Creative Finance Live

Okay, should be live. Happy Wednesday, everybody. Hope you are doing well. Today it is going to be just me. Christian is over at the Robin Hood Village Resort in Union. If you want to check that out, robinhoodvillageresort.com. But he's working on some projects hands-on, interviewing some new members of the team and making sure all the projects actually get accomplished. Today we're going to jump straight into some questions. We're going to have a few people that will be joining in here in a minute. But, uh, question number 1 has to do with buying turnkey rentals. This is from Ryan Mitchell. Would you ever do a deal on a 2 to 4 unit property where you seller finance the debt, raise the down payment as debt, but you don't have any really significant upside in the deal? Well, absolutely. However, it depends. Hey, it looks like we got Dividend Dave here. We can start right away. Good to see you. If you're buying a 2 to 4 unit deal and you don't have any upside, if you can solve for how do you buy it and how do you never lose it, I'd absolutely buy it. If it adds long-term fixed rate debt to your portfolio and it adds cash flow, I would absolutely buy it. But you do have to solve for the how do you buy and how do you never lose it. Just because it's turnkey and doesn't have a bunch of upside doesn't make it a bad deal. Some deals, if you get cheap enough debt, you can cash flow zero money down, and it's just going to be operating as if it was the prior ownership. So you don't have to get this steal of a deal. I've only had one home run deal, and I'm closing on it in about a week with a good friend of mine. But, um, you don't have to get this crazy value-add opportunity to make money in real estate. You have to figure out, how do I get predictable long-term fixed-rate debt that cash flows with margin. And if you can solve for that, it's good to go. Now, your second question, Ryan: what criteria should a property meet before taking on private hard money debt for the down payment? Well, regardless of the property size, whatever your first loan is, whether it's from a bank or whether it is from a private lender, you should have sufficient cash flow above and beyond that mortgage. If you're going to borrow any money, you need to make sure you have cash flow, because if you don't have cash flow, you're going to zero. That's one of my favorite Kevin O'Leary lines. But you need to make sure that you have your cash flow in place before you try and borrow money for a deal, because if you don't, you're going to be funding it. And if you don't have deep pockets or you don't have a high-paying job, that can be incredibly difficult to do. Dividend Dave, looking forward to seeing you in Washington as well. Appreciate you being here and, uh, super stoked to see you here in Washington. From Lou: I own a single-family rental. It doesn't cash flow much. If I sold the property, I'd walk away with about $275,000. Rent is maxed out for the condo, and where I invest is brutal on taxes. How would you disperse the funds and would you put it into multifamily? Well, I would absolutely put it into multifamily, but the first thing you need to do is establish what's the target and where do I want to be. Nick, good to see you. I appreciate you being here. But once you actually decide, okay, I want to buy multifamily, this is the market I want to be in, from that point on you get the funds. If you're going to do a 1031 as a rental, then, um, you would get with an intermediary that does 1031s professionally, and you'd look at putting your condo on the market, selling it, and moving those funds up into a bigger asset. But I would absolutely go 100% into multifamily. That is up to you on your strategy, but being Multifamily Strategy, we're a little biased towards multifamily because we know it works, we know it's predictable, and people need housing. From Clinton, now And I've gotten this question a lot. What's with the hair? Is that deliberate or is that a birthmark? That's neither. That is called alopecia. And that happens to some people. From Big O Dog, how do you keep it? Cash flow. How do you never lose it? Fixed low-interest debt. Am I getting this right? Mostly. So if you want to make sure you can figure out how do I buy it and How do I never lose it? You need to get, uh, the deal, the debt, and the equity lined up for that purchase. The cash flow is great, but you do have to figure out how do I actually close on this asset. If you want to go buy any piece of real estate, you need two types of money. You need debt and/or equity. And if you can't get 100% debt, then you need to bring in some equity. And if you can't get any debt, then you need to do 100% equity, which means you write a check. That's how do you buy it. How do you never lose it? Fixed rate, low interest debt. I mean, it's— there's nothing about low interest. Low interest is great, but long-term fixed rate debt that cash flows. If you can solve for long-term fixed rate debt that cash flows, you're going to be in a much better place than those who just focus on, I need to get the lowest interest rate. A lot of people are getting burned right now because they did, uh, the lowest interest rate they could. They didn't fix it, and now it's a heck of a lot higher than a lot of the other