Creative finance live! Denver Edition

Alright, so I'm live. I'm in Denver. Cody's back in a restaurant paying for food and finishing up some docs, but wanted to make sure I say hello to everyone. We always do Creative Finance Live this time on Wednesday, so wanted to get a chance to get in here, say hello, and talk to you guys about what we're up to while we answer some of your questions. Today will be a shorter episode as I am walking through Denver, but we will We'll do our best here. So update, we are shooting a show right now for BiggerPockets on multifamily mentors. Just met with Terrence Doyle today, absolutely fantastic. So Terrence owns about, I don't even know how many, thousands of apartments here in the general Denver area. He's a big multifamily investor. He's done conventional purchases just himself. He's done syndication, he's done flipping, he's done a little bit of everything. We had the chance to meet him, walk his portfolio. So now we're here in Denver to answer some of your guys' questions, get through some of the questions from the YouTube channel. Again, it'll be a quick video today, so I apologize. Cody may or may not join me, but, um, all right, here we go. So first question from the chat here: Been looking at deals for the last 3 months, trying you guys' method, have not been able to find anything that's come all the way together. Okay. Uh, the question is, how long did it take you to find your first deal? Well, that's a good question. All right. So my first deal, I actually wanted to invest in real estate for 2 years before I bought my first deal. Now technically I bought a condo, I did a little live and flip with my family. My wife and I, we had a roommate. However, outside of that little transaction, I didn't buy anything for 2 years. Took me that long to figure out how to play the game. Cody moves a little bit faster. Cody took 9 months from start to close, from when he started negotiating deals to when he finally closed on his first 12-plex. That's something that you are looking to do, that is something that you could absolutely, absolutely pull off. Next question here. You guys have mentioned contract for deed. Is contract for deed the same as seller financing? Not quite. Very similar, they're adjacent. The difference is contract for deed isn't gonna put a lien on title. It's not a note. It's, think of like a car payment. Where the bank holds the title to your car, you pay it off, and you get the title to your car. There's two types of title. You have equitable title, which is what you get on a contract for deed. Then you have legal title, seller hold. So if you actually pull a title search on a contract for deed, you'll actually see the old owner and the new owner. You have control of the property, you have all the benefits of owning the property. However, it is different than seller financing as it's not a note in deed of trust. It's actually structured a little differently on a sales contract. Great question though. Next question from the YouTube comments, and again, we're mobile from Denver today, So if I'm a little clunky on this, I apologize. Okay, what is your guys' average deal look like in terms of down payment? It's a good question. There's no such thing in creative finance as average. Everything is completely negotiable. However, a lot of our deals seem to fall right around 10%. That for some reason seems to be the golden number for us. Where we really differ from a lot of the syndicators or other players in the game is people have to do these high down payments. 20, 30, 40, sometimes 60% down. If you're doing creative finance, it's completely negotiable. So you do whatever it is you can do. If you can only do 5% down on a property, and we've had that happen in our, uh, Tukwila 7-plex, we ended up doing 4.5% down because that's all we could do at the time. It's what you negotiate is what you get. However, if you want to know what the average is for our deals, it's probably somewhere right around that, that 10% mark. All right. And one more, and if anyone has questions, please post in the comments section. We will get right to it. Actually, I just got one. I'm going to answer this right now from Adrian. Can you please explain subject to? So that actually is a clause on contract for deed. There's a lot of things that it can be subject to. While some people made that their brand, subject to is simply a clause that refers to a clause called subject to existing debt. So that means the owner actually holds their existing mortgage, it stays in their name. So I'm going to keep this really simple. If I'm buying like a duplex, small property, the owner has a 30-year fixed rate mortgage with a bank, they're 10 years in on it. What I can do is I can actually say, hey, I'm going to purchase this subject to the existing debt. So original owner now the seller of the property, you are going to hold the original debt in your name. You're going to keep paying your mortgage exactly as you always would. Pretty simple, right? I'm going to pay you above and beyond that mortgage. Whatever we negotiate on the contract for deed, my monthly payments will cover that mortgage. Now where this gets sticky is one, most people don't tell their bank that they're wrapping the mortgage around like that, that someone else is now paying their mortgage in title change. Most people have what it's called a due-on-sale clause. Now, if you have a due-on-sale clause that's triggered, that note becomes due, it's a good way to lose the property. So you have to be really careful with how you put these together. It's not, it's extremely straightforward. The other correct thing that you need to make sure that you do on contract for deed, you're gonna set up a note servicing company. And we do this on all our notes anyway. But that note servicing company is going to pay their mortgage directly. That way you can't mess it up because if they default on their mortgage, you're in trouble. The other thing that protects you on is you're not paying them directly because what if you pay them and they stop paying their mortgage? You lose the property. So with subject to, you need to be really careful. Cody and I have never done subject to existing debt for that reason. It's a little bit of sleight of hand with the bank, which we like to be very straightforward, and there are some inherent risks. It's not extremely simple, which means it's harder to repeat. And going into the chat here, how is Denver? Well, Denver's been awesome. So just mentioned this at the beginning of the call, but we're down here filming with Terrence Doyle. He's a major owner in Denver. We're filming for a new episode of BiggerPockets. So we'll be flying out of Denver here fairly shortly, but went really, really well. I'm excited for everyone to see it. I think it airs— it's going to be Multifamily Mentors Season 3, Episode 2, airs sometime in December. So look forward to that. We had a chance to drop some bombs there. Terrence has done a lot