Why the next few years are the perfect storm for seller financing and how to capitalize on it

Welcome to the Cedar and Porch Real Estate Investment Podcast. I'm the host, Shona Lepis. Follow along as we unpack and demystify real estate investment strategies through expert interviews and personal experience. From how to find off-market deals to creative financing to long-term and midterm rentals, our goal is to educate and inspire others to gain financial freedom and generational wealth through real estate investing. We have an extra special guest today and we're going to dive into some of my favorite strategies. So in my real estate journey, I'm kind of a new full-time investor and I've tried all the strategies, wholesaling, flipping, and what I really is true to my heart and what resonates with me is buy and hold rentals and owner financing and off-market deals and working directly with sellers. That just feels the most authentic and genuine to me. It's what gets me the most excited. So with that being said, we have a really special guest today, Jeff Stephens. I'm taking his course and it's amazing. He's the founder of The Thoughtful Real Estate Entrepreneur. He's an expert in seller financing and direct seller relations. So Jeff, thank you so much for taking the time. This is my favorite topic. So I'd love to hear your story. What brought you to real estate? You're very successful. Just kind of your backstory. I always like to hear that and also just what I love about real estate is you kind of bring your, your past experience into it, like what you brought in for your past career. So I'll let you take it from there.

Yeah, awesome. Well, first of all, thank you for inviting me to be here. I really appreciate that. That's a privilege. So let's see, my, my real estate story began in probably— well, really, I guess in 2002, the same, the same month I got married, my wife and I bought our first house and we still own that house today, although we've moved a couple of times. And I didn't realize it at the time, but that actually really was a catalyst. And it was a good— it turned out to be a smart purchase that really helped propel a lot of other things. But shortly after we got married, I kind of quit. I quit a job that I had and I started being self-employed. And so, I've been self-employed for just about 20 years now. And the first, say, 10 years or so, I had a marketing and branding agency and that was really my full-time focus. But I came across Rich Dad Poor Dad and I read it and I thought, wow, that's exciting. And then I read all the other purple books and I was like, wow, this is pretty neat. And so it inspired me to take some action. Now simultaneously, the house that we had bought, we bought, I guess, sort of at a fortunate time in a good location and it appreciated a lot. So we were able to tap that equity with a home equity line of credit. We bought our first rental property and this is maybe 2006 or so. It's like, oh, that's cool. But it's sort of a side thing, you know? And it was a triplex and we self-managed it. Yeah, we'd, so we'd make some money in our business and pay down the HELOC and I was like, oh, let's, let's do it again. And so we did that a couple times and that went well. And then we decided to move and we kept that house as a rental and the story progressed very kind of slow and organically like that, but definitely making progress. And then about 10 years or so into having that marketing business, I started to feel just like a little stir crazy. You know, I was, I felt like I'd learned what I needed to learn. I was starting to get a little bit bored. And I thought, I need to do something different. This real estate thing has sure been interesting. I think I'm going to pivot to that. And so in about 2013, I made that switch. So I've been a full-time real estate entrepreneur now since, uh, since 2013. So as we record this, it's getting right up on the 10-year anniversary of that. And that was a different chapter. And, um, it was really interesting. For the first couple years, I was sort of stumbling around in the dark trying to just figure things out, which is fine. And that was, it was good. But what I'd find is that, so there were certain things I would read about because I was just, you know, like real estate investors do, we just study, study our brains out, right? And yeah, so I'm learning about all this stuff like, oh my gosh, so I'm trying some of this stuff and I'm trying some of this stuff. And what I found was that some of it maybe sort of seemed to make sense to my head, but it didn't make sense here. Like it just did not feel like me. Like for instance, hanging up bandit signs. That was an example of something I was like, I just don't see myself I saw myself doing this. Some other stuff felt good to my heart, like, oh, now this feels like me, but it wasn't really working. And so, a few years into this, I had a kind of a local group of real estate entrepreneur friends and somebody said, you really need to connect with this coach. His name's Greg Pinho. And if you want to be as good at this as it seems like you do, you really need some guidance. And so I met Greg and really at that point everything changed for me because in a nutshell, the strategies that he taught me were the perfect intersection of both. It made sense to my brain and it worked and it made sense to my heart and it felt right. And so I could, it was working and I could really give myself to it fully. And ever since then I've been sort of off to the races and I've been taking that stuff and, you know, like putting my own little bit of a spin on it and trying to be a messenger of that approach to other people too.

I love that head and heart because I mean, there's so many kind of get-rich-quick strategies. I don't— on paper, like just wholesale, you make a bunch of money, but it just feels shady kind of. And there, yeah, I really, I love that when you find the strategy that you connect with, because there are a lot of ways to make money, but I feel like doing the right thing is super important. So it's when you find that thing, it just clicks and you're like, I don't know, it's that magical moment.

Yeah, I think you just, you experience a lot of friction if something only makes sense in your head, but your heart's not into it because it feels inauthentic. But the opposite is true as well. You could just be following your heart, but then not really getting anywhere because what you're doing isn't sort of, you know, strategically sound either. And so, yeah, I am stunned actually that this conversation of the intersection of head and heart in a real estate investment strategy isn't more of like a frequent part of the dialogue in our, in our industry. So anyway, I like to bring it up when I can.

No, I love that because I did also, my background is in marketing. We had an agency and then I slowly found my way to courses and there's a lot of strategies that just are like very, I mean, they're very all about, you know, targeting motivated distressed sellers and it just didn't feel right and I think it's really important to do. I mean, I believe in being authentic and leading with your values. And there's just so many— I don't want to say shady, but like SMS and RVMs and bandit signs. And you're just— on paper, it looks like someone should be motivated, but are they really motivated? And so, yeah, I think that's a really interesting approach. And when I found your course, and also I'm a student of Greg's, just it made so much sense because you're working directly with sellers and they, they are generally landlords, so they're, they're in a good position. So it's peer-to-peer versus kind of someone that's owner-occupied and that maybe is in a, maybe not the best position. And so you're, you could be taking advantage of them a little bit, which I never really liked. Yeah. Um, um, so yeah, I also love how you call yourself a, an, a real estate entrepreneur versus an investor. I mean, I think that, that That really also rings true for me because you wear a lot of hats. And so I'd love for you to unpack that a little bit. I don't know if that's something you landed on or what your thought is with that.

