$20,000,000 in real estate owned in 1 year - Creative Finance Live

And it looks like we are live. Cody, welcome back. I see you are at the Robin Hood.

Hi, I'm at the Robin Hood. I got some stone cobblestone walls behind me and I'm in the A-frame building. Super excited.

Perfect. Sounds like your internet might be a little bit auto-tuning, but as long as it stays stable, we'll keep you around. But wanted to open up this week with the topic that people keep asking us about, because last Friday is the day we officially closed out and got recording numbers for the Robinhood Village Resort. We wanted to talk about that for a little bit, and a lot of the questions were around the number that we've been throwing out there. We're now at just about $20 million of real estate owned. Most of that we bought together through the last 12 months. Going into this, Cody, how much real estate did you have prior to our partnership as far as unit count and dollar value?

Yeah, I had 30 apartment units at the time. My 112-plex was worth about $900,000. Another one was $1,350,000. And then I had a building worth about half a mil. So that would have been $2.75 million worth of real estate, and it was a lot higher leverage than it was today.

I can imagine so, because you either changed out the debt, paid off some hard money on those— a lot of it, like all of it. That puts you in a really good position. Uh, now for Cody and I, we partnered on the 38-plex right off the get-go, and that was almost exactly a year ago. Which just seems crazy to me that that's all it's been. But a year ago, partnered on this 38-plex, that was a $2 million purchase. Our appraisal that we got a couple of months ago says it's worth about $3.4 million. So that's a sizable chunk of equity right there and of our portfolio value. We've partnered on 12-plexes, 10-plexes, blocks of duplexes, and now the Robin Hood Village Resort. Which is officially onboarded, up and running. That was a $4.5 million purchase, which is the most we've ever done. And, um, it feels really, really good to have those recording numbers in and to actually officially have landed the shot that we called about 2 months ago.

And it's my house. I didn't qualify for traditional financing, FHA, so We did $1 million down and bought a seller-financed resort. A little more fun. And it actually worked. Deal debt equity.

Now, if anyone has any questions on how creative finance and seller financing works and why you need it in your arsenal, our current lending rules do put us in a place where Cody just doesn't qualify for traditional debt. He can't buy a $200,000 house conventionally, but we can buy a $4.5 million resort, $1 million down. And Cody's paid to live there. Dumb? Yes. Functional? Absolutely. So we want to go into more creative stuff. Everyone watching, go ahead and start posting your questions here. I know we posted a little bit late that we were starting, so I know we'll trickle in a little bit slower as we get going. Cody, I just shared it on the IG, so if you want to blast that out to your crowd, we'll get this a full room.

I can do that. Awesome.

Now I am going to open up some of the questions from our, uh, YouTube channel. And everyone, as you have questions, go ahead and post in the comments. I see Dave's already got us, uh, kicked off on that front.

Is that Dividend Dave?

No, that's Dave G. I wonder if it's the same Dave or if it's a different Dave.

It's not Dividend Dave.

There we go. Well then, hello, Dave G. I'll start with your question, then we'll jump into the questions from our YouTube comments this week since it's up here. Hey guys, can you talk a little bit about your inspections of your properties you purchased? Do you hire a contractor to walk through with you? There is best practice, there's what we've done, and there's what we do now. Best practice, do exactly that. Actually use a property inspector, pay for the inspection. You will always be glad that you did. I did that on my house, my first duplex, my second duplex, and that was about it. Cody, how about you? What did you order an inspection on and what do we do now?

Yeah, so I got an inspection report on my first two 12-plexes, my 6-plex, and that was the last property I got an inspection on. Reason being, granted, I appreciated the inspection reports on the first one, but After my first 30 rentals, I started looking at stuff and I was like, well, that's wrong and that's wrong. That's also wrong. When we bought the 38-plex, everything was wrong. Had a leaky roof, had a whole bunch of stuff that was broken and or missing. And I didn't need to pay someone $5,000 to get told that everything was wrong.

Exactly. You know what's really crazy? If everything's wrong, what's the point of the inspection? I know the electric's wrong. We know the septic's wrong. Roll from there.

Yeah, exactly it. So we ended up stopping our inspections after the— well, we never did one as a partnership. I mean, I did it for my, my own rentals, but Christian, I walk in and we're like, okay, this is what's happening over here. And most of the problems can be fixed with cash flow. If there's something structurally wrong that we can see, I got to buy a lot of single-level buildings, so I'm not really looking up and down. You got to look at the roof, you got to look at the foundation. If there's a crawl space, there's crawl space. There's not a lot of crawl spaces on the apartments that I buy. A lot of them are on slab. But, you know, look at the, the main components. That's how we've done it. Not recommending that's how everybody does it, but as far as inspections go, we don't do them anymore.

Yeah. Now, if we were to venture into a new market where I don't know all the expenses to do something or we buy a totally different class of building, I might be more open to do that. In Central Washington, where most of our portfolio is, we're buying primarily 1955-built buildings. Most of them, not all, but most of them are brick exterior. A lot of the electric panels are bad. They're Square D. Or there's Insco. Both of those are awful, but I already know that. I know how to deal with it. We know the cost to upgrade them. So when we're acquiring these, it's like, well, there's nothing new to know, or, you know, nothing major. On a concrete wall, you kind of know what's in the wall. When you look at the electric, you know what's in the electric, and you get a hang of it. When you're starting out, 100% get that inspection report. This is very hard to estimate expenses that you've never seen before.

Yep.

Um, okay, going to our questions from Facebook, uh, from, uh, Dallin R. Williams. Um, great video. Thank you. I don't know which one that was in reference to, but I assume it was a great video. How should you start making relationships with brokers and owners when you haven't bought a property yet?

Well, you don't need to own a property to go buy a property. It's going to be the same exact formula. It's not like you're trying to buy a Ferrari from a dealership where they say you already have to own a Ferrari to buy a Ferrari from us. That's not how the real estate game works. And so it starts with a phone call, or if you meet them in person, it starts with a handshake. But you don't have to assume that you have to own stuff to get taken seriously because that's not how it works in this game. You have to have good values, be personable, be able to connect with others, and be able to communicate. And if you can't do some of those things, if you don't know how to communicate or you're not good at it, you can work on it. I've worked on my communication skills over coffee. Like, I, I practiced it on baristas because if I butchered it, I'd never see them again. I would just go to Starbucks. That's when I first started getting into coffee. So it just comes down to being, you know, yourself. Be transparent, be upfront, let them know what you want to do. And then it comes back to circle drill. You share relatable points to get in the room, share your goals, people be more likely to work with you. And if you share the significance behind those goals at the right time, then that creates buy-in like magic. Ta-da!

Yeah, it's not like a job. This is a fairly common train of thought of, hey, do I need to have done this to do it? This isn't like, hey, I get an entry-level job or an entry-level property and that qualifies me for bigger properties. Now, should you start with a 200-unit building? Probably not with no experience. There's— that's just— it's a big enough dollar amount where that could be a big oops. But generally speaking, you want to start with a 20-unit building and you meet with an owner of a 20-unit building. You start the same way you start any other relationship. This is what I'm trying to do, and this is why it's important to me. How did you get started? Um, that doesn't change whether you've done 100 deals or you've done your first deal. Your story changes a little bit because you have different experience, but the conversation's the same thing. This is what I'm trying to do. Um, uh, next question we have here. If you go to the bank or a mortgage broker for a loan, do they know you have a seller-financed property? If so, do you share the terms with them? Okay, so essentially they're asking, um, what it looks like when you go to the bank and you show them your schedule of real estate, or SREO, Schedule of Real Estate Owned. You include all the details of everything you have on there.

You don't—

and if you, if you don't disclose it, you're committing mortgage fraud. And That is a really bad idea.

That is a crime.

