Creative finance - Unique Creative Deals

There we go. Let's try this again. Welcome to Multifamily Strategy Live. You guys can hear me, let me know in the chat. Looks like I may have muted my mic. Today we are talking about the most creative of creative deals, the most creative deals that we have ever done on Multifamily Strategy. Both in the mentorship deals that I have closed, different structures that we have put together. If you are the first time, first time that you've come to this channel and you are watching and wanting to know, hey, what's going on here? We talk about one given topic, then we open up for questions on business, on real estate, on multifamily, whatever it is that you want to talk about. We will answer until the questions cease. So without further ado, we're going to dive right in on the most creative deals that we have done, creative deal structures, crazy things that we have done to get things to the finish. My hope is that you can take some of this and apply it to your own business. Okay, so I'm gonna start with one that actually closed in Multifamily Strategy a week ago. This is a mentee, uh, brought it to the group. Her name's Alex. They brought their deal to Multifamily Strategy. We underwrote it on the calls. It was an interesting deal, needed a little bit of work, seller finance deal. It came together. They presented it in the call. It was interesting. They put it under contract. They learned mid-contract because they originally do 25% down, by the way, seller financed. They learned mid-contract that unit 8 was actually basically just a closet that was unrenovated. There's another unit that was completely unrenovated. There was a lot more work and they weren't completely— seller was not completely honest on the numbers. So what did they do? Well, I would not personally throw 25% down on a maybe slightly under market price deal. You got an okay price, but you have a whole lot of project. Their investors also weren't interested in funding such a project. Now, a normal person would've said, hey, the seller lied. This deal's not going to work out. The numbers aren't penciling. Here's what Alex did. I went, well, you know what? This does work if we can go 5% down, take some of the remaining capital, invest it back into the deal, make it cash flow, finish out unit 8, uh, finish, uh, the new finishes on the units that needed to be heavily remodeled. But they finished their remodels. Uh, they're like, this works if we do 5% down. Problem now was that the broker was not going to have enough money out of the transaction to get paid. So the broker's like, well, that doesn't work because where am I getting my money? They ended up doing 5% down. And the buyers paid the broker. However, they did not want to dip into cash flow. They financed the broker's fee out of cash flow. They said, hey, you presented this deal to us and not everything you said was necessarily true on the deal. We're still willing to close. However, this is what it would look like for you. You will be paid a portion of the cash flow throughout the next several years until your commission is met. I believe it was 10% of the total cash flow. If this deal is as good as you said it is, and if you think we're going to execute the way that we are, You will get paid your whole commission within 3 years and we will get this deal closed. The broker agreed to that. They took an expense off the seller, moved it to them, financed that expense. Ridiculous deal. I believe it is going to be this Friday. I'm actually doing a podcast with Alex and Shannon, two of the partners who knocked that out. We're going to go super deep into that deal, how we structured it, the things that worked, the things that didn't, and what their next steps are on that deal. That is something I have never attempted yet. Financing the broker's commission for a deal that otherwise wasn't working. Creative clause. I would call that in the very creative. Is it repeatable? Yes. Is it going to come up often? Probably not. But if you have a deal where you find that this has happened, where it's like, hey, something was misrepresented, you still want to close the deal, but there's a point mid-transaction where you need to renegotiate. Remember, all fees are on the table. You can finance anything you own if you're the broker. And you are owed a commission, you can finance that commission. If you are a savvy investor and you're trying to figure out the right question on all of these deals, it's going to be the same thing. How would I make the deal work? If you can answer that question, you can buy the deal. So another really creative deal that happened for me, and this was an interesting one, we bought a deal, and this is when we were very young investors. We bought a 6-unit building on Broadway, came with a bunch of land, 6 units, barely cash flowed, but it did cash flow on fixed rate debt day one. So bought a deal, good price, some cash flow, lots of upside. And we made a mistake. We raised exactly what we needed to do to close the deal, which I think a lot of new investors do. They're like, well, let's get it closed and then we'll figure out the rest. We had to do some renovations to actually get the cost, like the rents up. We had moveouts when we did small rent increases because people already didn't like the spaces. It