Cody And Christian - Multifamily Strategy is live!

We're both in frame. Hello and welcome back to the channel, everyone. We are live again. It's Wednesday, just after 3, and we go live every Wednesday at 3. So here we go.

Except for last Wednesday.

Except for last Wednesday, which I made up for on Friday, and we had a fantastic live. If you haven't seen that episode yet, check it out. Um, I always like to share things real time. I'm gonna put the camera further back so you guys can see us all a little better. Um, but, uh, One of the conversations we just had today was doing the wrong deal or doing a deal that's too big for you. Now we are huge advocates for doing bigger deals. In fact, we absolutely love doing larger deals.

Yeah, skip the single-family house.

Yep, and you can skip the duplexes and the fourplexes. Cody and I have, what, 11 of them now between the two of us?

Yeah, I got a lot of them.

We have a lot of duplexes and triplexes, but that's not what we're going after. We usually pick them up when they're next to bigger stuff that we already own.

This individual, they had bought about 60 rentals in the past and they'd sold down, they upped their cash position. They happened to be looking at a 60-unit, but the difference was instead of $50,000 a door, it was over $200,000 a door. That's a big difference.

That is an extremely sizable difference.

It was big enough to completely wipe them out.

And our rules, I think everyone knows when we share them all the time, but the rule is how do you own it, how do you never lose it? That would be a good way to lose it. I want to make sure our audio is protected by keeping my phone out of the water.

And so you're putting it on corn.

So I'm putting on a husk of corn. The quality of attention that you all receive. There we go. That should, uh, that should enhance the audio from here. Uh, Cody, if you want to log into your phone since my phone's a little farther away streaming, um, we will be checking all the questions in the chat, by the way. So if you guys have any questions, this is creative finance and multifamily live. Now, yeah, on that deal, you don't want to do a deal that can wipe you out. You need to answer how do you own it, how do you never lose it? This was someone who had a very clear path to own it. They very well could have cash flowed, very well could have cash flowed if their assumptions were correct. And it's really exciting to do the big deals. That being said, if you have multiple millions of dollars and you're not sure how you would exit it if things don't go as expected, it's not a deal you need to do. We don't share this all the time on the channel, so I'm just saying it is okay to walk away on a deal. You absolutely can do that. You do not have to close every deal. Facts. Yeah, uh, we looked at a deal before. It was a 60-unit opportunity, multiple millions. Uh, it ended up being a deal that we're not going to be going through with, at least not all the deal. There's potential to close on some of it, but when we went under contract for it, it's in a different market. It made sense on paper for sure, but it's not the deal that we needed to do. And that's really important when you're looking at these is what is the deal that you want to do and create the opportunity that you want to create. Uh, know what deals are important for you to close, know what you can do with them, and make sure that at the end of the day you have built the business that you want to build. And that is a question you need to ask yourself every time. Just because you can doesn't mean you should. In creative finance, when you can buy anything with or without money Having that discipline to know this is the right deal or the wrong deal for me and the business I want to build is extremely important. And that's, that's been a top of mind thing today. Other housekeeping items. We have a Robinhood event coming up, don't we?

We do have a Robinhood event coming up. Where can people find out about that?

There is a link. I'm going to attach it to this video afterwards. But if you are looking for it right now, you can go to my Instagram page @ChristianOsgood. It is in my pinned highlights. There's multiple links to it. There's also a Facebook event group. You can find it on my Facebook posts. It's all over our media. If you're looking for that event, we will drop a link in here afterwards. If you're watching live right now, we're going to, yeah, we're just going to give you a million ways to find it on our normal social media platforms.

Yep. And that'll be November 10th, 11th, and 12th. Super stoked to have everybody there.

Now, one thing we introduced in our last session, which we're doing here again, is we're going to do day passes to the event. So if you want to just come on the 11th and you're local or you're flying in and want to spend a day with us, totally fine. You don't need to spend the night there. The 11th is going to be a bulk of the presentation. If you book a cabin, you get a hot tub, you get to relax with a whole bunch of other investors. There's going to be archery there, whether, you know, weather provided. And we're going to be doing a huge party the night before at our neighbors at Canale, the wine bar and gourmet pizza shop across the street. And we've got a surprise for you on Sunday morning as well before you all head out.

Which will be a lot of fun.

Yes. Now we're going to go to the part of the show where we open up to Q&A and questions. You guys ask them in the chat, we will answer them. And if it gets really busy, go ahead and drop something in the Super Chat and we'll answer even faster.

