The real estate world looks very different today than it did just a few years ago, and landlords are starting to feel the pressure.
Expenses are up. Rents have flattened. Cap rates are shrinking. And for many investors, the math simply doesn’t work like it used to.
To understand what’s really going on — and what smart investors are doing about it — we recently revisited a 30-minute interview with Eddie Speed, founder of NoteSchool and a 45-year veteran of the note and creative finance industry.
Take 30 minutes and watch the replay here:
Everything below comes directly from that interview, summarized and explained in plain English.
Why Rental Returns Are Dropping — Even for Savvy Investors
Eddie shared a story about a highly sophisticated investor — someone overseeing billions in real estate — who ran an honest evaluation of his rental portfolio.
Here’s what he found:
Property values doubled
Rents rose about 20%
Expenses rose about 60%
When they recalculated returns based on current value and current net income, the result was shocking:
A sub-4% cap rate.
For many landlords, that reality hits close to home.
Eddie’s point was simple:
Landlords didn’t mismanage anything — the market changed beneath their feet.
Insurance is up.
Taxes are up.
Repairs are up.
Contractors cost more.
Cap-ex is higher.
And rents have hit a “glass ceiling,” unable to rise fast enough to keep up.
Why Lending Has Tightened — and Why That Matters for Seller Financing
Most landlords don’t need a spreadsheet to know things feel tighter. But Eddie lays out the numbers clearly:
Insurance premiums have exploded
Property taxes keep climbing
Repairs and contractor costs haven’t gone down
Property management is more expensive
Rents have hit a ceiling
And inflation has pushed operating expenses way up
The old 35% rule for rental expenses (from 2018) is gone.
Today, many properties are running at 50% expenses or more.
What That Does to Your Cap Rate
Here’s where many investors get a wake-up call.
Cap Rate (simple explanation):
Cap rate is your rental property’s true return based on what the property is worth today, not what you paid for it.
Formula:
Cap Rate = Net Operating Income ÷ Current Property Value
Example from Eddie’s transcript:
House is worth $200,000 today
Nets $8,000/year
8,000 ÷ 200,000 = 4% cap rate
👉 A 4% return for all the work and risk of being a landlord is NOT good.
That’s the kind of return people get in a bond—without toilets, turnover, or taxes.
And that’s what Eddie sees even among major operators controlling billions in rentals.
Why Many Investors Now Ask: “Should I Become the Bank?”
Eddie makes a bold comparison:
A single seller-financed note on a rental property
can produce 2.5–3× the net income
of that same property as a rental.
Why?
Because when you become the bank:
You don’t pay repairs
You don’t pay taxes
You don’t pay insurance
You don’t deal with vacancy
You don’t manage tenants
You don’t deal with property management
You don’t handle emergencies
The property becomes your collateral, not your responsibility.
Eddie even jokes that NoteSchool used to be “a home for burned-out landlords,” but today it’s more accurately:
“A home for landlords ready to reinvent themselves — not quit investing.”
The Biggest Mistake? Doing Seller Financing the Wrong Way
Eddie is clear:
Seller financing works only when structured correctly.
Many investors make “homemade loans” or use informal documents — and that’s where problems start.
To do it right, Eddie says:
Your paperwork should mirror conventional mortgage standards
The loan should be a Qualified Mortgage (QM) or close to it
Your underwriting must be documented and defensible
Your note should be structured so it can be sold on the secondary market
Done right, you create an asset that passive investors, funds, and even institutions want to buy.
Done wrong? You create risk you don’t even see.
Why This Isn’t a Trend — It’s a Shift
Eddie believes the market has entered a new phase — one where investors must challenge old assumptions.
He compares it to Henry Ford’s famous quote:
“If I’d asked people what they wanted, they’d have said faster horses.”
Today, many landlords are trying to make their “faster horse” (their rental) work harder…
when the better opportunity might be the car — seller-financed notes.
So… Is It Time to Become the Bank?
If you’ve never run the numbers, Eddie recommends a simple test:
Start with the property’s current market value
Look at the true net income (no fudging)
Compare it to what a seller-financed note would produce
When investors finally run that comparison, the reaction is usually the same:
“Why didn’t I look at this sooner?”
Ready to Learn How to Do This the Right Way?
Should you be the bank? Do you know how?.
To actually do notes safely, profitably, and legally, you need a clear playbook.
That’s why we’ve invited Jeff Watson—long-time investor, 30-year attorney, and NoteSchool instructor—to Kansas City in January.
Jeff has created seller-financed notes for decades, for himself and his clients, and he teaches the exact processes NoteSchool uses to create compliant, high-value notes.
Here’s how to learn this hands-on:
Tuesday, January 13 – MAREI Monthly Meeting
The Power of Private Mortgage Notes: Why Notes Beat Rentals Right Now
Learn the why behind the shift and how the math really works.
Saturday, January 17th – MAREI Workshop
What You Need to Know Before Your First Note Deal
A step-by-step guide to evaluating, structuring, documenting, and protecting your first seller-financed note deal.
If you’re curious about seller financing…
If your rentals aren’t performing like they used to…
If you want predictable cash flow without the landlord headaches…
These two events will change how you look at your portfolio in 2026.
NoteSchool
NoteSchool's mission is to empower individuals with the knowledge, tools, and opportunities to achieve financial freedom through note investing.