was relatively heavy renovations. We're talking new cabinets, new floors, fixing up bathtubs and showers, or just straight replacing them. They were heavier renovations that need to be done to these units. We didn't have the money. We bought it ourselves, so we didn't have another capital partner to come in and we had no one to ask for money. We couldn't take on additional debt because we weren't cash flowing, because we were just barely cash flowing before we had a couple of vacancies. So now we're stuck with this deal where we had a good price, we have good terms, but it's losing money. We're breaking the rule. How do you buy it? How do you never lose it? If it's bleeding money and you don't have money to fix it, you're trending the wrong direction. Here's the solution that we found, and this may or may not work for your LLC. We went to AMX and Chase and we applied for a credit card, zero interest for 18 months. On both of those. I think now it's a 12-month promotion, but that's typically what we see there. So zero interest for 12 months and, uh, or sorry, for us, 18 months. We got the renovations done in 3. When we refinanced, we paid off the cards, and the rents also would have paid off the cards before the end of the 18 months. If we had gone over 18 months, we still would have had 18 months of no interest. So even if it jumped to 20% interest and took us an extra 3 months, We still would have had just a little teeny bit of interest on a 2-year timeframe. When you're looking at how to structure debt, if you did something wrong, like not raise enough money for your renovations— newbie mistake— if you structured you like that, look for inexpensive or promotional lines of credit. Or if you have enough cash flow built, you can come in and bring in a new equity partner to fund your deal. Uh, that's something that I've actually done 2 times in Texas. So let's go to the Texas deals. Partnership was bought right price, right terms. Uh, same problem though. This was not my deal. I did buy into these later. I was part of the solution. But 2 properties were purchased at an excellent price with amazing terms, absolutely amazing debt terms. One absolutely critical problem though. No money for renovations. There was no chance the deal would work long term where they could hit the needed value to refinance without doing the renovations. They brought on original partners who did not have the excess capital to actually get through it. There was no plan of how we're going to finish the problem or the project. We just have a project. I was brought into this deal to help fix it and restructure it. I talked to all the original partners. There was no way that we were going to bring up the money between the group, so What did we do? We said, hey, if we can't finish the project and you guys have all invested in this project, hence invested in the other partner and now me because I'm buying in, I'm like, if you have placed money in this deal with us and I'm coming in to fix it and there's not an obvious solution, here's what I'd like to do. Can we bring in someone who has the money? We cash you out, we make you whole. In fact, we'll give you a little return on the way out. We ended up doing that on several deals. Several being two. We negotiated a price for them. We're like, hey, we got into the deal. Maybe some due diligence wasn't done on what it would actually cost to get through the project. I then entered. I brought one partner to take out multiple partners. We've now cleaned up the partnership. They bought the people out and they brought in the additional capital to fund the deal. We got the deal funded. We're on both projects. We are partway through the final renovations to get them fully leased up. Maximize the value, refinance, get the buying-in partner all the money back. And on both of these, we will go ahead and recycle the capital by doing what's called a 1031 exchange. We will sell these, we'll take that equity, and with that brand new partner on those deals, we will roll into brand new larger properties with a tighter partnership with the money that we earned from executing the deal correctly. That's getting pretty freaking creative though. If you're having to do a membership purchase agreement to swap out partners and to adjust your pieces It's beyond what someone would normally think they would do. What I want to illustrate on this is there are times where you may feel that you're stuck. Either your deal is dead, or even worse, you're mid-deal and things are not working the way that you think they were. You have so many creative options. You can swap out partners. If you have enough cash flow, you can raise new debt. Um, big rule on this though, do not raise more capital or more debt or throw money at a deal It's not going to be a long-term solution. I have seen someone fail on a deal and to meet their obligations, they had another investor buy in. And guess what they did? They were in default to the next investor. So then they tried to find another investor to buy out the second investor. We call that paying Peter to pay Paul. If your deal is dead, which occasionally— it's never happened to me, but I've seen it happen where people just overpay, they get bad price, bad terms. You cannot fix those deals. The last thing you do is throw money at them. Don't raise