Creative Finance Q&A with Christian Osgood

All right, let's go talk some creative finance today. First, I got some updates for you, uh, for those who have not yet seen the footage. I was at the Robinhood yesterday, our seller finance resort. And there was about 3 inches of standing water in one of the cabins. Now, I'd come in in the morning, it was fine. So the pipe literally burst while I was on site. I happened to be in a different cabin at the time. Funny enough, I was standing out there and Robin Hood's beautiful. We were like 80 degrees outside. I was listening to the birds, the frogs. I was like, man, I love the sound of the creek over here. And then I realized the creek's on the other side of campus. We turn around, there's water pouring out of the front door. Uh, I, I just posted this video on my Instagram too, so you can, you can take a look. I posted a few minutes ago. Uh, it literally ankle deep water flooded the whole thing out. So fortunately had our team. I was on site. I was out there till a little bit past midnight tearing out the carpet, tearing out the floors, making sure that we can salvage the subfloor, get everything dried. I'm gonna get teams out there to fix it. So the good news, those floors were a little bit tired. We're gonna do upgrades and fix the floors. There's not too much left to do. I lost a couple of electronics and that's it. So as disasters go, avoidable, but really important to remember if you are buying real estate, it is not free. Things will happen. This is why you need to have a reserve and you really need to plan these things out. So fortunately, we're ready for this project. We have the money set aside, contractors already ordered, remediation's already done. But oh my goodness, water's crazy. Water and fire will kill your building so fast. So fun updates from the universe. Real estate is in not free. Income is not passive here. Uh, subfloor, by the way, just, uh, it's like standard. If you look at like something, there's usually just like wood planks. I don't even know what type of wood it is. Plywood, basic, uh, thin sheets that go down to answer Dylan's question here in the chat. So talking a couple things creative finance here. Creative finance has allowed me to go from no money. I'd left a high-income job, so I did own a house. I used basically all of my money to buy 2 duplexes, ran out of cash, had a little bit of cash flow, left my job, had no income, and had this dream of I want to retire my wife and we want to start a family in Texas. I could earn my way to a house and a couple duplexes, and I think a lot of people would love to be there. You can do that in, for me, an 8-year career. You can make that happen. Fast forward a few years, figured out how to buy deals with or without money. Now I look at a deal and I go, oh, if I see an opportunity and I love this deal, we're going to find a way to buy this thing. And that has made millions of dollars, has let my wife retire from teaching. She now works full-time in the companies with me, and we're building our dream home in Texas for— wait for it, official announcement dropped this weekend— We are having our first kid. He's going to be born in Texas in that new house. Now you're gonna see a lot of stuff online with flashy cars, boats, houses. Anyone goes, oh, buy my course. I have the one secret, these 3 ways, the things you didn't know, this little known secret. There's a million of these freaking guru ads everywhere. Here's what matters. I cannot teach you how to buy a sports car because I don't have a sports car. Uh, in fact, my wife and I share a car. It's a Tesla Model Y. It's a decent car, and we are a single-car family. I have a little house here in Renton. I'm about to have a big house in Texas, but it's not ridiculous. It's a 5-bedroom house. It's nice. That is attainable. That is something that anyone can do in a 5-year period, learning how to invest. Now, it took me 3 and a half, just about 4 years to be able to hit all of my goals, but today I have hundreds of rentals, excellent partnerships, and we bought a lot of stuff very, very creatively. So today Our focus is talking about creative finance. Ask your questions here in the chat. I'm going to get to them until we run out or until my wife tells me it's time for dinner. So we have at bare minimum an hour where we can hang out, talk, chat. Let's talk creative finance best practices. But yeah, we've seen a lot of a lot. If you haven't yet, join the community, Multifamily Strategy. There is something— multifamilystrategy.com. There's something that's happened in the past few months that has been the best thing that has ever happened in Multifamily Strategy, in my opinion. We have a course included in the mentorships, like 250 videos. I add to it all the time. We have the mentorship 3 times a week. We do live Q&A together, kind of like we're doing here on this call, but, you know, it's live. You get to interact a little bit more. Do deal deep dives every Tuesday, look at real deals, run the math, run the numbers, figure out how to make them work. We do structured lessons on Thursdays. They all get recorded. Hundreds and hundreds of hours now of mentorship material just recorded on the plat— platform for you. However, the best thing I've ever seen happen in here— we have community within the community. There's actually now an after-mentorship call hosted by the mentees. I've been invited to guest speak there. It's not mine, it's just Multifamily Strategy, the community. And the fact that I don't own it, I don't control it, it is just a sub-community of people doing real estate together. I was on there. There's like 30 people in that last call. They're booking guest speakers. I've had the privilege to speak at the sub-community one time. It's really, really cool. I want you to be part of that community. If you guys enjoy this or you really enjoy this content, sure, like, subscribe to the channel. But this is the best time to buy. I'm going to get to the questions, but I'm going to start with this. There's one thing that I think is really important to mention. We have the best opportunity we've seen in 11 years, period. If you have committed to buy real estate, There's all these guru crappy ads out there. If you're committed to buy real estate, getting a coach or getting a mentor is not going to change the fact that you are already going to buy real estate. I have never coached anyone who purchased real estate who was not going to be successful before they met me. What we do is we try to remove steps that are unnecessary so you focus on the best things. So we condense time. And then I have made six-figure mistakes in how I've structured deals. Now it's on deals where I made 7 figures, but I'll tell you, $300,000 on my first deal, there have been times in my business where that $300,000 would've been so unbelievably helpful today. That is the goal of mentorship. If you were already committed to buying real estate, you don't want to just buy the sports car and the crazy boat. You want to actually have attainable goals that mean something. You want to work with an operator, multifamily strategy, Join the group because all I want to do is have us buy deals, optimize our opportunities, and cut out some of the time because I took a long time to get a couple duplexes. I took very little time to get over 200 rentals under contract for 176 rentals right now. That is a lot of units. Anyone can play this game. Creative financing is freaking awesome. Let's dive right into the questions. Speaking of the chat, Shannon, one of the guys who hosts the, the after-hours mentorship— I don't know, I don't know if there's a name to it, Shannon. If there is, post in the chat. That community is my favorite thing that is happening in our entire org. Of everything that I do, it's the part that I don't actually do, that something came out of this that is community that runs separately outside of this. It's a beautiful thing. I want everyone to be a part of it. You are all invited. All right. Uh, Troy's liking the new logo. Yeah, I get made fun of for this eyebrow thing I do in pretty much every video. I also only wear hats. Someone's like, dude, I have the perfect logo for you. They made that for me. It is— I actually love it. I'm just leaning all the way into it because I get made fun of all the time for this. And so welcome. Uh, yeah, Multifamily Strategy logo. We have the Christian Osgood eyebrow. Uh, diving into the questions here. Dylan, congratulations on the kid again. Thank you. Yes, for those who don't know, I am having a son. I'm also the last male Osgood, so now as long as this guy's born healthy, the pressure is off me. It is up to him to carry on the Osgood name. I can have all daughters from here and we're in the clear. Uh, let's see here. If I have 4 hours of free time and want to cold call, should I go do all owner calls or any amount of time towards broker calls? I do a few broker calls a week. I would say if you're calling a broker twice a week, that's probably fine. And if there's— if you find deals and you, you're like, this is interesting, pick up the phone and just dial that broker. I don't try to allocate a ton of time there, but consistently be calling brokers because they do in fact bring you deals. I've done a— just under half of my deals have been brought to me from a broker who I've built a relationship with over time. Uh, key for brokers: you start talking about an individual transaction and build a relationship. With owners, you start by building a relationship, and then eventually it could turn into a transaction. The order is completely flip-flopped. The end goal is the same: solid relationships with these people where you are their first call and they are one of your first calls. If you have that relationship, you're going to do deals. But it's structured, little flip-flop between brokers and owners, something that you see. So yeah, crazy is part of the game. Yeah, flooding happens. I've had it happen on a 23-unit building. So we had the Robinhood flooded, well, I had flood in the Robinhood where a pipe burst this winter, but that was really easily remediated. It was dramatic, but it was like, it broke in the old commercial kitchen. I have tile floors in there. It was actually not that bad. This one was like my favorite cabin. Cabin number 3, 3 inches of standing water is above ankle deep. I have another operator on the team who's helping me run that. This was his first day. So we're on site trying to run that thing. It was quite an adventure. If you're going to do this, no, this income is not passive. If someone's marketing that to you, it's BS. This is a ton of work. It's really hard. But if you play this game and you can get equity now, that's why I love creative finance. If you don't have a lot of money right now, but you can get a large equity position in real estate and you can buy it and never lose it, it's going to appreciate, appreciate, appreciate over time. You don't bank on appreciation. You buy for cash flow, but the properties get more and more and more over time. And on average, they double in value about every 15 to 17 years. Which is conveniently about what rent does every 15 to 70 years. It doubles. As long as you can hold it, you will become rich faster than if you try to save towards it. If you lose it all or you sell it all, or you're a wholesaler or a broker, you can make money, but you're not going to hit that next level of wealth. So not passive at all. Water damage happens. It is crazy and it, some of it's wild and it makes for an interesting Instagram reel. But you know what? At the end of the day, you have to be able to manage your stress. I walked in there, I was like, ah, it's flooded. Here we go. Not good. We got it cleaned out. It took 3 hours to remove all of the flooring. I pulled it all out on the back of my riding lawnmower. It's in the dumpster. It's all dried now. Contractors are in next week. They are going to re-floor this thing for me for, I think it's gonna be $2,000. That's it. Total flood, whole thing filled with water. It's gonna cost me $2,000 and then I'll probably put the trim myself. All right. What's the most complicated creative financing structure you've put together? Oh my goodness. Okay. Way too complicated. Remember this, everyone, this is super important. This is for all business, not just real estate. If it is simple, it is repeatable. If it's repeatable, it's scalable. If it's scalable, that is a business that I want to be in. This is too complicated. I couldn't do this structure again. Robinhood Village Resort. We purchased, 'cause there's 7 different parcels, we purchased them on 3 different contracts. One is seller financed. The other two are land contracts. The reason being is we pay them off one at a time. So all of my principal pay down at the end of every year. So it's seller financed. Oh, apparently I did the face capture. My camera's going to follow me now. All these are seller financed or not seller financed. I guess it's seller financed the first one, land contract the other one. Effectively, the seller financed the transaction for us. All the principal pay down at the end of every year, we negotiated interest only, 4.5% interest on, on $3.5 million of our $4.5 million. The principal paydown goes towards paying down contract number 1, and then it jumps to contract number 2, and then it jumps to contract number 3. The goal is to pay off the Robinhood almost in full by the end of our 8-year note. The bummer with this It's all due as a lump sum at the end of the year. There is a genius piece to this of it's due in October, which is the end of the summer, which is most of our revenue. So in hospitality, you have fluctuations in income. Having a one-time lump sum of principal helps us save throughout the year, even out the whole year, save in the good seasons, and go ahead and pay down our loan. Paying down debt is awesome. However, That is too large of a debt paydown. That was irresponsible. That's basically all of our profit. So we start every winter with no money and we go into the slow months with no money. That was stupid. Granted, we pay off the Robinhood very, very fast, but that was a stupid structure. On the capital raise, we came in and said the partners were basically like, look, we're going to bring in another partner. We want you to pay them some interest in exchange for lining up the million dollars though, we would like to have. All of the cost seg benefits. It's called a special allocation. It's a non-standard allocation of taxes. Now, if anyone is listening to this transaction and hearing seller finance, two land contracts— oh, by the way, there was a $75,000 subject to on one of the houses on one of the parcels. One cabin is on its own parcel and they had a little bit of debt on it. So if you're listening to this and you're like, wait a second, there was a small subject to There's 2 land contracts, there's 1 seller finance, there's a special allocation of taxes. That is way too freaking much. It is so hard to track. It is so hard to get through accounting. What we should have done was found 1 partner with the million dollars who looked at the deal, who had operational experience in hospitality, and closed it with them. And we would've done way better and it would've been way simpler. Whole thing, just 1 seller finance thing. When they had their creative proposal to break it up into 3 things, Just say no. I think we would've won that negotiation. We didn't learn to do that. Long answer to that, but holy Lord, not repeatable. So not scalable. Throw out anything. If you're getting too complicated to make a deal work, don't do the deal. Just, there's other deals to do. Shiloh's Crib. When raising a down payment, I hear a lot of people say they should raise more than you need. How much do you recommend when it comes to raising capital? You really want to get quotes for how much the renovation's gonna be. You want to have a reserve in there. Some of it is a little bit, By like, how much do we feasibly think we need to go through on a property? I like to have 3 to 6 months operating expenses in the account at all time. If all income stopped, like my 38-plex, for example, if income was just turned off, that thing brings in $30,000 a month. The correct reserve is going to be a minimum of $90,000 in that account. Now, is everyone going to leave at once? No. But that's a nice benchmark if you're just looking for a rule of thumb. That's probably appropriate for that property. We're going to have, because it's a newer property and I don't know everything about the property, you do what you can in due diligence on an acquisition where there's more unknowns. I'm buying two different transactions, same owner, 176 units, $8 million purchase. I'm going to leave half a million dollars in that account. I'm over-raising by a lot more than I need. And we're just putting a clause in there that says, look, at the end of the year, if we haven't blown through this budget, which we don't expect to, we're going to come up with, we're going to basically have a meeting and get together and say, how much do we really want in reserve? And we're going to return any excess capital to the investor. So it basically says, hey, I don't want to come back to you for money because that's awkward and uncomfortable. Let's overfund this. Let's be comfortable with the amount of money in here and know that we're very unlikely to overdraw this account at any point. So we have excess money. We're going to go through the first year. And when we have a full year of books behind us and we're really comfortable with the operations, let's pick a lower number for reserve and give you back some of the excess capital. That's a structure that I really like. The number one