Creative Finance Live!!! How to make your first Million in Real estate

We're live.

We did it. We did the thing. Welcome, YouTube. I'm Christian. This is Cody. We're going to give everyone a few seconds to cycle into the channel, but it is Creative Finance Live, which means we're going to be answering all the questions that come in through the chat and we'll go as long as that lasts. I think we have like cut off in 2 hours. So if you guys have a lot to say, we have a whole lot to offer.

And if you have nothing to say, then I'm taking a nap.

Yep. This will be a very short video if there is nothing else to say. So looking forward to seeing a few people show up here shortly. But today's topic is going to be how to make your first million in real estate. We're going to share the story about how we did it and how we did it several times over in 2 years of partnerships. As, as I exit the intro here and pass it to Cody, I'm going to start pulling up some questions from the YouTube chat this week so we can answer those. To get us kicked off, and then in about 10 minutes, we will dive into our topic for the day.

Hey, we got a message from Alex Hawk. The owners I have met are very helpful, but I don't know how seller financing works. Oh, they don't know how seller financing works. Not sure, uh, how they would offer to sell to you. Well, they may not. If they don't know it, they can't teach it to you. The point of meeting with a property owner is to learn how they play the game so you can get a little takeaway and apply that to improve your overall business.

Facts.

All right. So you got some questions?

We are pulling them up now in real time. We got a bunch of kind comments this week, which means that my questions are buried. But thank you all for the, the kind comments. First one I had is we did a post this week, real estate party. We're doing our next event March 17th, 18th, and 19th at the Robin Hood. Someone asked, where is this event going to be at? Well, it's going to be at our resort, Union, Washington. Robin Hood Village Resort, 3 days. We have the best pipeline of speakers I think we've ever had. We're bringing in some heavy hitters.

Yeah, heavy hitters. We're going to bring some of the BiggerPockets people, some of the non-BiggerPockets people, and it's just going to be a good time. Mm-hmm. Since it's St. Patrick's Day, we will have green beer.

We will. Our neighbors across the street, they've hosted for our last 2 events and they get further and further along every time. The first event that they ever had at their venue was our first event. They opened business the week before, so we did an event there last time. We absolutely filled their tiny little, uh, taproom and wine bar. Fantastic time. If you guys want to come, book a stay at the Robin Hood and you get bonus poker night and a party over there.

Oh yeah, it's gonna be fun.

Yeah, really excited for that.

We got a lot of people, a lot of our common folk joining the chat. Dividend Dave, All Nighter Hider. And Rob.

Oh, good. With, with Dividend Dave and All Nighter Hider, we are officially allowed to start. So welcome to the chat, guys.

They asked if we got Zuber to commit to an event.

Zuber wanted to do April, and I am figuring out my April schedule before I figure out a weekend. There will likely be an event in April. However, our priority is getting our March event full. So once March event is filled up, I'm going to focus all the attention on April and we're going to get Zuber and crew over here. If it's not April, it'll be the month after. Who's managing the employees that work at the front desk and the cleaning staff? Well, interesting thing with the Robin Hood, we are a— what, this campus has 17 cabins?

Yeah, 17 total livable spaces.

Yep. And then we have another campus one block over, adjacent property that has a large Airbnb, and we're finishing up the tiny house. So it's a small resort. There is actually no front desk. You come right in. You drive right up to your cabin and like an Airbnb, you let yourself in. The staff has pre-opened the cabin for you. You walk right in. It is fantastic. So no one manages a front desk. Cleaning crew, we have a wonderful, wonderful lady named Heather who runs that crew. Maintenance staff, uh, we just hired for. So this is, uh, Zach's first week being our head of maintenance, which has been awesome. He knocked out a ton of projects.

Also, the tiny home we bought over there, we bought Zero down, 100% seller finance. You can buy whatever you want seller financed.

Did we really need a tiny home? No, no.

Is your wife mad? Yes. But we did it.

We did it. That one. Yeah. Don't always buy things. We hadn't actually bought anything that was 100% seller financed. We did it for the story. I just wanted to see what it was like to do 100% seller financed. Turns out very easy.

Zero down is easy. All right. Someone asked if we scrapped the restaurant. Nope. Previous ownership did that. And they turned it into their house, very baller house. But now we rent it out to the public.

Yep. Here's a question from the chat. At what point, in your opinion, do you move from sole proprietor to LLC? We'll both have a different answer for this.

Well, if you're a sole proprietor and you don't have a partner, then I mean, you probably don't need to. But what I put in the comment as a response is if you're going to partner with someone else, you probably should. Have an LLC. I would not buy a property personally with someone else just in personal names. I don't see that as being wise.

And that's really the purpose of having the LLC is so you have that operating agreement. LLCs don't do that much to protect you. It's honestly pretty easy to pierce the corporate veil. So it's while there's some legal protections, the main thing is you're spelling out this is how the partnership operates. Everyone's roles, ownership goes in that operating agreement for the LLC. So when do you get an LLC? It's when you bring on equity partners who own the assets with you. That is the appropriate time for me. I actually put my first property in an— no, second property in an LLC because I was told that's what you're supposed to do. Well, then I went to refinance it because I bought it with hard money, refinance conventionally. Well, to get a 30-year fixed rate mortgage, you have to own it personally, which means I had to pull it out of the LLC, refinance under my name. I paid a small amount of excise tax to do that, and it was just an overall pain in the butt. So don't add steps if you don't need to. Just have great insurance. If you're getting started, we start bringing on partners. That's when you need an LLC.

Dividend Dave just said, how many owner finance offers do you go through before you get one accepted? Well, my first one was accepted. My second one was accepted. My third one was accepted. And my fourth one was accepted. So 4 for 4. And yeah, basically every offer I make outside of maybe just a couple formal offers have all been accepted. And we just got another one accepted, our 12-plex. We just— we had gone mutual on. It's also seller finance. And that is going to be zero money down out of our pocket. Phenomenal seller financed opportunity. And we just waive feasibility.

And that's— there's a reason behind that. With the seller-financed transactions we do and just transactions in general, it's highly relationship-based. So when we're doing these with relationships, we've already, for the most part, discussed our goals. We know what their goals are. We understand the property. So we're not just slinging out offers on anything we see. We've actually had this conversation beforehand. So by the time we get around to writing that offer, we pretty much know it's going to be a yes because we've done the work up front to solidify that relationship. A question from the chat this week, or the, uh, the comments section rather. Cody, when you first started calling owners, did you call multiple a day, and do you leave voicemails, or would you just call back another time?

I called all the players in the market I was looking at buying in until I got through to them. So if I had to leave a voicemail, I would. It wasn't super scripted because I didn't know what I was doing. It was just simple, like call the players. So I'd call everybody, wouldn't get through to everybody. I left some voicemails, tried sometimes without leaving a voicemail, sometimes got hung up on. But I booked a lot of meetings, and the meetings that I booked I ended up buying from.

Yep. And some of my background, I was a professional cold caller for years. I, I did it, uh, I started by selling apparel nationally, then I moved to land.com, which got bought by CoStar. Then I was selling costarloopnetapartments.com. There's some golden rules for leaving a voicemail. A very specific voicemail will typically never get returned. Very simple. Hey, it's Christian Osgood. Wanted to get a hold of you. Can you give me a call back? I'm available all day. 425-336-9332.

45 seconds or less.

Yep, that is my actual number. If anyone catches that on this, you may call me as well. But yeah, the golden number is if it's— we actually ran metrics on this. If the call is less than 45 seconds, the actual number is 44, but 45 is easier to remember. 45 seconds. If it's less than that, you are way more likely to have them actually listen to it and give you a call back. If it goes over 45 seconds, it drops dramatically. So short, sweet, little bit of mystery. Don't give them too much. Because you're going to explain all of that when they call you back. And then from D Storm 2.02, quick question here. Can you still slightly negotiate the price after inspection, or do you have to come up with terms? This is probably in response to our video on negotiation and why we like to do all the negotiations upfront.

Yes, we just did. We did a lot of negotiation upfront on the 12-plex. They wanted a Higher interest rate, 5.5% amortized, and that killed the cash flow because the cap rate was around 5 at day one acquisition, which is not good. Earn 5, borrow at 5.5, and pay down the debt. So we negotiated that down to 4.5% initially, and we had it go IO for a very long period of time, which allows us to cash flow, which is phenomenal. However, we got through inspection, there were some things that needed fixed. So we dropped the price and dropped the down payment, and they accepted. So you can absolutely negotiate later, but you have to have contingencies that give you the leeway to do that.

Now, the game plan is you want to negotiate the deal that you want upfront with the pieces that you have. So you don't want to rely on, hey, I'm going to get close to what I want, and then after inspection, I'm going to try to ding a few things. That's what I did on my first ever deal, and what happened was there were a few things to get the price down to where I wanted it. And they just said no. I'm like, oh, well, that didn't work. If things materially change the deal, you're going to need to renegotiate. We had a few things come up in inspection where I'm like, that's actually going to cost some money. And so we needed a few things done and we don't usually change anything. There was enough on this inspection where it's like, okay, I don't want a big project and I need a little bit of money to fix up a few projects. And so we did a small renegotiation, came a little bit off price, a little bit down on down payment, and the deal's right where we want it.

