20 year olds with 28 units how they did it - live interview

I'm ever doing a dual live, so prepare for technical difficulties. We'll have a few people probably come in who are sitting on the other stream going, what the heck happened? That being said, we're here. So what we do every Monday on this channel is we talk to other experts in the space, other up-and-coming entrepreneurs or masters who have done something that we have not done yet. You guys have invested way younger than me. You guys bought a ton of units. 28 units is a lot of multifamily.

Family.

So well done, guys. Very, very excited to have you on the channel. We are doing a hot seat, and so I'm doing this from the sauna. It's 150 degrees in here, so we're gonna go until either we run out of questions or I pass out. So we're gonna do one or the other. Uh, but really excited to have you guys on. Every Monday we tend to pre-record these. I forgot to do that. You guys were at my house, we never actually pre-recorded it, so special edition going live. It's the only way to get it raw and unedited on our channel and get it done today. So here we are. Caleb and Chuck, good to see you again.

Thanks for having us.

For everyone in the chat, I appreciate your help on this since we are launching the first time dual live. You can share, hit the like button, and let your friends know that we are on. Uh, the first link is dead, so there's gonna be people trying to hop in that, that, uh, aren't gonna see us, but that's okay. We're committed to doing this. So I wanted to start with you two. Beginning of the journey. First, introduce yourselves, who you are, where you're from, and what you're doing before you bought your first rental property.

Yeah, so Caleb, Chuck. Yeah, before we bought our first rental, we were still in junior college and just doing DoorDash, and we are located in San Diego. Oh, where did Christian go? Oh nice.

Do you guys not see me?

Nope, you were a black screen.

We're professionals. Oh. Well, I still hear you, so continue on. All right.

Yeah, but doing DoorDash, junior college, pretty much it.

Very nice. Yeah, I think people trying to call me also freezes this. So all things that we learn doing our first live. You'll have my audio, but fun fact, I did a bank loan. There's a new thing with loans where if the, what is it? Commercial bank stuff actually sends out your information. They sell it to everyone who does loans. So you will get nonstop calls forever.

Seems like it's time to go and do undisturb, Christian.

Yeah, I know. Really? That would be helpful.

You need a bank phone.

Yeah. Refinancing some of the resi stuff. That's how they get you. But okay. That's fine. I'll continue talking from here. This interview is all about you guys. We'll figure out video stuff as we go on. But, um, okay, so you guys were starting out on DoorDash. Let's hear about your first deal. What, uh, what was the property? Where's it at?

Yeah, so 10 units, McAllen, Texas, uh, South Texas. 5 side-by-side duplexes.

5 side-by-side duplexes, that's phenomenal. How is that project going right now?

Oh, it's going super solid right now. We just started our payments, I think a month ago, our first mortgage payment. And yeah, it's cash flow and steady about 8% so we can pay our investors. And now we're starting to turn over units and get it really going, optimizing the property.

Oh, that's what I want to hear. Well done. What does optimization look like on that particular deal?

Yeah, that one is basically units are dated. Mom-and-pop owner had held it forever himself. So just going in there, updating the units and boosting rents up.

Love it. Love it. So you did your first deal, that's in McAllen. What was deal number 2? Because we've answered our first 10, you guys have 28 units.

Yeah, it was an 8-unit in Laredo, Texas.

8 units in Laredo, Texas. Fantastic. And tell me about that deal. Uh, why did you guys pick up the deal? And if you just bought McAllen, why Laredo?

Yeah, pretty much the same thing. Um, picked it up, longtime owner, rents are below market, kind of mismanaged. And we went there just because our strategy when we were starting out was just growing markets in Texas. And we really liked the border towns in Texas.

Okay, I like that. Border towns in Texas are really fun. I've heard great things about them. Now, some people have given us flak for that, saying that, hey, the border towns are actually really rough and you shouldn't invest there. Everyone I know who invests in Texas loves the border towns.

Yep, we ran into the same thing. It's just people who don't know the market a ton are usually the ones who are hating on the markets.

Well, go figure. That's, uh, that's on them. Incorrect. And let's talk deal number 3. So you bought in McAllen, you bought in Laredo. Where'd you buy next?

Yeah, uh, last property we bought, most recent one, was a 10-unit in Houston, Texas.

10 units, Houston, Texas. Love it. And talk about that deal, because from what I've heard from you guys, that sounds like the favorite deal.

Oh, by far the favorite deal. We just got— I mean, really what came down to is we just got a great price and great terms, um, and we're just cash flowing our way through it. I mean, it's not even a stress because it's just 20— or it's like 17% cash on cash day one. So, and we're turning units and it's like $300 bump on rent, so Um, yeah, it's just a fantastic deal. Yeah, it's a pretty stupid deal.