Turns out if you've got liens on title, you should probably be upfront because what they're going to do, if you know, you can have a mortgage lender, they're going to give you a loan, they're going to pull what's called a title report. And a title report is going to show the liens on title. So don't lie. They're going to find out anyway. Don't. Don't lie about debt you have that is actually against the title because they're just going to find it out. So make sure that, you know, if you have seller finance debt, it's going to show up on a title report just as a normal mortgage would. As long as you get everything recorded, then just disclose it. It's going to be on your balance sheet. You got your assets, you got your liabilities. And for notes payable, if you've got promissory notes that you've made to people, you list that on your liability sheet with the associated property, and then that should be well represented with the title company. It should be on that title report. And then you should have a corresponding mortgage statement if you're going through a note servicing company that you can just line up and say, okay, originally it was $1 million, now it's actually $971,000, and it all lines up.

Uh, next question is in from Julie Anderson. Welcome back, Julie. You answer— you actually ask a good deal of our questions on the channel, which I appreciate. Um, this is in regards to the Robin Hood, so I'll direct this to you, Cody. For the Robin Hood Village Resort, is there a restaurant nearby?

There is. There's not a restaurant in the Robin Hood. However, we've got trails on the back of the property, which is actually like right there. And those trails go to a deli, so you can get breakfast, you go there for lunch, great food. Just up the hill, the, uh, there's one you can walk to, which is the Alderbrook. And a lot of guests here always go visit over there because the Alderbrook is amazing, owned by Jeff Frakes, very, very cool building. And it's got spa. We're working on bringing in a sauna here. That's going to happen next week. But, um, they've got a spa, sauna, and then they've got a cool restaurant. FYI, the restaurant inside the building is way better than the one outside the building. We learned from personal experience. And then down the street, they're working on getting an employee, um, so they can keep it open. But the country store is phenomenal, and they're open during the warm months. And when— during the cold months the owner usually goes and stays in warmer areas. You've also got Dos Margaritas, which is just 2 miles that way. Great Mexican food, highly recommend. Yeah, like, great. It's really good. And then you've got the golf course. And the golf course, the Alderbrook Golf Course, which is actually owned by someone separate from the owner of the Alderbrook, uh, resort— they have a clubhouse with great food and great wine. So a lot of great places to choose from, and they're all pretty close.

Uh, last question we're gonna do today from the chat. Uh, this is in response to a video that we posted, uh, last week with Caleb and Chuck, who closed on their 19-year-old, no, like literally no money. Like, I— they have $0, uh, and no income. They bought their second deal, their 18 units. They're about to close on another 10. We did a video with them and someone asked, what about property management? That's the most important part for out-of-state properties. I want to address that really quick. This is a part of their model that they're doing very well. They found and they spent a lot of time getting recommendations for the right property managers. It sounds like that is going very, very smoothly. Their income is much more passive than ours. Cody and I made a decision after getting burned on property management to start our own company. Was that a good investment of our time? Yes. However, it's a lot of our time. Caleb and Chuckie have— they built themselves cash flow with like— it's truly passive income. It's incredible what they've put together. Uh, if you haven't followed them yet, they just started their own YouTube channel. I'll link it below after this. Uh, Caleb and Chuck— I, I think it's literally just called Caleb and Chuck for their channel. Yeah, um, they're They posted their first video today. Follow them, their adventure. I hate to say this because I'm competitive, it could be cooler than ours, or at least comparable. So follow their story. But yeah, their property management, they spent a lot of time finding the right manager.

Yeah. What's happening for them is what would've happened for me had my prior mentor not ended up doing the bad business that he did. And they're about to, like, rocket ship. It's going to be insane to watch them. So super excited.

They're part of our mentorship group. If you want a mentor that we didn't have, that is why we started it. This channel is not a plug for that course, but we do have a link below in the description. Currently you can join us there, themultifamilystrategy.com.

And if you want more info, yeah, and if you want more info on that, just talk with Caleb. Yeah, he's, he's the OG. He's one of our originals. So incredible. Yeah, let's, let's move into the comments.

Yes, you got David Weiss.

Yeah, can you speak a little more to how balloons work and I/O work respectively?

I'll start with balloons, you take I/O.

Pop.

All right, balloons. The problem with them is that they do pump. You need to manage balloons. Essentially, a balloon payment means you're paying either interest only or an amortized schedule, but you're servicing a note for a fixed period of time. And, you know, if it's a 30-year amortization, you're going to pay off the whole loan in 30 years. However, if there's a balloon somewhere in there along that path, The note becomes due, and whatever's the remainder of that note that is unpaid is now due— the remaining principal balance. With balloons, you need long-term fixed-rate debt if you want to play this game and answer the two questions: how do I own it, how do I never lose it? That's all you need. So the rules with balloons are you don't do super short-term balloons, and if you do you have a very clear plan on how you're going to refinance into long-term fixed-rate debt. You can't miss a balloon. That is how you lose it. Yeah, the thing you don't do is you don't have all your balloons due on the same month. You don't go, hey, I'm gonna do 5-year balloons, that's long enough, and then do them all due December, 5 years from now. Because if you buy $10 million of real estate, you can spread out balloons and knock that out. But if I don't know if you're me or Cody. I don't know exactly what I do if I have $10 million due at the same time. I don't know how to navigate that. You want to spread them out in 4, 5, 6, 7-year increments so you have time to move your pieces and move your capital. That's balloons 101.

Yeah, we can figure out a million bucks, probably figure out 2 to 3, but if we had everything due— I've got $11 million of debt today. A lot of equity compared to the debt I have. It's almost sub-50%, but still, if I had $11 million coming due, I mean, I would— I'd be in trouble. And talking about interest only, the only reason you do interest only is because you want to cash flow more. You'd rather get the cash flow than the debt paydown. And there's a time for that. We did a deal, 10 units, It was a 7-year interest-only note, 5%, with an option to extend another 8. It works. 15 years IO is wonderful. Now, some people are going to say, well, you're not going to pay down the loan, you're not going to build equity. Well, that's only part of the equation because the way you build equity is you either pay down the debt or you increase the asset value. And I'm taking a bet here that the asset will be worth more than it is today in 15 years. So the reason we're doing interest only is we want to increase our cash flow, and we can get 15 years of it. We're on board because I am highly confident that the stuff in Moses Lake will be worth more in 15 years than it is today. And so my debt doesn't go down, but it gets devalued in comparison. We prefer cash flow on that asset over debt paydown because the extra cash flow helps us float. It helps us thrive and grow in other aspects of the business, and that's significantly more important to us. Wow, that's pretty loud. You can probably pick that up. You hear that?

I just barely in the background.

Oh wow, it's insanely loud here. But it's just— yeah, well, the reason we do it is because we can get long enough term debt and paying down the loan to value right now is not as important. Loan to value is only important if you have to sell or you have to get new debt like that. That is the only time it matters. And that happens when you have a balloon.

And if you want to pay down your debt, you don't have to do that on a fixed schedule. The cool thing with interest only is all the cash flow is going to you. If you want additional principal pay down, you just pay additional principal. There's nothing that prevents you from paying down a loan unless you have a prepaid penalty that says you can't. Generally speaking, you can do whatever you want with the cash flow. That's why we like interest only so much. It gives us power over the money in And I would rather— quite honestly, the more principal we pay off, the more risk we carry on the property. Because if we lose the property, all that money is sunk with it. If we have the money outside of the property, we're in a better position. If you want to pay down principal, my recommendation is save it up on the side, control all of that. And when you have enough money to pay off the property in full, write a check.

That's what we're going to do. Yep.

I don't know that we've actually called our shot on the channel, but we'll shoot a video on this so everyone knows Cody and I are going debt-free. I mean, minus a few properties, and we will still acquire with debt, but we are implementing, uh, the next phase of our strategy, which is we have picked up enough to live the lifestyle we want to live, especially Cody, who lives at an awesome resort with kayaks. We've pretty much done what we're trying to do. Now we answer the final how do you never lose it. You eliminate all the debt on the things you're unwilling to lose, which is the base that we've created. So we are going to go debt-free, follow the adventure here, but we'll show you guys the math behind what we're doing with this. It helps with how you're going to acquire properties as well.