Yeah, the word entrepreneur and the idea of an entrepreneur has long resonated with me. But as I started thinking about it as it relates to this, because really what we're talking about is what is the difference between a real estate investor and a real estate entrepreneur? Well, I realize there are other people who might see things a little bit differently, but here's how I think about it. An investor is somebody who goes and gathers up certain resources and then they find something into which they can place those resources, right? So you save up some money or you have some money from your paycheck is set aside and it's put into, you know, an IRA and the IRA is placed into a stock or a mutual fund or whatever. So resources first and find a place to put them. That's kind of the investment mentality. But the entrepreneur mentality is much more like I'm going to go find and create an opportunity, then I'm going to gather the resources into which to place into that opportunity, right? So an investor is resources first. Now let me find an investment. Entrepreneur is let me find an investment worth doing, then I'll find the resources. And so really ultimately at the end of the day, I think that an investor is somebody who is really focused on and trying to get confident in their resources, whereas an entrepreneur is somebody who is focused on and trying to get more and more confident in their resourcefulness. And to me, this is a really critical distinction, right? Because you kind of go out into the wild, the regular world of real estate investors and you will hear people say like, I want to start investing, but I haven't saved up enough money yet. But the real estate entrepreneur would be more like, I haven't found a deal worth doing yet, and then I'll worry about the money side of it. That's my perspective on it.

No, it's true. And I think that's people's biggest kind of starting out stumbling block. Like the 20, like when I, before I knew this creative stuff, it was very 20% down leveraging equity. But as an entrepreneur, it's a whole different lens of like, As they always say, if the deal is right, you'll find the money. So I love that. It's a really much more kind of strategic approach to it.

Yeah. Well, I was also going to say there's so many different ways to get wins through real estate as well. And I think an investor kind of has maybe a more one-dimensional way of looking at those things. You know, they say, this is my plan, this is my investment strategy, and I stick to it. But I believe a real estate entrepreneur is maybe like has a little bit of a wider stance, is like a little bit more agile. And is willing to look at an opportunity and see like lots of different possibility, right? The one possibility might be, gosh, look at this, this thing could— I could buy this and it could cash flow like crazy. Another possibility though, through the same, a different set of lenses from the same entrepreneur might be, wow, you know what? If I were to add an extra bathroom here, this would totally change the retail value. And the bigger win would actually be for me to just resell this to somebody else, take the profits and move on to the next deal. An even more elaborate or sophisticated, I would say, perspective would be around the terms. Someone says, well, the property's okay, the price is okay, the cash flow would be okay, but I can negotiate amazing seller financing terms. That's the big win I'm going to get out of this. And I'm going to structure my deal in a way that I'm just going to extract that benefit and I'm going to move on. And so, I think an entrepreneur just has a wider perspective and is willing to see possibility in in lots of different forms.

No, it's true. Yeah, because there are so many ways to kind of approach something. Yeah, no, I love that. That makes a lot of sense. Well, I think you kind of touched on it. Owner financing is my favorite topic. I mean, for so many reasons. I love talking to sellers directly and there's just— you get the financing with the house. So I think this market, I know you've talked about it a lot. There is change happening, things are recalibrating, and I think there's opportunity for more people being more open to seller financing. So I'd love to kind of hear, you know, and I think, again, to say there's always been opportunity, but I think now it's just maybe getting, I don't want to say mainstream, but a little bit more out. So I'd love to hear your thoughts on how to, how this is the right time to maybe propose that or bring that up, you know, in conversation a little bit.

Yeah, absolutely. So here's how I think about this. First of all, I should say, I think seller financing is a term we hear a lot. It's kind of, it's almost like a slang catch-all word that could mean a lot of different things. It could mean like what I do and what you and I kind of work on and focus on is installment sales, promissory notes and trustees. I buy the property, I'm the owner, and I just make payments to the previous owner. It's actually very straightforward. But then there's all these other things that we hear a lot, um, kind of in the real estate investing community these days. Like, you hear the word sub-to or subject-to a lot. You might hear about wrap notes or lease options and, um, you know, land sale contracts and all these different things like that. So when someone says seller financing, we have to kind of take a moment to make sure we know what they're talking about, because they could be referring to lots of, lots of different things. And all of these things are have their own merits, but I tend to focus on, like I said, the first one, which is just pretty straightforward. I mean, this is kind of what I jokingly call like regular seller financing where I just, I'm buying the property, I'm the owner and I'm making payments on it. The payments are just going to Bob and Susan rather than Wells Fargo. That's kind of, that's sort of how I think about it. So if we think about like why seller financing matters, I would say, or why it makes sense, I should say, In my mind, there's kind of two categories of reasons. People might say, "Oh, starting right now, this moment in time, late 2022, seller financing world is opening up. It was very hard to get seller financing before." And I would say, I don't think that's true. I just think the reasons for seller financing in these last, say, 5, 6, 7, 8 years are different than the reasons for seller financing moving forward. And that presents to me the two kind of categories. So reason number one, I think it was mostly what was true in the last few years, and both reasons number one and two are true moving forward. Reason number one, and the reason we've been able to buy great seller financing properties in what has sure felt like a seller's market the last few years is that seller financing is an excellent, excellent way for people to sell properties in a way that will if structured correctly, will help them defer the pain of some capital gains sales tax without them needing to buy another replacement property. It helps them continue to get an income stream from a piece of property. It prevents them from needing to figure out what they're going to do with a big payoff to go and redeploy that capital to try to make it work for them. So in the past few years, that's what we were looking for. We're looking for somebody who they would have a big capital gains tax problem. They really like having the income. That's why they probably have a rental in the first place. And we reverse engineer our whole process to find those people because that solution is a perfect fit for that type of problem that they have. Now, I would say that there's those people absolutely now and in the future as well. There will always be people who are thinking to themselves, my goodness, I'd love to sell this property, but the tax bill would kill me and I don't really just want to trade this responsibility of this house for the responsibility of this fourplex through an exchange. So all that stuff that's been true, I believe, continues to absolutely be true as well. The difference I would say now is that because our— or not the difference, but the additional reason why seller financing I think is going to be even bigger in the next few years is because that market cycle is shifting. The demand, supply and demand dynamics are changing, right? We've gone from what was very clearly a seller's market in the past to what now feels more like a balanced market or maybe even starting to trend towards a buyer's market. It's certainly by comparison to the last few years, it feels like a buyer's market, but that means there'll also be sellers who are trying and wanting to sell properties. It's not quite as easy as it used to be, so they might be open to more ideas and, and ways that they could help facilitate the sale of their property by being involved. In the financing, right? So if you're, if you're the seller of a, of a house and all the buyers right now are applying for mortgages and finding out that the interest rate is 7.5% and now they can't afford the house, maybe the seller of that property says, you know what, let me make you the loan because that's actually what makes this house affordable for you. You can pay the price I want, but we'll give you the loan at 5% instead of 7.5% or whatever. And now it helps them move their products that they were having trouble selling otherwise.