mistake most people say— this is really common— the number one thing that I hear, I wish that I raised more on my first deal. I raised enough to close it. That was Cody's biggest mistake. That was Kayla's biggest mistake. That was my biggest mistake. That was Ethan and Eddie's biggest mistake. That was Vlad's biggest mistake. These are all people who've gone through the mentorship group or is Cody and I raise more capital. Don't go back to your investors for money or go, hey, we're going to close this thing because we love it and we'll figure it out later. Just raise the darn reno cost with a little bit of margin on top of it and do the project. It is going to save you so much headache. I promise you, better way to do it. Vincent, good to see you, my friend. I saw your post on our Facebook page, which everyone's invited to, by the way. Multifamily Strategy, it is invite only, but if you want to reach out, we will go ahead and accept you. Anyone on these lives is always welcome into that community page. Vincent, I saw you post there. Welcome to the club, my friend. After, uh, the after-call meeting, uh, with the members is awesome, by the way, dude. It I'm blown away. I can't say good enough things about how fun it is to be just even able to pop in occasionally. I think it's important that I don't influence every piece of the community because then we get these weird cult-like guru groups where it's like, ah, you must follow my thing. I'm going to have on Thursday, if anyone's considering joining Multifamily Strategy, by the way, literally today or tomorrow, morning, like early AM is the time to do it. I'm bringing on 3 of our past mentees. They're going to talk about the things that they did that I didn't teach them. Like, I want— they're going to come on, they're going to talk about like, okay, here's what I got out of the course, here's what I did afterwards, and here's how my strategy differs. We're multifamily strategy. It's not my strategy. It's let's learn as many strategies as we can. It's going to be fun, and you're going to get to learn from people who have been successful in their own business after taking the course., but not influencing everything and making it like the Osgood method, the, the Christian and Cody show. I love this community so much. I, I've been talking about this all week. I just love what was put together there. It means the world to me that we have community within the community. Community-ception. It's the best thing ever. Uh, question from Steven. I bought a house hack duplex for my first property. Should I slowly scale up to a quad, then 5 to 8 units? No, I actually feel very strongly about this. You should look for the next thing you want to scale up to house hack, because house hack's a great strategy. It really is, but it's slow. I actually had a mentee do this. He bought a duplex and he was looking for his next fourplex. That was the next move for him. He ran into a 20-unit building because he expanded his, his mindset for like, okay, what if I bought bigger? He went under contract for that fourplex he was looking for and a 20-unit at the same time, and he closed both. You will miss opportunities if you focus on the strategy first. Focus on, do I have a deal? What size is the maximum deal I think I can take out? And then maybe add a few units to that and push a little harder. If you're like, maybe I can do a 10, buy a 12. It's like, oh, I think I can handle 20 units. Look for everything 25 and under. I think people should push themselves. Don't go out and say, I'm comfortable with the fiveplex. I'm going to start with a 100-unit building. The stupid tax on that will kill you. You don't know what you don't know to a certain extent. What you absolutely should do though, look for deals that are in your comfort range and a little bit outside of that comfort range. Also be looking for that next house hack and next property to move into. When you combine those strategies, you're going to find in 5 years, instead of being at 20 units, you're going to be at 200 units and you're going to be so happy that you did it that way. Dylan, when you're showing a unit, do you just walk around and small talk and tell them the benefits of living there? Showing units, I have done it before in my property management company. I did it with my Tukwila building, and I do outgo most of my staff. Not Corey. Corey is in Moses' leg. She's a freak of nature. It's a little bit more than small talk. You want to give them, if you're showing your own units, you want to give them space to imagine things. So I will come in, I'll tell them a little bit about what I— like, I talk to them as we're walking up to the door. I'm like, okay, tell me a little bit about what you're looking to do. What are you doing for work? That's the small talk part. They get in there, I usually give them about 20, 25 seconds of total silence just for them to walk in and look around. They need to imagine stuff. I'll usually tell them a couple things that I like about the property, upcoming things that are going to be improved with the property, And then I just ask them when they would like to move in. I keep it super, super simple. I had someone who was moving in, he's like, hey, me and my sister are looking for a place. I just got a job at the airport. I had the 7-plex right next to the airport. I'm like, okay, there, there's 7 units here. 4 other tenants also work at the airport. This makes sense to me. Like a lot of our community here does work there. We're getting a new landscaper in because it was notable. The grass was really long and we just had the tenant who moved out was our landscaper. Like we're getting a new landscaper handled. So that's going to be improved. Said, this unit was just renovated. I had two open. He's like, what about the other one? I was like, the other one doesn't have a washer and dryer. If you're gonna have two people in here, the nearest laundromat is a couple blocks away. I think it's inconvenient. If I was you, I think this is the one that you're looking for. But if you want to tour the other one, let's go. That was about it for my conversation with them. People will or won't want to do it. I don't really sell them on it. When they seem really interested, I'm like, let's get the application done now. It's a very passive approach, but when they're ready to sign a lease, close the lease. It's a, it's a basic sales cycle. Vincent, when you guys negotiated the interest on seller finance, is the interest compounded or simple? So it's going to be, so, so the way the interest is going to work, and there's so many different ways is the thing. So you have, so basically a lot of what I do is interest only. So it's just whatever the principal amount is. And you pay that amount. So I do a ton of interest only. So if I borrow $1 million and it's a 10% interest rate, I'm just going to pay that 10% per year. And so the monthly fee is going to be 10% of $1 million divided by 12, 12 months in a year. That's what we're going to see there. It's not going to affect the actual principal value. So it's not like we're not compounding the amount of money that would be on a negative ad. We're just doing, it's just straight, simple interest. Annualized interest only. A lot of things have an amortized schedule, so it will say basically, okay, there's going to be interest plus principal, and the payments are going to be— say it's a 30-year AM— through the course of 30 years, this loan is going to pay itself off in full. And so when you start, you owe more, so the interest is higher. As you pay down, the payments stay the same, but your principal amount that you're paying off grows because again, you're borrowing less money as you pay it down. That's how an amortized schedule works. Those are the two ways you do it. The main things you need to know for this— this is a creative finance thing, by the way, on the Creative Finance Live. This is the magic. Loan factor rate does not matter in conventional purchasing. It doesn't matter. That's why if you haven't heard of that, you're like, what is a loan factor rate? No one talks about this. There are no secrets in real estate, but this one, if there was, this is kind of the secret. You can tell exactly what interest you can offer if you know loan factor rate and the cap rate of your deal. We explained this in the course. There's video modules. This is— I go in depth into this, but basically it is your principal plus interest annualized divided by your debt. That is your loan factor rate. So if I borrow $1 million and my monthly payments are $1,000, I'm just giving the random numbers here. $12,000 per year interest only divided by my purchase price. That's going to be my loan factor rate. If it is lower than your cap rate, that is the return that you have for every dollar invested in the deal. So that's if you bought the deal in cash, this would be your return. If your loan factor rate is lower than your cap rate, that spread is the margin you make on every dollar borrowed. As long as you make money for every dollar you borrow, you can borrow money to buy deals. So when I'm negotiating interest rate, I just play with that loan factor rate. And within about 10 seconds, I can tell you on a deal, if they're like, okay, well, here's the opportunity, seller financed, what are you thinking for terms? I can tell them, okay, this deal will say it's a 6 cap, like a true day one, it's a cap rate of 6. I'm like, I can borrow at 4.5% interest only, and I will make a 1.5% spread on every dollar borrowed. I can do that, and it, it builds so much credibility, and it makes your math super easy. Again, it's just simple. Real estate is simple. Now, the whole process isn't easy. There's a lot going on at the same time, uh, so it's, it's a lot of work but very, very, very simple. Dylan, uh, Dylan, connect with Shannon. Troy, oh yes, the hats. This is, this is my hairstyle. I almost never do my hair. I like to go to work. I am an in-the-field sort of guy. Toss on a hat. I literally, I just have a huge row of hats and I only really ever choose 3 of them. But I'm like, okay, what hat am I wearing today? I pick up one, I flip it around backwards, go about my workday. 50/50 on whether I even put, put contacts in. Funny enough, I'll walk around my house blind unless I have to leave. I just, I get up and work. Shannon joined the membership in February. Found my partner. We're looking to close on 8-plex in Texas next month. Also negotiating buying an additional 10-plex. If I recall correctly, that 10-plex is also near my 10-plex in Texas. Both Shannon and his partner have been members of Multifamily Strategy for a while. Shannon more recently. This is the type of stuff that we're going for, by the way. You're showing deals like this deal. This showed up on our deal deep dives multiple times. So this has been in play. We've underwritten this together. Everyone's seen it. And then it came up where two people connected, where this hit everyone's goals. One person had more money, one person had the opportunity, and that other person was very, very, very organized with how they presented their opportunity. Partnership deal funded. I expect that one to close. That is the core of multifamily strategy. Let's just buy real estate and cut out the rest of the garbage. And congrats to Shannon. Alexis asked how much to join. So the mentorship, it's $5,000, which is notably less expensive than virtually all of the BS courses that I've seen out there. Just as a note, price is one thing, but value is everything. It's $5,000. You get the course., which is $2,000 included in that 250 videos. I have, last I counted, I think it's 125 recorded mentorship calls that are in there. They're all over an hour. So you have like 150 hours of stuff. One person was crazy enough to go through all of that, which is wild to me. But you can watch all the past ones. We record every single mentorship meeting. So you have the endless Q&As, you have structured lessons. I just went through and added titles to every structured lesson. So you can now go back in that everyone from the mentorship on this call, by the way, you can go back in time and you can actually click the topics that you want to know in the mentorship group. So if we talked about math and underwriting, you can go into that, that like deeper deep dive section and you can watch it again and again until you get what you want out of it. So I try to get a bunch of diverse topics, but we will always talk about a few things live every week. But yeah, check that out. MultifamilyStrategy.com. It's $5,000. I'll tell you guys this right now. I haven't raised price in a long, long, long, long, long, long, long time. Everyone who has the course now is going to get for free the functional flipping course. I've— by I mean Danny, my lovely wife who runs 90% of the maintenance business for how we do our renovations, how we're structuring our underwriting with contractors, with expenses. For the actual, like, how do you build the army of people who help you run your portfolio? She's launching like a 100-video course. We'll probably do a price bump around the time that comes out. If you already are part of Multifamily Strategy, I'm just going to give it to everyone for free. That is a huge thank you for helping us build the community that is inbound. So if you're looking to sign up and you're interested, seriously do it today. Like you could DM me if you wanted to discuss more. But if you wanted to just dive in, which is what I would do, multifamilystrategy.com, sign up right there, join the community, connect with people like Shannon, and you will get plugged into community. Troy Roberts, when reviewing, say, a 20+ unit, what makes you decide to get Section 8 qualified? It depends on the unit mix and what rents are currently at. If it is entry-level housing, so you're usually talking Class C or Class B, they're Often they're a little bit older. They're not usually like brand new buildings, but market rate, when it lines up pretty close to the Section 8 maximums, I'm usually going, okay, I'm offering to both market and Section 8. I will literally put my listings Section 8 encouraged to apply or Section 8 available. That's about it. All of our renovation standards are done with the Section 8 handbook, which by the way, you can just download, download online. And, uh, if you want them to send you a physical copy, your local housing authority can totally do it. Uh, their standards are national, so it's the same book no matter where you go. I follow their renovation guidelines. Is it over-renovated? Yes, there are some things in there that are a little bit redundant. However, I know that I will absolutely qualify for every other housing assistance program. Anything that needs checks, anything needs to be to code, if you follow that, you will have better units than everyone around you. I love that thing. That is my Bible for renovation. There's only 1 or 2 things in there that I sometimes, I'm like, eh, we're not gonna do that one for this. But I would say 99% of what is in that book is exactly what we do on every single turn. There we go. Everyone on Instagram and YouTube comments who blows me up, $2,000 is not bad for a course. There is so much freaking course in there. We have done a lot about, we've just done a lot of business and we've made a lot of mistakes. I said this earlier and I'll say this again. You don't need a mentor to be successful. Anyone who tells you that is trying to sell you something. I'll also say this. Every single person who I've mentored who has bought real estate would have bought real estate without me. There is nothing magical about me and I am not enough of a narcissist to say that we have the magic method. Real estate's been around for a long time. There are no secrets. The only goal if you're going to buy real estate is can we condense time for you by removing unnecessary steps? I hear a lot of people asking, should I become a broker first? Not if you want to be an investor. Be an investor first if you want to be an investor. Things like that. We want to shorten time and we want to take your 6 and 7-figure mistakes that we've made and others in the community have made, and we're going to share them with you aggressively. I'm going to be like really aggressively, don't make these mistakes. And you're going to find somewhere in your investing career, the 6 figures that you saved by buying a $2,000 course or even better, a $5,000 mentorship. When that $300,000 comes up, you're like, oh my gosh, this structure was way better. You're going to be glad you joined the community. Join groups that do that sort of thing. It doesn't even have to be mine, but like actual operators who are not showing up in their ridiculous sports cars or the private jet. People who have done the thing that you want to do, attainable goals. Do that. I appreciate that, Troy. Everyone who hassles me on YouTube, everyone who watches this video and goes like, $2,000, you're trying to steal our money. Troy says it's good value. I agree with Troy. Dylan, you want— do you want 3 to 6 months reserves for all properties? Yes. Every LLC should stand on its own if you have multiple partnerships like I do. If you're fortunate enough to not need partners and you can buy everything with debt or with your own money, you just look at the whole portfolio universally. In addition, you want to have an umbrella policy that covers you universally across the portfolio. So they're really inexpensive, like shockingly inexpensive. As you get multiple LLCs, I think once you hit about the million-dollar mark of net worth, that's when I'd say start playing defense at that point. Step 1, focus on building your net worth to $1 million in real estate. I highly recommend