Caleb Hommel on Creative Finance

Hey guys, this is Caleb. I'm subbing in for Christian today. Christian is on his only— first and only vacation of the entire year. So I was Christian's third student ever, currently his business partner as well. We're buying a bunch of multifamily in Texas. I'm just gonna run through here. Yeah, quickest, um, just want to run through a quick presentation for you guys. We're going to be talking about creative financing and why we shouldn't actually lowball sellers. So feel free to drop if you guys have any comments, um, or anything as well, any questions about this. But basically we're gonna be running over exactly why you shouldn't lowball and creative finance, how you can actually make a win-win for sellers. The biggest thing right now, I'm sure everybody's seeing this on the market, is things are finally turning. Things are finally heading in the right direction. We're seeing some better deals come on, seeing better deals basically every day, especially it's basically here in Texas. And we're seeing better deals every single day. Um, for those that are just joining, my name is Caleb Palmer. I'm subbing in for Christian today on his first only vacation of the year, and we're going over a little bit creative finance. So what I was saying is why we shouldn't lowball. The biggest reason is with sellers, when you're doing creative financing, you want it to be a win-win scenario. You don't want it to be, oh, we're lowballing the seller, we're throwing $300,000 under asking price instead of just giving them what they want. The biggest example I have of this in Christian and I's journey we did a deal in a town called Stephenville, Texas, outside of DFW. And biggest thing we were doing this deal, seller did not want to get cash out. His ideal, ideal seller for seller financing, right? Creative financing. Seller did not want to get cash out of this deal. He did not want to get hit with the tax benefits. He loved his monthly income. So wanted $2 million for it. Deal did not work conventionally with interest rates here in 2023 at $2 million. It would not have penciled out. So for us to create a win-win for that seller and Christian and I, what we ended up doing was structuring a creative finance offer. This looked very creative. It included 15% down, interest rate day one was 3.5% interest only. So we're not paying any amortization. Our monthly payment is about $5,000 a month, not much higher. And then from there, we create a win-win for him versus just lowballing him where the deal was actually that day would have been worth about 1.6 to 1.5. Cap rate had been too low for a bank debt deal. So for us, we create a win-win with him through actually going in and doing seller financing. And so a lot of people out here currently, a lot of wholesalers, a lot of smaller investors are going to go, go for a lowball on some deals. And that's just biggest philosophy is you shouldn't do that. Had an offer. I had a comment here on the YouTube from Clash 205. I wonder if pro forma is enough to use the MFS calculator. I asked for actuals and the broker told me I can make offer based off contingent. Under view a schedule, 25 P&L. So what Clash is asking about is the multifamily strategy mentorship calculator, which is how we underwrite all of our deals when we're getting started. It's a great tool to use. Clash, I think it's a great idea to go ahead and plug in the pro forma numbers just to get a feel for numbers and what they could be like. Ideally, your pro forma is often going to be off day one numbers. That's why it's called a pro forma. They're not real. For those of you guys just joining, we're going over a little bit creative finance and taking a little bit of Q&A. Christian's on his only vacation of the year, get back from the Bahamas here shortly. For this question, absolutely go ahead and plug pro forma in there though. But when we are using pro forma, especially on creative finance, we need to be very careful just to make sure we're actually acknowledging that it is pro forma, that they're not real, that it's not a real set of numbers, and that we need to go ahead and actually get actuals from the seller before we go ahead and submit an offer. You can submit an LOI contingent on getting financials. Not something I would recommend ideally, just because you want to make sure you have actual financials going into that. Good question there. If we have any other questions, feel free to ask. We're going over creative financing and why it's better than traditional lowballs. Another example of a deal that we did on a property was, uh, it was a 10-unit complex. It was actually the first deal I ever did. It was for $900,000. Seller did the same thing. A big thing with these older sellers is they do not want to pass their kids their properties. That's a big thing these people want to avoid. They don't want to give their properties to their kids because their kids don't care about them like they did. That was the seller's goal as well. Property was not worth that full $900,000 day one. So instead of that, I went to him and said, hey, like even less down than that first deal I just talked about, went to 10% down, 4% interest only. Deal was cash flowing phenomenally day one. For him, it was a win-win. He got to avoid the giant tax ramification that he was fearing the whole time. I got a deal that cash flowed well, and his kids did not need to get sent— not get a giant tax burden. So if anybody has questions, anything creative finance, I'm Caleb Hommel. I'm Christian Osgood's business partner. We've done 189 units together here in the last 3 years, picking up another 144 right now with some more to come out in Texas. That is what he sent me. So Clash is referring to this as a pro forma is good enough to use. Clash, I think that's great enough to start out with. I would just make that contingent on getting actual financials and verifying these financials. A lot of sellers are going to often use pro forma numbers or some guys even fudge their bank statements, which is less than ideal to deal with. Uh, but Christian and I both dealt with that, and you actually have to do enough due diligence to get under the hood of the deal, so to speak, and make sure you're getting actual numbers. We'd love to hear a little bit more about that deal, where that's at, if you have any more information on it. For those just coming in, I know we've got a few people hopping in, a few people leaving. We're going over creative financing, uh, why it's better than just traditional lowballing on deals. Clash, would love to hear if you could put a little more information on that deal in the chat. Um, going over any Q&A anybody might have. Talk a little bit more about what Christian and I are working on. Clash, if you have any more info, I would love to hear a little bit more about that if you've got anything. See if he's got any info on it. For those of us just hopping in here, I see people hopping