Christian and Caleb - Multifamily live from TX !!

Oh, it wants us to do it this way. All right. Hello everyone, we're live and live from Texas. I'm Christian. Yeah, playing pickleball. There's the pickleball courts. Did some real stuff, stuff, stuff, stuff. Doing the real estate stuff, stuff today. Long day of travel. I'm down here in Texas with Caleb. Caleb, why am— well, I'm down here to check on my house we're building, but what did we do today with your portfolio?

I toured another 26-unit apartment complex I am currently under contract on.

26 units, Caleb, how many units will that put you at?

That will put me at 79, looking to break 100.

This year. 79 units, he's getting to 100 today. Maybe a shorter live because we are in fact in the field and we have as much battery as my phone has. So if you have questions, ask them. We're gonna talk a little bit about this deal, why Caleb's doing it, why I'm down here, and we're gonna have some fun today. So an addition, by the way, everyone joining here, it's Caleb's 21st birthday. So everyone on the live, wish him a happy birthday. Everyone who watches this today, it's January 10th, so best day of all time. If you catch the, the recording after this, go ahead and wish him a happy birthday. If you're here live let them know in the chat, show Caleb some love. All right, so let's talk, let's talk your 26-unit. So how far away is this from the 25-unit building that you just bought?

This is 1.5 miles away from the 25 I just bought. Dividend Dave, thank you.

There we go, Dividend Dave, always the first one to bring some good news to us. Thank you for, for diving in there, Dave. But yep, okay, so this is a mile and a half from your 25-plex. This puts you at 51 units in Stephenville. And how many units overall?

This puts me at 51 Stephenville, 79 overall.

So 21— and your birthday on 21, so really you put this all together while you were 20. Uh, 21 years old, 79 units. What is your goal personally for what you're gonna hit in 2024?

Bare minimum this year, I'm looking at 100. Ideally get to 125 by the end of the year, um, and only expand in Stephenville from here on out.

Okay, we talk a lot about this on this channel. So this is a good thing to talk about. Hyperlocality. Cody and I had a lot of efficiencies buying in Moses Lake. We control a lot of the market. We know what rents are. I have the best contractors. I have the best legal team, which isn't saying much because they still kind of suck over there. But I have the best players because we've operated in one location. I don't have to rebuild the wheel again and again and again. Caleb, you started all over Texas and investing out of state. Were there any inefficiencies or difficulties by being spread out in McAllen, the Houston. Yeah, how did that feel?

I mean, for sure it's kind of sporadic. Like, I'm not there, so I can't like drive down to the property. I'm not saying that's everything, you don't need to be at your properties all times, but it's kind of nice being able to drive there, check it out, know what the contractors are doing, being able to see the work, meet with them in person instead of just all over the phone and kind of trusting word of mouth. That was kind of the biggest thing with Stephenville. I can just be there, be in person, and get the best teams. All-nighter hider, I love that. Happy anniversary of birth. That it is.

You've made it, Caleb. By the way, if you guys haven't followed us on Instagram yet, we share a lot of the story there as often as we can. Caleb, where do people find you on Instagram?

Instagram, I'm @caleb.homel.

And by the way, I'm @christianosgood, so if you haven't yet, follow us over there. I post 2 videos on Instagram every single day, sharing the journey, sharing tips, and occasionally having fun Futurama-related memes. So join us there, we appreciate it. We're gonna share a lot more about this as you progress in your project. So on this 26-unit building, tell us a little bit about the bed-bath breakdown. What is the actual project? Is this fully stabilized?

What is it that—

what are you buying What are you buying it for and what are you hoping to get it to?

Yeah, so buying it for $1.6. Had inspection today, going over a little more of that. May actually— I don't like beating up on purchase price, learned that from Christian and Cody, but may actually try to retrade this one a little bit. Um, found some leaks, some mold and that stuff. The inspection, nothing crazy, but just some bigger renovations. But for the most part, it's tenants are half of rent where they should be. They're renting at $550 right now, market rents at least $1,000. Gonna shoot for $8,500 or $850. $8,500 would be nice per unit, but shooting for that. Um, minor cosmetic things, a little bit of mold, some flooring. That's kind of the the real big things here.