other capital. Don't additionally endet yourself. If there's no way out, you're going to have to cut your losses. That being said, 9 times out of 10, when you feel stuck, there is a legitimate creative solution that you can utilize to fund your deal and reach the finish line. If it's just a lack of capital to get from point A to point B, usually a very simple fix. I actually have some questions here piling up in the chat, many of them from Dylan. So we will dive on in here. I answer a couple of these questions. But if anyone else has any questions for us, either on any platform, Instagram included, please let me know. Question number 1. You mentioned a property with grease in pipes. How did you figure out who did it? Well, it was the tenant who called in and said that their sink was backing up. And when the contractor took pictures, there was grease all all over around the sink and on the backsplash— backsplash, words— um, on the backsplash. When you go through that, it's like, okay, I have photo evidence of— we think we know who did this and how this came together. Not a whole lot of mystery there. Also from Dylan, if you do a cash-out refi Does the loan get restarted like 30 years left on a loan from that point on? Um, typically yes. If you have a 30-year loan, then yes, which a lot of them are. So it's— you're going to get a brand new loan. A refinance is a brand new loan that takes out the original financing. It doesn't pick up midterm. But you have the full range of options. You can get a 20-year loan, a 10-year loan. There's a lot of different ways to do it. If you're talking about an amortization schedule, oftentimes yes, you will reset the 30-year AMM. So you'll get a new note, even if there's a 10-year balloon, it will likely be on a 30-year or 25-year AM depending on the property that you're buying and the condition that's in. What do you do to be prepared for a recession? Know how to buy properties with or without money. I'm serious. I know that sounds like a cheap answer for a creative finance channel, but if you can transact when other people are not transacting, it is the most powerful time to take the field when everyone else is not playing. You just get more playtime. This is how a lot of titans take over industries, is when the industry slows down, the most agile players can move in. If you understand how to structure a deal, find the debt, find the equity, it works in an up or down market. The other way you plan for a recession is you buy everything in stable, long-term, cash-flowing, fixed-rate debt. When the market pulls back and I have 10-year debt, I don't care. I still get paid. My rate, my debt rate is fixed. My costs don't go up because the economy is down. Rents don't just magically decrease. They just go up slower or they may stagnate, but rents don't actually go down because people's expenses don't go down. Landlords can't afford to just drop rents because a lot of the value and appreciation of a property has been based on they've taken out debt that the property can service. So what we see with supply and demand and just the rules of economics Rent really does not go back down. So if your expenses don't go up and they're all fixed and your income doesn't go down in a recession with fixed variables, you wait on everything you have. You don't sell your stuff. You just go and accumulate more and you buy it where it works because there are going to be other people who do have reasons to sell, who are in a financial crunch, who bought on variable rate debt. All of these things happened in a recession., and it is just opportunity for those who buy exactly the way we buy. We have, uh, and actually David Greene talks about this on my last episode of BiggerPockets. We have essentially built a recession-proof model. We do not care about market. Like, there are no market variables that affect my strategy whatsoever. I am market agnostic. Heiner, when I see a unit, should I bring an inspector on the first viewing? Um, if you're under contract, yes. If you're not under contract yet and you're just looking to put it together, probably too early to start involving an inspector unless you have like a really close friend who just wants to walk it with you, which I often do on some of my deals. Uh, but I would not pay someone to go out on an initial walkthrough. I would start spending money when you're actually under contract. It's your deal to lose. The last thing you want to do is pay for people to come out while you're making a decision and just have it go under contract to another buyer. That's just a waste of money. Uh, Heiner, when working on agency debt, do they want to have enough down? Do they want you to have enough for a down payment or more? Well, yes, because you'll need to pay the down payment. Um, on agency debt, you're less able to be creative. They're a little bit more stringent. That being said, you hit the qualifications, it is conventionally one of the lowest debt products on the open market. Would a partner come in, um, would a partner come in second position When getting agency debt, no, agency is not going to— I've never seen agency debt allow a second position on a property. They will not allow a second lien. If you have a partner though, a partner is not debt. A partner would be equity. They would be on the loan with you. If