Creative Finance Live - Why we HATE Partnerships

I'm gonna go live here.

Go live.

It says we're live.

All right, we are live. Hello everyone, welcome to the Robinhood. We have some tech issues, but we appear to be in, so welcome. We are, uh, we are present. We're sitting down, making sure the camera's at about the right angle, and I think we're good to go. I'll just slightly up so that my head remains in the camera, and from there should be going. We have you guys running on both Instagram and YouTube. YouTube is the better platform, so if you guys are watching from Instagram, check out Cody and Christian Multifamily Strategy. We'll be a little bit more responsive to that chat as everyone filters in here today. I wanted to first welcome you to the channel, and we will get into our topic, which is why we hate partnerships. This may be ironic as Cody and I are partnered on just about every—

what, we are?

Yeah. Um, but we're gonna get into that, um, as we go through. One of the first things we're gonna do is get into some of the questions from the week. I actually memorized them before we go in for our questions we chose. So we try to do this while looking at the camera and actually remembering what the heck we're talking about. One of the questions we have for this week, I'm going to open it with Cody since he is our resident math genius. Cody, can you explain what a cap rate is and why it matters? I'm going to jump in by saying I don't think it does.

Well, I mean, it kind of matters, but the reason it matters is not what most people think it is. A cap rate is your cash-on-cash return if you pay cash, period. If you buy a million-dollar asset and the net operating income after you pay your operating expenses is $100 grand, you got a 10% return. If you paid cash, it's a 10% cap rate. You're typically not going to find a deal like that. In a great area. So it's, it's a way to measure apples to apples when you're looking at assets that are not apples and apples. It's one way to measure your return. And where people make money in real estate, if they don't choose to do the cash route, is by borrowing money cheaper than their cap rate. If you can borrow money at 4%, 4% interest, and you can make 10 if you pay cash, you're arbitral. Wow, you are arbitraging every dollar you borrow. And that is how leverage can help you. However, there's a two-edged sword to that. It can also burn you if you borrow more expensive money than the cash-on-cash return if you pay cash. If you go buy in downtown LA and you make a 3% return, if you're borrowing at 6%, that's the reason that most lenders are going to require you put 50-60% down in a market like that, because you will actually lose money on every dollar you borrow.

So I'm going to take this one, uh, one question deeper. This might be deeper than we should go on a YouTube Live. We're going to do it anyway.

Do it.

Okay. So if there is an amortized debt, so you're on 30-year, but there's a principal portion to that.

Yep.

Are you comparing apples to apples when you're just looking at the interest rates to the cap rate, or is there something we need to consider there?

No. So the way that you can arbitrage borrowing money, if let's say you buy a 6% cap rate, you buy a million-dollar asset and you have, let's say you have a million dollars worth of debt, you 100% leverage because you do stuff that we do and you don't have any money. So you borrow a million bucks. Let's say you borrowed at 6% interest. Well, your interest is $60,000 a year. If you bought at a 6% cap rate, that means your NOI is $60,000 a year. You could break even on a zero-down investment. That could be considered a good deal, but the problem is if you amortize your debt, that means you're also paying down that loan. So while the interest rate may match what you're earning, you also have that debt pay down, and that's where you measure it with a factor rate. If you're not familiar with the mortgage factor rate, you should look it up because if you borrow at 6% on a 30-year AMM, the rate that you're actually looking at is closer to 7.2%, meaning you would lose 1.2% on every dollar you borrow.

Now that's going to loan pay down for the amortized amount, but the problem is you don't cash flow. And if you are paying to run your asset, that is what we call a bad deal and a great way to lose your real estate.

Yeah, that's a poor financial decision if you're going to go negative. So make sure that your real estate makes more on a percentage basis than you're paying out.

Yes, that is a— that was our first question there. Another one, and this is a basic one, we get it all the time on the channel, wanted to just open with it: seller financing. How are we finding the deals? People want to add to their pipeline, and there's multiple ways to do it. How do we do it, and how do other people in our sphere do it?

Well, seller financing is just one way to put together deals, but when you want to get super high leverage seller financing, that's what you're probably referring to. It comes from relationships, period. You're not going to get super high loan to values from a seller or from a property owner if they don't trust you. They're typically going to want 30% down. It's really easy to go get owner-financed deals, but getting the high leverage points is really the thing that you got to try and Hey, if you want to play this game and multiply the money a lot quicker, because if a seller is going to take 30% down, you might as well go with the bank. It like, you can just go get better debt options typically if you do that. So how do you get high leverage? You call people and you build relationships with them and you don't ask for the sale. That's against the grain. It's contrarian compared to what most people are going to say if you're going through sales training. But if you don't ask for the sale, you end up being different. What we ask for is, how did you do this? What was your strategy? We don't want people to agree with us. We want people to give us their thoughts and their strategies, how they play the game, so we can take the best parts from it and omit the rest. And when you do that, you grow, you become intentional, and you start building a relationship and you start building trust. The trust is how we get the high leverage point, the seller finance piece. That's really easy to get. Just put more money down. Most people will accept that if you put more money down and raise the price. But how do you get the super high leverage? You have to actually go out and build those relationships and stop trying to buy their stuff.

Yep, that's the key. It's all about deal flow. Like, seller financing isn't the magic key to doing every deal. We've done things with hard money. I've bought more conventionally than Cody has. We both have a conventional bank loan. There are ways that you can play the game either way. It is a tool. It happens to be our favorite tool with our strategy. What you're really after is more deals so you can figure out the debt and equity. You can do that with relationships. You can do that through And you do that through calling people, Google Maps. You can do it through— on a lesser effectiveness, you can do it on mailing lists, show up at real estate meetups, or work with brokers. We have people like Caleb and Chuck. If you haven't followed them, you should. Caleb and Chuck on YouTube, they worked only out of market, out of state with brokers, and they built up a pipeline. But really all you want to do is you want to have the opportunity to look at more opportunities. And with more opportunities You find the debt and equity. So find opportunities to find opportunities.

Yeah. If you're playing the game and you're meeting with a bunch of people, learning how to play the way they play— like, we, we just met up with the owner of the resort. We learn a lot from them, even though we do some things differently.

A lot of things differently. Yeah, we changed ourselves.

We changed the 4 key components to a business, and we did it all in the first 2 months of owning it. That can cause some red flags, and they want to know what's up, but we can learn strategies from them and implement different things. We take the best pieces that we like from someone's strategy and combine it with the other things we've learned from other people. If you learn from a whole bunch of people and you take the best pieces of how they played the game, you can just play a completely different game at a completely different level. Neither is wrong, but it allows you to play the game you want to play if you learn all the strategies from all the players.

Yep. And last question, by the way, I think everyone knows the rules by now, but Creative Finance Live, this is your question. So you guys start posting your question in the chat. We're going to answer one more question from the YouTube channel. We're going to go into our major topic for the day, which should be a few minutes, and then we're going to open it up to all your questions. We will go until the questions stop. We'll be answering them on Instagram over here, so you can ask your questions here if you really want to get them seen quickly. We have YouTube running here. That is our main channel, Cody and Christian Multi-Family Strategy. The last question that we had from the chat this week is You guys bought a resort, you guys bought your 100 units, you hit all the goals that you stated online. What do you guys want to do next?

We're paying off all our debt.

That is what we want to do next. We are doing, uh, we wanted to do a stabilization year. We actually talked about it on this channel quite a bit. We had a friend say, well, what if you did all that stabilization in 90 days? I was like, wow, that'd be really hard. That sounds like something that we would do, uh, take a bunch of pain right now so we can go faster. By my birthday, February 17th, we're gonna have—

calling our shot. Yep.

Uh, we're gonna have more employees, more systems. It's gonna cost more and we're gonna have our time back. And from there we're gonna do scaling and paying down our debt.

Yeah. And so what does that look like? Cause we just signed some stuff today. We, we commit first and we figure most of it out upfront, but we figure the rest out later. And that is a saying for a reason. We just signed up for another $12K in payroll today.

Oh no.

So $12,000 a month. Do we have an extra $12,000 a month from the company that we're, we're hiring for? Not yet. No, we don't, but we committed to it because that frees up both of our times that we were investing into that business to now go figure out how to make new money. So in order to scale, number one, we want to build an organization that doesn't need us. Right now, the companies need us or they die. That is just a fact. We need every single person in the roles that they have or the organizations die.

And it's a 1-year-old business. It's a baby.

It is a baby, but by the time it's a 2-year-old business, it will be an adult. And that is what we are building right now. That is the next steps. Because if we can get the businesses to stand on their own legs, regardless of whether Cody and Christian are here or not— because we won't always be here, there's nothing saying you can't get hit by a bus— if that can't happen, we need the organizations to stand on their own feet. And so we are doing that in real time, adding more systems to the business. And then we are going to go figure out how we go earn and expand the business to where it could self-sustain instead of us feeding it, because that'll just be us feeding it as an owner contribution until it does itself.

Yeah. Now, if you follow this channel because you're like, wow, couldn't Christian buy epic stuff? First of all, thank you for the subscription. Thank you for following. I appreciate you very much. This is not quite as sexy as buying the resort or buying all the real estate. However, if you want to follow the adventure, this is the part that people don't do online. People either leverage all the way up forever.

Yeah, or a lot of people leverage and they're getting caught with their pants down right now.

Uh, or they Dave Ramsey and they do it all in cash, which is awesome, but really hard to scale. We borrowed our way to where we're at. We're just going all the way down. Hard to scale quickly and hard not to implode. If you, uh, you know, it's hard to sell quickly if you're doing the debt-free. If you're doing the leverage, it's hard to not implode. You do usually one or the other. We're walking the line in the middle.

We bought what we wanted to buy and then we debt hammered and it's paid off.

So that is what we are doing next. Follow the journey so that it is more palatable for everyone. We moved it from 1 year to 90 days. So follow us for the next 3 months. Um, the topic for today, and then we'll dive into the questions. Topic today is why we hate partnerships.

Partnerships. I mean, look, people suck very badly. That's just a fact. Most people will let you down. And while that's a really hard truth, it's a hard pill to swallow. Most people will not do what they say they're going to do. On the time that they say they're going to do it, and they will let you down. That is a fact. We've been through this multiple times— not just once, not twice, not three times— but we've been through it over and over and over where we want to believe in people and it doesn't happen. And then we see it happen to so many people that try and go and partner. We could not be where we're at without our partnership, but we will still tell you partnerships are awful.

They're very hard. Um, people have to look— we did a video on this, so this is perfect to share. Uh, liars and leeches, the two personality types that sneak up. They're all over business. They're the worst two that we have identified. Uh, liars are usually going to be highly confident people who attract a lot of people around them. They're usually narcissists, typically, or very narcissistic, and they can get a lot of people to do a lot of things for them. If you find people who are dishonest to others Yeah, I promise they're lying to you. That took us a second to learn, and that cost hundreds of thousands of dollars to Cody. That cost me a year of my time, which is also hundreds of thousands of dollars, plus I lost $50,000. So, uh, that was our first bad partnership with a liar. We've had many since then. You got to watch out for those leeches. They're rough. They're, uh, they typically come off as nice people. Typically they always look like they're busy. They typically look successful, but You start realizing they don't do anything, but they ask for a lot. They're actually my least favorite because no matter what, they always ask for more and they always think they're right. I hate working with leeches more than I do liars. At least liars, you can count on them to lie. Yeah.