in and out. We're going over creative financing primarily, going over some real estate deals as well, what we're working on and what makes a creative finance deal a win-win. One of the core principles Christian has that we look at on every single deal is deal, debt, then equity. And we're looking for long-term cash-flowing fixed-rate debt. So a lot of the seller financing deals out here, it's contingent like Cash is kind of talking about here. It's a lot of pro forma. And we're looking at pro forma on deals. That's not a recipe for success if our goal is long-term fixed-rate cash-flowing debt. With seller financing, we want to make sure, hey, we're getting actuals so we can actually make sure we have a cash-flowing rental on long-term fixed-rate debt. Whatever cash flow metric is up to your choice. We recommend seeing double digits on the smaller deals. As you get bigger, that might be high single digits day one because there's more money involved in the deal. But we're focusing on long-term cash-flowing fixed-rate debt just to make sure I'll not happen to what happened to a lot of syndicators here in the last 4 to 5 years where bank debt, you get floating rate debt here in 2021 that was incredibly cheap, incredibly attractive, but that floating rate turned into double what market rate is now. So we're just talking about avoiding that. If anybody else has any deals they're working on— Clash is a part of Multifamily Strategy, got the hoodie on. That's where I started out as well, with Christian's community, where I started getting my feet under me with buying rentals. Does anybody else have anything either they're working on or any other questions? Clash, I don't know if you have any more info about that deal you want to share, but would love to hear a little bit more about that. Or if anybody has any questions on what you guys are working on real estate-wise. Said Lock Haven, Pennsylvania. Yeah, would love to. I'm sure, um, if you don't have my number, either send it to Christian. Would love to hear a little bit more about it. He's given some more information on the deal here for us. Uh, if you're just tuning in with us, we're going over creative financing. We're talking about deals actively being worked on and why it's better to avoid, one, lowballing on creative finance offers and making a win-win for the seller. It's usually not about price for them. Sometimes it is. We're going to go ahead and go for the other things— terms, interest rate, down payment, that kind of stuff. And we're also talking about why there's certain principles you need to follow that are long-term cash flowing, fixed rate debt, especially doing creative finance. So working on that in Lock Haven, Pennsylvania, $1.5 million, 47 bedrooms. Is that a deal you found within multifamily strategy? Would love to hear a little bit more if you found that on market, calling the broker, or how you went about that one. I know I'm kind of putting you in the spot here a little bit, but would love to hear a little bit more if you're following— you're building owner relationships, if it's creative finance, or what your offer is. For those of you guys just tuning in here, uh, Christian is out on his one vacation annually, coming back from the Bahamas. We're talking about creative financing, uh, buying deals, not making sure price is the biggest obstacle to buy those deals and talking about a few principles to those deals as well. Student housing is awesome. We absolutely love student housing. 47 bedrooms total. So it sounds like they're on separate parcels, I'd imagine. Said you found it through a broker, it looks like as well. If anybody else has any deals they're working on in and out of MFS, questions about the mentorship, what that looks like. My name is Caleb Holmes, Christian's third student ever, currently at 189 doors, buying another 144 with Christian currently. By the end of the year. Um, yes, Randy, we are still live. Um, still live currently. If you have any questions about anything we're working on or any questions about real estate in general, would love to hear more. But yeah, I am, um, was third student ever. We're buying 144 right now. We're doing some bigger deals that are actually non-creative finance, but still, we wish we could do creative finance on even on these bigger deals. It's the absolute best way to go. And after going through a few closings, uh, working with Fannie, Fannie Mae, I wish we could do seller financing on every single closing. It makes your life so much easier. Custom interest rates, custom down payment, custom purchase price, custom terms makes life a heck of a lot easier. Um, go back to Clash, or if anybody else has anything they're working on currently, would love to hear a little bit more, um, about it if you guys are working on anything else here in the, in the meantime. Um, Clash, would love to hear more if you're thinking seller financing on that one, or if you're going bank. Awesome. Separate parcels, separate parcels, run pro phone numbers and bring the deal, deal deep dive. That is— are you thinking next Tuesday's deal deep dive, Clash? I know you've been in the mentorship for a little while as well, I believe. If you don't mind me asking, Clash, how long have you been in with Christian Osgood now. Yes. Awesome. Yeah, that's a great place to get analysis. I've also gotten a handful of my deals funded on those Zoom calls. Clash, that's a great place to be looking for these opportunities, is making sure that you are actually getting good feedback on these deals. That's a great place where you can get a bot. Oh, let's go! Second week in Multifamily Strategy. That's awesome, dude. You're taking the right steps. You're in the right place. Um, without a doubt, that's where you should be doing. Um, that's exactly what I did. 4 years ago now and 189 units, only a few thousand dollars out of pocket. Uh, Randy McDonald, that is awesome, man. First time and you don't know what to do. Uh, is anybody else there on that spot? Randy, if you are, if you want to say something in the chat on YouTube or wherever, uh, Facebook, Twitch, anything, we'd love to hear a little bit more about what you guys are struggling with and how we might be able to help you out. Randy, where have you, um, what's the biggest thing holding you up? Is it on the knowledge side? Have you started looking for any deals yet, or you really just looking for step one? Love to hear a little more. Clash too, if you're still there, would love to hear, uh, if you could, um, provide some encouragement to Randy, maybe about the mentorship as well. I'm sure we've all been in a similar spot of not sure, not being sure where to start and what to do. Um, would love to hear as well on that deal out in Pennsylvania, what you're doing with that. Um, as far as I know, you said you got pro forma numbers. Uh, if you have any clarity from the seller on what they're looking to do, if it is— if they're only open to bank financing