you had a note, you would have to pay off that note with your refinance or with your initial financing for the agency debt. But generally speaking, unless anyone's worked with an agency, uh, you know, a bank that's doing agency debt, uh, that has allowed it, I don't believe, um, I've ever seen that done. Sean, as, uh, do you get your water heater tanks, uh, emptied out each year for yearly maintenance? Do I? No. Should I? Absolutely. Uh, I am working on getting a tighter maintenance plan than we've had. We've done so much renovation, a lot of the tanks are new. One of the best things you can do is continue to service them well. If you do not service them, they'll last 7 years. If you do service them, I've seen people get these things to last like 50 years. I'm not kidding. I actually have a water heater that was from 1955 when the property was built. Insane. You can basically keep these things alive forever. I did an episode, um, this was— oh man, it was forever ago. I did a live with a guy named Johnny Nyland. He's a maintenance tech here in my home area. He did a whole like hour on water heater maintenance. It was very intense. But you have something called a sacrificial anode that collects a lot of the dust and— or not dust, sorry, rust, and other ionized metals. It attracts a lot of that stuff. That is something that literally it's a sacrificial anode. It sacrifices itself to keep your tank alive. You replace that, you keep a lot of the crap out of your system. You drain your tank every year and just do the general maintenance, keep on top of the sacrificial anode. You can pretty much get those things to last for like 20 years. That is a best practice. Um, I'm starting to do it on some properties. I do not have a plan rolled out for my entire portfolio. That is a 2025 thing where I'm actually going to build out a deeper level of the maintenance side. And a question here: what is a good rate for private lenders to help fund down payment? If they're funding down payment, that usually means it's in second position. Second position is expensive. 12 to 14% is what market rate seems to be right now. Last time I did that, uh, borrowed at 13.5%. It is expensive debt. Second position is not as secure as first. It will always cost you more. I sent an initial offer on an 8-unit. What should I look for going in next week when I come back from vacation in the Bahamas? First of all, had my first trip with Danny to the Bahamas this year. Amazing. One of my favorite trips ever. I went to Atlantis and I pronounced Nassau. Someone told me I was saying it weird. I think I'm saying it correct now. Um, but we went to Nassau in the Bahamas. We had a fantastic time, uh, stayed at the Atlantis. Uh, excellent, excellent vacation. Um, but if you sent— yes, yes it is. Um, so if you sent an initial offer, what should you look for? Um, not sure I, I know the answer to that question. What are you looking for? You're looking for a response to your offer. Um, I'm not sure, uh, I'm not sure exactly what you're looking for there in the question. Um, but when you come back and if you have an accepted offer, you're going to start looking at, you know, let's, let's start the due diligence thing. Heiner actually happens to be a member of Multifamily Strategies Mentorship. So if you run through the due diligence section, we spent a lot of time on that for a reason. We also have a due diligence checklist there for you that has every single item in order what you need to do. But you will want to start, if you go under contract, into your financial feasibility and your physical inspections. So yeah. Oh, good, good. I was answering the question. When you view the unit— yes, uh, when you view the unit, um, first thing most people miss, and I've seen this happen a lot of time with newer investors when I do a walkthrough with them, look up At the ceiling, look down at the trim boards. When you do— when you— biggest damage pieces are fire and water. Uh, water is more common, so I'm looking at the trim boards and the ceilings for mold. That's where they tend to collect. If it's from the roof, the ceiling is going to have mold. If there's water in the walls or from a pipe, it's going to pool near the bottom of the floor. Water, you know, gravity pulls water down. Those trim boards are your first sign that you may have mold. I actually found one in a building I bought in a 26-unit Unit was, I was told, is rent ready. It looked gorgeous. There was on the outside of one closet that was locked a little bit of mold on the trim. And I was like, you know what, I have a bad feeling about this. So I busted the door open, whole closet black mold floor to ceiling. We had a water heater that was leaking in there for apparently for several years. That the door was sealed, we thought it was locked, it was actually just like mush and had kind of sealed itself shut from the, uh, the moisture and the mold and all the growth. Uh, very nasty, very expensive remediation, like $8,000 on a unit that was otherwise done. $8,000 to get all the mold out, redo the drywall. Uh, we had to remove cabinets. $8,000 catches. Look up, look down. Don't just You know, a lot of people look at the electric panels, do that. Look at the plumbing, absolutely. Look at the water heaters, absolutely. See how everything looks. Inspect for mold, check