112 unit update, The Management Option, and Live Q&A

Hello and welcome back to another episode of Multifamily Strategy. I am Christian Osgood, your channel host. If you don't know me already, I've purchased a couple hundred units starting with no money over the past 4 years. I had a career that got me to a couple of duplexes, learned creative finance, bought a 38-plex with scaled into hundreds of units in Washington and Texas, and what an adventure it has been. Coming live to you every single week on Wednesday, 3 PM Pacific Standard Time. We already got a few people in the chat, including the one and only Lumberjack Landlord, one of the people who taught me how to play the game as well as I get to play it. So everyone, ask questions in the chat. Let me know your thoughts on anything I can answer. Creative finance, business, real estate, contract. We're going to talk about the 12— sorry, 112-unit building that we are under contract for. Last time it was 176. I'm going to give you guys some updates there. And finally, using an option contract. I have sold a property on an option contract. They then failed their option 6 days later. I'm finally using one of my own. I'm going to tell you guys about that deal, and then we're going to get rolling into the questions. So Welcome everyone to Multifamily Strategy. Here we go. So a couple weeks ago, actually just over a week ago, went under contract for 176 units in Waco, Texas. One of my favorite cities in Texas. I love it down there. It is super fun. Yes, it used to be a super rough town. It has gotten a lot better. The school's also gotten a lot of press. It's apparently getting better, but that little town has a ton of development. It is a just Awesome piece of Texas. If you guys have ever seen the show Fixer Upper, that is where they are based. We're just buying bigger stuff than they do and we're doing the same darn thing. We're flipping them, we're turning them around, we're operating them better, and we're making it into something new. The 112 is really interesting. So we went under contract, it was supposed to have 20 vacancies and be bringing in about, I think it was about $67,000 a month in revenue. Well, they just got us our due diligence items yesterday and turns out it's actually bringing in about $72,000 in revenue and is only 10% vacant. They gave it to us on numbers that worked just fine. Turns out they're actually doing quite a bit better than they thought they were. They're that bad at math. Um, so, uh, very pleasantly surprised with the project so far. Uh, Caleb went down and drove it for us. I'm going to be down there next week doing the interior walkthroughs and inspections. But very excited to get to see the property, to really get our hands around what the project is. But looks like we actually have less project with better numbers. We were going to do an additional 64. We made the decision driving past it. That building just looked a little bit beat up on the outside as compared to the larger one. Entering a new city, no reason to do 176 units all at once. 112, That is a doable deal, paved right off the freeway. 40 units are reserved for low income. And even if we went all the way down to the very low income minimums on every single unit, this thing would be cash flowing a ton. It would be the single best deal I ever did if we went very, very, very low income across the board. We're not doing that. We're doing a blend of market rate and low income. This thing is going to be a monster. Rents are way under market. We have a few more units to lease up and it's almost fully renovated. I believe there's 4 unrenovated units. We're picking this thing up really nice. They just had no idea how to do bookkeeping or management. Owners don't care. We're picking it up conventionally and we are absolutely crushing that deal. So super excited. That I am quite sure is going to come together. Account is funded. We have the investor who wants to do that with us, it looks like. We're going to fly down with him and get the final things done. But yeah, it's a big deal. Texas conventionally financed. Here we go again, winning on price this year. I think we're going to see a lot more price wins as we continue into the sustained higher interest rates. So if you don't know how to buy properties with or without money, this is going to cost me $0 out of pocket. I have a debt structure with the other partner. Where we're going to return all their capital within the next 5 years. And when the capital accounts are balanced, I'm going to own with Caleb 70%. They're going to stay on as a 30% partner. We will all have no money in the deal. They will do very, very, very little work. This is not a lot of money to them. We're going to put like, I think it's like a million and a half dollar raise. It's just not a lot of money to this particular investor. They're happy to park it. They're even more happy to have it back. They're happy to keep the 30% of an awesome deal and the cash flow that that brings. They just want to park the money. Simple deal, easy structure, great partner, fantastic location. So that's very exciting. In addition, I am working on building the portfolio closer to my house. There is an 8-plex in a little place called Lake Worth. It's near my house. Uh, we are wrapping that up on an option contract, a management option. Now, Texas is one of many states where you cannot do on commercial multifamily a traditional lease option. They do not allow you to do that. Rent-to-own type models are not allowed there. What is allowed and is allowed everywhere is the management option. You can always do an option contract, but in lieu of leasing and then subleasing the property, you gain control by getting a management contract. You pay the mortgage direct to them. This is not subject to. Though it's in many ways similar, but title stays in the owner's name. We're paying the owner directly. They then pay their mortgage. All of their bills and recurring utilities are transferred to the management company, which we have a management agreement. So you pay an option fee for the option contract. You get a management agreement in which all utilities and recurring bills and maintenance is passed on to the management company. In exchange for the option contract. Your option fee is your option fee. The debt stays with the owner and the title stays with the owner until you execute the option. It is a very simple workaround, functionally very much like a lease option, but allows you to pick up properties and stabilize them. Why aren't we just buying it, you might ask? Because that is always the goal. It is not bankable right now. It needs property management to one, build the books correctly because they have poor bookkeeping. Two, they have a couple of vacancies. There's a little bit of project to do here. We are very qualified to do the project. So we're going to come in on the management contract, fix it up, and the owner is thrilled. We showed them our portfolio of what we've managed, and he's like, well, you're unlikely to do worse than me. And he knows we want to buy it, and he knows what we have to do to get it bankable. So what I pretty much pitched is, look, the option fee is the option fee. If we don't execute, you get to keep the money. So we're paying for that. We're taking the property headache off your hands. But more importantly, if I fail, you keep my option fee and I am capable of running this property better than you. And I can show you how I've done that. And he looks through this stuff and he's like, I will likely take back a property that is performing much better than it is today. It works very nicely. And I happen to have the property management company in Texas now. So now that I own the property management company, I have all the pieces. It's called the Management option. It is superior to the lease option, I believe, in structure. It is legal everywhere that I have ever seen because it's— you can always do a management agreement, and option contracts are illegal everywhere. You can always do these things, but you avoid all the headache of master lease and tenant law. You avoid subject to. These are fantastic ways to put a property on the roadmap of how are we going to purchase this. Not seller financeable, not every deal is, How would one purchase it from the bank? I need to get it into the position in which I can get the financing that I need to close the deal. How's that for creative finance? Starting the Wednesday call. Now we get to the part where you all run the call. Ask your questions, I'll answer the questions. And here we go, I'm going to start diving down these. We already have a ton, so this is going to be a good one. I'm also celebrating my father-in-law's retirement tonight, so I'm going to go fast through the questions, but thorough. So rip 'em out. We're gonna go, uh, let's see here. Uh, Luke Divine, for having ways to collect rent owed, would you recommend having a promissory note? Can this only work if you have it in place at the beginning of the lease? Uh, having ways to collect rent owed, I would probably stay away from any creativity on rent owed. Rent is due, and if you're not paying rent, they need to find somewhere else to live. And it's not like this mean, like, oh, we're going to evict you. I love working with people. I've come up with a bunch of payment plans that have worked. In fact, in Washington State, by law, you must offer them a payment plan and they are allowed to propose changes to the payment plan, which is garbage, but you must attempt to work out a payment plan before going through eviction, or at least offer the ability to do so. So you can do it with a version of a promissory note, but as people are getting caught up, you really need to be quite strict on rent needs to be in. If there's back due, there needs to be a clear plan of here's how you're getting caught up. And then once you're caught up, you're going to stay caught up. Otherwise, it spreads like cancer. You have one delinquent tenant and then the tenant next door goes, oh wait, they haven't paid for a while. People talk. And you end up in a campus of 20 apartments with 4 or 5 people who all have issues paying on time, who are all falling behind. And every time you try to get them caught up, oh well, I heard you helped out this one person. Great management means you are a strict but kind manager. Kind but not nice. So when you go through this, make sure that you're following those rules and put together. Uh, Luke, why should I seller finance this building to you? If we're just asking How we put that together, like what, how we answer that question, why should I seller finance this building to you? If they're asking that, there's something wrong with how you set it up. I'm always starting with, here's my goal, here's the property. If we're talking about the deal first, we're getting into like a seller has proposed the transaction. So they've, they've moved from being an owner relationship to, okay, we're now engaged in a selling conversation. As we go through the pieces, I'm going to bring up financing, not even with the word seller financing typically. I'm going to say, okay, here's how I see this going. Here's how much I can put down on this deal. So let's say 10% down. I can do 10% down if that is okay with you. The rest I would like to structure as payments of X amount with X interest over Y period of time. I'm not even saying, oh, would you carry the contract? I'm just saying, This is how I would like the deal to be structured. If they're open to it, they'll tell you. If they're not, they'll usually say no. They rarely say, why would I seller finance to you? If they did, I didn't clarify something along the way. It's like, well, why would you do that? Well, this is just where the deal works for me. If it's a deal that's not bankable and that's why we're doing seller financing, that's an easy explanation. For the price that you want, I do not believe a bank's going to look at this and finance this. For this reason. I don't have a material problem with your pricing. I can manage it to get it there. So the price is fine. This is why we're doing terms. Or it depends on the way that the deal is structured. You don't just throw out seller financing early on in the conversation. It is because it makes sense for the deal. That 112 units that I'm doing right now, not seller financed. The 8-unit, beautiful 8-unit on the lake, That property, we're doing an option contract so I can get it into a position where it's easily bankable. It's creative. It's definitely creative how we're taking it out. The contract is awesome. Possibly the best piece of legal that I've put together. I love this contract, but it's not seller financing. It's not the answer. So if you have a deal where seller financing is the obvious answer, the way you present it, it should be clear. If they're asking, well, why would I do this after you presented it? Go back and revisit how you would attack it. Dylan, good to see you, my man. How should I learn about reading contracts? That's something you just kind of got to trust the attorney. If so, uh, well, Dylan, you have advantage over many people on this live. You're in the mentorship. You can ask your mentor Christian or Cody or both of us to look over these with you and help you put these together. How do you learn to read