Creative finance live - mobile edition

All right, we are officially live. I'm remembering that the camera is on this side of my phone, not this side, so I'm looking at you guys now. Fortunately, we're going live mobile, which means I didn't get to launch this from our fancy setup, and there's no one in the live yet. So if you're watching the recording, welcome, we're here being goofy. If you're hopping into the chat, uh, welcome and hello.

Spilled my coffee.

Oh no. So today we'll keep pretty brief. We'll see if we actually get anyone. We're just going live with no, uh, with no people. With no people, which is really weird.

Yeah, we're gonna talk about what we're doing right now. We just walked a 14-unit that we're under contract on, and I want to talk a little bit today because we've gotten questions of when should you not buy deals. And I think that is really—

right now.

Yeah. So we walked this 14-unit, and this is the second worst property that I've ever walked through to buy. The worst property I ever bought was the second 12-plex I ever bought. And we fixed that up to be one of the nicer assets that we hold. And we gotta go in, probably do another $100,000, $200,000 in renovations. Then it's gonna be turnkey, it's gonna be wonderful. Problem is, I don't have an extra $100,000 to $200,000 to throw at it right now. So we get through this 14-unit, everything's wrong, they have no books, they don't do bank statements. Sup, dude?

Is All Nighter our one viewer?

Hey!

Yes! Hello, all-nighter. Oh, there we go, we got a few more people.

Okay, a couple people joining in, but we're talking about when not to buy properties. And so this property that we walked through today, 14 units, we're under contract on, absolute turd burglar of an asset. I mean, everything's wrong. They just went in and textured and painted a couple of their vacancies and a couple of their light switches. Yeah, they painted the light switches, the electrical panels. And that's not bad enough. I went in there and told the property manager, I was like, you got a leak. And they're like, we don't have a leak, everything looks great. Well, they didn't realize that they just painted over, or they're trying to lie to us, I don't know yet, but they painted over all the problems. And so I was like, so why is this wall bubbling out? And I tapped it and it all fell apart.

Oh, that leak wasn't there before.

Like, uh-huh. And then the roof was falling in in one of the units and None of the wires are grounded. It's got Federal panels, and if you don't know, one of the panels to avoid is Federal Pacific. Well, Federal and Pacific merged a while ago. We've got Federal panels before Federal Pacific merged. Yep, not ideal.

And then the new— there's a few new electrical, um, what are they, the breaker boxes in there that are Square D. Now Square D is another one that you don't like because they're impossible to replace. They're really old and they're just not fantastic. So we have— I'm going to call that a Square F. We have Square D in federal. Square F. The electric's bad. How's the plumbing?

Oh, it's that old galvanized and they've got some jacked plumbing on how they did. They've got plumbing PEX outside of the wall for the showers that's connected from underneath the sink. Absolute garbage. Now our play for the property, it's got about an acre, it would be water view, we could build 2-story townhomes, probably get 30 to 40 rentals in there. However, for folks that have asked us the question of, I can buy a bunch of real estate, I learned how to do it zero down, when should I not buy the real estate? If you can't cash flow it, or if you're not up for the project, if you have too many projects, then it's just gonna become like yard art. You get a cool truck 'cause you think it's gonna be a fun project and it could be a fun project, but then you buy the Mustang and then you buy the old '58 Corvette and you get all these things that seem like cool projects and you bought 'em 'cause you could, but then you can never see it all the way through. Super important to make sure that you can see your projects through. We can handle all our projects and if we just see the course of time and we finish our projects, Trish and I'll be worth $100 million each. By the time we retire.

It's a lot of projects.

It's a lot of projects. We don't have to add more. That said, we're still willing to do it if we do ridiculous terms. And that's where we love the creative finance, the seller finance game, is we're going to counter them. And we're not going to put all the terms out here, but basically we're dropping the interest rate from 5% down to 2%. And if they don't take it, then we're not going to float it. Like, there's no reason for us to take on their problem. Yep. Now, now, had I done this as my first deal or my second deal, absolutely would have taken it on. But today we have too many of those yard art projects that when finished will make a ton of money.

Yep. Our 3 rules are: how do you buy it, how you never lose it, will it be fun? This would violate rule number 3. I put 2 fingers up. 3.

I'm the counter.

For the, like, okay, so how do we buy it? Seller finance, like you said, 5% interest. The deal cash flows day one. Financially, the deal works. Just raw numbers.

Yeah, it would cash flow like 4 figures a month.

Fantastic. Okay. So, we got a fairly low down payment. We got cash flow. Okay, we know how we're buying it. How are we keeping it long-term cash flow?

Long-term fixed rate debt. It's positive cash flow. Have a little bit of reserves in the bank. Deal would work.