The current portfolio will be paid off within 5 years or less. We will keep scaling with non-recourse debt. However, we are going to knock out and the existing debt. And the whole idea behind this came from a funny analogy that Christian made up. If you still remember the story, I'll let you tell it and then we'll go on to the next questions. But go for it.

Oh yeah. Debt just kind of accumulates and it chases you down. So I was, we were in my office and I was like, it's kind of like we're just creating this huge debt monster. However, That debt gives us cash flow. Now, people who spend all the cash flow, you'll get killed by the monster because your cash flow is your ammunition. So we originally called this model the debt cannon. Essentially, we build a big enough monster of debt where we take all the cash flow generated from it and we shoot it with cash flow until the debt monster is gone. Is it a weird child's fairy tale? Yes. It's an an odd analogy. However, it really works for me. You have a big debt monster chasing you. You have all these balloons. We have to refinance. We need capital. Well, what if we just shoot it with itself? Um, I don't know of anyone who's ever done this. We're essentially using debt to do the Dave Ramsey debt snowball. The only problem is you need it to be a cannon. You don't want to pay it off in monthly payments because you increase your risk. You see the reason on the side and blow chunks out of your debt one mortgage at a time in full.

And the reason that it adds risk, if I'm out and about and let's say my Quincy 12-plex, I don't own that with Christian, it's separate. If I started chunking that thing down, I got it to where I owed $100,000. Something happened to me, didn't make payments, just, you know, Maybe I lost memory and forgot about it and things went wrong. If I had it outright, I'd be okay. And if I had it super leveraged, I'd just have more cash. But if I owed $100,000 on it and it was worth $2 million at the time, if I lose it, I lose all the equity. And so what we were going to do and what we're moving forward with right now is the debt cannon. We stack up cash in a side account, and when we can write a check for that mortgage, we pay it off because now we're not tying up equity that is super easy to lose if you just have something happen. Life happens. People say, oh, you don't lose property. But then you see these gurus online that are buying a whole bunch of property from people that are going through rough times. It happens. So we don't want to be those people. We want to stack the cash and then we can eliminate the debt. So that if something does happen, we own it outright or we just have a ton of cash and we don't lose all the equity. We don't want to lose a bunch of equity. Not fun.

All right. Before we move to the next question, I am excited to bust through these. We're starting to get a good deal in the chat. So everyone keep asking your questions. We're going to answer these a little faster pace. If you have a friend or anyone who would benefit from this channel, from this content, or who has a question, Shoot them a share right now, get them in this chat. I, I really want to just bomb through some creative finance questions today. If that's good with everyone on the call, shoot this a like, share it with a friend. Let's get your questions rolling. On to question, uh, number 3 from the chat. Justin Sereno: Hey, wanted to ask, do you have to put money down when seller financing, and how do you seller finance Does credit do an impact?

Okay. Okay.

Have an impact. Got it.

I'm trying with you. So the seller finance piece, they're rarely going to give you 100% seller financing. Does it happen? Oh yeah. I know a lot of people that have done it. That's great. But that's not a reality for most deals. And so they're typically going to want to want like 5, 10, maybe 20% down if you have a relationship. If you're going above that, you probably don't have a preexisting relationship. And so you should probably build that relationship. The senior to the deal and the story is worth more than the real estate. We've said that many, many, many times. In this situation, though, you're typically going to need money down and that's where everyone gets stuck. They're like, well, how do you come up with the money? Well, you don't. You don't come up with the money until you find the opportunity. So go find the deal, then negotiate the seller debt. And if you can get the seller to finance 90%, 80%, 95%, you want as much as possible, then you got to find a little bit of money down and it could be as equity. I don't recommend just partnering with people, so I'm not going to recommend you just go do an equity partner. Caleb and Chuck did that on their first deal and their second deal, and they have enough cash flow to where they're going to be able to buy those people out. So you can do it with an equity partner. Then you have some sort of buyout agreement that your attorney drafts and you eventually get 100% of it. Or you can do what I did and you can structure it as debt. And so I put a second lien position loan. So you got your first loan and then you get your second loan. Think about this like a HELOC, except for it's not a HELOC, it's just a loan behind the primary lender and they both record at the same time. So the down payment is debt against the asset and that money, when it's the form of cash at closing to the seller, you get your deal, then you line up your debt with the seller. You want as much as possible. At least that's what we try and do. And then you have to figure out the money down. You're typically not going to get zero money down, but it can be zero of your own money if you source it from other people's money in the form of equity or debt. All right. From Matt Gary, can you go through the math process you use when deciding whether a property is a good deal or not? You want to do the cash flow equation?

Yeah. That's pretty easy. So we target— you want a cash-on-cash return that makes sense for you. You actually do have to make money on the money invested. The biggest thing is we can't buy cash-negative deals. Wise person when we first got started told us, hey, if every deal cash flows negative $1, you're limited on how many deals you can buy. You can't buy infinite deals that lose money. At some point you'll run out of money. However, if every deal cash flows $1 positive and never goes negative, you can buy infinite deals. Well, I like infinite deals as opposed to limited deals. And every time you close on a property that cash flows in long-term fixed-rate debt, you just make more money. So the actual equation is you're going to take the monthly cash flow— it's gross income minus gross expenses— that does include your debt service. What is left over at the end of the month to pay yourself? Now you're going to multiply that by 12 because all returns are done on an annual basis. You're now going to take that number, that's your net annual cash flow, and you're going to divide it by the money that you put into the deal. If you put $100,000 down, you're going to divide by $100,000. Now we have an interesting option here. I am seeing in the chat Caleb, who is our next comment, entering the Zoom room. I'm going to admit him and we're going to get some input from Caleb and Chuck.

You see, how's it going, Cody? Yep. Also, we won't let them chat right away, but let them in. Uh, we got a comment from That's What She Said, and I connected with That's What She Said. I just don't remember who said that was their YouTube. So if you put your name, that'd be awesome. But they said, why not put the cash flow in an infinite banking concept, let it grow at 5 to 6% compound interest, tax-free growth, and then use that money to pay off debt? I wouldn't. I've done the math on that a lot. I used to be against it, and then I was super for it, and then I did more math on it. I was like, this is dumb. There's a lot of people out there that they're gonna be like, okay, Cody does not know how to do math. You can let it grow and borrow from it at the same time. Look, I, I've gone through the numbers. You can play the whole life insurance, but it's insurance. It's not an investment. That's not how you're going to get rich. So the way that we operate is like, we want to get rich and wealthy— wealthy first and then get stupid rich., and then we'll divest some of the cash into things that are not bankruptable, that can really protect us in the event of huge loss. We look at maximum foreseeable loss on a lot of things. It's a huge conversation starter for us. That's not a place to start for us. We're not going to start buying insurance so we can borrow our own money and let it grow. Below inflation rates. You know, that's not exciting for us. We're going to go get a whole bunch of real estate, build a portfolio, take all the cash flow, accumulate it, pay off the real estate, and then we can fund that extra stuff. But that is an add-on for our business model. And every time someone tries to run the numbers past me, I always just point out how they do better in real estate and they're like, oh, okay.

Now to answer the question, then I'm going to welcome Caleb and Chuck here. How do we decide if it's a good deal or not? Well, my answer used to be I want to see the cash flow greater than 8% because that's decently hard to do in the market that we had. And I was like, you know what, that's, that's my minimum. In a market like this, I never want to get cash flow below the rate of inflation. I want to be able to outpace inflation through cash flow alone. There's another metric I look at, so You know, you're going to be 8, 9, 10%. If you're seeing a cash flow number around there for your return of the money in the deal, that's where it starts to get interesting. Now, if you're bringing in equity partners where you also have to pay cash flow, you want to make sure that you are making that 8, 9, 10% after your partner has been paid. That takes them out of the cash flow equation. Calculate your cash flow to you. Otherwise, why the heck are you doing the deal if you're not making anything and you're taking on the risk? Of investing money. Um, that's my metric. Caleb and Chuck, welcome to the channel. What's up? There they are, you guys, literally the 18-year-olds or 19-year-olds with 18 units, about to be 28. What do you guys look for in cash flow? What, what's, what's your number? What's your metric? You've analyzed a lot of deals. What do you look for in a deal where you go, this is the one we're gonna do?