Yeah, that makes a lot of sense. I mean, there's so much to unpack there. I think just stepping back a little bit, I mean, I think you and I, like, the installment thing comes super naturally. And but I think for someone that's maybe hasn't heard that term, and I think that I think people think it's a little bit of a unicorn. Seller find. So just like, you know, and I think there's this fear that like everyone just wants cash or they don't. Like, I guess my big— maybe just unpacking how, you know, I just feel like a lot of people haven't. And when I've done training, it's not as common. I think there's a lot of questions about how that works and kind of fear even broaching it. I know that's a big question, but I just, I think it's such— I think it is such a win-win just because the seller is actually making a lot more money because they are making the interest along with the actual sale of the house. But I feel like it's for someone that's maybe never done it, it's a little intimidating, I think.

Yeah.

Yeah. So if you had never heard it, how would you describe it to someone that was a newer investor? I guess if I could ask you that.

Yeah. Seller financing in general.

Seller. Yeah. And it's specifically the installment plan to your point. Like, that's a really big bucket, but I think that's the the type that is what I, what I, that kind of really for all parties for so many reasons.

Yeah. So I think actually the, the easiest way to explain something new is usually to try to relate it to something we, we already are familiar with, right? So if I buy a house from somebody and I go get a loan from Wells Fargo, I, I buy the house, I've become the buyer. I become the owner. The bank doesn't own the property. I own the property, but the bank has loaned me money and I have said, hey bank, I promise to pay you back. And I have pledged the property as collateral for that loan, right? So the bank is not the owner of the property, but the bank has got, you know, a deed of trust, which is sort of the document that says, hey, this Jeff guy promised to pay us back. Or he said, you know, he puts the property up as collateral if he doesn't live up to his promise, right? So you go down to the county records and you see like, oh yeah, Wells Fargo has, you know, they have an interest in this property because it's been pledged as collateral because this Jeff guy said he'd promised to pay back the loan. That's a very normal setup that I think most people are very familiar with. The seller is no longer part of the picture in that. In seller financing, the installment sales we're talking about— and by the way, installment sale is just sort of like, that's like the language of the CPA or the tax code, but In seller financing, the setup is actually really the same thing. It's just that the seller— let's call him Bob. Bob is now playing the role of the seller and the role of the bank. So I buy the property from Bob and I am now the owner. Like, the title shows that Jeff is the owner, but Bob is also the bank. So now Bob is not the owner anymore, but Bob, just like Wells Fargo, would have a deed of trust recorded with the county on the property that says, hey, Jeff promised to pay Bob this money back and he has pledged the property as collateral. So it's really the same setup that we're all very familiar with from sort of normal home buying. It's just that instead of the word Wells Fargo, just scratch that out and write Bob there because it's the same, it's the same dynamics. Just the seller is now no longer the seller and instead he's He is the lender.

Okay. Yeah, that's helpful. I think— and I think what I mean, to me, the idea is it's way more— if you give the seller this pile of cash, right, they can put it in the stock market, they put it in a savings account that is unsecured, right? It could just— the stock market could go down or up and down versus if it's secured by the house, it is really a secured asset. So it feels very safe, right? I think so. I don't know if— When you're, when you, I guess the other question is when you're kind of pitching or not pitching, but when you make a proposal to a seller, do you generally have to explain how do they usually understand the benefits to them of like, hey, it's secured, it's passive income. If I default on the loan, like, I'm curious how much are you educating or if they're open to it, they're fairly savvy, I guess is my question. Yeah.

So I, I would say, well, of course, of course it's a little bit different in each person, but to generalize, I would say that they don't typically understand the benefits all that well sometimes, but that's, I'd say a little bit more rare. So we have the opportunity to help them sort of see, I guess, what those would be. Most of, if we think about who the sort of avatar is for the, for this seller who is likely to sell us this property, they are in the later stages of life. You know, like if I looked at, if I made a list of all the people that I pay every month like this, it's like at least when I met them, like 70, like it was, you know, very, very consistent. And they're at a point in their life where they, they've owned this property. It's been very good to them, but they're ready to spend their time and energy differently. right? They don't want to be up on ladders. They want, they don't want to be fielding phone calls from tenants or things like that. They want to be traveling and doing other stuff. So that said though, if you're 70, you weren't born yesterday, right? And so they're probably, they've heard some of these terms. They've probably heard other slang terms like on contract. That's one of the things we hear a lot about, or hold the paper, maybe different things that they, so they're not like starting from total zero. But normally there is an opportunity to help them understand some of these things a little bit better, but also to connect the dots for them, I guess. Right. So if I say, Bob, you know, here's path A is, is you get paid off from this property, which is totally fine if that's what you choose to do. You get this money, then you spend a little time figuring out what you're going to do with the money because I'm guessing you don't want to put it under the mattress, right? So you're calling the bank, you're finding out the CD rates, you're calling the stockbroker, you're trying to figure that out. But now you have a new project, which is what in the world am I going to do with all this money. The alternative is, Bob, if I were to make payments to you at a guaranteed interest rate of say 5%, there's no project. You just know exactly what you're going to get. There's no volatility in that. It's a fixed amount of time. It's easy. Now, Bob, only you can tell me if you prefer easy in that sense, or if you want the project of going out and seeing if you can triple your money in crypto or whatever it might be, right? So we have to like, they probably kind of understand some of the basics, but I think it's good when we specifically say like, here's how this could work for you, right? If you sell this property and don't do a 1031 exchange, you're likely to have this tax bill. Maybe you're fine with that tax bill. Some people are, absolutely. In the event that you're not though, here's how this other path might be able to improve upon that situation for you.