loans that are in the current marketplace. Some people went from 2-3% all the way up to 8-9% or more. So you need to make sure it's long-term fixed rate debt that has cash flow and margin. If you don't have that, you're gonna be in a really bad place. So Someone said, need to help find and see if it's a good deal or not. Well, make sure, Caesar, that you bring your deal. You can always bring a deal. And if anybody here has a deal they want to go over, feel free to put it in the chat. Uh, but I need more details than that. And other than that, someone asked, what website do we use to find the owners of LLCs? Well, there's this place called OpenCorporates. I see Ryan Mitchell's in the chat. I did go over your question, Ryan. Uh, but it is good to see. If, if anybody here has any questions they want to go over, feel free to put them in the chat. It is just me today. Christian's busy at the Robinhood. But if you are looking to find who the owner is of an LLC, we go to opencorporates.com. And the nice thing about Open Corporates is, let's say you find an LLC and you want to see, okay, is this a big player or not? You find who owns it, and then you can reverse engineer and you can put in the person's name and see every LLC they own. You can see how big or how small a certain individual is in the real estate game. How do you go get funding? Did you do debt equity partnership? We have done debt partnerships and we've done equity partnerships. But, um, as far as funding goes, everybody likes to focus on the money, but the money is the least important piece. You need to find the opportunity first, and that is as simple as finding a big roof on Google Maps. I find all my deals on Google Maps unless it's on the MLS, which have been a few of the deals. But find the big roofs, you have to find that deal. And after that, realize that there's only two types of money. You've got debt and you've got equity. Debt costs you money every month, and equity costs you money later if you want to buy them out. And it also costs a share of tax benefits and cash flow. So you get to pick which sort of structure works for your deal best based on the cash flows or lack thereof for your deal. But when it comes to getting funding, that's going to come from the relationships that you build. Hence why we always say relationship is worth more than the real estate. The relationship allows you to get into other opportunities you couldn't do without it. So whenever we need funding or whenever we need money, if we're not doing it with a bank, then the seller is going to finance a big portion of the deal, and then there's usually a little bit left over. And if we don't have that money then we have to go find people that do, and we have to share an opportunity, make the pitch, let them know, hey, this is what we see happening in this market, is what we see happening for this deal, this is how we're going to make it an absolute home run. And they'll either want to, to partner up as a partner, or they might be looking just to lend the money. But again, just because you can doesn't mean you should. You have to make sure that it fits everybody's ideal situation that you build that relationship first and that the deal can pay for itself. You need the real estate to buy the real estate. All right, Aaron, it is good to see you even though you're only here for a minute. Glad you dropped in. Let's see if we have any other questions from the week. Kid City, how do we find out about the Robinhood events early enough to get a room? Well, we do put a lot of videos when we prep for Robinhood events I believe the next one is going to be in July. So we'll put some more videos out there, but you're always welcome to message us on Instagram or shoot us a text message. Our phone numbers are all over the internet as our, uh, our Instagrams. But, uh, Christian's Instagram is @ChristianOsgood and mine is @DoingCodyThings because I am always in fact doing Cody things. Good luck with the new adventure. Switching subject, looking at a 12-plex C-class property on LoopNet. There's approximately $8,000 to $10,000 per unit, landscaping, etc. Should I go after it? They're asking $750,000. I don't have enough details on your specific deal. $750,000 for a 12-plex sounds great, but I mean, if that's going to be in downtown New York, then you're getting a steal. If that is in Mississippi, maybe you're overpaying. Need to know more. But if you can solve for how do you buy it, you can get the deal, the debt, and the equity lined up, and it'll cash flow on long-term fixed rate debt, then I'm likely to say, yeah, make it happen. However, I don't have all the details. Again, if you want to make the pitch on the deal, just share where it's at. But if you can figure out how do you buy it and how do you make a profit on it and upgrade the property over time, absolutely take a swing at it. Now, if it's going to need a lot more than that in repairs, if you're worried about getting shot in that area, then I probably wouldn't buy it even if it makes money, because just because it makes money doesn't mean it makes sense. All right, from— let's see here in the chat. Do you house hack at one of your properties or have your own home? I don't do either. I rent where I live and I buy things that I can rent out, and I pay a lot