The project is so ugly. Now, in the future, if we can extend this debt to 10 years, which is what we'd We can afford to sit on that property for a while and we're going to make it nice enough to live in, but it's, we're not going to spend a whole bunch of time or money on that building. What we'd actually do, cause it's about an acre lot, is we would build 2 brand new buildings and this whole lot is downtown, fantastic location, hideous building. So you go through, build a building or 2, and you can fix all the plumbing problems, all the electric problems, all the roof problems with a wrecking ball. Yep.

Knock it down.

We will come in like a wrecking ball and fix everything.

Gonna Miley Cyrus this crap.

However, and that would be fun, but we need a lot of time for that because we have a bunch of other projects. And if we did this project with all the other projects, it's gonna be a nightmare and we violate principles. That's why we have the 3 rules. And that's why the fun one is actually really important. It seems like a haha. Yeah, I hope it's fun. If you don't enjoy this, you have a very, very expensive, very time-consuming job.

Real estate costs money.

And it's not passive, at least not when you're starting, especially if you don't have a bunch of money.

Yeah, like right now we spend— it's ludicrous how much money gets spent on the projects. I mean, it's dumb and I won't announce it on here, but it's a lot. Real estate costs a lot of money. So if you're not having fun doing it, know that you can grow. And when you learn the creative game, you can buy basically whatever you want. You can buy as much when you want, where you want. It's just a game. That said, it should be fun because if it's not fun, you're gonna lose interest and you're gonna be like, why am I spending all this money? Yeah, someone just said losing interest can be really expensive. That's absolutely true. I also saw a question in the chat and they said, are we going to be reenacting our Burr video this weekend? Only if you are. I'll get in that water again and that'll be my second time doing the cold plunge. So if you want to join, we'll That's where it's at. We're going to be in Union.

I would happily film another episode.

We'll film it with people.

Yeah.

If you want to join our YouTube video, we can do that.

If you want to join us, by the way, at our event, all 13 of you who are here right now and everyone who watches the recording, it's going to be the 20th, 21st, 22nd. Apparently we're doing a cold plunge. I don't have that on the schedule, but we will work that in at night. It's going to be a blast. We just booked the last cabin. I believe there might be one more. We can check that. Lando, I saw you were in. But, um, we do offer a day pass for Saturday that we just came out with if you guys want to come join us just on Saturday. It doesn't come with the cabins, the hot tubs, or the paid breakfast or dinners that we cover. But if you would like to join, uh, just DM us on Instagram, either @DoingCodyThings or @ChristianOsgood. We'd love to see you guys there.

Yeah, let's make it happen. Do we have any questions We're only keeping this to 15 minutes because I gotta get back. Do we have any questions for today for Whiteboard Wednesday Mobile Edition? I think it'd be live chat, not top.

Aha, learning how to use chat on the phone mobile. Well, we do have some questions here.

When looking at population growth, do you look at the growth rate within a certain amount of miles for the property or city?

I usually do the city level because it's easy to look up on worldpopulationreview.com, which is my favorite one because it opens with a graph that tells you is population going up or down.

If you're visual— going up.

Yeah, you can, you can tell if it's a great market by the picture immediately. If people are moving there, there's something desirable. So that's 85% of our, uh, how much due diligence is that?

Yeah, someone just asked how much do you guys recommend having in reserves when you buy? Well, it depends how much cash flow you have. 'Cause for us globally as an org, like, and that's all our businesses, we've got property management, consulting, we get like $7 on YouTube. Globally as an org, we have enough cash flow to float any common issues. We had to pull out trees at the Robin Hood and it was $10 grand. Ugh. Not fun. We didn't expect it. That was after we already spent 4 figures to take out more trees. They— but they were hazards. If they fall on someone, it's going to cost more than $10,000. So we just had to write a check. We wrote that out of cash flow. If you don't have the cash flow for common expenses— now, you may not have a whole bunch of trees at your first apartment building or your first duplex, so that's not really a worry. But if you have to get a plumber there and it costs $1,000, do you have $1,000 coming in every month? If the answer is no, then I'd probably opt to say, okay, you should have 6 months for reasonable expenses.

Yep. And I think even if you— so if you're starting the game with no money, that's fine. We started the game with no money. Yeah, uh, it's more important to buy the deal and get started than it is to get the exact right amount of reserves. However, you do want to get those stacked up pretty quickly. I love Dave Ramsey's targets of 3 to 6 months reserve, and that is for every single building in its own operating account. What does it cost to operate? If all the tenants left, can I afford to float the building for 3 to 6 months.