Yeah, no, that makes a lot of sense. So obviously the benefits are passive income. It's a kind of a guaranteed— it's like similar. They're already kind of used to getting this, you know, I say air quotes, passive income, right? Because it's not as passive as people say, but either kind of— so it's just an easier thing. And I think, I mean, also the fact that they can pass it on, maybe they have a beneficiary, if you know, so they're kind of— it's more maybe more generational a little bit because they could pass it on if they do pass away earlier. So I feel like that. I don't know if that comes up, if they say like, well, my kids, what happens? You know, is that something you talk about as far as generational?

Yeah. So, you know, here's a philosophical point, if I may. I would say seller financing has attributes, but whether those attributes are benefits is relative to that person and how we explain the attributes in the context. Of them.

Okay.

So for instance, an attribute of seller financing is you get a payment each month without having to do anything. That's just, that's just a fact. We're not really placing a judgment on there that says that's a good factor, a bad fact. It's just a fact. So then it's up to us to get to know the seller and to explain it to them in a way, if that is indeed a benefit to them, to actually explain it in a way that they see it as a benefit. Here's a different, maybe a slightly different example. The deferral of capital gains tax, right? So the fact without judgment is an installment sale can change the schedule on which you incur and have to pay your capital gains tax. That's just a fact, not good or bad, but how we we present it to them based on what we know about them, that's where it becomes either a benefit or not. So, you might be talking to, you're sitting in the living room of the seller, you walked in, you saw political bumper stickers on their car, you see certain clues around their house and you know pretty closely how they probably feel about the current president, for instance. So now you say, you take this thing, it's just a fact, it's just a fact the installment sale changes your capital gains tax, but now you present it in the context of what you know about that person. So you say, you know what, I have a feeling you're probably not a big fan of the people in the White House right now. So here's one of the things about the installment sale is that if you just cash out and pay the big tax right now, there's a big old chunk of money that's getting sent to the current president so that they can spend it as they see fit. Now, if you think maybe there's going to be a regime change coming on and You want to change the schedule in which that money gets sent to the White House eventually. Here's a tool that, that will change. Like, we're waiting at least 4 years or 8 years, you know, before the federal government gets your money. If that makes sense. What we're doing is taking this thing that's just— it's just sort of a neutral fact, but we're presenting it to them in light of who we know them to be, maybe what they've told us they want to accomplish. I mean, I've definitely had many sellers like literally say to me, like, there's no way I'm paying capital gains tax during this administration because I hate those people and I, you know, I don't want to fund them. Like, okay, no problem then. Great. Now we can structure something that will avoid that particular problem. Does that make sense?

Yeah. No, it doesn't. I think what you— in your course, your course, you're really— and also the benefit of, I guess this brings up off market is you're tailoring a proposal. You're not just saying, here's my offer. You're actually sitting down and saying, what would work for you? Like, what would you like a month? And you can kind of really propose something that's really a win-win for everyone. It's not just like, it's just so much more customized and you get to know their story. And I think, I'm assuming, I don't know, this is my, maybe it's my like dream that they, they're going to feel better about selling it to someone that they know because they've cared for this property. Like you said, it's been good to them and you really build a relationship and you can, you know, like my approach to— I mean, I have a small portfolio. I like to take care of properties and do the right thing. And I don't, you know, not everyone has the same kind of values or whatnot. So I think you're really— it's that relationship and knowing they're passing it on to someone and it's really going to benefit them and both parties. And so that's what I love about it too.

Yeah. Oh, absolutely. And, you know, Maybe this isn't about the seller financing part specifically, but more just about the relationship-based negotiation, which is, you know, as you know, that those two things go hand in hand, at least in our work together and our conversations. But yeah, you'll find a lot of— if you go back to the avatar, the 70-year-old person, they've owned this property 35 years. It's really common, you know, when, when the seller, when Bob says to you like, hey, I just want you to know, you know, Sue has been in the front unit for, 28 years, and you should just know her grandson comes by every other Tuesday to deliver her some groceries, and his car is not really that nice. So you might see it and think, oh boy, something weird is going on. But just know it's Sue's grandson. You know, there's all these little idiosyncrasies, and those people want to feel like they're handing this, this property and everything it entails over to somebody who's going to care about those little idiosyncrasies. As well. And if it just feels like an arm's-length transaction, there's never even an opportunity to tell the seller about that, let alone for the seller— I'm sorry, to tell the buyer that, let alone for the buyer to lean in and say, okay, and what's his name? Oh, it's Brandon. Okay. And like, what kind of a car? So just so I know what to look for. Great. And now we're taking notes. And that makes them feel infinitely better about everything because they now, they feel like the person who's taking the baton from them on this property cares about it as much as they do.

Yeah, because I imagine it's an emotional sale too, right? They've cared for this property and they've had it and it's been good to them. And it's not just transactional, I would think. I mean, let's— yeah, that kind of brings up how do you find— how do you reach these sellers? And I just have to say, like, I've done courses and I feel like I've been exposed to all the strategies, the bandit signs, the ringless voicemail. SMS messaging. I mean, and I just, I've tried them with an open mind and I just, they felt like I was, you know, pulling a list and I was targeting motivated and distressed people on paper and it just, yes, I could help them. It just didn't sit right with, like you said, head and heart, like on paper, like, yeah, you just send them a million text messages and then you send them an email and then you send them a postcard and you say, we buy fast, as is, no repairs. All the things which— and my background is in marketing and kind of content marketing and value-driven marketing. So I'm adding value and when someone's ready, they, you know, so anyway, so I just, I think a lot of this is marketing. So I'm curious on like, I mean, I know the answer, but what you landed on the kind of marketing that you kind of teach and how that, why that's different.