So I don't know that we'll get that busy today, but we've got 10 people.

We'll find out. Last time it got busier than I thought on a Friday night.

All right, from Atticus: How do you check inventory in an area to make sure if it has enough commercial properties and isn't just dominated by single-family homes?

Ah, this is how we find all of our deals. Google Maps is your friend here. You're going to look in the residential areas, so where all the houses are, and you look for the bigger roofs. That is the first place to start.

Big roofs.

Big roofs. Uh, there's most— not all— most markets are going to have areas that have a lot more multifamily. Often you have the— those 6, 12, 25-unit buildings are typically in areas that have a lot of duplex and fourplex already, or properties that are obviously rentals. So as you identify those areas, you look for those big roofs, and that is how you knock that out. That is the first way to find them. It is worth noting there are places in the U.S. where people who live there expect— we all own our houses, uh, small house, white picket fence, and that is the entire market. Not every single market is a rental market. You can find that information on worldpopulationreview.com, same place that we look for population growth. You can actually look at percentage of homeownership. I want to see at least half the people in that market being renters. That's something that's really strong.

All right. And then Field of Dreams says, do you value single-family with a good ADU same as traditional duplex multifamily if you plan to owner-occupy? No. You're going to get it comped based off of homes with ADUs. And depending on your loan program, they may not use the rental income as they would with a duplex. To help you qualify. There are some debt products that are changing that where you actually can use the rental income from an ADU. However, traditionally you don't.

Funny enough, we actually have a speaker who will be covering that exact program at our upcoming event at the Robin Hood.

And then Anthony, hey, excited to have you at the Robin Hood.

So for those who don't know Anthony, Anthony is a friend of ours.

If you need electrical, you should give him a call.

Yes. He just recently opened his own shop. So he's been, uh, he's been apprenticing for a long time or working for another electrician. He has gone solo. He has helped me with a project at my primary residence already. Uh, his company is named Power Pros. If you are in the greater Seattle area, Tacoma especially, he's located pretty close to there. Um, fantastic electrician. He has helped us at the Robin Hood. He's helped me at my primary residence. Uh, he is really, really good at what he does. We don't endorse people on this channel all the time, but Anthony has said hello, and so I'm introducing him to all of you.

Also, if you'd like to meet him and build that own connection, he will be at the Robinhood event.

Yes, he will. Um, he's going to be there.

Now you're not allowed not to go, Anthony.

Yep, that is true. Anthony, you are now signed up. Everyone else, uh, Anthony is a guy worth knowing if you're in the Seattle market. If not, uh, find an electrician like Anthony. We have a few people in our portfolio who are key maintenance people. Very skilled, very smart, and it's nice to have some people that you can rely on. So find, find your Anthony in your market if you don't have one here.

And that is it. All right, Anthony says see you there.

Good. So he will in fact be there. Now everyone else, keep asking your questions. We'll give this some time to mature and get the chat going live. Uh, a few other updates that we did, uh, that we did want to share. We got a lot of questions about this, so I want to make sure we cover it. We bought the 23-unit hotel. I've been calling it 22, but technically there's an owner suite that's going to be a 2-bed unit that we add to this. On the hotel project, that is going relatively smoothly. One thing we've learned since then, because we did a lot of our work with the city immediately post-close— we reached out to them beforehand and made sure that they liked the project, but we did a lot of the legwork as soon as we closed. If you are in an area where you have some tired hotels that you're like, this could be made multifamily, the multiple on those is huge. In our area, hotels sell on a 9 or 10 cap rate. Oh, what, 8 to 10? Yeah, realistically, multifamily will sell closer to a 6. You have a much higher valuation on the same asset if you can convert it multifamily. Um, so that's something that we're working on right now is working through the city piece there. We've had a few holdover tenants from the hotel because it used to be on monthly rentals there. So we are shutting it down this week. In about 2 weeks, we'll have an empty building. We're doing our light reno, and then we are going to be live with that project. I am super excited to get that thing off the ground. It's gonna be a cash flow monster.

I like cash flow monsters.

Yeah. Um, other deals that are exciting, uh, we're gonna be closing on the 15-plex. Yep, that's about what, 2 weeks out?

Yeah, that's about 2 weeks out, so that's exciting. And we're still working on the housing authority deal, but they're slow.