Yeah, and for all of our buildings, I mean, we've had deals where literally no tenants were paying. Yeah, bought, uh, we had 2 triplexes. Someone pitched us that these are amazing deals, and they were okay deals. They weren't fun for us, but nope, nobody was paying. We had people leave, and then we had non-pays, and the non-pays were worse than the people that left. But, uh, that was absolutely Not fun. However, we could afford it. We had the cash flow. We didn't have any reserves. Put that out there. We had no reserves at that point in time. Nope. But we had enough cash coming in every single month to where it didn't matter. So it's a balancing act. I will waste all my reserves, and it's not really waste, but I'll blow them on investing into the assets I hold as long as I know I have money coming in that can handle the basic expenses.

All Nighter has physical gold and silver as reserves. Well, it's better than cash. I have a little bit of silver just because I like some silver coins from Star Wars that I just have. They actually went up in value, which is ironic. That's— they're not investments, um, I just have them. But, uh, yeah, not a bad way to have reserves. I like to keep a little bit of liquidity but not a ton. In fact, Cody and I, we're We paid ourselves for like 3 months last year.

Yeah, we decided, you know what, we're gonna pay ourselves and we got enough real estate to do it and we're making a little bit of money on, like we got property management, we got some businesses, so we're making a little bit of money, we can finally pay ourself and then we just stopped 'cause we were like, that's stupid, let's just reinvest everything.

We can pay ourselves when we're out of money and that's something that you can start to do as an entrepreneur or as a rental property owner. When you need money, Turn the cash flow onto yourself, fill up your accounts, take the money you need. Awesome. And I have a little emergency fund. Then if you want to just buy more assets or improve your assets, spend all the cash flow on those. Some people like to pay themselves a salary. Our original plan was let's just pay ourselves a salary so it's stable, predictable income.

Yeah, we wanted to pay ourselves $10,000 a month and the real estate can do that today.

Absolutely.

The problem is if we threw $20,000 a month at the real estate to $10,000 and $10,000 every month that we don't need to pay ourselves, that we live on reserves. So for me, I got another month, then we'll pay ourselves once and I'll live for a few more months. But we take the extra $20,000, we throw it at the real estate, we get the income up, get the expenses down, we go in and improve the property. We're looking at doing mini splits, so that'll reduce utility costs and up rents just a little bit. But we do that whole thing across portfolio and all of a sudden we're saving like 12 to 15 grand a month, which is wonderful because we have a lot of utility costs on our portfolio and rents will go up a little bit. If we blow our 20 just paying ourselves 10 and 10, wonderful, but instead of building our reserves, I'd rather build up the property so that we have more future cash flow.

Everyone wants to network and get like Cody and Christian, two GOATs.

I want to be like Cody. I don't want to be like Christian, you're old. Oh, just kidding.

On that vein, networking is everything. That's literally all you have to do is you just meet with people, talk about real estate. Even this trip, which is probably a bust, like we're going to—

we're going to throw it out. It's kind of what you call an F-you offer.

Yeah, it's like, okay, your building is junk. No one else is going to buy it at your price. However, if we get ridiculous terms, Sure, this project gets fun because I can afford to wait till I have time to do this project. It's not gonna be a huge distraction.

Yeah.

So yeah, if you want to play this game at the highest level, just network. Like, we met with a broker while we were in town. We looked at another deal while we were in town from the same sellers. We met a property manager, and then we looked at one of Cody's buildings. But like, if we're out and about, we're just meeting people, and it is a really fun way to play the game. You met with a guy named John. I really like John. He's just a fun guy to be around, and Yeah, that's one more deal source and one more person who wants to get in the game.

And I got to see my favorite apartment building that I own. And it just happens to be the one I don't own with Christian, which is kind of sad, but life happens.

For Landa, quick question on the event, do we get an itinerary? Yes, in fact, I'm sending out the itinerary tonight for those staying in cabins. I have the full 3-day, and for those doing the day pass, you have a 1-day. But we'll email those out later this evening. I'll get those to you shortly.

Yeah, it's built out. I looked at it and I was like, that's way better than the first one we had.

If you guys attended the first event, if anyone on this— what, we have 21 people right now?

If any of you guys attended the first event, this one will be a lot better.

This one will be better. I really appreciate those who came out on the first ever event because there's some figuring out to do and we had a fantastic time. Granted, a little lower price point because we're figuring it out, but great time. Had a blast. Had some kinks. Like last time we ran out of water. I'll get more bottled water this time. The food will be allocated and we'll have more time allocated to breakfast. But really, really excited for this event. Expect the itinerary tonight unless you sign up tomorrow, in which case I'll send it tomorrow.

We only have one cabin, right?

I think we only have one cabin available. The day passes, we have room for probably 10 more people.

What's the question?

How old is Christian Osgood? No, I'm 30.

It's just an ongoing joke because he's 25% older than me.