And I mean, the main thing, it's okay to lose money and it's really not, but it is. It's hard to lose time. And every partnership that we've taken on outside of our partnership, We've lost, like, I've lost more money in any partnership that I know of than Christian has, but we've both lost a lot of time. And when you run out of time, it sucks. If you, you get to think about it, like, if you're going to college and you just run out of time, uh, you, your deadline, it's due, and you're like, I physically have not enough time to get this done. It's a crunch, and you either figure it out or you don't, but it's a really painful situation. Whatever the ante is, whether it's in college, high school, work, or you have a deadline for your balloons, your, your debt comes due. You either figure it out or you don't. And more often you can avoid those crunches, the better. The problem is with most partnerships, you will waste time. You may waste time figuring out if the other person is actually doing what they're saying they're going to do, or you just trust they're going to do it and it doesn't happen, and now you got to play catch-up. Or you just try and learn how the person operates and you spend a whole bunch of time doing that instead of what you should have been doing. And you just blow opportunity after opportunity.

Yeah, there's a few people that have been great to partner with or to keep in our sphere. Cody and I have an effective partnership because we have trust. Uh, everyone will lie. If you disagree with that, then you are lying to yourself.

Yeah.

Um, everyone has a point that it will lie. Now, whether that's when their child's kidnapped and they're trying to get them back, or whether it's they want to take the last cookie in the cookie jar, it depends on what level they'll lie, but everyone has a point where they will lie. It is important to know where that is in your partnership. To my knowledge, Cody has lied to me one time. I got a call from him an hour afterwards after he'd eaten and said, hey, I did something I shouldn't have, and then I lied about it because I was embarrassed. That builds a lot of trust. That's Cody's lie point. If he's too hungry, he may say something that is not true to me, and then he will reverse course, call you, and tell you that what he said wasn't true. I can deal with that level of honesty. Yeah, uh, that's a story that Cody shares often, which is why I'm embarrassing him on camera, but it builds a lot of trust. I have absolute trust that Cody will do what he says he will do. So we have that. The other piece is that you have to be pulling the same amount of effort. It does not mean you're equally effective in every role. Starting the company, Cody is more valuable. He had 30 units when we were buying a 38-plex. Of the two of us, with my 4 units and his 30, who do you think was the better property manager going into that?

Yeah, I was able to asset manage. I knew how to structure the creative debt. I knew how to raise the money. I had a lot more of the pieces to actually build the business. Christian had more of the pieces to not lose the business.

I had some money, which was helpful, and we did need pretty much all of it. Uh, we had 3 investors. One of them actually was not liquid at the time of the transaction. I had to spot them for 2 months. All the buying. If we didn't have the money, that would've been a pain. So I brought some money, but the big thing that I brought was, hey, I'm going to learn this with you. I'm gonna brand this with you. And then we're gonna tell the story together. In our current iteration of business, it's probably a little bit heavier on me 'cause we're doing a lot of systems. And that is where I thrive. Cody has a lot of fun doing the sales and the systems and the properties. I like, or I'm sorry, the sales, the finances, and the creative contracts. For me, the systems and the operations are a lot of fun. It's never even— like, in the beginning, if we were trying to fight for, like, well, I'm bringing more to the table, Cody probably should have been paid more. Um, granted, we weren't paying ourselves, so we got a larger portion of zero.

Yeah.

And today, when we're actually getting paid, I'm probably taking on a little bit more for the next 90 days.

You're getting paid, but I'm not going to get paid more.

Because if you try to fight that battle, that's— I see partnerships get wrecked on that all the time. If it's like, oh, it's not equitable, doesn't matter.

Yeah. It's irrelevant. It's 50/50, but we both give 100% all of the time.

And our 100%, when we're together, has 1,000% results, what we could do ourselves. If Cody was a clone of me, I would be at exactly double of who I am. There's two of me. And when I work with Cody, I, I don't like so much more time. Yeah, I like to think that I keep Cody on task better than he keeps himself on task. He's a visionary, which means his job is to have 10 ideas and we choose 1 or 2 of those that are really good ideas.

Yeah, and I had an idea today that should make us an extra half million bucks next year, but I also had a lot of other ideas that were stupid.

Yep. So the other thing is that we're both doing 100% and our combined 100% equals 1,000%. Good partnership. The third piece— oh my God, I had 3. Let's go see if I can get them live. Um, so we have trust, we have effort, and then we have direction. We have the same goals. We talk about our goals pretty much daily, I mean weekly at the very least, but we talk about targets and goals every single day. The ship is moving in the right direction because we have the two people piloting it in unison. If your goals do not align with your partner, you guys are going to diverge at some point and it's going to blow up.

Fact.

There should be things in your partnership agreement that protect you for when that happens, because it tends to happen. Same thing works with marriage. People don't check that they have the same life goals. They get married, and all of a sudden, that's how divorces happen. You need to be on top of this piece. Yeah.

Wow.

Yeah, turns out if you actually talk about the direction you're heading and go that way, uh, things work a lot better. Basic concepts, but we have those in our partnership. People who I work with well— I actually saw Caleb join the, uh, the Instagram feed here. Caleb, you're still in there. Caleb Hommel is someone who is good to work with. He is trustworthy. His effort is 100% all the time.

Yeah, he bangs his head against the wall to get stuff done. Even if I tell him not to, he'll still make it happen. He— the effort level is up there.

Caleb's a workhorse. Caleb, if you're here, let's improve those skills so you don't have— no, you're incredible.

Yeah, you work very hard, and I love working with him.

Uh, so there are people we work with well. But partnership itself usually does not work. It's usually very difficult. I love Dion McNeely's strategy where he took more time to do this. He took 12 years. I like going faster than that.

Yeah.

He has no partners. He has no LLCs. He has very little headaches.

Oh yeah. His existence is simple. He built it. Yeah.

Whatever you can build, if you're bringing in partners, business is easy until you introduce people. People suck. So that was our topic for today. I wanted to cover that and really just nail that. We're gonna get into the questions.

We actually don't have a lot of questions in the YouTube chat. So if you wanna pop over there and drop them in, let's make it happen.

There we go. Caleb says, thank you. Caleb is here. Caleb, you and Chuck are amazing to work with. I'm gonna say one more thing on partnership, then we're gonna answer this. Caleb's business partner Chuck is very similar to Cody and I. Caleb did a lot of the front end 'cause the whole sales pipeline, I mean, Caleb just worked it. If you guys follow their YouTube channel, Chuck's editing is fantastic. We don't edit because neither of us have that skill.

We also can just one-shot stuff. We don't care if it's wrong. Like, we'll choke to death on a live edit.

However, which is why we do so much live content now, is I'm like, well, it's the same as a recorded unedited video.

Yeah, it doesn't even matter.

Let's go. But, uh, Chuck brings a certain amount of, um operations and backend and marketing that really enhances what they do.

Ah, you got a phone call. Decline that stuff.

Yep.

Oh my.

All right, well, we'll lose audio on Instagram for a little bit. Hopefully it comes back.

We're gonna— we'll just jump into the chat and it'll either make sense or it won't.

Um, question number 1 from Steven, uh, Laredo. Question: I'm thinking about getting your course. What does it include? We always get this. Let's knock this question out. Early and efficiency. What is the actual course part?

Course is the content that is from A to Z, how I did what I did before I met Christian, and then how we scaled it when I met Christian. It is the how-to in theory. Now there's theoretical and there's practical application. For those who are watching, if you wanna save yourself a course, you don't have to buy it. Understand that information is theory and that alone is useless. You actually do have to apply it, and it will be different when you apply it. So that is the theory of exactly how to do what we did. That's how we underwrite. That's spreadsheets. That's the, like, how you make the pitch, what are the creative terms. And then we do a deal deep dive on all of our properties. Super simple, but it is how we call brokers, how we call owners, how we build the relationship, what do you do when you're actually getting coffee. Those are the pieces.

Yeah, that's pretty much it. Um, the course is the information. We have all the information. It's different than YouTube because we put it all in one spot linearly. You can go through that and do what we did. Where most people will get stuck is they go through the course and then they buy another course and they buy another course and they buy another course.

Don't do that. I mean, if you've already done a ton of courses, pick a strategy and go.

Yep. We have a mentorship group. If the question's about that, that group, it is only application. We meet 3 times a week. We go through your questions live in discussion. So it's like this YouTube Live, but it's interactive.

Yep.

We go through your deals and then we'll go through a structured lesson that's going to be much more robust than what you'd see in the course. So we might go like a deep dive, like this week, tomorrow's factor rates and cap rates, how they combine and how we make money with that. We go through those sort of topics there, but that is our full offering for education. It's the information and the application.

Yeah, tomorrow's going to be fun. I'm a math guy and there's some people on the YouTube channel that disagree with some of my math. And then I, I can just do circles around them because they are actually wrong. It is okay to be wrong. I end up being wrong more often than not in some situations, but math is usually not one of those. So if you want to join factor rates, cap rates, all that, we're doing that tomorrow. All right. From Landon. Hey Cody, if your first properties were in a, we're in a high cashflow area like Cincinnati, How long would you stay in that market before moving your portfolio to a place with higher equity growth?

I love that question, by the way.

Yeah. Quality of your questions determines the quality of your outcome.

If you apply the info, that's a great question.

So in that situation, I would try and start somewhere where you can multiply the equity. You can multiply equity in any market, whether it's a high appreciation market or a high cash flow market. And the basis for that claim there is if you can make it make more money, it's worth more to an investor. Regardless whether the cap rate is 10% or 4%, you can make the property appreciate if you can improve the systems, improve the income. So if I were to go buy in a market like that, let's say you raise rent on a 10-plex $100, an extra $1,000 a month. If you do the math, 10 units, $100 per unit, $1,000, $12,000 total new net income. There's no added expenses to that. We can factor for vacancy really quick, but I want to use round numbers. On a 10 cap, you add $120 grand in value. You take the $12,000 new net income divided by 0.1, and boom, property value went up $120 grand. Well, if you put $120 grand down, down payment, let seller finance, all of a sudden you double your money net of fees. If that is a 6 cap, you take the $12,000 divided by 0.06, you added $200,000 of value. And so on and so forth. You can do the same thing with the 4 cap. You add $300,000 value. That's if you're doing it in downtown LA. You pick your market. You can do the strategy where you start multiplying the money. But in the beginning, my goal is to, I want a cash flow. I want to get paid, but I want to multiply the money I have in my deals, which for me was zero. However, I was borrowing hard money. I was borrowing 12% debt for the down payment. That's 10% down. I had so much money at 12%. Grateful that most of it's paid off. I got it all paid off and then I borrowed more, but, uh, put $125 grand down, seller financed it, or for the, uh, difference. I got to multiply that money. So if I buy an asset for $1.1 million, if I put $110 grand down in that deal, 10%, I need to get the asset value to go up 300 to 400% on my down payment. So I don't need to get it to be worth $3, $4 million. I need it to be worth $1.5 million because I put so little down. And I do that by raising the income in excess of the expenses.