Yeah.

It may be our first deal that I would actually call an absolute home run.

Yeah, it's a great opportunity.

Yeah, the 38 would be the next one that financially was a home run, but the amount of work to get there—

yeah, well, let's go into the questions here. Yeah, we're talking about making your first million. My first million, your first million was made buying 38 bucks.

Yeah, excellent segue.

Something that I heard from my first mentor who is no longer in my sphere He said, Cody, the best way to become a millionaire is to borrow $1 million and let someone else pay it off. And so then you're rich. And so you kind of get to pick your net worth. If you want to be worth $10 million, borrow $10 million to buy real estate and let someone else pay it off and don't overpay for your assets. And that was the simplicity of it. You just got to figure out how do I buy it and then how do you cash flow it long term to pay off the obligations. But we bought the 38-plex and it was a non-performing asset. There's non-performing assets all over the United States, every city in America. And we bought the biggest of the turds in our little area.

Fun fact, they actually had the biggest SWAT operation ever to happen in Grant County. It was at that building. That was back in the '90s. But they had a major, major drug bust. This property used to be really rough. It was outside for a long time, outside of the city lines. So there's limits on what the police could actually do there. It's since been incorporated into Moses Lake, which was prior to us buying it, which made it a lot easier to clean up the property.

Yeah, but we bought that property and anytime you can take something from non-performing to performing, you can typically make a lot of money because most people can't buy non-performing assets. They can't afford it. So we afford it? No, but we rolled the dice. We said this is going to put us on the map or it'll sink us. So we ended up buying the 38-plex. And we were able to take it from non-performing to performing. We got it from a negative cap rate. And there's some people, some haters, keyboard warriors on YouTube that say that's impossible, but they live in pro forma land and they're wrong. And that's the only thing to say on that. They're just wrong. So it lost money if you owned it in cash, just the way it was operated. So we had to flip the management, we had to get the rents up, we had to get all the non-pays paying. And when we did that, On appraisal, we got the value up 75%, which made us $1.5 million. Now, we bought that with zero money out of pocket. Christian and I were already each worth $400,000 from some of our investing. He had two duplexes and a house. I had 30 apartments that were highly leveraged, but we both had about $400,000 to our name. So adding another $700,000 and change—

so worth noting, none of that was in cash.

Yeah, not in cash.

We had net worth but not money.

Yeah. And now we've got multiple, multiple millions to both of our net worths, but not in cash.

Yeah, we got a little bit of cash. Not much.

A wee bit.

We need up the cash reserves now. And that is the actual phase that we're on now. Stabilization and optimization. Liquidity is going to be a huge piece of that.

And we're making large strides and we're going to work on a development project now on the 38-plex. It's going to cost $10 million. Just we have to figure out where the $10 million is coming from, but they'll add another $17-ish million of value to the property. So borrow $10 million to make $17 million. Mm-hmm. That'll work.

And just to illustrate some of the numbers behind this, when we first bought that 38-plex, actual collections for the first month was about $5,500 just upfront.

$5,500 in collections on 38 units. Is not good.

If anyone's good at math, that is horrendous. I know of 6-plexes that yield a lot better than that. We have 38 units. There were a handful of vacancies and rental projects which were totally factored in, and there were a handful of non-pays. I want to caveat this because we're talking about we made our first $1.5 million of net worth bump. Now, granted, we had some partners on it, so it really was about $1 million that the two of us made. The million dollars was made fixing up a non-performing asset. If we went into that without knowing that it had all those vacancies and all of those non-pays, if we didn't do the due diligence and actually figure out what collections were prior to close, we would have absolutely 100% lost that asset. Yeah, would have been terrible. We had to have a plan for it going in. One of the first things we did is we lowered the payments dramatically for the first 6 months before it ramped up to full payments. We don't look at— we need lower payments for an extended period of time while we fixed the collections issues. We knew of multiple government programs that were available because this is right as we were right mid-pandemic. There are all sorts of relief programs for people who can't pay rent. We just needed to help people get on whatever the appropriate program was to get them caught up, get them stable. And that worked beautifully. But we had to have enough time to execute that problem project. Otherwise, the problem would have been cash flow would have eaten us alive. Fixing the property. So things you have to factor on that. But really how you make your first million is you find an opportunity. It has to be, one, an opportunity that you are able to fix, and two, the one you want to fix, because that deal was on market for 13 years.

Now, on an income approach, for the math people that are watching this, if you can add $10,000 a month in net dividends to an asset, meaning you can increase the net operating income by $10,000 a month, $120,000 a year, in a stable market, let's just say 6% rate of return average market, that adds $2 million of value. So if you could do half of that, you make a million bucks. If you do it with a partner 50/50, make $2 million. And that's the simplicity of it. So that could be 100 apartments that you raise around $100. It could be 10 apartments that you raise $1,000. Probably not going to be that one. So you're probably going to have to get somewhere in the middle. You could build a 50-unit portfolio that has a $200 rent bump. There are deals like that all over the U.S.

Yes, there are.

All right. Should we go into the questions here?

Yeah, let's go into a few. I'm going to scroll up here on the questions. By the way, if you guys are watching right now, let's get some more people in here to ask questions. Everyone hits the like button. YouTube will like it and people will start popping in. So ask your questions. Invite a buddy, hit like. It's just so we can get more questions.

Rob asked, what can you do at the resort in winter? Well, it depends on which cabin you book, but we do have hot tubs for almost every single cabin. And one of them that we are launching here in a minute has a sauna. There's also a wine bar next door, so if you're into that, you can hobble home and you don't even have to drive home.

Hobbling. Yeah, it's, um, There's a lot of hiking. Hiking. This is actually the— we have some of the best fishing in Washington State, just hands down. Hood Canal is awesome, and all the rivers that run in here are fantastic for— if you guys are fishing dorks like I am, they have salmon, uh, sea-run cutthroat trout, and all the fish are just really easy to catch here. If you're a fisherman, the off-season winter is one of the best times to fish here.

And we have a golf course right at the hill.

Yeah, though I don't know how good the golfing is in the winter, but Fishing is great. Hiking's still good because we don't get a lot of snow down here. And, um, I really think the best part of winter though is you come out here, it's cold outside, the hot tub's 104 degrees, you hop in the hot tub, you relax with a glass of wine from Canale, and you just get away in the middle of winter. It's a fantastic place for it. And our pricing is a little bit lower in winter because it's a resort. Ta-da! But yeah, that's one of the best things you can do here. One of the questions Rob had asked, so you're running the resort like an Airbnb, basically?

Well, it's a hospitality business, so we do have it on Airbnb, but that is not the main source of traffic. We've got direct booking through robinhoodvillageresort.com, and it operates almost as if it's just a hotel. Come check in, stay, enjoy the hot tub. You can go— there's a lot of restaurants nearby and then check out.

Yeah, about that simple. All hotels run like an Airbnb. That's why hotels hate Airbnb is they—

and that's the key. If anybody wants to come stay here and check it out, you can either go to the website or you send a text message to 360-490-8168.

Yes, yes, facts. And if you guys have any questions about our event on March 17th, also text that number. And if you want me to send you some details, I can send those to just DM me on Instagram @ChristianOsgood or text us 360-490-8168.

Yep. Someone asked— go up, you're scrolling past questions. All right, there you go. How are you doing? Good. The owner has asked my friend to show tax returns and he's an 18-year-old in high school. Well, he probably doesn't have tax returns, so I just let him know, hey, I don't have tax returns. Trying to get into the game, use your story, but keep it super simple. Yeah, don't lie. I do that.

Nope. I keep those as simple as possible. We got started, people like, well, like when we first started, are you bankable? No, not really. Not for this size asset. When we first bought the 38-plex, Cody and I didn't have a combined net worth of $2 million. We didn't have a combined net worth of $1 million when we bought that property. So if they had asked anything about our bankability, it's like, well, no, we can't take this to bank debt until we stabilize the asset. And then we did and we brought in a bank debt.

Fancy.

Yeah. But yeah, when you start, you don't have those things. So just tell them that's not going to be an option for me. Here's my situation and this is why this is the right deal for me.

All right.

So I got that one.

What's the best way to find a mentor? Christian Osgood.

Best way to find a mentor. So there's two. The first one is you go to the multifamilystrategies.com. But if I'm not plugging ourselves as mentors—

but we are plugging ourselves because we're the best in the space for this game.

We are the best at the creative finance thing. But part of our mentorship is how to find the right mentor in your market. There's two things that you do with a mentor. So one, you have the general concept. So you have like someone who runs a group like ours and it's like, okay, perfect. You have someone who knows how to play the game at a high level. Then you have someone in your market who knows something that Cody and I do not know. At least we don't know as well as they do. It is how to be successful in multifamily investing in your specific market. You're gonna find someone who has done exactly what you want to do. And you are going to do everything in your power to meet with them and get that first coffee meeting and build a relationship. And you need both of those. You need a strategy and someone who you're following. You're like, okay, what is the actual pathing that I want? And that's what we do. But I cannot compete with the person who has already done exactly what you want to do. So find the person who owns those multifamily buildings. If your goal is I want to get to 50 units, find someone who has 50 to 100 units and ask them like, how did you get to 50?