if they're open to seller financing. Randy, step one, that is awesome, man. Um, I started that during COVID so it was a little difficult to go to any meetups or anything like that. And that's actually, um, how I first heard of Christian. I went to a meetup, uh, over 4 years ago in San Diego, California, where I was, um, previously located. Went to a meetup, somebody knew of Christian. I joined Christian's mentorship over 4 years ago now, uh, through a long journey. Started buying, um, 10, 10 Oh, we've got somebody in the Stephenville. That is awesome. I might have an idea who this is. Not your leader. I think I know it. This is Jake. I wouldn't be surprised. Stuck in the Ville, of course. Believe he's talking about Stephenville there. We've got another comment here. Dale 9846: Seller financing and zero down, how do you get an inspection on that? So that really depends, Dale. You can get really creative on that. As far as what you're working on there, if you're going seller financing, zero down, that typically means like no money into the deal. If you're thinking that or if you're actually 0% down and the seller's paying broker commissions, that's a little different. I imagine there's going to be something on your deal that comes up as far as maintenance. As far as I know, I did this at first. I did not raise enough money and that is one of my biggest mistakes to date. Make sure you are like if there's deferred maintenance on these projects, please, please, please just raise extra capital, even that's in the form of a small loan. Depending on the size of a deal. That will save you so many headaches. Um, if you're doing inspections, when I first got started— I don't recommend doing this as an 18-year-old kid— I put my EMD and inspections on a credit card. Highly do not recommend doing that. I was 18 years old, had to have someone co-sign off the credit card with us. So wouldn't recommend doing it, but if there is a will, there's a way. Would love to hear, Dale, if you are thinking of doing— or you have a deal at seller financing, literally 0% interest— or if you're thinking of just doing a no money out of pocket deal. Those are quite a few different things. Class said nervous as well. I just know the first step is to find myself a deal. And that's, that's the first thing, Randy, even with you on this, I would just say for everybody on here hasn't gotten started yet. The order goes deal, debt, then equity. A lot of people get that confused and they often try to line up all their money beforehand. I see a lot of this with like kind of syndicators in the space. Oh, I'm raising money for a deal. What deal are you working on? They don't have a deal they're actually working on. So for you guys in here, it goes deal, debt, then equity. So we have a deal that could make sense. Like for in here right now, Clash is working on a deal right now. So we've got the deal, then we got to figure out the debt, what makes sense, and then we got to figure out the equity after that. Oh, Christian's here. Christian says hello from the Bahamas. Thanks for popping in, Christian. Looks like he's in a personal YouTube account. That is awesome. Thanks for popping in here. And then going back up here, so we're going deal debt, then equity. Like, going back to Dale's comment here, if we're going 0% down, make sure we have a deal first before we're actually just offering 0% down or just saying 0% down. Make sure you have an opportunity first and that the debt matches that. When I say that, it means like, hey, does the seller actually agree to 0% down on that property? And then, Clash, then you can figure out the money as the last step. Chiropractic Sunrise, I would love to hear who this is. I have an idea of 2 people it could be. Would love to hear a little bit more if you're in the mentorship. Um, Randy, yes, um, there are ways to do little money, little to no money down anywhere. So people often have a misconception online that you're gonna see a lot in ads, it says zero money, like 0% down real estate deals. That's horribly unrealistic. Those are out there, but more than anything, you're gonna see zero money out of pocket deals. And that is literally what Christian and I do on every single opportunity. Sometimes we'll invest as partners in our own opportunities, when we do have the money at those certain times for bigger down payments. But more than ever, you don't need to use your own money on these opportunities. The biggest thing, Randy, is there's more money out there than there are good deals to fund those opportunities. So if you can learn to control good deals, that is where you put yourself in a spot for success. And then going down to, uh, Paco— Paco, I apologize for butchering your name. Um, first time too, first deal to deal deep dive yesterday. That is awesome. But on this, I would often recommend anybody on here who is using a broker or you're going through a broker on a deal, please just have them fill out the LOI for you. I had this at the beginning with some bad brokers. They're like, oh, can you fill out the LOI and send it back to me? If they're not worth your time, if they won't write up an LOI for you, they're probably not worth your time. So the mistakes are totally fine. Mistake there, I would say just make the broker fill out the LOI next time. I still don't make— I don't like filling out my LOIs. I'll have people send me them. I'll take a look at it. I'll okay it. But I don't like building it myself. It's kind of a headache. Poor Christian suffering like he is. Yes, Christian is suffering in Atlantis in the Bahamas. What a hard and tragic life. And we're on Tyler Torres. How do you determine how much capital is needed to renovate? How to determine how much upside that will bring at refi? This is a great question, Tyler. What I would say— so first and foremost, if you're looking at a blind deal, so to speak, you maybe you have some photos of it, you have the address. You haven't seen interiors at all, you're first going to make sure in every contract you ever do that you need to have a feasibility period. That's when you go in and kind of get your head under the hood, so to speak. Even before that, you should be doing walkthroughs beforehand and actually going and seeing the property, looking through a few units, getting your idea around the project. Christian and I were on a contract, under contract, an ideal in Waco, Texas, about a year and a half ago. And we were down at the property. We had seen photos. Whoever did photographs of the property did a phenomenal job, knocked it out of the park because when we went down there, It did not photograph like it actually looks. It photographed 100 times better. So we're walking the property and there is like clear foundation issues, clear issues that we had not been shown in the photographs. So we actually had to back out of that deal. And that was a lesson for us to like, hey, we need you to walk this thing first. So make sure if