them? The best way is by doing. And so yes, get your attorney to draft it. And I will, I help people with this all the time. Drafting legal is my, like, that is my best thing in real estate of everything that I'm okay at. Legal is the best piece of real estate for Christian Osgood. When we put these things together, you need to be able to read them. You are going to make mistakes when you are new. You're never going to be perfect at it. You need to have someone who has more experience read over them with you. And there's many owners who are a lot better at reading these than the lawyers that put them together. Have me read it. Better yet, if you have an owner in that market that you have a relationship with, that is a fantastic time to say, hey, remember when I said I'm new and I'm playing this game? I'm under contract for a deal. I love this. I'm looking at legal for the first time. You've done this more times. Would you be willing to give this a quick look over with me? Great way to build a relationship with someone who you really want to help you learn how to play the game. Someone who's a little older, maybe a little farther in their portfolio, more experience. Take advantage of those. But yeah, Dylan, bring those to me. I'll help you with those too. Luke, what is self-syndicating a deal? Oh, I love this. I've talked a lot about wholesaling to yourself. You put it under contract in your name, you find a fantastic price where it's like, oh, I could have wholesale this. Wholesale it to the LLC if it's a great deal. That's part of the conversation with your partners. You can go, "Hey, I'm bringing the deal and I've structured this deal and I have an amazing deal that I could sell to someone for a lot more money. I would like to take a small upfront fee as I assign it to the LLC." You're basically wholesaling to yourself. If you're starting with no money, it's a way to get liquidity while still buying great deals. If you win on price, wholesaling to yourself works. So what does syndicating to yourself do? So syndication, I generally don't like it. It's an SEC filing. You're creating a security. You have general partners and limited partners. Limited partners are essentially crowdsourced. So we can get a whole bunch of investors to pool their money. You create a security, lots of regulation around it, and you're creating a fund. And they're going to come in and fund your deal. And you're going to give them some sort of typically preferred return. You can get very creative with them. I do not like them because they have been pitched to people for a long time as you can get into real estate with no money if you're a syndicator. Start with a 200-unit property. People who had no business running that size property are buying these with syndications because they're great marketers and salespeople. They're losing people's money. Interest rates went up. They bought on a variable rate debt, tons of problems. The self-syndication is interesting, especially if you know seller finance. I am looking into this on one of my deals, specifically the Robinhood, because I have an amazing debt structure, but it's not the debt structure for how I want to run the deal now that I've owned it for a while. I've learned a better way to run it. I am doing what's called a recapitalization. I am bringing on new liquid partners to replace the old partners, fund the account with the money I want to do to do the upgrades I want in the LLC. And we're looking at, do we do this as a syndication, or do I find one very, very, very, very liquid partner to come in and bring all the money to bring this whole resort to a brand new level? I like the idea and I'm open to the idea when you're an operator real estate, if you build, say like I did at Moses Lake, a 150-unit portfolio, and I did it piece by piece with 6-plexes, with 8-plexes, with 12-plexes, with 38-plexes, with 31, we built it one building at a time, but we own all over town. Well, now it's a deal where if I wanted to pull a bunch of money out of that and I have the cash flow to back it, Instead of going to a bank, I could syndicate that portfolio to myself. That would be a cash-out event, and I'm very confident that I can run that portfolio because I run all those properties already. It's my portfolio. It is a way to pull liquidity out of your portfolio, to move your pieces, or to inject new capital. I could do something in a syndication called the Moses Lake Revitalization Fund, and if we had a whole bunch of CapEx, capital expenditures, we wanted to add to the portfolio, it would be reasonable to say, I already manage these. I'm very confident in our numbers today. This is what we want to do on a CapEx, either build more units or to go crazy on upgrades. And this is our projected return. You could do a syndication where you are the GP selling yourself your own portfolio. It could be for liquidity. It could be to move capital. It could be for a specific project. These are all options that you have only when you have pieces already on the table. Do not look at syndication if you are new to real estate. It is not for you. It does not make sense on small properties, and you should not buy a huge 100-unit deal as your first deal. Your stupid tax, the things you don't know you don't know, will wipe you out. 99 out of 100 people doing this, you're going to get wiped out because you're going to make a mistake. None of us are smarter than Matt Hawkins on this particular live. And if you're not smarter than Matt, you're not allowed to do that. Troy, howdy Christian. So how do you get in contact with the owners? How did you get in contact with the owners on this deal? This was brought to— this was actually brought to Caleb from a broker who knows him from the deals that Caleb and I did in Stephenville, Texas, a little bit north. He reached out and said, you guys are interesting. I like the way— I liked meeting Caleb. He's seen my YouTube channel. This is one of the very few deals, and I mean very few, that I have actually got from my marketing efforts talking about real estate. I think there's some value in telling the story online. This is one of two deals where this came up because one, Caleb is doing owner meetings. He moved to his property. He met everyone in town, people heard of him. On my end, people have seen my marketing and some people have actually bothered to watch my videos, which is very kind of you all. This deal came up because of that. It's a broker relationship through the joint storytelling of Caleb Hommel and Christian Osgood. We came together on a property. We decided this is the right size to open our property management company in Texas. I already have employees lined up. It helps me launch my company, but that's how this one came up. It was an owner meeting that introduced Caleb to a broker who then fell in love with us through our storytelling. It's a little bit of everything we say to do. From Edmund, how exactly did you exactly find the investor to place the capital in your deal? Owner meetings. This is an owner. This is the magic. Caleb's Caleb's freaking nature. I'm a really good deal architect. That is, that is where I shine, the putting together the legal and the structure and the financing. I'm really good. And I'm also a good closer. My weakness in real estate, if I had one place that I'm actually the weakest, I would actually say it's the opening, finding a bunch of new relationships. I do a lot of public speaking, but I'm not an extrovert like Caleb is. He makes more connections in a room than I do organically. So this is someone who also is an owner in Stephenville, Texas, someone who lives in Florida. He happened to be in Stephenville. Caleb asked him out to coffee as an owner meeting. A few million dollars is not a big deal to this person at all. It's just someone who happened to be a property neighbor of Caleb's.. And we hopped on the call and there was a lot of deal architecture that needed to go in. And so when we hopped on the call, you combine my experience and the deal structure that I crafted, and then you combine Caleb Hommel and the relationship that he brought. Opener, closer, great partnership. That's how that one came up. Notice on all sides of this deal though, the story started with an owner meeting in the town that we decided to invest in. We're finding a deal in a different town. We're finding a deal bigger than any other deal that I've bought in size and dollar amount. I was just thinking about that. Just barely the most expensive deal I've done or will have done should it close. Don't count your eggs before they hatch. But started with an owner meeting that introduced us to a broker that gave us the deal. The capital started with an owner meeting. Meet owners who've done the thing that you want to do. I promise you they will move you forward. Luke, what would be an example of crowdsourcing? So crowdsourcing, best I can— so it is not a REIT, which is a real estate investment trust, which is basically a stock that holds real estate, but it's most similar to that type of structure. You're creating a security where someone is investing. So basically it's like a note. You're creating a security backed by an equity position in real estate. So you're owning fractional shares. People sometimes say, "Oh, I bought my brick of the building," is a phrase that people talk about investing in syndications. Crowdsourcing is where you raise, say there's 100 people who all bring in $10,000 and that funds your deal. That's what crowdsourcing is. It's not dissimilar from a stock going public. They take the offering to market, everyone buys up shares, the price is determined by the market's hunger for the deal. It's most similar to that. That's at least what comes to mind for me. But crowdsourcing is I am going to a crowd of people as opposed to one or two investors. How I operate business, and I believe this is superior in every way, joint ventures, no SEC filing. Fewer partners, less reporting, much more intimate relationship. Everyone is a member in some way. Even my passive investors have input on the renovations. We are all on the same team. I write all my deals so the objectives for everyone align with the goal. Syndication has a huge habit of paying yourself upfront and when you sell the property, which means people get paid to enter and exit. That does not always align their goals. With their investors. Their only obligation to their investors that I see consistently aligning with the goals is that if they do a great job, they'll get to borrow the money from the same people again. That's not a good enough alignment. If they're a really good marketer, they can find new people and they can fund a new crappy deal and do it again and again and again. Syndication is not a model that I like. It is a tool in your tool belt when you're an experienced investor on how you could take out bigger deals. Though I have found as you scale, you also meet bigger players. And when I need a few million dollars, I go to one person and I ask for a few million dollars. And later in my career when I need $10 million, I'll probably go to one person and I'll ask for $10 million. I have found every level of this game over the past several years. When I needed $100,000, I found people who have that. When we needed $500,000, we found people who had $500,000. When we needed a million, we found someone with a million. There are people who are playing the game at a much higher level than you. There's more money out there than you realize. I like a JV structure even on big deals. Find one or two people to fund that deal and partner with you. It is going to be a lot better, in my opinion, than syndication. When have you used substitution of collateral? I haven't. I have not had to substitute collateral yet. We have talked about it many times. For those who don't know, it's basically saying, hey, right now I have a building that is backed by We'll say this 6-unit building. I would like to refinance this. I also have a deal over here. As I'm getting new debt, I love my debt product on this building. Would you be okay moving it to my debt-free building that I've already paid off right down the street? Also happens to be a 6-plex. Would you replace your first on this building with your first on a different building so that I can refinance this building? For whatever reason that I want to do so. Sometimes it's just a way to pull out more capital while keeping an awesome debt product. That's what we were looking at. But that's what substitution of collateral is. Whatever backs the note, you just agree with the other party, hey, we're going to substitute it with some other asset. Cool piece. Great piece of creative finance. Often that'll be another way to— I can move notes around a portfolio. It's a way that people can get properties free and clear. If you pull it, say someone wants to buy a property from me and they want me to sell or finance, but I have debt on it. If I can move that debt to another asset that has the equity substitution of collateral, well, now I could free up that asset. I could sell or finance. The ability to move pieces around is really important, which is why it's important to do multiple deals. More pieces on the board, more options available. I have not used it, but we have proposed it before. It was denied. There are use cases for it. What is