Very slow. If you guys do a deal with a housing authority, budget 6 months to a year for close. Yep, which is totally fine. They usually have some rules and regulations around that. By the way, that 15-unit, this is something that we've been sharing a lot more this week because we've had a lot of these come to fruition. Your best deals typically are going to come from the long-term relationships. You are usually not going to get the best property or the best deal from an owner who you haven't already done a lot of work with. The deals that we are— that are coming to our pipeline right now that we are consistently closing, the 15-unit included, is a relationship that we've done multiple transactions with. We've known for years, and we've continued to build the relationship. Now, when I got started in real estate and wanted to buy multifamily, it took me 1 month to find a deal that cash flowed very nicely, very stable, bought it conventionally. The next one I bought 100% hard money, 101% actually. You can buy these deals and you can absolutely get started and in a month you can buy your deal. However, your best deals, your biggest deals, I promise you they're going to come from long-term relationships as you play this game more. We are finding that consistently. And, uh, we'll be sharing a lot more of these as they come to fruition, but keep an eye out for this. We are going to be picking up— next 5 or 6 deals are all going to be from these relationships.

Yep. And through our relationships, that'll put us past 300 units, which is insane.

It's just— it— we've been partnered for a little over 2 years.

To quantify that for everybody, if you get to 300 doors and you own your doors, you don't syndicate, but you, you own them If your rent goes up $100 just due to inflation, it's not like you're being a mean landlord and trying to jack their rent, but there's more money in circulation. That's an extra $30,000 a month in cash flow.

That's not nothing, especially just for 2 people. Yeah. You can really be in a fantastic position with some of these. So just keep that in mind if you are getting started or you're struggling to get a lot of traction. I don't want to use the words get rich quick because that's not the strategy. But we quite honestly, we got fairly rich fairly quick with a little bit of patience. I'm talking a few years of dedication to the model.

And we put more time in it in those few years than most people do.

So I think, I think anyone listening to this can do this in 5 to 10 years. Yes. Everything we've done in 2 years, you can do in 5 to 10 years. Some of you guys can do the same thing in 2 years. Some of you can apply what we've already taught and go faster and go way faster. Uh, great example, Caleb Hommel, who we have on this channel all the time. He's 20 years old with 53 units.

I had 24 units at 20. I thought I was balling.

And you were, to be fair, you absolutely were. Um, because there's more information out there than there was when we started. And even if you watch this channel, um, you can absolutely exceed us. All right. I have a few questions in here. From Adagas.

Are there markets that are too big for the relationship-based strategy?

No, there are not. Because at the end of the day, every property is owned by a person. And even the ones that are owned by LLCs or corporations, there's a person who owns those LLCs and corporations. Now, are there buildings that are too big for that strategy? Technically, no, but you're not likely to go downtown Seattle and seller finance a bunch of skyscrapers. That's unlikely to happen. But Cody and I in Seattle, it's technically the city of Tukwila but has a Seattle address. We have a 7-unit building. It's the second or third property that we picked up seller financed, very low down, very, very low interest. It works everywhere. We've seen people do this in every market. Mentees of ours have done it in Texas, Florida, New Jersey, Delaware. I'm just thinking of places that have busier downtowns. They've bought in core areas of those markets consistently.

All right, from Joel. Hey guys, I'm looking at buying a fourplex. It's my first property. I'll be living in one of the units. What type of cash-on-cash return do you typically shoot for? Well, I wouldn't shoot for a cash-on-cash return if you're going to live in it. But if you're north of 6%, I'm happy.

Yeah. Cash on cash return is helpful and it's a good metric, but not necessarily a reason to buy. What cash on cash return tells us and the reason that we like cash on cash return as a metric is it will give you an indicator on a deal that you're not living in. Are you raising this money as debt or as equity? It's a great indicator for that because you know how much cash flow you have to give out to potential investors. That is what that metric's for. What you're really looking for in an investment is debt service coverage ratio. You want to know how much money do you have after you pay all of your expenses and your debts, like your operating expenses and your debts. I want to be able to save at least half a month's mortgage payment on every property. So a debt service coverage ratio of 1.5 means that we're buying in a fantastic cash flow position consistently. Um, now if you're doing the house hack thing, there's some more nuance to it. What I opted to do is buy a house and buy enough apartments to support the house. That's an option. If you want to live in a fourplex, If you can get anywhere near break-even on those where your cost of living is free, it's generally a fantastic opportunity because when you rent out that unit that you live in, you'll be doing pretty darn well on cash flow. That's general rule of thumb. If you can get that thing near break-even while living in it, that is a pretty darn good cost of living. Yep.

How do you keep track of the owners you've called, how many times their responses, etc.? I don't track it.