you can walk it, walk it. If you can have somebody in the area for it, walk it for you, awesome. If not, at least do the best you possibly can on Google Maps, getting information from the broker. If the broker is half decent, they're going to know what's going on with the project. They're going to know what's going on with the deferred maintenance. They're going to be straight up and honest with you, especially if the product's been sitting on market for a number of years. There's a rare number of months, at least there's a reason it's not selling, and that deferred maintenance might be one. So I would just say, um, Tyler, biggest thing is contractor quotes. I'm working on a deal right now where I have a guy getting a quote on a down building for me where it didn't think we were going to include in the renovations. It's not a part of the active income on the property and looks like it needs to be renovated per lender standards. So I'm going— actually had a guy going out getting quotes for me today before we close project. Um, so yeah, and then as far as how to determine how much upside the project will bring at refi— this is another awesome question, by the way. If you guys can keep questions coming in, we'll get to all of them that are here. Um, how much upside the project will bring at refi— Tyler, the biggest thing is knowing your market and knowing your market well. And that comes down to market cap rate. A lot of people on the internet love to talk about, or brokers love to talk about, hey, you're buying at a 9 cap, you're buying at an 8 cap, you're buying at a 7 cap. Those numbers are all cool, they don't mean anything without the market cap rate. If you're in a 10-cap market, which is primarily very, very, very central— not central, very, very middle of nowhere markets, very tertiary to say the very least— the higher the cap rate. So the less desirable the location, the higher the cap rate. Christian and I both live in the DFW area, downtown Fort Worth and downtown Dallas, right next to TCU, right next to SMU, with the colleges in the area. Those cap rates, some bigger deals I've seen trade at high 3 caps. That just shows you the lower the cap rate, the more desirable those deals are. So as you go farther out, the cap rates get larger and larger. That means if you bought the property cash flow, what would it cash flow essentially? So if you're Tyler, if you're looking at a 4 cap market and you're buying and you're exiting your refis at a 7 cap, you're going to make some money, but you need to know that market cap rate and be doing your refinance math. I would say do the math for 75 to 80% LTV depending on the lender that you're working with. If it's a bigger deal and it's a little more distressed and you're Maybe even go down to 65% if it's a less desirable location, less desirable deal. Just make sure you're doing that math would be my biggest feedback on making sure the upside on the project. If you have any more questions about that, would love to answer anything that you have. Um, I don't know if I am still talking, if anybody can hear me. If you guys could let me know if you can hear me, that'd be very much appreciated. I'd rather not lose audio. Yeah, if you guys could let me know, that'd be awesome. And then in the mentorship, let's go in the right place. So what is the best way to find property? This is another awesome question. Best single best way to find property for you, for those of you guys who are just getting started, there are typically two ways most people find property. You could say maybe three, and that's awesome. Thank you for the update, Tyler. Appreciate that. Awesome. Appreciate you guys. And then so best way to find property. There's usually 3 ways, and that's wholesalers, brokers, and owners. People like to refer to owners as sellers. I wouldn't do that. Treat them as an owner. Don't treat them as a seller and start lowballing them. That's the biggest thing we want to avoid. Best way to find property is actually meeting with owners. I found that to be the single best strategy to date. That's when I picked up over— gosh, it was over about 150 units in less than a 2-year span by actually meeting with owners and actually learning their stories and learning what they wanted. I did a town outside of DFW called Stephenville, Texas. I had the advantage of needing to live in the market for a period of time. Jake, if you're still here, Jake lives there as well. I was living there, so I got to meet all of these owners very directly, very quickly, very efficiently. It starts with a simple cold call. Nobody likes cold calling. I still don't either. Nobody likes it. You need to go blast 500 cold calls a week. You just make a few a week, 5 to 10 phone calls a week, nothing more. When you're calling these owners, Randy, we're not calling saying, hey, I want to offer on your building at 123 West Main Street. You're going to call and ask about the building. More times than not, for everybody in here, they're going to tell you they're not selling. As soon as they tell you you're not selling, my rebuttal to that, that one Christian Osgood, I can't buy it even if I wanted to. Or good, I'm not buying. And if any, if anybody knows anything about sellers getting blasted by other people trying to buy their properties, that throws them off every single time. And that's when you get a chance to articulate what your goals are, who you are, For me, it was, hey, just moved to the market, trying to get my feet under me. I've got about 30 units to my name so far. I'm really looking to expand here, buying another 25 in here right now, looking for property. My whole goal for me was retiring my parents, which I'm still working towards. And if that's articulating your goal clearly, it actually builds a connection there. Now, don't get me wrong, you're still going to get some hangups and people telling you to get lost, for lack of a better term. But that's going to lead to more realistic owner relationships and actually building a connection with these people. Where if they don't sell you the deal, like the first guy I talked to actually sold me the deal. If somebody isn't going to sell you a deal, they're going to point you in the right direction. My next deal after that one was a guy. He had about 24-unit apartment complex, student housing, also a giant storage facility, which I passed on buying. One of his best friends in town was selling a property. He didn't want it. Nobody else knew about it. So he directed me to that deal. And that's the single best deal I've done to date. So those owner relationships, Randy, are how— the best way to absolutely find deals, without a doubt. And then Randy also asked what an LOI is. LOI means letter of intent to purchase, essentially. So it's not a binding contract like a purchase and sale agreement. It's a letter of intent that is non-binding that leaves out your purchase price, your financing intentions, typically your feasibility