I mean, typically day one I don't like to go anything under 12%, personally, just day one. And then you obviously want to see upside there. If you're buying fully stabilized and there's no upside, you're sitting at 12%, I don't know if that's a deal worth doing either way.

Super true.

Caleb, I got a question for you from the chat. Going on, how do you— oh wait, nope, uh, well there's a couple for you. Uh, why not go with the house first?

Why would you go with the house first?

But they're asking why not. I mean, can you elaborate why you went with 10 instead of 1?

How do you go zero down with the house? Well, we don't have any money, so I don't— I mean, another, another thing there that just for me, just one of the first things when I start getting into real estate, and that really drew me to multifamily even more is if I bought a house versus I bought a 10-unit, if I go vacant in my house, I'm making absolutely nothing. Right now, my 10-unit, I have 1 vacancy, I'm still cash flowing $3,000 a month. So that was just basically— that was the first thing that drew me to it.

It's awesome. And I think that's the, that's the right way to think about it. You're not going to buy a house in most cases— I, I can't think of any markets where you buy a house with debt and you cash flow $3,000 a month.

Yeah, I haven't heard of that one yet.

Yeah, I'll do it there, BNB, but we don't play that game. I mean, we're doing the, the short-term rental game, but like, that's not a good place to start.

Well, and yeah, long-term rentals are guaranteed income. If you want passive income, you want long-term fixed rate.

Change your verbiage. Not guaranteed, it's stable income.

Yeah, but it's on a contract where they have, they have accepted, hey, we're going to pay. Now, do things happen? Vacancies, people move out, you have non-pays. Yes, you do have things. It's not a guarantee, but you have a contract in place that says we're going to have X amount of income on an annual lease. And that is what we like to see, is the stability behind an annual lease. That is much closer to truly passive income than Hey, I'm going to do short-term rentals and my income will fluctuate plus or minus $3,000 every month.

We got a question from Chris. How important is having a partner? Chuck? Yeah, Christian or Chuck or Caleb, one of the people.

Let's go, Chuck.

I would say it's not— it's definitely not necessary at all, but if you have the right partner, it can definitely be helpful.

So I agree with that.

Yeah, the goal for me, 1 1 should equal 3 when it's partnerships. If you have someone who's a carbon copy of you, like if you just cloned yourself and that was your partner, logically 1 1 should equal 2 there. There's no X factor, there's no synergy. You're just both able to do the tasks that you could otherwise do. When I have a partner like Cody, who is factually the single best person alive at buying real estate I've never seen another human that good.

Caleb is catching up, but he's not catching up. He's, he's trying to get on the board.

He's gonna do it.

I'm on the board already. Uh, you're at like, you're at like the bad end of the board. Oh no, I'm kidding. Caleb's great.

Yeah, Caleb's great. Cody's, Cody's amazing at buying real estate. When I was 8 years older than Cody with more money than Cody. I had 4 units in the house, the one that I live in. Cody had 30 units. I came into a strategy that Cody was already a few years into developing. Did we grow it together? Yes, but I am the systems guy. Cody's YouTube channel was alive for a year or so before I joined it. However, it was 18 videos and had a couple followers. We worked together And now we get to talk to a community like we have here. I build systems, Cody buys real estate. Can we do each other's role?

Yes.

But when we work together, the net result is much larger than anything either of us could put together individually. And I'm seeing the same synergies in Caleb and Chuckie's systems. They just launched their first YouTube video. Chuck did that. Caleb is amazing at going out and buying real estate. I doubt he would do the level of video editing and attention to detail Chuck had in growing their brand and doing their marketing.

And that could be a very real outcome for their partnership. One person does the stuff and the other person shows off the stuff to the peoples. That's real. You need a marketer. Yeah, and, uh, that, that could be You guys are at the very beginning of your partnership. Trish and I have made it at least a year now, but, you know, we broke a year.

But now you can do these things with employees, by the way. As an individual, you can head a company and you can put the right people in the right seats. I will say partnerships are much more dangerous. They don't work out much more often than they do work out. When they work out It is so much more fun than going it alone. 1,000%. A good partnership is the best possible scenario. It's also very hard to get to.

All right, let's bust through some of these questions really quick. From Dave, uh, you're looking at— if you're looking at a listing, is a good idea to assume 10% down with seller financing? No, you should make a phone call and see what's up. You shouldn't just assume. You don't want to play in fantasy land forever because then you never You go do the things. You actually have to buy the real estate. And to do that starts with outreach. You got to make that phone call. Sales is contact sport. So I'd make a phone call, see if they're open to holding a contract for one, and then I'd pitch an idea. But I wouldn't just underwrite everything. Okay, it's going to be 10% down because that's not real to me that those are all going to be 10% down and that they'll even be seller financeable. So you got to give them a phone call and make the pitch.

Now, uh, Caleb, this is from That's What She Said. How much do you typically keep in reserves for vacancy and repairs? What do your reserves look like? Because I know they looked a lot like Cody's and I when we got started.

Yeah, so being broke 19, not really that much. So the way we're building our reserves on our first one is we have that 6 months no debt service on our first property. So we'll be somewhere in the range of $30 grand for our first property's reserves. We have no debt service for 2 months on our second property. So after those, we'll have about $50 grand in reserves for our first two. And then our third one, we knew it was a renovation project, so we're gonna have, what, $70, $80 grand in reserves for our third one.

That is fantastic. When you are starting, you always want to have reserves, but if you don't have money, the next best thing is cash flow, and you stock cash flow until you have reserves. It's one of the Dave Ramsey things I actually like. 3 to 6 months emergency fund. I just take the operating account and say— and we're doing this for all of our companies— 6 months operating is set aside in cash reserves. That's the target. Where were we when we started? Cody and I have gone down to zero multiple times. We always have positive cash flow.

It regenerates.

Don't keep it from getting started, but the bigger you get, the more important your reserves are, because how do you own it? It's the first thing that comes before how you never lose it. How you never lose is very important, and you do that with, uh, cash flow and liquidity.

If you don't have liquidity, save the cash flow. Also, I don't know if everybody can see this, but I got a pic— oh nope, because my phone's blurred. Uh, we had two people at the resort buy I'm Cody Doing Cody Things shirts, and I just got a photo. So if you want your Cody Things shirt, they're not our shirts, But they're on Amazon somewhere.

Yeah. Link's actually in this description. You guys can grab those too. That is really fun. Okay. From Vlad. Hey, Vlad. We just saw Vlad in person. Cody, there's no way that's gonna get picked up.

I think it's—

is it the same Vlad? Oh yeah, that is our Vlad. That's the— how can I get into your mentorship? It's gold. Well, Vlad, you're already on board, cheater. Um, however, um, themulti-familystrategy.com, our goal is the information and application. So if you want to do the mentorship, sign up for our lifetime access. The mentorship's free for 3 months, which is what we wanted to do. We actually just met a bunch of our mentees down in San Diego. Caleb, Chucky, Vlad, Ethan, a whole bunch of our group was able to meet there on site.

Um, and I met some folks in Seattle. So that was just last night.

Super, super fun. We love having people from our mentorship and actually creating a community. The goal is to actually create a space where you can get your deals done. And that's where we're seeing people like Caleb and Chuck knocking out deals. They included one of our friends, Ethan, on one of their deals, kicking Ethan from— I think he had a duplex before that, but 2 units to 10 units. Fantastic.

We've got a question about proof of funds. Do you get asked for proof of funds or have you been asked for proof of funds? Well, I'm going to give my response on this and I'll let Caleb, Chuck chime in. The only time you'll get asked for proof of funds is if people don't think you can close, because if they knew you could close, they don't care. We bought the Robinhood without showing a proof of funds. Were we liquid $1 million when we wrote the offer? Nope.

No.