that. Build, build, build. Once you're there, then you've scored enough points to start putting some defense in place. We're going to look at umbrella policies, ideal LLC structure. And then when you hit the $2.5 million mark, that's where I started looking at, do I need to have the right holding company? Let's put together— do we need to put together a trust? Do it in blocks. Don't worry about those things up front. Those are steps that If you're not a millionaire, keep focusing on building all of your energy. Build, build, build, get to the million, add some security. However, when you're there, reserves, they matter. Your building floods, fills with water. I make jokes about like, hey, we added an indoor pool, but seriously, like, that is stressful. Like, you don't want that to happen. And when it does, it's very comfortable to say, okay, we're going to solve this with a check. And is that the LLC that I want to write checks out of? No, that is one of my least liquid LLCs. Doesn't have enough reserves, but it does have enough reserves to fix the floors, and I'm grateful. Are you invest— are you giving the investor interest on the reserves or actually giving it back to them? So I am not raising as debt from investors under that structure. Those are when I have an equity partner. They're going to put X amount of money in. And that particular— the last 2 LLCs that I've done where I'm putting the reserves, where I'm going to give a chunk back, I'm overfunding the account. The operating agreement is written like this. I'm 51% owner. Me and actually on that last deal, it's Caleb Hommel and me. The 2 of us are 51% owners. The 49% owner Puts in 49% of the money, or sorry, 100% of the money. But when we back out all of that money, when we do a refinance or other capital event where they get all the money back, we're going to keep the equities the exact same and we'll start doing even distributions. Until then, all the cash flow checks, all the capital events all go towards paying them off. So what it does for me is when I give them the money back, one, they just have less money in the deal. 2, I'm closer to getting paid because now I've given them a chunk of the excess money back. We've almost, you know, we've taken a step towards zeroing out the account, which is excellent. Their reward and our reward is both the same. We're going to finish the project. These are value-add projects where we're stabilizing, we're increasing the value. We don't want to take a lot of money out of that deal. We want to get the project finished. Those are ones that we actually plan to ride for. We have a plan in there for a review in 5 years. To see where everyone is at. And if we need to do a buyout, we have structure around how that will be done. It'll be done based on appraised value of the asset. You're entitled to get a second opinion, but it's basically going to be like, whatever we build in 5 years, let's discuss buying each other out. And this is what the buyout will look like. And if we don't want to do that, we're going to kick to 10 years and we're going to see if we want to buy each other out. It's a longer-term partnership structure, But that is one where I'm giving money back and there's no interest or bonus return on it. I'm asking for their capital with a path for all of their capital to come back and for them to keep an asset with me that cash flows. Everyone, no money in the deal. That is a capital structure. That is not the way to do it. I do a lot of them where there is a buyout, in which case, if I have a fixed buyout in a fixed period of time with a fixed amount of money in, I would be offering them a return on the overraised money. And I'm happy to do that to hold a reserve, but your deal has to work with those numbers. Daylon. Yeah, there is huge value in the— I can't say enough things about it. I'm glad everyone else is as excited as I am because I'm just— I'm over the moon, over the moon for how that's going. How are you setting up your notes for the deal after the deal, i.e., substitution of collateral, rights, first right of refusal, purchase the note, subordination, et cetera? Okay, so there's a lot of creative stuff that you can add to this. We absolutely go over this in the course. However, I focus a little bit less on the deal after the deal thing. Things that are really good practicing, substitution of collateral. I rarely get people upfront who are willing to put that in there. I have negotiated it though before where I've built a bunch of equity elsewhere. I'm like, I really want to make a maneuver with my pieces. Would you be receptive to taking your note and moving it somewhere else? I always negotiate that in the post-negotiations. I don't usually put the right to do that in a contract because it sometimes gets too creative for the sellers. That's been my experience. First right of refusal to purchase your note— I, I, my first, what was it, 15 deals, I didn't put that in there. I was aware of it. I never did it. I started doing that now. This is such a good idea. So If you have a note, say you're a seller-financer, notes can be changed to liquidity. Remember, we have 3 asset pools. So we have liquidity, we have cash flow, and we have equity. They can all be traded for each other. A note is cash flow. You can sell a note for money. It's usually sold at a discount. But if you're like, oh, I need to get cashed out, I actually had this happen.. And someone was going to sell a note. Instead, we found a way to pay them off earlier and we got the discount. We did it through refinance. They wanted to sell their note. We owed them $1.7 million. They were willing to sell the note for $1.4 million. If you have a right of refusal in there, say they found a buyer and they're like, okay, we're going to sell this note. You can go, nope, I have the right to buy my debt back from you cheaper. If you get a big enough discount, you can raise new money. Say, say someone, you have a $2 million note and someone's like, I just need cash right now. I'm going to sell this note for $1.2 million. You can make a new note with a new lender for $1.2 million to buy them out of that note. You can literally just lower your debt massively by signing a new note. Though these are all creative options that should be in pretty much every contract. Subordination and all the other stuff usually gets negotiated in the post. Okay, here we go. Should I show my units or pay someone else to? I typically pay someone else to. That has just been— it's not, it's not expensive to do. I started a property management company very early, so I've always had employees under my belt to do this. However, there have been times where we've been stretched really thin, and I, I have 2 in the reserve at all times. I have 2 brokers. They're usually younger brokers who are hungry and building their career, where I go, hey, would you show this unit if I tossed you $50? It's little transactional things. It's a little addition to their day. They're already qualified to walk through houses and, and walk through apartments. They get the basics of the game. Uh, paying a broker $50 to go out and show your unit is a fantastic, fantastic use of your time. If your time is worth more than $50 to drive out to wherever that is, then go ahead and send a broker out there. Or if you have a property management company, they'll handle that for you. Yep, Lumberjack Landlord pays a realtor by the hour. Um, I stole that from him, by the way. He, he taught me how to do that. I— funny enough, the guy who I have do most of my notice postings when my team is busy, his name is also Christian. He's a young, hungry broker. In Grant County. Uh, Stephen— no, sorry, sorry, I'm going to go into the, uh, the conversations here. What are common exit strategies used to pay off your capital partners? What is a good return metric for a capital partner with every dollar additional 50 cents return? So return only really matters with timeline, because if I gave you a 50% return in one year, you would be over the moon. That is insanely good. That is, that is so expensive. If I gave you a 50% return in 10 years, that's not exciting at all. In fact, I could have put my money in a lot of different places to get that. So it's really the time of the note that determines it. This is not a rule, so don't think this is a rule. These are basic parameters to shoot between. If you're doing an equity buyout, so say you have no monthly payments to them, you guys aren't taking any cash flow distributions, there's no preferred return, There's no money borrowed. There's no payments going out. It's all the value is like, hey, in 5 years, I'm going to buy you out. If you double someone's money every 5 years, they're usually pretty happy. That's a good metric for, I have a plan to double your money in 5 years. This is how we're going to execute it. That is reasonable. If we're doing just debt in today's market, and it does fluctuate wildly, 8 to 12%, somewhere in that range, depending on the investor, is going to be a reasonable interest rate where You can buy them out at principal value at a later time. So if you're 100% debt, like an average of 10% tends to get it done. If it's all equity, it's usually going to be, I'll double your money in 5 years. So if you have a 3-year plan, just do, you know, give them whatever that return is, 3/5, give them a return that matches that. Now, if you've noticed, it is much more expensive to do equity compared to the debt structure, which is definitely true. Debt is almost always cheaper than an equity partner. However, it doesn't touch your cash flow throughout your project. So if you have a big value-add project where all the reward is at the end, an equity partner may make sense. You're going to give away more money, but you're going to preserve the cash flow in your deal, which is the most important part of owning it and never losing it. If you have a deal that can support the debt, always use debt before bringing on more people because people are variables. If you can get fixed rate debt instead of another partner, I will do that every day of the week as long as the deal can pay for it day one. Stephen's part of the Lumberjacks Bootcamp. We like, we like Lumberjack Matt Hawkins. We love him. I have not gone through his bootcamp thing, but I have taken his course. I actually audited his course before he sent it out. Really high-quality landlord. He is the best operator that I know. He is a phenomenal, phenomenal operator. So not quite on this, Edmund. So a 6 cap with a 4.5 interest rate IO would result in a 1.5 loan factor rate? No, 4.5, because it's interest only, your loan factor rate is your cost of capital. So principal plus interest divided by the loan amount. Now, if you're doing interest only, your interest payment divided by loan amount is your interest payment. So a 4.5% interest only loan will have a 4.5% loan factor rate. However, you'll have a spread of 1.5% on every dollar borrowed under that metric. Cash in the deal yields 6%. You're borrowing at a true cost of capital of 4.5%. The reason that we use loan factor rate is because if you have an amortized schedule, you need to remember to add principal in. It's very common for investors to go, "Okay, the deal makes 6%, I'm borrowing at 4.5%, I'm definitely making money." But if you're looking at an AM schedule, your principal payments, you might actually be cash flow negative because you're making principal payments. And while you're building equity, you're hemorrhaging cash you need to run your property. So it is the best way and the most holistic way to go What rate can I afford to borrow at where every dollar I borrow will increase the amount of money that I make on this deal? Thank you, Dylan. Yes. Multifamily Strategy. Join us. Be there. I'm having, there's nothing I'm more passionate about. I won't go into a long spiel on that because I've already talked about Multifamily Strategy today, but oh my gosh, love this. Love the community so much. Let's see here. This is at Dylan, but I'm going to speak to this a little bit. Structuring deals so that they make sense besides conventional financing. Conventional financing is really hard to make deals work right now. Pricing is coming down and I'm winning on price for the first time in a long time. We've won so many deals on terms. I am actually starting to buy things conventionally, not just because I've qualified, because I've built enough portfolio where I have the cash flows and I actually am bankable. I'm winning on bank deals because the prices that we're getting are phenomenal. Again, I think this is the best opportunity to buy that we've seen in the last 11 years. I think it's going to continue. For probably 18 months. Pricing is pushing down slightly, but it's pushing down. There are people who are getting pinched and getting out of the game. If there was ever a time to learn how to buy deals with or without money, it's right now. Whatever you need to do to understand creative finance— like, ideally 6 months ago was the perfect time to learn it. If you didn't learn it 6 months ago, learning it right now, this is the best time I have seen since pre-2008 to be like, oh gosh, I need these skills. I need these skills right now. I just see this as the best opportunity we've seen in a very long time. Down markets, one, the other players slow down. They don't— your competition drops massively because people sit on the sidelines, the money sidelines, and they go, oh, we don't know what's happening. If you can buy a deal and you can buy it, never lose it. You start with a deal, you line up a debt product where you have cash flow, long-term fixed rate debt. If you follow all those rules, You are buying income streams in a down market. When the market comes back up, you just make more money. Those who take the field when everyone else picks up the ball and goes, goes home, that is how you expand. And that is going to be the next round of multimillionaires in real estate. So if you don't have the skills, learn them now. What's some of your favorite markets on the East Coast? We love Florida. Unfortunately, so does everyone else. So you have a lot of competition in Florida. And Florida just passed laws where you can remove squatters, like police can get squatters out, reasonable common sense laws. People love Florida. I've heard good things about Virginia, though I have only driven through Virginia once. I don't know that market nearly as well, but I've heard good things about investing there. A little pricier, but still possible to get some cash flow deals, good appreciation area, strong business fundamentals throughout a lot of the state. There's pretty good jobs. Um, but for East Coast, there's a lot of the Southeast seems to be superior. That being said, Lumberjack Landlord, a guy I have on the podcast all the time, uh, another guy, um, Axel Ragnarsson, he's also New England area. There's people who play up there, New England and Maine, who do really, really well. It works everywhere. We have a lot of people in the mentorship from New Jersey. New Jersey is a popular place. Super hard to compete. But when you find a deal that cash flows there, appreciation usually goes off the charts, low cap rate areas. So you can find a deal anywhere. Vlad, who's on our mentorship call tomorrow, bought in Delaware for his first deal he did after buying Multifamily Strategy. Really cool seller finance deal. He ended up— there's a restaurant component. He didn't want to keep it. He sold it on a wrap. I think he held it for 6 months and made a couple hundred thousand dollars. And that was just his first deal. It was like, bought it creatively, sold it creatively, made money, rolled into next deals. Really cool structure. I'm not about selling real estate, but really cool structure on the front end and back end to use creative finance to make a spread. From Troy, when you started PMCO, What was the mental mindset that was a game changer to the success of the business? That is a good question. For me, I, it started as no one can do this better than me and I can outcompete these guys. Like this competition is squishy. It turns out it was, we, we did better very quickly, even with very little experience. Now we have a lot of experience. We've been through a lot of a lot. When it started, it was that what's made us really aggressively outcompete is when I realized how much better we were than the other management companies. I mean, it was, it was egregious. We pick up more clients from eviction court than I do any of the marketing I do to grow my company because people see me hop on. If we have a, like, if we're getting thrashed, I will, my team will text me and say, we need you to swear in. I will hop it. I'll hop into court with almost no prep because I know where every unit stands. You text me, it's time to swear in, I'll come in, get sworn in, and I'll represent our client in court. And we are, uh, total in our time representing clients, we are 27-0 in eviction court in a state that is ludicrously hard to win. I have so many people come and say, I saw you in court and you are the only group that is winning evictions every single time. And the way that you treat your clients is how I want to work. So the mindset of I am ridiculously competitive and I want to win, and I also don't wanna manage all of me and Cody's properties for free. Love Cody Davis. Do not want to be like, oh, I run this company at a loss and Cody gets free, you know, I pay to manage Cody's properties. That wouldn't be cool. I need a profit. I need a profitable company. I need to be paid for the time and we can come in cheaper and better than everyone else because it is just a Ridiculous market. Doing the same thing in Texas. It's just, it's too easy to compete with bad managers. So