more to rent where I live than I probably would pay if I did a house hack, and that is okay. I, uh, I don't want to buy in King County any more than I have. I I own a 7-plex with Christian, and it is amongst my least favorite properties. So, uh, I don't really want to buy more here. I pay way too much for rent, and that is what it is. But every little bit of extra cash, I don't have to worry about the upgrades of where I live. I don't have to worry about the maintenance. I let the landlord take care of it if anything ever happens, and I just pay my rent. Some people are going to say, well, you should absolutely always house hack. That's great, but there's a lot of cost with ownership, and I've felt that big time owning apartments, and I don't want to do that right now based on my financial situation with where I live. I'd rather rent, not worry about anything else, and if I ever want to move, I can just move. Would you advise buying an older building that are in A-class neighborhoods? Okay, so, uh, you can absolutely do that, and you'll probably do well, but it's going to all revolve around Cash flow. I love great areas. If you can buy in a solid area, that's phenomenal. Older buildings in itself aren't the problem. And, um, what happens is people go out and buy older buildings and they say, well, there's all these problems with the building. Well, you can get buildings that have been neglected that are older, and you can get buildings that are older that are in great condition. So you're going to have to take a look at how have they been maintaining it, because some people will take care of their stuff and some people won't. Some people will be a slumlord and Some people will take care of it as if it's their only property, even if they have thousands of properties. So you need to really look at what is the asset actually looking like. The age doesn't matter. Everything's going to get older with time, as do all of us. So, uh, if you take care of your body, you're going to be in better shape at 60 than people who don't. Same with the real estate. Age alone is not enough to say if that's a good or a bad deal. How is it performing? Will it cash flow? Can you get the debt? I love that it's A-class neighborhood versus something like a D-class or a C-class, but there can be better deals in C, B. I wouldn't, I wouldn't do D. I've done that before. But just, just make sure that you figure out how to cash flow it on long-term fixed-rate debt and you're set. What's your taxes like? Not sure how you mean. If you can qualify that or quantify that a little bit more, that would be phenomenal. It's a little bit open-ended and I don't get exactly what you're looking for, but I'm happy to answer it. When you say make sure the property pays for itself, are you saying that you don't really care about cash-on-cash return of a certain amount? I may be misinterpreting your words. You're not misinterpreting. I don't care about cash-on-cash return. That is an irrelevant metric. As is IRR. There's just a few things in real estate that I really don't care about, and cash on cash is not one of them. If you're just focused on cash on cash, try and put zero money down and you'll get an infinite return. Problem is, if you do zero money down on every deal, you're not going to have a ton of cash flow. So you need to figure out what is the actual metric that matters to you. For me, I care more about debt coverage ratios Now, like, how much does the income exceed the debt cost? And I want that to be super high because I actually focus on what's my cash flow number, not what's my cash on cash return. I started with basically no money, so my cash on cash return would be about infinite. But infinite on $0 could mean $1, it could mean a million dollars. That's not enough just to know if you're doing well in this game, especially if you're playing the game no money. All right. Hey Cody, let's say I'm 20 years old. All right, I'm gonna assume you're 20 and I'm trying to break into seller financing. What exactly would I do? Well, you're 20 years old, you may or may not be working, and you may or may not be going to school. What would you do? Well, you'd go meet with players in the market, meaning you establish what is your objective Who has accomplished that objective? How do I meet with them? And it's one thing to get to the table, it's another thing to not get kicked out. So how do I meet with them and then build out a relationship to where I can work alongside them to get to my goal? The quickest way from A to B is a straight line, and people can help you get there a lot faster even if you go in a straight line. If you can get in someone else's car versus building your own, you will get there faster. So I would go figure out who's done this game, who's played it the way I want to play it, who's crushed the goals that I want to crush, how do I get to meet with them, and then how do I not get kicked out of the room? How do I go build that relationship? The way I did it at 19 and 20 years old was through Google Maps. I like Google Maps because it's very simple. You can get more complicated, but the more complicated you get, the less repeatable it is. And if it's not repeatable, what's it worth? So I would just figure out who's done what you want to do, go meet with them, and