I—

you could do it any market. You want to buy in Cincinnati? That was a weird roundabout way of saying it. You can buy wherever you want, but I would buy with the objective going in of I'm going to multiply my money. If I'm putting $100 grand down, I'm going to turn that $100,000, whether it's my money or I borrowed it or I partnered, I'm going to turn that into $400,000 to $500,000. Can I get this deal to get me there? Because in the beginning, you have to build the equity. You earn returns on your equity. If you don't have any, you get pinched and you end up like these syndicators who have to sell. Bad place to be.

Now, in your question here, Landon, about like, when do you— if you're in a high cash flow market that doesn't get as much appreciation, when do you make that jump? It's when you build the base of cash flow that you need. So if it depends on what your target was and what you're trying to build, but if you want to get into a higher appreciation area, Get to where you're trying to go on the cash flow. So if in a real-world example, I needed to retire my wife, to get there I needed $5,000 a month passive income. I set my goal to 10 because I also wanted to be out, but that's what we were trying to do is can I get to $10,000 a month as an excess of what I need? I would get that in the cash flow from your real estate, then you're there. If you have excess cash flow from what you need to live the life that you want to live, well, now you take that excess and that's where I would start investing it in a higher equity growth market, still wouldn't buy cash negative deals. They still have to cash flow.

Cash flow is the bank. Like, that will kill you. Like, that'll kill your business.

But if you buy cash flowing deals, you can buy deals with a little lower cash flow with much higher appreciation potential. If your real estate in Cincinnati can support that real estate over there, that's how I balance the dual market strategy. That's how I do that.

And remember, you talk about deals, you talk about cash flow, you have to have an adjective before that. It could be positive, it could be negative. You need to describe the situation. I had a mentor told me cash flow $100 grand a month. The problem was it was negative. You need to assess the situation. If you have negative cash flow, you will lose eventually. You cannot float forever.

And that is not an exaggeration. I have seen the bank accounts, as have you, that mentor. I— 6-figure every single month negative cash flow sucks. And guess how he paid that? With more borrowing at 12%. And you want to implode, do that. Yeah, we learned how not to run a business.

Yeah, poor business model. But again, get takeaways from people who've played the game. Game, just a different way.

Uh, from Sean, what are your thoughts on using a real estate agent for seller financing? I'm not currently represented, but seller is not sure if it'd be worth asking seller's agent to represent me too.

I mean, what are they bringing to the table? Right? If you've got solid representation, go for it. I hate representing myself. I can do it. I'll take the commission, but I don't really care about the commission. The problem and the trap is people get addicted to quick money and they're like, oh, I can go get a commission. I can get paid to buy my own deals. That's the not Like, that's a poor reason to buy real estate, to get a fee. You should buy real estate— like, in our business model, we buy real estate so we get paid every single month. And so if you have an agent who can represent you, they can handle all the, the coordination with the legal team, they get the contracts going, like, great. Let's get the PSA written up. Let's make sure the due diligence looks great. Work with someone who's done it before, been through the wringer, had good and bad transactions, so they understand what they're doing. You can't put a price on a professional. You just can't, because it will cost you a ton if you work with people who start making mistakes. And it's okay to make mistakes, you don't make them twice. There are brokers out there who will make the mistakes over and over and over and they never grow. I would work with a broker even if it cost me as a buyer money, just flat out. Yeah, if they're bringing value. If they're not bringing the deal, if you find the deal and they're like, oh, I want to broker this for you because I'm a friend and I'll get paid 5%, just pay me an extra 5%, then I wouldn't do it. That would be a poor decision.

But we had, uh, the property next door— by the way, we're in the Robin Hood Club Suite, so, uh, yeah, welcome to the resort, come hang out. But yeah, uh, I think we have one cabin open this weekend, maybe, maybe not, I don't know, someone canceled, snow. Yeah, there could be room for you. Um, but the, uh, property next door, it's a, it's a little triplex. We had Brandon Vuklich. He's on our channel very often. He's actually the designated broker for our property management firm.

He—

we had him write it up because he does better paperwork. He's the one who taught me how to broker. He was instrumental in Cody learning how to broker. Yeah, he is the paperwork guy. We could have got a 3% commission for buying our own deal. We gave that to Brandon because better paperwork, and 3% doesn't make a difference in our deals, but that's, um That's my opinion of brokers. If they're good and they bring value, they're worth every cent. I wouldn't just pay people to pay people though.

Yeah, that's a bad business model.

Uh, Steven Laredo asked, uh, do you have a structure, the deal contracts, etc.? I think this is in, um, conjunction with the course.

Yes, we'll show you how we structure deals. We actually do, for the mentorship stuff, we, we do a deal deep dive. That was yesterday because we do that every Tuesday. Monday's Q&A, Tuesday's deal deep dive, Thursday's lessons. Tomorrow's lesson. But, uh, we go over how we structure our opportunities. Now, do we give you contracts?

No.

People who promise you contracts that give you boilerplate, that's, that's not good business. Best business practice is to have a great attorney draft everything deal-specific because every deal is different. There are principles from every deal that remain the same. However, every deal is specific. So it is what we've found unwise to use a boilerplate, to use a template. We'll show you what the docs are called, what you ask your attorney, just as far as principles go. However, that's about it, because the structure, the ideas, the concepts, those will always remain the same. How you apply them on a deal-by-deal scenario is different. So that's where the attorney comes in. You end up spending $300 to $500. Is that a scary amount in the beginning? Yeah, I remember when I couldn't afford that. But it's well worth it because when you get into a legal battle and you used the boilerplate, then you kick yourself.

Yeah. And will we help you structure the deals? That is what that day is about. Like, we will help you with every bit of it. We're working with one of our mentees the last 3 weeks. They brought the same deal with a different spin, but it's this castle-like 30-unit building. It's super cool, has a big turret. It's super cool.

I want a turret.

And then it has a massive restaurant, but the restaurant's vacant. And so we're getting creative on how we actually structure the financing. We're actually using the Caleb Hommel special— no debt payment for 3 months.

Mr. Hommel.

Then it goes to half of the half payments for a full year, giving him time to lease the cash-negative space so he's not stuck with cash negativity. Is it a big variable? Yes. We're working with the entire group on that call, 30 people, on how to actually structure that. We'll give you pointers on what you want to ask your lawyer to get the right contract. Uh, but your legal will be your legal. It's different, but it differs by city, county, state. Um, we're not gonna tell you what to put in the legal, but we will help guide you on what to ask for those. I love that question.

Yeah. Hey, Vlad joined the chat. Hey Vlad, good luck on your deal.

Vlad's another person who's doing an awesome, awesome seller finance deal right now.

All right.

All night hider. I'm excited, uh, just to be doing the work and keeping my head in the real estate space. I'm confident I'm identifying a great deal soon. That is the main thing you have to do. I know that's not a question, but buying the deal— once you get there, it tends to go very fast. And I know I've seen multiple names in the chat who have bought their first deal. Almost all of them have multiple pieces of real estate.

It's—

I can count on one hand how many people I've ever met who invested in one property as an investment. Once you're in, it goes fast.

All right, so we got From Bob, how do you find the phone number of the sellers and what is the best way to build relationships with these owners if you are not in the same market? Well, we actually have a video on YouTube, this is on the channel, of how to find any property owner ever. I dropped my phone number in there because I am in fact a property owner and I didn't want to spotlight someone random. So if you ever want to text me, my number is in that and I get a lot of texts all the time from that. So feel free to reach out if you have questions. Don't abuse it though. That is how we find it. Go through the video. It is a step-by-step of exactly how you find anybody's phone number. You can go find celebrities. You can find the Wolf of Wall Street, Elon Musk. I found both of their numbers. I reached out to the Wolf of Wall Street. I did not reach out to Elon. There's no amount of value I could add to him.

Yep. Jordan Belfort got right back and connected you with the right person in his org. Yep. His CEO.

You could do it with anybody. And I just use that strategy regardless of market. Now, how do you actually build a relationship with them? You gotta reach out and try and book a meeting if you can. If they're out of market, well, sorry, you might have to fly over there. I did that with Bradley.

Yeah.

Since we're name dropping. And that got me in a position where we're working on getting on Dropping Bombs. So we have something scheduled for next year, but I had to go build a relationship. I haven't met with him in person, but I just kept reaching out. I did little videos, sent him a video. Got on the phone with him, did some texts. You could find anybody's phone number.

Yep. Vlad, uh, just because Vlad's popped up in the chat, Vlad met a huge owner recently, and that's— it just takes one. He's been at it for a while. We were at this for a while before we got traction. Once you start meeting that 1, 2, 3 owners who control a lot of the market, and one of them likes you, and one person gives you a little hand You get the first deal, then you get the second deal, you get the third deal. For Cody and I, it was financial freedom. Granted, we don't own our time yet.

We—

our finances are free. Our time, that's our current phase. But we have financial freedom in one year of partnership. It is realistic for anyone to do it within 5 years. We went faster than I think most people ever do. Um, and that's not to say we're awesome, just we had a very good partnership and we put everything into this. We don't have kids, Cody doesn't have a girlfriend, my wife works in the business full-time. So it's like being single helps. Yeah, being single or having a wife who gives you like 50 hours a week of free labor. Uh, not everyone can do it in one year. I'm not advertising that. That's very hard to do, and not everyone's circumstances are as ideal as ours were. That being said, anyone can do this in 2 to 5 years. Oh yeah, exactly what we did.

Aloha from Hawaii. Aloha from not Hawaii.

I am jealous. It is cold and snowy here.

Kevin, I am willing to take— I'm willing to overpay for long-term fixed-rate seller finance debt.

Me too.

Nice. How can I make sure I am not underwater when the balloon payment is up? Should I have the property appraised before purchasing? I don't get appraisals. I don't care about appraisals. I look at cash flow and I look at what's my debt product. If I We're talking long-term, we're talking 15, 20 years plus. I've got 30-year fully amortized debt. I've got 15-year interest-only debt. And it doesn't really matter what you pay for it if there's two pieces. Number one, it cash flows, and that property can pay itself off before it's due. If you bought a $100 million property, let's talk big numbers now, on a 1% cap rate, there's Not many situations where that'll ever work. You'll have $1 million in net income on $100 million purchase. You're grossly overpaying unless you're like— I mean, there may be a one-cap market somewhere, but you're grossly overpaying. There's no debt product on the conventional market that'll make that work. Even if you got 2% interest only, you're going to lose a point on every dollar you borrow. If the seller financed it at half a percent interest only on a 90-year note, I don't really care because the cash flow, I'll just make half a point spread. If the income never goes up and you know, that's half a million dollars a year cash flow. How do I buy it? How do I never lose it? I'm going to be dead in 9 years. I will cash flow forever, half a million bucks if it never gets better. It's very deal specific, but I wouldn't sign like grossly overpay for anything unless we're talking decades, decades of debt, because the only time loan-to-value matters is when you have to get new debt or you have to sell. That is it, period.