Yep. If you want to become a player, you got to meet with the players. It's just that simple.

Yeah, I'm terrible at poker, but if you ever get started in poker, you come in and you have to learn, which means you're going to lose a lot. You're not going to know what you're going to want to— like, how to play. What typically happens at the table is someone spots you a few chips and goes, okay, here you go, get in, learn how to play. You're just looking for the person who's going to deal you in, and it's not going to be everyone, but someone's going to go, okay, I actually do think I have the right property for you, or I know someone who does. I'm going to help you structure this. But people who do real estate know people in real estate. Meet that person. They might not be the one to sell you something. They will be the one to show you how the game is played and where you're going to buy your first deal.

I'm sorry.

Oh, good.

Working out. All right. Hi, Cody and Christian. You ever buy a property without seeing it in person? Nope. We don't do that. We have to go see the project. We're not going to go buy some slum without seeing it. It's going to become our slum. We need to at least see it first.

And I know a lot of people who buy sight unseen and they share on their YouTube channel, I've never seen this building. I know someone— I hope I didn't share her story on the channel. I know, I know an investor who had contractors fall through the floor of a building because they never actually walked the property and it cost them about 6x what they originally mathed to renovate the property.

Not good.

We had this 14-unit under contract recently, and on paper the math is spectacular and someone can still come in and make money on this deal. Yeah, we walked that deal. There is dog poo everywhere you step. I think there's more poo than there is concrete around the building. It's missing supports. The roof is the weirdest drainage system I've ever seen. Yeah, ever. And the inside of the units are infested with cockroaches.

Not good.

That didn't show up in the numbers. Then we talked to the tenants. The broker went, oh, this, this tenant's lived here for years and years and years. And she's like, I moved in 2 months ago. I'm leaving.

It was 1 month ago.

Oh, that's even worse.

I lived here 30 days and I'm leaving. Yeah, not good.

So it's like, okay, the broker lied, the units are bad. Yeah, there's— oh, due diligence is everything. Seeing the property is part of due diligence. I'm adding that to our course. We don't have actually go see the property.

People suck.

Adding that, that's a rule. Mark my words, that'll be in the course by the end of the week.

Mark his word.

We just went through a whole due diligence deep dive thing and I realized physically going to the property needs to be part of that. Yeah, super important. We would never, never just rely on the numbers. Know what you're buying.

Does the seller of a deal obtain 1031 benefits if they do seller financing? Well, it's not a 1031 exchange, but if they 1031 up and up and up and up, I've been through this before on multiple deals representing clients as a real estate agent. And what I've found by talking with all the different CPAs is that some of their prior gains can get realized even if they're not getting it all at once, if they're not getting it in the down payment. This was the issue with the deal. It was an 8-plex in Bremerton trying to do $100,000 down. And the problem was their tax obligation was higher than $100,000. And I was like, well, how can it be higher than $100 grand if they're not getting the paycheck? Because they 1031'd up a whole bunch of low basis. So that is something that you should definitely check with your CPA, because every time I've tried to spin that and I've thought that I'm like, no, that's wrong, I've been proven wrong. So I would run it by your CPA. But it— what it seems like is that if the basis was super low and it gets stepped up and stepped up and stepped up, then they may have a taxable obligation. That CPA also might have been wrong.

And there are a whole bunch of firms that actually specialize in 1031.

Yeah, every good to run it by. Yeah.

And everyone I've ever talked to, they love to educate. They actually make most of their money on just consulting, figuring out how to solve your problem. And if they're the one who actually figures it out, they're the one who gets the business. So that's one where the advice is free and you can just call them and talk to them and they're, they're all really knowledgeable.

And I don't know if that CPA was trustworthy because it wasn't my CPA, but it's definitely something that you should chat with a 1031 intermediary on because they're going to know better than YouTube.

Yes. And by the way, we have a— we're getting like 30 people in the, in the viewers. However, I'm running low on questions already. I'm ready to keep this party rolling. So if you guys have anything on your mind, pour them in here. I have one or two more questions, I'm sure, off the YouTube channel, but when we run out a couple of times, we are done. So from Andy, if I don't know any investors in the area but I find a good deal, how do I fund it? Assuming it is largely seller finance and I am the one covering the down payment.

Well, if you don't know any investors, you should probably go meet with some. And the investors are the players in the space, which is why everything we do is relationship-based. The reason we call up owners We've had property owners that we've called with this strategy fund our deals, not just the seller financing, but fund the down payment.

That's a huge part of the reason that we promote the strategy of just network all the time.

Uh, I just got done networking with an owner in Union. He owns the Sky House. You look up Union Sky House, it's Tyler. He owns that, and that is a unique property that you're not going to find anywhere else in this county or surrounding counties. The history, if you look it up, is just crazy. But opportunities come out of that that I wouldn't get otherwise. Like, I have to go network, go meet with the players. We're doing that all the time.

And it's not meeting with sellers, it's meeting with owners. Um, after we're done with, uh, actually right after this, Cody and I are probably gonna grab a quick bite to eat if we have time.

Uh, we're gonna have time, and then we're—

and then we're gonna be running up to, uh, Tacoma, about, about an hour away from here, to go meet with more investors. Just going to a different meetup group, one I've never actually been to, just to hang out with more people and meet new people. If you are around people playing the game, find the deal, the money will come. Yep. Great question though.

How do you guys structure financing when the owner has debt on it? Well, it depends. There's a thing called free and clear title. That is the best practice. Green clear title means that when I buy something, all of the other owner, the seller in this case, all their mortgages are gone. They're wiped out. Yep. There's no clouds on title. Well, if you're going to do it that way, then you have to either assume the mortgage so that it clears the title from that owner, or you have to pay it off, or they have no debt. But in this case, you're saying they have debt. So you either got to assume it or you got to pay it off. That's it. So if they have debt, what you could do is you could borrow enough of the down payment in the form of debt or equity from an equity partner to knock it out, even if it's a large amount, and then you could refinance it out later. But best practice is to pay it off. There are— we're not going to say you should ever do subject to. There's clause in a real estate contract that where you keep it in place. Not worth the risk for us. We're not in the game to play it twice. So if you're going to keep other people's debt in place, we would just say, hey, assume it. And if you don't qualify, find someone that will help you qualify.

Yeah. And the more, the more and more we research and look into subject to, because I mean, we understand all this stuff, there's a reason we don't do it. But the more often I hear about it, the more stories I hear about it, the less I want to do subject to existing debt.

Yeah, we keep looking into it and it's just all the explanations where people try and make it sound better, it makes it sound worse. If it doesn't pass the logic test, we don't do it.

Yeah, it's the— just even going down to the, the who is a good candidate for it, it's almost always distressed sellers.

Yeah.

And we work with masters of the game to learn how to play the game better. If I'm playing with people who are losing their assets, uh, this is gonna sound harsh, but like, I don't want to learn from losers. There's, there's no lesson there.

We're not calling them a loser, we're just saying they're losing stuff.

Yes, they are. In fact, They are, in fact, yes, they are, in fact, by definition, a loser. Now they're going to win other stuff in life. I'm not making fun of the person. I'm just saying people who are losing that game are not the people I want to lose or learn from because I don't want to learn a losing strategy. So what we actually just want to do is network with masters of the game. Masters of the game know how to move the debt around.

They typically pay off their debt over time and they buy stuff with free and clear title.

Yes. So these are all things to keep track of. Just don't work with— everyone's after distressed sellers. You'll see so many books on like, look at the beat-up property, you should buy that. It's like, no, buy a beautiful turnkey property on fantastic terms. We just bought a building, Moses Lake. It's a duplex, huge, 2-car garages, big buildings. Fairly new build.

I would live there. It's nicer than where I live. Yeah, as, uh, it's nicer than where you live.

It's nicer than where I—

the carpet is crap, but we— there's green and turquoise carpets in it. Those will be fixed.

Yeah, it's really, really pretty. Um, so I'd buy those assets subject to. I would throw that— if I'm you guys, I would just throw that option out. It's— there's enough deals without doing it.

Clear title, for those who are listening. All right. How many deals do you review in a month? I review a lot, but I'm the numbers guy. We're not allowed to buy more because Christian's wife will get mad at us. So in the meantime, we have a lot of projects.

And to be fair, she's actually very excited. She said this last week. She's like, I am so excited for when we finish our renovations because then we can unleash the Cody on more deals.

That said, like within the last little 20 minutes or 30 minutes that we've been doing this live, I reviewed another seller finance 12-plex that my broker sent me. I just did it on my phone like 10 minutes ago. So there's a, there's a 12-plex seller finance. It's in Yakima. So I instantly said no because I don't want to buy a little 12-plex. This may sound like a big deal for you, but it's a very little percentage of our portfolio. So I don't want to buy in a new area, but it's seller financed, slow money down.