Um, in all honesty, that's great. So you guys are all over Texas, you've invested in a few different markets, uh, around the state. You're from San Diego. Has it been easy enough running the 3 properties?

Oh, do we lose you? I don't think the sauna Wi-Fi is helping us, Christian. I wonder if they can hear us. I bet you they can. Yeah, Christian texted me.

Let's kick me out.

No, we're so good. Well, can we see the chat? I think the chat just pops up. Can you guys still hear us? God, probably not then. It's delayed a little bit. Oh, my battery warning.

Okay, yeah, maybe we're lagging.

Oh, oh no, he said yesterday. Okay, so yeah, it's Christian. Can't be recording stuff in the sauna, man. That's the biggest mistake ever. Phone overheated, I bet. Oh, that's probably what happened. You want to text him? See?

Yep. All right, he's done. We'll have to do this again. All right, adios. Are we back? Can you guys hear me? Ah, but the screen is black. All right, well, let's try relaunching this one more time. We're gonna do one more relaunch. Sorry guys, I'm trying my best on these one here. Launch one. There we go. I'm back in waiting for the guests to get back in and we should be good to go. Thanks everyone for sticking through the technical difficulties. I'm excited to share this stuff, but we're learning how to, how how to tech our way through everything. Caleb, I have you. Chuck, I have you. We made it. Oh, there we go. Video's gonna work until someone tries to spam call again, but that's fine because I got you guys.

Telling you, it's kind of good. Do not disturb.

I am trying, but I'm learning one tech thing at a time right now. Getting into a live is the, uh, is the first thing. Okay, so we left off your 3 markets. Any inconsistencies with, uh Any inconsistencies with management expenses? You're managing remotely 3 totally separate markets. What have you guys learned through that experience? Yeah, the biggest—

excuse me— the biggest thing I feel like we've learned is it's just finding a balance between being too on your management companies and being too off them. So it's a constant balance of trying to oversee the renovation of the products they're doing and then kind of giving them space to operate because they are management companies and that's what you hire them to do is manage your properties.

Absolutely. What are the things that they're doing that you have had that struggle with where you want something to happen and they are telling you something else?

Yeah, I think the biggest thing has just been communication. It's like, you just put me up in the loop. Like, there's certain things, like, I don't really care about being kept in the loop on, and there are other things like, hey, I just want updates on this as consistent as possible. It's just kind of voicing that and clarifying that to them has been the biggest thing.

Perfect. Give me an example. Like, what, what's something where you you would either want more communication or less communication on that your PM is—

Yeah, so this is a recent one. Um, our deal in Laredo, we had a vacant unit and they were showing it over the weekend, and I was just like, I was looking for a text over the weekend if we got the unit filled, because if we didn't, we were going to do some more renovation on the unit. So I was just trying to get some insight on it, and then Monday morning I got the answer. But it was like, hey, can I just be kept in the loop over the weekend as well? But so we know where to like deploy our capital and where to keep it just in case.

But yeah, that makes sense. Now, is— are you guys able to do that between all 3 PMs fluidly, or are there any PMs that you're looking to trade out teams on? I have just found personally that property management's a really hard business. A lot of people want input on, you know, what should I do, how do I do this, how do we put it together the best. Uh, I've had PMs steal money, I've had property managers decisions I wouldn't make. So I'm just curious, when you're running 3 simultaneously, has that been easy enough for you guys, or is there any, um, anything you're looking to do moving forward where you have more consolidation of properties? Yeah, a great question.

So 2 of our property management companies are rock stars. It's like I can basically be fully remote and just be like, hey, just keep me posted on whatever, and they're just awesome at it. The 3rd one is just— that's one where it's more communication. It's like, hey, We just, we're looking for a little more communication. So we're going to ride it out with them through our 1 year. And then if things keep on the incline, like they've been doing great lately, we'll probably stick with them. But if the lack of communication comes up again, it's probably going to be a switch.

That makes sense to me. When you're doing anything with PMs, teams, partners, lawyers, you name it, communication's pretty much everything is what I found. If all the teams know what's going on and what needs to be done, you don't have a lot of problems. Exactly. Little stuff. Even like within our work this week, I, we went to pick up keys for a property and I totally know that the, uh, there's a secured access door to get to all the multifamily in our mixed-use building. No one actually asked me before scheduling that. So we had teams go over there trying to post notices on doors and they couldn't get in cuz they didn't have the right key. Could have helped if we just, uh, shot a text saying, hey, do I need anything before we head out to the building? That's a little example, but that could happen on big things too. If you're good at the communication, you keep that really tight, your partnerships, your property management, your legal, everything's going to be more or less seamless. It's almost always when something goes wrong, something was not adequately communicated. So I'm glad you guys are on top of that and learned that really early.