partnership structure, uh, looking like for the equity partner? So in this one, we are going to go, uh, right now at least the conversation is we're going to own 40%, they're going to own 60%, and they are open to us owning 70% and them owning 30% after all of their capital is returned. Now there are some tax ramifications for us when we swap equity, but we will own— we only really get the benefit when we return all of their initial capital, all of us have zero of our own dollars left in the deal. And at that point, because we did all the work and all they had to do is park their money, we will take more equity in the deal for successfully finishing the project. They will get a free 30% of a fairly large deal, the associated cash flow, all of their money back. And then if they want to negotiate a buyout at that time, I'll be very, very, very, very receptive. To buying their remaining 30%. But that's how we structured that particular one, or at least how we're talking about it. We should have confirmation on Friday if they're going to be the investor, schedule flights, we'll go down together. Uh, very excited for that. How can you minimize risk with no books? That's a great question. Um, funny enough, the 112, they do not have bank statements because they have commingled the daylights out of all of their accounts. Going to be very, very hard to underwrite. I am working with their PM and I'm going through the collections, and in this one I'm looking at the owner distributions on a per-property basis and going into the owner statements. They have— their property manager was bad, but their software was pretty good. And so I'm getting in there and hedging against that. You really want to see the bank statements accurate. So I'm checking that the management software matches the rent roll that I was given, matches the leases. And now we have to— this is a requirement— I need to see tenant estoppel letters because I have to get enough information. If I had the bank statements, I would be much more lenient on the estoppels. On this one, 112, I'm going to want to see like at least 75 estoppel letters to, to be able to say this is the rent that you're claiming, this is the rent your tenants are claiming, This is what the project is. This is what the property management software says. You do everything you can to verify. At some point, you have to make sure, okay, if we have less due diligence, there is more risk. Every single time, you need to be really, really, really confident in your numbers. If I am seeing anything where it's not lining up or making sense, we're going to need them to figure out their, their darn books right now. They're getting away with a well-structured P&L and management owner statements that are matching what we would expect to be distributed. That is a very good start. We're diving deeper. Due diligence started yesterday, so we're still fairly new and diving into the books. It is looking very promising. Their bank statements would be nearly impossible to separate. They have a lot of assets all just getting dumped into one account. We're doing our best to pull it apart. We'll see how that develops. There's usually ways to do it. Gary, the management option is very interesting. Can you talk more about that deal structure? Yes. So I am paying them the mortgage directly on this structure. It has 2 vacancies, uh, both of them need renovations, but they should be light. And so the agreement is I'll handle the renovations bill to the management company. We have a management contract that just says, hey, this is how everything's being billed, and it is actually linked directly on the same document as the option. The management contract is linked directly to the asset. So we're going to draft up a— we reference the management contract in the option so we understand that in exchange for the option, we are putting money in and assuming the expenses, and we are going to manage the property. So all of these are part of the consideration for the option. I have 2 years on the option to get the property in bankable status, which on an 8-unit building is very, very, very easy for me, and I have the capital to do so. I can be quite wrong on my numbers and it'll still work. The pricing is phenomenal, but the numbers don't— the day one numbers don't support the price, so a bank will not lend on it. We need to get the operations in check. I also have, uh, I actually have a few employees that I'm actually moving into the building, so I'm renovating the building and then I'm actually putting some of my company employees in the building. So we're, we are more or less just stacking the deck in our favor here. I actually need some, a building that has some vacancies. Planting some PM staff in the building allows me to, one, lower my cost because I'm actually covering their housing as part of their contract. I get to place some of my best staff in a building that we're turning around. I get them near where I live. They're in the central hub. It's going to be very good. So For the team that I have, this helps me build out my pieces. It gives me time to get the management done, to get the renovation done. It gives me time to get the books in a condition in which the bank's going to look more favorably at them. And the option contract is actually fairly small. So when we put this in, like the actual option fee, I should say, we're looking at probably $15,000 for a million-dollar purchase, a little less than a million-dollar purchase.. But on this one, it's like, okay, the worst case scenario, we're out $15K, but I was able to house my employees and we made a building better. But this one's a slam dunk and I can afford this building. So we will get the deal done. But that's the structure there. It's a management agreement tied to an option. Edmund, during feasibility period, when you have the capital ready to be placed, where does it get transferred? And is it done during feasibility? So I like to do earnest money due after feasibility. In Texas, you need some consideration of a valid contract. So I usually do $500 upfront. The rest of the earnest money due on completion of feasibility. That's not always the case, but that is what I strongly prefer. It is placed in escrow. So if you're in a state where title's closing, they will usually open an escrow account. You'll put the money in that account. They will give you a receipt that the money is being held there. It is now stored. For the transaction. If you back out in feasibility, that third party sends it right back to you. In some states, there's a law office that handles this, but you're going to have an escrow account held by a third party. In both cases, you never give the money to the other party. That is a huge, huge, huge, huge, huge mistake. Never do that. A neutral third party will hold the money, and if you back out during feasibility, it says essentially If for any reason you want to back out, you get the money back. So they'll send the money back to you after feasibility is waived. Typically it's called the money goes hard. It is now non-refundable. It is tied to the transaction. If you back out, you may be losing the money unless you negotiate something else as part of the back out. But yeah, it could be done during feasibility. I like to make it after. I think it's much, much safer to not write a check for anything. I have had earnest money held up for 1 year on a transaction where I was right. But we spent a year going through the court system to get the earnest money back. And I eventually— it was $130,000 of earnest money, by the way. We settled on $100,000 because I was like, I need $100,000 to go renovate something and I don't want to take a new loan for it. So we just took a $30,000 loss just to get the money back to buy something else that we've already doubled the money on. Still painful, still frustrating. Earnest money, if you can avoid writing the check as long as possible, that is the way to do it. Oh, sorry. What do I look for in a property management company? Well, one, uh, property managers mostly suck. That's why I manage my properties and I own my property management companies. It is a hard business. I do not recommend it for most. It is stressful and brutal and low margin. However, if you have a large portfolio, you can make yourself a boatload of money by being a better manager than everyone else around you. That is what I have done. So what do I look for and why do I tell my clients they need to work with me? One, I am ridiculously freaking competitive. I want to be better than all of the other property managers because I want to win. I want the market share. People know this about me. It is noted in the town and people, I get a lot of clients in eviction court because we're so good at winning evictions. They're like, oh, these are the people who are always there winning. I could probably use them managing my property. Also, property management companies that own properties. Owners think different than service providers. It is a fact. Find someone who owns some of their own properties who is willing to manage yours. I have found it— I have rarely seen one where they give preferential treatment to their own properties. What I've typically seen is owners respect the game. They understand what other owners are doing. They do a great job of managing way more often than people who are like, I'm going to start a management company. And it's usually a couple of brokers you get together and they want to try to build their pipeline. It's usually a mess. It is a really, really rough business to be in. So anyone who is choosing that pain and not owning the buildings, I don't understand what they're thinking. And they're usually not very good at managing. Holy cow, you need to have a payment plan in Washington State. It's freaking crazy. Evictions. They get a free lawyer who's actually phenomenal, unfortunately. I hate her. Um, I'm actually in the process of suing her because she's getting clients illegally, but they will actually provide our tenants with a free lawyer. We have to offer them a payment plan, and they always fail the payment plan because it's always eviction for non-pay for me. So they never make a payment on it, but I have to offer the payment plan. If they accept it, we have to put it in effect, and then we have to give them additional time to actually fail the payments. Then we go back and restart the process. In addition, if you're evicting them for any reason, and I mean like if they've murdered their neighbor next door or like the clear violations of lease, by law in Washington State, if you are evicting someone, you must— for the entire duration. That was weird. There we go. So in Washington State, yeah, if I am— let's just say like something ridiculous, you have 32 dogs in your building and you have a lease that says no pets. If I start the eviction process, I must house you and your 32 dogs for free for the entire duration of the eviction. They take about 60 days, but there's a bunch of ways that they can get a lawyer involved for free. And stall an extra 30 to 60 additional days. Washington is ridiculous. If you guys want to know why I'm buying in Texas and moving to Texas, business in Texas is in fact better. Edmund, helping out one person could result in violations to fair housing laws. Oh, oh yes, yes, yes. That is another thing with, with tenants. If you are too kind to one person and like, oh hey, let's work something out. Um, yeah, especially in, in liberal states that are more aggressive on this, you could get sued by your other tenants for saying that you were choosing favorites. Or I mean, God forbid there was any reason that they were a protected status of anything. It gets ridiculous because we have so such loosely defined stuff. Someone could just say I identify as a fish and that is why they rejected my housing. And now you have to prove in court that you're innocent. It's quite ridiculous. So don't play favorites with tenants. Be very, very, very strict. When people are late, they get a— in my buildings, if you are late on rent, you get a 14-day pay or vacate. And then if you pay, you're fine. And if you need help, we will work with you. There are people who are like, I just lost my job. It's like All right, let's come up with a plan. But there's a, there's a very specific documented reason of why we're putting it together. We have in writing from them what they're working on and why we are allowing it. You have to be so careful. You have to be so careful. People are terrible, and some tenants are terrible. Protect yourself. Treat all of your tenants the same. Play by the same rules. Do not have favorites. And just be really like responsibly aggressive with posting your notices. Dylan, anything else I need to trust other professionals with since, uh, you learn from doing? There's, there's gonna be certain things that you need to trust. Your broker should be writing the best contract possible, but you need to read every single line of it. Your lawyer or title company should be drafting the note correctly, but you need to read every single line of it. You shouldn't trust anyone with anything But you're going to need to rely on people to a certain extent when you're learning how to play the game. I like asking people who do not have a horse in the race. So if I'm trying to ask the opinion of