I don't either. Uh, there is no master list for, for owners. Um, we have a general list for, for capital partners that's very general— first name, last name, email address, phone number, the amount of money they wanted to place, and what their overall goal is with the money. I do track that for capital partners because I want to match the appropriate deals with the appropriate money, and we never raise before then. So sometimes you just got to remember Who has the actual money and what do they want to do? When you're talking about deals, which comes first? Deal, then debt, then equity. When you are looking at the deal and you're tracking owners, you're forming relationships. If you have a real relationship with them, generally speaking, you're going to think about them. A good example, we invest heavily in Moses Lake, Washington, very heavily in Moses Lake, Washington. The owners over there, when we are planning a trip to town, We're thinking, who do we need to meet? Who do we have questions for? Those are the people who are getting texts. You don't need to follow up with every single owner. Sometimes you have a conversation with them and you get your takeaway, and it doesn't need to go anywhere. But the people who are important to you, who are going to be relationships where they're interested in working with you and they also move you forward, those relationships you're not going to generally need a metric because those are— those end up being basically your friends in business. Yep.

Um, I don't mean with my friends in business on Friday. Yes, some of our friends.

Yes, we are. I'm, I'm very excited for our meetings on Friday. Um, but yeah, I don't really have to think about it or set a schedule because it is an actual organic relationship. It's not about going after the seller, it's about meeting with owners. And to the extent you can master that mindset, that, that will indicate how far you can go in these relationships.

Do you guys have a template that you use for structuring terms, seller finance deal, or do you start from scratch each deal? We start from scratch each deal.

Yeah, there's some basic principles that go into every deal. You can't get too complicated. If the deal, if the structure is really complicated, don't do it because you can't repeat it. And it's, it's generally, that's where mistakes are made by legal teams, by brokers, by you. Yeah, exactly. Um, The more complicated it is, the harder it's going to be to put together consistently. So what you want to do, like, that's checkpoint number one. Like, is this fairly straightforward? One or two creative clauses, you can spin the Rubik's Cube a little bit, but once it starts getting like, okay, I'm going to buy into this entity and then this entity is going to buy this other entity, we're going to carry a contract over here and a second over here, those deals get so complicated and so convoluted they usually don't come together. And when they do, there's some problem with how they're structured that comes on down the line. Ask us how we know. We've done deals that are too complicated and there's added expenses later, both in legal to clarify them or just like, uh, come tax season sometimes you didn't know something that you didn't know.

So been there, done that.

Yeah, so keep them, keep them super simple is rule number one. And then on a basic standpoint, if you have a ton of cash flow day one, you probably want to bring in the money as debt if you can service that debt, because you want— your goal is to own the property. If it's low on cash flow but you have a ton of upside and a clear plan on how you're going to own it and never lose it, you're probably going to raise with an equity partner so you can conserve cash flow and buy them out later at a higher price. So there's some basic principles, but absolutely no template. It goes deal, then debt, then equity. Figure out what the deal is, and then you sit down and go, okay, what is the appropriate debt product and what is the equity? And once those two things are solved, you have a deal and you have all the money. You are free to close.

I like being free to close.

Free to close is my favorite place.

And I will always structure it as debt if I can. There's a deal I'm looking at buying now that's over in Moses Lake. You know which one I'm talking about.

I do.

But, um, that'd be a solo deal and I'd be borrowing the down so I don't have to partner.

Yep. If you can do it all as debt, that is preferred, unless— I'm gonna add a caveat to that— you manage options and obligations. If you— if your debt options are gonna stack too many balloons at the at the same time. Say you're buying 4 different deals, but the only debt product that you have available is a 5-year debt term. I would probably take on an equity partner or 2 there just to change the timeline, because I do not want 4 balloons happening at the same time, especially if you don't have a lot of pieces. Yes. Now, as you get a little bit bigger, you can do more things, but that's— that goes into the bucket of just because you can doesn't mean you should. It's going to be a judgment call based on your personal debt stack.

Besides making weekly owner calls for coffee meetings, what else can I do? I'm just starting out to generate momentum.