But the other party knew we could do the deal. There was trust. So whether you do it on market, off market, nobody asks us for proof of funds. And even before we had the social media presence, we had the real estate. Nobody asked for proof of funds. Ever, because we, we presented ourselves well. Your ability to communicate where you want to go and the plan on getting there, like, that determines if you're going to make this thing happen or not. You have to have an idea where you're going and have a plan to get there. And if you can communicate those things, people don't care about all the minute details up front. So if you're getting asked for a proof of funds, it's probably because you did something in your presentation that's like amateur, and they're like, I don't believe you can close. And that's no fault to anybody that gets that. It's just take it in, internalize it for what it is, and grow from it. Because if you don't grow from it, you're going to get cynical, and that happens.

All right, I got one here from Christopher Hyatt. Uh, how can I use the government's money and buy complexes or build low-income apartment complexes? I'm 21 in college with no money? Well, I'll start with don't start with building. I highly recommend against that unless your entire background is building. Um, building is expensive. You are estimating a lot of things and markets change mid-build. If you start building, you want to have existing cash flow to support that. Builders are the richest people in the world until they're not. Until they're not. Just go bankrupt. Um, As far as using the government's money, I mean, unless you're doing VA, where if you served, thank you for serving, as a bonus, you can buy property zero down. But the cool thing the government keeps doing, I'm not a fan of it, but we certainly benefit from it, is they just keep printing the darn money. As inflation is going up, there's more money in the economy, it is easier to start to put together private capital because we have a surplus of of capital in the economy. So in a roundabout way, use the government's money by finding excellent deals, finding people who have a surplus of capital, getting to know them on a personal level, and finding deals that meet their objectives and structuring it in a way where they benefit and hit all their objectives while you get to own real estate. That's my short answer on that.

Anyone else have an addition? No. All right. Warm beans. Hey guys, in what ways do you look to secure the numbers the brokers advertising are accurate? Well, I'd look at bank statements. You're going to do that during feasibility. You're not going to do that prior. So you're going to typically get an off— this is like just how we do it. Our order of operations: find a deal. It's listed on the market, going through a broker. We're going to wrap it up, get it under contract so that we have the right to buy it. We're going to go through a feasibility period so we can do a physical inspection of the property if we want, and we get to do a financial inspection. So we're going to look through bank statements and we're going to get a title report, make sure there's no extra liens on title that we don't know about. We're going to get title insurance and we're going to look through their bank statements to make sure, okay, they're actually making money. When we bought the Robin Hood, I looked at bank statements It's a big deal. And if they were just flat out lying on their numbers, which they didn't, I would want to know about it. If they're saying they're doing $50,000 a month and it does $5,000, we got an issue. It's like, where's all the money going? Oh, we just collect cash. Well, no, that's unacceptable, right? That's not— that's not going to fly because you can't trace that. I look on the documents here for when buying the Robinhood and I see the money that they said it was coming in was coming in. And anybody who's doing good business operations should be able to provide that. And then the second question, would you confirm with the property management company during due diligence? You could do that. You could reach out to PM, but if it's a small firm, you don't know whose interests they have. I've had it where it was just a single person managing the property and they forged estoppel letters. And a stop letter, if you don't know, is a tenant-signed document that clarifies and states what their rent is, what their security deposit is. And they forced the tenants to sign false documentation representing higher rents than were actually done. And they had them all sign it. And as soon as we got closer to closing, the tenants were like, by the way, I don't know if you guys know, but the manager made us sign all these. We don't actually pay this much. So it was hundreds of dollars a month higher than it should have been. So I would just look at bank statements.

Very hard to lie on a bank statement.

Yeah. Hey, I'm— can you just increase our numbers here?

Yeah. Wouldn't that be nice? Hey, yeah, we're going to make the property look better and let's— yeah. And then we go right back into bank fraud.

Um, okay, next question. Oh, that's a question for me.

Oh yeah, I'll ask it, and then I want to direct that same question to Caleb and Chuck because they are in fact the same age you were when you got started. Uh, but Cody, how did you shift your mindset towards real estate and financial education so young?

Well, I had read Rich Dad Poor Dad at a young age because one of my parents ex-significant others gave me the book, and so I read it and then put it back down because I realized I was 14 and couldn't do anything about it. And then in high school, my civics teacher started talking about real estate. It was their final year, so they brought it up on the last day of school because they'd been in real estate and they were an attorney, and they said they made way more money as a real estate investor than as an attorney. I was like, that's a big deal. And I'm I'm not like the smartest person out there, and I didn't think that I was ever going to get like a super high-paying job. Granted, I went to college for 2 quarters to pursue chiropractic and business, but it wasn't just this opportunity where I was going to get super rich as a doctor. That was never in the question. So I thought, you know, you don't have to have any money if everyone else pays for your stuff. And if I can buy a bunch of real estate where a bunch of people pay off the debt and eventually I can cash flow, then I would do okay financially. And that's what sparked it all. Now, did I know anything about real estate? Absolutely not. I thought I was the smartest guy in the room, and then I realized I knew absolutely nothing about real estate. And then that began the 3-year pursuit of knowledge that we're on right now. In 17 more days, that marks the 3-year anniversary from closing my very first property.

Legit, that's actually kind of cool. That's— that is amazing. I want to just point out, while we've done a lot of this adventure together, I am 8 years older than him, and that doesn't sound like a ton, but when you realize he's only 22, 8 years is a significant portion of Cody's existence. What Cody did is actually just ridiculous, and he got to 30 units more or less by himself. Like, he had a bad partner who like stole a bunch of money from him and kind of helped him get started a little bit. But I mean, Cody figured out how to do this at a ridiculously young age without a good mentor or without anyone really showing him how to do it. He just made it happen. It's why what we do is as unique as it is today, because Cody's Cody, and we appreciate him. And that's why I wear the Cody Things shirt, not the other way around, because Cody Things are awesome.

Yeah, and it was, you know, it's not easy. Like, and Caleb and Chuck talk about this too because they're 19 years old. We met them when they were 18. They got introduced to us because, uh, I think it was Julie. Yeah, yeah, Julie.

She's in California, right? Yeah, she's over in— she's in North San Diego. Yeah, she's about 25 minutes from us.

Okay, well, she made Julie, who's a She basically helps connect people, great connector. She connected us and she's like, oh, Cody's done what you want to do at a young age. And so Caleb and Chuck are now farther than I was at their age by a lot. So what did it take for you guys as far as mentality goes? Because I kept telling you, you were doing it wrong and that they, they did it the hard way. I mean, they, they were literally beating their head through a brick wall instead of just like climbing over the wall, but Um, well, how did the whole mentality thing go for you?

Yeah, so it started off our, um, junior year of high school was when the whole COVID thing hit, and so I didn't really have a ton to do. And then Chuckie's mom actually recommended him the book, some book called Rich Dad Poor Dad. And Chuck read it, he's like, hey, this is pretty cool, you should check it out. So we read the Rich Dad Poor Dad, read all the other Kiyosaki books, and then still the mindset was, oh, maybe I can do this after college, like, um, after we have high-paying jobs and figure this whole thing out, like way down the line. And then I was at junior college, we both lasted a semester like Cody did, 2 quarters, and just realized this isn't where I wanted to be and I wanted to be somewhere else. So I started reaching out to just local people in the area or into real estate. And then like Cody said, Julianne connected Cody and I and then was bugging the crap out of— crap out of a bunch of questions. And he was starting up the mentorship and he's like, hey, you come take a look at this if you guys want to keep going. So Chuck and I joined that. It's been about 11 months now, um, definitely didn't go too bad.

Could be worse off, but I mean, the main thing is you guys just kept pushing. There was a point halfway through I thought they were going to quit. It was getting hard and they were just—

yeah, that wasn't an option, but it definitely sucked for a little while. Definitely was ass. It was when the market was flaming hot and then everybody was just outbidding everything and it was Miserable.