what to do, I almost never go to the selling broker because they want to get the property sold. That's how they're incentivized. They're incentivized to lie to me to get it done. And they tend to do that. Your lawyer wants to get paid. I've seen lawyers rip out contracts where I can tell they copy and pasted everything. They put the wrong company name on it. And I'm like, guys, I paid you a ton of money and this was lazy. It happens. Don't trust anyone with anything. Be excellent at everything you can be. But when you don't know something, you don't know, find a neutral third party to look it over for you. All right. Could you recapitalize with the refi or, uh, into one with the 1031? There's a lot of different ways to recapitalize. The recapitalize just means I'm, I'm redoing my debt stack and adding new money into the partnership. So yes, you can do that with a— you— there are ways to do that with the 1031. Uh, yes, you can. That's actually a common way is you do a refinance into a new partnerships. If someone comes in, they usually execute the buyout first. So you would buy out one partner, a new partner would come in with additional capital for a new project. They will join you on the loan for the refinance, which could open up even more money for the LLC, and you march forward that way. You can also do that for bankability purposes. But yeah, uh, recapitalization is exactly what it sounds like. You have an illiquid account or an account that is not liquid enough to do the project that you want to do. So by recapitalizing, you are restructuring your debt stack, you are adding more capital into the pool, and you are moving forward. I often do this with a new partnership. Matt says no syndications for me, and you know why? Because Matt's smart enough to do a syndication and he knows not to do them because they're unnecessary. He is one who has a large enough portfolio where he could extract an ungodly amount of money, but he would lose all of his 30-year fixed-rate debt. Which is like his whole portfolio. He has low interest rates on everything in ludicrously long, fully amortized debt. Why would you trade that? He's already living the dream. Once you win, don't trade your pieces. I see too many people do it. Eric, when you set up a seller finance deal, how do, or how does the payments work? Do you pay the seller directly? Or does it go to an escrow or title? Can you talk about this a bit more? So on a seller finance deal, I put all of them into professional note servicing and there is note servicers everywhere. Not all of them are created equal. Get a reference from another landlord for note servicing. Trust me, I've had notes messed up from specifically from note servicing where it actually almost cost us $40,000. I had to call the seller and they're like, oh no, you're totally right. But they, the way that they put it together. They actually had the interest start accruing before we even closed. And so they counted every payment we ever made on time as paid towards the prior month. So basically they acted like we were late every single day since the note started. They told us 4 months in and there was a $150 per day penalty for being late and it was for 2 different deals. So like, oh yeah, no, you just accrued $300 a day of fines for 4 months. We didn't say anything. I called the seller and they're like, I was unaware of that. Money has hit when I expected. Yeah, we're going to wipe that and do the right thing. They could have had an argument for, I'm just going to try to take the money from you. And that would've been messy. So title comp or not in the title, sorry, the note servicing, find one that is good that other landlords like using, use them. But I always push for note servicing. I have two sellers who I do trust who refuse to do note servicing. Who we pay directly, and I hate it. And we have to help them with the end of year tax forms because they have no idea how to do it. It is frustrating. I don't like it, but you can pay them directly. Try not to do that. The right way to do it is to put it in professional note servicing, put it on autopay, set it and forget it. You'll never miss a payment. Owner will be happy. Really easy to do taxes. Lee, how do you actually find deals? What are the aspects of a good deal for you? Okay, so a good deal, here's the rules of the game: long-term, cash-flowing, fixed-rate debt. I need to answer two questions: how do I buy it? How do I never lose it? I had a mentor when I first started, and he could buy absolutely anything, and he bought 20 condos in 2007. And then 2008 hit and he lost all of the condos. He bought them all zero down. He built a portfolio on them. He got special assessments. So his cash flow got absolutely destroyed. And then the economy collapsed. What did he do next? He bought a seller-financed office, one of the best real estate deals I've ever seen. And he decided, I am a god at doing this. I'm going to buy another office for 3 times the price, even though it's worth half as much. He massively overpaid for another office. He was hemorrhaging money. And on top of it, guess what happened in 2020, the year after he bought it? Office was shut down on the entire country and his building stayed completely vacant, making no income, and he lost it again. So the rules of the game: buy deals that cashflow day one on long-term fixed-rate debt. Choose something like multifamily where it's going to be relatively stable, even in a disaster. People need a roof all the time. I don't want to say the word because YouTube's going to ban me, but in the thing that happened in 2020, or I guess technically 2019, um, for when that thing happens, there were still ways as a landlord to operate your properties. Even with all the moratoriums and all the things that we had to deal with, it was still possible to run your properties profitably. In fact, we did very, very well because of various support programs that helped people in need. And some people who weren't actually in need pay their rent. So one, choose a stable asset. Two, how do I buy it and how do I never lose the property? And that is answered by buying things in long-term cash flowing fixed rate debt. That is what a good deal looks like. Beyond that, the flavor of that is going to depend on you. I love entry-level value add. We're super good at it. I know everything about the renovation basically. We can renovate basically anything. Class F to— I could turn Class F to a Class B and rent it to Section 8 and do fantastic. I can do a blend of entry-level housing and mid-level housing, but I like the entry-level affordable housing. I am good at it. Some people like luxury. If you're good at it, do it. You like hospitality, you're going to get a lot more variable income. Choose something that you're not going to lose. That is the end of the day how to do it. And guys, we can start the show now. All Nighter Hider is here. If you guys don't know, he is one of the first people ever to watch these videos live. He has been here since the beginning. The party does not start until All Nighter is here. Welcome to Multifamily Strategy Live. Steven, when raising capital, is there a preference on who you go to? Seller, then private money, then hard money? Actually, no. Actually, no. Deal, then debt, then equity. If I can do a deal without a partner, I will do a deal without a partner. I actually— my last 2 deals that I did zero down from me, like $0 out of pocket, not with a bank, were both hard money because I was— they cashflow enough. I bought it 13.5%, by the way. They cashflow with 13.5% debt. One, insanely good cash flow deals. Two, I don't have to have a single partner. Both of those projects are something I'm going to refinance into much lower interest bank debt, and one of them into a mezzanine debt product, which is going to be closer to 9% once we stabilize them. So I have 2 years on debt, a debt product that I need about 6 months for. I'm in the process of refinancing both right now. One of them I actually think I'm probably going to sell before I even finish the refinance very profitably, about $700,000 of profit on a 25-unit mobile home park. But when we put these together, I actually go deal, then what is the optimal debt? And if we need more partners, do we bring on an equity partner? And then I look at, okay, do we have private capital? And then always on the debt stack though, because everything you asked here can be used as a debt stack. Seller financing is usually your cheapest. So if it's available, almost always the best option. Sometimes your private person could come in even lower though. If the seller wants 8% and you find someone who is fine with a 6% note, I'd go private. Private is almost always better, easier, faster, and cheaper than hard money. But hard money is like, it can be very easy money. On my hotel conversion, they funded 100% of the reno and 100% of the purchase price. That is in budget for me. That is $0. We bought for $1.6 million, stabilized is worth $3.1 million. Our target is to sell for $2.5 million. That is just a great deal. We're going to make a lot of money on flipping this thing. It cash flows above and beyond the 13.5% interest. And we funded the whole thing, whole thing with hard money. And my hard money lender loves me. And so they just wrote the check. They looked at the project and they're like, I don't know how to underwrite these, but I do believe in you. And the basic numbers make sense to us. We're going to give you the money and we think it's going to come back. That's crazy. But they did it and they're going to make a lot of money doing it because they charged me 13.5% interest and 3 points upfront. So They make money, but I got the money without having to do a capital raise and no other partners other than Cody. Just our LLC just came in and took it out. Love it. Luke Hyder thought we'd never start. Oh yeah, I know, right? I, I, I'm always waiting. Look at this. Look at this chat. Everyone just, everyone waiting for All Nighter. How do you have that much impact on a community, man? I, we appreciate you. Edmund, would you owner network first before having a deal so that you can have a source of finding the capital for the deal? Yeah, but more likely your deal's going to come from that network that you build with owners. Who has the best deals? The people who are already playing the game. If you're not dealt any, I think of a poker table. You're at the table, you've never played poker before. You've watched online, you've read the rules, you understand. There's a whole bunch of experienced players. You're not getting to that table and you're not competing at that table without the knowledge that they have, without the connections that they have. Someone has to offer you a seat at the table. Typically, you're going to find outsiders control the market. There's going to be a few insiders who invest there, and then a bunch of people from out of area that invest in pretty much every small to mid-sized town in this country. If you're in the US, that is very commonly what we see. Outsiders control the actual market. How do you get dealt into the table? You meet the owners. Where do you find the deals? Usually from knowing the owners. How do you connect to the best brokers? Usually from the owners. Best property manager, banker, note servicing, accountant, all owners. Everything in real estate starts by meeting the players who've done the thing you want to do, which by the way is advice for everything in life. You want to have a better marriage? Talk to someone who's been married for 25, 50 years. They're going to have better advice for you than the person who's been doing it for 1 year. But like, how do you do anything? Learn from someone who's done it. I think people forgot that. And I think it's silly that I've built such a, a lot of my brand, people are like, oh, you're the owner meeting guy. I'm like, wow, am I some, I'm not some genius. I was like, how would one learn a thing? Ask someone who's done the thing. I mean, that's, you want to know the brand of multifamily strategy. There are no secrets, but that would be the secret sauce. Um, talk to the people who've done the thing. They're going to help you do the thing that you want to do. Oh, not our gift. I've said to, uh, Realty Mogul— oh, this is a good example of crowdsourcing. Um, it was set it and forget it, and don't try to sell it because it's pretty much one way. I do get paid a whopping $30 a month. I gave $1,000 to Fundrise, which is another online syndication fund where you can Put your money in, you have to hold it for, I think it was 3 years. It's locked for 3 years. You can't withdraw it. And it made a whopping 6.5%. I would've done better in the stock market. That was a bummer. They are not incentivized to make you money. It is not that I, I do not like those platforms. So when their capital gets returned, that will be through cash flow accrued through the deal of 6%. Okay, so this is back to the 112 unit I'm buying. If you're new and you just joined the video, Welcome. I'm buying a 112-unit in Waco, Texas. On that deal, the 60% ownership that they have, I have it structured because I do not need more cash flow right now. So your pieces matter. For me, I have the income that I need to live the life that I want to live. I have an excess of capital coming in every month, which