never wanted to start PM again. First thing I'm doing in Texas, Apex Asset Management. Logos created, websites going up probably in a week. Found my designated broker. We are rolling again because I think they're worse than they were in Washington. They're pretty darn bad. So brutal competition and a true belief that no one can outcompete me in my own market. I think that went really far. If you're not super competitive, by the way, there's nothing wrong with that. I remember this from high school sports. I always did when they're like, hey, there's the competitive group and then there's a casual group. Some people just don't have the same competitive drive. It does not mean that you can't succeed. It just means you need to tailor a strategy to the fact that, okay, there are competitive people out here who may take market share from me, you need to come up with a little bit more defensive strategy. And that's totally fine. Myself, what has us dominating markets is I am ludicrously competitive. And I only partner with people who are very, very competitive. When do you think functional flipping will be out? Functional flipping should be out. Let's see here. Danny and I, mostly Danny, but I've looked through it. We have been putting together a course map for 3 weeks now. I like to launch things. I believe done is better than perfect, so it won't be perfect. It'll be very, very, very, very good. I like things to be excellent when they come out, so I, I wanna make sure we don't miss anything and I wanna make sure it flows in the right order that people will have questions. Um, to answer your question directly, I want to have that out in a month. We, we have the map. It's going to take days to film. It's going to take weeks to edit. It's going to take a little bit of time to get it all uploaded, titled. And there's a lot that gets— the course thing is stupid hard and stupid expensive. For those who don't know, it's quite a process. I'm going to say probably in 4 to 6 weeks. So if anyone is going to buy Multifamily Strategy, you're going to get that for free. Like anyone who's ever purchased it, The course is lifetime. Even if you have the mentorship, 6-month mentorship course is lifetime. You don't buy a deal, by the way, we guarantee that we'll coach you until you buy a deal. So if you're like, oh, but what if I take 2 years? Congratulations, you can stay in the mentorship for 2 years. We just want people to win. It's all that matters. If you've already bought the course, you will get the Functional Living course included. Otherwise, it's going to be an add-on to Multifamily Strategy. We'll raise the price a little bit and that will be the first price increase we've done in like a long, long, long, long, long time. I think we've added— when we added it up, I think between courses and recorded mentorship calls, I think we've added 100-ish hours. It might be more. I think we've added about 100 hours of content without touching our price. So that will be my gift to you though. If you guys sign up now, you'll just have it. What does your underwriting process look like and what do you look for in a deal? Underwriting is pretty simple, I think. Does it cash flow day one or does it have a very, very, very clear path to do it very, very quickly? Do I understand how my investors are getting paid out? Do I have a clear path to own it and never lose it? So that means from day one, to whenever I have to sell, or your options are sell, refinance, pay off the debt. At the end of my current debt terms, do I have an answer, a definitive answer for here is 1 to 3 ways that I am going to cycle the money to own this asset without having to sell it? Doesn't mean you don't sell things. Sometimes you switch around your portfolio. Sometimes cash is premium, but it means I am never forced to sell a property. I don't have to sell it to make the deal work. If you can do that when you're underwriting, that's what you need to do. Anyone who's been in the course, our calculator is really simple. Some people add a bunch of stuff to it. I have bought $31, $32 million of real estate. I'm buying another $8 million of real estate in the next 60 days, assuming due diligence goes to plan. And I don't marry a deal until the paperwork's signed. I was able to do that with a very simple spreadsheet. And I just explained, this is what we're doing. Here's our game plan and here are the numbers and any other number that you can IRR or any of the alphabet soup of other things. I'm like, they don't matter. It cash flows day one. I have a plan to get the value up. This is what we anticipate the value will be. Here's the game plan. It's very, very, very simple how I write things. Long-term cash flowing, fixed rate debt and a clear exit. To which the investor will be paid off and I will be the one left with the real estate. If I can do that every time, it's free real estate. It's a ton of work, but the money doesn't leave my pocket and my investors make a lot of money. So it's a win-win. Have you ever gotten creative with a vacant building? Yes. Vacant hotel converted to multifamily. And that's the one where the plumbing burst, the whole building, like total loss of building. And we seller financed our equity to the partner who funded the deal for $200,000. So I bought a 23-unit building for $1 million seller financed, $300,000 down from the investor. When the building flooded, I was like, look, I have 4 other projects. I don't have insurance, didn't cover it. So I'm like, we, I have too many other projects right now. I can't get to this for 6 months. It's going to be vacant for 6 months and it's going to bleed and it's going to suck. And they're like, well, I don't want that. And I would love to do the project and I have the money to do the project. What if I bought you out? So I bought it $0 in and 6 months later I got bought out on a note for $200,000. We got paid for total loss of building and that guy is probably going to make $700,000 on the renovation and perfection of that project. Everyone won maximum. These worst things, total loss of building is the worst thing that can happen outside of like burning to the ground. Having an unusable building that needs to be renovated basically from the ground up is awful. Worst thing that can happen happened to us. And yeah, we got creative with the vacant building two ways, bought it creatively and got out of it creatively and got paid to leave. On this one, I'll answer this one. I know it's at Dylan, but You want to have a positive spread between the cost of debt and the capital. Even if it was like 0.5, it's like, okay, every time I borrow a dollar, I make money. Like all the cash in the deal, whatever the down payment is on a 6 cap, it's making 6%. Because that's your return on cash. That's what a cap rate is at its essence. In addition to your 6% return on cash, every dollar you borrowed makes more money. So you want to borrow as much as you can. That's what loan factor rate is. It just has to be a positive spread when you subtract the cap rate or you subtract the loan factor rate from the cap rate. Positive spread means positive debt. Oh, I answered this question. Huzzah. That one ties to the last one I answered for Kevin. Yes, that story I told was the perfect one for that. Your wife worked for 9 years and purchased the duplex, went through it, made it Section 8 compliant, but out of habit, wanna make sure renters safe and friendly. Yeah. It— once you adopt the Section 8 renovations, it just becomes part of your rhythm. It is how I do it. There's a— I won't name him. There's a guy who most of us probably been advertised to because he's all over my feed, but he's like, I'm the Section 8 master. I'll teach you everything about this little-known secret. Now, there's no secrets about Section 8. It's like the most common low-income program ever. It's a massive national program, literally the least secret secret in real estate. Everyone knows about it. It is ludicrously easy to learn. It is ludicrously easy to work with. It's not that it's like, oh, I can do this in an hour. If you renovate an apartment to their standards, if you took 2, maximum 2 workdays of calling them, figuring out their program, figure out how many vouchers they have available, you will know everything that you need to know about working with Section 8. I actually— I did a— we added this for free to the course recently. I did a whole Section 8 section. I should have made it the 8th section, that would have been funny. Uh, but I did a new section on Section 8 in the course, released it for free. It took me 2 hours to film, and I didn't have— I mean, it was so easy, I didn't need to send it to editing. I literally added text to it and put in the course. I'm like, There's all you need to know. There's Section 8. Super simple stuff. I love Section 8 though. Once you start utilizing it and utilize it well, it is a great addition to a portfolio. If you're doing classier buildings, which is totally fine by the way, but if you're doing like B+, A buildings, probably skip Section 8. But if you like entry-level housing and you're good at entry-level housing, the types of renovations I like doing, the standards I like renovating to, it's a really good fit. So we partner really well. With bank, you can't change the term, so it doesn't matter. The only option is to put more down. In creative finance, yep, there's a few ways you can improve your deals. You can put less money— like, you put less money down on a positive cap rate. So you actually, you know, there's only really two ways you can do it. I'm going to rephrase this: borrow less money, which should put more money down. You'll have more cash flow if you put more money down. Because you owe less. That's just math. Put more money down or borrow cheaper money. Those are the two ways you can increase your deal. Everything else is done operationally. You can't control that before you buy a deal unless you buy it on a management option contract. You have a set amount of time to fix the project, then you can increase income or decrease expenses. There's the only four ways to make money in real estate though. Increase income, decrease expenses, borrow less money, borrow cheaper money. If you're trying to get the cash flow up, those are the only 4 levers you can pull. 2 of them are done before you buy the deal. So you either lower the price so you borrow less money, or you put more down so you borrow less money, or you borrow at a lower interest rate, which is cheaper money. Only ways to affect cash flow before you close on a deal. On some deals, the appraised value is held by out-of-capital partners. That is not my usual structure. Typically we will negotiate the buyout. So like, for example, on a 2-to-1, I had someone— this is a 6-plex. This is the second seller finance deal I ever did. Needed $90,000 to close 6 units, 3 side-by-side duplexes, $90,000 in. In 5 years, I'm paying him $180,000. I get 100% of cash flow. So for $0, I get paid cash flow, thousands of dollars a month for 5 years. At the end of 5 years, he gets a check for $180,000, which is actually a little bit less than the total cash flow from the property. In addition, the properties are worth a lot more than they were even 3 years ago. I have 2 more years on that. So in 2 years, I get to probably just refinance and pay them. But if I don't refinance, I can sell one of them, pay the rest out of a check. I can just write them a $180,000 check. We've sidelined the money. I almost have the money in the account to do it. I think I'd rather spend it on repairing the buildings though. But we have flexibility. That was a fixed price regardless of what appraised value is. I'm buying them out at a fixed price. I do have other partnerships that are designed to be longer term. This is usually with higher net worth individuals. We're trying to build a larger portfolio with them. We just do like, okay, well, if we want to do it, we'll negotiate it, but these are the terms of which we're going to value this. So it depends on the nature of your partnership. I can coach to both. There's a little bit of nuance to it. The circle drill plays a huge role in it, but mapping out what it is that they're trying to build, you can pitch to the correct way to get the capital. That's why I almost always get yes. Between Caleb and I this week, we've raised $2.6 million for acquisitions and recapitalizations of LLCs. We structured all of the deals in a way that is very specific to the investor, but gives us every protection that we need. That is very important to be good at that. Dylan, so typically your deals, on your deals now, you don't need more cash flow. A lot of your deals, you don't typically make any cash flow until you buy them out. That is correct. I built enough cash flow in my first few years and my first structures to where I don't need more cash flow today. I want more cash flow. Don't get me wrong, I love cash flow. I don't need to be paid today. I would rather, since I have everything I need to live by my house, live in Texas, have our kid down there and retire Danny, since all of that is stable, what I do is go, okay, I want to leave all the money in the deal because if all the money is left in the deal, we can go even faster. And if we go even faster, all of your money's backed out of the deal. All my— I never had any money in the deal. Our capital accounts are balanced at zero and we are going to start getting cash flow. And so for no money and the minimum amount of time, I can leave all that money in the deal. That structure, if you need cash flow today and you're building your business, that structure is off the table for you right now. And if your goal is $10,000, that's what you need to live on. You get $10,000 a month. Once you're there, you can start doing that structure because once you back out all their capital, all of a sudden you get your 50% of cash flow. On the deals that I'm doing, some of these have like $25,000 a month of cash flow. When they're stabilized. If I get nothing for 2 years and then all of a sudden I get my half, or in this case, Caelan and I are partnered on the half, so I get my quarter of $25,000 a month. I moved way forward, like way forward, and I could do it faster because I put all the cash flow back into the deal. So different structures for different places in your partnership, but that's like a real example of something that's happening right now. Sam, my broker's just telling me I need to sign up for CoStar and the MLS for residential and, uh, couldn't help me on the commercial side. CoStar is very good data. I've sold it for 4 years. I was a CoStar rep. That is how I got my entrance into commercial real estate. It was a slower way to do it. If you want to be an investor, just go buy a property. Much, much simpler way to go about this. Uh, CoStar is great. It is also expensive. Depends on how you want to use it. I would say that you probably do need a data source to be truly amazing. Reonomy could work as well, especially if you're doing multifamily. Reonomy could work pretty well. Uh, that's a less expensive software that has better owner contacts. So it depends how you're using it. For prospecting, I'd use Reonomy. For commercial data or CMBS data, if you're trying to prospect through like buildings that have a loan that is likely to need to there's either going to be a seller refinance coming up. You can call on expiring debt in CoStar, and it's really powerful. So it depends on your use case. CoStar is more versatile. It's way more expensive. Better data, worse owner contacts. Their skip tracing, it's always been awful. Reonomy has amazing skip tracing. They have really good contacts. They're good for looking at owner's portfolios. If you're just prospecting owners, it's really good. So pick your poison there. But I, I do think as a broker, it is a more transactional sales job. You need to front-load that funnel with actual data. Personal opinion. Red Bar is watching you and building a case on your apartment scam. Just a heads up, bro, that doesn't sound good. Well, I don't know what a Red Bar is, but, uh, good news with my apartments is they are all public record. So I own the stuff, I've done the projects, and we own the real estate. I fortunately don't have any, uh, or is it a parent scam? Uh, whatever scams they're worried about, uh, I can back all of it. Fortunately for us as well, um, we've been published in many news articles. Uh, BiggerPockets did a deep dive on this, but the biggest audit that we had was with Business Insider, and I've been on them twice. They actually have us go through like line by line. They have us do the public record, go through every LLC, show my ownership in the LLC, and send them the building description, like the legal parcel description. So they actually, like when I said I have over 100 units, they actually made me show title and record and LLC ownership and parcel maps for everything that I own. So whatever scams people want to build a case on me for, absolutely freaking go for it. Again, 27-0 in court. Let's go. Put whoever Red Bar is, put me on your channel. Let's talk, let's talk real estate. Mason, how are you managing your rentals in South Texas when you live outside driving distance from them? So I'm managing my rentals with property managers down Am I happy with all of them? Absolutely not. But we're making do. I have a pretty tight leash on it. And what I've done recently, and this is to be announced, but a lot of those deals had too many partners and they didn't raise enough capital on the front end. There are deals that are great deals with great debt structures, but they're not put together exactly right. So what I am looking at doing is I'm going to put together what's called a recapitalization. I'm going to have one partner take out multiple partners. So now I have a smaller partnership, which means less variables, more capital in the capital account. And that person is actually helping me for a fee manage the property. So we're going to have our own onsite management. I'm basically, it's going to be owner managed, but it's going to be managed by someone who is actually an equity partner in the deal. I found that works a lot better and I get exact, like, perfect oversight on pretty much everything that they do. That is my solution for down there. Eventually I'll migrate Apex Property Management all the way down I-35 and to the border towns. I think I'm about a year out from that, but I will bring it into my property management. For right now, I'm fixing it with swapping around my partners and money in those deals to finish the projects, get them leased up, and get them done. Oh, Edmond Good. Loan factor rate's hard to wrap your head around, so I'm glad that worked. I'm still stuck on this one. Red Bar is building a case on your apparent scams. I love that. I love that. I'm glad I'm not a stress person. That's so fun. I want to go toe-to-toe with people on stuff. I love it when I get challenged. I don't know, I don't know if everyone else feels the same way, but when there's something that came up, even like yesterday, there's a certain high to like you walk into an apartment and it's like actively flooding. I'm like, we gotta find the leak right now. We should shut off the power before we go ankle deep into water. Best practice, don't electrocute yourself. I forgot to do that. That was a good way to die. If you go ahead and do this correctly though, I thrive on stress and pressure. I actually like the— when someone comes out and goes like, oh, I don't believe this, or you did this, or oh no, the, the cabin's flooding, insurance is not cooperating, those things. There are different people who operate on different levels. I am my personal best when there's some defense to play, so I freaking love that one. Dylan got two owners this week that said they want to invest money with me without asking them. That's a good start. Still waiting on someone looking to sell a property. One lady said she'll sell me her property in Killeen when she is ready. 