There's 12 in Yakima. Yeah. I looked at that 2 days ago and that other broker is looking at it too.

Yeah.

That owner is using, is talking to this, to multiple brokers. That's funny. Yeah, that's— you know what you want to buy when those come in, by the way. And brokers come in being able to say yes, no, yes, no, really fast.

Yeah. He asked, do you want to buy this? I said no. Send it to my buddy Brian. Yeah.

And that's the guy we usually say yes to. That's the same broker who we're buying the other, the other 12 flips from.

Yeah.

When you find owners, what happens if that property is under a realty?

Property. It wouldn't be the best idea to seller finance to a bank. Okay. I don't, I don't understand your question.

Yeah, I'm—

it was under a realty. Like if it's listed, I buy a lot of seller finance properties listed.

Yeah, if that's the question, we do that.

We did that on this resort. Yeah, we didn't even know this was listed. I was told it was owner financed. And it was off market. So Christian called the owner, booked the meeting. We met in literally that room over there, and we got to the meeting, learned about their story. They learned a little bit about us, and we ended the meeting, and he asked, so you bring a suitcase full of cash?

Heck yeah. No, we didn't have a suitcase full of cash.

I said, yeah, a million dollars. He's like, okay, go get it. No, I don't actually have that. But, uh, yeah, so if it's listed, go through the broker. But if you find out it's listed after you already called the owner, then this is what it is. Yeah.

Um, from Andy, uh, haven't managed to get an owner to want to meet with me yet. Any tips on building relatability when calling owners if they're skeptical of you and just want to know why you're calling them? I think the biggest thing, and I've given a lot of thought to this because Cody and I do seem to consistently, even when we started, it's not that easy, but we had less resistance than a lot of people seem to be experiencing. And I think a lot of that is the tonality and the pacing that you have on the phone. I, Cody had to learn this the hard way. I mean, I, when I first met Cody, he was just in an office making calls, finding deals all the time. Cody was just, it was actually a really small office. Cody was just in the corner on a phone, just railing calls.

Let's go.

So Cody had to build the skill set as a broker. I had to build it as a salesperson so that by the time we started this, the tonality and the pacing, it means a lot.

Um, yeah, you can get people amped up, you can get them super hyped, and you can also get people to chill out. I had a cold call from someone, um, they texted me, and so I, I had to call them about an issue that popped up that, that was not my fault. You know what I'm talking about with Quincy?

Oh yes, yes, yes, I do.

And when he picked up the phone, yes. Because escrow made a mistake and they thought that I was paying off a million-dollar note 7 years early. They don't want that because the gains. So he was really pissed, but within just a few sentences, completely chill. There's nothing I could say that would make him chill. It's how I said it.

Yeah, there's, uh, if you want to learn how to do that, there's 2 books, and you want to do them both on audiobook because you want to hear the tonalities, because they both talk a lot about tone and body language. Um, while I love reading These are audiobooks.

I don't love reading, so I do audiobooks.

Perfect. But you have the Way of the Wolf, Jordan Belfort, Straight Line Selling.

Yep.

Fantastic book. It will talk about tonalities. I read the book. The tonalities make absolutely no sense if you're reading them. When you listen to him explain the tonalities while using them, it clicks and you can use them. Do that book. Practice the tonalities. Do the book. Do the book. Read the book. Do the tones. That is how you work on tonality. If you want to learn what to say and how to phrase it, Chris Voss, Never Split the Difference. So Chris Voss, Never Split the Difference. He was an FBI negotiator. And so the whole thing is you can't split the difference when you're negotiating for hostages. You can't just negotiate for 3/4 of a hostage. You actually have to win the negotiation. A lot of the communication things in there Combined with the tonalities from Jordan Belfort's book, Way of the Wolf. If you do those two books, phone calls will be way better. Just a sales statistic, people on the phone, you have, in person, you have 4 seconds. On a phone, you have less than 4 seconds to make a first impression. So it has to be high energy, say your thing, whatever tone they start with, you're gonna match exactly. You're gonna mirror the tone, not their, not anything else, just the tone of their voice. And you're quickly gonna bring the energy back up.

Yeah. There's a thing called pace, pace, lead. So you pace with them a couple times and then you lead 'em to where you want 'em to go. And so whether it's with like if they're super grumpy, then if you start out and you're, you're not grumpy or you don't have that edge on your tone, they're not gonna think you're very agreeable cuz they're not gonna see you coming from the same place they are.

So you pace with them.

A couple times, then you lead. So if you get on the phone and it's weird, we don't talk about this a lot. No, I haven't had to even think about this in a long time, but this is the stuff that I had to practice and learn. And I recorded myself, so you're probably going to want to record yourself. But the ability to enter where other people are at, and if, if they're kind of pissed because you call them out of the blue and they don't know who the heck you are, you got to be able to pace with them just a little bit and then lead them back to the realm of being calm.

And I've always seen it taught pace, pace, lead. The way we've— this is how I see masters do it, and this is the way I see it happen on a lot of our phone calls now, is it's pretty much just pace, lead. I mean, you can bring it really fast. You match them, they say something, and your next sentence, you're on a totally different thing and you brought them to where you need.

And that's what I did with, on my call with this, uh, note holder, because they did not want a million dollars right now. Imagine that. I'd love another million dollars, but they didn't want it. 'cause the taxes were gonna hurt. So within just a couple sentences resolved and Christian got to listen to the whole thing.

It was a 10. I don't give 10s lightly. It was, I listened to, I was like, that was a perfect phone call. So yeah, that is, if you're having trouble on the phone, it's usually the tone or the pace. And those are fixable with those two books and a little bit of practice.

And when you practice, don't practice till you just feel like you can do it every once in a while, practice it till you know it. And once you know it, you can execute on it. You don't have to think about it. I never think about this stuff. It's weird even thinking about it.

The only time I ever think about it is when I mess it up and I go like, ooh, I felt that, that felt off. What do you know? It's just, you know, any sports athlete, you miss a, you miss a pass or something. You're like, what the heck happened?

Where can you find the equity piece? Had no luck finding an equity partner for down payment. Well, you need to find your deal and then your debt. Most people try and find the equity partner before or they have a solid opportunity with the debt actually lined up. Some people think they have the debt lined up and then the owner or the lender says, "Nope, you're not qualified." You need to line up a deal and then you need to line up actual debt. Doesn't matter what debt product it is, but you have to have a deal and then the means to buy said deal minus the equity partner. Once you find that, then you can consider making the pitch to somebody. But until you have that, you don't have a deal because without the loan, you're not buying it. Doesn't matter if they have the 20, 30% down. If you don't qualify for the loan product, you're not buying any real estate. Yeah.

And I, to be fair, we almost never know where the equity piece is coming from. There's, we're looking at a deal where we're gonna have a $3 million down payment. Uh, we actually have that call.

$3.5 million.

Oh, I forgot about half a million.

Um, yeah. Yeah. Where that money's coming from?

No, that's in, 2 and a half hours we're gonna be presenting that.

However, we have the deal and we have the debt lined up. And if you have the deal and you have the debt, easier to pitch for the equity. Have we ever done a $3.5 million raise as the JV? No.

Heck no, we haven't.

But we've done a million too, so we're close.

We'll get it, we'll get it figured out.

It'll either go well or it won't, but we lined up the, the correct order of operations.

And the biggest raise before we bought this resort, we had no idea where a million was coming from, but our biggest raise together was $300,000. We tripled that for the resort and then some, and then some. So lots to, uh, lots to figure out when you're doing these, but the deal will come together if you follow everything in the right order. The deal, the big one we're looking at right now, the deal is, I would call it very good.

Yeah. I, I think that deal, make— could both double our net worths. Yeah, I think that would make us like $5 million.

And the due diligence on that one is really important because it could also tank us. So you'd have to— you have to think about what you're doing and why. But excellent deal. The debt product is stupid. It's, it's, it's a— it's one extra step of creativity. It's not complicated, but it's like—

we'll talk about it later on the channel when it's done.

Yeah, I'm excited to share it. But putting together a deal like that, the whole point is we found a very good deal and we found a unique and creative but simple debt structure that makes it just ridiculous and nobody's done before. I've never seen the play made, but it's just taking two simple plays and gluing them together, basically.

But it's never been done.

Never been done.

And we'll coin it when it's done.

Yeah, it will have a cool name. Yeah, but the equity piece, that's why I'm comfortable that we're going to be able to bring in $3 million because we have a good deal and good debt and it's never been done and it'll be baller.