timeline, your closing timeline, and any other miscellaneous items that need to go into a purchase and sale contract that are important. But a lot of them are important, but the major points will be highlighted in that letter of intent. Besides pinging brokers, is there a resource with historic cap rate data that might be available? That's a great question. I think even better than brokers on the listing side, I found my best resource for market cap rates is my debt broker, which came a lot, lot later in my journey. In Multifamily Strategy, we can help you out finding market cap rates. We can talk to our in-house debt broker, we can refer you to a good debt broker. That's the easiest way I've seen to do it. I found looking up on Safari, it really spits out some random numbers, especially ChatGPT really has no idea what it's talking about most of the time. You could look up things, recent properties sold for if you have access to CoStar, access to a broker you like that has access to CoStar. Yeah, Rob, the long answer, longer, is either asking a debt broker is number one, or if you have a listing broker, I would go to them and just talk to them about, hey, like, what are they seeing on market cap rates typically? I would talk to multiple, especially if you're just getting started, so you make sure you're getting the proper information. Not, but not somebody telling you the wrong things. Are there certain places to look for properties that are for sale? Yes, Randy, I would look on LoopNet.com. I'd look on CREXi.com. Those are typically the biggest multifamily housing sites. There are other ways such as Realtor.com, Zillow.com. Those are single-family sites, but sometimes they actually have properties for sale in multifamily as well from typically smaller brokers or agents will list their properties on there because they don't know about the bigger sites. And don't know how to listen to bigger sites or get their information out there. So there's some great resources, Randy. Number one, though, if you are looking to get started, I would— no, no, no dumb questions here, Randy, at all. Please, no dumb questions whatsoever. I was in the same exact shoes as you less than 4 and a half years ago. I started— when I started working with Christian, joined his mentorship off the bat. That's how I learned everything. It was— it's Multifamily Strategy, multifamilystrategy.com. Helps walk you through A to Z exactly how to buy your own rentals in 6 months or less. Without that, I wouldn't have bought a single deal. I would not be at 189 units buying another 144 in any way or shape or form. Um, what are some major pitfalls or mistakes newbies need to know? This is a really good question. The number one mistake I made, uh, for everybody on here, when you are buying deals, raise extra money. Do not just raise the down payment and closing costs. Please raise extra money even if you aren't planning on doing a lot of renovations. Please raise— like, we're buying 144 units, we're raising an extra few hundred grand bare minimum because we know stuff's going to come up. We want to have a reserve. Even on the 76 we bought, we raised extra money because we know stuff is going to happen. Without a doubt, you're gonna have either have a mass— like, the example is mass exodus of tenants. On one of our properties, we had a rent bump, and about half the units had a rent bump, and we expected a few of them to leave. It was the lowest rented place in the city, and almost all of them we increased left. So we had a mass exodus, but thank goodness we had more money saved up to get through that project quicker and lease those units back out at a higher rate. So number one is major pitfalls is not raising enough money. Two is trying to do it alone. I tried to be rebellious when I first started with Christian and realized I was not making any progress. I need to just listen to what he was saying. And then I bought more units than I ever have, scaling up more aggressively than I ever have. The biggest thing, so raising up money, doing it alone, and not being, not being conservative with your underwriting. I was this way myself. I've seen so many other people do this. They just want to buy a deal so bad that they don't care if it's going to potentially lose money, if it's a giant risk, if they're underwriting completely off pro forma, yada yada yada. People just completely disregard that. Please do not disregard that. Please be more conservative than you need to be or that you think you should be. No deal is better than a bad deal any day of the week. Anybody who's gone through enough deals and struggled will 100% acknowledge they would rather have done no deal than a bad deal. What if it is listed with a broker? So this one, if a property is listed with a broker, I would by no means in any way, shape, or form circumvent that broker. There's— that is one of the easiest ways to piss brokers off, easiest ways to get under a seller's skin, is if that property is listed with a broker, go around and going around them to call the seller when the seller is contractually— has written up a contract with them to get a contractual agreement for them to list the property. The seller doesn't want to get calls. He doesn't want to hear from you. Just go through the broker. We have a broker script in Multifamily Strategy. There are like 4 to 5 questions that you need to know when you're asking brokers to determine if they're worth your time or if they're just not that good of a broker. You got a question. What's the culture shock like going from San Diego to Stephenville? Going from America's finest city wearing flip-flops and shorts every day to going to the cowboy capital of the world is exactly how it sounds. Going from 5 to 10-year-old kids wearing flip-flops, playing baseball, surfing, to seeing 5 to 10-year-old kids wearing full-on cowboy gear and being a cowboy or a bull rider was a bit of a shock for me. You guys, please keep the questions going. We got a few more here. We'll go until you guys stop asking. So we got 20 of you on here. For those of anybody joined late, Christian is currently out of country in the Bahamas. He's coming back today. So I'm filling in the live for him. If you guys have any questions, I'm 22, I've got 189 doors. Was Christian's third student ever. I'd love to help answer whatever you guys got. Tyler Torres said, you guys always buy value-add as long as it cash flows day one? And are you building a presentation as a pitch deck to show potential new equity partners? That's a great question on the value-add day one. It depends more— I hate some of the syndication metrics, but if you're gonna go raise large amounts of capital, syndication is never a bad way to do it. I often have a pitch deck. I never— on pitch decks I don't over-present. I think something that really turns people off is having a million pieces of text in a slide. Have some pictures, have a general idea of the project, make sure your