Cody And Christian AND CALEB - Multifamily Strategy is going live!

Because there's 3 of us on the thing. And like that, we're live. This hat is casting an odd shadow.

There we are.

Welcome back to the channel. I'm Christian. This is Cody. This is Caleb, who just keeps showing up. What the heck, dude?

Sorry.

Where do you live now?

Moving to Texas, but still San Diego for now.

Okay. Where are you gonna live?

Stephenville, Texas, outside of Fort Worth.

Why that specifically?

I don't know, my dad just bought some random 25-unit apartment building down there and we live on site managing the whole thing.

You buy it seller finance?

It's a dumb question, but yes.

How much money do you put down out of pocket?

A whopping zero.

That's in budget.

Turns out that works.

Yep. For those watching, that is an affordable metric. And for those watching, I believe there's only one person watching right now, and it's us. For whoever you are, it's a good chance either All Nighter Hider or Dividend Dave. We'll find out in the comments section below. Uh, but yeah, today we're gonna be talking a little bit. We shared about Caleb's deal on Monday briefly on the channel. Um, so if you guys want to get all the details there, uh, check that out. But the big punchline is his capital fell apart and he raised his capital on— let's see, you closed on Friday. What day did you raise your money?

Uh, technically Friday at 1 AM.

Uh, Caleb landed in a different state to close the deal with $0 available for the deal, and he closed it. I did.

It was not fun, but I did. Well, closing was fun, but the raise wasn't fun.

So how did you fund it?

So I was obviously going to do this equity, but that short of time frame, I couldn't turn around and have an operating agreement drafted for that, and let alone 6 hours at 1 AM. So doing it as a loan, then transferring that to equity, but then I have a 90-day window to do that.

Okay, now you're 20 years old. Why would someone do that for a 20-year-old? Just like, hey, you know, we don't really have documents, but can you just send me a bunch of money and we'll turn this into equity?

That's from relationships. When I started out, I mean, you guys talk about all the time. We were talking about this too. I was going the broker route, Cody, and you kept saying beat my head against the wall, beat my head against the wall. Finally realized you guys might have been right.

So this might have been—

you guys were right. That's how I got the deal. And the same thing, how I landed the money in for the deal. It's just all through relationships, not being transactional at all.

Dude, that's absolutely fantastic. So everyone who says that you can't do this, you can't do it when you're young, you can't do it if you don't have family money, and all the other excuses that we see or, hey, you guys are a bunch of scammers. I'm just thinking like the most common highlight reel of the comment section.

Rich uncle.

Yeah, yeah, family's money, rich uncle, daddy's money. For all those who say all those, I didn't have that, Cody didn't have that, Caleb didn't have that.

Would have helped.

We are all closing deals. We are all building the relationships. None of those things matter. What matters is the deal and then lining up a debt product where it cash flows, getting that in long-term fixed rate debt so that your variables don't change. And I believe that is all the steps.

Those are the steps.

It's not that hard. It is a lot of work, as Caleb knows, as we know. It's a ton of work, but the reward's there, and this is something that anyone can do. So that is my main message for today. What we'll do here—

I think we got 7 in.

It lags a little bit. We have more than 7, but—

Less than 700.

Less than 700 people. If you guys want to get this kicked off for us though, get a few comments in the comment section. I'm going to answer a couple questions I saw this week on the YouTube channel. Channel, and then we will answer questions until the questions stop. That is the game plan. So, um, oh yeah, and by the way, for the few of you who are watching, hit that like button so other people think this is an interesting, uh, interesting channel. I will check the comments right here below. We're on my phone again today because I landed about 35-ish minutes ago and we are already here. Let's see here. So we got a congrats to Caleb, by the way. They love the story behind it.

Thanks, Zach.

Appreciate it. I think that's—

yeah, it says Zach. Yeah. Uh, so one of the questions that I saw, this is in response to our post on, uh, Monday about your closing your deal.

How do you feel about Texas taxes?

They're high for property, zero income tax.

So everything's bigger over there.