All right. From Rob, my niece is 18 graduating this summer and I'm trying to convince her to look into house hacking. Any suggestions on how to present this stuff? To a disinterested teen? Well, I'd map out what her goal is. For me, I'm into cars. So if I look at renting right now, the— and this is not necessarily what it is for her, it could be, but my rent is the same amount as the McLaren payment. So if I didn't have my housing payment, I could just do the McLaren right now. Now granted, I can do the McLaren anytime I want, but she can't yet until she gets the real estate. So I would map out, okay, what do you want to do? Maybe it's traveling. And I would just put numbers, apples to apples to it. Hey, if you want to travel 1 week a month and that costs you $3,000 and rent is $2,000, if you house hack and then you just math it out for them. But whatever it is, could be $1,000 a month, $4,000, $10,000. House hack is not going to save you $10,000 a month, but anything reasonable, if it saves your housing payment, you can just do this and other people will pay for it. Yeah.

And it depends on the level of disinterest as well. There's— I've had this happen a bunch of times when I was growing up. This is why it's so hard for entrepreneurs to find friends. I hear this among every single entrepreneur.

Like, yeah, Christian died. I have no friends.

Like, all my friends, like, don't want to hang out with me because I got successful and my life doesn't look anything like theirs. It's not a jealousy thing. It's just you lose relatability and so people lose interest. It's a sad fact of being in the space. But if someone's not interested, making someone want to be interested in something you're interested in and they're not, never works. I've had so many friends who've been like, how do I be successful? I wanna be able to do some of the cool things that you've gotta do. I'm like, okay, do this. Yeah, do this, this, this, and this. They're like, well, that sounds hard. I'm like, yeah, it's really hard. And then they don't, and then they end up playing video games and they wonder why they're broke, watching anime, which I've never gotten, sorry. Any, any anime people on this call, but it doesn't work. And the 9 to 5 is just a broken system. And anyone who believes in it, it's really hard to convert someone to your way of thinking. I would, I would give them the education and hope that they grow more interested over time. Yep.

All right.

All-nighter.

A lease option. We've considered lease option on an 8-plex. We're not going to do it. I've got a buddy who's trying to do a lease option right now, and his option payment was $750,000. I said, you're stupid, nobody's going to fund that deal. He's like, I got someone to fund it. And then they didn't fund it. I was like, what did you learn? So just try and buy it if you can. You can do a lease option on a house. I wouldn't do it on apartments.

Yeah, lease option, it works as a way to, like, if you have absolutely no way to take down a deal right now, or there's just no way the numbers are going to work, put a pin in the map. Yep, you put a pin on it for like, I'm going to acquire this down the road, this is how I'm going to do it. It's a very unique use case, though. The goal is to own the property and almost everything that you can do with a lease option you can do in a seller-financed or contract-for-deed deal where you buy the property and actually own it. So I would start with ownership unless you have a very specific reason why that's not going to work. We've considered it but never executed on it because there's always been a better way or a better deal. All Nighter just mentioned just like savers are losers. Or— yep. Oh, to our, our last thing about being losers. Yep. Saving—

don't lose your stuff. Yeah. How do you own it? How do you never lose it? It's a saying for a reason.

Actually, this is— let me plug our model right here because I, I love what we're doing. So there's a force—

we want to talk about the 4 business cycles and then really all we care about in real estate.

Yes. I'm gonna add one more thing to it afterwards, but yes.

Okay. The simplicity of this game, the way we play it, is you, you build your portfolio You stabilize it, meaning you get to consistency, consistent income, consistent expenses. Then you optimize it. You increase the income and decrease the expenses. You get it to the highest and best use, and then you pay it off. And the way that we go through the build phase is you just have to solve for how do you own it and how do you never lose it? And will it be fun? Because if it's not fun, you quit.

Yep.

That's the simplicity of the way we play this game. Yeah.

Now, where a lot of people go bust is they leverage forever, and then something major happens economically and they lose everything. You don't want to just lever to the moon, which is what a lot of people say that you need to do.

They build and stabilize. They forget to optimize or pay off.

And is that the best way to grow indefinitely? Yes. Is it, to my knowledge, the best tax strategy? Just grow forever.

However, yes, I'll pay the taxes so I don't have to start over. There's so many people that are losing so much stuff right now because they played the stupid debt game.

Yep. So the Dave Ramsey thing is not wrong in its entirety of like being debt-free is awesome. There is something to be there. I'm so excited to be there. The problem is you don't start further enough along to ever get there. You have to save forever unless you make ludicrous income. If you're Dave Ramsey and you make— I have no idea how many millions he makes a month.

Yeah, but he's got hundreds of millions in real estate alone in cash. You figure if that spews off maybe 5, 6%. Yeah. And he's in a high-end high rate of return markets. But if it's only 6% on, let's say, $400 million, $500 million, that's still $24 to $30 million a year dividend.

But to actually get that real estate, you need a lot of money if you're buying everything in cash, and that will take you a long time to save up if you make less than $1 million a year. Even if you make $1 million a year, to scale, it's going to take a long time. So the whole model with that whole build, stabilize, optimize, payoff, The goal is to be debt-free. The pathing there is we're going to leverage until we hit whatever our original goal was.

Then we optimize it. We take it one step further so we can pay it off, and then we do a giant debt snowball. I love the debt snowball that Dave has.

Awesome.

It's awesome. The problem is, what are you left with when the debt snowball gets to the bottom of the hill? And for us, it's a lot of real estate. For most people, it's a paid-for car. Maybe a house and no credit card debt. So we're building a giant problem that we're going to knock out with a giant debt snowball. Yes.

But anyway, that just reminded me that the savers are losers. I'm actually really excited to save. We just had to build our income to like $1 million a year before we can start saving it and actually doing anything.

And the properties make now top line a couple million a year.

Yep. And then we have a couple other companies. So that's, that is what we built and why we built it. But the goal is just own all this stuff because then you're invincible. Like, how do you lose that much cash flowing real estate? Hard to do.

Hard, not impossible.

It's like people find a way.

But not married yet. All right. I've been studying everything I can about real estate for about a year now. What helped you make the jump? I bought a property. That helped me. Yeah, that, that's really the thing is you're gonna jump off a cliff into water. If you're gonna jump off— sorry, I'm only gonna cut that. If you're gonna, if you're gonna go cliff jumping, you have to jump.

Watch it, that's, that's the first short that goes viral. Someone clips that. If you're gonna jump off a cliff, then just jump. Cody Davis. And now they have me saying the same audio. We're criminals. No, but seriously, if you're going to jump off a cliff into water, you're going to go cliff jumping, just leap. Um, I'm an ice bath guy. I love, I love doing the cold plunge thing.

I tried the cold plunge for the first time ever last night. That was, uh, not fun.

It takes a while to get fun, but the way to get in is to just get in. If you try to work your way in, you're never going to do it. You have to just dive in. It starts with the first piece of real estate. I would go because I started with a condo. I never talked about the condo because it was irrelevant. I sold it, but I started with a condo and I hated it. And so I got rid of it. And then later I bought a duplex. I bought another duplex, but I was comfortable with a single family. I would recommend going a little bit farther than you're comfortable with. If you're like, I can wrap my head around duplex, shoot for 4. If you want a 4, shoot for like a 6 to 10 plex because they're going to be about as hard to operate, but they're just going to make you more money. But go a little out of your comfort zone. That is your target for what you want to buy first.

Yep. And I'm a parkour guy. I love jumping off buildings. And I remember the first time I did a jump from one building to another, that was so scary. But the quickest way to make progress and actually overcome that, just like jumping off the cliff, when I first jumped off the— it was like a 45-foot cliff in Hawaii. I just had to leap. Now I made sure it was safe down below. It wasn't safe down below on the parkour jump. If you fall, you fall. But that's why due diligence matters.

Yep.

But when I was ready to jump off the cliff, I wasn't going to make any progress unless I just left. And that was the scariest thing I ever did. And then I did skydiving. That was scary too. But you have to actually jump. You have to take the leap. And in real estate, you have to buy something. It could be a $20,000 house in Detroit. Now, would I do that? No. But you could. You don't real estate.

All right. We have 35 people viewing and 17 who've liked it. So we want more people. So About half of you have not hit the little button. Hit the thumbs up for— oh, there we go. I saw it go up. Thank you, whoever hit that. I appreciate that. That will get more people into the video.

You upgrade your network. Uh, well, we're not going to recommend a book to upgrade your network. If you want to upgrade your network— so network skill, just go do it again. Take the lead. Just go to a networking event and talk to somebody. Found an 8-unit seller finance opportunity. Seller wants $300,000 down. How do I come up with the capital? I don't have enough details. I need to know what are you buying it for? Where is it? What's the net operating income and what's the debt looking like? Because if the debt's 1% I/O for 50 years and it's in Florida, that's going to work. But if that's in Mississippi, your down payment is probably higher than your purchase price. So we got to know more details.

Yeah, but we will look for that if you have more details as we get down that, Chris. Well, we will look for the details and we'll go back to that.

How much should each unit cash flow with a 10% down payment? Again, depends on where you're buying. All right. I have 50 under contract but haven't been able to get the pitch. Seller is financing 75% LTV. Okay, so if you want to pitch people the way that we pitch people, you have— let's say you have someone lined up that could fund the other 25%, 30%. If you're over-raising, just be smart. But when it comes down to making the pitch, you have to pitch the story. The story is worth more than the real estate. The real estate is crap. I'm not saying your real estate's crap, but real estate is crap. The story behind it is what makes it valuable.