And on a commercial asset, it's the only time cap rate matters. I need to know roughly, conservatively, what the cap rate will be. So I usually assume that markets will be in a worse place when I have to refinance. But say we have— say we buy a little over market value and we have a 5-year balloon, so we're not grossly overpaying, but we know we have 5 years to get the value up. That is middle-term debt. That's not short-term, definitely not long-term though. I mean, you have to hit your benchmark and it's, it's coming up. So when you have debt like that, what I would do is get a game plan of, okay, if it's a 5 cap market right now, let's assume it's going to be a 6 when I refinance. It's not going to get better. Let's assume I don't get rents to where I think I can, so let's take 10-20% off of market rent, today's market rent. Assume the market doesn't go up, which it Honestly will. And you're going to look at it and go, okay, can I refinance if I get this within 10 to 20% of market rent and cap rate goes up by a full point? If I'm in those metrics, I know that I can pull the money back out. Well, I know where my money's coming from, but that's how you identify that. How do I never lose it? You find the deal first, and then you find your debt, you figure out your equity, and whatever buyouts, whether it's an equity partner buyout or a balloon payment, your ability to hit that is going to be your exit date math. If that's 15 years out, great. If it's 5, you have to be more aggressive. That's, that's about it. Super simple.

And that's it for our questions. So we're at the point in the call where if you have questions, put them in the YouTube chat. And if you don't, we will wrap up early.

And Instagram, I haven't forgot about you. You're up there. If you guys ask questions in that chat, I will, I'll answer. It's easier to read the YouTube one because it's on a way bigger screen. Um, but any questions you have, we're doing our final call. I'm going to go back to our main topic for a second to give you guys time to post all the final questions. Uh, partnership.

Hey, someone asked—

oh, someone has one. Okay, good.

I have a 3.25% interest rate for my rental property. Do you suggest me refinancing? Well, it depends what your goal is and depends who's going to refinance because you're probably not going to get 3.25%. Something that Christian did, because Christian had a great interest rate on his house, is instead of refinancing, he got a HELOC. Yep, just to do that product in second position. Don't change the first position, he changed the second. So you totally do that. You can refinance, maybe you get some cash out. We went from a 4% to a 6% interest rate, but we got to pull money out. We had to readjust our debt stacks elsewhere. And that, that's something you could feasibly do, but have a goal behind it. Don't just do it just to do it. That'd be a poor business model.

And for us, it was important. We were having trouble getting bank loans because we didn't have any bank loans. It's kind of like your first job when they're like, hey, entry-level job requires 3 years of experience. It's like, well, how, how do I get my first 3 years? It was kind of like that with the bank. We needed to get a big bank loan so that other banks wanted to lend to us. One more thing I wanted to add to that, um, I don't know how long your balloon is. If you have a balloon coming up in like 2 years, I would refinance. If you're on a 30-year fully amortized product at 3.25%.

There's no way I would do that.

I would hold that debt forever because you basically are holding on to free money.

Yeah.

When we're— when inflation's like 9% and your interest rate's 3%, you're making money just by holding that money.

Yeah. All right. And they asked, uh, goals to cash out, buy another rental. What was your interest rate on your HELOC? What was it when you got it? And then what's the lesson you learned?

Oh God. Okay, so I'm glad it was only $100,000 HELOC. I could have taken it higher. I didn't want to go through the process. Um, you know, just so you guys know, um, $100,000, they don't do any sort of income verification.

They just value certain—

yeah, for residential, they'll look at it and they'll just go, okay, uh, we'll go up to $100,000. We don't look at any of your personal financials. We'll just value the asset.

So he got no-doc money in weeks.

Yeah, which was very, very helpful because I needed it to buy a 38-plex with my buddy Cody. But when I was doing that, I got, uh, 5%, and it was variable. We hadn't had any of our rate increases. I mean, it was— this was before you rolled the dice. Yeah, I was like, lost. I was like, okay, well, I'm probably going to borrow this for about 2 of the 10 available years. Rates probably aren't going to skyrocket, so it's fine. I'm now paying like 8.5%. Still not bad, which could be worse. And it's not a ton of money, it's $100,000 that rolled into a $20 million portfolio I share with Cody. So it's It's not a lot, but you do want to be careful with the HELOCs. Lock in that interest rate. It's really important.

All right, and then last few questions from this chat. How many of your properties are being refinanced with your strategy? Are we going to be refinancing almost every property? Well, we have one asset that is refinanced. I have one bank loan. I know I'm cheating on my old strategy. No, I'm just kidding. The strategy is how do you buy, how do you never lose it? Can we have fun with it? So the banks are not off the table. We have one bank loan. I'm going to put one of my 12-plexes into bank loan. I will take some stuff to agency in the foreseeable future and get some long, long-term fixed-rate debt at that level. However, right now, only one. We'll do more to get liquid. Part of the building out your stability is not just having cash flow, but also having Cash.

Which brings up a good point. I like this topic. Cody, talk about agency debt. What is agency debt? How do you qualify for agency debt? Why is agency debt absolutely awesome?

Oh, it's pretty cool because it's just a completely different product overall than just going and getting some little credit union to finance it. There are some different requirements. I'll start with some of the requirements, and, and albeit I don't have an agency loan yet, so I'm speaking out— we talked about theory and practical application. Give me 1 year and we can talk about practical application. But the requirements— you have a net worth requirement that not all credit unions are going to have. If I want to go get a $10 million loan myself or the overall asset team is, you know, there's a lot of syndicators out there that have their KPs and they've got their people that they give equity to because they're high net worth individuals. We don't do that, so it has to be us. If I get a $10 million loan I have to be able to show a $10 million net worth and not die.

There's a bar behind you if you want to get a glass of water.

Wow.

I can cover.

No, that's okay. That's fine. They have some different requirements for actual seasoning of the asset. So they're going to be looking at, okay, for the last 90 days, because they want stable income, they want to see 90 days of 90% occupancy or higher. And the reason that we would want to do something like this is they can do what's called full-term IO, meaning we can look at getting 10 years of interest-only money. That's a lot better than I've seen any credit unions give.

That is what I want to do.

Now, why would we do interest only? Because some people want to amortize their debt. That's where one of my old mentors was wrong. It just is what it is. You can pay down your debts over time and amortize it, or you can keep the risk on the lender till the last moment when you write the check. We want to keep as much risk on the lender as possible till the last minute. That doesn't mean that we're going to put them at risk and default, but we want to maximize our cash flow and not pay down the debt. Because if we got it to where we owed $100,000 on a million-dollar asset and we lost it, well, we lost it. If we owed $900 grand and we banked that $800,000 that we would've paid down as cash flow, we'll just write a check when we can, but we keep all that risk on the lender. So if we lose it, we still got paid. We didn't pay them, we got paid. We want to keep the risk on the lender and get rewarded as much as possible. So if we can do interest only, we are getting the benefits of that asset instead of just paying down the obligation. And when we want to, we write a check and pay it off. That is why we are working towards it, because we want to maximize cash flow, take it to non-recourse debt. We have non-recourse seller debt. Our first bank loan, my first bank loan, it's recourse. I'm sure your bank loans are course. Oh yeah. But what that means is, and granted, 55% LTV, I'm not super worried about recourse or non-recourse. If I over-leverage an asset, if you over-leverage an asset and you have a recourse loan, they can come after you and your other assets to get made whole. They don't need to take all your stuff just to take it, they being the lender, but they do want to be made whole. On a non-recourse loan, if it's underwater, they get stuck with that asset and that's it. Unless you committed fraud. Don't be a fraudster.

Don't commit fraud.

Funny, you know, I know some people have done that. They're going under right now, but don't be a bad human. Like, that's just a good business practice. Don't, don't be a bad human. Be a good human. And so, uh, that, that's why we're pursuing that. That's why we focused earlier, we're talking about equity growth versus cash flow. We need the cash flow, but we're focused on multiplying our equity because right now Christian and I can back about a $6 million loan. That's it. Now that, that's a lot compared to where we were a year ago, because a year ago we couldn't back a million dollar loan, which is weird to think about. But, uh, we want to get that to 8 figures so that we can go compete with all the syndicators that get stuck and have to sell. We can go get agency debt, you'll get that long-term IOs, uh, and then start playing with the lower cap rate deals so we can go buy the premier real estate and take it away from the people that are syndicating at a high level or the funds and just buy it because we want to own it. Yeah, so that's what we're working on.

All right, next question there, then I'll read some of the ones from Instagram to get caught up on that front.

Okay, uh, Vlad said he wants 8.5% money. I'll go get some 8.5% money.

Vlad is out there, you can get that private.

Earlier Cody was talking about the importance of multiplying equity. Hey, we just talked about this. Yeah, equity at the beginning of the journey. The way that's done quickly in your strategy is through deals where you can put low money down and increase the asset value just a percentage. If you buy a million-dollar property—

I love this example—

and you get it to be worth $2 million, I would ask you, what's your ROI? Some people say, oh, it's 100% or 200%, depending on how you look at it. And it's like, okay, great, so you turn a million into $2 million. However, I don't have any money and relative to that situation, so I'm going to put $100,000 down. So I don't turn $1 million into $2 million. I turn $100,000 into $1,100,000. What's my ROI now? 1,100%. Ta-da! If you put less money down and you get the asset through making it better, getting the income up, getting the expenses down, or some combination, you get the asset value to go up. And if you put less money down than all the syndicators and all the people that are putting 30%, 40% down into their deals, your returns are just ridiculous. So that is how we are going quickly, how we went from— we weren't accredited investors a year ago. Like, we weren't.

No.

And then we got to our first 7-figure net worth. We didn't earn 7 figures to get there. We got asset values to go up and like way in excess of where inflation's at. We went from $400,000 and change each to a few million. And we did that through buying stuff very low money down, non-recourse debt, getting the asset value to go up a similar amount to everybody else through raising rents, improving the property. We've spent a ton of our cash flow. Like, we don't pay ourselves out of cash flow. All our cash flow goes back into the deals to make them better. We did a 6-figure renovation on just one of our buildings out of just money. Like, how do you pay for stuff? With money. So where does it come from? And since we don't have real jobs, like, we are just full-time in this space improving everything. That we own and manage, we just take all the extra dividends and we throw it at the buildings and we get the asset value to go up. But the difference is, if our value goes up 30%, if you're putting 30% down, you double your money. Congratulations, that's a great deal.

You did it.

We put 10% down, we turn our 10 plus the 30, we 400% the money. So that's how it works.

We do what we do, it's just math, which is fun, which is why we do acquisitions because creatively financed because you can do low-down acquisitions that is easier than going to the bank. The way that you make money, money, if you're using money, the way you make money is the way you make money going through a bank is you have to buy a deal. If you're putting more down, you have to have equity day one, which means you have to negotiate on price and you have to win on price. You're doing an appraisal. If you have a property that's worth $1 million and you buy it for $500,000, that is the other way to make half a million dollars is you buy under market The way we like to play it, if you want to improve the asset, you buy it low down and you have to be a better manager than the last guy.

Yeah, you got to be a good operator. If you're not a good operator, this is a hard game to play.

Yeah.

Okay, you guys going through this or should we go through that?

Let me— I had one come in here a little while ago. Uh, let's see here. Uh, and, and sorry YouTube, I'm, I'm sure I'm blocking the camera here. Trying to decide on if I should build a dadu on one of my properties or use the money for another rental investment, 20% down. Any advice on what you think would be a better move? I actually do have a thought. Do it.

What's your thought?

My thought is you can always go back and build a dadu if it's sitting on a cash-flowing property.

You already have the asset.