don't get kicked out of the room. Go build that relationship out so they can help you go a little faster. From Jan: When's that McLaren coming? Well, McLaren comes after I knock out obligations. Your ability to manage obligations and options determines how well you're going to do in the long term out outlook of this game. So, uh, we took on a lot of obligations to go as fast as we did that we probably didn't have to take on, but we didn't know what we were doing. We didn't have someone guiding us for all of it. So we have some expensive debt on the, the way we structured some of our deals that we need to knock out. I think we knock that out in the next 12 months to 18 months. It is a rather large amount of money But once that's knocked out, I think feasibly could get the McLaren in the next 12 to 18 months. And that will be a lot of fun, but not there. So, uh, it'll happen as soon as we knock out the obligations. To follow up, when using a cash-on-cash return along with cash flow number, help you identify which deal is better or more profitable. Not necessarily, because if you cash flow $1,000 a month on two different deals and you put the same amount of money down— let's say, uh, one you buy a duplex and one you buy a 12-plex— which deal is better? Well, if you put the same amount of money down, your cash on cash is going to be the same. And if your cash flow number is the same, then that, all things side by side, you're, you're buying identical deals. Problem is the 12-plex has more debt on it. I guarantee you that 12-plex will have more debt on it, meaning that your debt coverage ratio is going to be worse than that on the duplex. However, the upside on the 12-plex will be higher. So you have to look at a risk-reward. Nobody looks at risk-adjusted deals. I would take the 12-plex because if I do $100 rent bump, my cash flow will go from $1,000 to $2,200. You do a $100 ramp up on the duplex, it only goes to $1,200. So you have to look at it risk-adjusted. At the same time, if you bought that duplex, your risk will be less in the beginning because your debt coverage ratio, the amount of income versus the debt that you take on, will be higher than that of that 12-pox. So it just comes down to risk tolerance, but you will do better long term with the 12. So that's why I don't look at just cash on cash and the cash flow number. Are you saying that you essentially just want to own as much real estate as possible as long as it covers itself? I want to get as much real estate that I can to pay for the real estate. To do that, I have to have excess cash flow. That is, the cash flow will make or break your business, and you need an adjective before it. So it's either going to be positive or it's going to be negative. You need positive cash flow. And you need a lot of it if you're going to borrow a bunch of money. So we have a lot of debt. We have $14, about to be $15 million of debt. However, we've got enough cash flow to service all that and then a lot of extra. So you need to just make sure that you build it off of that actual cash flow number in excess of your debt payments. Otherwise, you can get into cash crunch. Aloha from Hawaii. Aloha, glad to have you here. Millennial Mike said McLaren will be a major W. I'm excited for it. I'm gonna get the 720S. I'd love to get the 765LT, but, um, I don't have enough money for that one. REI Stoners made it to the party. All right, Brian Mitchell, on deals where you had to take on short-term debt for the down payments, can you talk about a few examples of how you execute? Your exit strategies. Absolutely. Whenever you take on short-term debt, you add a lot of risk, and that's because you don't— you actually have to knock those out, otherwise you lose your assets. I've done it before where I sold out a portion of the LLC to get the cash, so I basically let Christian buy into it. I got the cash and I wrote a check for the debt. I converted debt into equity and equity into debt. I've gone back and forth a couple times. That's one way to do it. Another way to do is to earn it, where I go out and sell a couple real estate deals as a real estate agent, get some cash, and write a check. Another way is through refinance. I've refinanced before. I took out a 60-day loan once. I beat Dave Ramsey's 90-day loan, but I took out a loan for $135,000, and I knew I had a refinance coming due. So I used the refinance money to knock it out. Now, if that didn't happen, I could get the cash elsewhere. I could always take it private. So I'm not leveraging something that I'm unable to cover, but I knew I had my refi coming in. If it didn't, then I would take it private and knock it out with new debt. But you can do it with debt or equity, and the money has to come from somewhere. So if you're counting on just one lender on a short-term deal knocking it out, you're probably not in a great place. You're going to want to have 2, 3, 4 lenders that could handle it and then probably figure out one way to knock it out with actual cash. That way you can feel comfortable and that you're not going to lose your assets. Okay. How would you approach an owner who has only one property? The same exact way I'd approach an owner who has a bunch of properties. How do you get to where you're at? That one property could be a duplex. Owned