That it is. Every—

everything is bigger except the income tax.

Oh, for everyone who's wondering how to calculate taxes in your area, people have been asking for a cheat code. So what I've been doing is I just look at comps in the area, uh, once taxes go up, which is usually a few months after the deal closes. But once I see a tax increase, I just see what percentage of the purchase price that was, and I kind of get a feel. Uh, turns out Zillow already does that for you. If you go to any house in your area on Zillow, it uses their algorithm to estimate what the tax will be, and it's actually a fantastic number. So for Texas, I've been using 1.8. Zillow uses 1.77. They exactly match what I already do.

Wow.

If you go into the estimated mortgage thing on Zillow, you can find out exactly what your taxes are likely going to go to. Um, that's interesting. Yeah, absolute cheat code for your house. Yep, that's what I'm using for my house, putting in that offer on my Texas house. I should be signing that tomorrow, but it's an automatic yes, so that is happening.

Someone asked, can you use seller financing to buy a house instead of a traditional mortgage?

Well, I am using a traditional mortgage, however You absolutely can. It's less common in single-family because seller financing is a little bit more sophisticated than, hey, I'm just going to sell this and walk away with a bunch of money. Where you typically find it in single-family is on the larger houses. If you're in those multi-million dollar houses, all of a sudden those are people with money. They don't usually need large cash injections, usually. And the tax ramifications are more significant when you're selling a multi-million dollar property. So seller financing for multiple reasons. If you're going for a bigger, fancier house, you may have a better chance of getting creative terms than if you're buying a starter home or a, you know, a run-of-the-mill house.

Christian, how did you get enough money for the down payment on your first house?

Years of work.

You calling condo or the house?

Um, well, let's, uh, I'll do a quick run through on both. Uh, condo, my wife had saved up with 3 years of teaching preschool, and at the time my fiancée and I had saved up over the first 2 years of my career enough money to buy a house. We were dumb and we did a 20-year fixed rate mortgage because we were told, hey, you'll pay it off faster. Don't do that. Protect your cash flow. That being said, I did that through working a sales job in conjunction with my wife working a standard 9 to 5. My second house, I had converted that condo into a rental. We bought another house 5% down on a 30-year fixed-rate mortgage. And that was done another 3 years into my career. So we saved for it. I held the condo, rented it for a year, decided I hate single-family rentals, and sold that, which is what I used to remodel the house that I live in today. That is my whole backstory for where the money came from.

Caleb, how did you fund earnest money on your first deal?

That was off a credit card.

How did you do that?

Um, that was tied to someone else's credit that I leveraged. We paid back after closing.

And was that a family member? Um, that was. Okay, so that is—

so you took a cash advance against—

actually, it was not my family.

Yeah, it was a friend's family member.

Friend's family member.

Okay, you guys took us— what was it, 7 grand?

$8,000 on the credit card.

And what was your plan if it didn't go through and you lost it?

Whole lot of DoorDash.

Back in the DoorDash days.

I think you'd make— you make that between 2 people. You can do that off DoorDash in a month.

Of everyone in our mentorship, by the way, Caleb is the only one who's ever used a credit card to close the deal. I know people do that, but, uh, you're the only one in our, our immediate circle who has gone the credit card route.

And look at you now, 53 units at $20,000.

If you're going to do that, you need to absolutely believe in your deal. And you did, and you closed it, and it worked out okay. But that is not the preferred method.

Not best practice at all.

But it is a method. There's a certain point on deals, and it sounds like you came to that on this last one, where you're like, I have no money. It's close day. There's a certain point on deals where the decision has to be made. What is it gonna take to get this deal done?

And that was how the 38-plex was for us.

Yes, it was.

We did not have it funded until the day of closing.

