In this video Christian Osgood (with partner Cody) discusses recent bank failures and the expectation of continued high interest rates, explaining how these macro‑economic shifts are squeezing many multifamily investors, especially those using variable‑rate syndication loans. He argues that the prevailing risk is the rapid increase in debt service costs for projects that rely on floating rates, leading to cash‑flow shortfalls and investor losses. Osgood proposes a counter‑strategy: acquire cash‑flowing multifamily assets using long‑term, fixed‑rate debt (10‑30‑year horizons) or creative seller‑financed notes that lock in low rates. He illustrates this with a recent 12‑unit purchase in Ephrata, Washington, financed through a seller‑financed loan at a negotiated 4‑4.5% rate, backed by stable government and Microsoft‑related employment in the area. The video concludes with a call to investors to focus on stable, long‑term projects, leverage creative financing to control interest costs, and view the current market pull‑back as an opportunity to build a real‑estate empire.
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It is time to buy, figure out long-term cash flowing fixed rate debt. Hello YouTube and welcome back. 2 minutes and 45 seconds ago I closed on another 12-plex with Cody, of course seller financed. And today we're going to be talking about market conditions and why we are still buying right now and why you should too. Welcome back to the channel everyone. If you haven't yet, please like and subscribe. We work really hard on getting this content out, and I want to deliver as much to you as we possibly can. Also helps if you give a share to your friend. So if you have anyone who wants to see this information, we appreciate it. Diving right in. So we've seen a couple banks go under in the last week. I think we're going to see more in the near future. I know the Fed's saying, hey, it's just a few banks, but I think we're going to see a lot more of this as regulations tighten. We've done a poor job of reining in inflation. And we are now printing money to bail out people and banks. So I don't see that changing. What does that mean economically? Well, it looks like we're going to see an extended period of high interest rates. We have a few more rate hikes in place. Multifamily is starting to get pinched. I've seen a lot of people post. I'm not going to name drop them, but you may have seen these posts online. I don't know anyone making money in real estate. Real estate is having a really rough time right now. Markets are compressing, get out of real estate. I'm seeing these all over the internet. And a lot of these are from really big players. The best players are expanding right now. There's a strategy I'm going to talk about briefly, syndication. This has been possibly the most popular acquisition method for medium to large multifamily for the last several years. Essentially, people will crowdsource a bunch of money, put it into a large project, and a lot of it is focused on value-add where you have to get the values up. The problem here is a vast majority of them, not all, but a vast majority used variable rate interest, which means they went from, in many cases, 4% to 8%, or had extremely expensive insurances— they're called a cap on their rate— where they hit the absolute max where they Their income may be at a fixed level, but they had a whole bunch of penalties. So now they're being squeezed. A lot of people are losing their real estate. They've lost their cash flow and distributions are not going out to investors. If you are hearing about turbulence in multifamily, it is primarily from the people who use variable rate interest, who are mid-project, and now the cost of debt has gone up so much that no one can afford to buy the buildings. The valuations are no longer there and their universe is crumbling. What is our strategy? I say this, I believe, in pretty much every video. Long-term, cash-flowing, fixed-rate debt. That is it. That is the only thing that we buy on. It has to be cash flow day one. The debt has to be long-term, and I'm talking 10, 15, 30-year debt. Long horizons. And it's fixed rate. My expenses don't change when the economy does this. Now, when interest rates go up, rents have to increase to continue to service expenses. That's just what happens. Which means our rents are going to go up, but our expenses aren't going to change because our debt is fixed. Sure, you have basic utilities and things that will change a little bit with inflation, but for the most part, we fixed our biggest cost, which is our mortgages. If you are buying real estate this way, no matter what, you buy on long-term cash-flowing fixed-rate debt, you make more money than you did before you bought the property. This is the case for the 12-plex Cody and I just closed. 12 units, Ephrata, Washington, just north of Moses Lake, a little bit northwest. And it is the home of Grant County's government, which means I have a lot of government jobs, stable jobs, PUD, basically all the court systems. And Microsoft is doing a huge expansion there. So you look at a stable market, bought a cash-flowing asset on a fantastic seller-financed debt product. Which is the other big thing we're doing. We don't usually use banks, and right now we look like heroes. The reason we don't use banks is because when we started, we don't qualify for bank debt. We did not have the credit or the money to go after these large assets. We had to find sellers who were willing to be the bank for us. The fun thing now is we negotiate the interest rate. So when rates go to 7% and a deal doesn't work, let's say for example, the owner wants their price. They want to get $1 million, but you can't service $1 million of debt through the bank on the property because the income doesn't sustain it. We can write that note at 4 or 4.5% where it works again. You can always borrow either less money, which isn't an option because we need to— we don't have the money to put down, or you borrow cheaper money, which is what we negotiated for. So when you're looking at all the economic forecasts, what are we looking at right now? Interest rates will still keep going up, at least for the foreseeable future. Markets go in cycles, they'll come back down at another time. Right now, banks are going to have more regulation. We're going to have a hard time in multifamily if you're banking on appreciation. Because as those rates get more and more expensive, that will have some effecting on pricing and valuations. So short-term projects, probably not the time to be doing them. You need to get long-term projects, stable projects, pick them up as many as you can. And if you can use any form of creative financing that allows you to control that interest rate, you're going to be able to compete on a playing field that none of the other operators can. Simple as that. I'm going to say it one more time for everyone: it is time to buy, figure out long-term cash-flowing fixed-rate debt. Ask the questions, how do I buy it? How do I never lose it? If you can answer those two things, no matter the market cycle, you're you can expand. A lot of people are pulling out right now or sitting on the sidelines. That is the time for you to build your empire. If you enjoyed this video, again, please like and subscribe, and we will see you all on our next video.