is beautiful, and I'm so grateful. And it was really, really, really hard to get there. It was a lot of hard work. Very simple, very repetitive, but a lot of work. So 100% of cash flow stays in the deal until we're done with renovations. We are overfunding the deal by a few hundred thousand dollars in case we run into anything. I hate doing additional capital raises. At the end of year 1, the excess money in the account, we're going to go, okay, what do we actually need as a reserve now that we've run this for a year? And we're going to give them back a huge chunk of money. What is in excess, have it back. The rest of it, from that point on, 100% of the cash flow goes to him until his capital count is zero and/or 100% of the future refinance and/or future from the sale. No matter what liquidity event the property has, be it cash flow, be it refinance, be it capital contribution, be it whatever, eventually sell the property if he hasn't been made whole already. We don't make any money until all their money's out and then everyone has $0 in the deal. And then I get more equity and then we get 70% of the cash flow. He gets 30, he gets 30% of the equity, we get 70. No one has a dollar left in the deal. It's a really cool deal structure and there's a lot of upside in this deal. So his 30% is worth a lot of money when we do this. So that is a deal structure that works. That's how we structure this one. If you are starting and you need more cash flow in your portfolio, you're probably going to do something more similar to what I did with my first 6-plex. 6 side-by-side units, 10% down, so $90,000, double their money in 5 years. I get 100% of cash flow all 5 years. So for a $0 investment, I bought myself my first $1,500 a month income stream day one that I get to keep for 5 years that helped me stabilize and grow my business. So when you're starting, optimize for cash flow. When you're cash flowing like $35,000 a month, at least for me, that's where I was like, I don't spend a lot of money. I don't need this much money. When I hit that, I'm like, okay, I don't need to do deals that optimize for cash flow. I'd rather leave that money in the deal, pay back my partners even faster, and own more of my deals. And so that is how I'm structuring now. So Know where you're at in your investing cycle and tailor your deal to that. Don't just copy my deal structure because if you have less rental income than I currently do, my structures might not make sense for you. If I'm just not taking cash flow distributions for 2 or 3 years, you want income, optimize for income. You want equity, which is what I'm focused on now, optimize for equity. Yes, consideration is equivalent to exchanged value. Luke, want to make sure I got this right with the management option so that I can get zero money out— so I can get in with zero money out of my pocket, fix up the building, and get into bank finance. Okay, so for a management option, you have two pieces. You have a management— you have the management agreement, then you have the option agreement. And the management agreement is referenced in the option. So as part of that consideration, part of that What you are putting in is, I'm going to manage the property and I'm going to take on these expenses into my management company. That's a lot of your ongoing cost. I'm also going to pay the owner the monthly fee equal to his mortgage on the first every month so that he can pay his mortgage, so that title and mortgage are still in his name. It is not a callable note. This is why it's better than subject to, empirically better. Same effect, but it can't be called. Better structure, period. Management option contract. So you have that, then you have your management agreement, which lays out what you're managing, what you have the right to do. It lays out your control of the property. So you pair these with an actual management contract. Um, if you're getting in with no money out of your pocket, you're probably going to need a partner because there is usually a monetary fee called your option fee. That is your upfront money usually applicable to your deal. So you can use this as part of your down payment, but it is non-refundable money that you are paying in exchange for an option to purchase at a fixed price in a fixed period of time. So it's not zero down. For me, I'm buying an 8-plex $15,000 down. Um, funny enough, my partnership with Caleb just put $50,000 down on a large, uh, on 176. I'm not doing 64 of those, which has $25,000 in earnest money. As soon as that earnest money comes back, we're executing the option contract. That's where the money's coming from. So if you're doing it with $0, you're going to need to find that $15,000. Caleb started with a zero-interest credit card, which is not my recommendation but is a way to do it. I've had people borrow the $15,000, you know, borrow $15,000. But you can get into these low money out of pocket. It doesn't have to come from you. Come from the bank and come from an investor and come from a family member. But for low money out of pocket, you can lock these up. And if you find a deal that cash flows, the option contract can give you 2 years to structure your deal. If you're brand new, you're not figuring out how to put the deal together, you're looking for the capital partner, you can lock it up on a multi-year option contract, get control of the property, get the cash flow, but realize you're only building your cash flow. To build equity, you do in fact have to execute your option and build that stack. Your goal is to get cash and cash flow and equity all at the same time, and that's when you're rich. Option contract does not build equity until you execute. Do not build your business just on, oh, I'm going to arbitrage a bunch of properties, which is where you're saying, I'm going to take control of them. Someone else will own them, but I'll take the cash flow. If you hold a property for the long term, appreciation will take care of you and you will become rich. Come up with a plan that has you buying as much as you can. But it is a good way to put a pin in the map for, I have this much time to put this deal together. Evan, what service do you use to determine market rents? I run a property management company. I use CoStar data. I use RentPath. I use Rentometer. And then I manage as many rentals as humanly possible in the markets that I invest in so that I set and influence market rent. That is one thing that is different than me about almost every other investor. I will go through the headache and the employment and the legal to build a ridiculously tight team. And I do a lot of firing to get these people. I need an A team to run an A business. So I will only accept A players. I get a lot of decent people who work for me who are on the B team or even worse, the C team. They get fired quick. They move on out of the business and I only keep the A's, and I am very selective. But I have built a business of all A players who can control market rent in and around my buildings. So when I get started in a new market, all the data available to me—CoStar, CREXi, LoopNet, Apartments.com, Rentometer—I'm looking at all of it to determine why do I think I can get to the rent that I believe is right here. I'm also talking to other owners. As I move into a market and get established, I manage everything around my building. So when I'm doing rent comps, it's against something that I already control. That has been invaluable to me. You're not going to start there though. So find that data. If you are having trouble with that data, most brokerages, especially the larger ones, have access to a ton of data. So look for your larger firms, your CBREs, your Marks Millichaps, your— Go to a broker who works at one of those firms specifically for data and market information. Shiloh's Crib. We haven't got a question from Shiloh yet. Um, how does the verbiage, the verbiage look like on paper, uh, when stating a, uh, 2 to 1? Okay, so if you're saying I'm going to double your money in 5 years, you're basically saying, um, and you cannot do this as a requirement, by the way. That is not legal. You can't have a mandatory buyout. You can have penalties for not executing the buyout, but you can't say, I must buy you out at this price. It is an option to purchase. So the buyout agreement is a buyout that says, I have an option to purchase you at this time, buy you out at this time for this price. So fixed price, fixed period of time. If I do not do this, this is what will happen. So on most of my deals, if I am agreeing to a 2-to-1 buyout or any sort of multiple, this will happen, or you will get my equity in the deal. If I fail, I surrender my equity to you. We already know that we love the deal. You get my equity. I lose, you win. That is your collateral. That is an easy, easy, easy way to write these. And if you have a ton of equity in the deal, it might not be backing it with all of your equity. If you're starting out at 60%, they're 40%, it could be Look, if I fail to do this, you're going to become the 70% owner of the property and I surrender my control and voting rights of the property. So you effectively now have control. You're in the driver's seat. You have a higher stake in the property. I lower my interest in the property. So that's how I structure these. It is an option to purchase, fixed price, fixed period of time with a damaging penalty that says I will want to buy you out because if I fail, It is only good for you. You're backed by more than I'm writing. And if you do that on every deal, easy to sell your investors on. It takes a couple sentences like, here's what we're doing. Here's how you're backed. Worst case scenario, I double your money. Best case scenario, I fail and you make more money. If you can put it together that way, people tend to be okay with that. All right. From Reese. Hey, Christian. Is our first deal always going to be sourced through the benevolence of owners we meet with? No, no, no, no, it will not always be sourced through the owners you meet with. My first ever deal was from someone in my office when I was working for a property management company. They said, hey, we have a client who is looking to sell this duplex. Do we know anyone who is looking to buy this type of duplex? They want this price. And I ran the numbers and I was like, I think I'm the buyer. That was just for me being around people. The 38-plex, my first create— like truly creatively financed deal. I did a zero-down deal prior to the 38-plex, but my first seller finance deal, that was on market for 13 years at the same price. Anyone could have bought it. That was found on market. A little under half of my deals are listed on market and I purchased them. So it could be through a broker, it could be through Mine was on LoopNet. Could be on LoopNet. The place deals go to die is also the place where conventional deals don't move and creative people can come in and propose something that works. There are lots of different ways to do it. It won't just be the benevolence of another owner. Sometimes there is a great solution and there's a deal right in front of everyone. That has been the case for me many times. And I remember being in the— I remember being on the other side of this, being like, I don't understand how there's these real estate investors who just seem to magically have deals where they find things online, because I'm not seeing them. I think it takes training on how to think creatively, and then you just see them differently. It's not hard to do, it's just different than the way that everyone else is looking at them. That's why I do MultifamilyStrategy.com. Feel free to join it. Of course, mentorship. We just drill how are we looking at deals differently, because once that muscle's built, you can look on the internet and be like, I think I see an opportunity here. It's not magic, it's not luck. It's just a way of seeing and thinking about deals that makes plays that are not obvious to everyone else obvious to you. That's all it is. That could be with owners, that could be with brokers, that could be with the internet. It works for all of them. Your first deal can come from any one of those. Who do I need to rely on? Bookkeeper, attorney, broker. Okay. Main people that you're gonna need on your team. You need to have you. So in this case, Dylan, you need to be able to look at a deal and say, I am comfortable that I have a deal here. Deal than debt than equity. You need to buy a property before you build your team. Once you have that property and you're like, okay, I got the deal, you're going to need a broker to write it up for you, a lawyer to draft your operating agreement for using partners, or if you're getting creative finance, you're getting a little bit extra creative, You're gonna need a lawyer to draft your note deed or trust. Sometimes title will do it for you. If you're getting creative at all, they tend to go like, uh, our limited ability to practice law is— this is beyond that. Go find a lawyer. Um, so I need that on the team. And then you'll very quickly need a CPA or bookkeeper to help get your— and/or bookkeeper to get your books in order and make sure that you're doing everything correctly and you're maximizing your write-offs and like all that tax strategy stuff. But it all comes in order of the deal. So you'll need to