Yeah, Cody and I got to 100 units before we started looking at all— because we picked a bunch of land in there. I mean, we have a lot of land.

We've got acreage.

Yeah, because it just came with the multifamily, the cash-flowing multifamily. Which means my land is effectively free. I find easier to buy a cash flowing deal than paying to build a speculative deal. I would, if you're looking at a small investment, you don't have a large portfolio yet, I would lean very heavily on, I would expand your portfolio, pick up more properties like that where you can build ADUs. And once you get the skill building a ADU, you're like, oh, wait a second, I have 6 more properties I can do this on. And you copy and paste the strategy.

And by the way, we're not saying we're ever right. This is just what we did. However, We built what we wanted to build first, and now we're optimizing. We talk about an extra $12K in payroll. Well, that's optimizing and it stinks to write the checks, but we have to optimize now rather than optimizing earlier. You have the pieces to add income. If you can just do that, I know people that are doing that and make thousands a month. If that is easier for you to do than to go buy more real estate, then if I was in that position, I would do that because if it's a logical next progression in your journey, and you know it can generate $2,000 a month, $3,000, whatever it is. If that is the next logical and easy, simple way to make extra money, do it if you have all the pieces. But if you know how to buy real estate, you have opportunities because you're going out building relationships, I would opt to go buy more real estate and optimize it all later.

That, that's my thought too. What I see people do— and this doesn't mean that if you're really good at building then it's like I would go build stuff and I make your money there. But what I tend to see is the people I know who are building dadus and ADUs focus on buying small buildings. They build smaller buildings on their small buildings. They spend a lot of time to build very, very optimal but a very small portfolio. It's typically a longer journey. It does not mean that you can't do a better business model than a lot of other people. Us personally, I'm better at buying real estate than I am building real estate. So I'm always going to expand before I optimize.

100%. Okay. Can you talk a bit about debt versus equity partners specifically? How does an equity partner save day one cash flow? Okay. So let's go into that. Why we look at debt versus equity. Think about it like all the syndicators online that are looking for equity partners because they don't know how to do otherwise. They bring in a whole bunch of partners. What do the partners want? Cash flow. That's done. Yeah. But they want to really multiply their money. That's what a lot of people online, especially the people that are soliciting for funds, like we don't do that. The people that are trying to create their funds and bring in a whole bunch of partners, what's the projected equity multiple? What's the IRR? What, how much are we going to multiply the money?

Alphabet soup.

If we put in $100 grand, it's going to turn into $300,000, you know, whatever they make their pitch on. Equity partners want to multiply money. They want equity in an asset. And the goal is like what we're talking about when we do our own deals. Putting $100,000, can I turn it into $400,000? Can I turn it into $500,000? These are the what-ifs that we play in our head. A lender doesn't look at it like that. A lender, you go to a bank and they give you a loan for $100,000, you'll pay interest on the $100,000. And how do you get rid of the loan? You give them a check back. You give them $100,000. You pay off the principal amount. You pay off any associated fees that they throw in there. But if you borrow $100,000 and you make the interest payments, it's not like you wake up one day and it's a $400,000 loan. Like, that's not how that works unless it's a, you know, negative AMP or reverse mortgage or something like that. Traditional loans, you pay off the principal balance that you owe, and ta-da, it, uh, it's gone. Equity partners typically want to multiply their money. And so if they give you money today, if there's no cash flow There's no distributions. If we don't make money in our real estate, it's not like, okay, Mr. Real Estate, you got to pay me $10,000 this month. It's like, oh, well, if there's no cash flow, there's no cash flow. So if there is no dividend, partners can't get entitled to a share because there's nothing to share. If it's a lender, you either pay them or they foreclose. So if you borrow a bunch of money We— I borrowed $12 million. I make my mortgage payment every single month regardless of whether the real estate does well or not. That's my burden to bear. But if I could write a check for $12 million, it's gone. It costs cash flow today because I have to make the payment. If there's no cash flow and I have a partner, they don't get anything, I don't get anything. And that is the simplicity of how debt versus equity works. Equity costs more to get rid of costs more to get rid of me as a partner than it does if I lend you money, which I won't do.

Yeah, because monthly checks, you're getting the money back over time. If you're going to park money, it's not going to do anything for a promised return. You have more risk, you see less money through time, which means there needs to be a higher reward to compensate for that risk. Now you can structure this as debt or equity, by the way. Like, you can do a debt payment. We've never done this, but you can do a debt thing where it's all deferred till the end of the note, where it's effectively on accrual, a buyout. On accrual. The reason that we do equity partners is because what do you do if I default on a note to you? I'm going to foreclose on the asset, which means you're going to take equity, right?

Yeah.

So if you're collateralized by the equity, this is something we offer, and this is up to you whether you want to do this or not. I give direct equity because it's like, well, let's cut out a step. I believe in what we're doing so much, I'm going to bypass you needing to foreclose. I'm going to make you a partner. You're going to participate in the tax benefits of this asset.

Yeah.

And we're going to get to the end of the year.

That's what, that's what we did on the Hood Lodge right next to the resort. We bought a massive 4,200 square foot little Airbnb right next to the resort.

That thing's gorgeous.

Yeah. And we brought in an equity partner. Why would we do that? Because it can't support new debt. It just can't. So there's no dividends, like there's nothing to pay out, there's nothing to pay out. So instead of borrowing money where there has to be dividends, we have a a partner who threw in the money and they'll be bought out later.

Yep, simple as that.

Yep. Okay, I spent some time going to networking events, calling property owners, LinkedIn, Facebook, even past clients. I'm running out of ideas and options on how to find equity that's outside of private or hard money. Well, I mean, private is all those people we're talking about, like the people who fund our deals. It's just private. Private just means you're not going through the conventional route, like you're going to individuals. If individuals have the money, is it going to cost more? Sure. But everything you want, someone else has, whether it's experience, connections, money, deals. That's how this game is played. It's played on the private sector.

So, and the more people you know and the more people you meet, the more opportunities you have. I know, um, the granddaddy of online marketing and syndication, Cardone, Uncle G, he borrowed from, uh, very, very wealthy elderly person for— what was it, 2, 4%? Something. I mean, he had like—

it was cheap money. I think it was 4%.

He borrowed a lot of money at 4% because he had someone who wanted to make 4%, wanted it in a very large—

better than a bank. Yeah.

And wanted to place it in a large Class A asset. You know who buys large Class A assets? Cardone.

So wealthy individual Private funded. It doesn't mean it has to be hard money rates.

Yeah. It doesn't mean it has to be expensive. The thing that I like about private capital is it's whatever you can negotiate is whatever meets their objectives. We've bought at 0% before.

And all the loss. Yes. And all the loss. Don't be a fraudster. Don't know how many times we'll ever have to say that, but people are coming out and going bust right now. Interest rates going up are showing a lot of people that cheated.

Yep. Don't be a cheater.

Yeah.

But it just depends on how you want to structure it. We got creative with, partners where we borrowed 0% on a 5-year note where the payback is the principal they put in the deal. Like, you can, you can do what they wanted. Yep, that's what they wanted. They wanted to be in because they needed to place some capital for tax.

Alrighty, so then we've got, have you ever looked at a seller finance deal where you needed to raise down payment as debt and the seller wouldn't accept second position? So that is a clause, at least in Washington state, in DSA, called no further encumbrances. It couldn't be the same thing somewhere else, I don't know, but it is here. Which means you can't encumber the property further, no second liens. So yes, that is a real thing. Some people don't want that to happen. The way around that is to encumber something that you own elsewhere or do a partner, or, uh, well, those are really the only logical ors.

Those are the main ones.

Yeah, yeah, that's it. I mean, you either encumber something you have, you back it with equity that you have elsewhere. By the way, never borrow money if you can't back it. That is a poor business decision. That's why I hate credit cards.

That's how you go to jail.

Yeah, I've seen people do that too. Bad model. That's why partnerships suck too, because some partners will take out debt, they don't tell anybody, and then it's unsecured. I mean, that happened to Dion. His partner took out debt that he didn't know about, right? Oh yeah, that was a spouse, but that's a partner. $89,000 bad debt he didn't know he had. Like that Surprise, surprise, unsecured. So you do need to find a way to back and secure it if you're gonna borrow money. Like, that is just the best practice. But, uh, yeah, either you do it against the asset you're buying or something else you own. Ta-da. Yep.

Uh, question from the Instagram here.

Okay.

Um, have you gone negative on a property as of yet? And if so, how did you come back from it? Yes, we've done this a couple times. We do not advocate for it.

We've never lost money on a deal, but we've definitely gone negative.

2 times, 3 times where we've done negative on a property.

Negative cash flow. Yep.

And I'll tell you, we've never gone under value. However, going negative cash flow on a property, because we advocate so heavily for not doing that.

We've gone negative $15,000 a month. We've gone negative $7,000 a month and we've gone negative $3,000 a month.

Let's start with the first one. These are good stories. 38-plex, negative $15,000. At that point, Cody had 30 units. I had my house and my duplexes, and they were nice. All those were really nice properties. We didn't have that much to lose. I knew compared to our goal, yeah, that wasn't astronomical. It was something that we were 110% sure that we could rebuild. I was willing to lose that. Don't play with pieces that you're not willing to lose.

And don't leverage anything you're not willing to lose. That is a principle.

Yes, I am willing to lose my house to get to where we're at now that we have 100 units in my house, the resort. I'm not willing to lose these. My risk profile— now we're paying down your house. This would be very painful to rebuild. Uh, I'd dye my beard brown because it turned white. Um, it was a lot of stress to get to here. When we started, um, one, we saw the vision for the deal. Two, we had the bandwidth to take that out. We had two people who had the time and the capacity to get it to where it needed to go. Uh, third, we needed to do something big enough to actually put ourselves on the map. The 38-plex is really what launched everything. It got us on BiggerPockets. Um, I don't recommend doing that if you have anything to lose. If you have kids, don't buy a cash negative deal, period, ever.

Don't do it. Just That's just a bad idea.

If you own your house and you love your house, don't sign for recourse debt that can lose your house. Granted, our 38 was non-recourse, so we could not lose our other assets based on that property. But that was cash negative. That was not the model. It did put us on the map. We share openly that was negative. Uh, after we had— I think you were close to 100 units, you were in the 90s at least. We bought a 6-plex on Broadway with hard money. Uh, yeah, 2-year balloon, which is not something we typically advocate for.

Yeah.

And it's negative, what, about $1,000 a month? Is that about right?

No, that one was the 3.

Oh, that's right. Um, that was a bit—

I managed the money, not Christian.

Yeah. Is cash flow negative? Cody, why did, why did we buy it, and what is the vision for that property?

We bought that 100% leveraged, so we bought it for a signature. It was very expensive debt. We're talking double-digit interest rates. However, it came with an acre on Broadway that is developable. We can completely redevelop a lot. And it was just a great price. We bought it for $550,000 for a sixplex. And the fact that it came with extra land in a great location where we buy, that was just a bonus.

I think it was worth $700,000. We got it on $50,000 off.

Yeah. But that's because we have the vision for it and we just get it to where it's actually income-producing again. And all of a sudden it won't lose money, but we bought it negative because we had a vision and it would've been fun. The story's worth more than the real estate and the story behind that asset. What we're going to do together, that'll be one of our very first developments. It's worth more to us than the negative.