Yup, and we had, yeah, we didn't get the, We were close on the end of the funding. We ended up, what we actually did on that is I had my last $80,000, 'cause I had just finished my flip. I had my last money. We had an investor lined up and he went, "Oh wait, I didn't realize that we had to be liquid on that day. I don't have the money until like 2 months from now." So they refunded me later, which then got rolled into another deal. I had to come up with every last penny I had to close that deal, and that's, that's how we closed our deal. So sometimes you get to game time, the money's supposed to be there, it's not there, you figure it out. Credit card, phone a friend, phone a friend's family member, put it on their credit card. Whatever it takes to get the deal closed.

Enrique said that he's got an established history in sales and is asking for a job. You want to chat with Caleb. Kayla has a company for that. Also, we had a question in YouTube that the investor put down 100% of the down payment and wanted equity for the property. How much do they get? To which—

you're talking about my deal?

They got 49%.

Yeah, that was stipulation of the seller is I needed a 51% controlling interest in the property.

To which they said, that's interesting, you get 51% of the property, you didn't put any money down. Never heard of anybody ever wanting to do that.

Wow, you should look at our deals.

Yeah, but that stipulation, the seller, I had a 51% controlling interest of the property.

So Cody and my second deal together, we have 66% of the property, um, and put no money down. Uh, 6 side-by-side units. Not nearly as impressive as your 25 side-by-side units because those are all fourplexes. We got 3 duplexes. Caleb, oh, that's pretty cool. So we got 6.

Caleb just wants to one-up us.

I'm trying.

That's a—

you're doing a pretty good job.

Beautiful campus. I had a, I had a chance to swing by that property while I was down in Texas to check out what Caleb did. It is phenomenal. Excellent purchase. I appreciate it. I am worried about that river and flooding, um, but other than that, it hasn't done in the past, so we will see.

It's, it's— yeah, I mean, there was enough room for that to go out.

Oh yeah, that wasn't Enrique, that's Enigma. I tried my best to read it.

Close, uh, close.

Sunny out, we're using it.

But Enigma, really quick, if, uh, I do know that you are expanding because you have sales reps that he actually assigned to our account because we use, uh, Caleb's company now. Um, if anyone is looking for a sales job, do you have open positions? I'm just curious.

Coming up there will be.

That sounds like a yes. Reach out to Caleb. He's @caleb.hommel on Instagram.

I might just try to buy them. I'm gonna kill Paul the guy again.

Do it. Alright, from Kevin. Is interest only preferred for money borrowed for a down payment?

Yes. Yes. Why is that, Cody?

Keeps it simple and it helps you maximize cash flow.

Now, what you can't do when you do interest only is say, "Hey, I have a ton of cash flow. I'm not gonna go buy the sports car." That'd be stupid. The cool thing about amortized debt is it forces you to pay down your mortgages. What we like about interest only is that if you save that to pay down your mortgages or repair your properties, you have flexibility on what property you direct that at and where where in your debt stack that capital is directed. Just remember, don't take that capital out of the property because now all of a sudden if you're just paying yourself, uh, you are playing with fire and pulling capital out of your LLC.

Stupid on steroids.

Yes sir.

What are the 3 hardest lessons you've learned in seller finance?

3 hardest lessons in seller finance or just real estate?

We're going to answer that with real estate because seller finance is just a debt product.

Yeah, yeah. My one thing, I'll start with the seller finance one. Uh, when you lend with private people, it is much easier to close the deal. And private individuals have, like, on one hand they're easy to work with, on the other hand, when they're not easy to work with, it's been an absolute pain. We've only had that happen 2 times where the individual has been a pain, but the frustrations are different than that of going through a bank because they are not professionals. It is much more emotional for people who have sold the property or owned the property. And we have had two parties in the past who did not do a great job of reading or understanding contracts in the way that a bank would. That's, uh, number one for me directly on seller finance. Uh, real estate in general, Caleb, you choose one. Cody, you choose one.

Um, biggest one for me, everything takes longer than you'd expect. That was probably the biggest thing at the beginning. Everything does take longer. You're like, oh, on paper it'll go X, Y, and Z and this fast, and it takes a lot longer than you usually expect.

I found 3 times longer and cost 3 times as much is usually a pretty good indicator of how it will pan out for new people starting in real estate.