40-unit seller finance, probably a few years away. All right. Sounds like you need to keep looking for a deal. I also may have, I mean, specifically in Texas, I actually might have a deal coming up out there and I don't have bandwidth to take on. Stay in, stay active in the in the community, especially right now. Like, Texas is really popular for our mentorship group. Maybe it's because I'm moving down there, so I might have attracted more attention. But look for— there are deals to be found, and there's going to be a lot more here in the next 18 months. Having people interested in capital is great. Keep doing what you're doing. You will find deals. You absolutely keep doing it. Why do you care to get more real estate? I used to want to be super rich. The more I learned, the less I care. I am— after I pay off the investor of the Robinhood, because I wish I didn't buy that LLC, and that one just drains capital. It builds a ton of equity. It looks great on a balance sheet, but it drains a lot of liquid cash. Once I buy out the partner on the Robinhood, I would consider myself rich because I don't have a cash-draining thing. So it would just be like, okay, I have liquidity, I have cash flow, I have equity, I'm happy. I love playing the game. I love playing the game. I love being in community. I love talking about real estate. I'm a board game player and this is a board game I'm addicted to. It's literally a board game. We have an actual map, of actual cities where we get to take pieces and make things better. I have fun driving through like Moses Lake, the amount of improvements. I think we've done $2 million-ish, maybe a little north of that, of total improvements on our buildings. It is so cool to drive through town and be like, that building, that building, that building, that building, main drag. These are things that we've improved communities on. I've removed drug lords from these properties. I've, you know, new roofs, new plumbing, new electric. It's— I love the impact of it. Building a business is really fun. There's a lot of people I meet who are like, I am in real estate because it makes money. And that's okay. Your goals don't have to be, I love real estate. It could be, I'm interested in real estate. I understand real estate as a means to an end. That's fine. For me, that's not what it is. Real estate is a game that I actually want to play. And I talked about this earlier. There is the competitive there's the not competitive team. I've met a lot of people who are like, I don't care about competing. I want to make money. I want to provide for my family and then I'm out. I want to travel the world. Awesome. Do that. For me, I look at this, I'm like, I like what our team does and I want to be better. This is my professional sport. So for me, that's how I feel about it. It is a let's get down here and let's do this better than other people, especially when I see things that are frustrating. Slumlords, mismanaged properties, bad property management, bad legal, bad leases. I look at that stuff and I'm like, we can, we can do better. I don't know. That's just the way I look at it. You have limited time to live, do the things you love. I love playing this game. I love teaching this game. I love talking real estate. That's why I go live for free every Wednesday. We haven't talked for what, an hour, 15 minutes? Feels like no time. Mason, do you have any favorite cities on the East Coast? I don't really have any favorite cities on the East Coast. I like some of the East Coast. I like the warm parts of the East Coast. I like Southeast a lot. I personally— I'm sorry, New York, I don't like that city. I don't enjoy being there. Every time I've been there, it's been an absolute monsoon of a rainstorm or has been brutally humid. I don't love the Northeast. I'd love for someone to prove me wrong or show me a cooler city up there. Not my favorite. So I personally don't have favorites because I invest in places that I want to be, that I would want to live. I have not come to somewhere in the Northeast that I would want to live in. That has just been my experience so far. Someone invite me out to prove me wrong. But yeah, a lot of the warmer climate in the Southeast, I love a lot of areas there. There's areas all over Florida where I'm like, I could definitely see myself investing here. I chose Texas though because Texas feels like home. I like the culture, I like the food, I like the environment. I love the super heat. Dallas is, Dallas is very me. Shiloh's Crib: With the higher bank interest rates today, have you had to go back to your investors and tell them that you can't refi cash out at the moment? I have only had to do that once, and it's not that we can't, we actually could. Our terms are so good on the seller financing. I called them and I said, guys, We have a buyout agreement and I can refinance this out and the deal will still cash flow, but we have insane terms and we are making— it's only 17 units. It's a smaller LLC, 2 buildings. We are actually going to make a lot of money in cash flow with our debt. And our debt is 7-year debt. We have 5 years left. What does everyone feel about just getting paid for 7 years and restructuring the buyout? Because I would love to keep the debt product that we have. We all talked about it. We just rewrote the OA and we adjusted the pieces. That's the only time I've had to do that though. There will be properties where it's like, hey, refi is not the option. So what do we do? I bought everything with multiple exits and we buy pretty aggressively. I haven't had a problem with the interest rates. In fact, it's created more opportunities. The only deal there, there is one deal that I would like to refinance. That won't make sense to refinance because of rates. The hotel conversions that I'm doing and the, the mobile home park repair that I'm doing, just projects that are really fun, I'm going to sell those and I'll have more than enough cash to cash them out without having to refi. So there's always a way around it. Get more pieces on the board, you can move more pieces. I only have one deal that would be blocked from being refied just because of where interest rates are today. Everything else, it's like, well, I just, I like my 4.5% debt a lot. I don't know that I want a new debt product. So that's just been questions to investors. I'm like, we're good either way. There's no stress, but I have a new preference based on where the market is. What do you guys think about this idea? And I've gotten yeses on those across the board. They're like, no, we get it. Let's wait because if interest rates drop again, this is worth more. Let's restructure. What's something you see that is overlooked when it comes to your Exit strategy. Hmm. My exit strategy. What do I see? What do I see? What do I see? Well, it's hard because I believe in having multiple exit strategies to every deal. So I don't know that my exit strategy would necessarily have an issue. And I'm open to criticism here. It's how do you buy it? How do you never lose it? So it's refi. And if you can't refi, you do it in cash flow. And if you can't do it in cash flow, Selling the building is an option. You can also borrow more money. You can swap out the investor and do a recapitalization. There's just so many— you can go back and renegotiate with the seller for seller finance. There's so many different ways to do it. I would just say if your deal only works because you have one desired exit and it's market dependent, you haven't answered the question, how do I own it? How do I never lose it? I don't do deals that say, hey, we have to hit a number to refinance. Chance. That is an option that I want to see on the board, but that's— it's just not something that I would do. You need to have multiple ways to answer the question. One thing, like, legitimately, one thing that we're looking at, I have investors who want their return, and we have multiple investors with really small investments in one of those Texas deals. I bought into the deal. I didn't structure the original deal. Too little capital up front, too many partners up front, excellent price ridiculously good seller finance terms. I just found a new investor who came in and cashed them out and was like, I love the deal as it is. I want to get to the rest of the upside. I realize this needs more money and it's still a good deal. And so every investor got their return. We did a recapitalization. I don't have to refinance. I didn't have to come up with the money personally to buy them out. We have more money in the account. We're going to finish the project. Everyone's going to make money on the back end. And it works with today's numbers. That's just an example of multiple exit strategies. This is the type of stuff we work on all day. People get stuck. That is the— it's fun putting the puzzle pieces together. Debt partners generally offer 8 to 12%. Is that as in hard money? No. So a debt partner is going to be an equity partner. That's someone who's going to have a preferred return. So you're basically structuring equity like debt. You can also just get a private note if you can put it against your property. Often you can't. Seller finance, You'd have to be able to put a second position loan. Often there's a no further encumbrance clause, but if you negotiate, do it as debt. If not, you can structure equity like debt. You can say you're going to invest here and the first 8 to 12% of cash flow is going to go to you every single month. After that, we're going to split it. Who knows? 80/20. Maybe I get all the cash flow after that. Whatever you negotiate, you get what you negotiate, but your general cost of private capital are going to fall somewhere in that range. Hardest part of real estate. I don't know how to answer that. There's so many things. I would say the hardest part of real estate is partnerships. People are harder than math. Real estate is not emotional, at least it's not to me. I know some people really get some sort of Oh man, I just love designing the space. Real estate is numbers and providing great housing for people in need. I love moving forward. I'm super proud when I go to a building and it looks beautiful, but it comes down to, can I get the mission of providing housing at a profit consistently every time? The hard parts are when you have people who either have emotion that gets in the way, or they get upset easily, or their vision changes for it, or they get weird about money. There's all sorts of people things. So I will say consistently, the hardest part of real estate is people. And it's, it's, it's not just your partners, it's your contractors, and it's your lawyers, and it's your property manager. Is the human piece is so hard to manage. And it's— there's not a way as an employee that I'm aware of to learn those skills. You learn those skills By buying real estate and operating real estate and going through all of the hard stuff. Your hardest piece will be managing your partnerships, managing your contractors, managing the people that you need to run your real estate will always be the hardest part. I don't think that there's an exception to that. Have you found a good way to manage your time so you stay on top of everything you were juggling without, and allowing personal life too? Uh, no, I have not found the second part. I am very good at managing my time, but I work every waking hour. I'm not kidding. I worked at Robinhood because we had that surprise flood. Um, I worked at Robinhood, which is an hour and a half from my house, till just after midnight last night. I left in the morning to get there. I was planning on leaving at 5 PM. There was work to do, so I did the work. I will trade sleep to move forward in the business. Is that healthy? I don't know. I'm very competitive. I'm really competitive and I will just get the work done that needs to be done. One thing that has really helped me though is time blocking. I actually have dedicated times each day that I'm dedicated to individual companies since I have multiple silos with multifamily strategy, with PM. As far as my personal life, my wife and I do business together and we both love the businesses. So I get to hang out with her all day. Like we, we talked renovations of the Robinhood and we're like, we should do this meeting down the street at a coffee shop. And so we got coffee, we got crepes, we sat down, and I got to have a business date with my wife. I get personal joy out of doing that, as does she. And so we worked together and had a great time. That is an example of something that, like, that's my ideal work-life balance. I'm about to be a dad though. That's going to shift. So ask me that question again after October 4th, and my answer may change dramatically because I'm gonna have to figure out how to be a dad. And balance all the companies. I have ideas, but we'll see how it goes. So Dylan, in my case, I want cash flow, uh, starting off, uh, happier to pay more and buy more people out later, or find someone to work, uh, long-term with as a partner. Would you care about getting depreciation on first deals? I'm not buying my first deals for depreciation, but you need to manage your depreciation. If you buy larger properties, you're probably going to want to run a cost seg if you have any active income to write off against. Again, that's a question for your CPA to get more specific. But yeah, I would manage the depreciation thing, but that's not, that's not a long consideration. Depreciation, talk to your CPA. If they think you should run a cost seg, run the cost seg. And they're not that expensive to do. I, there's one that does it online that's fairly inexpensive. I really like called DIY Cost Seg because you can do your own cost seg. Give them all the details, send them some pictures, good to go. Luke, do you use any keyman insurance when going— when doing single-family deals in case the person dies? I don't. I know some people do. Just personally, I haven't used it. I have all sorts of insurance. We have, we have quite a bit set up as far as ownership structures, umbrella policies, individual property policies. We have a lot of insurance, but the key man thing I haven't dealt with yet. It just hasn't come up. Um, I know that is something that people look into. I haven't looked into it, so I won't pretend to know things that I don't know. So when you do, um, your single-family, your SF. Do you have the LLC backed by XYZ, son, wife, whoever it may be, in the case of death or loss of the person? Um, no. For like, for single-family, you buy it in your own name. That's the easiest way to do it. The LLC is— and if you're the sole owner, you don't need an LLC. Some banks will require an LLC for commercial financing. But in general, if you're buying like 1 through 4 units and you don't have partners, buy it in your own name, get your own debt on it. There's fantastic debt products available on fully amortized 30-year fixed rate debt that you can do if it's in your own name, but you can't do it in an LLC. So I would personally, I don't buy them in an LLC. The debt structures are fairly simple. We get a little bit more aggressive in partnerships and LLCs on how we insure, how we back things. How equity is vested when you're starting, don't stress about that stuff. Most of the people I know, even though we have thousands of units, have a lot of it, just it's in their own name and that's fine. It's a quite— it's a question for your lawyer as you get further along. But general rule of thumb, don't