Okay, so you have— and I walked the units with you, we'll post some, uh, we'll post some pictures here on Instagram here shortly. Um, but you're looking at tile floors, generally pretty nice appliances. Uh, you probably update some of those ranges, but that's what I'm thinking.

There's a few ranges I'd like to update. Um, I mean, a few of the units are obviously older people. Um, got some hoarders. I think every complex has that. For the most part, it's pretty simple. You're probably looking about 550 square feet, 1 bed, 1 bath each unit. Super clean, simple operation. Laundry room on site. Um, paved parking, 3 roofs. Super nice buildings.

Yep, and that's basically what you're looking for. The exteriors are immaculate, uh, paved parking like you said looks really, really good, uh, appliances look generally good. We didn't see a lot of bugs. Um, so you're just doing these general walkthroughs, I'm like, okay, you have a mostly stable campus. You did mention rents before, uh, what are rents at today? Where do they need to be by the end of the year?

Yeah, um, rents today are all at $550. Out of the 26 units, I have 21 people on month-to-month, so immediate upside there. On my other campus in Steamboat, I actually have a waiting list. So picking up 21 more units in the same town is going to be huge. Or 26 more units in the same town is going to be huge because I'm just going to go, hey, I've no vacancy here, but I've got vacancy here after I start raising rents, getting those people out. We're going to local housing authorities to get that up end of year. Gosh, as many people at $850 as humanly possible, closer to $1,000 if we can get there.

Let's see. Now that's going to be a great place to be. So the way that it's written right now at this price point, does it cash flow day one or do you need those rent bumps to get the cash flow?

Cash flow? I'm cash flowing day one. It's more towards break-even, not a huge spread. I'm pretty much buying at market rate and pretty much buying value of what the property is today. 1.6, maybe I go down to 1.5 or 1.55 eventually before we close, but it's worth about there day one. And then after I get those rents up, I'll be worth closer to 3, if not 3.2.

Perfect. And in this one says, where do you find your lenders? Lenders are the sellers' transaction. Uh, they—

yeah, it turns out seller financing is not new. Yes, everything used to be traded.

However, interestingly, on this deal, you've done 4 seller finance deals.

This is actually the first bank project I am doing. When not seller financing, it's too good of a deal to pass up. So this is my first bank deal. I am working with a local bank that literally is a mile from my other campus, 2.5 miles from this one, familiar with the deal, knows the guy who owns it. He's super familiar with even the units. He's even seen some of them. So the lender is pretty comfortable.

We're working through that process right now, which by the way is a great piece of advice. If you are finding a— you found a building, it's bank financing, for banks you have to win on price, which I you did on this one. If you have a deal that is bankable, it is a good price, it is a fairly stable asset, you can come into these. And the ones you're looking for are going to be local credit unions and banks. If you don't have one locally that wants to lend, go regional. But the more local you are to the area, a lot of banks will actually have in their charter that they have to place X amount of money back into their community. So you're looking for these small local regional banks, of course, 2 miles from your property on a smaller bank. That is exactly what you are looking to do, and those are typically where you get the higher loan-to-values. I'm curious on this one. Is this— are they looking 70, 80, 90? What are they looking at for a loan-to-value?

LTV on this one, we're actually looking at 80, 80/20 LTV on this one. Guy's super comfortable with the deal, super comfortable with everything, so that's kind of what we're looking at here.

I mean, eventually—

I mean, final underwriting, you never trust a lender till the deal's closed, so maybe it goes to a 75/25, but we're looking 80/20 day one on initial underwriting.

There we go. Okay, so you have to— so you found the deal, you found the debt, which is bank debt, so you have that. Um, and then is it going to be an equity partner that comes in to fund the rest of this, or are you taking additional debt, or will the bank let you do that?

