, visit
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Thanks for listening and we'llsee you next time.
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