And it is easily, easily, easily covered out of the positive cash flow from our portfolio. We can afford that out of cash flow.

Now it is not a good practice to say, oh, I can afford to buy negative cash flowing stuff because my other stuff works. Yeah. That's robbing Peter to pay Paul, except for you happen to own Peter and Paul in that situation.

You're robbing one LLC to pay the other one.

Yeah. It's just, if you can get everything to stand on its own, and this is a good practice that was shared to us through One Rental at a Time.

Yeah. Michael Zuber.

He's awesome. You should have all your independent organizations stand on their own legs, on their own feet. You shouldn't have to feed one from the other. However, our story, like what we want to build, is worth more to us than following that principle all the time. And so instead of doing that, we bought an opportunity that lost money because it will be one of our very first development sites where we get to learn. And when we get it stabilized, just on the apartment side, it will cash flow. So we'll have a cash-flowing development.

And the way that math worked on that, and again, because we have the existing cash flow, we can do this. We bought it $0 down, we're bleeding $3,000 a month, and we're going to be bleeding that for about the first year. It cost me $3,000 a month to buy something $150,000 under market price.

So we're going to—

for $0 down, I'm concerned that $3,000 a month are down payment on the property is how I feel that should be treated.

Yeah, we're getting the real estate by the real estate. It just happens to be our other real estate that's buying that one, our one other cash negative deal.

Actually does hurt. Ooh, you know what I'm gonna say?

$8,000 a month next door.

$8,000 a month negative. We have an empty triplex. We have— and we're paying employees to help us renovate it, which means I have payroll and, uh, mortgages, utilities, and private capital payments.

Yeah, ouchie. That is a real one right now. And we— the $3,000 a month negative and the $8,000 a month, that is right now.

Why the heck did we do that, Cody?

Okay. So there's a reason. Back to the story. We bought the Robin Hood and we don't like to go slow. We changed things rather quick and this place pops up on the market while we're under contract to buy the Robin Hood. This place I'm talking about is the triplex next door, 2.5 acres, adjacent land, adjacent waterfront to our dock. I mean, it is, it's just cool. We could not ever buy that if it sold. It would not trade again for a long time. So the thought was, okay, what if we connected the campuses? It shares Creek and a bridge. Like, it just shares some really cool common ground, and it'd be cool for expansion. It'd just be a great story. Never be done again. It has the whole street corner. So we're like, let's just buy it. So I call them up and get them to hold the contract. They did not list it with seller financing. It sat on Zillow for a while. It was 100 days when I called them. Hey, would you guys hold the contract? And they said yes. So Got them to seller finance it with 20% down, and we brought in an equity partner for that. They needed cash flow, so we just guarantee cash flow payments to them, which is why our cost of debt is so high on that asset. But we bought it with a signature, and we'll, we'll buy that out later when we have the cash. But we can afford to cash flow it, and when we get it up and operational, that adds another 3 cabin spaces to the resort.

That's what I want. And then the resort will be able to lease those spaces. The resort that is very profitable will fill the spaces for us with all the systems that we have, and we're cash flow positive. However, it's a heavy bleed to get there. You don't get to do that until you have a lot of cash flow to support the negative, because $8,000 hurts. We talk about not ever buying negative cash flow deals Yeah, I will say this. There is absolutely no way, and this is recorded, so this is a thing. We're not buying any more cash flow negative deals until everything we have is completely stabilized. And then we might look at something that has upside like those, but it has to be a very specific reason with a very specific strategy.

And a very specific story.

And has to be very comfortably covered by your existing cash flows.

Yeah, it is very painful to be negative on a couple assets 5 figures. And the only time we'd be comfortable cash flowing negative 5 figures is if we had 6 figures coming in.

Zuber calls those deals alligator deals because you always have to feed them and they're always hungry. Those problems— I love that. That is why I read his book.

Um, oh, calling me out.

Well, this is okay. I'm the book reader. Uh, Cody is an audiobook person, but I believe they have an audiobook. Dion's actually recording, uh, the audiobook for Zuber that will be out on Audible soon. Um, but alligator deals suck. The, uh, Zuber won't buy it. Michael Zuber literally won't touch them for any reason ever. Never violates that principle. For us, you have to have a massive global cash flow and a ton of excess of what you're paying negative to add anything negative to your universe. Yep, that's all. Okay, back from Cody Rabb.

Thanks for saving me from a frozen vehicle at 2 AM. All right. Is buying an RV park the same process as multifamily property? Short answer, yes. Longer answer, uh, you're going to have very similar due diligence. There will be some factors to look at. It's not quite the same as just buying a 10-plex, one building, 10 units.

However, I'm still going to look at the financials the same exact way.

I want to look at what's my net operating income, how am I getting the financing, because it's deal, debt, equity. So you find the deal, how do I get the debt? If it's seller finance, great. Prom note, deed of trust, I would want to figure out if it's park-owned homes, like who actually owns what's on the land. But very, very similar. That's coming from having chatted with a lot of RV park owners.

Yeah, so a little bit different on how you treat them because they're, they're done a little bit different on the depreciation schedule and how you run them. However, um, functionally very, very similar to like owning a Class C multifamily building. Um, I got a great question up here.

Oh, I can read it.

Okay, perfect. Yeah, you want to read it off for us?

Oh, I was just saying I can read it.

Well, I have to stand up to see it.

Okay. Why pay off all your debt and increase cash flow, uh, as much as possible? Does that impact tax strategy?

Oh, it does tax strategy.

Yeah, you're going to pay more tax. Turns out if— I mean, debt is not taxable, so you borrow more money, you'll just have more liquidity. That doesn't have a tax obligation to it. However, we want to own it. We don't want to borrow our way to wealth forever. Is it worth the tax? Mm, probably not. So what do we have to do? We'll have to go lever up and buy 100-unit complexes plus without any partners. We will continue to leverage this game and we'll play the seller finance game, call our shot, 'cause we already did and said we'd get to $10 billion. It's all made of numbers, but $10 billion, I still got 17 years to get there. We're getting closer and closer and closer. However, time to do that. We will buy seller-financed 100-unit complexes, 10% down. I guarantee it. And we're recording it here because you can hold us to it. That will happen. We will start playing 100-unit, 200-unit, 300-unit, 1,000-unit portfolio assemblages, eventually seller-financed.

And then we'll get the one 10,000-unit building called the Cube.

Have we stripped that out? Maybe the cube is a 10,000 unit.

We're not going to do that. No, that would be a self-sustained dystopia. We're not going to do that. But basically our tax strategy, we've done a lot of cost segregation studies.

We—

this year, yeah, we didn't do anything this year. We have a lot of our depreciation is condensed to a 5-year period, which means every 5 years you have to buy bigger. So while our tax strategy, if we paid everything off and just went completely debt-free, we would have to keep scaling with debt, but think of it like blocks.

You build your first block. For us, by the time we pay it off, the current real estate we own will be worth about $25 million with really, really conservative appreciation.

And when it's paid off, it's solid. And if it's solid, you can stand on it to get to the next lever. You've built yourself a stair. So you get to the next level, I'll lever up again and we'll buy something low down that's bigger.

And by the time we get there, there's a lot of people that say, well, you're going to have a lot of open opportunity to get sued. I'm like, well, that already happens today. So I mean, it is what it is. Dave Ramsey is big enough where he doesn't care if he gets sued and he has a bunch of equity. He's just rich. So we're going to play that game. So we get to $25 million, pay it off, which we're working on right now, and then scale up again to $75 million and then go to $150 and then $300 and then Once you get it all paid off, we are just borrowing our way to become Dave Ramsey. And then we'll be Dave Ramsey by paying it all off. And yes, will we pay taxes? 100% we'll pay taxes. Government, please don't abuse that.

But yeah, you know, we know they will. At some point your real estate makes enough income without that, it just doesn't matter. It's like, okay, fine, we can pay taxes.

Yeah, pay your dues.

Yeah, we might reverse course on that later, but I mean, tax strategy and tax management is a real thing to consider.

Consider. It's your biggest expense.

However, if lowering my debt and securing my assets mean that I pay more in tax, that is a price I'm willing to pay.

Yeah, I mean, you may not be willing to pay it, so you can Robert Kiyosaki this thing and lever to the moon. I don't want to play the game twice. There— I know of people that have lost billions of dollars of real estate.

That's me with a B.

They leveraged it improperly. Now, some people watching this may say, well, I wouldn't do that. Well, Good. You don't get to do that because you're not there. It happens. So we don't want to happen to us. We don't want to play this game twice. Yes, there are ways to not lose everything. However, we don't want to play the game twice. So we are going to build it this way. And since you're commenting up there, I can't see your name, but you get to build whatever strategy you want to build. For us, we will pay that price for security.

All right, let's get caught up on some of these questions. Where do they pour it in?

All right, thanks. No problem with the Tesla. Good story. All right, thanks, Cody. Okay. What does your buyout look like for your equity partners? You have structured as debt. Okay. Well, they're equity partners. They're not debt. However, the buyout depends. We've had 2-for-1s that we've done in 6 months. Ouch. We've had 1.5-to-1s for 5 years. We've had 1.25-to-1s. To 1. If you put in $100, they would get bought out for $125.

Bought out.

Yeah. Now, is that a promise to them? Absolutely not. However, something that I learned from the resort owners that you want to incentivize the compensation model of the successful outcome of the organization. If we don't buy them out, it costs us more money because the equity position that they have in that asset is worth more than we're buying them out for. They're getting cash flow higher than ours day one, which is why they would take that. However, we fail to buy them out, they're just worth more money at that point. We secure an option, and if we fail to perform, oops, it costs us more money. But at the end of the day, we're still going to get in the real estate, so we're incentivized to fulfill our obligation.

Yep. And we usually put ridiculous security when we're doing the, uh, the equity stuff. We usually back by more equity than they put in. And we usually have something in there that's like a clause of forfeiture of our equity or huge financial penalties.

Oh yeah, like for the, for the resort, it was $100,000 a quarter.

$100,000 a quarter if we don't buy them out. And penalties.

I mean, it's just awful.

And it is a—

can we afford it?

Yes, but ow, ow, that would hurt.

You can, you can bet that we're going to want to make that thing happen. Happen.

Yeah, make it, make it safe for the other people involved.

Okay, Bobby here. I hear I have been mentioned.

Yes, 30-unit deal. Hey Bobby, we talked briefly about your strategy and your turret.

I want a turret.

I want you to buy that deal because it's epic and you get pictures in front of that.

However, make sure you do your due diligence because wants and haves are different. Make sure you have a business model that can float the negative. Okay. From, I think that's how you spell Joey with a G. I'm closing on a triplex that has 1.25-acre zone multifamily in a single-family area, looking to hopefully put a 9-plex on. How would I look to get financing for this? Okay. Uh, if you're closing on it, you're already under contract. Congratulations. If you want to put another 9-plex on it and then you'd have a 12-plex. I love 12-plexes. It's my first 2 deals. Get the land first, get it cash flowing. The more cash flow you have, the more debt you can support. So if you want to borrow your way to building it, increase your cash flow. That's the number one. Then you can either take it private or you can try and throw it through a bank for a construction loan and use the equity you have and the cash flow you have to build it. Make sure with the city or the county or the jurisdiction you're in that you can actually build a 9-plex up.