the roof, and those are your main things for the walkthrough. If you bring a professional inspector for a walkthrough and you're under contract, they're going to help point out stuff. But I find stuff all the time that my inspectors don't catch. Just be good at those pieces. And of course, we go through that on the, uh, the mentorship all the time. Brad has a great point. I'm not saying Nassau weird, I am just weird myself. I think I was saying it like Nassau or something. I was, I was basically adding a syllable when I was trying to say it originally. I'm glad I'm saying it correctly now. Uh, great place to go to the Bahamas, visit the Atlantis. Coolest hotel I've ever stayed in, period. Favorite vacation. I've ever had. Do PML historically charge points for origination? Yes, and they charge more. Private money lender, 2 to 3 points isn't super uncommon. The nice thing with PML, you have some flexibility on negotiations. How rigid they are is up to them. I've talked lenders down on origination points before, specifically because they're working with me and they know they're going to get more business, but Historically, private money lenders not only charge points, they charge a lot of points. That is if it's a private money lender who is a professional. If you are going to a private individual, so like a, a PML, I would think of like Flynn Family Lending in our market. Fantastic friends of mine. I own real estate with them as partners. I— millions and millions of dollars of debt that I've cycled with them through the last several years. I think I currently have like $2.5 million out with them right now. Um, love PMLs, professional lenders. They charged me 3 points on my last note, and it was a, you know, 7-figure note. We— they got a pretty good paycheck for that. That's a good fee. With private individuals where I just go to, you know, say a Microsoft or Amazon employee, um, a local chiropractor has actually funded one of our deals, but, you know, higher net worth individuals— if it's an individual funding your deal Not only do they not pay points, I've charged people points to join me in a partnership where I did a ton of work. So on a larger deal, if you line up all of the capital, so like a seller finance deal, 90% financed, uh, the deal is completely negotiated at a great price. If I've won on price and terms and 90% funded the deal and you are coming in as a partner, there's a chance that I will actually charge a couple points for me to assign the LLC or assign my contract into our LLC. Effectively, the lender sometimes pays me points to come in as a capital partner on a deal that is already done. That is when you've done— in my opinion, the best way to do that is when you've already negotiated the deal and the debt. Like, you're coming in for like 10% of the deal, you're going to own 25% of it, I'll buy you out later, but I've done a ton of work and I'm not going to get any compensation for that for years. So when you fund the account, I am charging a fee of X to assign the LLC. It's technically wholesaling to yourself, but it's functionally the same thing. Uh, I charge my private money lenders on deals that can afford it. First off, you are awesome. Well, I don't know about that, but I appreciate it very much. Uh, currently renovating a duplex. All in cash. Good way to do it. Um, we'll rent, uh, $1,500 per side after renovating. Thoughts on exit? Should I leave it paid off, hold the cash flow, refi, sell in 1031? Marvin, that depends on what you want to do. If you haven't done this yet, envision why you are buying real estate. Like, what is the cash flow for? End goal. For me, it was retire my wife, build a house in Texas, start a family. That cost me about $15,000. So I am engineering what is the most efficient way to get to $15,000 a month. Now, I hit that in 11 months, but it often takes a little bit longer to get $15,000 a month. You can do it relatively quickly, but you need to have a clear goal. If it's not going to be done by a bunch of duplexes, what I did with the duplex that I renovated with my own cash, I put $50,000 in duplex in Moses Lake. I sold it. Instead of 1031, because I didn't know what I wanted to do, I sold it, got the cash out of it. I used the cash to buy into a partnership that held a 12-plex. That partnership then expanded to a 24-unit LLC without me injecting more capital. We did a cash-out refi on the duplex. I doubled my money on the 12-plex. I 3x'd my money in 2.5 years. I 6x'd the principal by rolling it into a larger deal. I also have duplexes that I love that I've held. So it very much depends on your deal. I no longer need more cash flow. I get to play the game because I love scaling and now I want to run my companies better. So I want to scale more units, expand my PM company. So there's more employees, there's more systems. My goals have changed and my reasons for buying have changed. I don't need to sell duplexes to scale up because I can buy deals with or without money anyway., but I've already hit my cash flow goal. So I rarely will sacrifice stability on a cash flowing unit, even if it's a duplex, just because it's already like, it's already stable. So it depends on your phase. If you're in build phase, you're probably going to sell it and roll it up. And that's probably the right thing to do. If you are in