Yep.

So the Robin Hood built by John Beckman, 1934, set designer for Walt Disney— that adds value. Now we're not just some cabins in the woods.

And then we explain the opportunity. So when we're talking about this, it's like, look at the Every owner who has ever owned this campus, owner-operator, has lived here. They owner-occupy the resort and they are a live-on operator.

We can't do that.

So the opportunity— it's never had systems, it's never been run as a business. It's been run as an owner's retreat.

And as soon as you systematize this stuff, it's worth more, roughly.

Yeah, a little bit more than twice as much of what we bought. Yeah, it's— the deal is stupid, but it's not a great deal if you're going to run it like the prior owners and nothing against them.

They were on the back end of their career and they were happy doing it the way they did it.

They had a blast and they had it paid off. This made a boatload of money. Why change anything? I'm not faulting them. And just as business operators, there is a larger opportunity here and that's where you get to come in and make it happen. But you tell that story of, so here's the, here's the building. It's beautiful, two-story walk-up brick building.

I'm just—

I'm making up your building here, but middle of Texas. The opportunity I see is the rents are a little low here. We have a plan and I've talked to some property managers on how we are going to raise rents over the next 2 years to be a little bit under market and to have a much better valuation. Now you're ready to start talking numbers, but always start with the story and the plan and then get into the numbers. I had someone call me and ask about a deal today, and that's all I told them. Like, I don't have the numbers in front of me, but I just want to hear your thoughts on the actual adventure. This many units in this market— I'm not going to give away everything yet. We'll talk about it soon if it works. But big complex, huge upside, super creative how we're going to put it together. I need one more person of high net worth to pull this off.

Yep. And we know who it is. All right. Do you already have experience with commercial real estate? Yep.

Yep.

Where are the reading questions from? Is this from the chat?

Yep.

There's a live chat. Oh, Dividend Dave sent us $5. Thank you, Dave.

We appreciate you.

You help us pay our mortgage. Oh, yeah. All right. I'm speaking with the property. Oh, from a property management standpoint, I hate managing residential, love managing commercial. Great.

Us too. Commercial multifamily, bigger buildings. Yeah.

I have a hurdle to overcome. I must start in a hypermarket that everyone I've contacted wants insane prices. So what? Prices don't dictate cash flow. You want more cash flow, put more money down, borrow less money, or borrow cheaper money.

I'm worried it won't get any views on YouTube because it's technical, but have we ever shared the mortgage factor rates versus cap rate on YouTube?

No, but we don't need to. That's in the mentorship.

That is a good point.

FamilyStrategy.com, check it out.

But there, there are ways with creative finance. All you need to do in a nutshell is if the price is high, get a lower interest rate. Yep. That's the punchline.

Borrow cheaper money. I get what you're saying. I understand everything except for how to find investors, a.k.a. sellers, to finance your deals. Well, Google Maps. How to find any property owner ever is on our YouTube. Check that out. Optimization and stabilization seem like it would keep a portfolio nice and balanced. Yep. And then when you pay it off, it's even better. Then someone said, no, that is the only reason I'm not heavily invested in real estate. Okay, well, if you want more real estate, borrow more money. Is bond for deed the same as contract for deed?

She haven't heard the term bond for deed, have you? No, it may be that, uh, I haven't heard that terminology. That might be a, a local thing for it. It sounds like it probably would be, but I don't know, so we won't speak on that.

I feel like my first owner finance deal will come soon. Make it happen, Dividend Dave.

I believe it will.

All right, from Andy: What was the extra piece Christian was going to add? Oh, more pieces.

So it wasn't an extra piece, it was just an add-on of the, the Dave Ramsey versus Kiyosaki. So it was the Dave Ramsey wants to pay it down, Kiyosaki wants to scale forever. We are the only group I've ever seen who really rides the middle of like, you can't scale fast enough, so let's Kiyosaki our way. Let's, let's, let's borrow and plan to something. What he missed though was the front end and the back end of Dave Ramsey. Dave Ramsey starts with set a goal, a fixed goal with a measurable timeline. You set that and then you go, what do I need to hit that goal on a monthly cash flow basis? Very Dave Ramsey. Problem is it takes forever without leveraging. So we're going to lever till we hit that amount and then we're going to pay it all the way down. So I just wanted to share the actual—

like, now the story is worth more than the real estate and the brand can be commingled with the story. But if Dave wanted to take his business to the next level, he would go get non-recourse debt because he'd qualify. Non-recourse debt means the lender has no recourse beyond the property. So he could leverage the fact that he has a ton of cash and a ton of net worth, buy a couple billion in real estate with non-recourse agency debt, and then use all his current cash flow to pay it off over time.

Yeah.

And if it went bust, it wouldn't jeopardize his current stuff, which is the reason he's so scarred in the first place. He had 90-day loans, and even if it was 120-day loan, like, that's just a bad practice.

Yeah.

But he didn't know because there was nobody online telling people about that like Dave does now.

So he was on Graham Stephan recently. He said he has about a $700 million net worth. He'd be worth billions had he introduced a little bit of leverage.

And if he did a little bit of leverage today, non-recourse, 40, 50% LTV, he'd get to billions if he's not already there a lot faster. But he doesn't need it. He owns his stuff. Yeah. How do you own it? And how do you own it?

Yep.

All right. Have you ever had a seller tell you that negative cash flow isn't real? And that seller financing is illegal. No, but I've had some faceless people on YouTube tell me that.

We have had lots of people, and especially the Instagram comments, say that seller financing is illegal and negative cash flow isn't real.

Well, I'll share with you that if negative cash flow wasn't real, you wouldn't have any of these loss stories. Oh, I lost $50 million in real estate, or, oh, I lost hundreds of millions of dollars in real estate, or I lost millions of like you wouldn't have those because the world functions on cash flow. There's positive and there's negative. You need an adjective.

Practical example: I live in a home which is a piece of real estate. I have no renters in my house because I don't like sharing walls with people.

Even if you rented it out, I don't know that it would cash flow after management, maintenance, utilities, because you have maintenance on that house.

Yeah, it would be— it would probably be close to a wash. Probably. I have pretty low payments because I got in back when interest rates were like 3%. I've had it forever. But I mean, functionally, I spend a couple thousand bucks every month to live there. Does the property positively or negatively cash flow? I lose $2,000 a month to live there.

Yep. And that little white house over there called the sauna house, we haven't rented that out yet. We have the downstairs rented, but our total cost based on the way we structure it, it's about 7 grand a month. Currently brings in about $2,500 a month. That's a little bit negative. We lose $4,500 a month on that until we rent it on Airbnb. Yeah, not the best.

We do hear a lot of seller financing being illegal. There are a couple of things that I will address super quick. Generally, I think it's on a federal level, but it might just be a state thing. I should look into that. But at least I know in our markets it's come up multiple times. You can only do 5 seller finance transactions before you actually have to apply to be considered considered a bank. So then they usually end up doing real estate contracts instead, and they do real estate contracts instead, and that is a workaround there.

And then they can do lease option and then just sell it the following year. Yeah, there's so many ways.

There's a ton of ways around it. That is the only thing where you end up into any sort of legalities. Also worth noting, if you did seller finance 6 things, there's absolutely no department in this country that will audit that and say, whoa, you did too many loans. That, that's not a thing.

Now, where do we hear that? From the people that have millions and millions and millions, but hundreds of millions of net worth and 8 figures in notes. They've been seller financing since the '90s. So they've been doing it longer than any lawyer I've ever found. Now, is there going to be a lawyer that says, well, that's not true? Well, maybe, but that's why you chat with your lawyer.

Yeah, but seller financing has been done everywhere since before there was bank financing.

Yeah, we had someone tell us on TikTok out of all places that seller financing in Texas is illegal. And we're working on a 197-unit seller finance deal in Texas right now.

Caleb and Chuck, one of our original mentees, they have 3 deals in Texas seller finance.

They did seller finance. So the TikTok person was not right.

But I thought TikTok knew everything.

Yeah, all these TikTok realtors flexing with their friend's Lambo. All right. Most people are used to dealing with banks and getting the money up front. Nice.

So you'd be amazed as you start playing the game how many people don't want to do that. I mean, that's on a tax basis. There's a lot of people like we're, we're cashing out a note right now. The owner of that note's like, do we have anything else we can just put this note against to move the money? I don't want to realize the gains. Can I just give this money to you to go develop or something?

Wow, we're really behind on these comments. We should start speeding up. David and Dave, I do the try and cry strategy. All right. I have an opportunity to seller finance a building with 3 apartments and 2 commercial units. Caveat is that, is that a full restaurant is included in the sale. Property cash flows without the rest. Thoughts? I'm not a restaurant guy. Couldn't give you advice on that.

Though, would it be fun? Because it's like, how do you buy it? How do you never lose it? If you can answer those questions, the finances make sense. If you want to own the restaurant, are you running— I guess the question is, are you running the restaurant or are you having a manager run the restaurant? Um, but if it's a project and an adventure that you want to take on and you want to get into that space— we did that with a resort. Like, we're not in the resort space until we are, and I love it.