Which, by the way, everyone who's stuck on the sidelines, who, who during the, uh, the low debt was like, oh, there's too much competition, and there I noticed they're mostly the same people now who are going, oh, now the debt's too expensive. Um, turns out when it's easy to buy real estate, you have a ton of competition, and when it's hard to buy real estate, everyone complains about being hard. At the end of the day, you have to push through and just buy the darn real estate and You are the best example that I've seen on the internet right now of buying good deals at a young age in any market.

I don't think, uh, we've done this one yet, but, uh, Caleb, how do you generate your leads for seller financing? Yeah.

So like Cody said, I didn't go the owner route. It's just for us, it was kind of tough to make. We don't want to— we both live in San Diego. Didn't want to own here. Price with our legislation just sucks for landlords. So we wanted to be in Texas or other states. So how we did that is all 3 of my deals have come through brokers. One was on the market for, I believe it was either a little under or a little over a year. The second one was about half a year. So yeah, just through brokers and deals are sitting on market when nobody else knows how to buy it and you do, turns out you have an advantage and you're the only logical buyer for it.

That's magical right there. If you can become the only logical buyer or the most logical buyer, this game gets so freaking easy. We just as a whole— it was originally me and now Christian and I, that since we're taking over Moses Lake, if you want to buy multifamily in Moses Lake, go at it. But midsize multifamily, we are the only logical buyer for that stuff. And a lot of the owners know us like that. That is the way that we get most of our deals now. We just became that figure. If you can figure out a way to make that story in the beginning like Caleb and Chuck did, now they're starting to buy up in Texas. Hey, we're the most logical buyer because we don't need any money and we don't need a bank. That's the ideal client right there.

So good job, guys. From Christopher Hyde. Hard money, private equity. How do I find other people's money? Caleb, I'm going to go to you first. We did— we gave you some parameters of what not to do. We did hold your hand on don't make these mistakes, but you guys raised your own money. You're in the mentorship group, but we didn't raise money for you. How did you raise your own money at 19 years old?

Yeah, so our first deal, like Christian said, we didn't have any money. I mean, we're both broke as a joke. And so we went going about that. It was just, you got to go through your network. And for us, first thing, my dad's been a commercial real estate appraiser his whole life, so he knew, he knew of people in San Diego who had some, who were fairly wealthy, and he'd known him for a while. So I took him out to lunch, talked to them, and then pitched them the deal. And turns out those guys were like, hey, it's awesome seeing young kids get started. We want to help you out. So helped out there and then we're still $30,000 short. So it's like, what do we do? Didn't beat our heads against the wall. Nothing was working. Oh, you're too young, yada, yada, yada. The pitch wasn't good enough. Refined the pitch. Then we went to Facebook and actually raised $30,000 off of Facebook.

So it's— And you're doing that, you're doing that as a JV, right? I mean, you're not syndicating.

No, JV.

Okay.

Right.

Cool. But you don't want to partner with everybody is what you told me. How are you getting rid of them? Yeah, so we—

so then you put buyouts in place. So we have buyouts after 7 years or 10 years, and that's just like Cody said, you don't want to be partnered with people forever. Eventually you want to be the only ones on the deal, and that's our plan. So we're buying those people out after 7 or 10 years. We've got long-term notes with them.

How do you buy out people?

Yeah, so that's on a refi. You either got to earn the money to buy them out, or that comes on the refinance.

There's a lot of people on the channel that don't understand how you buy out It's with money. You got it. So, I mean, it's with cash. You're giving yourself time to go find new cash.

Yeah.

Best way to do is to earn it. But I mean, that's what Chris and I are doing right now. But if you can't earn it, best have a way to cash flow it or refi it.

That's the magic. The game is relationships. One thing I wanted to note really quick in your story Where people are saying, hey, I'm having a hard time raising capital because I've never done this before. Notice that was actually Caleb's pitch. Hey, I'm new at this. I found an opportunity. People gave him money. The, the first money in was because people went, hey, we love that you're young. We love that you're learning the game. Yes, they like the deal. The deal is important. Yeah. They're investing in Caleb and Chuck because of their inexperience and because they're getting into the game. And that is a really cool thing.

Use your story and who you are and where you're at to get a yes.

100%.

That's what happened with Dan, Caleb. You remember that?

He didn't want—

he didn't really like the deal that much because he wanted to double his money in 6 months, but he's like, yeah, I like you guys, so we'll see what happens. Yeah, the guy was a little a loon. But yeah, it was for us, not the deal itself.

Hey, this is live. Don't name-call the internet.

Yeah, use it.

The only people I get to name-call— we get to name-call you because you guys need cash flow.

Yeah, you loon. Um, okay. Uh, is there a link for our course? Yes, I just included that below. If you guys have questions on the course, a better person to ask is actually Caleb and Chuck because they actually are in it. So if you want like a non-biased opinion because it's our course. I love it. It's the best thing ever. Yeah, we'll pitch you all day long. But, um, better direction would probably be ask Gil and Chuck what their thoughts are, what they're trying to do, and tell them what you're trying to do. They understand how this game is played. They've learned it from the ground up. They were in the group when we met for an hour one-on-one twice a week, and we didn't have any idea what we're doing. How it has changed. Were we—

I think we're the long— are we the longest tenured ones in it now?

I believe we are, right? Yeah, yeah, you guys have been in it longer. We had some people that bought some real estate, like they bought a duplex and then they ended up being like, all right, peace out, Girl Scout. They actually beat us out on a duplex and was just like, I'm happy for him, go Alex. But you guys have stayed in the longest, which is awesome. Alrighty, so more Questions. Wow, we got a lot of— it's a lot, lot. Yeah, we need to invite Caleb and Chuck back. Yeah, come hang out. Our stuff does well. You guys are more popular than us. Make sure to check out Caleb and Chuck. Just YouTube it. It's literally just Caleb and Chuck. I hope you guys never change that. I think that would be iconic. I think so. Okay, so we have questions. Since we're buying all over Washington, how do you manage and get maintenance done quickly? Well, we've had some issues with that on occasion. However, the, the main thing is we bought up a county. We didn't buy a whole bunch of counties. So we're not buying in Grays Harbor and Grant County and Spokane County. Like, we're not buying all over the place. We're buying very concentrated areas. And the one property that we own, that's not a Moses Lake as far as multifamily, Christian lives 10 minutes from, and the one property that we own that's not in Grant County or King County I live at. So we really just have to worry about Grant County, and it's all pretty close. So we just have people on site. We got to build out some more systems for that.

However, it's better done than perfect, and we remember all of our rules for that stuff. We bought the real estate first, and now we're optimizing. I've shared the story before, but I retired my wife. That was my original goal. Um, we're so busy with the contractors piece that we have temporarily unretired her and she's full-time all day been working on lining up projects for us. So she'll go back to doing what she wants to do, but she's helping us out here for the next little bit. When you scale to a certain size, like get there first and then we're doing stabilization year now. We went from build year to stabilization, but you'll just need more people is what happens. You, you need more people to manage 100 units than you do 20 units. And that just means either more employees or more contractors, and you figure out who you need to add to your network every time.

From Chris, what is the most difficult part of the journey? I can answer that. I mean, I, I went through some very hard spots that cost a lot of money. Didn't have to do them, but I did. But Caleb, we'll jump through. If you guys want to jump in, what was the hardest part for you guys?

What do you think? Probably the beginning when we had no— we were just working on it every single day and we weren't seeing any results at all. Yeah, just we've optimized the broker thing a lot now. Definitely have it down. But at the beginning it was kind of just call everybody no matter if it was seller financed or not and just really inefficient, not really optimizing anything or have one goal. And like, this is what I need to do. This doesn't fit the strategy. It was kind of just didn't know what I didn't know still. It was just starting off in the group mentorship. It just started. And it was just, was used to the instant gratification, thinking stuff should happen immediately. And I didn't have to pay my, pay any dues or put any time for it. And it was like, what, why, why isn't anything happening? And it's just, I had no idea what I was doing still. So just going through that transition and starting to learn all the material And I guess just setting the right expectations was probably the hardest part because I thought we were going to buy a deal like a month in. Yeah, that's what I thought. I'm like, I'm ready to buy. I'm ready to buy. Let's buy it up.