I'll tell you what Caleb did. Caleb invested out of state, so he couldn't do the owner meetings all the time. This does require a list, by the way. This, this requires a little bit more organization, and this does work. This is how I sold CoStar for years. But essentially, he called brokers, salespeople He looked on CREXi and LoopNet for who's representing the most properties, and he called to talk to them about the deals they have on market. And he sincerely just talked to them about the deals they're listing. He didn't end up actually buying any of the deals that those brokers listed, but he competently had a conversation about the opportunity. They could tell he was ready, able, and willing. He was upfront about the fact that he's young and hungry to get into deals, and he found brokers who were willing to work with him. They found transactions that did meet his parameters, and he bought his first 3 deals through brokers in the market. Now, Cody and I have found plenty of listed properties. We've called on them and we've closed on them. About half of our deals came from on market, and about half of the ones that were on market we actually found because a broker brought to us. The other half we found online. Those are other avenues that you can take. Just know that it's a little bit more grindy. It's going to take you more time. And if you're calling a bunch of brokers, that is one where you want to set a monthly follow-up. You want to be on top of it. You're going to spend time It's a much more transactional relationship, but something you can absolutely do to get the deal flow rolling.

Joel asked if he should start with a house and then buy multifamily. Do. Buy the multifamily first. If you're willing to house hack it and live there, do it. You'll thank yourself later. It's going to be like apartment living, but if you're already renting an apartment, what's the difference other than you own it? You do have to factor for expenses because now you will have maintenance costs. That is a real thing.

Yes.

But if you can afford to own it and when you move out it'll cash flow well, or if you're in a market where it'll break even or cash flow while you're living there, absolutely start with that.

I 100% agree. That is a great way to do it. I started with a house hacked condo and while I didn't skyrocket from there, I ended up living in there for 2 years. I rented it for 1. Because I lived in it, I got to sell it for tax-free. Took about $100,000 out of it, renovated, bought and renovated my current home, and used the excess to close on my first duplex. You can absolutely do that. The problem is that portion of my strategy took me about 4 years full cycle to go from I bought it, I lived in it, I renovated it, I leased it, I bought another property. All those different pieces. It's not a fast way to go through real estate. So the best practice— Cody started with a 12-plex, then he bought a 12-plex, then he bought a 6. He got to 30 units at a young age. I did a duplex, a duplex, and then a 38-plex, putting me at 55 units in my— or no, those— I'm sorry, 42. And then I bought a few more units that got me to 55. Um, but in my first year, I got to 55 units because you started stacking bigger numbers. Because we started stacking bigger numbers. You do not need to start with the little stuff. You don't have to do 50 deals to make $1 million.

I saw someone post, if you just do 50 deals and you make $20,000 a deal, you'll make $1 million.

That is a brutal way to get there.

And even if you made $50 grand a deal and you did 20 of them, it's like, it's— that's more deals than we've done.

Not the preferred method. You can go into these, uh, start, start a little bit bigger. It's going to be much, much, much easier to scale. Just 100%, that would be my recommendation.

Yeah, and it's not about those deals. Like, it's not about getting out and staying busy. Busy is not an indication of success.

No means busyness is not business. That's one of our rules. They're not the same thing.

Facts. And that's it for questions.

Yes, it is. So great seeing everyone today. Um, we are back on schedule. So every Wednesday at 3, we are going to be here. Very excited to see all you at 3 Pacific time, I should add. And we'll talk to you all soon.

And the last question, do we stick with it? We will get Daniel's question. Should I save money to get started or should I look for a partner? The order of operations is deal, debt, equity. Don't worry about the money first. Go find a phenomenal opportunity in an area you'd like to buy in. It's the first question is, do you want to buy the deal? 'Cause if you wanna buy the deal, figure out the money next. So I wouldn't go looking for a partner. You should be saving money. You shouldn't be going negative every month. That'd be a bad business model.

Mm-hmm.

But while you're saving and while you're meeting with people in the space, go find the right opportunity that fits what you wanna do. And then when you have something, you'll have something to share with those people.

And no one in the Multifamily Strategy Mentorship Group has ever failed to close a deal because of a capital raise. Ever.

Ever.

It's never happened. Of course, deals don't all come together. Sometimes you find something due diligence. Sometimes the seller has lied about something. Sometimes, sometimes we've seen partnerships fall apart before they close the deal. Like, we've seen deals not come together. It has never, ever happened because of the money. The money is never the obstacle. If you have the right deal, there is so much more money out there than there are great opportunities, especially if you're getting creative because you have a completely unique opportunity that you're offering, you will close the deal. Don't worry too much about the money. Everyone does, including me when we started. We're like, we have to raise $300,000 for this. It's like, okay, no idea how that's going to work, but let's go.

And it worked.

And it worked. And it's worked every single time for us. It should work for you as well. Because so far, everyone in the multifamily strategy is batting 100 for capital raise. So I hope that helps and gives you some encouragement. Focus on finding those deals. The money will find you.

And that's it.

That's a good place to end. See everyone next week.