Yeah, I couldn't agree more. It's just effort to stay in touch and stay on top of things is the key to all of it.

Now, for the reason that I think most people have stuck with us through all of our tech start starts and stops here for this call. We're doing it live right now on how you guys bought 28 units. We've shared a lot online. Those were all 3 seller finance, right? Yep. Okay. Let's talk about a little bit of your terms on the deal. I think people are going to be interested on what do you put together on a deal seller finance that would be different than conventional. So let's start with, let's start with McAllen.

Okay. First deal, $900,000 purchase price, 10% down. So $90,000 down. And then it is— we did 6 months of delayed payments, so no payments, no accrued interest. We're not paying down any principal for 6 months. And after that 6 months is done, then it's, uh, 4% interest on a 45-year amortization schedule.

So let's see if I could summarize that compared to bank. Uh, you're about 50% or less of what a bank would require for a down payment. Yep. A lot of them I'm seeing 30%, so you might be a third of what a bank would require down payment. Excellent. Uh, interest rate, uh, I've seen a lot in 6%. You guys are at 4%, so you guys are astronomically beating bank interest rates. And let's talk more about your special clause there— no payments for 6 months. Now, are those deferred payments where you owe them later, like it's tacked on the back end, or is it literal, like the payments don't start?

Yeah, the payments do not start. It's delayed. It's not deferred, I guess, the best way.

So it's, it's almost like you get all the cash flow, but you didn't really buy the property for 6 months. Like, you have none of the associated— yeah, uh, purchase payments other than you guys have, uh, income and operating expense.

Yeah, that's pretty much it. It's like we just bought the property, got some cash flow, but didn't really do— we didn't own it for 6 months, so to speak, with paying the mortgage.

That's what I want a lot of people to hear here. If you're starting with no money, there are different ways to play this. Picking up a property, you're worried about the your contingencies and what do I need in reserve? What if you just whack your payments in less than half? Is that less scary now? You have a lot of income and not many expenses for 6 months while you figure out and stabilize everything. That is an excellent move. We call that in our mentorship program now, Caleb and Chuck Special. That is a move whenever you're starting with low reserves or you're trying to figure out a deal. Maybe it needs some stabilization. You don't know enough of what you don't know. Saying, hey, can we have payments start in a few months? We'll figure everything out. Awesome. Okay, let's move to deal 2. What's the structure for the Houston deal?

Uh, do you want to go deal 2 or you want to go Houston deal?

Oh, that's right, because Houston deal was deal 3. Uh, let's, let's actually go in order. Let's go in order. Uh, Laredo deal.

Oh, we're scams.

Gabe Lincoln, you guys are scams. Yeah, except that, you know, public record shows this and you're, uh, You guys have bought and still own the property. So well done holding these. Let's talk about Laredo. What were the— what was your scam in Laredo that allowed you to own that one? That one's another— is that an 8 or a 10?

That's the 8. So yeah, Laredo, we're $700,000 purchase price, 10% down, 4% interest on that one as well. And that one we did instead of 6 months deferred payments, we just did 2, but still better than nothing.

There we go. So you got a couple months of no interest payments negotiated in. No scam there. That's just the— everyone agreed to that as a reasonable concession to put the deal together. Was that on or off market?

Uh, both our first two were on market. That wasn't on, um, LoopNet or CREXi or anything. That was just on the local MLS there.

Okay, so you found it on the MLS. How long was it on market before you guys picked it up?

Gosh, I want to say about 150 days, give or take.

Okay, so everyone else had a chance to take a look at this, which is maybe why you got some of your special clauses. Did you guys offer them the exact price they originally wanted, or what pieces did you actually negotiate to put this together?

Uh, yeah, they just— like most owners out there, I agree, owner finance, they just want their purchase price. So we're like, okay, that's not an issue, we'll give you purchase price, we assume terms.

There you go. So deal sitting out there, anyone could put together, sitting on market, advertised as please buy me. Right?

Pretty much.

And you guys came in and said, look, uh, you found what they needed. They needed a certain price. That was the thing that they wanted. You offered them that. You asked for, hey, can we have a couple months before the payments start? Reasonable. Reasonable. Interest rate is fantastic. Down payment's fantastic. Guys, that's how you get into deals. Kevin says in the chat, your terms were fire. Yeah, they are fire. If you can get the terms, basically real estate, you can get price or terms. You rarely get both. I have one deal where I got both. Yep.