We got to. And how much, how much were your guys' mentorship? Was it $300 or was it $200? Regardless, it was more money than you had because it always freaking bounced.

Yeah, but I mean, we DoorDash forever. I mean, I didn't work a job. DoorDash is the way to go. So yeah, but I think we were $200,000 at the beginning.

Yeah. So these guys were blowing all their money on something that wasn't working for like 8 months. Yeah. I imagine that, that was hard mentally.

Yeah. The mental side was, yeah, that was 100% the hardest part. But once you figure it out and it starts rolling, it's incredible.

We have a question specifically for you guys. How many offers were you putting in to get your first property?

Oh, I— there was a lot.

There was quite a bit.

We actually had a few opportunities that fell through.

Christian, do you remember Mark Coyle? Uh, well, we're not doing names.

Don't, don't mention— oh, I'm sorry, I'm sorry.

So we'll say only nice things.

We—

there was a broker where they didn't, um, we got in disagreement right there.

There was that, that deal fell through. There was another deal where numbers were written wrong on a contract. There was the best deal I've ever taken a look at I went $500,000 over asking and somebody came in with cash.

And so yeah, there was definitely lapses of communication cause issues. And that is a learning lesson. That's a learning lesson for Caleb and Chuck. 100%.

Yeah. But I mean, that was the biggest thing. It was just, we put in a lot of offers and until we really started understanding the seller financing more and how everything worked, it was beat my head against the wall. And then as the market started to shift more, it was okay, less offers, more success, kind of how it went.

Cool. All right, moving on. With your old partner— okay, someone asked, with your old partner taking money like Christian described, is that because of there not being any terms written? Oh, there were terms written on paper. They just weren't being followed. It doesn't matter what the paperwork says if people don't follow the paperwork. And sooner I learned that— I mean, I wish I learned it sooner than I did, but it is what it is. Like, we split. I'm fine. And I don't know how he is. He's somewhere closer to Caleb and Chuck's properties. He moved, but You know, it is what it is. Move on. And as far as your question goes, some people just don't always do what they say they're going to do, and it's not because all of them are evil. I'm not saying he's evil, but, uh, if you get pushed into a corner, you either do the right thing or you don't. And it's easier to do the wrong thing for a lot of people. They can mentally justify it in a moment of being in a corner than when they're not. That's all I'm going to put there. Deal that equity. Heck yeah. Bryson Hill. All right. Order to buy duplexes, then moving into multifamily apartments or low-income housing.

Okay. That is a continuation of his previous post. I think the whole thing is most of my friends in college are focused on having fun and drinking. I'm dead broke, interested in financial education. What's the path I should follow from hard money to buying duplexes, then moving into multifamily apartments?

I think that's how that makes sense.

Okay.

So I would go meet with people that have bought the properties in your market. They're going to be the most knowledgeable in that market, and I'd go learn how they got to where they're at. I'd also network with folks who have done what you're looking to do just in the age demographic. So if you're younger, like you're mentioning, talk with Caleb and Chuck, talk with me. My phone number is all over the internet.

And I would ditch the drinking friends. I know that's most of the people in college, but I didn't bother with that really much in college at all., and I had stellar friends and I surpassed everyone I know financially who did the whole drink your way through college thing. So I would, uh, I would cycle out those friends who are having fun drinking and stuff, and I would find the people who are ambitious, who want to build cool stuff, find fellow entrepreneurs and surround yourself with them.

All righty. Is it best to calculate 2 years of reserves when initially underwriting? That's a lot of years. We definitely don't do that. I mean, we're looking at 3 to 6 months of reserves in the bank if we can. Well, we should push through these. We're going on a long live. This is awesome. Okay. What general terms and clauses do you guys use for your seller financing deals? They're all unique. Yeah, everything's unique.

Every deal is different. If we bring partners, there's always a buyout clause. That one's important. There's always a path to us owning the property, just us. We have a few strategic partners that we'll ride with, but we don't take on new people as long-term partners.

Yeah, but that's not associated with the note. On the note, we're going to have typically a due-on-sale clause. So if we sell, we have to pay off the lender because we want to do that. We're— I like having it amortized. Like, I've got a 30-year fully amortized deal, no balloon, but If I have balloons, I like interest only and I like long-term, decade-plus long debt, but nothing super special. We don't need to do substitution and collateral like we're not— we don't overcomplicate it. We just like to buy it. You know, how do you buy it? How do you never lose it? And part of that's paying it off so we don't need to move the debt around forever. Some people are chronic debtors.

We're not those people. Let's see here. Who pays the broker? When you buy on-market deals, you do an on-market deal.

Who paid? You repeat that. Who bought?

Who pays the broker? Who pays the broker on on-market deals?

Seller for us. Yeah, the seller pays it.

But who pays the seller?

So that comes out of our pockets. It's always out of your pocket. Like, always. I don't care. Like, people can argue this. The seller pays it, but who's paying the seller? It comes out of the down payment.

Yeah, we were looking at a deal, um, ended up not getting it, but it was— we wanted to go lower down. He's like, well, I can't go that low down because I need to pay your commission. So it always comes out of your pocket, the down payment.

Yeah. All right, next question. How do you find brokers to reach out to?

Mainly deal with large multifamily. I mean, go on market and see who's got the listings.

There you go. LoopNet, RE/XE. Yeah, just look on the websites that list multifamily and boom, those are the people who sell multifamily or try to sell if they're not very good. Cody and Christian, what are the next steps going in with your guys' business stabilization year?

And we're paying where I shine. Do it. It's my time. Cody's been the star for 3 years because he's the best buyer of real estate alive, period. That being said, the business structure, a lot of the back end is run through me. We are adding the right employees in the right slots. We are restructuring a few of our debt pieces. We are slowing down our buying and we are setting us up to initiate our debt hammer where we kill all of the debt in our portfolio. We have grown to what we wanted to do. We set a 2-year goal to buy 100 units. In one year, we bought 100 units or built 100-unit portfolio and bought the resort and the property next to it, closes next week. That's actually enough where I am— that's bigger than I ever thought I'd get in my lifetime. And we did it together in a year of partnership. I want to stabilize that, kill the debt, and then we will come up with a whole new adventure. Are we still going to buy along the way? Yes. Are we doing it the same velocity? No, we're going to help other people do this. More education, more stability. That is what is next for us. Building out that org chart, building out the companies, and just adding more legs. The one other piece— there's 3 pieces of this game that keep you from losing everything. Equity in real estate is going to protect the value of your money. Cash flow is what you live on. That is the lifeblood of your company. It's the most important. Liquid reserves are also very important. Cody, I are building 3 to 6 months reserves for every single business that we own. Our property management, every single LLC that holds real estate, they are all going to have a limited amount of liquidity equal or greater than 3 to 6 months of operating expenses. Those are our next steps. We will share more on the channel as we go. There is a 3-step plan to this.

We're on to phase 2. All right, Caleb, do you mention creative financing with the brokers on the first call?

Depends on the call, how it goes. I mean, if you first question you go through, you obviously ask how is it available. If not, call's dead there. For that deal at least. But if, I mean, if the call goes well at the end, I have thrown in there before, what, what does the seller think I can create on this one? That's typically, I'll throw that question in there if the property's been sitting on market for a long time, because usually those sellers, or they just want their price, and then those sellers become a lot more willing to get creative on their deals. But yeah, it depends on the call, how it goes, for sure. Cool.

Someone asked if, uh, we split with our equity partners 50/50. No. Not only do we not— no deal is the same. Every deal is different. We've had it where people are 18%, 33%, 40%. Depends on what it is, but nothing is ever identical when it comes to real estate. The cool part about real estate is it's an imperfect market. It is impossible for everybody to know all the same facts. And so that creates opportunity to get unequal share based on the deal and the opportunity that you're looking at. Do you know anyone that has repeated this in Australia?