trust your CPA because if you don't know everything about accounting, that's the one where it's like they know stuff that you don't. To a certain extent, you need to read all your legal, but you should generally trust your lawyer because they should know more about the law than you. I'm finding less and less lawyers do know about the law than I do. Running the property management company as long as I have and doing as many creative contracts, uh, I usually destroy lawyers in court. That took years of training and that is where I'm naturally gifted. Everyone will be really good at a few things. You'll need to rely on other professionals for the other things. I am a— I understand accounting. It's actually what I went to college for. I'm not good at it. I'm truly not gifted at accounting, so I have to rely on my accountant for a lot of different things. So it's gonna be partially your gifting and then partially like, what are you working on right now? But you, you will need to trust other professionals. As you build out your team, just to keep everything in order. Matt actually says it really well here. You need to understand it all. That is one thing in real estate that I do believe, and this is something where as a real estate professional, I understand accounting. I'm— I, and I know that I'm not good at it, but I can explain to my accountant, this is how I want to use my cost segs. Uh, this is where I believe we have the most tax liability. These are the things that I know I don't understand, that I need more explanation or help on, I can communicate what happens. And when they send me the books, I can go through everything line by line and say, this looks right, or this doesn't look right. Am I good at it? No. Does it take me more time than it does my business partner Cody? Absolutely. But do I understand it? Yes. Do I understand the legal? Yes. Do I understand the contracts? Yes. Do I understand deal structure? And real estate math, which is only addition, subtraction, multiplication, and division. I don't think I started with division. I already got myself lost. Plus, minus, divide, multiply. That is all you need to know for real estate math and then how to apply it. There's simple formulas. You need to understand all of it though, to be able to read it and to be able to put together a deal. And for the things you don't understand, you need to get in community with people to do so that you learn it because you learn from people who know what they're doing. How can I be better than the pro at so many different jobs? Care more, work harder. It seriously, I work more hours than everyone I've ever met. I've never had a partner ever who works as much as I do. Just period. Never, ever, ever, ever. Not even close. I went to bed at midnight last night and I woke up at 3:30 this morning. Because I was just thinking about something I had to do. And I got up and I emailed my business partners out of Israel because it's a great time for them. And then I went to my marketing team in the UK and I worked with them. I get more than 3.5 hours of sleep per night, by the way, but I am willing on a standard day to wake up on a Wednesday and say 3.5 hours is— I'm awake, I'm gonna go, I'm gonna go work. I don't know other people who do that. You don't have to do that to be excellent, by the way. You just have to be able to work harder and care more than everyone else, which is a ludicrously low bar. We have a Netflix and Instagram addicted society, especially Dylan. You're very young. Your generation in particular, you can steamroll these people and you can learn a lot of this stuff in a day. You can learn so much about accounting in 8 hours of sitting down and focusing on accounting. You can learn so much about underwriting a deal in 8 hours, just one full workday. I'm not even talking to 16-hour day, a normal person's 8-hour day. If you just studied that thing, you will know more than most investors. It doesn't take that long to be better than other people because most people suck at their job. I'm sorry, it's true. Matt didn't know anything about it. He went through the process and learned from each deal. Yeah, Matt, Matt dropped out in 9th grade. He is smarter than me by a lot. I mean, by like a ludicrous amount, crazy smarter than me. Um, but he definitely didn't get the education for it. No one taught him how to do it. He, he learned a lot of himself. He learned a lot of it from others. He got really good. It's not about being a superpower. If you're like me, I'm not that smart. So how do I get better than people? I'll work them. Consistently, and I'm more passionate. And for me, I'm more competitive. I can't stand people being ahead of me. And guess what? In real estate, you're never going to make it to the top. There's always going to be someone ahead of you. There's too many people with too many generations of money. I don't know that it can be done in one lifetime to be the biggest ever in real estate. So there's always someone ahead of you. There's always someone to learn from. Keep learning from those people. And there's just levels. You start out with people, duplexes. Like, I, I wasn't starting with people who have, you know, tens of millions of dollars to throw around. Those people I've just run into because I'm constantly around real estate and I'm doing interesting projects. And as my projects get bigger, the people I meet and talk to also grow. You just meet more people. That's how the game works. How does a pitch look like to investors for buyout options, especially if you're giving them multiple options? Oh, number one, if you're pitching, don't give multiple options. Salespeople, okay, I ate your sales script. If you want to close, you need to control your sale and you need to tell them what they're going to do every time. This is the rule. Choose what you want out of the deal and then ask for that and then inform them for investors how you are growing their money, where their money is going. And how it is secured. The biggest thing that investors want to know is how am I not going to lose money? You touch on that one the shortest, but is it the most important? Here is how you are backed. They need to be able to look at it and believe that they are backed by more than they're putting in, so their money is safe. Now that they're not worried about losing money, let's talk about how the deal is going to make them money. Talk about the opportunity. So the deal structure depends on what it is your investor is trying to do. I have people who specifically are like, I'm trying to grow money and I have a lot of money and I don't need cash flow right now. I want cash flow in the future. Right now I'm trying to grow what I have. Good. We're probably looking at either long-term partnerships, which I'm not a fan of, or I'm looking at equity buyouts at a higher multiple. That's the best way to grow money. I'm looking for value-add projects. They have less cash flow day one, but instead of structuring as debt, we're going to do an equity with a buyout. That's, that's the type of investor. So now I'm only going to bring deals to that investor that match what they're trying to do. I have other people who are like, I'm trying to get to $10,000 a month cash flow. They could be a debt partner, or I might buy a stabilized property with them where I'm like, look at this, cash flow is pretty decently. We're both going to get paid to own this. We're going to ride this for a while. And then I foresee us refinancing this probably in 10 years. So when the debt ends, one of us is going to buy the other one out. I just put it in the contract of, you know, we'll get an appraisal and we can negotiate it, but I want to put a defined end on the partnership. And if we want to renegotiate, beautiful thing about everything in writing is it can be rewritten as long as both parties agree. Those work really well. But I look, what does the deal support? Is it going to be debt? Is it going to be equity? Is it going to be cash flow? Is it going to be an equity multiple? What does the deal support? And then what is the person's goal? And then I'm going to pitch something that aligns both of those. In Multifamily Strategy, the course, we call that the circle drill. Know your circle, Know the details of the deal and then match that with the circle drill of the investor. If those line up, you get a yes every single time. There's no reason someone would say no if they have the money, you have the deal, and the deal hits their goal. If you present the right thing to them and communicate, you communicate. So say they want to get $10,000 a month. You told me you want to get $10,000 a month. This deal will cash flow $5,000 a month. To you. We need 1 year to stabilize it, but this is going to get you halfway to the goal that you wanted. All we have to do after this is do 1 more deal exactly like it, and you've already hit your goal. This is why I want to do this deal specifically with you. Pitch done. I know what they want. I have the deal that does it. I can communicate why it does what we want it to do. I can prove that I listen to them when they set their goals. I get a yes. People almost never say no when we pitch for capital because we know what we're pitching and we know why we're doing it. So keep it very, very, very specific to your deal and the investor. Make the right pitch. Don't screw it up. Don't give them options. Options will kill your deal. Welcome back, All Nighter. No more calls. No more calls. This is live day. It's the same time every Wednesday. You know the rules. We can't do this without you, All Nighter. So hang out. No, seriously, man, I appreciate you being here. Edmund, is hard money considered as a bank? I'm not sure about the verbiage here. Hard money is typically not bank debt, if that's what we're trying to ask. Hard money is typically going to be a private lender. Here, my go-to is Flynn Family Lending. As of next week, I have borrowed the maximum amount of money that their fund allows them to give any one client. So I am cut off of my favorite person. They have too much exposure on me. I have over the course of the last few years borrowed about $4 million from them in hard money. Now we've paid a lot of it back. I don't currently have $4 million of hard money. That would be expensive. But I do have $2 million of hard money with them out right now. And they are modifying one of my notes to give me an extra $125,000. I actually need it for another project, but they would rather back it by a project that they already have. So I'm getting what's called a note mod. And for, you know, a measly 2.5 points, they will give me a little bit of extra money to finish renovations on a building I just got back from someone who failed their option contract to me. So should I get mentored by a CPA, contractor, attorney, etc., to learn? Not necessarily mentored, no. I have found on those things, I ask a lot of questions, so I learn a lot from them. I wouldn't call them mentors. Uh, Matt's actually passed me his CPA. I have learned a ludicrous amount from him, but he's definitely not a mentor. He is my tax professional and I trust him. But I also— I, going through all of my K-1s, that's your tax return for a partnership, I have corrected him 3 times and it was on just Little things, but like massive impact to investors. You need to know your deals. You need to, you need to know your stuff. You need to be able to read everything they send and ask good questions if you don't understand something. I would call that more of a, like, for your CPA and your lawyer, you are their clients. They are your, you know, they're your contractor more or less. Ask great questions of your contractors, learn a lot, but they're not there to coach you or mentor you. They— that is a little different relationship, but ask a ton of questions when you're new. And like Matt says, they will charge you by the hour. I have paid my lawyer— last year, um, we had $70,000, I think $73,000 of total legal fees, and a lot of that was learning fees. It's very expensive. It's putting together creative contracts. It's representing us in court. It's getting that earnest money back. It's defending us against a partner who decided to team up with his father, who was the lender, to try to take the property back and give it back to himself. I think we call that collusion. But we had to defend against that. There's a lot of questions we ask and they do bill by the hour and it's ludicrously expensive and it's worth it. But you— it's definitely not your mentor. You're not hanging out with them. Uh, Lee, have you dabbled in commercial real estate? Um, yes. Oh, I only buy commercial real estate. Multi-family, 5 units and up, is commercial. It's commercial financing, it's commercial banking, it's— it is commercial real estate. If you're referring to offices and other things, I own a 5-plex That is multifamily on the top, so mixed use. On the bottom, we have one office and we have a barber shop. So I am invested in office and retail and multifamily in this little teeny building. Uh, the barber shop pays $550 in rent. I will never raise his rent. He is a fantastic tenant, and it's a little space that wouldn't be used for literally anything else. So, uh, yes, I have a little bit of it. My big commercial project is the Robin Hood Village Resort. That is a business. Resorts are