math is correct. Cash flow day one— if you're cash flowing, Tyler, like I'm looking at a project right now that's $1.5 million in CapEx. Cash flow's dealt well day one. There's not an insane amount of upside on the back end of the project by any means. It really just needs a bunch of exterior work, which doesn't necessarily raise my rents at all a whole lot. Especially we're already at market rate. So for that, cash flow is well day one. We're closer to 10% than we are to 5% on that one, with upside on the back end, it gets double digits. It's cool when we're at 12% cash on cash and there's not that much of an equity bump on the back end of the project. It doesn't make that much sense. So I, uh, depends on the type of deal, but I would say cash flow day one no matter what, especially when you're first breaking into your first few deals. And how to raise more capital? That's a heck of a question. Biggest thing is just— I've given this advice to a few guys. One guy named Matt in Multifamily Strategy. I don't know if you're in here, Matt. Biggest piece of advice that I heard from Christian was just talking about what you're doing consistently. If you keep telling everybody about what you're working on, they're eventually going to have friends that want to invest on the capital raising side, or they know somebody who wants to sell a property. When somebody asks what you do, talk about you're working on multifamily, talk about your goals. Talk about what you're going through, asking them like, hey, do you know anybody in the business? Or, hey, anybody trying to get into real estate? Just asking those questions and putting yourself out there is a great way to go. I also— not all meetups are created equal by any way, shape, or form, but if you can find some good meetups that actually have some reputable people going to them, that's a great place to raise more capital. And then of course, Multifamily Strategies, a bunch of people who are looking to get into deals actively that I found are very eager to invest in good properties. Randy said, start scratch, hardly no money, trying to build something for family. That's admirable. You're trying to build something. Better late than never. I think a lot, a lot of people can relate to that. I luckily got started sooner than later. But on that note, Randy, I would just say you don't need a ton of money to get started. If you have a few thousand dollars, without a doubt you can get started. If you want to shoot, you can always message Christian on Instagram. We'd be happy to point you in the right direction. Again, multifamily strategy is how I made everything happen. It was thanks to Christian's mentorship and his community. I would not be at 189 crossing 400 units ideally by the end of next— 300 by the end of the year, 400 by the end of Q1. So no, I will be over 400 by the end of this deal. Sorry about that. What deal qualifies for agency debt? This is a really good question. Agency debt is typically through Fannie Mae or Freddie Mac. Agency debt, what they want to see is these— they're government-backed mortgage companies. They want to see very stable assets with a— with very strong operators. So typically you need to have the sponsors on the deal or the key principals, a.k.a. the people running the deal, need to have a net worth higher than the loan amount. So if you're getting a loan for $1 million, that's a little small for agency debt. I think their minimum actually is $1 million. You need to have a net worth of over $1 million. They want to see 90% plus occupancy for at least 90 days trailing. They're going to underwrite the heck out of you. They're going to like to the tune of like having a late payment on a credit card from when you were 18 years old, 4 years ago that you thought you canceled and that Bank of America didn't cancel. They're going to bring that up and ask what was this about? So anything and everything crazy that they can ask you about, they're going to ask you about. They're going to look under the hood more than you knew could be looked under the hood. But the benefit of this is the debt products are phenomenal. Last deal we did, 80% LTV. This deal where 70% LTV, our quote most recent I saw is about 5.25%. So you can get phenomenal products. And then when you eventually become a preferred borrower with Fannie Mae and you've completed a few projects, Fannie Mae, Freddie Mac, you can get rates that nobody else could possibly touch. So I hope that answers your question. It's on the sponsor side of qualification, and also the deal side has to be good enough. Was thinking of doing my wholesale operation, then getting started multifamily investing, would you recommend that? Um, absolutely not. Any deal worth wholesaling is going to be a deal worth buying. Not all that makes sense to you, but instead of making somebody else rich because of that deal— if you're assuming talking about wholesaling multifamily or commercial assets, 5+ units— if it's going to make for something, make sense for somebody else at 5+ units, why not just buy it yourself? You can charge assignment fees eventually. You start doing syndication, you can charge acquisition fees, bigger things like that where you actually get paid up front instead of just wholesaling. But I would recommend, um, Kat Owens, I would totally dive into multifamily off the bat. I would not worry about wholesaling and what that could look like. That is the last question I have currently. We're going to keep going until you guys stop and stop asking questions. I'll keep answering. Um, does anybody else have anything else? We could like talk agency debt, we talk debt products. We've been seeing a lot of crazy debt products lately, seen a lot of projects, some great rates on loan-to-cost products where they'll cover 80% loan to cost, so including down payment, all that stuff. We got Christian asking— Christian, thank you for tuning in from the Bahamas. What is my end goal? That's a really good question. First goal, retire the parents, financial freedom. End goal, don't have a unit count goal yet. Totally at 1,000 next year and we're going to keep going for that. But I definitely do not have A better end goal than that is just keep scaling up, keep buying more deals with you, and we'll keep taking over Texas is our biggest goal. So appreciate that kind of poke there, poking the bear a little bit. Does anybody else have anything question-wise, debt product, anything like that, whether it's creative financing, whether it's agency debt, whether it's talking about getting into wholesaling? Randy, if you're still here, talk about helping you get started with any of your own deals. Anybody has questions on experience? Or debt products or buying deals, any of that stuff. Clash, you're still here. Glad you're still here, man. Is it, is it unnecessary if I run pro forma tonight, text you or Christian Osgood tomorrow about it or wait until Tuesday? He's asking this because Tuesdays are