Yeah. So as I was listening to you ask the question, there's one word that came to my mind that I feel like this is the word that is kind of at the root of a lot of the stuff that I don't think is right about sort of the way the industry does it by and large. And the word is assumptions. So let's talk about a couple assumptions. One assumption is sort of categorically real estate investors have an assumption that if the person, if the seller isn't motivated in like a very sort of obvious kind of way, then there's no opportunity to, and that's very, very reductive. Everything about assumptions is very reductive, right? But we're reducing this down to like, if that person isn't in trouble, there's not an opportunity for me. And I don't believe that assumption whatsoever. Now, if that person is in trouble and they need to sell fast, does that create an opportunity for us? Yeah, it probably does. But does that have to be the case? No. It absolutely does not, right? So first and foremost, all of the normal marketing strategies are really geared towards like going down that assumption. How do I find somebody who's in a bind? Because my assumption is nothing good happens for Jeff until somebody else is in a bind and I can take some of the chips off of their side of the table and move them to my side. Very zero-sum game. Assumptions level 2. Assumptions level 2 is like, We assume that all, like all the stuff you just mentioned, that's so typical in a real estate investing message. Like, I want, I'll buy it fast, I will buy it as is, I will close, I will bring cash, you know, it'll be, you know, whatever. All of those things, those two are assumptions that we're assuming the problem that they have is best solved by a quick close. Like, and I can tell you if we talk about the seller financing to connect these dots, The quick close is often the opposite of what is best for the seller financing seller. What happens when somebody receives a message like a seller or an owner or property owner receives a message that's just embedded with those assumptions? The property owner feels like, oh, look at all these assumptions they're making about us, right? When the person receives a postcard that says, I want to buy your house on Main Street fast, cash, as is, the seller thinks to themselves like, wow, they must really think I'm in a bind because they've sent me this thing. Now when they call you back, if they call you back at all, their guard is up. They're like, you know, aggressive energy is like, you know, they're expecting, like they feel like they've been targeted basically because it looks like, you know, maybe they'll let the lawn grow too much or like the roof needs to be replaced and now they're kind of getting targeted. Like it's like the antelope who's like, oh crap, I'm the antelope. These are all the lions around me. Yeah. Yeah. And that just does not like set the table for a real great conversation, right? Here's the, here's the other thing. Broadly, I would say there are two kind of two categories of marketing. Marketing we take and we push out our message to other people or marketing that's more like pull marketing. Like for instance, a Bandit sign, like a Bandit sign is just there. And if somebody sees that and that's what's on their mind, oh, I would like to sell my house fast with cash. Then it pulls them towards us, right? So pull marketing would be things like that, or, you know, we buy ugly houses, billboards, or, or whatever. When somebody calls you from one of those, right? Because a lot of people, marketers would say, well, I don't want to spend money to push my message to people who, who don't need what I have. Let me put it out there and pull them towards me. SEO is a good example for that. I've got a website, When somebody searches, you know, sell my house fast Portland, I want them to find me. Here's the problem with pull marketing though, is that person who is this perfect seller who's Googling sell my house fast Portland, are they going to find your website and go, oh, there's one nice person, I think I'll just stop there? No, they're going to ping every other, you know, website that has the same keywords. They're going to call every bandit sign. And now what do you have as the buyer? A boatload of competition. And you have a totally commoditized kind of conversation because that seller's just like, hey, you're my 18th call. What's the number? Oh, $352,000. Sorry, I got a $365,000 from somebody else. Boom. And now the conversation is just completely— this is not the game that I personally would want to play.

So yeah, no, I think that's true. And I think all that mess. It just, it just, I could go on about this, but it's just when you really break those things down, we buy fast, you know, often, or with cash, right? That we buy with cash. It's most, I would say, I don't know, I feel like it's 95% hard money loans. And yes, they can close quickly. It's considered same as cash, but it's not like you have a bucket of cash just sitting there that you're just going to write a check out. And I find it very misleading. And I just, or as is, right? You say as is and you get in there, you do an inspection and then you just, you just badger them down on the price, get them under contract and then come back with like $100K in adjustments because the house needs so much work. So it just feels very disingenuous, like you're trying to catch them with all these phrases that when you really break them down, I don't really think are true. I mean, I guess they could be, but I feel like it's just this magnet to get them in and get them under contract and then like, you know, half the things. And to your point, maybe they don't need to sell fast, but generally you're not closing that quickly. You still need to get maybe a private money lender and a hard money lender. So it's just really bothers me.

Um, yeah, yeah.

And it just, it's my pet peeve. Um, like, I guess I don't know how you feel about, but I feel like those phrases aren't really true, and that's just, it's really CD kind of marketing.

Yeah, no, I totally agree. You know, when I started my podcast, we changed the name eventually, but it was originally the name of the podcast is Sleaze-Free Real Estate Investing because it was like, that's all this stuff that I don't want to feel like I need to take a shower after I do my marketing because it's like so gross. I don't— yeah, I don't want to feel that way because then it, you know, maybe it makes sense to the head, but it does not make sense to the heart. You know, back to that. And Yeah. So what, you know, the more positive answer to answer your question is like, so that's why we don't do those things. But, but what, what do we do? And what we do is it's, it's so funny because to me it's, it's very sophisticated strategically, but it's also like tactically it's dead simple, which is we find the owners of properties we'd like to reach out to. We reach out to them with a nice letter. And we simply introduce ourselves, express our sincere interest, but we intentionally leave all that other junk out of it. All the, you know, close fast, cash, all that kind of stuff. And here's what happens, right? Maybe somebody on the outside would say like, well, why don't, why wouldn't you say this is what I want? It's close fast, this and that. I find that when we simply reach out to them, nicely introduce ourselves and express interest, position ourselves as a peer to them, not like, I'm not somebody who's in a position of power. I have money, you need money, nothing like that. I'm just a regular person just like you. What that does is it makes people so much more comfortable about the prospect of calling you back that they just do. It just feels safer because they're like, oh, this person's not like me. It's not Acme Home Buying Solutions Incorporated, you know,.com with a We Buy Houses link. It's just like, this is just a regular person. Oh, this Shona lady wrote me a letter. She just sounds like she's just a neighbor. Call there without being, having any worry that she's going to be trying to make an offer on the phone and at some ridiculous price. It just feels safe. And feeling safe makes people go ahead and do that thing that you want them to do, which is just simply pick up the phone and call you back.

