How to “Twist” Rising Interest Rates into a Powerful Marketing Strategy

We know interest rates are rising, right? I'm in contract on a couple of different investment properties right now. I'm still out buying despite the market conditions. Actually, it's an opportunity for investors. And when I got to the point of finding out what my interest rate would be on one of these properties at duplex, I was told that it would be 8.5%.

And I about fell over! 8.5%, that's nuts, right?

And she explained to me that, well, you could pay points, get that down to, you know, 7.5%, or even 7.1%. And there was a lot of strategies around that, but it was gonna be expensive on the point side. So when we're having this conversation, buyers like myself are gonna immediately think my, if I'm gonna pay that kind of points, I want somebody to share that cost with me.

Who do you think it's gonna be? It's gonna be the seller. If the sellers are gonna want top dollar, like these Impressment property owners do of course, they might have to participate in paying some of these points to get the interest rates down to a point which makes it attractive for a buyer.

For instance, for me, based on this investment where I'm putting 25% down at an 8.5% interest, it would be a negative cash flow going into the property.

So I had to say, wait a second, we're gonna have to re-strategize our equation here to make this work. And we can still make it work, but we all gotta work together. We've gotta be creative in how we approach it.

Here's why I bring this up:

We need to start preparing sellers that it's highly likely in today's market environment, that buyers are gonna come to the table and they are gonna say, "Hey, I need you to participate in paying down the points, so I can get an interest rate that's reasonable that I can afford. Maybe paying closing costs. Paying some kind of, you know, credit into the transaction so that the transaction can go forward."

If a seller's not willing to do that, then it's what we call price or terms, right? If you want the top price, you're gonna have to give up something. You're gonna have to play a little ball here in, in participating in the credit situation in order for buyers to have a reasonable interest rates, so they can afford the home and the payment on what you're asking for.

Or you have to reduce your price to compensate on the other side for the same exact thing.

Interest rates are eating into buying power and it's making homes less and less affordable because more of that money is going to the bank and not to the seller. So these are some things that we should strategize. Now, how would that conversation look when I'm sitting with the seller, what would exactly would I say? I'm gonna give you a, a quick script right here, which is pretty easy. And it will hopefully open some of the seller's minds.

Here's what you say:

"Hey, as you probably have noticed, the mortgage rates across the country have been changing rapidly. I'm sure you've been watching the news. To put it in perspective, back at the beginning of the year in January, interest rates were in the 3% range. They've just climbed up above 7%. In some cases, we're seeing 7%, 7.1%, 7.25%, and they're likely to go higher before they go lower. So I wanna prepare all my clients, including you guys, for the fact that when we have a buyer, it's highly likely they're gonna come in and ask for us to help pay some of those lender closing costs. And maybe buy down the interest rate. And what that means is that the buyer can actually get a lower interest rate if they pay what's called points, which are just a percentage point of the loan amount, so that you can buy that rate down. That way, you can get to a more reasonable level where people can afford the payment.

"If we don't agree to do that, it's gonna be more challenging to find a buyer. In fact, it can be a part of our marketing to incentivize buyers to look at our home. So, you know, might be something to think about and promote that we're willing to pay three points towards buyer closing costs. Four points towards buyer closing costs. Yes, it's gonna cost us a little bit money, but it's also gonna incentivize buyers to look at your home over the 30 other properties they have to choose from."

That's how we make it work for us. We talk about it in a marketing perspective.

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