in cash. It could be a 147-unit apartment building. It could be a commercial building. I was looking at a deal today. It's triple net. It's right next to my 12-plex, but it's got a Starbucks in it, and that's their asset. And I'd love to own that asset. Never done it before, but I'm not going to give someone more value or less value based on the amount of units they have. They have a story. They've done something I haven't done, guarantee it. If you can't find something someone has done that you haven't when you're talking with them, that's on you. So make sure you're learning from everybody that you chat with, regardless of how big their portfolio is. Have you guys purchased bank-owned properties or on, uh, foreclosed properties? I have not. I've got some friends that have done that, but that has not been the base of my business. A lot of my stuff is owned-in-cash rentals that I get them to seller finance. I'm buying from really well-off individuals for the most part. And as a byproduct of that, I can negotiate terms that I couldn't with foreclosed properties or bank-owned. Now, with those type of deals, you can get great price. You can really get a better price than the deals that I'm buying. But I'm not focused on building the equity day one. I mean, I buy based on cash flow for equity growth, but I'm not buying just based on price because because, uh, the price is the least important piece of any deal. And anybody who tells you otherwise is not doing the, the strategy that we do, which is the, the long-term fixed rate debt and cash flow. Because if you get long-term fixed rate debt and cash flow, you don't really care about the price. It determines how long it takes to pay it off. Speaking of the McLaren, is a corporate jet in your plans later down the road, or would you not have much use for the private jet? We are not there yet. That will more than likely happen someday. It's fun to dream, but we haven't made it that far. I mean, to, to do that, we'd probably need about a million bucks a year in free cash flow to get the one that we want after we buy it. And we don't have a million dollars a year in free cash flow. We, we're close, but that would be us not getting to live the life we want to live and I'd rather get to live a good life than just have a jet. So we need to grow a little bit bigger. I'd say we probably have to buy another 200 to 300 apartments to do that, which we are working on doing this in the next 12 to 18 months. But I don't see us doing that right away. That's just not the most important thing to us. I'd rather be able to donate money to, um, the youth, to to get into gymnastics, to focus on their health than buy a jet. But it comes down to your goals, because if you want to do that, if you'd like to do that and you haven't already, then figure out what it costs. For us, the one we want would cost about a million bucks a year to do what we want to do. And we just have to figure out where does the million dollars come from. A million dollars in free cash flow on a 6% rate of return is about $16 million and change of equity. Paying 6%. I believe that is the math. I think it's 16.7%, but we're not there yet. So we're not there yet, but we'll get there. And when it happens, it happens. All right, we're out of questions in the chat. If anybody has any other questions, that'd be phenomenal. We are here until the questions stop. And also there's 20 people here and 4 likes. So if you wouldn't mind hitting the like button, that would be phenomenal for the algorithm. Did your real estate agency help you buy your first property, such as funding? I didn't just get this crazy deal in my lap from the real estate brokerage I worked at. What I did get was introductions to investors. This is why your network matters. I didn't have any family or friends to help me get into the game with money. So what did I have to do? I had to make pitch. Well, where's the money coming from? From somebody. Do I know that somebody in the beginning? Absolutely not. So what I had to do is make a bunch of pitches. And who was I making the pitches to? To people that were investors of other brokers in the office. I had to ask, hey, can I pitch some of your clients? Most of them I botched. That's just how it goes in the beginning. I mean, the first pitch I made, I was up in front of a whiteboard and I forgot how much money I needed. I forgot the terms, the deal, the rents, how long I needed the money for. It was really brutal. It was a rude awakening, but I learned really quickly, as does everybody that goes through that process. So just being at a real estate brokerage that was focused on rental properties, that got me in the right environment to be able to make the pitch. Had I not been there, would I have gotten the, the money? Probably not, because I wasn't confident enough to go out into the market and try and find the money. But some people are going to hear that and say, well, you need your real estate license. No, you don't. You just have to be in the environment where those types of people hang out. When looking at a property that has half the tenants on HUD that are way under rent, would you keep them or have current owner vacate them before closing. Not sure how hard it is to deal with HUD. Well, I've bought properties where I've kept