not multifamily. That is a business. That was a $4.5 million, 12.5-acre purchase, 20 cabins on the water, historic. It turned 90 years old this year. That is a massive project. We run a wedding venue there and we have a whole music events business. It is my least favorite thing that I'm involved in. I hate hospitality. I wish I learned that before spending $4.5 million on it. Seller finance deal though does cash flow. I just finished taxes for it today. We turned a profit last year, so it is a positive venture. I just hate everything about hospitality. Office is a different game. Retail is a different game. Industrial is a different game. All of them follow the exact same rules. I have mentees who have done all of them, even industrial, and done very, very well. Seen people in self-storage kill it in multifamily strategy. People in mobile home parks kill it out of multifamily strategy because the rules are the same. Buy it, never lose it, long-term cash flow and fixed rate debt. Learn how to pitch and land creative financing. That works for everything. But Manny Kauffman, he does what I tell people to do. He loves office. He's amazing at office. Stay in your lane and become amazing at something instead of being kind of good at a lot of things. You pay different stupid taxes every single time you learn. Learn less things. Get really good at your craft. I should have done that. Biggest mistake I'll ever make in business. I share it every chance I can. We are becoming quite good at running hospitality. We hate it. It took away from my business. I would be astronomically richer. Cody and I were just actually sitting down talking about how much cash we'd have right now if we didn't buy the Robinhood. We would be very wealthy and feel very wealthy if we didn't buy the Robinhood instead of just being very wealthy and feeling broke all the time because that thing just eats the liquidity and we put so much money into it and we have to buy a partner out of it next year for like a million dollars. So the million dollars in cash that I've been able to put together in the last year is going to go to someone else next year. So to have $1 million, I have to earn it again. That feels terrible. So that's the lesson there. Have I dabbled in them? Yes. Do I recommend it? Absolutely not. Choose what you are passionate about and then become amazing at it. Did you— Reese, what do you say when someone says, I just bought it, when you ask them how they did it? Awesome. Tell me about the transaction. What are the details? Be engaged. Just be excited. I just bought it. That's amazing. I, that sucks. I, uh, I'm sad I missed it. This is the type of stuff I'm trying to buy. How did you find this deal and how are people doing this? That is stuff that I want to know. I have the beautiful Danny here. Danny, what's up? You joining? Yeah. Okay. Let me know if you need anything. You got a package for me? Okay. Is it appropriate? Okay, good. You never know with your wife. What does this say? I don't remember getting this. I don't think so. Oh well, I don't think I ordered this because I don't order clothes or know how to, but, uh, someone on my behalf apparently has given me a shirt that says promoted to daddy, which is definitely not something I would have bought for myself, but that is kind of funny. I'll have to wear this. I'm, uh, for those who don't know, Danny and I are having our first kid in October, so we're moving to Texas and having child number one. It will be a boy, and I am getting my promotion, but I don't know who ordered that on my account. I'm guessing that may have been Danny. Why aren't you doing all 76 units? Because I like the 112 better than I like these, the 64-unit. And you don't need to do every deal. I'm looking at the project. I'm like, I don't want to learn 2 buildings. I want to learn 1 building. And 120 unit— or sorry, 112 units is more than enough for me to learn and get familiar with Waco. And I don't like the pricing as much on the 64-unit, to be honest. I, I think they're going to come down. I think they're going to struggle at that price. If the 112 looks really good, I have a feeling that 64 is still going to be around for me in a little bit. So I'm going to be dropping that one. It's just managing the pieces. When you have— this is another lesson from the Robinhood— when you understand creative finance, you can buy anything. The discipline to not buy everything is something I learned by over— like, I just expanded more than I needed to too fast, and I diversified too much, and I regret it. I could do 2 big projects. I'll probably make a bunch of money doing it. I can also make a ton of money doing the one 12. I'm going to focus on the one thing instead of focusing on multiple things. I have never once done that and regretted being excellent at one large project. 112 units is huge. That is a big building. It's still the biggest purchase I've ever done. That sounds like the right step. So I think it's a discipline thing. Landlord Odyssey, one of my favorite names, by the way. Matt is also a superior property manager. Matt's a baller. That is the, that's the rule. I think every live we've mentioned this. Matt's a freak of nature and he's amazing. And we love him. How much work is it to find the right workers? Too much. I don't even know where to start going into that. I fire so many people. I am— so for my A-team, I have such an incredible team, and we have really, really deep loyalty to each other. I have A-players on my team who I've offered to live at my house when they have hard times. Like, we are a tight tight team. But I fire so many people because if you are not part of the A-team, you're not part of my team. That I can't compete with players who are less than excellent. So if you are good, you're out. If you're excellent, you're in. That is pretty much how it works. To find excellent people, it is about 1 of every— I'm gonna say it's around 1 of every 12 people we hire. That's a best guess, but I'm playing it through my head and I think it's about right. One of every 12 people we hire, we keep very long term. The best, best ones who I've worked with for a significant period of time, when I start new companies and I want them in the company, I give them equity in the company and they become partners with me in some of our ventures. In Texas, I'm bringing on people who I've worked with, who I love working with, who I can't imagine doing business without. And I'm putting them in roles where they have significant equity in the actual venture as well as a paid job in the venture. That's what it looks like for me to build an A-team is everyone's, again, goals and incentives align. Partnerships. I talk a lot about not over-partnering. People who have proven themselves and we both are like, all parties have a lot of loyalty to each other. I like that. I really like building that community. I will fire anyone I have to to get that community, which makes me kind of hard to work with because I'm very, very demanding and I pay very, very, very, very, very well to people who do excellent overtime. And I don't overpay people to start and I'm slow to give raises. But when we promote someone, it is usually astronomically lucrative for them. Like unbelievably moves people forward. That is the goal. So that's, that's how I do things. Is it the right way? I don't know. But I'm fast to hire, way faster to fire. And I do everything in my power to keep the best people. I know your original why was to retire away from the job. What is your why now? And have you accomplished that? Well, T-shirt. There we go. Daddy's home. That is my new why. So retire my wife, move to Austin, Texas. My house in Texas delivers on the 21st of next month. So I am just under a month. Actually, I believe exactly 30 days. This is a 30-day, 31-day month, I believe. Double-check that. Fact. So in 30 days, my house in Texas will be done. That was my original goal. So I am yet to achieve my goal, but I am there. I am, I'm knocking on the door. The money is sidelined, the house is built, we're, we're there. At that point, I have a couple of new goals, and I'll, I'll be sharing more of them in the channel. But one thing that is important to me is I love board games, and this real estate thing plays just like a board game. I am going to make a play to be the largest property manager in Texas, and I have a very specific growth plan for that. And I'm going to build a heck of a portfolio in Texas, not for the money, because money is— sure, it's fine, but I have money now, which I'm grateful for. When you hit your financial goals, like your initial, my needs are met, and then you hit your luxury goals, which I'm going to say my house definitely counts. I'm a simple person. A really, really, really nice gym and my own studio and a house and a large sauna. Those are the luxuries that I need where I'm like, I'm, I'm set. I am happy beyond what I ever could have imagined I could achieve. I'm putting all those into this house. So what are the next goals? It's like, okay, what do I want to achieve personally? What things do I think I could be the best in the world at? How do we develop that? And how do we build other people? There's one goal that I will share because this is my largest passion project. Project. Multifamily Strategy is my baby. I love coaching and I love being around people's wins and I love public speaking. I, I love getting to connect with people on like, I found things that are legitimately successful and I want to share them and I want to build community. I also see a lot of crappy coaches out there who are selling stupid courses that they slap together or they're doing mentorship programs where they've hired people who've hired people. You never learn from them. Or even worse, they start a mastermind and they teach a bunch of everything. I've— we have a lot of people who join Multifamily Strategy who's like, oh yeah, I joined this course and they taught me wholesaling and they taught me flipping and they taught me novations and they taught me different lending methods. And then occasionally they talk about buying multifamily, but it's not a huge focus. I have a course that says Multifamily Strategy. We buy multifamily strategy and I guarantee I coach until you buy a property. 6-month program, unlimited access to every video ever produced ever for all time. Like you're in the community, one-time payment, you're in forever. We're going to grow that and we're going to, I just want to take out the country on multifamily strategy. We're going to start launching meetups, regional groups, but I am pushing everything into growing that because I'm, I want to compete. I want to have a better product at a better price. Just like I do with housing. I want to do that in the education space. I think it's really important. And I just have so much freaking fun connecting with all you people. I love doing these lives. I love meeting in person when I get to speak. This is, this is what it's all about. We're building community. So that is my goal. I'm going to take out everyone, everyone knows who my direct competition is because he has a million dollar a month marketing budget. And his name is also a popular brand of salsa, and we'll leave it at that. We have a community that does a better job buying multifamily than his community. I want to surpass that. That is my goal. Mason, what are some structures that you like using with equity partners? I like the fixed buyout in a fixed period of time. And for certain partners, I like a structure where we have a set goal. And we're going to buy X amount of real estate and we don't renegotiate anything until we get there. So I've had some people who are, I resonate with, they're competitive, they're also liquid. And I'm like, okay, you got capital. I have operations. We're both people of vision. We come together. It's like, okay, we're going to do like 10 transactions together. That's the plan. We're going to start with one and see how it goes. And we're going to have some options to buy each other out if it doesn't work. But if we continue to like the partnership, we've got fixed goal, Fixed timeline. Let's go knock it out together. With lives, sneezing, you got to be on that mute button. Should I find a deal, negotiate and get it under contract and then look for investors? Yes, that is what I do on every deal. It goes deal, then debt, then equity. You need to know when you're looking at a deal, when you see a deal and you're like, I see a million bucks here. Or if it's a smaller deal and then you're like, I see hundreds of thousands of dollars on this deal. I see the deal. I believe in it. You'll be able to find the money. You'll be able to structure it. And I know that sounds crazy because I started with no money. I understand how it feels looking at a deal saying I don't have the money. There's been, there was two times last year where I ran completely out of money because I took on too many renovation projects and I had no stress. I'm like, I have $0 and you know how I know how to operate? I started with $0. I can do this. And we moved the money around the portfolio. I sold one building, 7-plex that I didn't like. We got liquid, we finished our projects, then we got a lot more liquid, and then I bought more real estate. You can move this game with or without having money. But until you