Dividend Dave, we'll skip down because he sent us $5 to, to buy our pay our mortgage off. We appreciate you. Can you talk about finding homeowners who are in pain? Well, we don't find homeowners who are in pain. We don't buy from distressed sellers. There are some other gurus online that are a huge fan of that. That's just not our thing. That said, if you're going to go the traditional route, I would go through Google Maps. I'd find the boarded-up houses driving for dollars. Google just updated all of Moses Lake. In Quincy. So I'd go through, see the boarded up houses because I don't have the time to go drive all of it. And I just go see, okay, who, who looks like they're in distress? And then I call them up or send a postcard. I would call. Most people do the postcard thing, but—

and you can also just call any title company. And this is not true of every state. I've had trouble with this in Georgia and a couple other spots, but most states you can call a title company and you can ask, can I get a list for everyone who's behind on their taxes? Can I get a list for all multifamily properties between X and Y units that the owner lives out of state. You can, you can pull whatever list you want, usually from title companies. If not, there's software like PropStream that people love to use. There are ways to do it. Your problem is going to be owners who are in pain typically don't have a ton of assets because they didn't do the stabilize, optimize phase. And so you're going to do probably 1, maybe 2 transactions with them. People who are losing are usually losing their real estate. And so you really want to— I work with people who have a lot of real estate and can continue to hold a lot of it so we can sell it when they want to and hold it when they want to.

Now, Chris Russell, $1,250,000. Oh, this is the deal. Okay, $1,250,000, $300,000 down payment in Florida. Okay, like that. I called that one earlier. Haven't talked terms yet, just wants to see proof of funds. Well, Why would you show proof of funds? They haven't given you terms. Money is the last thing. And if they're asking for proof of funds, the only reason is they don't think you're a qualified buyer. That's BS. So I say, look, what are the terms? I need to know the deal because I've got one partner. In my case, it's Christian. But Christian, it's not the money partner because I spent all this money on some duplexes. So I would just say, look, I've got a partner, but I'm not making the pitch till I know the deal, because it would be illogical to pitch them on something and then realize, oh, the terms are actually this. So you need to understand, okay, this is the price, $300,000 down. What is the seller financing looking like? Because if we're at 8%, I'm not a buyer for this anyway. Yeah. $1,900,000 liquid. Wow. A lot more than I had. I had $3,000. Should I buy a large multifamily in a tertiary market or a smaller deal in your market, Atlanta? Well, Atlanta's great, but I would buy in a tertiary market personally, and that's what I did. And I would, because with $125 grand, I bought a 12-plex.

It depends on what you want to scale to. Like if you just want something stable in a stable market, like the reason that you pay, you get lower returns in major markets, is because you have stability. Atlanta's not going anywhere. If your goal is to buy a ton of multifamily and get market dominance, we did that in a smaller market. It's not tertiary, but it's a secondary market. It's a smaller secondary market in Moses Lake, Washington. We dominate the rental comps and that allows us to have some direct influence on rents, which actually makes us millions of dollars a year. So it depends on what scale you want to play it. If your goal is to buy a few buildings and put them in a really safe investment, you're probably looking at Atlanta. If you're looking to scale and go huge, I would probably lean towards the tertiary markets as well.

Hopefully they'll answer the question for Apple. Oh, we missed an Apple question. Oh God, scroll. Can you please explain how to find the seller and pain? Is it properties that have been on the market for Could be. If you look at properties that have been on the market for a long time, typically there's a recorded— it'd be in the county assessor where you can see liens that were recorded against title. You can even ask agents, they can typically pull it. If a deal's been sitting forever and they have a ton of debt, they're probably struggling. There's a 5-plex that someone just decked out in Central Washington, and they bought it just a couple years ago for half— less than half the price they're listing it for now. And they're leveraged on it. Looks like they borrowed to buy it and borrowed to renovate it, and it's empty. They have the highest price per unit of any asset I've seen in Moses Lake that's ever traded. I would buy it for the price, but I know that market really well. Most people are just going to let it sit, and they're just making payments on a vacant building. Not a great place to be. So if you look at the debt history on an asset— when they bought it, when liens were recorded, and you can just see a little bit of the details on it. You can see if they're in trouble. What are you talking— wait, oh no, I don't know what I was reading. What are some things you should not say when talking to owners?

Oh gosh. Things that you should not say. I hate your building.

Yeah, your building sucks. You're ugly.

I know.

Seriously, don't try and flex on them.

Oh, don't do that.

Don't pretend that you know stuff. If you don't know it?

There is—

you do that with me, I'll call you out and I won't talk to you again.

Yeah. Um, don't over-talk about yourself, just in general. Like, I, I love to know who I'm talking to, so like, introduce— like, this is who I am, what I've done, where I'm trying to go. That should be a few sentences. Your focus with an owner is asking them questions about you because their time is valuable. And if you're trying to learn from an owner, their time is more valuable than yours if they're farther in the game You have more to learn from them than they do from you. So the main thing is just keeping the conversation about them, how they got to where they are, and what they recommend you do. And then you go out and do those things. But anything outside of that, I wouldn't talk too much about that. I also wouldn't— no, we— I've had an owner recently, actually, it was in one of Cody's meetings, they're like, hey, I make a lot of money. And they told them what they make. It's like, Yeah, it's like, that's cute, that, that's our monthly income.

So they were getting weird about money, but I can't, like, I'm not gonna flex on them. That'd be stupid because now I lose the relationship.

But don't— I, I wouldn't show all your cards. That'd be something that I wouldn't do in the meeting. I'd tell them who you are, what you've done, and where you're trying to go. I wouldn't open a meeting with, hey, I have $300,000 and I'm trying to invest this money. Like, I wouldn't, I wouldn't open with your position financially. I was open with, like, when I got started, I just bought my second duplex. I'm trying to expand this market. Your name keeps coming up. You own a lot. How did you go from owning a little bit to a lot? I'm assuming you didn't start with a lot. Well, yeah, I did it one property at a time. Thinking of, uh, our buddy Smiley, like, I'd save up money and I'd buy a property and I'd save up money. He did it the Dave Ramsey way.

Yep.

But if I had just waltzed into that with, I am buying this and I'm going to buy everything in Moses, and that meeting wouldn't have happened. So just be humble, ask great questions.

Do you ever offer more than one offer given the seller finance offer, small, medium, large model? No. The offer I make is the offer I make. Some people say, oh, I should offer conventional and then I should offer seller finance and lease option. That's a bunch of crap. We offer the deal that we can do for that property.

Yeah. And that is just a general sales thing. There's this whole— I don't— there's probably some book that this took up, but there's this good, better, best pitch. And I think it started in supermarkets where it actually makes sense because you're viewing things, you're not being pitched, and you're like, okay, there's a low, medium, high price thing. People tend to gravitate towards the mid. It makes sense for marketing. For sales, you do not want options. You want the right option and you want to be told what we're doing. I want to know where the other party stands. If we got in here and the owner's like, well, we could do $500,000 down and do this, or we could do $1 million down and— yeah. And if you waffle on terms, what ends up happening is a stronger negotiator knows exactly what they want.

On.

And they're going to take the best things from each package and they're going to say, okay, well then let's do this.

Yep, absolutely. We don't waffle on stuff. We say this is how it's going to play out. And the reason that works for us is because most people will waffle on it and we come in and we say this is how it's going to play out. We know it's going to play out this way because we've done it this way. And I've won arguments with attorneys over stuff like that where they were just wrong in and they waffled on stuff and I said, this is how it is, this is how it always is, and this is the reason it's this way. And I've won that with owners, I've won it with attorneys, property managers. If you know how it needs to happen, make it happen. All right. You guys talk about debt and how any deal could be possible if it's on your terms. Is there a video where you break down the numbers? We have some math videos, Math 101, Math 201.

That's one of our old videos. You can go back to that one. I think it's one of our most watched. So if you go into the history of like popular, popular videos, it's an hour-long video where we go through math. No reason to update it because the cool thing with math, math doesn't change.

Can you talk about what you expect from property managers? I expect them to manage my assets. We've had issues with that in the past, way back when, and they actually didn't do any of the management stuff. When I was working at a different company a long time ago. So I want them to be able to manage the tenants, be able to manage communications, help out with managing the money, rent collection, the statements, end of year tax docs.

Yeah, I want to calculate simple stuff.

All right. No state shall pass any law impairing the obligation of contracts.

That is law. And yep, they are all— seller financing is legal. We can do contract. Now, the IRS can still jack with your contracts. They absolutely— they can get in there and do all sorts of damage.

Yeah, your contract is stupid and doesn't follow law, then you get in trouble.

And actually, that's worth saying on the creative finance— the more creative you get, the more risk you have that in an audit. That, yeah, in an audit or anything else.

So one of those new IRS agents just says no, there's nothing you can do.