multifamily strategies deal deep dive day where we go over to get your defined fund, negotiate your deals on that Zoom call. Clash, if the deal is that good on pro forma, You could shoot us a text about it. Christian's going to be traveling currently, so you could shoot either of us a text about it. But what I would do if I were you, if you're running pro forma numbers on a property, I would go ahead and see if you get actual financials sooner than later. And then that'll make the world of difference. I got pro forma numbers on a property where the expense ratio was 20%, which is incredibly low. It's actually ludicrous. Didn't make a lot of sense. I got actuals. They were 60% expense ratio. So For me, it was not worth my time to underwrite more until I got actual numbers. But I would go ahead and you're just going to start looking for deal number 1 and don't have overflow of deals. I would underwrite it. I would send the broker some feedback like, hey, here's what I'd be coming in at. I need actual numbers. I'm going to put in an offer. Good question. What is your thoughts? What's your opinion on the Morby Method? Basically, these guys own stuff going. Incredible investor, does a lot of smaller deals typically talks about. I just think that there's a lot of unnecessary steps, especially with sub-2 or Gator lending or that kind of stuff. Sub-2, if you're doing sub-2 on 5+ units, unfortunately banks don't like that. It's an incredible strategy, especially for things not like real estate— cars, planes, that kind of thing. It's an awesome strategy. Uh, BORB method, Gator lending is awesome for some people. Different strokes for different folks, I guess. But I found just buying multifamily, the simpler you can keep it, the easier it is to repeat and scale, is my personal opinion. Um, Awesome. I would just say, because I'm an investor, it would be the same. I would just say I would throw in an LOI. I would say, here's where I'm coming in at. I'm open to writing you an LOI. I'm not going to write a non-binding offer. Or if you are going to write an offer, make it completely contingent on getting actual financials. And in addition to that, make sure that you're— if this was me, Dylan, I would not be putting earnest money down until I got actual financials. And verified I wanted to keep the offer. That'd be a little bit more creative language on the legal side, which might cost a legal fee. But my biggest piece of advice was like, just throw in— just do not go PSA on that. I would just go LOI, ask them if that would be an issue. I doubt it would be. Would you ignore a deal with no financials that appears to be listed by a residential broker with just a flyer of the area? That actually might be a really interesting opportunity. Typically with residential brokers and agents, what you're going to see is they don't understand the commercial game as much, or really at all sometimes. And if you can do that, if you can find a broker that just has a flyer of the project, and you can go through the correct broker script that we use in multifamily strategy to actually get numbers on this project— because that might be the whole reason, Jay, that that project hasn't sold yet, is because it's a residential broker, they're not marketing the property properly, and it actually could be a good deal, it could be seller financed. So I would just call the broker, and ask to go through the broker scripting. I don't know if you're a multifamily strategy or not, but I would go through broker scripting and we're asking certain questions about the property, what they like about it, what they don't like about it. If it's been on the market for a while, you can even ask what's been the biggest thing, most difficult thing in moving this one, things like that. It has been a really big success model for me, and that might be the way to get that deal to make sense. So yeah, I know we got Dylan asking some questions. Christian popped in here. Jay's asking some questions. Randy, if you are still here, we would love to help you out, man. If you want to shoot Christian a DM, absolutely would love to have you in Multifamily Strategy. Shameless plug, that's what changed my life forever. So couldn't recommend enough for any of you guys who are just kind of looking to break through. Do we have anything else? Rob, Tyler, Randy, Chiropractic Sunrise, Dylan, does anybody have any other questions before we go ahead and wrap up here? I'll give you guys a few minutes, kind of put some in the chat, see if we have anything coming in. If any of you guys are joining late and trickling in, Christian Osgood is on his vacation, coming back from the Bahamas. I'm here answering questions for you guys about creative finance, debt, buying deals, what deals not to buy, how to underwrite, any of that stuff. Anybody's got anything else? Um, awesome. Dylan is running a pro forma. Dylan, you better put in an LOI on that pro forma. If it makes sense. If not, just tell the broker, just be honest with them. Give them honest feedback. That's something not a lot of buyers do. They'll just tell them it doesn't work or ghost them. Actually give them feedback on your offer. If they tell you, oh, that's ridiculous, it should make sense, probably not a good broker. If it is a good one, they're going to recognize and appreciate the feedback. So yeah, Jay, if you got anything else, we'd love to hear it, man. Tyler, if you got anything else, questions about, uh, Method about picking up deals, raising capital. Dale, if you got anything else. Randy. Rob is still here. Is there an average cap rate target on deals you're trying to put together? Cap rate is not the most important metric to look at in any way, shape, or form. It's great. Like I was talking about earlier, I don't know if you were here, Rob, is the best way to go is understanding your market cap rate, understanding how a deal compares to that. If a deal's cap rate is higher than your market cap rate, you're buying it for a better price. If a deal's cap rate is lower than your market cap rate day one, it is not worth as much as it— if your market cap rate's a 5 and you're buying into a 3 cap, you're overpaying. If a market cap rate's a 5, you're buying in an 8 cap, you're getting a good deal. Just make sure you factor in, hey, what is the cap rate on a stabilized project versus a day one project? It's more of an all-encompassing underwrite than just looking for straight cap rates. A lot of investors do that. It is not necessarily a recipe for success. It's a good indicator if you're overpaying or underpaying. For a property. Oscar Pena, other than comps, what do you advise to find expenses or true expenses? I would ask for P&L. So if you're— before you go under contract, you'll be looking for P&Ls, T-12s, any of that stuff that actually gives you some expenses. But sellers can still lie on these things. So when you are under contract and you're due diligence, this is why we look for bank statements