Gosh, so I kind of up in the air how I'm doing that. I'm talking with the capital partner right now. We're thinking, um, liquid enough to do the project, it's just how we want to do it. Are we going to lend half to me? Are they going to come as full equity partner? How are we going to do the split? I'm pretty open to structures. I'm not super one-size-fits-all. I think every deal is unique. So I'm kind of waiting on them getting back with me for some stuff, some other docs. So once we know that, I'll have some more clarity there. But preferably, I mean, I want— I would prefer lending part of it and then them having part of it themselves is kind of the structure I would prefer. But again, I'm not super stingy with that.

All right, well, there's 3 parts to every deal. There's the deal, the debt, the equity. They always go in that order, and it sounds like you have the first 2 figured out. On to the last step, and then you're gonna have a closed deal. Inspection, it looks like it went really well.

Yeah, there was one— there was that one unit where I had the mold and I need to fix, and there's some some stuff with, um, the bathroom fans that's pretty easy to fix, but that's kind of the biggest thing. And then next we had a question. So the seller finances 100% of the deal? Not typically. I mean, I don't really see that seller financing. I know you're working on a deal with 100— what, 120% financing?

Uh, we are using hard money. Yeah, talk about win on price. Cody and I are working on a 33-unit in Washington State, uh, that's gonna have about— it came down a little bit. I think it'll be closer to like 115% financing. Um, which is fantastic. We're gonna have a lot more money than we originally thought we would to get started. Um, we will put no money down. It is all financed. It is hard money. It's an expensive rate. The property will close to break even. Uh, we have to rent a few units very quickly now. We, because we overfunded it, we have money in the account to do the renovations and service and to service the debt. So we raised money to buy the time so that by the time any of our own money comes into play, we will already be cash flowing. We will buy this property and get it cash flowing without putting any of our own money into the deal. Is this exactly what you want to do on every deal? No. And if this is your first deal, that structure is off limits. If we failed the project, we can float the negative cash flow. If we don't lease a single unit, we have a portfolio that will pay for it for us. That is the rules. You have to build cash flow. You cannot go negative cash flow. I'm gonna see if we have any other questions. Otherwise, awesome shirt.

Can't let you get close.

There we go. Can't let you get close, which is appropriate for pickleball because we're gonna dominate and, uh, Caleb's not gonna come over and snipe all my shots.

I probably will.

Can't let you get close.

Uh, what we got? Seller finances, terms are negotiable on All Nighter Hider. Always pretty much on the money. The owner finance deal, what was the terms? Uh, neither of these deals were owner finance, both bank and hard money.

Yeah. We do a lot of owner financing.

It's weird for us.

Yeah, well, here's what— here's why we like owner financing so much, and I'm open to doing bank, but, um, there's a couple reasons. One, right now where the market's at, uh, prices came down a little bit, especially on commercial multifamily. Rates came up, which means, uh, it's really hard to lend because people don't want to sell at a lower price than they were just able to. But your terms with the bank are not the same, so it's harder for properties to trade. In seller financing, you can get creative on the terms and match them to the price that someone wants. Which has been a huge opportunity, especially over the last few years. As we're doing the bank deals, the other thing is you have a lot more hoops to jump through to close the property.

I already hate this. Oh yeah, I already can't stand— you've done refis before, I've never worked with the bank, I already can't stand this.

Yeah, banks, uh, thank you.

Whoever said that, I can't see. That was Candace. Candace, appreciate you.

Yep, Candace wishes you a happy birthday. Everyone who's joined lately, this is Caleb's 21st birthday, which is why I'm down here hanging out with him, walking his new— or soon to be new property. Uh, really, really fun. Well, what I was going to say on the banks really quick, um, it's a lot more effort to close a bank deal, and nothing's as sure as seller financing if you negotiate your debt product up front.