We have, we have one too.

Yep. And we'll talk about that one next. Occasionally you do get both, but for me, with all the deals that I look at, that happens to you maybe once or twice a year. If you're in real estate full-time, you don't rely on home run or grand slam deals to make your career. You get, you get on base and you guys did that on your first two deals and you got fantastic terms. Which allows you to buy at prices that may have been at or over market price. The last piece here, how long are your balloons on these things for, for deal 1 and 2?

Yeah, deal 1 is 5 years and deal 2 is 10 years.

Okay. And we'll end this call talking a little bit about how you guys brought together the capital for those 10% down. But first, let's talk about your home run deal. Let's talk about Houston. What was the— what did you negotiate there where you got price and terms? What did you— what was the price and what were the terms?

The price was $725,000. It was worth about $1.1 million day one.

Um, 10% down. There we go.

Uh, 5.25% interest only.

Okay, so a little bit more interest than your last few deals, still underneath what a bank is currently offering. So that's fantastic. Any special clauses where you got a bonus non-payment? Nope, that one is just—

it was just, we're not even gonna push for this. It's like 15+ percent day one. It's like, let's just, let's just write this up.

I've seen a lot of people sell their way right out of a deal. You guys got terms that work, you got a price that works, you wrote it up, you closed it. You guys didn't push it, and I love that. Cody and I, on every deal we put together, terms was like, I would accept these. Some people just go for the throat on deals, like, I'm going to squeeze every dollar out of this. There's no need, just do more good deals. You guys found a good deal, fantastic price, and you got terms. What did you say the down payment was percentage-wise? Just 10%. 10% down on all 3 deals. When a lot of banks are looking for, we'll say, okay, because I've seen a couple of the assets, some of them had a little bit of deferred maintenance that you guys worked through with the cash flow. But when you guys are picking these up, banks are probably going to want 30% down on these. So you picked up 3 times as much real estate as you should be able to. If you had the money to take them out, which is how we'll end this. How much money did you guys have going into this?

I think we were a combined like $500, maybe $500, not $500,000 for everybody out there. But after we paid for your guys' mentorship, it was zero. Yeah, usually $500 at the end of the month, but usually there wasn't enough to pay for the mentorship.

I want to throw it out there. These were one-on-one mentorships that we used to do. This was when we were learning how to do that. Uh, this was $300 a month, uh, and they were in the program for 9 months. We are not charging exorbitant prices. We, uh, uh, we're doing our best to keep this affordable. It's a little bit more now, but it's a much bigger, much bigger, way more expensive production for us. Really proud of you guys putting it together. Let's talk about raising the capital. So you find a deal, you're going in at or above market price on the first couple, right? So you didn't get price. You got these amazing terms. How does one go about raising capital for a deal like that?

Yeah, I definitely, um, kind of biggest stipulation out there, just to add this on, is when you're raising capital, getting started, it seems like the most intimidating point by far. But once you've kind of got the things, it's actually one of the easiest points. But yeah, we're getting started, it's like we just didn't know how to go about it. So just reaching out to anybody we know who was maybe in real estate local to us, and that's actually found two-thirds of our first down payment. Set up a lunch meeting, they just grilled us with questions about the deal, and we knew our numbers, knew our stuff. So they was asking questions, how's the area, like unit count, unit mix, square footage, upside on rents, what are rents at now, just kind of firing stuff off. And we just knew it. And at the end of the meeting, they're like, yeah, the numbers are great, but the more important thing is we want to invest in you guys and give you guys the shot that we never got from somebody else. So it was just kind of the significance of what we were doing as well.

But I found that was true for Cody on our first deal. Um, our, actually our first 3 investors, that was the thing. They're like, we understand the deal, we like the deal. I want to throw the capital in with you because I think you guys can pull it off and I want to be along for the ride. And that is a huge thing. The ability to tell the story of here's the property, here's the opportunity, and this is why invest in us. Because at the end of the day, as an investor, and I've placed a couple of loans in my day, uh, the things that you're worried about is first of all, how is my capital safe? Like, am I Before anything, I want to know I'm not going to lose the money. That's super important. The second thing I want to look at is, once I know how it's safe, how am I actually getting my return? You guys explained that we got terms that no one else can get. We found a deal in a great market, and this debt structure that we found is unique. We came up with it, and this is why it's going to work.

And you guys—

and I'm imagining it looked very similar for the next two deals.

Yeah, pretty much same thing. It was just people seeing the significance in us and what we were doing. And obviously the numbers has to be good enough first of all, but after that, it's like, hey, I want to invest in you guys. Yes.