so you can actually go through the numbers and verify, okay, this number actually hit the bank statement, this guy's not fudging it. Not lying about it. Any of that stuff is what I would recommend to you. But beforehand, I would just ask for— make sure you're asking for expenses, confirm with the broker if you're just getting started that they're actuals, not pro forma. Get a trailing 12. More financials, the better. If the property seems to be trending in the right direction, that's awesome. If it's trending in a worse direction, that might be the value-add opportunity. But just make sure you understand that. Given the cap rate compression we've seen the last few years, have we seen a reversion to the mean in the markets you're looking at? That's a good question. So actually, so on market cap rates, we've seen a little bit of expansion basically on that. So on acquisitions, we've seen a compression in markets. I've seen expansion in most markets. When it was 2021, cap rates in markets were incredibly low. When there's harder deals to come by, I've seen cap rates fluctuate a little bit. Markets that were a 3 cap became a 4, 4 became a 5, went up a little bit. So that's why just knowing what's going on in the market overall in the economy is important. You don't need to be a Wall Street expert or financial savant, just having an idea what's going on. I would say, but as far as reversion to the mean overall, I would say definitely I'm seeing better deals than ever than I've seen last 3, 4 years actually pop up that could warrant an offer, could make a lick of sense, and actually taking some of these down that do make a lot of sense. So I would say overall reversion to the mean has been a great thing. We've seen more deals than ever here lately that are making sense. We're throwing offers out left and right. Hey, just how quick can we take them down? The last thing I see, um, Randy mentioned, yes, you would love to start something. Only hold back having the capital when I live paycheck to paycheck. Randy, I'd message Christian on Instagram. Anybody else here looking to get started, whether it's paycheck to paycheck, you've got $10 million saved up, I would go ahead. I would message Christian about Get Started on Instagram, Christian Osgood. I would go ahead, shoot him a message, talk to him there. We'd love to help you out. Love to get started. That's the same way I did it. Thanks, Caleb. I would use bank statements, Schedule K, or other tax docs. I thought there was another way to find expenses. How's your real estate acquisition going? Yeah. In order to find expenses before due diligence, your best bet is T12 pro forma or not T12, excuse me, pro forma, T12 P&L, getting actual expenses on it, but verifying those when you are under contract is really important. Tax returns are great. We'll talk about this, then we'll go back to what I'm working on in, in what I'm doing on my deals. Are you factoring dropping population rates in your, in your choice of markets, i.e., less students going to college in the future? Just fewer people. So that depends on the college, Rob. I think overall in markets we're seeing like the office space, for example, we're seeing return to office, we're seeing returns to students going to school. I'm not the biggest fan of college, but colleges still seem to be incredibly high demand across the country. I don't see that changing anytime soon. What I'm seeing, for example, in Stephenville, Texas, population at Tarleton State is expected to be at 30,000 in 2030. It was less than 20,000 less than 5 years ago. There's already a housing crisis, multiple thousands of units behind for students. That's why we're continually buying there and continue buying housing for students is this isn't going to change. The university is bullish on expansion. So really depends on your market. I would say, yeah, some college towns are dangerous. If you're looking at, I don't know, Toledo University and, you know, who knows where, or some school that's not a big school that's growing. For Tarleton State, it's the second fastest growing school, actually. The fast-growing school in the A&M system, fast-growing school in the state of Texas, top 5 fast-growing nationally. So for that, I'm going to keep doubling down the college kids, but it's market dependent, um, 100%. Oscar Pena, we'll wrap up with this. How is my real estate acquisition going? What are Christian and I working on? Uh, Christian and I are currently buying a deal on Abilene, Texas, um, that we are syndicating. It's our second syndication. Other than that, we're just doubling down on growing markets in Texas. We both live in Texas. Texas is big enough. So for us, it's a competitive advantage. We both live here, we have the connections here, we're doubling down. So yeah, that's what that— we're taking 144-unit down. We should be closing early December or late November. Then we're going, uh, to buy a few more deals here, close them out Q1, also in Texas, uh, 50 to 150 units. So yeah, if anybody wants to hear more about those, you can shoot me a message on Instagram. That's caleb.homel or Christian Osgood on Instagram. And that's what we're working on. So appreciate you guys having me. I'll hold on for a second. We've dropped a little bit here as people start to hop off as we get towards the end of the day. If anybody has any other questions for me or about what Christian and I are working on, deals, population rate, what markets we like, what markets we're staying away from, any of that stuff, we'll be more than happy to answer here as we get wrapping up. Yeah, good question, Oscar. Great question, Rob. Randy, please shoot Christian a message on Instagram. Seriously, Christian Osgood— or not Christian Osgood, just Christian Osgood on Instagram. 100% shoot him a message. 100% be able to help you out. He's never— usually doesn't let money be the issue for people getting started. If there's a big enough goal, you know, well, there's a way. So yeah, give Oscar another second, Robin a second. You guys got anything else? If not, no worries. I'll let you guys type questions out though if you got them. If you're one of the two people that just hopped in here a little bit late, We were wrapping up a live. Christian is currently in the Bahamas on vacation. My name is Caleb Pomell. I'm taking over the live for the day. Anybody has anything else? We'll keep going. Give you guys another 30 seconds or so if anybody's got anything else. But if not, we will call it there. Appreciate you guys having me. If anybody has questions about deals, debt, equity, you name it, go ahead and shoot Christian or myself a message on Instagram. Give you guys about 10 more seconds here before I go ahead and wrap this up. Thanks for having me, Rob. I appreciate it. Appreciate you guys tuning in. Go ahead and shoot Christian a message on Instagram if you guys have anything, or myself. Love to answer if anything— got you guys got anything. Thanks.