the part of your business where you are either stabilized or on the back end of stabilizing, you may end up just keeping it and say, you know what, I'm close or near my financial goal. So that would be very much up to you, Marvin, but that's how I would, that's how I'd think of it. What's the money for and how close are you? And does rolling it up help you get to that actual goal? Oh, look at that, Brad. Depends on your goal. Next step. It's like Brad's been here before. Thank you, Brad. I absolutely agree. Initial offer does not mean you're in contract, correct? If I submit an offer, I have to go mutual, which means there's mutual acceptance of the contract. That is when we have mutual agreement and we are good to go on the contract. Now hopping over to the Instagram really quick, let me see if you guys have any questions over here. We do, we do. Thank you guys very much. I'm gonna get through these. Instagram, by the way, I'm trying a different camera setup. If you've watched my last bunch of lives, I'm trying different formats. I usually on Wednesdays go horizontal. I'm going vertical specifically for you guys. So on Instagram, um, I finally got my camera to not be super blurry when I do this. Hope this helps. Really do. Uh, Luke is on Instagram. I don't know how Ben Mala can get money to fix up, uh, a 1031 property. Maybe able to pay back the reno money, uh, like he can't take any of the funds out of the deal. So you think they are long-term equity partners? So Ben Mala, if you're unfamiliar, uh, huge guy, literally huge human being, He has a lot, lot, lot of real estate, multifamily and hospitality. He buys properties, a lot of them creatively financed, by the way, but he buys a ton of properties, renovates, stabilizes, uses a lot of the same Section 8 strategies I do too. He actually runs a very similar business to me, except that he levers, levers, levers, levers, levers. He pulls out money anytime he can. On cash-out refis, which have got him millions and millions and millions and millions of dollars of liquidity. Ben Maller is a very wealthy individual. He is able to, on his deals, he wins on price enough where when he increases the net operating income, the NOI, he's increased the value of the property enough where not only does he get to pay off any renovation money or basis in the deal, he often gets to take out a lot more cash and pay himself out of the cash-out refi. One thing that is different between Ben Mallah's strategy and mine is that he'll run his properties closer to breakeven or at breakeven to pull the maximum amount of money out. Like, he will take it to the DSCR limit. I like to stay no more than 65% levered, and I like my DSCR, debt service coverage ratio, to be closer to 1.5. I carry less total debt in relation to my properties, and I carry more cash flow in relation to my expenses. Than Ben Mallah does in his business. There are two different ways to run it. It is just a different business model. Mine is a little bit more conservative. His is more aggressive. Again, depends on the goal. His goal is very much, how big can I build this thing? He is playing the game his way. There is nothing wrong with that. My game is about how do I provide the most stability for my family and build the best business that I can the best way I know how. For me, there is a balance of where I want to pull risk off. I will not pull every dollar out of a property just because I can. That being said, nothing wrong with Ben Mallis' strategy. You can still do that. A little earlier, Isaiah had asked, how do you pitch a lower payment to a seller, like 5% down, 5-10% down? I usually don't mention seller finance. Usually if we're talking about doing seller financing, how do you feel about this? I'll pay you this price And I will pay you this much upfront. In this case, we'll say 10%. So on a $1 million deal, I will pay you $100,000 now. And over the next 3 years, I will pay you 5% on the remaining $900,000. We're going to do it interest only, keep it really simple. And then in 3 years, I will pay you the $900,000. Reason being, I'm going to be doing some renovations here so I can actually get the value up. So that I can pay you the $900,000. I didn't have to mention creative finance. I didn't mention, are you comfortable with seller finance? And I don't have to justify seller finance after I mention it. I've just explained what we're doing. Sometimes when you just say what it is, like, here's what I'm doing. I'm giving you $100,000 now, $900,000 later, and I'm paying you on the $900,000 to basically rent that money from you at 5% interest only for 3 years. This is an example deal. If I pitch that to a seller, they're either going to say yes or no, that works. We don't have to qualify, are you open to creative financing, or what if I did less down? Just say what you want to do in simple numbers. They can process if that's going to work or not. It is easier to get a yes on that than it is to ask for seller financing. I found that consistently. Or for negotiating a low down payment, just don't address that as low. Just here's what I can do right now. I can do $100,000 down. And if you're okay with that, the rest of it will come in in X amount of years and I'll pay you X percent for the right to pay you later. That's how I make the pitch. That has worked better than