And the biggest lesson that we learned in our portfolio is you just have to knock out one unit at a time. We tried renovating all of our units at once and none of them got done and we blew all money. So that was the hardest lesson because we went from cash flow— did it overheat? Nope. And we're back.

Welcome back, everyone.

But our hardest lesson was definitely when we went negative cash flow, $25,000 a month. And, uh, that happened because we didn't knock out units one at a time. We tried to renovate everything. We ended up blowing through our— all of our cash, and we didn't have anything fixed. Which was really tough. So then we had to go back and do units one at a time so we could actually get them leased, get the income coming back in to fix the rest of our portfolio.

If you're going back and doing that today, would you still go one at a time or do you maybe go two or three at a time or how would you take it down?

I would have each of the contracting teams work at one unit at a time and then move them on to the next units.

Yes. Currently the way that we're set up, we have at any given time at least two teams because some of our contractors have multiple teams. But realistically, you don't want them working on a bunch of units. The other thing that we did is we had less qualified contract— we did the wrong end of the spectrum both ways. We had less qualified people than we should have doing a lot of the work, and some of the work we had contractors who were way expensive with way too nice finishes. And both of those were expensive mistakes. We had units that weren't getting done or units that were getting absolutely overdone. Both cost a lot of money.

Another mistake we made was trying to renovate too quickly, wanting to do everything at once. That's a big mistake for investors. If you renovate too quickly, you get rid of all your cash, you have no reserves. It's much better to lease it out at a much lower rent, get it leased, get the income coming in, and then doing it over a period of time rather than trying to do the whole property at once.

We call that stabilizing before optimizing, uh, and there's two types of most common types of investor that you see when they enter real estate. Either the slumlord, where they don't fix up anything and they go, hey, uh, this is a passive investment, that means I don't do anything, which is horrible. Or you have the landlords, which we tend to err towards, where it's like, oh my gosh, imagine what it will be and how much the people will appreciate it when it has a new roof and volleyball courts and new siding. Pickleball, yeah, pickleball courts, pickleball courts, of course. Uh, but The over-improver and the under-improver are two of the biggest mistakes you can make early on in your career, and they're very, very common. There is actually a balance between what do we need to make this a nice place to live, a safe place to live, and a stable place to live, and then what can we do in the future when the property is optimized to take it to the next level. But it is not a I'm gonna fix all the problems in the city and every property right now today. That is irresponsible.

It would be so fun to put pickleball and, uh, not a volleyball court, but a tennis court on the back of Cascade.

That would be phenomenal. I would love to do that.

We just needed to make more money.

Yes.

From Keith, suggestion on how to cash flow monthly using a HELOC of $100,000 via multifamily. How much should I cash flow?

Need more pieces on that.

It does, it does depend on your overall goal. If you're just, if you're going just for cash flow, not equity growth, I mean, you're going to want obviously a higher number there. You can cash flow 20%, that would be phenomenal. If you can cash flow 10%, that could be fine for you. But it depends on what you're trying to do with the money. If you have a goal, say you're trying to get to $20,000 a month cash flow, you're going to need to multiply that money a few times before you can actually get enough cash flow to do anything with that. So depends very much on your target. How we've invested most frequently You buy a few properties. This is the most effective version I've seen. Buy a few properties that cash flow really well, and then you can buy a project with a ton of upside that may not have as much cash flow. If those properties can support that bigger project with more upside, you can get the big equity growth piece without going cash flow negative.

Now I'll give you another example. Like, we're doing a deal right now over in Kentucky. We should be going mutual on it this weekend, next day or two. But, uh, $90,000 down It's 32 units and the mortgage is only $3,000 a month. It's seller financed, low down, very low interest. If you put $90,000 down on that, your HELOC payment could be at 20% a year and it's still going to cash flow thousands of dollars a month. So if you get a low enough down payment to where you're only borrowing really expensive money for a very small portion of that deal, then you can go buy a lot of real estate and you can cash flow a lot of money.