And we just had, we just had Matt the Lumberjack Landlord record for our channel. He's gonna be our co-host next month. He doesn't have a single white hair in his epic beard.

He's 45 and his cash flow is like, I don't know how many times bigger than ours.

A lot.

500 times more or 500% more.

I was gonna say 500 times. He's doing better than I realized. We're doing okay.

500%.

That would be something. But yeah, no, I dye my beard brown because it's all white.

I don't have a beard because alopecia.

That's okay. I'll have a white beard But Cody will be bald. You're looking at anything in your market?

What is the question?

They're asking if we're looking for anything in our market, they're happy to help.

Yes, my market's Grant County, so if you have a seller-financed property in Grant County, talk to us.

Or if it's an epic piece of multifamily in Grant County, I probably still want it. When we started, seller finance was the only way we could really play the game. We can You can do deals up to what, $1 or $2 million conventional without too much of a—

Without breaking a sweat, we could buy $2 million, but if we want to buy conventionally, we can go up to $6 million.

So yes, we are always looking for deals.

And if you got a package of houses, I still kick myself. This is a story I don't share online, but there is a seller-financed portfolio of houses I could have bought for $120,000 to pop, 3-bed, 1.5-bath houses. 3 years ago, it was gonna be 20% down. So out of pocket, I was gonna have to come up with a quarter million dollars. Yeah, the car is driving itself. But I was gonna have to come up with a quarter million dollars, and had I bought that, I would have made like a million and a half over the last 3 years. So it would have been a zero-down deal that I would have found the down payment for. So I still kick myself. So if you got a portfolio of houses, I will look at it if it's in Gray County.

Yeah, we were looking at one in Quincy actually a little while back. Back.

Yeah, that would have been big.

Yep, they ended up wanting to just slowly sell all the properties to their tenants, which is awesome. Yeah, which is great, but it is a little bit sad to watch a huge portfolio dissolve to a whole bunch of different people. But altruistically, awesome. There's a lot of their tenants who are gonna get a cool house for a great price.

What's someone saying?

Kevin's saying, getting better with getting creative because he's broke. We have been there, and actually Cody and I I typically roll down to broke. We don't keep as much cash as we should. Now in the business accounts, we try to keep that reserve. But personal funds, we've gotten calls from our lenders multiple times that just say, guys, you need to keep more money. And I'm like, why? I hate money.

Yeah. It's like—

I like real estate.

We got more real estate than our lenders and they have more money than us. So I mean, pick your battles. Yeah.

And that's kind of the point of the transaction, right? They have money, we have real estate. They give money to fund real estate.

Yeah.

I mean, shouldn't be a problem, but it is.

Did I— I'm watching ourselves now. I can look at the questions on my phone.

Oh, there we go, that's a good idea, Cody. Well, then we only really have 60 people watching right now.

Ta-da! Did you have a 9-to-5 job during your first deal? Just in case tenant doesn't pay. I have never had a real 9-to-5 job, so.

Lie, you worked at Safeway for like an hour and a half.

Yeah, I worked at Safeway for a minute and I coached gymnastics for 4 years, but if you count my $20 check or my $13 check or whatever it was from Safeway and then my $700 bucks a month or so that I got from coaching gymnastics. That's not going to flow to 12-plex. In the beginning, you have to buy excellent deals. Cannot compromise. Needs to cash flow. Needs to be stable. The first asset I ever bought was the one I bought without Christian. I didn't know who Christian was for a couple years after I bought that. And what ended up coming out of that, I got to go see it today. That was really fun. That's been my most stable asset, I'd say, out of the whole portfolio. And we've got some stable stuff. I mean, the Pheasant Street Apartments are wonderful and they've been really easy, but I'd say for the time I've owned it, Quincy, the Beverly Apartments has been the number one most stable, easiest apartment complex because I'm not maxing out the rents and I'm doing upgrades to make sure my tenants are happy.

Yep. For myself, I worked at CoStar for 4 years, had a career before that, so I had a W-2 for a while. When I bought my first multifamily, I had just pseudo left CoStar. I haven't told CoStar I left, but it was the pandemic, so there's nothing to do. So I was working 2 jobs at the same time for 2 different companies. Um, I actually still did really well at CoStar, which is really funny. When I stopped trying, I had like 3 really good months.

Oh no, we lost—

nope, we lost it for a second. Um, but when I bought my first property, it was the last month I worked. I bought a duplex. I went, there we go, I used the W-2, I qualified for conventional debt, I'm done. Uh, my second deal— minimum wage. We may be driving out of, uh, out of range.

All right, well, this is where we're gonna end our live. We appreciate everybody tuning in, and, uh, yeah, well, happy Wednesday.

Yes, had a job, lost it, answered the question. Talk to you guys later.

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