You're screwed. So take your creativity figure out how to do the deal. But if it's getting ridiculous, it may not be a deal worth doing. Even if it makes sense on paper and the lawyers sign off, you do have to keep in the back of your mind, can I also explain why I did what I did to the IRS? Because they can just say, no, screw your contract.

How much return are your investors getting when they lend to you? Well, it depends if they're debt or equity. I usually borrow money at 8 to 12%. Equity usually costs 18 to 25% a year, but we've had it be as expensive as 200%. Yeah.

So, yep, that's how we started learning. So made a lot of money.

But when you pay 200% a year on six figures, it's kind of—

that was painful.

How do you mostly get the money for down payment rehab costs for a $1.2 million deal? Well, if it's $1.2 million that I have to come up with, in cash, then quickest way, just like if you want to own 30 units, just buy a 30-plex, find someone with $1,000,002. We did that with the Robinhood. Someone funded $1,000,000. Yeah, one coffee meeting. I thought it was going to be 3 or 4, but it was one. Yeah.

And by the way, we titled this episode How to Make Your First Million Dollars. We had mentioned earlier we made our first on a 38-plex. But if you want to do the simple math, we invested in a market where the average return is 6%. So if you got to 50 units and you raised rent $100 on all of them per month, you multiply that by 12, $60,000 a year, $60,000 a year new cash flow. You divide that by 0.06, you've made $1,000,000. I mean, that's the simplest mathematical way to do it. Now, for us, we did our increases on a 38 plex, and we fixed collections, we fixed up the buildings, we spent a couple hundred thousand dollars to fix it up. Yeah. And the project made $1.5 million, which was enough to cash out the investors and keep our million. Like, that's the first million. We're sitting in a resort that made us our second million, really on acquisition, because the—

but we had made our second million each before we bought this.

That's true. But this deal, this is the second one by itself where the deal just made $1 million.

Oh yeah, by buying it and we get it stabilized when we refinance out the owner and then we really optimize all the systems here, we can get this to be worth like $10-11 million.

So the real rules to making your first million is one, do the math. Two, you just have to have enough scale. You need to buy a big enough building. There are some guys online who really focus on like, must be 16 or more units, must be 32. It doesn't have to be anything.

Wow. Way to call out these But you know, I'm thinking of everybody.

It doesn't have to be that, though. You can buy a whole ocean of duplexes. We're looking at buying 50 units at a time, but they're all duplex from the housing authority.

More coming soon.

That deal will also make $1 million. But the easiest way to make $1 million in real estate is find one deal to make $1 million. And if you can't do that, find two deals that make $500,000. It's really that simple.

After you build a relationship with an owner, do you ever ask to buy their property? Or does the owner bring it up? Typically the owner brings it up because of the questions that I ask.

I've never asked anyone to buy anything before. We came down to this resort as a premise of we'd like to check out something that they've expressed interest in selling to someone else. That's as close as I've ever gotten to asking, but they asked the question, so you guys want to buy this? How are you closing it? Like, the, the quality of your questions will dictate the quality of your outcomes as you get really good at this. Um, I have never in my life asked to buy a property.

It's just a dumb question. Don't ask it. All right. Laws have to be in the Federal Registry. Where's Title 26? I'm not going to try and understand that right now. I'm not supposed to be the smart one. I just figure out how to buy a bunch of real estate. Have a property in D.C. for $1 million and rents are 50% below market rent. And has low-income tenants on them, would you break— wait, would break even with regular financing and they don't want seller financing? Would you pass on this? Well, I mean, if I'd want day one cash flow, if you can figure out a way to make that day one cash flow, but 50% market rent, I mean, that's great.

Yeah, a ton of upside of it. I would need to see a little bit, so I'd come off the price or man, even if they can sell or finance just a little bit of it. So I just— I hate breakeven because breakeven is rarely ever breakeven. It usually turns into negative really fast and then you're hurting. You need to have a little bit of fluff in there to— yep, to make sure you answer the don't lose a question. But I love the fact that you have a plan to get it up in rent.

Would you buy a portfolio with clouded titles?

No, no.

What questions do you ask?

Wait, let me say one more thing on that. Uh, the nice thing is with clouded title is title can tell you what the clouds are. You can get them removed. So would I buy it? No, I wouldn't close on it. Would I go under contract for something that had clouds on title? Absolutely, as long as I thought that they were fixable. But you need to make sure they're fixed and it has title insurance. Yeah, so you can work around that. It's not a don't ever offer on it, but would we close on something while it wasn't clear who owned it? No.

What questions do you ask? So if I'm asking someone, and like, let's say I want to buy their property, but I'm not going to ask him to buy their property because I just want to learn. They bought a 12-plex, I own a 6-plex, I'm looking to get to the next level. How would you recommend I go about doing that? Well, I'd go meet with the owners that have 12-plexes. Okay, well, anywhere that you recommend I should start to get my first 12 or something above 10. Don't just be so specific that it's obvious. Yeah, that's how to do it.

It's pretty simple. And then what you do is you do one of two things. You're either gonna do exactly what they recommended if it's good advice.

Yep.

And I hear a lot of people give bad advice, like start with something small like a house and work your way up. It's like, okay, well that's not what you wanna do. Don't just follow every piece of advice, but still go back to that person who's farther in the game than you. And when you go buy that 12-plex instead of that house, you're back and say, well, I tried something. I said to buy a house. Oh my gosh, I bought this 12-plex and it was a lot harder than a house. Like, give them— like, give validity to what it is they originally told you. I like to make it a little comedic because that's just who I am. But within your own personality, address the fact that their information was valid. Tell them what you did, whether it was what they recommended or not. And you can get that next step from them. Like, okay, well now I'm at 12 units. If they gave you advice to go smaller, you're like, that was really hard. Maybe you should have started smaller. But now that I'm at 12, what would you say my next step is? And you repeat that cycle. And we've done that from Cody buying his first 12-plex to buying a little teeny property that we're going to develop on to actually going into development with an owner. You just keep doing, telling them what you did, do it, tell you what they did. What's the next step?

Do it.

Yeah, do it.

All right. How much cash flow should you be earning per unit? Well, it depends. We take all of our cash flow, which granted, amongst all the companies and all the real estate is six figures a month. It's a lot. We take all the income and we throw it back into real estate. So we don't put a cash flow number that you should be earning because we just reinvest it all.

Well, it totally depends on market too. Like if you're in the Midwest, where there's way less appreciation and less people who want to live there, uh, like, you should get a lot more cash flow per unit. If you're sitting in a major metro market like a Seattle, New York, what have you, you're going to expect a lot less cash flow because they tend to be extremely high appreciation.

And we have to have a lot of cash flow the way we structure our deals because we borrowed a lot of money. Now our loan-to-values are low, but that's because we've been taking all the money and paying off our debts.

Yeah. And the cash flow per unit works a little bit better if you're buying conventionally because everyone's kind of assuming you're putting 25% down, you're apples to apples.

Yeah.

When you're doing creative finance where your down payment could be anywhere between, you know, 0% to 99%, it's going to be cash on cash return is the number that you're looking at for that and debt coverage ratio.

But my sweet spot for the apartments that are stable, my 10-plex, my 12-plex that I own without Christian. $300 a month and higher is about where I like to be. $300 to $350 average. Are we there on every property? Absolutely not. Will we get there in the next 2 years?

100%.

All right. Do you guys have any bank loans? Yep. And getting a couple more done right now.

I have a few more than Cody have.

I have—

I had done one. For a property that I sold, and then 2 of my duplexes were in bank loans. My house is in a bank loan, so I've done 4 bank loans that Cody hasn't done. We currently have a $2 million bank loan and we'll have 3 more.

Yeah, my first bank loan was $1,925,000 and we're getting like 3 more done right now. Yeah, all 4 more done right now.

Oh, that's right.

Forgot about that. Can't talk about that one yet.

Nope.

All right. Hi guys, thanks for the content. If there's property on the MLS before submitting an offer, do you bring up the seller financing topic? I would. I just let the broker know what we're doing, give them a game plan. They say, no, that's not going to work. Send it anyway.

Yep. And we usually ask that, just like, are the owner— is the owner open to holding a contract? It's about that simple. It's— people try to overexplain it, and typically brokers suck.

So they say, oh no, you can't do that. We don't do that here. So in Washington, they're required legally to present all offers. So I'll just send it anyway. All right. That is it. Mexican food.

Oh, I'm in. I actually know exactly what I'm getting there too.

All right, everyone, Dos Margaritas.

Thank you for joining. We actually had a—

that's the name of the restaurant.

Yeah, if anyone is in Union, which I sincerely doubt, uh, you can join us at Dos Margaritas right now because we're gonna be there in about 10 minutes. But thanks for watching, really appreciate everyone on, uh, this meeting. And we're back, um, we're here every week. Are we doing anything special when we're in? Because we're in Vegas next Wednesday.

We're going to be in Vegas, so we're going to take it from the field.

Yeah, we'll probably hop out of a meeting. We'll be taking it from the phone. It's hard to pre-schedule those, so just remember, 3 PM, we will be there. See you soon.

Adios.

Oh, that'll be