$2,000,000 in Debt at 19 years old!!! Caleb and Chuck Strike Again!

How much debt do you guys have?

$2 million.

Let's talk about that. Hey, yeah, y'all are pathetic. Just kidding, YouTube. Welcome back, this is Cody, Christian, Caleb, and Chuck. Caleb and Chuck just signed for another 10-plex seller financed. They did it again.

Congrats, guys.

Repeatable.

So what's the portfolio look like today before we jump into the actual video?

We've got 2 10s and an 8.

2 10s and an 8. How much did you cash flow this month?

Plus the new one, it'll be about $7,000.

That's ridiculous.

No money out of pocket.

And you didn't syndicate that, right?

Nope.

Okay, so let's talk about that.

Yeah, now last time we met up, you guys had— we talked about being at 28 units. That was a little while back. That was 7 or 8 weeks ago. We just closed now. What were the delays? What were the hardships? You got it done, which was a huge thing.

And by we, we mean them. Yeah, we don't have any part in any other stuff.

No, absolutely not, but you guys made it happen. So 28 units, uh, first of all, what caused the timeline to take a little bit longer?

Yeah, one of the things was just in closing, just getting some legal work, and that always goes longer than expected. Attorneys going back and forth, that was kind of the biggest holdup there. Yeah, there was some nonsense that they read in and we were not going for it.

Let's talk about it. What kind of nonsense?

Uh, written permission to do any repairs.

Okay, so there's a plumbing leak, you You have to call seller. If seller's out of country and you don't hear back, you can't fix it.

Big no. Or if he just says no. Or if he's just like, no, you don't want to fix the pipes and you can't do it. And then he takes his property back.

If you see an issue there, that doesn't really pass logic.

Yeah. See, that doesn't work.

There's a logical fallacy in that idea.

Especially when he hasn't done repairs in probably years. He's anti-repair.

Okay, so what's your plan for the 10? I was looking through your prom note. You got 3-year balloon. We don't like to do short-term balloons if we're overpaying for stuff, and you've overpaid for one of your deals before.

Actually, yeah, first two we overpaid. This one, the reason the 3-year we were okay with doing that is we got it on a discount. So that was— it was such a steep discount, we were okay, we're comfortable with the loan-to-value as it is. That 3 years is nothing.

So what did you guys buy it for today, and what do you see it being worth at 3 years when you go ahead and do the seller refinance? Or talk about your strategy. And what do you think it's going to be worth?

Right, so we bought it for $725,000. That's what our purchase price is right now, all interest only. And right now, just off NOI, we're worth about $1.1 million. And I think we can get it to about $1.4 million.

I like that. And those are very similar numbers to stuff we've looked at. I mean, you guys are going to get it to 50% LTV.

Exactly.

Yeah, it's awesome.

So 3-year balloon isn't really the biggest hindrance there. We just had to negotiate some stuff during feasibility.

So what's the actual numbers look like? Because this one, you don't have delayed payments on your mortgage. In the past, they've done it because they have no money. I relate. They were just smarter than me. They just negotiated no payments, interest didn't accrue for 6 months. You're not doing that here. So what do the numbers look like day 1?

Yeah, the day 1 cash on cash is 15%.

Okay, but that's just a number. What's your income? What's your expenses? What's your cash flow going to be? We're bringing about— How much money did you put down? Or how much money did your partner come down? We put 10% down.

$72,500.

So you're going to make 15% on that, so about $800 a month. 10 grand a year?

Yep, about that.

That's awesome.

Yeah, no money out of pocket for us, and from there rents can go up day one. Yeah, they're already to about $1,000, uh, $1,000 a door.

What are they starting at?

$800.

That works.

Yeah, that, that, uh, that makes math.

So you'll get up to about $2,800 a month in cash flow. Yep.

Okay, so you guys have done— this is your third deal now. What were the takeaways that you had from this deal? Was there anything you learned on this deal that was different than any of the other deals you've done up to this point?

Yeah, the biggest thing for us on the first two deals, we, um, wasn't a whole lot of holdup with legal. It was just like just getting more pairs of eyes on it just to make sure everything was going over smoothly. Like we said, we had the thing in the contract about the written repairs and just double-checking and triple-checking everything on this one even more just showed us going forward that's going to be something we do. Because we're not legal experts at all and it's like $200, $300 to get it looked at.

And they're not supposed to be.

Yeah, yeah, exactly.

Yeah, it's way, way—

like our last review was $250 an hour because we had it expedited. Paying $250 an hour versus losing the property, it's a no-brainer.

Yeah, that's an absolute no-brainer. For those who are watching, what did you learn on the third deal that you didn't on the second or the first? Tough question. We're putting them on the spot. We haven't scripted anything. What's something new that you learned? You got a takeaway from it, you're like, this is new, I'm better for it. We talked a little bit about this, about lining all the terms before going into it. What is that called, remember? Term sheet.

Term sheet. Yeah, you brought that up. That's definitely something we'll be looking at.

So explain that to everybody.

Yeah, basically the term sheet is— I talked about this with Cody while it's always happening. It's kind of— it's not legal. You just write it all down on the paper and you, between you and the seller, and it's just what goals you guys are working towards together.

We did this on the, the Robin Hood Village Resort. Very complicated legal transaction, lots of stuff going on. And that's something we got as a takeaway, we being Christian and I, from that deal. But they had some complications and stuff came up. And the idea is if you just get a term sheet, not an LOI, but you have a term sheet that outlines these are the common interests and goals of all parties, this is what we're going to work towards, you can keep that in mind when the legal needs to be figured out and worked on. So that is something that will help you guys out in the future. But you didn't have to do it on your first deals.