Yep, that's the first thing we've been told. We've had great ideas of using the property exactly how it's been used for long periods of time. I know I saw that, um, like that, uh, that one property we just talked about, 6-plex with the lot. That lot has been used for parking forever. We decided it would be a good idea to file for a business license so we can market the parking and rent it out like, like normal people. Like, we have a parking lot, can people park here?

City said no, you can do it for free, but you can't charge.

Dumb. Um, that stuff happens. Just make sure if it's part of your plan that you have the city on board. And also, a verbal yes from the city is still a no. Yeah, that hasn't actually happened to us yet. I haven't got a yes from the city on anything I wanted to do.

Yeah, city's lame.

But when you— yeah, if the city says something, it does not count until you have it in writing.

So City of Moseley, give it to us, or I'm painting every building I own pink. Take that.

That would be hideous. That'd be a lot of pink.

That'd be atrocious. So we own more multi-family buildings in Grant County than anybody.

That would be— I'm picturing those buildings are pink now.

We'll send this video to the city.

All right, give me my parking lot.

So someone asked how we manage stress from scaling.

Uh, that's— oh my goodness, that's been hard to learn.

I lost my hair over it. His hair turned white. I mean, it happens.

Yep.

We had to have a lot of wins. This was a very stressful game to play. Very difficult to go this fast. It's not an impossible game, but if you want to go fast, it is actually stressful. There's a lot of pieces. We were meeting up with the prior resort owner. He actually lent us $3.5 million seller finance to buy this place. He's lent us more money seller finance than anybody. Hmm.

You're the biggest lender today.

Like, well, we'll, we'll pass that up. Yeah, but he was like, you guys have changed a lot really quickly. It's like, yes, yeah, we have to move quickly the way we built our business model. We can't just sit around, lounge around. And so while there's a lot of stress, that is used by us as a motivator to move forward because there's not stress on the other side of this fence. We are pushing and pushing and pushing to build what we wanted to build. As soon as it's built, it's built. Great. Well, now how do you manage it? So now we're pushing and pushing and pushing to stabilize the existence. Once it's stabilized, we do whatever we want. So we use it as a motivator to say, this is very temporary. I had all the hair on the back of my head fall out. I have photos of it if anybody wants to see. I won't show it to you right here, but if you ever see me, I could show you because it was really bad. I didn't handle stress well. You know, just to answer your question, it's very difficult.

I see Dion enter the chat. When we started our investing, Dion had a full head of hair. He lost all of his hair watching us. I'm kidding. I make fun of Dion from time to time, but he does remind everyone every time you hit the like button, you do in fact give an angel its wings. Dion, we appreciate you. Thank you for letting us make fun of you on occasion on our channel. Dion's strategy is baller. You need to follow him. So everyone on YouTube who sees him in the chat, you should click the name Dion Talk Financial Freedom because that channel is a channel worth following. That is how you build this without partners and live the life that— if you want to learn how to do this without stress, talk to Dion. Dion is the lowest stress way you can possibly invest ever.

Yeah, if this is too stressful, study from Dion.

We'll study from both, but apply Dion's. I learned something from Cody's piece of crap mentor, uh, that has actually really, really helped me with stress because I've— I struggle with stress more than Cody does. Cody holds it all in and loses his hair. Stress is hard on me. I put everything into 3 boxes, and it is this simple: things I can control, things I can influence, and things that I can't do anything about. If I can't do anything about it, I can't stress about it. There's no point.

Sometimes he still does, and I have to slap him around and tell him stop.

But you— to your extent that you put that into a box, you will stress about the things here that you can't control. I can't control a septic line breaking. I can influence it. I can go, okay, I can get—

we can do the maintenance.

I can get a professional out there at the speed they can get out there. I can't control the time it takes for them to get it done. I can't control the cost it's gonna be. And I myself do not have the equipment to dig up the line. So if I can't control it, I'm gonna influence it. The amount of stress I put on it is going to be appropriate. For me, it helps just to be able to put it in that box. If I can mentally go, is this a control thing? Well, good, I don't have stress because I can just put on my big boy pants and make it happen. If it's something that I have the power to fix, I can do it. We've done that with employees. We've had the wrong people in the wrong spot multiple times in our org, and it's like, okay, um, you may have to move someone to a different position within your company. You may have to let someone go. You may need to hire a new person. All of those decisions though, you control them, so you're not allowed to stress because it's on you. If you can influence it, that's usually the most stressful because it's not under your control. And if it's out of your control, you just have to say like, wow, this sucks. Smile and move on.

All right, Bobby asked if we accept rent via credit card for tenants. Yes, they can pay through AppFolio with a credit card. Edmund, have you ever constructed a deal to where your equity partner is working as debt with annual interest payments until the balloon goes through, then switch to equity split? We've only been playing this game together for 1 year, so the answer is no. We don't get that complicated. We've converted equity to debt and debt to equity. Yep.

We've, we've bought, we've given people to like to forgive a note. We've given people equity and great deals. And so we converted debt to equity. Uh, we bought out people on the 38th, actually. We bought out some of the people with money. Like we actually wrote the check, bought them out there, things done. Other people we wanted while we're starting buyouts, we wanted to finish the rest of the buyouts. We bought them out with a note. So as opposed to just buying them out with cash, We kicked out into the future and we now have payments on a note for the amount we wanted to buy them out for. So you can convert debt to equity, you can convert equity to debt. Um, never make that your going-in strategy. It is an option that you can do. Is that fair to say?

I think that's fair to say. All right, Edmund also asked, apologies for the confusion, I recall Caleb and Chuck posting a video of equity partners can be acted as debt or equity. Well, they can be debt or equity, but they're not an equity partner. So if they loan you money, they're a lender. If they partner with you, they're an equity partner. There's a distinction there.

Debt is a lender. And granted, they're, they're a player on the deal. Like people who lent us money, I consider them a strategic partner, not an equity partner.

They took a position against the real estate. Yeah.

They're, they're on your team.

All right. From Alex, I was offered a self-storage facility seller finance. I will have to raise down payment. I'm assuming it will be around $100,000 down. Should I be raising debt or equity? Well, if they're going to let you raise it as debt, second lien position against the asset, then go for it. If there's sufficient cash flow and the debt's long-term. If you're getting a 6-month balloon from someone because they want a loan to own where they want to try and steal your deal, then I wouldn't do that. But if they're going to give you a 3, 4, 5-year loan and it'll still cash flow and you're happy with that, then I'd probably consider it as debt. Boom. From Tal, will you ever do commercial property, office, retail, industrial, etc.? Why or why not? We'll do mixed use.

We'll definitely do office because I want to own an office building for multifamily property management. We have enough business where we can fill our own office and be our own tenant, which is where it makes sense to branch into office because again, you get into the control influence thing. I just directly control everything.

Thing.

That would be awesome.

Yeah.

Um, commercial property. A lot of our multifamily is commercial multifamily.

Oh my, that died.

Oh, that's funny. Our gimbal has died. Welcome to my shoes. I don't have a good— I didn't realize that was being held up electronically. Yeah, Instagram, I will, I will come save you. Um, Cody, ask the, ask the next questions.

Well, that— I will just answer that question. I won't ask that question. However, We will do mixed-use. By we, I mean at least me, because I love the idea of having housing on top of commercial retail. I think it'd be really cool to have restaurants down below and have 3 or 4-story Class A apartments above someday. However, you think about that in blocks. We build our first block and our second one, and then we'll start taking down $40, $50, $60 million purchases, eventually do the $100+ million purchases if we don't implode before then and we follow our good principles. But, uh, we're gonna map that whole thing out and the whole journey along the way on YouTube. So you'll get to see if we start violating principles. That's the reason we put it out there so you can yell at us if we do that. But, uh, yeah, we will get there someday, but not today.

But not today.

And that's it.

That's it for the YouTube. I have a couple questions over here. So YouTube, get your questions going because I'm switching over to the Instagram. If I come back and there's no questions, we're out. All right, so I got a two-part here from, uh, Brian Rogers. I have 10 acres in East Texas. I have a 2-bed, 1-bath, 900-square-foot barndominium. That's awesome. That is the most Texas thing I can think of, a barn on the property. I owe $100,000 on the property and I want to build duplexes on property. The appraisal is $357,000. How can I get financing for the build. So he has 10 acres, he doesn't owe a whole lot, he's 100, it's worth 357.

How much does it cost to build it? Do they not give that input?

I don't have the input of the cost, so let's just assume that it's a reasonable cost.

Okay, so when you— we talk about deal debt equity, you have to understand the deal. So if that deal costs you $150,000 to build, you owe $100,000, you could lever it up to $250,000. On a 357 asset, you're at 67% LTV, right in there. Yeah. Yeah. In that range. So there's a lot of lenders that'll do that, just do a cash-out refi, do a HELOC, but you need to know your numbers. If you don't know your numbers, you're playing in theoretical land and I don't like playing in theory land. That's where a lot of real estate agents live. And I don't like a lot of real estate agents. So I would go get your numbers first. And then once you have the deal, then you go get the debt. And since you don't need equity because you already own it, you already have the equity in that deal, you don't need to worry about that stuff. Deal, then debt, line up your numbers and go from there.

Yep.

Edwin asked, uh, I'll do you guys one better. Ooh, okay. Could you construct an equity partner at second position? So that would be a lender, not an equity partner, and use proceeds in the form of a larger quantity of goats Uh, I, I don't understand. Oh no, comedy hour.

They have switched camels. I mean, yes, that's the fun part about creative finance is that you can get whatever you negotiate.

Goats and camels. You can go seller finance your goats, camels, and let us know how it went.

This may be a better question for our Texas bar dominion.

Yeah, I'm gonna pass on that one.

That's funny. But seriously, you can do almost whatever you want. That's why I like creative financing. Technically, yes, you can buy a property trading goats, and those goats can be converted to another trade of camels later. There's no reason why you can't do that. We like to use debt and equity I find money is typically a good universal medium, but you can trade with whatever you want. You can do it with bricks of gold. I mean, it doesn't really matter.

Yeah. You just got your first silver brick.

Yeah, I did. I got a silver brick because I didn't know how big a kilo of silver was. Now I know. Also, it brings to mind, I'm just shooting the question for you guys to answer. Can you use another property as down pay? Actually, this is a great analogy for the goats and camels.

Can you use another property as down payment instead of liquid cash? Cash and transfer the deed. You should be able to do a trade. I've actually seen people do that when I was down in Belize.

Yeah.

You can do that. That said, instead of actually giving them the, like the deed or, you know, just giving up complete ownership, which I'm sure you could do, cause I've seen that happen down in Belize when I was at the real estate guys. Yeah.

It is doable.

I would rather just put a lien against one of your assets, take it private, go get a hard money loan or something similar against one of your assets, as long as you can afford it. And then use that cash as the down payment. Use equity. Yeah.

There's a 15-plex that we'll buy with a second against one of our other assets. That is, that is the stated game plan of the people seller financing. Like, well, let's just slap a second on one of your other properties. Um, ideally it'd be a property they sold us. So we bought one property, 10% down, we increased the value and then they'll place a second against it. Cool. I'm going to take that comment, hide it from YouTube, disappear. That is not going to be appropriate.

