Creative Finance Made Easy!

Every year, millions of Americans struggle to understand seller financing. Are you one of the people who don't understand how creative finance can help move you forward or what creative finance even is? Well, fortunately, we can explain this very simply in a very short video. So here we go. Hey, welcome back to the channel. I'm Christian Osgood. I'm going to be sharing exactly what creative finance is, how it works, and how we move forward on our financial goals with creative finance. So what is creative finance? Well, first you have to understand assets and liabilities. We're gonna break this down super simple. For all intents of this video, a liability is something on your personal balance sheet where you have assets and liabilities. Liabilities decrease your monthly income. If I have a liability, it costs me money every month. Assets increase your monthly income. Now creative finance allows you to create a custom liability basically make up money to purchase an asset. Now, this only works if you create a larger asset than the liability. So for example, I will create a note. Here are our props for today's video. Note. We're gonna say this note is $3,000 per month, which means I pay $3,000 per month. Now, a note is a promise to pay something in the future. So we want long-term fixed rate debt. So with this $3,000 fixed for a long period of time, we're going to go ahead and buy an asset represented by this brick of silver here. And we'll say that this is worth $5,000 a month income. This is going to represent a rental property for us. Now, if we can take $3,000 of made-up money, right, I wrote this note, this note, no money is actually left in my hand. But if I can take this note and buy this asset, I own this income stream. I own it as long as I can continue to pay for it and service this note, which is why we always do long-term fixed rate debt. This $3,000 never changes. Now, if $2,000 a month, which is your net cash flow, doesn't change your life, what do you do? You do another note for $3,000 and buy another asset and you stack them as such. And then you stack them and then you stack them. And so on. And this gets as high as you need it to be. But let's say your goal was $10,000 per month. Well, in that case, in this example, you write 5 of these notes for $15,000 a month. And with those, you buy— I only have 4 on me right now, but add another one here— you buy $25,000 of total income with $15,000 of debt. Well, that's well and fine. Now, now you have your $10,000 a month. You did it with creative finance. However, you still have a liability. And this is where most people online are going to lie to you. They tell you just lever, lever, lever, just keep borrowing, just keep scaling. You'll be fine. There's tax benefits to borrowing. Well, you know what gets really tiresome? Having a whole bunch of liabilities. And you know what? At some point, the note that you created comes due. How do we get around this? When you buy assets and you buy these with a liability that's smaller than the asset, you create positive cash flow. If instead of paying yourself and buying the sports car or the plane or the bigger house, or what have you. You take that excess income and you pay off the liabilities that you used to buy the assets. What are you left with? You pay off the note that you made up. The made-up money is now gone. It's paid off and you are left with assets on your balance sheet. Now, in our example, we had $25,000 of income and negative $15,000 of debt with $10,000 positive cash flow. If we eliminate that debt, we're left with $25,000. However, Your income's not fixed, only your debt is fixed rate. The fun thing with real estate and why we believe in and continue to invest in real estate is that over the long run, rents and property values always increase and adjust for inflation, which means while we're paying this down, say in a decade rents double, I don't just have $25,000 of income with no attached liability, I have about $50,000 of income. With no attached liability. Cody and I flew all over the country interviewing owners, and we have people in our mentorship group on multifamilystrategy.com, and they've done these deals in markets everywhere, all over the United States. And what we have found is that the people who are winning the game, who have hundreds of units and true financial freedom, this is what they do. They lever to buy assets. They stabilize those assets, which gives them a stable income stream. They then optimize them to push as much cash flow out as humanly possible. Then they use that cash flow to pay off all of the debt. With no debt, you own your universe and you win the game. That is how creative finance is played. All you do is create an imaginary liability that goes on a contract that is backed by something real, like a piece of real estate. You buy it, and as long as that piece of real estate pays you more than the note that you wrote, You've won. Now just pay it down with the money that you just created. That is our entire strategy. That is what Cody and I are doing actively. We're trying to get our entire portfolio paid off in the next 10 years. You can absolutely do this too. But if you want to understand creative finance, that's it. You just need to understand what is an asset, what is a liability. And if you can customize your liabilities to buy whatever asset you want, you can do creative finance. You want to learn more or do a deeper dive on how you put together these contracts, go ahead and follow this channel or check out more on multifamilystrategy.com. But this is Creative Finance 101.