them, and I'm working on buying a 21-unit right now in a downtown district area, and the housing authority wants to vacate the property prior to selling because they want to be able to move all their tenants over to another one of their buildings. So I'd be buying it vacant. And that goes against our rules of buying long-term fixed-rate debt that cash flows because it will be negative cash flow. That said, I'll be able to go in, lease it up, and within a month it should be full. So it can be difficult to work with them if you're working with the government. I mean, the government is not known for being fast at doing anything other than printing money, but they can be difficult to work with. So I just make sure you figure out your timeline. The 21-unit I'm trying to buy it's going to be like a 6-month close just to buy the real estate. So there's a lot of communications that have to go back and forth before anything like that can happen. And if you can keep them in place, get guaranteed income, that can help. But just make sure, even if it's low, that you write your deal where you cash flow. Any upside in the future is great, but you don't get it day one. So make sure you have day one cash flow when you're going and buying that piece of real estate. From Alex: What is your voicemail like when you're reaching out to owners for the first time? Well, if I don't reach them, if you're going to leave a voicemail, it needs to be 45 seconds or less. And I don't always leave a voicemail in the beginning. If I just call them back 2, 3 times, typically they'll get the message. Again, I'm not leaving a message, but they will typically just get, huh, this is someone that's trying to reach me deliberately. I should probably pick up. I'd rather not leave a voicemail and I'd rather just get through to them. But if you're going to leave a voicemail, say who you are, why you called, and that you'd appreciate a call back, and leave your number. Just have that call to action and keep it short. If it's over 45 seconds, they're probably not going to listen. What are you and Christian's outlook on out-of-state multifamily investing? There's a market for it. I mean, out of state is in-state for somebody else, and they're crushing it there. You can make money in any market. But you have to get good and connected in that market if you want to be one of those people. So what that means is you're probably going to fly out there and every deal you want to buy, you need to go see. Some people do the sight unseen thing. A lot of the people that do that lose money a lot. You should go see all the real estate that you want to buy. Maybe it's post-offer. There's a deal that I'm buying on the other side of the state that's basically out of state. It's 5.5-hour drive from where from where I live, and way farther than Moses Lake is, but it's 60-something units, and I'm super stoked to go see it. But I'm driving there on Monday. I was going to fly, so it could have basically been an out-of-state deal, but there were no flights, so I'm just going to drive there. If you're going to do out of state, you can absolutely make money, but just make sure you buy big enough to where you can have a competent manager that's not going to steal from you. Little deals, if you're trying to buy a duplex out of state, I wouldn't recommend it. I think that is a terrible idea. Are all of your debt products amortized? No, some are interest only. The reason I like interest only is it keeps risk on the lender till the final moment when I refinance them. Think about it like this: if you have a $2 million asset and, uh, you owe $1.5 million on it, if you are leveraged and you're paying that thing down, you go to the hospital, something happens and you owe $500,000, if you lose it, you lose it. You're going to lose some of that equity. If you kept that $1.5 million debt product on there and you stack the, the delta in cash, you're still going to have cash in the bank if something happens. So I keep the risk on the lender until the final moment when I refinance or I just pay them off with a check. I want them to keep the biggest cash position in the piece of real estate for as long as possible, and then I'll refinance and cash them out. But I, I like having some things interest only, and I do have some stuff amortized. My very first deal ever is amortized, and it just pays itself down every single month. Thank you for sharing the botched pitch story. It helps ease the nervousness. Well, the nerves are with all of us, and don't expect to be perfect because nobody is. Are you guys going to do a real estate meetup in the future? Absolutely. We do real estate meetups multiple times a year at the Robin Hood Village Resort. If you want to check it out, robinhoodvillageresort.com. We're going to set up a separate event website. We haven't done that yet, but we will get there soon where you can just register for any of the Robin Hood events. They'll be pre-booked and you can book in advance. When's the next event at the Robin Hood? Couldn't make the last one. Next one I believe is going to be in July, July or September. We'll keep posted. Why such a long closing? 