Do you have anything else?

Oh yeah, I got one over here from Instagram. I think I got a couple. Uh, oh, this is for you, Cody. You mentioned 12-plexes are your favorite. Why are 12-plexes your favorite?

I started with the 12-plex and then I bought a second 12-plex. My first 12 was awesome, still is awesome. I still own it today. It used to cash flow $800 a month, now it's closer to $3,500 a month. I just love that asset. Second 12-plex I bought was a turd and I made it less of a turd when Christian bought into that. But those are my first two deals. Yeah, I let him buy in at a discount rate of 6 figures.

Well, we had to improve the asset to get there, but yeah, well, it was worth more than when you bought it. Oh yeah, sure.

I let him buy in at a $900,000 valuation. It was worth 7 figures at the time.

Yes.

Now it's worth almost multiple 7 figures. I got started with 12-plex because I just have an affinity to 12s. That's how I got started.

I think it's a great size because 30 units, it starts to get a little bit technical to manage by yourself. Duplexes are hard to scale, though I did really well starting with them. They're very comfortable for me and they made good money. 2 duplexes paid for my home mortgage, so that's where my real estate was buying my real estate. 12-plex is a great target though because there's a lot of 12-plexes out there, and that's a good size deal where you can definitely self-manage and you have enough income potential on those where you actually make some money.

All Nighter commented that US Constitution Constitution Article 1, Section 10 states, uh, law— there's a law impairing the obligation of contracts, so goats and camels are fair currency?

As long as it is agreed upon and signed off by everyone's lawyers, the answer is yes.

There you go. All right, how's the resort doing? A lot of demand? Well, the resort's hanging in there. We are— we passed up the numbers for 2021, we also had a lot of stuff break. We had a septic issue that cost a lot of money. We had a furnace issue that stunk. We had, uh, a lightning bolt, I think, hit the—

lightning struck the power line and the transformer.

That caused it to surge, so we had to fix a lot of wiring. A lot of things went wrong. But how do you use— then we had trees fall on some of our structures. And then we had a huge power outage from heaviest snow that's been here in a while. And apparently the longest power outage the resort has had in decades. So outside of literally everything almost going wrong, it's going great. Yeah.

And like this weekend, we're running a real estate event with a few people we invited on the channel. And we're completely booked. Like we are, we are loaded for this weekend. Yep, every bed will be loaded this weekend. If you still want to join for the January, I believe it's the 20th, 21st, and 22nd. Um, I may have that shifted by one day, but it's that weekend.

Shoot us a message.

Yep, we are available. There is a number, we put it somewhere in our YouTube and our Instagram, but, uh, you can call the resort and book it direct through Hannah. Um, Cody's pulling up the number right now, but we opened it up to this YouTube channel first and Instagram. You're watching here too. If you want to come out and join us at the resort, we're going to have guest speakers. It's going to be fantastic.

360-490-8168. And that's 360-490-8168. That's not our number, that is Hannah. But if you want to text us as well, our phone numbers are on the How Do You Find Any Property Owner Ever.

But if we book that all from people here, I would be stoked. You can come out here and see— party. Um, but yeah, that is the resort. It's otherwise, it's going very well. Uh, the honeymoon suite, we've fixed furnace, which means it is going to be open. It's now rebranded the Robin Hood Suite, but it is the single coolest location that we have here. Never been open to the public in 88 years. That goes online, uh, on the 12th. So someone here, get our first booking. I appreciate that. And we'll be opening up the triplex next door here in the next few weeks.

Yeah.

All right.

Are sellers who are financing the property often willing to have a second position loan? Your experience. More than half my deals do.

Very common. All right, Retired Through Real Estate. Well, I like your Instagram name. What does the day-to-day look like for you guys? Thanks for answering these questions live. Very informative. Well, you're very welcome. This is my favorite part of the day, our favorite part of the week.

We just sit on a beach and drink Mai Tais.

Yeah, I just sit here in our private little, our private little bar. I look at our—

no, I'm kidding.

Right. Now, honestly, it's— if I'm awake, I'm working. That, that's just realistically what it looks like. It's the same way for Cody.

Building systems, automating as much as possible so that it's not so we can just go sit on a beach and drink Mai Tais. We are automating so we can move on to bigger tasks.

Yes, the day-to-day— I mean, realistic, I'll just kind of like rapid-fire because every single day is different as an entrepreneur. But the general stuff we have to do, um, we film everything live. I'm actually switching to a filming schedule here in the near future, so we'll have higher quality videos coming out. But, um, it's film a video, do a couple of the shorts, get the media stuff out of the way. Uh, we're gonna call clients, we're probably gonna look at 2 or 3 deals. We do our mentorship calls 3 times a week, so that's at least an hour. Uh, mentees in our group, I do everything I can to help you guys, so Um, I'll usually look at a few people's deals via email. I'll usually take a phone call from 1 or 2 people in our mentorship program. Cody does the same. Um, we'll have— man, what else do we do in like a normal day? Tons of accounting all the time. Accounting's everything.

There's a lot of fires to put out, but really just building out the team. Today I had a meeting. I woke up 6:30, got on a phone call with someone who's not from the state. To automate PM books, owner distributions, 1099s, overall bookkeeping. I don't have to do it. We actually got a discount because I had the books at a level that they hadn't really seen before. They don't have a lot of clients that actually keep good property balances. So if you need property management in Washington, we know how to play that game.

We hired the company that you hire when your books are trash. They fix your problems. We hired them because we're like, you know what, if you can run this, we get what, 5, 10 hours a week back of your time? Plus we alleviate time from my wife and from Hannah.

And we got a discount because the books were good.

Yep. By offloading some of the media stuff, we opened up 10 hours of my time. So we're, we're buying our time back with our cash flow right now. Um, but like when the resort got snowed out, Cody and I were down here with shovels. We were Clearing snow, digging out our blocked drains, carrying branches off. So I mean, depending on the day and what the emergency is, we're boots on the ground on half of our own properties. Yup.

Alrighty. So someone said, I got a house seller financed, a 6-bedroom single family, 2,900 square feet. Would you recommend renting by the room? No, I wouldn't. You can't evict a roommate, at least not in Washington.

Yeah, it depends on where you are and what the laws are. I wouldn't do it here. I've seen people try to push their income, it ends up being so active you don't buy other real estate. The people I know do the bedroom rental games own like 4 or maybe 5 properties. It's like, cool, you make 20% more on your 5 properties. I'd be about like 30 properties in a year. I would just buy more buildings.

I would just buy more property.

That's what I would do too. It's easier. You will have way, way, way, way easier time if you just get bigger. Um, best college degree to pursue in your opinion? That's in from, uh, Justin.

Well, I'm not qualified to speak on that because I didn't go.

I think— well, the— okay, I'm gonna give two answers to this. The best college degree should be, uh, if you need a degree for what you want to do, it's that one. If you want to be a doctor, I probably wouldn't get a communications degree. So outside of the obvious, like, get a degree in what you want to do if it requires a degree. If you don't need a degree for what you want to do, don't get a degree because that's stupid. Um, if you want to get a valuable degree and you want to go into business first—

I just thought of an invaluable one, but I won't name it.

The, um, I think one of the best degrees you can get is accounting if you want to do this. If you, you're watching a real estate channel, so on the assumption that you want to own real estate, a, a big understanding of accounting principles gives you two options. One, you can go get a high-paid W-2 that is very consistent accountants will always be needed. So you have security from your degree.

Well, they will be until they're not. I mean, eventually it could get automated, but that's true.

In, in the current economy, you will always need people who track the money. And I don't see that changing anywhere in the near future. Uh, two, it directly applies to business. It is the most applicable piece of business knowledge is how does the money flow? Do I understand my balance sheet and income statement? You can learn it without college, but if you're going to go through the whole college degree, there's going to be stuff in cost accounting. And I mean, you'll learn a lot through an accounting major. Also, every accounting major, you have a bunch of general business classes you have to go through to get that thing. I think that is the single most valuable real estate-based— yeah, degree.

No matter what you do, you're gonna have to actually go apply it if you go there. Like, Christian's forgotten a lot of stuff that he learned. Guarantee you that there's a lot of stuff that he learned at one point that he doesn't use anymore. So the practical application behind all of it, you have to actually go apply the things, otherwise you lose it.

Yeah, I think the things that I got from college personally, there's a certain amount of focus, uh, for projects. There's a certain amount of social skill that I learned that I apply all the time. The actual act of going through college was actually very helpful in who I am, and as the operations person being exposed to a whole bunch of different teams on a whole bunch of group projects. It was those skills that I feel like transferred really well into helping lead a company, was leading teams on a campus where you kind of get a practice ground to do that. By kind of, I mean you do get a practice ground in being an adult. That's a true advantage of college. I'm not anti-college, I'm just anti-wasting time. Could I have learned those out of college? Yes. Did it fast-track me? I think it did. Cool.

What's the next question?

Uh, let's see here. If we're looking through the Instagram, I got a thank you from Brian. Let's see if we have— ah, here's one from Gunner. How long do you guys usually have the seller to carry the note when you're drawing up a seller finance offer? So what's the—

10+ years.

Yep, that is the target. We have, uh, we have a reasonable amount of 5 and 8. Yeah. Um, but target is as long as possible because his first deal is 30 years. It's awesome. Klein Time. Dana Klein, he's a good friend of ours. I was just in his old duplex. One of our clients renovated it and it's gorgeous.

They spent way too much money on it.

Yeah, hopefully he's not watching that. He did spend too much, but it looks good.

He eventually is.

Look forward to booking, uh, our wedding with you. Hoping to make your January seminar. Dana, it would be awesome to have you there in January. It's a privilege to, uh, to be around you. And if we get the honor of hosting your wedding here, that'd be fun. That would, that would mean a lot to me personally. All right. That's what I have for questions on Instagram. We scrolled to the bottom. Do we have anything new on YouTube?

Someone said they prefer a free YouTube university degree from well-audited sources. I hope I'm one of those.

I was thinking the same thing. All right.

Well, that's good.

Did we make the cut?

If we didn't make the cut, that's fine because we're done with this live.

Yep, that is what we have. So everyone, thank you for joining this series of Whiteboard Wednesday Live, which has been rebranded to Creative Finance Live Instagram. Welcome to the lives. I'll share these with Cody, so I'll have on both channels. Um, however, this was, uh, awesome being here. If you haven't yet, hit that like button because more people will watch our next—

do it.

Which means you get more and better questions. So hit the like before you leave, share with a friend for next week, subscribe to the channel if you haven't. And that is all the things I can ask you to do. I hope to see a bunch of you at the Robinhood shortly. Are we going to answer that last question that just came in?

And then I'll ask that and then we'll be done.

Okay, this is the last question.

What are your thoughts on house hacking? I would— I mean, I do it right now. I love the resort. Free. I'm moving back to rent on.

I started by house hacking a condo with roommates.

Yeah. Do it if you want to.

Yep. Dion, uh, does that. He still does that. He, that's how he got started and he lives in one of his fourplexes. So huge fan. All right. For real, we're leaving. We'll see you guys soon. Next week.

See you next week.

See you next week.