in conventional finance and syndication and fix and flip, but specializes in value-add properties. We got to walk one of his just about 300-unit buildings today. Very, very fun. So Denver's been an absolute adventure. Super glad to be here. Now one more from the YouTube, and then we'll just go, we'll go off the chat. And once the chat's done, we'll call this a short day for Creative Finance Live. So in the YouTube comments, Are you and Cody worried about rising interest rates? We actually just talked about this recently with Terrence, so this actually ties right in. Current interest rates, am I worried? No. Why? We don't have any bank loans. I don't have a single bank loan with any bank. Now, we might change that soon, outside of my house, but it's all negotiable, so we make up the interest rates. Now, if you were going to refinance and you're going to put stuff into bank debt, or you're buying conventionally, We've seen one of the biggest raises in interest rates of all time. Interest basically doubled very rapidly. People who could afford houses like $800,000 are able to afford a heck of a lot less. Like, last I looked, if you could afford $800,000, you do $540,000 now. Really hard. I got a question for the chat here. How to handle the seller finance conversation. How do we initiate that? So on a seller finance conversation, you're going to get in there through 3 points: relatability, a goal, and significance behind that goal. And that is all. So I'm going to reach out to someone instead of saying, hey, I want to buy your property, which is the wrong thing to do. I'm going to say, hey, this is Christian Osgood. Now, like when I got started, I had a duplex. I have a duplex on your street. We're property neighbors. I wanted to just know my neighbors, let you know that I am another owner alongside you. They usually respond with, "Okay, that's cool." Not that interesting, right? Little relatable point. Well, I realized that what I want to do is I want to retire my wife, and one duplex at a time is not doing that for me. So I saw you had this 12-plex, and I wanted to learn how you got there. Their normal response would be, "Well, I'm not selling." Which is great for me because at that time I'd spent all my money on the 2 duplexes I owned. So I went, well, I spent all my money doing duplexes, so no idea how I'd buy it. But that's actually why I wanted to meet. I'm going to be in Moses Lake working on my property. If you're in town anywhere near your property, I just wanted to get to know you, how you got started in real estate, and see how I scale to where you got, because you've done something I've never done. That is how you approach a seller finance conversation. It's a relationship. Some people tell you, hey, they're going to do it for the tax benefits. Hey, they're going to do it for financial reasons. They want to earn a little bit of interest on their money. That's not usually why someone would seller finance. The reasons people seller finance is because one, most commonly, they want to sell to you and they want to move you forward. They believe that you can handle the property and they don't need all the money today. The other reason is this is a distressed property that can't be taken out with bank debt. If you can't take out the property with bank debt, then your options are, hey, I'm gonna buy it in cash or Has to be seller financed. And, uh, down, thanks, uh, thanks me for taking the time in Denver. Absolutely. This is absolutely the— let me try that again. Absolutely. Uh, it's really important to me that we share with you guys every Wednesday. I want to keep it consistent. I know it's a little bit, uh, it's a little bit shaky and, uh, you know, it's not the most professional job I've ever done, but I do want to keep you guys involved as we're doing stuff. Cody and I are really trying to push some of this media stuff. We want to be on more podcasts as we travel. I just want to bring you along for the ride. I'm going to share a takeaway that I got from Denver, and we'll see if we get any more questions in the chat. If we do, that's awesome. If not, we'll call it a day. But getting to walk some of Terrence's 300-unit properties— and granted, syndication is not something we want to do. Reason being is because you can't negotiate price on a conventionally financed syndication deal. And I know a lot of really lame syndicators. Just so happens Terrence is a fantastic syndicator. He actually puts a lot of his own money into his deals, and I got a look at some of them. My takeaway is I want to go out and buy bigger. It would be so cool to own some of the buildings that he owns. However, Cody and I are going to do without syndication, so I'm going to call my shot here. Cody and I are going to buy 200, 300, 400-unit buildings, and we are not going to syndicate to get there. So follow the adventure here for how we do that. And with that, any other questions in the chat? I can view them in real time. If I missed one, I can't see it on my phone. Okay, uh, should I join your lifetime membership now or after I've met several owners to learn their stories? Okay, not a sales pitch, but seriously, you should do it now. The lifetime membership we pair with our mentorship get 3 months free. The reason you would do it now is because if you learn how to talk to those owners, you go through that script, and you actually spend the time with other people learning this together, your presentation to every owner that you have will be better. The more knowledge you have, the better you can apply it. Application is way more important than education. So by all means, get out there and meet owners today. However, You can't apply information you don't have. So get the information immediately so that you can apply it. Dory sends a plethora of emojis here for us and a thumbs up. Dory, it's good to see you, or at least your emojis. But yeah, seriously, if you guys want to check out the course or our, our mentorship group, it's themultifamilystrategy.com. Feel free to hop on there. I'm happy to help anyone reach their goals. We're going to have Caleb and Chuck on here again for one of our lives soon. Those guys bought 28 units at age 19. There is no one I've seen in this country buying as fast as those two are or as good of deals. So yeah, if you really want to learn more about how they're putting it together or the community we're trying to create, reach out to them directly. Their YouTube channel is Caleb and Chuck. They just launched it. Follow their story because it actually might be even cooler than ours. I'm up for the challenge. We're gonna try to grow big and keep everyone posted, but they have a heck of a story. So it looks like that's what we have time for, and I gotta get over to the airport. But thanks for tuning in for the, the 12 or 13 of you guys who are watching. Dory, again, good to see you. Everyone, thanks for your questions today, and we will have a much longer meeting next week when we're back to normal.