6 months. Okay, so you're talking about the housing authority deal, the 21 units. So it's 14 units of apartments and 7 retail spaces. So we're starting to get into the mixed-use space. It takes a long time to get property from government hands to non-government ownership, and especially on a deal in a— like in Grant County, when buying from the housing authority, there's a lot that has to go on, has to get approved by the board. Which happened. And, um, there's just things like relocating tenants. There's a lot of moving parts there that have to get the check mark and the box has to get checked off prior to actually making it happen. Graydon, I have a private money lender for $115,000 on a 9-unit. He's in second position. He has deed of trust and a promissory note for security. He's also looking at collateralizing the deal if I somehow default. Any advice? Well, it sounds like he already collateralized the deal. For those who didn't track with that, he's got a second position note and deed of trust against the asset. So in the event of default, then he's going to have second lien against title. The only reason that he probably wouldn't feel comfortable is there's no equity in the deal. So you have to figure out how do you make him feel comfortable, or, or her. Oh no, you said he. Okay, so how do you make him feel comfortable in that deal if you default? Well, you need to show that there's enough cash flow to not default on the first mortgage. And realistically, if you default on him, worst case, which you don't want to do, then you could maybe look at signing something like a deed in lieu where you sign over ownership instead of him trying to foreclose and sell the asset out and That, that would not be fun. If he wants more collateral though, you could probably collateralize against something else you own, but, uh, I don't know your whole situation. Thoughts on markets that aren't going to gain great appreciation, if any, but can cash flow just fine, such as Detroit? I know a rule is you have to buy based on cash flow. In areas that it will appreciate. The reason I like the whole appreciation thing— you buy based on cash flow for equity growth— is because I want my net worth to go up. Because the more my net worth goes up, the more I can borrow conventionally. And the more I can borrow conventionally, the more options that I have long term. You don't have to do that. You could push for a debt-free org, which will make you more lendable anyway. So if you bought a whole bunch of 10%, 15%, 20% cap rate deals in an area like Detroit, and you spent 5 to 7 years and took all the cash flow and paid off the deals, then that could be a really advantageous play. Because if you could get 20, 30, 40 units in cash, then you could take all the cash flow and buy in an appreciating area. I just don't like to compromise because I realize the quicker I get to my goal, the more time I have to enjoy it. That said, if you have great deals and you're happy with it and you can figure out how to buy it, how to never lose it, then go for it. I'm not going to buy in Detroit. I looked at it, but I just— I didn't spend enough time. I didn't go— really want to go visit and take time out of the business that we're building here yet because we want to buy another couple hundred units where we're at. You can absolutely do it though. There are people that will make money in that market. There are people that will lose money in that market. Opt to be the first group of people. From Alex Hawk, On the first meeting with owners, how do you keep the conversation on track? It's hard to learn how they got to where they're at when they give a vague answer. Well, some people are going to give you vague answers, and that's just how it is. But you can just ask— you can map out a couple questions you really want to hit and say, okay, if they gave me a direct answer, great, and if they don't, then I'll follow up with this. But If you're not comfortable with the conversation, then you're probably not going to remember these anyway. So I would just script out a couple things in your head if you really don't feel comfortable going into that meeting and you get nervous of, I just, I just want to hit these couple points. And if you can just hit these couple points, then no matter what they say, even if it's a little vague, I'll be able to get a takeaway from it. It's not really on a— you're not on a train track, like you're not gonna just go straight. Sometimes they're gonna go off to Pluto a little bit, but your ability to just ask quality questions— there's this saying I heard from Brandon Dawson, the quality of your questions determines the quality of your outcomes. If you're asking bad questions, it's really easy to get off track. I'm not saying you are, but if you can improve the quality of your questions, you will do better. From Ryan, what is your personal approach on the 2 to 4 unit deals? Do you ever consider something turnkey, or do you only consider deals where you can force some appreciation. Absolutely. I've bought deals that are turnkey. I've absolutely bought some deals where I can force the appreciation. I love both, but everybody's got a limit for how many projects they can take on. And if I can just add stable cash flow with turnkey assets, I bought a deal recently that will only cash flow a couple hundred bucks a month. It's nothing special. But it was built in the early 2000s. It's a really phenomenal asset, great