Christian Osgood and Cody break down a three-point framework for buying multifamily properties: commit to holding 30-50 years, secure the deal with debt and equity, and lock in day-one positive cash flow with fixed-rate loans. Variable-rate debt can turn expensive fast.
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You never want to lose a piece of property in buy and hold real estate. That is how you truly build wealth in real estate. Today we're talking about how to assess a deal, and this could be a pretty short video today because it's actually ridiculously simple. So we're going to roll right into it. Welcome to our channel.
Welcome back. This is Cody. I'm here with my buddy Christian, and today we are talking about how to underwrite and really just assess if you should buy a piece of real estate. Now there's only 3 things you got to think about. Number 1, would you like to hold it forever? We don't like to sell real estate. We're not flippers. I've done a flip. He's done a flip. We made multiple 6 figures between the 2 of those and it was a great deal. Fantastic. However, I wish I could have held the real estate, would have made a lot more in the long term. And that's usually the case for most people that sell real estate. So would you envision yourself owning this in 30, 40, 50 years? If the answer is yes, Then we proceed to number 2, which is, can you buy it? Which is really, how do you buy it? Deal, debt, equity. You find a deal, then you locate the debt, and then you figure out the equity. It's one thing to envision yourself owning something forever. That's great. But in practical application, you have to find the deal that you want to buy. Then you have to be able to line up the debt and the equity. And the last piece is you have to make sure you never lose it. Yep.
You never want to lose a piece of property in Buy and hold real estate, that is how you truly build wealth in real estate. You can't lose it because then you have to start all over again.
That's not fun.
Yeah, not fun at all. How you lose it is simply we need to find a deal that cash flows day one. That's the first and foremost. If it makes money, much easier to hold than something that loses money.
Buy and lose real estate is not as fun as buy and hold.
So that's the cash flow. Well, now what are we looking at next? It has to be long-term debt. If I have a great cash flowing deal and I have a 90-day loan on it, I can probably afford to hold that deal for about 90 days. Oh, good math. I can do about 90 days to hold. The length of that is really important. So we have long-term, cash flowing. Next thing, and so many people forgot this, fixed rate debt. You cannot have debt that just changes. People love variable rate.
Oh, you sure can, it just won't go well.
Oh yeah, I mean, you can technically do it. Is it a good idea? Also no. So with the fixed rate, what you're doing is you're eliminating variables. You're going, I am fixing my costs so that I know that cash flows now at this number. Meaning fixed rate debt over a long period of time, which means everything's constant. If I am now a good operator, I can improve cash flows, potentially lower expenses, and it will just do better and better and better. What I don't want to do is halfway through my loan have, like we just had happen, a lot of people had interest rates go from 3.5% to 8% on variable interest.
That hurts.
I had that happen on a HELOC on my house where I went from 5% to 8%. Loser. Yeah, unfortunately it was a $100,000 loan in our $12 million debt portfolio. That being said, that $100,000, I'm like, wow, my payments really went up. Can you imagine if you're one of the people who hold $100 million loans, and they're out there, I know of a few, I won't name drop here, but you have hundreds of millions in debt and it all of a sudden went from 3% to 8%. Game over, you lose, start over from square one.
Yeah, buy and lose real estate. Yeah, that's a strategy.
But that's as simple as it is. You have to have assets that you want to hold forever. That's the other— I think that's the one other thing that you really— it's, is this something that's what I started with forever?
Yeah.
And that is what I want to end on. That is the main thing is, do I want to hold it forever?
Yeah.
Follow the rest of the steps.
Make sure you can hold it forever and that you would like to hold it forever. Then you just have to solve for how do I buy it, how do I never lose it, and will it be fun? Because if it's not fun, you're not going to want to hold it forever. And then you become like a flipper and everybody flips tends to regret it.