Yeah. No. And it's just the conversation. In my experience, the conversations where I've sent a letter or they found me online, it's just, it's a whole different tone. It's just this conversation. It's not like They're like, why did you— when you get the other way, when you're pushing the stuff out or targeting, it's a very different conversation and it's not exactly pleasant. And you feel like— and I get those posts, I'm just like— or you get the calls like, hey, we thought about selling X property. And I'm like, I know you're a VA calling for an investor. It just pisses me off. But a letter feels personal. And the other thing that Like, again, I feel like I've done every single— I've done SEO, I've done social, and it's a really, really wide net, right? Like, you, for good reason, for fair housing laws, I understand you can't say I want to be in this neighborhood. This is the area, or this is a specific niche place. You really, you're casting a very wide net. And when you're sending a letter, you can, you know, you can target the romantic neighborhoods, like the location that you feel like renters would like that you'd want to be in that are close to home, that are— so that's the other thing. I think even if it's maybe a little bit old school, there's so many reasons why I like it. I mean, having tried everything, it's what makes sense to me. Yeah.

And I think that's a really important point that you just made that I think is, you know, kind of relates to what I was saying with the head and the heart thing is you've tried it all, right? It's like, it's sort of like this big buffet and you have to go and, you know, you don't know what you want to go back with a second clean plate of until like you've sampled each one. You're like, oh boy, that's not good. That, oh, this one feels really good. And I, as like dogmatic as I am these days about like, this is the way we do it. The truth is we have to sample the different things before we know what feels right to us. And so I think it's great that you've been on that journey. I'm glad I went on it. I'm glad I'm past that part of the journey, but I think it's important because Yeah, we, we have to kind of land on what feels right to us. It's not a purely academic thing. We actually have to kind of try some different stuff and be like, ooh, that didn't feel good, or that felt really good. And then, and then proceed. I just try to help certain types of people, I guess, maybe shorten, shorten the length of time it takes to do that process.

Yeah. No, I mean, it, it is, I think it's something you should try all the strategies and you might, you might love SMS. I mean, it's automated and I, and I also just I am, I love technology. Like, I'm a huge, like, I do love tech. So I thought I would have been, you know, and I do have a website, but I just, it's just such a wide net. And to your point, they're, they kind of just want like an instant offer and you're not building a relationship and it just feels like a really different conversation. So what I really, I mean, I take a lot of pride in, you know, having well-maintained rentals and even with tenants, like, I really go above and beyond because because, you know, I don't— I think it's really important to provide, you know, comfortable housing that people can make a home, right? So yeah, to me it's just funny how you find something, you're like, that's like that white bull moment. Just makes sense. I guess just to kind of wrap it up a little bit, I mean, I think so in this market, I mean, clearly for a lot of reasons, interest rates being high, right? I think people are probably more open to seller financing, but I mean, is there any, do you think it's always purely off-market or do you think you can, you know, go to MLS and maybe, you know, work with an agent? There's those two kind of like on or off-market. I think as investors, like the holy grail is off-market, right? But maybe if you're just starting out, you know, and you just, you know, I'm curious like what your thoughts are on that.

Yeah. I think that, let's see, the right way to put it, there's opportunity in both on-market and off-market. I just believe that the game you're playing is a different game, whether you take one path or the other. Most people would say, oh, it's just a slight variation of the game. Like, You'd say, oh, it's basketball. It's just slightly different basketball when you go through the agent and look at listed properties. But I would say, no, no, it's basketball or it's tennis. I would say these are two totally different games with different skill sets required, different odds, different dynamics really in every way. And so while there might be these days, and as inventory increases, there's maybe a lot more sellers willing to play tennis. I think we each have to kind of look at our personal strengths and say, let me not choose to play a game that doesn't fit my strengths. Let me just keep playing the games that fit, that really fit my strengths. Like just to kind of get away from my silly analogy, like make it more literal. The strengths that I have are mostly around kind of connecting with people, asking good questions, listening, inferring what they really mean, asking another good question, developing rapport. Those talents, regardless of how much inventory is on the market, are kind of nullified if I'm talking to an agent, right? Because I'm playing the game of telephone. I can maybe try to use those skills to develop a relationship with them, but they still have to talk to the other party. And so, you know, it just, it doesn't make sense really for me or in my mind for me to leave my greatest strengths on the bench, so to speak. And so I think we just have to acknowledge that if we go both routes, there's nothing wrong with that, but just know that they're two totally different games. Because I do like analogies, let me give you just a slightly different one. I think when we're working directly with the seller, whether seller financing or not, but this is especially true of seller financing, it's like we're at Taylor and we are sewing, trimming, cutting, measuring things specifically in a way that fit perfectly that seller, but also what we want to accomplish, right? If you were a tailor, you need to be able to like kneel down and get your tape measure out and get the scissors and be able to like touch the pant leg yourself. You can't call somebody else and have them touch the pant leg and then tell you what they found and then back and forth. We, it's like impossible. It would be like trying to do brain surgery wearing ski gloves. Like you just don't have the dexterity to do the minute precise work when you, your hands don't get to touch the other object, right? And the realtor acts like a big old fat ski glove that's like, you're, you're kind of touching the other thing, but you're not really touching it. And so to me, that's what I always want to just know that like there's no intermediaries, there's no buffer, there's no layer between me and the, the person I'm trying really hard to do a great job of tailoring something for. Yeah, if you were to tailor some pants in ski gloves, like it's, they're probably not gonna end up fitting quite as well because you just can't do the little detail work, if that makes any sense.