location, and it's just stable. The tenants have been there for a long time. They want to stay there for a long time. I'm not worried about that going up in value because I already got all my other projects that are doing that. When I finish my projects, then I can go do new, new value-add projects. But in the beginning, I would absolutely just focus on how do I increase my cash flow. And the way you're going to really increase your cash flow is on the value add. But if you find a really stable asset that has consistent cash flow, $500, $1,000, I'd buy it. It doesn't have to be this unicorn. I've— to this day, I've never really bought a unicorn. I've just figured out how to get great debt. Unicorn, great price, great terms doesn't usually happen, but you can make your deals unicorns over time if you just keep adding cash flow and eventually pay them off. There's a deed in lieu on the first mortgage, so if I don't make payment, she can take the asset back if she activates it. So can I still sign it over to him if it got to a place where I would default? So, uh, on that deal, um, I would just figure out how you structure it where you don't default. I mean, worst case scenario right? You can't make your payments. If, uh, you're seller financing— I don't know if you're seller financing your first loan, but if your first mortgage is seller financed, you can refinance, write a check, or you can restructure it. So I would go to them and say, hey, look, I'm having a little trouble with the property. Can we restructure this loan? I'd love to refinance. This is why I can't. The books are a little rough, and I'm trying to stabilize it, but it's a tough situation. So I can't refinance, I can't write a check because I owe you whatever you owe them. I owe you $750,000, placeholder, and I'm not liquid that right now because I'm trying to renovate this asset. Can we restructure this note? Can I get 3 months of no payments and we tack it onto the back end? Just figure out how to not lose it, because if you're just focused— I know I'm not directly answering your question because the, uh, the whole default thing, that's like the F-bomb in real estate. You don't default on your first mortgage or any of your mortgages. I would just figure out how do you restructure it if you can't refinance it or write a check, because the same amount of time that you're going to spend on figuring out how to sign it back over to somebody, uh, you could spend the time to figure out how do I restructure my situation so that I don't have to. Takes the same amount of creativity, the same amount of time, and the same amount of money. So where you put your attention, you'll get better at. I appreciate those questions, but I would just change the question. Again, the quality of question determines the quality of your outcome. Instead of losing that real estate, let's figure out how do you restructure the debt. Well, it could be a couple months no payments so that you can figure out how to hold it and then tack all the additional interest onto the back end of that loan So your loan balance is going to go way up in the long— in the grand scheme of things. However, you get to keep your asset, which ultimately gives you time, which is the one thing that is hard to buy in this business, to fix your problems. I'd also figure out on that 9-unit, what is your problem? Because if nobody's paying, what due diligence was missed in the front end, and how do you make sure you don't do that again? And just like that, we are at the end of the questions. And if anybody has any questions, feel free to drop them in the chat. I will wait another 10, 20 seconds, and then we will rock and roll if that is it. But I do appreciate everybody jumping on today, and, uh, looks like we just passed the 40-minute mark. If anybody has any questions, feel free to reach out to us. I'll put my number here just because it's on the internet anyway, 253-389-3005. If you ever want to reach out, if you have a question on a deal you're looking at, then feel free to shoot me a text. Also, if you haven't already, multifamilystrategy.com is getting revamped. Our website editor messed it up without our approval, but if you ever want help really doing a deep dive We do offer mentorship, uh, and that is the simplest way to go from wherever you're at to your goal in the real estate business. Dylan asks, when is the next real estate event? Our next real estate event is going to be at the Robin Hood Village Resort, and that will be sometime, I believe, in July. Not quite there yet. It was going to be in April and then it wasn't, so that happens. But we believe it's going to be in July, and we will have a date here shortly. From Troy, what are you— what are your seller finance interest rates currently looking like? My last deal I did was 4.5%. The deal I'm closing on next week is 3.5%. I did a deal recently at 7%. I've done them at 6%, at 5%, 5.25%, 5.5%, 4.25%. They're all made up. So you get to pick your rate, but make sure regardless what the rate is, even the 7% cash flows, long-term fixed rate debt that cash flows, negotiate as low as you can. But at the end of the day, don't blow up a deal over a point if you don't have to. And like that, that is it for today. Appreciate everybody jumping on, and we'll see you next week.