worry about it until you have more than a million dollars of net worth in real estate. And then you're like, I really need to start playing some defense here. But one step at a time. What is the contract actually called when you're agent? Writes for a fixed fee. Um, I don't even know what it's called. It's usually like a one-page, the broker sends, but there is an actual broker representation page. There's probably a technical name for it. It might vary state to state, but essentially just says this is the compensation for this. So in that case, it's just a basic one-pager that lays out, okay, for this fee I'm going to do XYZ work and I am representing you. I often use that one-pager And the broker always provides it. I just go, I negotiate and they come up with the paperwork. So I'm like, send me something and I'll sign it. For a fixed rate, if I found the deal, I negotiated the deal, I know the seller, but I don't want to write the contract, I want representation, the broker will go ahead and come on. I'll pay a flat fee to them. You can also do this with a lawyer. I'll pay you a flat fee and for this fee, you're going to represent me on this transaction and they'll send you the paperwork. Don't worry too much about it. Just negotiate the price. I've never come up with a name for the document or read the header on it. I'm reading the actual body of it. I'm just like, would you represent me on this deal for 1% of the deal or for a fixed rate of $10,000? Will you look over this, guide us through this, open escrow for me and just generally be my broker? I did all of the work finding and funding and putting together the deal. I've done the negotiations. I just want someone to represent me. It's an easy conversation to have. What does the seller agent do in the deal? What contracts do they write or do in the transaction for me? They're going to be getting— they're going to be the interface between the sellers. So they're one, bringing it to market, they're explaining it, they're working with the other broker, and then they're going to work back and forth with the, uh, with a broker who's representing you to pass the information that you need. So for like right now, I'm in due diligence. I just sent them a checklist of here's the things that I need. I need a P&L. I want to know that the age and type of plumbing that we have in there. I want to know what's going on with the roofs when they were last replaced. I gave them a checklist. They're going to go to the listing agent who's going to talk to the seller, get all the information, pass it back to the buyer's agent, and pass it back to me. So they're just an interface between parties. Let's say I bought $1 million for $1.2 million and the property gets refinanced for $1 million. Okay, so you overpaid for the property by $200,000. "Why would I have to cash out refinance? What other ways can you get out of this sideways situation?" This is really hard, especially in multifamily. If you overpay and you need to shift your position, you can't do much because the only way to fix an overpayment is to outperform. So if you overbought, it works if you have long-term fixed rate debt and long-term, I'm talking 10 years plus. You can overpay if you have 10-year debt, because in 10 years, regardless of the market cycle, the property will in fact be worth more than it is today. If there's a bunch of upside on the property, there's no projects that can't be finished in 10 years. If you have a long enough term debt, you can overpay for a property. If you have 3 or 5-year debt and you're significantly overpaying for a property, that's a 20% overpay. I can't tell you for sure where the market's going to be in 3 years. I can tell you it'll be higher than it is today in 10 years. We can look at history and we can say that with 99.9% accuracy. What we can't do is say in 3 years we're going to be in an up market. I don't know. So if you're in that sideways situation, the only thing you can do is outperform, which is really hard in multifamily because it tracks the market. In hospitality, you can actually get in and get creative and compete and make things better and get more listings and boost revenue. In multifamily, it's like everyone's trying to lease up. There's a market rate. You kind of are you can get stuck there. The only way around something where you're like, oh, I am sideways on a deal, I did the wrong thing, the only way out is forward. You either declare bankruptcy and you lose, and then you start over, or you go, okay, this deal is not going to be the one that gets the return. I'm not going to rush into a bad deal, but I'm going to find more opportunities. I'm going to make money elsewhere. And unfortunately, some of that's going to go to pay down this loan to get us refinanced. Refinanced or to buy out a partner. I haven't had to do that yet. That is a viable way to do things though. There are properties where I want to keep the debt stack, so I don't want to refinance. I'm flipping other properties so that I don't have to sacrifice the awesome debt I have. That wasn't the original design, but I'm like, hmm, I'm doing these conversions. I'm doing a couple of flips, taking the cash from those flips. I'm paying off investors on other deals so that instead of ballooning and having to refinance to get the money, I just earned the money elsewhere in my portfolio. And that's one of the options. You want to pay off debt. How do you pay off debt? With money. If you can't do it from your deal, if you failed to have the real estate buy the real estate, where else can it come from? You're going to have to go out and earn it. Edmund, when it comes to renovations and establishing the new value of the property, what if an appraiser/lender undervalues significantly to your projected value after stabilization? Well, it's basically the same, same question. If you get a bad appraisal, you're in the same spot. So same answer as the last one, same exact same, exact same question. If you overpaid for the property and you lose on appraisal, you can get a second opinion, but you get all the normal things. You can bring in a new capital partner, recapitalize if it's still a good deal. If it's in fact not a good deal, Do not throw money at a losing property. That is the number one mistake people who are going bankrupt make is they're like, we're in a hole, there's no way out, let's keep throwing money at it. There's a point where you go, okay, we have a loss and it happens in investing. We're looking at a loss. Things didn't go as planned. How do we pivot? So you look at your pieces, you find the option, you pay your debts with money, you can earn it, you can sell something else, you can refinance. You can borrow more. It's going to be unique to your situation, but there is always a way out. It does cost money. Losses can happen. You only lose when you stop playing. So if you, if you did 10 deals and one of them's upside down, you may have to sell 2 of your excellent deals to pay off the other one. Good news is you did 10 deals. You're stuck with 7 deals that went really well. You had to sell out 2 to bail out the one. You're forward. Now do what you can to not make mistakes. Hence things like multifamily strategy, like join a community, underwrite deals with other people, limit your mistakes, but no one plays a perfect game. And at some point I'll probably do a deal that goes sideways and actually has to write a check. It hasn't happened yet, but if it does, I understand what the game is. You are placing very calculated, very specific bets on what you think is going to work. You're stacking the deck in your favor, and sometimes you're going to get a bad roll and something will happen. And you— if you've taken 10 steps forward, you have to take 3 back, you're still 7 heads— 7, 7 steps ahead of everyone else. On that example earlier with the, uh, the operating agreement for the 17 units where we went, okay, we're going to refi and buy you out on year 5. When we adjust this, we said, okay, nope, we're going to stay long-term partners. So we're going to get— we actually like our partnership, so we're going to go ahead and say this has gone well, let's nix the buyout. And let's optimize for cash flow. So we're going to actually contribute. We all agreed to contribute more money to finish the project. Needed more reno than it needed, or than we projected it needed, but it's also a better deal than we thought it was going to be. So we're like, okay, best thing we can do for this, let's all agree to put in a little bit more money. Let's hyper-speed through our projects. Let's just get contractors to knock out everything. So we're going to get done building interior, exterior, landscaping, everything done. From there, we are just going to hold this and we're going to do a review period 5 years from the time that the building is completed. And done, which is estimated 3 months from now, all renovations will be handled, done, optimized, project completed. Congratulations everyone. 5 years, we're going to go through and we're going to just do a review period. And basically we just have set times where we're going to talk about the deal quarterly. We're going to check in, do updates, actually have my next meeting with them tomorrow. And then we're going to roll into, you know, in 5 years we're going to be like, okay, do we want to keep this partnership where it's at? Does someone want to buy each other out? And that's where it says, hey, parties have the option to buy each other out. So they can buy me out, I can buy them out. We can make the proposal and vote on it. We're open to this. So there is a set time to discuss, do you want to own it together? Do we want to separate? And then it says based on appraised value, and there's rules around the review period for if we get a crappy appraisal, I can change my mind and say, well, I don't want to be bought out for that. Or I can go, hey, I'm going to get a second opinion and we'll verify the appraisal. So we have set terms what it would look like, but we basically turned it into a longer-term partnership so that we can keep the debt. And we were happy to do that together. How do you come up with the cash to buy out the equity partners? Ideally, the deal does it. So best thing, you do a BRRRR, you pull the money back out. Tada! Partners purchased that. That is one way to do it. You can also just earn it. You can also bring in new partners to buy them out, called recapitalization. You can borrow money if the deal's cash flowing a lot. You can convert their equity into debt. So I've actually had owners seller finance their equity to me. So I had a partner and I was like, hey, if you would like to see a little bit more cash flow on this, I would like to own the building. If I wrote you a note for X amount, would you give up your equity? Now the note's going to be due, but that's a way to extend things. So if it's, so say you actually got caught on a deal where it's like, uh-oh, I can't buy them out in the projected time. That's one of the first things you can do. You communicate really clearly. So you call them and say, hey, something came up. There is a problem. I don't think we're getting the valuation that we need for the original plan. I want to be straightforward with you. I'm willing to take the risk if you are comfortable so that we don't have to battle this out. Would you accept a note? For this amount. That gives me a little bit more time, but turns this into a cash flow problem instead of a liquidity problem. Great way to handle these. Haven't had to do it yet. That would be the first thing that I do. And I have bought people out early where I said, hey, I could do this. The deal should be able— we have no reason to think that we won't be able to refi this out, but I would like to change around the equity partners and capital stack. Would you accept a note in lieu of your direct ownership in the LLC? And they've said yes. So you can give them a seller finance their equity. You can borrow it from someone else. You can refinance the deal. You pay with it, or you can just earn it at your W-2 job. You owe someone $1 million and you have a job that makes $1 million. You can do that. Some of these aren't huge buyouts, like $90,000 buyouts on a small deal. Sometimes some of us can just earn through that, but money has to come from somewhere and it's going to be one of the above. There's a lot of different ways to make money move though. Favorite questions to ask an owner when you meet up, hints towards something along the lines of I want to buy this. My favorite questions to answer an owner is, or to ask an owner first, where did you get started? I want to know where the adventure started before you had all the real estate. I love getting into that question because you get a lot of the relatable points there for a lot of people. And you also get to know their, you get to know their mindset and their position. I ask them specific things about how they structured some of their deals. So when they talk about opportunity, what was the debt structure on that? Why did you buy that deal? What's those sort of things? One of the ending questions, and this is going towards, I would like to buy something. I never ask them to buy a deal because I don't meet with owners about a specific deal. I meet with them about learning about their business., but a question I ask all the time. All right. So my goal is to get to X. When I was first starting, my goal is to get to 100 units. So my goal is to get to 100 rentals. I have 4 right now. You have hundreds of rentals. In your experience, what should I be doing right now if I want to move from 4 to 100? That's still saying like, hey, I want to buy stuff. It's very clear what your intention is, but you're not saying I want to buy your stuff. It's what things would you be doing if you were me with your experience? That is an excellent question. And they'll remember that question and they'll never forget that, hey, this is someone who's trying to buy and they're nowhere close to their goal. And when they see a building that they're like, oh, maybe this isn't the right deal for me, but I think this could work for Luke. You usually get a call or text from them saying, hey man, you have time for a chat? I actually had something come up that you might want to take a look at. That happens to me all the time because I don't ask for the deal. I never tell them I want to buy this. I'd go, here's what I'm trying to accomplish. You've already done the thing I want to accomplish. In my position, what are my next steps? Great question. Why can I not refinance if I may be flipping a house with hard money? Well, if you're flipping, you're not going to refinance because you're selling it. I wouldn't pay the fees to refinance and then just sell the house. So I would not Refinance wouldn't make sense on a flip. If you are holding a house with hard money, you're going to need to refinance. But if you owe too much to do it, you might have to put more money down. And that is the catch there. But you absolutely can refinance if you may be flipping a house. There's no reason you can't, but it shouldn't be the main strategy. I actually refinanced the duplex that I was converting to hold I held it for 9 months and then the option came up to buy out one of Cody's partners on a 12-plex. That's how we started our partnership. On that deal, I ended up selling it after I refinanced. But yeah, nothing's holding you back from refinancing unless you owe more than it's worth, which is not a good flip. What metrics do you use to find market cap rate? CoStar's excellent. There's a lot of data out there, but the best way to do it you can call a broker and get their opinion, which helps, and it's good for broker relationships. But the best, best way is call a local lender and just ask them what they're seeing appraisals coming at. It's super easy. Like, okay, I'm underwriting this deal. What are you seeing for market cap right now? I have a deal that I really, really like, but I'm not sure with how much the market's changed, how much correction we've seen in cap rate. What are you guys underwriting to right now? Because the lender is the one who really matters. That's going to give you like Okay, when they're going through appraisers, this is what they are seeing go through consistently. Lenders know best. Luke, what are the options when you have an equity partner who is, uh, brought on to refinance the deal and you have to pay them off? It's the same thing as when you bring on a partner without refinance. Like, you just need to have a structure in the deal for what are we going to do with this property that would conservatively get their money back. Is it going to be long-term holding cash flow? Are you going to have a long-term partnership? Do you have value add to a point where you're going to be able to refinance and pull their money out with margin? Do that. It depends on their goals and it depends on the deal. Completely deal dependent though. The structure always depends on the deal before the debt and the equity. So I cannot tell you the equity without seeing the debt and the deal for what will be right for your deal. Leo, what do you think about doing a 5-year master lease and all rent payments will reflect on lower purchase option. I think that's way too long for a master lease. There's so many ways to get out of a lease. That is, you're probably gonna pay a large option fee for that amount of time. The lease options or management options, which I actually think is a superior contract but similar functionality— when you write these option contracts, the only reason you do them is one, there's no way to buy the deal right now. Two, they have too much debt on it and is not bank financable. So you need to