So yeah, there's, it does. No, I mean, it's just because it, and I think what I think for, I don't know, I'm more comfortable now, but I think, oh, people are very intimidated about talking to a seller. It's like very this big big scary thing, like they might bite you or something, or ask you a question you can't answer. But when I really learned about that, it is— I could, to your point, tailor something that really fits where they are in life, what they want to do. I can really help them more than just going through a bank and a realtor. It gave me a lot of confidence. So I think if someone's kind of intimidated about it, if you really, really dive into all the benefits and pros and cons and you really believe it yourself, then it's not like you're selling it. You're just kind of explaining this as an option and seller, these are kind of your goals and this is what you want to do and this is an option. I really had to understand it myself and it took away that intimidation. I don't know if that makes sense, but I think, yeah, other people, it's very scary to talk to sellers directly. And when you have that realtor, you kind of have that buffer and it's a comfort zone thing, I guess. Yeah.

Yes, I think you're absolutely right. But if you can frame it as like, look, I'm gonna be able to do a better job crafting something that's gonna work perfectly for you if I can hear the words directly coming out of your mouth about what you're trying to accomplish, then that's a, a frame that, that might help ease those concerns, you know, a little bit.

Yeah. And I think it's not always right. Like I, when I, I feel like oftentimes I will tell someone, hey, like, especially if it's like a, you know, you should lift it, you'll, or whatever. And I, I don't, I always— there's not just— it's one tool, right, in the toolbox. Like, you don't have to do seller, but understanding it and knowing it. And like, the— when I have done them, if someone— if it's that, you know, they don't want capital gains, like, it's just— it's not necessarily always a hard sell either, right? I think— I think people— I just think there's— there's a lot. And again, like the unicorn thing, like, I think people think it's really hard to find, or it's impossible, or you have to just get super lucky. But I think You know, you are— it's out there and I think understanding it. So for anyone that's newer, I just feel like it's a really cool strategy that you should, you know, understand in your, you know, your box of tools.

Yeah, absolutely. I mean, this— here's the simple thing. All of us were in third grade at one point and we sat in the gym in a circle and we played the game of telephone. That's literally what, you know, if I'm the buyer, I call my realtor to call their realtor to call that person. We know how this story goes. We learned it when we were 8. The communication gets lost big time, very, very, very quickly. And if you can believe the premise that like the best solution is going to be a result of the most clear communication, obviously that this— there's some shortcomings to that, that game of telephone that is so normal. So anyway, I think if we can think of it like that, then it's not about fear, you know, being scared or fear or negotiating. It's just about like, let's make sure that we are hearing each other clearly and that we're coming up with something that works as well as possible for both parties. Yeah.

And also just the caveat, like, I mean, agents are great and there's a place for everyone. There's not to say that, I mean, I think we've all worked with agents and oftentimes that is the best thing, but I think there is a place for this too. I feel like we covered a lot and there's so many more questions. I feel like we should probably wrap up. This has been a great conversation. There's so many tools and I think this specifically when you open it up, there's so many benefits of it. When I just, like I said, like when I really, when I heard you talk once and I really dive into, I just, it really clicked for me and it maybe it's not for everyone, but when you really, it's such a win-win, I think. And that's, I used to think, oh, it's just a win for me, right? Like, so I get to negotiate. A great rate. And it's just— but it's really for both parties. And I think that's also not— and the fact that you're getting the financing and the property, and you're not— because banks, especially, you know, when you're self-employed, they want your firstborn, and they want, you know, I mean, like, it's very challenging, even with, you know, an asset-based loan. So there's so many reasons. Um, yeah. Is there anything else that we didn't, like, high-level cover on seller financing points that you would make?

I mean, you're right. If we had another 13 hours, we could fill it. I'm confident of that. But yeah, I mean, I would just sort of, to me, the summary that I would leave people with is that, actually, okay, sorry. One thing we didn't cover that I'll say real briefly is most people are inclined to go out into the world of properties and then ask about seller financing. That sort of makes sense. Unfortunately, it's actually the opposite of what we need to do when we are committed to buying properties with seller financing. We need to go find people who are good for seller financing and then look at their properties. And that is kind of 180 degrees from what most investors are used to doing. But if you go out and shop for a property and then just sort of randomly ask people like, hey, what about seller financing? You're going to get a lot of no's, like, you know, 99 times out of 100. But if you go and look for the person who's a good fit for seller financing and then see what they own, now there's a much higher likelihood of those things happening. So anyway, if you can learn and adopt that approach, what you'll find is that there's really two huge benefits to seller financing. And I'll just sort of leave these as the takeaway. It's like the loans are much easier to get. You don't have to reapply every time. I mean, the conversation is the application. You don't have, there's no seasoning periods, no sellers like, hold on, let me calculate your debt-to-income ratio. Like it's easier to get loans on a repeated basis, which is what allows us to scale. But the second point is that those loans, if we become masterful negotiators and we know what a good loan looks like, and those loans are not only easier to get, but they're actually better loans also, right? We talk about supercharged seller financing, which is a kind of a whole world of its own. But if we get good at this, the loans are much easier to and they're much better loans. And those two things together are what allow us to scale either faster or certainly more continuously. Because a lot of real estate investors, like, they buy something and then they have to wait a while, then they buy something and they have to wait a while. But with this approach, we can certainly scale more smoothly and probably faster.

Yeah, no, I appreciate that. And just to quickly put a bow on that, I think when you talk about who the perfect person— it is, I hate to say, tired landlord, landlord, but someone that has owned the property for a while. It's been great for them, but they need to kind of move on. They're not generally not underoccupied, just they've had— so that's kind of my opinion, or from what you've taught to the person that is more likely to be open to that. Perfect. Well, just to wrap up, this has been so fun. You know, if you were to give someone advice, I don't know, life advice, or maybe someone, you know, this podcast, I think a lot of, you know, what would you tell someone that's just starting out? I don't know if someone gave you advice, like, you know, what would you tell them?