By the way, if you guys want to do more, uh, more of these questions in a live setting, we have officially set our date for the next Robin Hood Village Resort meetup. We'd love to have everyone from the YouTube channel there. So if you guys would like to attend that, that is going to be on— the main event is November 11th. That is, I believe, the second Saturday of the month. However, if you book a cabin there, the 10th, we have a huge opening party. We're gonna be across the street at Canale, that is all on us. You get a cabin for 2 nights, hot tubs, the whole 9 yards. You have the event and then we'll see you guys, uh, checked out on Sunday. So plan the weekend if you guys want to spend time with us. It's going to be phenomenal.

And then last thing that someone put in the comments— awesome, thank you— what should the cash flow be on that Kentucky deal? Well, we'll bring in about $16,000 a month. We have about $5,000 a month in operating expenses, which brings us down to an $11,000 net. On that deal, and our mortgage is $3,000. So fully stabilized, it would cash flow about $8,000 a month on $90,000 down, which is over 100% cash on cash per year.

And quickly, for my sanity, um, would either one of you like to join the YouTube video on your phone so we can read, uh, the questions from this one? Or is that where we're already at?

That's where I'm at.

You're already at it? Just read them.

Oh, you're not reading them from there.

Oh, I thought you were reading them off the, uh, the, the prior comments. Oh, perfect. Okay, we're on it. I was like, wow, we got a lot of good questions in backlog. This is fantastic. No, I'm just tired and just got off the plane.

Do you have any advice for face-to-face networking? Face-to-face? How to start a convo? How to stand out?

Uh, have extreme confidence. That is the biggest thing. Even when you're not feeling confident, uh, that's the number one thing is people just like being around people on mission. If you know what you're trying to do, you've written down, hey, here's my goal, this is why it's important to me, and you're going to the meeting, you don't have to know everything, and you can tell people that you don't know everything, but just be really, really confident. That is massively different than almost everyone I talk to who is nervous about having their first few meetings. It's the guys who come in— guys and gals who come in and just confidently tell me, hey, this is what I'm all about, what I'm trying to do. Uh, that is the biggest difference maker to me. Yep, yep, yep, yep, yep, yep.

Check. From Keith, they said, uh, thanks guys, just signed up for your course, super stoked.

Awesome.

He's the man, Keith.

You're the man.

Welcome, Keith. Good to see you.

Also, if anybody else wants to be the man or the woman, then multifamilystrategy.com. Check it out. And that's it for questions.

All right, we'll give everyone the obligatory few minutes because I know there's a little bit of lag here, but we'll just call this a last call for questions. Good to see everyone. We'll be back to our normal schedule. I know we took a few weeks off, um, we went live last week. We're gonna be back rolling these every single week. It's gonna be at 3 o'clock Pacific time on Wednesday. So you guys have questions, you want to learn real estate, hop in and we will be here.

All right, our last question: when you debt hammer, doesn't that upset the seller because they wanted long-term monthly payments? Some do, some don't. Some want the seller— some want 3 years of payment, some are 5, some want 1, 2. We opt to negotiate for longer though. Yep.

And that's a good way to prioritize which ones you're going to pay off first. We love long-term balloons. Sometimes the seller does not want a long-term balloon, which means that's going to be one of the first properties in our debt stack that we either pay off or have to refinance. And so, uh, the big thing there is stagger your balloons. Don't give yourself a whole bunch of 3-year balloons because then, you know, if you have millions and millions of dollars due at the exact same time, you may have trouble reaching that. What we always opt to do is let's get some long-term debt as long as we can, but when you start paying stuff off, look at your options versus your obligations. If I have some big obligations, that's probably gonna be the first thing I start allocating capital to.

Yep. Yeah. Alrighty, well, Enigma said they messaged Caleb, and I think that's a wrap.

That's a wrap. Thank you for joining today. If you guys have additional questions, feel free to post in the comments or hit me directly at Christian Osgood on Instagram or at Doing Cody Things. If you guys have questions for Caleb, at Caleb.Hommel. That is Hommel with two, not one, but two M's. Wow.