get the performance of the property up before you buy it. It's actually the only clause that allows you to fix income before purchase. Traditionally, it's borrow less money or borrow cheaper money is the only way to increase your NOI. On a lease option, you can actually decrease inspect expenses and increase income before purchase. But that is why you would utilize that contract. I'm going to get this to outperform. I'm going to negotiate a price today. I'm going to pay a fee to lock in that price. Then I'm going to take over management of this property and I'm going to get it performing the way it needs to to get the bank financing. That is the use for those. I think 5 years is way too long for that though. You don't need 5 years to stabilize a property. Do you take into account the seller's AFR when structuring deals? No, no, I do not. Here's why. Here's what I take into account. I'm not going to do subject to— that is, that it creates a callable note— unless they specifically have seller finance debt that has no due-on-sale clause. Then, then, then subject to is fine because there's You have no due on sale. That's the problem with subject to. Assuming that we don't want to do subject to, I don't care too much about the seller's position. What I'm looking at is what is the deal presented? Can I buy it with long-term fixed rate debt? And can I hold this deal forever? Is there enough cash flow on this and stability on this deal and upside on this deal where I can hold this forever? If I can answer yes to all those questions, that is all I consider when I'm structuring a deal. The seller's pieces is just like, okay, well, what is it that they actually want? Do they want monthly payments where seller financing makes sense? Awesome. Do they want to get cashed out? We're going to need to write a deal that lets them get cashed out. That's going to be banks, it's going to be private money, it's going to be hard money, whatever the structure is. Can we do a blend of bank and seller financing? Sure. So I need to know what their actual equity position is in the deal, but everything else with the seller, it's all their business. I don't really bother them too much. Dylan, so if depreciation, so for depreciation, no money in, if I have to structure half the money as debt, do I have to pay interest on that portion as well? Yes. If you structure as debt, you're going to pay interest. So if you can't afford the interest or the deal doesn't pay you enough cash flow to pay that interest, you can't borrow that half. You're going to have to do an equity partner and you're going to lower your basis in the deal. So you are going to have more tax liability potentially. Because you cannot depreciate more than your personal basis in the deal. And if you buy zero down and you didn't borrow any of it, you're not going to have as much to depreciate. There's a lot we can talk about depreciation. Your basis also changes whether you're taking on recourse or non-recourse debt. So there's a lot to factor. In general, if you can afford to structure as much debt as is your equity, you can have someone bring in all the money but borrow the amount that would be proportional to your equity. That's usually the best structure, but only if the deal supports it. All right. I'm going to try to speedrun here. We are approaching 2 hours. I love these lives. I love these lives, but we are coming towards the end. Edmund, when it comes to using debt as equity, if you fail to meet the partner's preferred return, what would happen to them? Would you forfeit the property to them? Yes. Most often I actually back it by my equity. So I go, "Hey, you're going to put in the money and you're backed by the deal." Sometimes it's just they're backed by more equity than they put in if you have a really good deal and you're then forced. It's like, "Okay, well, you can force me to sell the property, but they have direct equity in it." So there's a lot of things with the preferred return, but if you fail to meet whatever the requirements are of the note, there's usually a recourse that the partner has. And if it's personally guaranteed, They're going to come after you for whatever, which is usually going to be directly out of your deal. It's very rare that even on a personal guarantee, it will extend beyond the actual transaction that's involved unless there's mitigating circumstances. Dylan, the interest rate on offers completely depends on the deal. If it cash flows like 25%, I'll borrow at 10% all day long. If it cash flows 8% but has a ton of upside, I'm like, okay, I'm going to borrow from you at like 5% and we're going to just fix this This deal, you're going to have some cheap debt from you to get this thing started. The interest rate is deal-specific. Deal, then debt, then equity. Okay. Sorry, I read this for a second. To Luke's comment, $1.2 million purchase with seller finance note, property gets appraised at $1 million. Would you be able to use the $200K As a second position note seller finance instead of cash out refi or cash in refi, sorry, where you have to actually pay to refinance it. You could, but the bank is not going to let you over-lever the property. So there's no way that you're, because if the valuation's $1 million, the banks are going to lend 70% LTV. So you're, you're not just out the $200,000. I mean, you're going to have to pay it down to 70% loan to value unless you have cash. It depends on how much cash is in the deal. Assuming that you did a 30% down payment to the seller and is compliant with the bank, now it's like, okay, we just have to come with the extra $200,000. They're probably not going to let you lever it that far above the value. Just realistically, the bank's going to have a problem with it. If you have another loan product or you have private money, which can be more expensive, you can do that. But in most cases, if you're like, oh yeah, you're going to max your loan to value and then I'm going to put a second behind you. To over-lever the property based on the appraisal, most banks are going to look at that and say, "Absolutely not." Emmanuel, I recently watched your podcast with Yan. Great episode. Is it worth joining the WARRI Facebook group even if I don't invest, live in Washington? I think so. One, it's a fun community and there's a lot of just funny memes and just fun stuff in there. I think WARRI is fun to join. You get connected with a lot of people and a lot of people do operate in and out of state. I think WARI is, I think it's fun and there's a lot of takeaways for people. So yes, that's a Facebook group online, Washington State Real Estate Investing. Of course, it's geared towards Washington investors, but I participate in that group a lot to better build my communities nationally. If you want a good Facebook page to join, check out the Multifamily Strategy Facebook page. I'm trying to basically emulate what they did there as far as the community feature. We're bringing in more lenders, more vendors, uh, more conversation, and we're going to start posting more deals there very soon. So if you want to get involved in a community, that is a growing page. I think we only have like 700 people in it, but we are going to grow that too. My target is by the end of the year, I want to have 10,000 people active on that community. So join their Multifamily Strategy, uh, that is on Facebook. That's Multifamily Strategy Facebook group. Edmund, do you remember to get the property appraised before closing to minimize risk? I recommend not remember. Wow, I've been reading a lot of words for a lot of hours. Uh, do you recommend to get the property appraised before closing to minimize risk? Uh, no, not all the time. If you're doing a value-add project, I don't care what the appraisal is because it has nothing to do with where the project's going to be. Unrelated, does not help. I don't care. Uh, I do care if we're buying a stabilized property in day one. If it's turnkey, then absolutely If I'm banking on a refi, I want to know what it's worth today for sure. So it depends on the project. My hotel conversions, whatever number they give me on the front end does not have anything to do with where it'll be in the future. If I got an appraisal done on my first deal, I bought it for $2 million, 38 units. It probably would've appraised for $1.2 million. It had no income, negative income, negative cap rate. I don't even know how you would appraise it way overpaid. By $2 million for what it was bringing in. We refinanced 11 months later when it got an appraisal of $3.7 million because we fixed the operations. That's how I made my first million in real estate. First deal, definitely overpaid for the property by appraisal. So on a large value-add project, basically worthless. On a stabilized project where you're just going to try to run it a little bit better with minimal upside, I would do the appraisal. Are the tenants responsible for damages they make to your properties? I wish, I wish. Yes, there's a security deposit which you can take for damages done. But a great example, I just had a tenant drive their truck into their unit. They were drunk. They drove through the wall of their unit. They don't have driver's insurance. And then they decided to stop paying rent. The perfect trifecta. Rent damage, no insurance, and stop paying rent. There is no money to get from them. Obviously their security deposit will go towards the $16,000 of repair. They put their truck into their bedroom. We'll put money, we'll put their $1,500 deposit towards it, but the rest of it's going to be out of pocket. I talked to my insurance company and they're, well, I talked to the agent. I didn't file the claim. They're like, if you file that claim, insurance rates have gone up astronomically since you first purchased this. What's probably going to happen is they're going to cancel and rewrite your claim at the end of the year, or your insurance, and they'll double your insurance rate. It will cost me an additional $20,000 a year to make a $16,000 claim. First of all, that's BS. Second of all, tenant's not going to pay it. If I sue him, he doesn't have any money. Can't get blood from a stone is the exact words that my lawyer gave me. He's like, we can sue him all day, we'll definitely win, You won't get anything, but we can win. It's not helpful. So to a certain extent, yeah, if insurance isn't covering it, it's usually not worth it to do insurance unless you have catastrophic damage, which is sad. And tenants sometimes do stupid stuff that goes above and beyond their security deposit. It happens harder in Washington than other states, but There's a certain amount of like, yeah, sometimes people damage stuff and you are the one stuck with the bill and it sucks. Ryan, is a house hack duplex a bad deal if it doesn't cash flow while you occupy one unit? I don't think so. I have conflicting, there's conflicting opinions here. If you lower your cost of living and buy an investment property, here's how you underwrite a house hack. In my personal opinion on a house hack, if you moved out of that unit, would it have been a good investment? If you're just buying the duplex to house hack and live for free, it's like, okay, does the deal work as an investment if you didn't live in it? Because when you move out, it needs to work. If you're buying something just to lower your cost and that's how you're justifying it, don't do a bad deal to live in it. I think that's stupid. But you definitely don't need the cash flow to lower your cost of living and to buy a great investment. So I think in my opinion, Answer is no, it's not necessarily a bad deal. It's a bad deal if you rent it at market rate after you move out and it still doesn't cash flow, then it's a bad deal. Dylan, if you're looking at a small town and the owners say there's not enough stuff selling to know market cap, I can think of a deal like this. What would you do to get a purchase price? I'd talk to brokers in the area. There is a way to value stuff, but ultimately at the end of the day, I look at the deal itself and I go, okay, how much money is this going to make? What is the cap rate? What is the return? And can I get an investor on this? If it's a great deal and they're like, I'm having trouble valuing it, I'm like, okay, we're going to need longer-term debt. I just need to be really comfortable on this. The margins are going to have to be better because it's rural. That's one of the great things about tertiary markets. So if I'm looking at that, I'm like, okay, no one can value this. The owner doesn't know, brokers don't know. We're going to come up with a price that I like for the amount of income I'm buying. And we're going to get a long-term on the debt so that I'm very comfortable that it's going to be worth a lot more in the future. You can on something like that, that is an appropriate time where you can also get an appraisal because an appraiser is going to have to justify their findings. Go get an appraisal on it, see what it comes back with. Give yourself a starting point to negotiate off of. From Ty, you put yourself in a hypothetical fairy world for one second. If this world, I were to write you a check for $25 million, how would you deploy it into real estate? Interesting. Also, would you continue making content? Yes. To the last part, yes. I think it is absolutely the most important thing in the world to share the journey with everyone. I absolutely believe this. I, while it takes a ton of time, like an unbelievable amount of time to document the journey, I don't, I don't know if you guys realize how much it takes to do 3 YouTube videos a week, 1 live every week, multiple posts daily, run the podcast, and do daily short form on Instagram, YouTube, and TikTok. It is ludicrously busy. And I do most of my own filming. I have an editing team, thank God. But yeah, it takes a lot of time. Would I continue to do it? Yes. I think, one, it's so rewarding to get to do it with people. And I love going to— it means the world to me when I land in some other state. And people see me in the airport and go, oh my gosh, I saw your YouTube channel and I bought a deal seller finance. That happens to me more frequently than I would've imagined. And it's amazing. It is fun to get to impact more people. And I personally, I really enjoy public speaking. And more than that, I like connecting with people in real estate and getting better at the game. Sharing the journey has given me more doors open than I ever could've imagined. Even just my podcast. I've learned so much from interviewing other people. I'm getting to do the owner meeting for everyone on the Multifamily Strategy Podcast. That's all that's supposed to be. I front-loaded 2 episodes a week for a while just so we got a little library going. I'm going to just 1 a week now, but every single week you get to learn from an awesome owner, most of them much bigger than me, how they're operating their business, their biggest stupid tax, the takeaways for what they built, the opportunities to do those. It is my favorite part of the game. That piece of teamwork and being social, always do the content. The, the content I will do forever. It's something I'm really passionate about. By the way, we're at 95,000 subs on YouTube. We're almost at 100,000 people who have subscribed to watch this journey and like be on the journey with us. That's so freaking cool. So I don't know, for me, I love it. Um, with the $25 million, better, better suited to your question. I had $25 million. I would go out and I would buy a blend of like, there's stuff I'm winning on price right now, blend of bank financed and seller financed opportunities. I would deploy a vast majority of it in Dallas because that's where I like to live and I love being driving distance from my properties. So Dallas down to Waco is like that whole strip, like Dallas to Fort Worth and down the 35 down to Waco is like my target area. I absolutely love it. I would deploy $25 million there. I will say we'll have an average down payment of 15% because of my heavy blend of low-down seller financing that I tend to do. So with $25 million, we would probably buy somewhere in the realm of like 15x that dollar amount in real estate. We would buy a ton of real estate with $25 million, a ton of real estate. The next thing I would do with that ton of real estate is I would make sure it all— well, first of all, cash flow has a plan. Plan to pay itself off. I would lock that stuff down and start letting it pay itself down. That's a ton of real estate and we'll let it roll itself down. And one day it'll all be paid off. It'll be hundreds and hundreds of millions of dollars of real estate with no debt attached to it. No one bothers to do that. Everyone stays levered except for the mid-size players who pay it all off. And I'd love their strategy. I'd love to see someone do it on a massive scale. $25 million. I'd be like, okay, We're going to deploy this bad boy and then we're going to go on a mission to pay it all off. I might have to sell a few buildings to do it, but we're going to optimize cash flow and we're going to roll off all this debt. $200, $300 million of debt-free real estate. I can only imagine the amount of cash flow. I'm not even doing the math in my head right now because it's too exciting. How does basis change from recourse to non-recourse? This is a question for your CPA, but I'll give you the basics. Recourse debt, your portion of the obligation is actually something that you're— I learned this from my CPA this year. This is new. He's like, oh good, some of these are recourse. Recourse actually increases your basis. The exact percentages that it does or how it works on the balance sheet, I don't know. Ask your CPA. All I know is that recourse equals good for tax purposes. Also, most recourse debt If you're buying correctly and you're not just overleveraging, recourse debt still goes after the property that you have, like the underlying property first. So if your underlying property can clear the obligation, recourse debt doesn't affect your other stuff. It rarely ever happens and it's super messy. It also doesn't— they don't like to affect other partnerships. So if you have multiple LLCs, they usually don't dive into one or the other. Recourse is not as risky as everyone thinks. It doesn't mean that you don't take recourse seriously. When you're signing or personally guaranteeing something, you are backing it by everything. You're saying all of my worth, everything that I own is the ultimate backing for this. But can they pick and choose what things they go after? If you have 100 buildings in your house, can they just say, well, I really just want your house? No, they can't do that. Are you technically— is your house on the table? Sure. On a personal guarantee, everything you own is on the table. But they can't pick and choose. And if they're backed by more than that, the deal, you sell the asset or you sign it over to someone and the deal's done. But the actual recourse, your obligation to it does affect your tax basis. That is one for your CPA, or in my case, my EA, which is an enrolled agent who's like a CPA on steroids. Ty, a great question. Have you finished the Halo series? I did. You talk about me not doing a lot of personal time. It took me a while. I very, very, very recently finished, but I played Halo 1 through Halo Infinite. I skipped, I skipped a lot of the in-betweens. I just did the numbered Halos, and then I guess Halo 6 is Infinite. Um, that was fun. I'm video gamed out. That's, that's all I can do. So I'm, I'm actually just working, but that was a fun, like, hey, I got done with my 90-day burn, let's go on a fun personal adventure. That was fun. I'm now aware of what's happened with Spartan John, Mr. 117. Kind of disappointed with the Cortana storyline personally, but here we are. Do you have any owners who invest in Virginia or North Carolina? Do I know any? Yes, I do. Yes, I do. The ones that I'm thinking of live in Dallas. One of them actually does live in North Carolina. Very wealthy individual. Virginia, I only know one and they're a smaller investor, but I do know a few owners who do invest over there. The Carolinas are super hot for real estate. People love it over there. Population growth off the charts. Really, really good. How on earth I have 40 missed texts since we started this? Who knows? 