do that, it's really hard to believe because everyone for the most part is used to, I do a job, I get paid, I rely on the paycheck, it pays the bills. I have safety over here. Money regenerates at a certain rate. I have my savings. When you play the entrepreneur game, it always goes back to those 3 resource pools: liquidity, cash flow, equity. I'm building those. They can all be traded for each other. I know I have pieces on the board now. All I have to do is move them. And any piece I don't have, someone else has. That's why I'm always going to be connecting with others and meeting other owners, because everyone else has a different hand. Everyone has pieces for each other. You can trade pieces in the board game. So that's how I play the game. It is a totally different mindset than being an employee. And I— it's hard to— it's hard to express how different it is being an entrepreneur and an employee, having done both. Almost no similarities and very few transferable skills. Completely different mindset. That is how your deals work though. When you are buying a piece of real estate, you're buying a business. You need to learn how to think like an entrepreneur. If you're not there yet, that's fine. I didn't start there. But you get that muscle built really fast and you start thinking about and seeing money differently. All of a sudden it's, I have an opportunity. Of course money's going to come to this because it has to come to this because like 38-plex, we're going to make $1 million. I was wrong. We made $2 million. How did we do that? We found a deal and we believed in it, and then I found the money with no experience on how to raise capital and no money in my bank account. I'm not a superhero. It just was a good deal and people needed to know it was a good deal, so we told people about the good deal and then it closed. That's how it works. Dylan, how do you ensure bookkeepers and attorneys are correct if I don't know what I don't know? You get a mentor. Ideally named Christian, possibly last name Osgood. You can also ask his wife Dani. You can also ask Cody Davis. You can also ask Matt Hawkins. You could also ask Caleb Hommel. There's a lot of people to ask, but you ask people who you know and trust who have done it. That is your answer. That is— it's the only way. If something doesn't look right, know about it. Why Caleb doing both? If this is about the two parts of the deal that we're doing for the Waco deal, Caleb's just doing the $112,000 with me. We're going to drop the— we're going to drop the $64,000. What software do you use to manage your properties? AppFolio. I also use Buildium in Texas. Now that I have over 50 units, we are swapping to AppFolio. It is hard to onboard AppFolio. AppFolio is technical. It is hands down, not even kind of close, the best software software. It's probably the only— AppFolio is probably the only company that I would legitimately sponsor on this channel. If they reached out and were like, would you film an ad in your episodes? I would like— yes, AppFolio is amazing. It is not user-friendly to set up. You have to know a lot about a lot. I hire a company that operates a lot of the software for me and does a lot of setup, but it does everything. Anything you can imagine needing to do in property management, There is a way to get AppFolio to do it. The reporting is superior, the automations are superior, the plugins you can get for it are superior. It is the best software out there. You cannot use it if you have less than 50 units. Buildium, as I have found, more than Yardi or anything else, Buildium has been the easiest interface to learn as a beginner. And when you sign up for Buildium, they don't care about your portfolio size, and they will assign you a rep. That is included in your purchase for 2 months, and they're actually like super helpful. So Buildium's good to build off of until you're large enough for AppFolio, then get AppFolio and never switch. Xavier, uh, do you pay for a subscription to CREXi for their data? If so, what platforms? No, I used to. I used to pay for CoStar and Reonomy and a bunch of other stuff, and what I found is All the brokers who I network with, their companies pay for the data. So I like meeting with brokers and I like brokers thinking about me. So I go to their office and I'm like, hey, we got to run some searches. And so I just commandeer their software. CoStar is expensive. It's also really good data. So I find vendors who have the data that I need and I get the data that I need from them. That, that's how I've done it. When I started, I bought them all. And then I realized I'm not using CoStar at $800 a month. I'm not getting $800 a month out of it. I could get it for free and network at the same time. So that's what I did. Michael, is it recommended to get a property under contract, then align private? Yes. Contract first. If you have a deal and you love the deal, get it under contract. That is the mission. That is the only mission. Least favorite thing that happens in multifamily strategy when I see a deal and it's brought up like 9 times. They have questions about it. I'm like, we've loved this deal the whole time. Why is it not under contract? If you love a deal and you believe in the deal and you like the numbers and you've underwrote it, get it under contract, get it in feasibility. What paperwork is needed to close on a deal? There's quite a bit, but you're going to need, you start with the PSA, the purchase and sale agreement. You're going to need to get all your due diligence items. So bank statements, estoppel letters, rent roll, T-12, leases. You're going to need a note and deed of trust drafted if you're doing conventional, like either conventional financing or seller financing. It's a little bit different with a land contract. You'll need a sales agreement drafted, but you get those documents drafted. So that's the note is the promissory note, deed of trust is what's backed by. Then you'll need to get final closing documents and whatever things are needed from the lender. Those will all be put together by title. But as far as like paperwork that's needed, that's a bulk of your paperwork right there. Get it all signed up. At some point, you'll— if you're buying with partners, you'll need to do all the documents needed to form an LLC, which is going to be an operating agreement. And you need to file for your UBI, which is your business, like your state business registration, and then your EIN, which is your federal business registration. Then you get a bank account. That's about it for paperwork. Different deals may have a few extra parts, but that's it. LLC has an operating agreement and general formation documents. You have a purchase and sale agreement that leads to the prom note and deed of trust. All your due diligence items— I actually have a checklist of all these in the course so you can go through due diligence in order. It's downloadable. For those in the mentorship, go to the downloadable section and just download that, print it, and check it off every time. But go through those documents and that's the paperwork that you need. Michael, what is the mind— or sorry, what mindsets did you see successful investors have in the beginning to close on their first deal? That's actually a great question. I can usually tell when I meet people who's going to be successful and who's going to take a long time to start getting the hang of it. People who have a lot of hesitancy or low risk tolerance generally, generally just can't wrap their head around the fact that the numbers in real estate are large dollar amounts and tend to fail. People who can't manage stress end up flipping and wholesaling everything, or they become brokers because they buy a property, they They're always stressed about something happening and they eventually sell the property and they're like, I need quick cash. I need quick cash. I need quick cash. They rely on liquidity. So you have to have high risk tolerance and the ability to handle stress. There are some people who are just competitive and they don't care. I happen to be one of those people. I just don't feel stress. It's not that I don't have it. It just has zero bearing on how I make decisions. It's not important. In my head, stress is something that is there to help you survive in the wild. It's like a survival if you're a hunter-gatherer. It doesn't have a place in business, so it doesn't have a bearing on my decisions. I understand other people are wired differently. Um, people who are wired like that tend to do better. Uh, for those who know Cody Davis, Cody Davis is not a particularly emotional person. He is very analytical. He feels stress. It does not affect how he operates. People who can do that do exceptionally well in business. I have found that's one of the personality traits I look for. So when you're looking at mindset, uh, people who set their goals, people who are competitive, and people who know how to internalize stress and not let it affect their decision-making. If you have someone who can identify their emotions— nothing wrong with having emotions— but if they are not— if their thought processes are not limited by how they feel they tend to do a lot better in business than other people, like astronomically will outcompete and dominate their competition. Shiloh is by far the best mentorship program. I appreciate that. That's what we're going for. That is the, that is the job. I will continue to grow this indefinitely. This is, to me, Multifamily Strategy is my baby. It's like my life project. It's the only thing I have that's unique. Anyone can buy real estate, which is super fun, and no one can buy it all. I love real estate. Always buy real estate. I love real estate. Being in community and actually playing the game with other people, that's being a board game person. That's what it's all about. It's building the community and the competition and the fun. Fun, and that's where I thrive. Michael, we appreciate— I, I appreciate you sincerely. I, I really do appreciate you, man. And then, hey Christian, just curious how you manage tenants with pets. Do you usually charge a pet deposit? Yes, we— there's a pet deposit and there's pet rent for every pet. My team sets that pet rent. I actually, off the top of my head, couldn't even tell you what it is, uh, but that's why I put the people in place who who, who do those detail things for me because I am, uh, I'm not even big picture. I'm, I'm mid-picture person. I'm like systems and operations, but when you get me into like the little details, I don't know how the things work. I just know what things we need working. Um, we do charge pet rent though. I know that we do charge it and, uh, it's on a per-pet basis. There are certain pets that we will not rent to for safety reasons and for just like damage reasons. There are some large breeds of dog where it's like, I love dogs and you need to buy your own house and not put them in some of our buildings. There are some breeds that are just destructive or have a habit of causing more damage. We do not want lawsuits. We want people with happy pets in happy spaces. So we do have some limitations on them, but that's how we manage that. We work with the landlords individually on— some units are not pet friendly, some of them are, uh, but just a couple breeds, even breeds that I absolutely love, that we won't rent to. And it, again, it's because of liability and safety things. I actually used to— funny enough, I was briefly a dog trainer in all of my many, many jobs. I love all breeds of dogs, especially the ones that tend to have the most problems. I love them. I don't love them in my apartments. We've hit the end of the questions, and my father-in-law is coming over in 3 minutes. So I think we officially called this a live. 1 hour 45 minutes. Thank you guys for forgiving me for being a little bit late. If you have not yet Join the Multifamily Strategy Community. I'm serious. This is— if you're waiting for someone to tell you to do it, I'm telling you to do it. You are invited. This community rocks. You pay one time, you're in it forever. I am adding 100 more videos very soon to Multifamily Strategy, the course. Once you're in, you get everything I release forever. I will never change the pricing. I will never charge you more. Once you're in, you're in. It doesn't get cheaper though, so just get in now. I want to build this community. We will build it. This is going to be a freaking awesome year for us. But if you are in a position where you want to learn in community with other people and you really want to get down the basics of how am I buying deals with or without money regardless of financial position, this is the place for you. So you are officially invited to Multifamily Strategy. If you have a question, DM me on Instagram @ChristianOsgood. I am banned for sending messages for 5 days. We still don't know why. But apparently I posted something that offended someone, so I will answer you, probably from my wife's account, Functional Flipping. But message me there. I can read the messages. Look for a message from Danny this week if you have questions. Join that community. Like and follow the YouTube channel because I love sharing this message, and I appreciate all the questions. You guys have a fantastic rest of your week. We will see you next Wednesday, same time.