Yeah, it's— there's— I mean, there's so much uncertainty, right? I mean, original quote was at 7.5, I'm already coming down towards 7 on my rate, could go down as low as hopefully by close 6.5. I have no idea. And it's like with a local credit union, it could even come down even lower. I have no idea, kind of up in the air.

So yeah, so you always want to be on top of that, um, when you go to refinance Well, the one thing I like about the bank project, you close with seller financing, it's a fairly easy close. From there, you usually have, like, say you only did a 5-year note, you did midterm debt. I have 5 years to get through the bank underwriting process as opposed to 60 days and it has to work. Let's own the property first. Let's get it cash flowing. Let's get control of the building. And then you have all this time to work on the bank debt. It's much more comfortable. That's— I love acquiring with seller financing for that reason. Um, let's see here from the Build-a-Bunch. A note for mold after cleaning up and removing as much as possible, uh, Bin-Bi-Zinsser or Kilz works great as paint primer. Yep. Ozone works well. And yeah, we use Kilz in our portfolio on everything. That is the, uh, you have a mold problem, uh, clean it up, fix whatever's causing the mold. That's the main thing. There's usually water somewhere.

That's typically why mold is present.

Yep. And then, and then kill it with kills.

Let's wrap this up and go play some more pickleball is what I'm thinking.

And we will do that pretty soon. You got a couple more happy birthdays.

Appreciate you guys.

A bunch more. Oh, let's see here. Connor's working on a 12-unit and trying to—

Connor's the man.

Oh dude, the Hommel hack. We talk about this every time you go live. I feel like it's still appropriate. It is your branded move. Okay. So, I'm going to tell the story really quick. When we got started, Cody and my first deal ever together, it did— it would not cash flow day 1 unless we got lower payments and scaled up to the monthly payments that the sellers wanted. So, we got a lower interest rate.

Lame.

Yeah. Got a lower interest rate for 6 months. Well, actually it was less principal payment in the mortgage, but we had lower payments for 6 months and then stepped it up after we got the property where I could service the note. Caleb took it to a new level. This is on— first time you did this on your 10-plex, right?

Yep.

Okay, tell them what the numbers were and why you did this.

Yeah, so basically I was gonna be breakeven cash flow. There was a lot of renovation, or decent amount of renovations that need to be done. I had $300, so I was pretty much like, I can't do lower payments 'Um, how about we just do no payments?' Um, offered it to the seller. Seller jumped at the opportunity, which I have no idea why. Uh, I mean, I do know why. He got his rate, he got his price, he got us down. So I kind of threw that in there. And $30 grand— that probably about $36 grand that I had from that was life-saving. Use that for renovations. And Christian should have done that on his first deal.

That is a fact. I probably should have. And, uh, yeah, Cody and I have used the Home Will Happen hack on a hotel conversion. That was my first Humble Hack. We only got 3 months of no payments, but it was still like— that got it.

Not good enough.

We needed the 3 months. We really did. It's a hotel conversion, so we had to kick everyone out. We dropped income to zero. We're leasing up. We don't have as many units leased as we wanted to at this point, but we did get legitimate leases and income going. We finished a lot of the project. It would have been hard to do without the negative cash flow. Right now we're sitting right at about breakeven. Every lease now is profitability, which is a good place to be. Um, let's see if we have anything else in here. We will, uh, get rolling.

Oh, uh, Nider Hider, the great suggestion again.

Yep, vinegar to clean mold. He likes Ben. We love Kills. Exactly right. Yeah, any of these, uh, any of these primers, don't leave your roller in it. Same goes with paint. Clean your stuff, it'll all last longer. And it looks like that's it for our quick 15-minute live from Texas. If you haven't yet, again, we post the entire adventure 2 times a day on Instagram, or at least I do. So I'm @ChristianOsgood. Give it a follow. I promise I'm gonna make it worth Caleb can be found at Caleb.Hommel.

Gonna play some pickleball.

Let's go pickle. See you guys soon.