Yes, it's called vendor financing there. However, it's actually more common there than it is a lot of other places. The reason being it is very hard to, one, get bank debt there, to get a reasonable LTV, and three, interest rates there can just make deals not work. So what you see more often is you're going to see people, uh, seller finance so that you have some control over the terms. Places that are harder to get bank debt or have shorter-term bank debt available, you typically see creative financing as a more common practice.

All righty. And then from Chris, if we are talking repetitions? I'm guessing that's what they meant to say. To perform a day calling brokers, sellers, running numbers. What did your lifestyle look like? For example, you came home and called 5 sellers, 5 brokers, 5 properties. In the beginning, I called everybody until everybody knew who the heck I was. I was a little bit more motivated than I, you You can say Caleb and Chuck. I mean, I called everybody in Moses Lake, Grant County until I had talked with everybody in Moses Lake and Grant County. That got me blocked a few times, got me meetings, but I learned how to play this game just doing it and making 6 hours worth of driving for meetings. I would drive 3 hours there, 3 hours back for a 30-minute meeting, and some of them canceled on me when I got there. So I mean, in the beginning, you either do it, you do the work, or you don't. And you do whatever it takes. Now we do maybe a phone call a day for finding deals. But what got us here is not what will get us to the next level. We can't just keep beating our head against a wall. I was trying to prevent Caleb and Chuck from beating their head against a wall because I'd already done it. They wanted to prove it to themselves. That that was the wrong way to do it. But hey, it works. Like, it worked for me, it worked for them, but there is a better way. And so, um, in the beginning, you got to do whatever it takes to get the meetings. And I wouldn't just put a metric hard and fast that you have to do X amount of calls because that's not how it works.

Now, however many calls it takes you to book that 1 to 2 owner meetings a week 52 weeks in a year. If you commit to, I'm gonna do as many calls as it takes, which often isn't that many, but if you get that one owner meeting with a different owner every week, 52 owners a year, you never have to talk about a transaction. You will find opportunities if you meet with that many people, learn how they did what they did, and ask how you're gonna apply it yourself towards your goals. If you just do those steps, you will buy real estate within a year.

All right. Are you concerned with the direction of the economy and markets? No.

No. Irrelevant to me.

Long-term fixed rate debt and cash flow and below market rents. It's not like we're riding the top of the market and it's not like we have $3,000 luxury A-class rents. Everyone can move down to us. If they get a promotion, they can move up to us. A lot of our rents are at or below $1,000. We're not charging people an arm and a leg to live in decent spaces. My nicest apartments that I own, and I'd say my nicest building I own without Christian, my highest rent there is, I think, $1,150 or $1,200. Two-bedroom, 840-square-foot apartment with laundry next to the church, next to the school, next to Microsoft. Like, it's nothing insane. All right. Okay. Do you think it's realistic to want to replace my 9-to-5 income investing with $50,000? Well, I think it's realistic to want to replace it. I don't know what your 9-to-5 generates. If you generate $24,000 a year, $2,000 a month, I'd say, yeah, you could probably do that. If you make $150,000 a year, I'm going to say it's probably going to take you a few years. So, I mean, I don't have enough pieces for you, but yes, it's just going to be contingent upon how long it takes you to actually do that.

You have to multiply that 50 in equity several times.

Yep. All right, Christian, do you use a standard percentage for maintenance and vacancy, like 10% of gross rents?

I typically don't. And it is An unfair question because a beat-up property that you know you're going to have more maintenance on, built in 1955 like a lot of what we've bought, is going to have higher maintenance than something that was built in 2017. Just realistically, stuff breaks. If your roof's 20 years old, your budget is going to be higher than a roof that was put on last year. So completely depends on the property. Super rough numbers that I use It's a new building, everything's fine, it's all renovated. $50 per unit per month up to a certain point.

That's about right.

It's kind of a property in the middle where you're like, okay, there's some older stuff, there's some newer stuff. Property's been around for a few years, $100 a unit. If it's a rough building where you're like, man, I am worried about the electric or the plumbing or 60-year-old galvanized steel pipes. $150 a unit. That's— it's very rough math, but like, if you're just trying to get a general idea without looking at actual numbers for a property, that's what we use: 50, 100, or 150. Is it great and new, kind of in the middle, or really bad? That's the metrics I use. If it's horrible, you can go to 200 a unit. But—

and then our last one— oh, hi Dory! Hey, it's here. Yeah, Dory has the Cody shirt, I believe. But last one. Hey, I'm 21. Just finished reading Rich Dad, Poor Dad. Saw Cody on BiggerPockets podcast, started following you. Do you think working for a brokerage makes you more reputable to buy property? No. I was going to let Christian shake his head, but nobody can see you shaking your head because it only shows the person that's talking.

Oh, I'll just make noise.

Ah.

No, the, uh, if someone calls me about a property and they open with, I'm a broker, my mindset is completely different than, hey, I am trying to invest in real estate, or hey, I own the 12-plex down the road from you. I want to network with other players of the game. Brokers are not other players of the game. Brokers assist people in playing. They're a consultant, they're a service provider. Are there great brokers who also invest?

Yes.

Brandon Buklage is on our channel fairly often.

He's a fantastic broker and he's got— yeah. And his nicest property shy of the Robinhood is more expensive than our biggest property. Like, he's got a multi, multi-million dollar asset approaching $4 million. Like, he's played the game. He's got stuff local, he's got stuff short term, long term. I mean, he's in his biggest deals in Boise. So, I mean, brokers invest. Is it going to give you credibility? Probably not. All right. Well, that is it. Oh, if you had $100,000 to $200,000 to get started in multifamily investing, what price point building would you look at first? Christian, when you had $100,000 in your HELOC, What type of building did you buy? I bought a 38-plex partnered with Cody. Magic. And I had no money, so I mean, there was that.

So I'm at $100,000 though. I bought a duplex and then I bought a second duplex and the two of them cash flowed enough to pay for my house. I am a huge advocate for going bigger because turns out 38-plex makes more money than my two duplexes. 38 units will bring in more gross than 4. You have more potential. Buy bigger. However, it's what are you comfortable with buying, what pushes you, and what reaches your overall goal. Like, for me, I got into real estate to cover my living expenses. I had this idea of like, what if my real estate paid for my real estate? It's kind of like house hacking, but I'm going to live in my house. I'm going to buy enough rentals to cover it. $100,000 did that for me., and I had a $25,000 to $30,000 emergency fund left over after I did that. I only spent $70,000. So the short answer is do what you want to do, but don't limit yourself to, hey, I'm going to buy a duplex, or hey, I'm going to buy a 38-plex. Buy the assets that you want to buy.

Cool.

And do you have a site to check out crime? You can Google crime rates for any area in the country, and there are like 5 or 10 sites. Most cities have their own. Um, so I don't have a specific recommendation. I'm gonna do the final call for questions. So post your final ones.

We're gonna answer one from That's What She Said, and then, um, this is our longest ones. We'll be out. This is our longest one. Yeah. I have an 18-unit. The seller would be open to owner carry. He said to make him an offer. How would you structure the offer based on full asking price, interest rate, or term length? Well, I'd structure it where you can actually do the deal. I don't have any inputs on the numbers, but full price is irrelevant if I don't know where it is, what it is, you know, make it make sense. Put together a deal, long-term fixed rate debt.

Yeah.

And then you got to be able to find the down payment. So don't do 50% down. That makes it harder. But keep it simple. Write a deal that you can make it. Work and go from there. But that is it for today. Appreciate everybody tuning in. We'll do this again every single Wednesday. I think this was our biggest one yet, so I appreciate everybody. And, uh, till next time. So— oh, he said he won't say, just make an offer.

Okay, then just make an offer. Oh, we have someone who wants to stop by the Robinhood, by the way.

Cool.

Ed or E space D. I don't know if that's abbreviation or your name's Ed. Yeah, either one. I'll look through, but, uh, excited that you bought the course. Um, you are welcome to the Robinhood anytime. Message me @christianosgood on Instagram. That's the easiest way to connect with us.

We're still live.

Yes. Oh, now. Ah, goodbye.

Surprise, now we're in.