Yeah. So, you know, I think it would have something a lot to do with get comfortable with the idea of talking directly to sellers yourself. Put aside like the fear that you're going to make a mistake or you're going to get, you know, taking advantage of and just put yourself in a position to talk to more people because talking to more people is where things happen, right? Like I saw just on Facebook the other day, somebody said, I'm going to buy my first property next year. So the first thing I'm going to do is I'm just going to start analyzing more deals. And I'm like, you spending more time behind a computer is not going to get it done. I mean, you don't need 100 spreadsheets. You don't need a bunch of calculations on a calculator. You just need to talk to more people. And if you just practice getting comfortable allowing yourself to have a direct conversation with a seller, like good things will come out of that. It's almost impossible not to. And if I can say really, really quickly, the thing that to me is correlated and attached to that, I said this to somebody on Facebook the other day and I'd never said it in exactly these ways and I was like, oh, I like that. I need to remember this for myself is I'm actually, every investment I make, is I'm actually investing in myself. It just sort of comes in the form of a piece of real estate, but I'm not really investing in that piece of real estate. I'm investing in my entrepreneurship to take that piece of real estate and do something amazing with it. And that's kind of a critical— that's not a potato, potato thing in my mind. Like, that's a critical distinction. I'm only investing in myself. It comes in the form, it manifests as a piece of real estate, but I'm investing in my ability to raise the rents by $1,000 or improve the value in this other way or whatever it is. So if that makes sense.

Yeah, I know. And it goes back to that entrepreneurial kind of spin versus just investing, right? You're just investing as this very kind of linear thing. I love that. So next question is kind of silly. What is your superpower in life?

Okay, so this is going to be so, this is going to be so nerdy because I have, I have an insanely prepared answer that I just know this off the top of my head because I was in this coaching program and this is one of the things that they like teach you to figure out and, and to refine. So I can tell you exactly what the answer to this question is. And it's not because I'm a psycho, it's just because I've, I've done this before. So we call it a unique ability. So my unique ability is seeing the core essence of a situation from a different perspective and helping other people do that and asking them questions to unlock aha possibilities and sort of moments of epiphany for them. So that applies when I'm working with sellers, like they're looking at their situation and they're seeing it like this and I'm helping them maybe kind of walk around it and see it from a slightly different perspective. And now they're more open to different ideas. That's what I do as a coach. I help real estate investors see things from a slightly different perspective. It's what, like, it's why when a friend is stressed, they call me and say, you know, I'm so upset about this thing. I can help them see it from a slightly different angle. So that's my superpower. More, and, um, I just try to use it as much as I can.

No, I see it every, every week in the call. It really is. Um, okay, next question. Um, you know, like, I guess, you know, a book or a podcast or a resource you can, you know, your own podcast that you'd recommend.

Yes. Um, so I would say the most important thing any, uh, real estate entrepreneur maybe not investor, but real estate entrepreneur could do would be improve their human relations skills. Like the math stuff. Yeah, the math is great. It's important to understand the math, but human relations skills. And so the best read, I would say anybody who's going to do any off-market marketing and deal-making and negotiation is How to Win Friends and Influence People. And not only have I read that, I actually took a class once over the course of a few months from the Dale Carnegie Institute.

Man.

It really, I mean, the lessons are not rocket science, but they're also not, you don't always do them all naturally, right? So it takes some practice with those things, but it's extremely, extremely powerful. It's a classic for 100 years now for a good reason. So yes, weird statement of the day. Jeff says you want to be a better real estate entrepreneur, go buy or go read this book, How to Win Friends and Influence People. Don't read a book about real estate, read it, How to Win Friends and influence people.

I love it. Actually, it's on my Audible rotation. Yeah, love that. Okay. And then lastly, obviously you're an entrepreneur. You have a lot of things going on. You have a course and a podcast. So I'd love for you to just to share a little bit about how people can find out more about you and learn more about you.

Yeah, thank you. I really appreciate that. Yeah. So I call sort of the brand for what we do, The Thoughtful Real Estate Entrepreneur, and I call it that because When I was first creating this, I was like, I feel like when people use the word thoughtful to describe to me, that's always the thing that feels like the greatest compliment. And it's not like people were saying it every day, but whenever they did, I was like, I love that. Thank you. And I want to be more of that. And so we called it The Thoughtful Real Estate Entrepreneur. We've got lots of free, good resources, podcast, Racking Up Rentals. We have a Facebook group called Rental Portfolio Wealth Builders, and people can get lots. I mean, there's really a lot of sort of free resources and stuff and community in that. When somebody says, I want to go from grasping the tools to mastering the tools of seller financing and off-market negotiation, then we have what we call the Deals Workshop, which is a paid group coaching mentorship community/course experience. It really is super I think thorough and nuts and bolts. It kind of goes everything from here's how we understand who we're marketing to and why to how we're marketing to them exactly what to say in the letters, you know, what to say when they call you back, how to progress the negotiation, how to figure out what, like what I call, you have to solve the person before you can solve the deal. Here's how you do that. Here's how you structure it. Here's how you can get it written up. So it's very, you know, yeah, detailed and thorough and sort of of nuts and bolts, take somebody by the hand and walk them through the process so that they can put something in contract in just a matter of a few months. So thedealsworkshop.com is the place to check that out.

And I highly recommend it. If this is your jam, it's well worth checking out. Well, Jeff, this has been a real treat. I know we went over. I'm sorry, but I just, I love talking about this stuff.

It's a pleasure. No, thanks for letting me drone on about it because this is what I geek out on too.

Yeah, it's just, it's such a, I don't know, I never get tired of talking about it. Well, thank you so much. Um, yeah, I will let you know when this is out. And again, I really appreciate your time and it's just been a treat to talk. So thank you.

Thank you for yours as well.

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