We did not.

First ones were slam dunk easy.

Yeah, way easier than this one, a lot quicker.

So where did you find the 10-plex?

This one was through a broker I built a relationship with off market.

That's awesome. That's your first off market deal.

First off market one. Yeah. On to the next.

Wow. Took a couple of on market deals. So you guys now own in McAllen, you guys own in Laredo. Where's this third deal located?

This one's in Houston.

Houston. Okay. So you're starting to spread out geographically. This is where your strategy does differ a little bit from ours. We are very big on, hey, we're going to dominate one area with just a few owners that we have deep relationships with. You're way out of market, so your ability to build those deep relationships is a little different. Houston's not that close to Laredo or McAllen.

Yeah, you're basically out in Mexico. Yeah. Yeah.

The thought with that is you guys in Washington, it's like you can go meet up with coffee. Like, we went out to Texas once, had a few meetings drop out, and it's like we waited. We had $1,000 for one owner meeting where not much came out of it. For us, after that, it's kind of the strategy pivoted to, hey, these brokers, we can physically get the deals from them. Because either you're getting it for brokers or owners. And for us, it's just easier to build relationships with the brokers versus the owners and going to get coffee with them for a $1,200 round trip.

So this broker that you met with, this is your first off-market deal broker brought to you. Is this a broker that you worked with before, or is this the first deal you've ever done with this person?

First deal I've ever done with this broker.

Why'd they take you seriously then? Because a lot of people have questions about that.

Yeah, I mean, I'd like— as you know, you've said I've called a million brokers, which I have. I mean, not the most productive strategy, but it's going through the scripting and building credibility through that is why they seriously. Under— and they sent me deals that were on market under, hey, this is why it doesn't work, and show I knew what I was doing. That was a big thing, show confidence and I knew what I was doing and how to act. And then he's like, hey, I have this opportunity, came to mind, seller finance.

So Chuck, all this stuff is really spread out and you guys are getting more and more deals all the time. How are you managing all of it?

Uh, third-party property management. He knows so many brokers that we can get like a million referrals.

Yeah.

So that's the great thing about knowing every single broker in Texas.

That is what makes it easier. You guys have passive income. You gotta manage your managers, but we have to manage our tenants.

Yeah, that's— Chucky touched on a great point there. It's just the one bet— the biggest benefit I would say after calling so many of these brokers— I have different brokers in every market. I just call like, hey, who's your property manager? I'll call a bunch of them. That same name just keeps popping up. It's that interview them. They happen. It's so important to work with a great property manager. I mean, it's horrible working with the wrong one. Yeah, no, our two and the third one, that'd have been great. The first year, knocking it out of the park as we speak.

That's excellent. That's one of the most painful things you can do is get the wrong manager. And sometimes it happens and it may happen where management changes, employees shift. But I've seen it happen a bunch of times. So it's going to be something you guys look at. One thing that I like about buying out of market is that you have to choose a deal that merits all the additional cost of occasional travel, so you have to buy big enough.

Exactly.

It has to cash flow enough to pay for a manager, which means you have to have— it's usually on a per-unit or per-income basis. So I mean, you have to have a chunk of sizable cash flow that you could throw at that.

Yeah, ours is, um, percentage of income.

But it means that you actually have to pursue deals that are conservative enough to afford third-party management and all the other expenses. When you're limited to deals that work really well and have to be passive, you end up with a great business model of passive income, consistent properties, and you guys have built a really good financial base for yourself in a very short period of time.

That leads into the next question. What's next?

Honestly, just keep buying seller-financed multifamily. There was a while Chuck and I were looking at going a lot bigger, and at the same time, it's just the risk-to-reward ratio.

It's—

we could go bigger. I get these bigger deals sent to me quite often, and I could possibly put one together, and it's just I don't have enough otherwise to float that deal. One of our deals, something happens, we can float it. But if we buy a 40-plex, we can't float a 40-plex at this point. So next— so it's kind of stay between the 10 and 20 range is what we're looking at.

That's awesome.

I have a challenge for you guys. I started with a house and 2 duplexes. It wasn't a 40-plex, to be fair, it was a 38-plex. But the jumping off point for me to go to the next level. And this is where Cody and I partnered. Cody pushed me here, but that was the first deal I bought, even with a relatively high income, where I'm like, I actually can't just work my way out of this one. Like, I can't solve this problem with a check if we're wrong.

Today we can, but back then we sure couldn't.

Yeah, that was the thing that pushed me to the next level. I think you guys have enough portfolio. You had 30 units when you bought The 38 units by 21.

Yep. You guys are at 28 by 19.

40 might be the size that you take a peek at if you find the right opportunity that may push you to have to operate at the next level. Food for thought, but that was a big jump for me and you guys are at almost the exact same numbers.

Just might be. Yeah.

Make it happen.

Stay tuned. If you guys have not yet followed their channel, whatever they end up doing, the journey's been insane. I am almost 100% sure there's no one their age who's bought as much as quickly on as good of numbers.

Nobody's—

nobody has done that, and for sure no one's documented it. So they're doing this.

Follow their channel. And Chuck— that's it, it's just Caleb and Chuck.

They had a great YouTube name that's easy to remember because their names are Caleb and Chuck.

Go figure.

Yeah, so follow the adventure on YouTube. If you haven't liked and subscribed this channel, they're always here too.

Yeah, they're hanging out.

Yep, we're in Fresno. We're gonna be speaking down here with our good friend Zuber, Dion McNeely, and a few other people, but very excited to be down here again with you guys.

Good job. Congrats on your deal.

Appreciate it.

Thanks, guys. Appreciate you following along. Stay tuned. We'll post again tomorrow.