Now I have 3 more minutes available for this live before I have to go back to the mentorship calls, because we do those on Mondays, Tuesdays, and Thursdays. However, my neighbor's kids are jumping on a trampoline, so—

oh, the Wi-Fi. No, no, poverty Wi-Fi. Hey.

Brenton has fantastic Wi-Fi. Do you guys? There we go. Yeah, you guys are getting the full, uh, the full Osgood House experience. Welcome to the studio, everyone who's not seen the live studio. It is a very tiny room with a cat tower. Uh, see here from Kevin, mentorship 10% down. I get that all the time. Oh yeah. There's actually a reason why I can't do that. And it's not monetary. I am not a programmer. Everyone's login credentials, emails, they're all automated. They're all tied to our paywall. And I do not know how to program any of that stuff. So to keep everything automated, to make sure that we have the same level of service for everyone, we do the same level of pricing. Also public service announcement. No one has ever had a problem with the mentorship save one person, and it is the only person who we ever gave a discount to. Therefore, I'm not going to name names, but the only problem that we've ever had is when we gave a discount, someone had custom pricing, and the first thing they did was call everyone else in the mentorship and tell them all their problems and that they got special pricing and went, hey, guess what, I got a discount, you guys got ripped off. It caused cascading issues, so I cannot be nice anymore. I wish I could, but I, uh, that cost me a lot of money having to redevelop the site and the links and everything. So I have no creative financing on the mentorship. However, you can use a credit card and you can pay that back however you want. So that's great right there. There's your creative financing. And, uh, If you have a business, you can take out a zero interest card for 1 year and then pay it back throughout the year however you see fit.

Now it's separate payments, so you can use 2 credit cards and split it up.

Extra creative.

Yeah.

Yeah. So all joking aside, I don't do that for efficiency, but I am open to rolling out a program in the future. We're working on that with the tech team. I will announce that when it is live. It'll be more than 10% down. 0%.

This is education.

My time is spent regardless, and my collateral is nothing. Piece of that. If you could buy me my time back, we can talk. But, well, yeah, we'll see what you put up in collateral. That's funny. That's a big piece of creative finance, by the way. This is how easy it is. Um, you have a piece of collateral, which is usually the real estate that you're buying, and you have it backed by a note and a deed of trust for seller financing. So it says, here's the note, these are the terms that we agreed on, and the price that we agreed on, and, uh, I intend to pay it. If I don't pay it, you get the property back. That is a standard seller finance thing. Most of them are non-recourse, which means the only recourse is the asset. They're not going to come after your other assets for them. Which is great when you're getting started. Exactly. You have no assets, I guess it doesn't matter. But if you get them later, uh, you don't want to collateralize them. Now, closing thoughts, guys. I apologize, I have to run, but we are coming up to that time. Uh, closing thoughts, any other tips that you guys would give on raising capital or presenting your deals to anyone? Any closing pieces of wisdom for us? What would you say?

I would say just get out there and do it. Like, go to meetups, as many people as you can, because you're just not going to be very good at it at first. Like, before me and Caleb landed that initial money, we went with another guy, um, and we had a lunch with him, and it just— it did not go very well. Yeah, because we had never done it before. Yeah, first time ever. So, but that guy also ended up saying, I want double my money in 6 months, which turns out that would be incredible if you were offering that every single time, but that didn't work out. Yeah, but practice makes perfect. You're just not going to be an expert at it the first time you do it.

So just getting out there, practicing over and over and over again until you get Fun fact, Cody and I actually did, uh, double all the investors' money in 6 months on our first deal. We didn't mean to, and oh my gosh, that was expensive. Uh, but we ended up wanting to refinance, had to buy them out based on how the deal is structured. Uh, we offered them 2:1s in 5 years, but there was no acceleration in there. So if we paid them off early, it was still the same 2:1. So we got, uh, we did it, it made enough money, but oh my gosh, uh, doubling people's money in 6 months, that is very, very, very expensive capital.

Yeah, and you're promising—

yeah, get out there, do it. You're going to be bad when you start. You're not going to know everything. Uh, hopping in something like our mentorship can help, help these two. Um, but the main thing is that you're just around other investors. That doesn't have to be a paid thing. That could be joining these lives here on YouTube. That could be going to a local meetup. Talk to the investor who owns the property down the street from you. If there's multifamily, give them a call. It's about that easy. Guys, thanks for joining us. YouTube, thanks for sticking with the tech things. When we launch this, I'll make sure we do some creative editing to this video and have it start where the conversation makes sense. Caleb and Chuck, thanks for hopping back on 3 times to get this figured out. And we'll see you for the full live on Wednesday at 3 Pacific. Sounds good.

Have a good one. See ya.