49 actually. That's not kidding. That is I'm popular right now. No emergencies, but dear Lord, I clear my text every single morning. So that's, uh, boy, you guys are— people are busy today. Uh, do you, uh, do you do inspections during the tenant's lease term to ensure the units are in good condition? Yes, uh, we do them annually. Some do them biannually. I think it's too often, but we do an annual inspection prior to renewal, full walkthrough. Checklist. Make sure nothing's damaged, everything's being, you know, everything's done safe and according to lease. Check the smoke detectors, the basic safety pieces, very important. From JP123WWU, how much money should I safely have saved up to buy my first deal? I didn't have any deal debt equity. And when you have no money, the great thing is you have less to lose. I don't worry too much about the money saved up. You have to do a better deal. I would not do a deal where you overpay and went on terms as your first deal. I'd build some equity. I wouldn't start negative equity. I think that's a stupid way to get started, but I'd buy a deal with some good upside that I believe in on conservative numbers. And I would be really careful with my underwriting. This is where multifamily strategy, any mentorship group, this is where going along side with someone who's actually done this before is really valuable because that first deal's really important and you're going to make the most mistakes on the first deal because you're the newest you'll ever be when you buy it. But when you put this together, you should have 3 to 6 months reserves of the property's total rent collected, like the total income on the property. I like to keep in reserve, like 3 months of it is just fine. If you have 3 months of income, if the building was fully occupied, awesome. That way, if all your tenants left, you can just keep running the building like you were. That is the right answer. However, it's not a reason not to get started. If you have $0 and you have a deal in front of you, do the darn deal. What return would you aim for in a rural area? Depends so much. So much on the market. There's so many rural areas, some places you would expect a 25 cap because no one invests there and there's no— it's like you just need crazy numbers. There's some places where rural areas are just really hot, you need a 6 cap. It's going to be way, way market dependent. If you had $10,000 and you were back to square one, how would you get back into the real estate game? Well, It's more than I had when I started. So I do the same thing again. Find a deal, find the debt, find the equity. I am putting exactly zero of my own dollars into the 176-unit acquisition. I could do that deal if I had no money. It doesn't matter. It is deal, then debt, then equity. I've found the money that I need to do the deal. I needed $2.1 million to close it. We have 3 people who want to fund it in full. I have the person that I really want to do it with, so I'm giving them first shot. But putting together that deal, I could put that deal together if I had $10,000 in my bank account, and I'm spending less than that to close this deal. And it's an amazing freaking deal. This is a very, very, very good deal unless we find something in due diligence where it's not, and then you don't fall in love with your deal and you go, okay, it's not as good anymore. If it's galvanized pipes, They're too old. We stopped using those forever ago. They will fail. It's super expensive. I don't want to deal with it. So if we— they did the— the owner's like, oh, we don't know what the plumbing is. If I find that's the plumbing, this deal's just going to disappear. Insurance has been going crazy. I underwrote really conservatively, but if they come out back with an even more insane insurance number, it can kill my deal. I won't do it. So food for thought, but it is a deal the way that it's written right now. If our underwriting goes the way we expect, $10,000, I could take out $8 million of real estate with $10,000. It is fine. Dylan, have you ever thought about buying subs? Oh, for, for YouTube? I don't know. I, I've never heard of anyone buying subs for YouTube. I've heard about people buying followers for Instagram. I'm not sure if you can do that for YouTube. Uh, the answer would be a very, very, very solid no. What is the mission of the YouTube channel? And my Instagram to connect people in real estate, to build community, and to engage people in community. If I'm buying fake bots, it doesn't do anything for anyone. And on Instagram, allegedly, it just ruins your engagement. Part of how Instagram pushes out things is it goes per post, how many people see it and how many people engage, how interesting are you. If you are someone who is buying fake followers, you are less interesting. The algorithm is not interested in you. Now, do you do advertising? Like, I, I've done stuff where I've had a fantastic post that a lot of people liked. You can boost the post so that more people will see the post. That's the type of marketing I can get behind because real people will engage, real people see it, and I'm not buying following. But yeah, buying following online, that is a loser's game. It ruins your channels. It ruins engagement. You want to build community. So everything that I do is organic outside of like legitimate, normal boosted post and higher traffic ads. So you'll see ads for Multifamily Strategy. Some people see that a bunch of times, like I should follow the free YouTube channel. I do that stuff, but no paying for subs, very bad. Do I think a lot of YouTubers do? No, actually, I know at least the YouTubers in my network, a lot of them just post a lot of content and it takes a long time and they grow really slowly. We kind of went off for the first time after we had, because we've done a bunch of rounds of BiggerPockets, which really helped, really helped. I did a show called UpFlip at the Robinhood that did ludicrously well. I think it got like 600,000 views. I need to check it again, but I think it got over half a million views. We got a huge wave of following there, and then we've just continued to grow. From that point a lot. I also, in that time, that's where I launched the podcast. We have a lot of things going, but that's the way you build community and that's the way that you actually build a stable pipeline. If I had a bunch of bots, I don't think a paid subscriber could possibly join. If I bought for some robot based on an Indian computer to, or a lot of them are out of India, South America, parts of Africa where they're just, you can just buy cheap following for fake accounts based in those countries. If you were to buy those, I don't think that any of those are going to sign up for multifamily strategy. I don't think any of them are going to engage in our conversations. So I don't think that that would work. Do you have to put earnest money down on the 176-unit? Yes. I actually had on this particular one, I did put the $50,000 down. And guess what? The investor has, because it's a large loan, it's too $2.1 million, or not loan, but it's equity position. They're going to put $2.1 million in. I cannot have them backing out at the last minute. I just explained to everyone, look, earnest money's $50,000. I put it in for you. Whoever invests, I need you to have skin in the game because I need to actually see some money move from your account to our account so that I'm confident that you're going to be the one who closes because we have a lot of competition for this deal. It is a fantastic deal that I believe in, and I need to cycle the money. So I put it down. If I didn't do that, so back to the question where if I had $10,000, I would, for this particular deal, because it's a fantastic deal, I would've borrowed the money. You can get transactional financing. I do not recommend it when you're brand new, but on this particular deal, I'd be like, yeah, we're going to go ahead and borrow that. It's refundable earnest money. During due diligence. So if I borrow it, I'll have to pay the interest on it. But if I back out of the deal, the money comes back and it goes back to them. I can do that. And I have someone, I actually have a friend who does the transactional financing, who I think he has like $800,000 in cash. He's kind of weird. He posted his bank account recently, which I thought was silly, but he has a lot of cash. And he was one who I can go to and I can just say, hey, this is what I want to do. I'll back it with my— I'll back with my car if you want, whatever, whatever you want to see for backing. But let's go ahead and put this together. $50,000, come with the down payment, and then have the investor who comes in, when they agree to come in, refund that money. Cycles right back to that person. Everyone's happy. These are all ways to play the game. How did you get on BiggerPockets? We had a meeting with someone who ended up being friends with Brandon Turner right before Brandon Turner left BiggerPockets. They were really interested in what we had to say. They booked Cody on the podcast because of how young he was. He had the most watched episode they have ever had on any podcast episode, over a million views. Um, it went absolutely off. For those who are newer to the channel, Cody's my original business partner. We host Multifamily Strategy together. Cody coaches that with me to this day. He got on there. They really liked what he had to say. I got on there. My episode didn't do nearly as well as his. We got on there. We did a live episode in Spotify Studios in LA, and it was super fun. That episode actually did quite well. That was with David and Rob, me and Cody. So we all booked a room in Spotify's headquarters. It was really fun. Those all really helped boost, but it started by we bought stuff. We shared the story before, so we called our shot. We documented the journey really well, and it was interesting and easy for BiggerPockets to look us up and say like, oh, these guys said they were going to do something and they did that thing, and they're pretty young and dynamic and fun. We're going to go ahead and bring them on and see what happens. And so that's the best thing I tell people to do when someone asks if I'm going to keep posting content. If I had $25 million and I bought hundreds of millions of dollars of real estate with it, yes, because there's always benefit towards sharing the story and I think others can benefit from it. And if you're just doing this for money, like you don't need that much real estate to be good on money. You don't need a sports car, you don't need a yacht, you don't need a superhouse to be good on money. It has diminishing returns as far as like the endorphin level that you get from having more of it. So you hit to a certain point, it's like, okay, I just love the game. I want to move forward. Sharing the journey allows me to move forward more, move other people forward. It's way more rewarding. Okay. I'm going to cherry-pick a couple of these and then I'm going to go eat some dinner. Let's see here from Luke. Can you tell me all the possible ways to cash out an equity partnership? Oh my gosh. I'm going to rapid-fire a few of them. There's, There's so many. You can do a recapitalization. You can self-syndicate. You can syndicate to a new LLC, crowdsource it. You can do the cash-out refi. You can earn it in a W-2 job. You can earn it from the cash flow of the rest of your portfolio. You could sell another building to pay out the equity partner. You could sell the actual primary asset and essentially run it as a flip to pay them out. You can borrow the money from someone else if the property that you're borrowing from has the debt or has the income to service the debt. Those are the immediate ones that come to mind. There are more plays available. There's also substitution of collateral. You can move them somewhere else in your portfolio and then do the refi on that property. There's a lot, lot, lot, lot, lot of ways that you can do that. I've actually seen someone move. They paid off a bunch of the land and then they got it permitted to build on. They traded that piece of land to the investor and it was worth more than the buyout. So while they probably could have profited by selling it, they didn't want to go through the whole project for doing it. Everyone walked away with money, everyone was happy, and they never actually had to write the darn check. Oh, they can also seller finance their equity to you. So you can actually turn their equity into debt, buying yourself more time. Those are the main ones that I can think of off the top of my head. There are many more. So when I say like there's multiple exits, there's multiple exits. Mason, could you run through underwriting of your 176 on one of the mentorship calls? Yes, yes, I will. I'm going to wait till I get all the due diligence docs in so we can actually look at like, okay, here's the pro forma numbers we looked at and here's what it looks like in due diligence. So let me get a little bit farther through the transaction and then absolutely, that is the type of stuff that we want to do. Like, let's look at real deals and it's a big deal and I'm going to show you exactly how I do it. We have a whole bunch of due diligence videos, but nothing replaces actually doing due diligence on a real deal in real time on a call. So yes, not only can I do that, that is one of the best things that I can do. And Edmund, can you give an example of a debt partner term? So on a debt partner, they're just going to write, I mean, a debt partner's a note. So they're going to write a note. You're going to back it by equity in the deal. And usually it's your equity. If it's a note, it's just debt. So it's okay, I'm going to buy 100% of this deal. You're going to write me a note. I'll back it with 100% of my equity though. And in 5 years I'll pay you off. So it'll be 10% interest only, be expensive debt, but I'd do it for the right deal. 10% interest only, roll through, pay him the interest, pay off the note at the end. That's a debt partner. It's just a private individual who writes you a note. All right. 12 minutes, 17 seconds. Thank you everyone for hanging in there, asking great questions. We had a ton of questions today, which is what I appreciate. So thank you for being here. If you guys are not yet joined Multifamily Strategy, this is the time to do it. This is the best pricing we're ever going to have, but also this is the time in the market where you need to be able to buy deals with or without cash. Opportunities are here now. I'm winning on price now. I haven't done that in years. We're winning on price. We're winning on terms. We can buy the deals with or without money. The opportunities are coming. They're going to continue to come through this year. Be prepared. MultifamilyStrategy.com. I will see you there. If you need to know more, shoot me a DM. I will answer the question for you personally. Like, I will go into my Instagram for everyone who asks. I can help if you have more questions. Other than that, sign up. We'll see you there, and we'll watch everyone join again every Wednesday, 3:00 PM Pacific Standard Time. We'll see you on the next episode.