how I used to do it, which was still a totally viable way of doing it. But I would go through the thing and be like, hey, are you open to carrying a contract? While I often get a yes to that and then we negotiate, I like just skipping that and just skip to the negotiation part. Here's what I would like to do, and then tell them what you want to do. I, I found that there's no need to use the word low down, down payment, seller financing, creative. Uh, none of those words need to enter your negotiation. You don't need to qualify it. Just tell them what you want to do. That, by the way, there's no secrets in real estate. If there were, that would be one of them. Um, I've never learned that in any class. That's just learn from doing. That, that was a lot of transactions in before I was like, oh, This is for every psychological reason, this is a better way to pitch this. Um, so for those watching, this is a masterclass on how to negotiate. Tell them what the terms are. Don't ask them to seller finance or creative finance or do low down. Just say the thing. Michael, how do you recommend finding owners' information in California? Not impossible, but finding is difficult in LA. LA and New Jersey, two of the hardest states to find owner data. So I talk a lot about how to do this. I do all over my YouTube channel, over my Instagram. It is harder, not impossible, but it is harder. Um, it is not all of California. LA specifically has a special set of laws unlike any other county in the US that makes it harder to get owner information. They do not share it publicly the same way. Than any other county does in the US. Um, I do not have the answer for you in LA other than you need to find and work with a broker to help you get more contact information. You are in one very unique spot if you are trying to buy in LA. The protections around owner data are uniquely difficult to overcome, not impossible, but in LA specifically, try to get a broker on your team. Worth mentioning I have a friend Brenton. He's actually much closer with Cody, but I have an acquaintance who's one of Cody's friends, uh, Brenton, who has hundreds and hundreds and hundreds and hundreds of units in LA County. There is a way to play this game. Um, it will not be exactly the same as my popular YouTube video on how to find any owner specifically in Los Angeles. Even in New Jersey, you can do my method. It just takes, you know, it's gonna take you a little bit more Googling. LA, it's super hard, man. I, I feel you. When you submit an offer, do you use an LOI or a purchase contract? Always a purchase contract unless there's a very specific reason. Um, if, if I have a concept, like once I've pitched a management option contract, they're like, I need to see that in writing, put it together in an LOI because they need to wrap their head around it and chew on it. That makes sense. If there is a negotiation reason why someone needs to see something in writing before accepting an offer, use an LOI. There is some bad advice going out, and I've seen this all over. There are mentorship groups that people run where their basic method is like, just be writing LOIs all the time. That is idiotic. I completely disagree. That is the wrong way to do real estate. I rarely just rail on someone else's strategy, but I've seen this before and it's bad. A ton of LOIs means literally nothing except that you're spending time writing LOIs. What I would do is if you have a deal, negotiate the deal. And if you like the deal, write up an offer. An offer is a lot stronger than LOI. And if they actually countersign it, then you're under contract. Don't add steps. LOI is a step. Another time that I have used an LOI, 173-unit transaction, we ended up not completing that transaction because we found some problems in the bookkeeping. But when we initially put that together on a deal that size, there was enough moving parts, multiple transactions, different terms on each deal. The way that we structured that, it was like, you know what, we are going to need an LOI to make sure everyone is even on the same page. So if it's complicated, LOI, if you need to explain something in writing, LOI, Other than that, always, if you have a deal and you know what you wanna submit, like when you wanna submit an offer, submit an offer, not an intent to offer. I always found that one of the silliest things in our industry. Back on Ben Molliday. This is Ben Molliday. Why does Ben Molliday keep buying and not hold onto them? Ben Mala is cycling capital. He does a lot of 1031. He does a lot of cash-out refi. He is trying to rip as much cash at all times out of the real estate portfolio. When he has finished a project, he is looking at what is the return on— like, the cash-on-cash return on investment right now after this property is fully levered. Often he's not getting paid a lot to hold it anymore. The only way to tap the rest of the equity— say he brought it all the way to 85% loan-to-value, which I've seen people do. If you pulled your property at 85% loan-to-value, there's no bank that's going to give you more money to cash out the last 15%. If you own a $100 million building, there's $15 million still in value on your building. And if you took it to break even, you're not getting paid to leave it there. If I'm Ben Mulla, it's like, well, let's rip the last $15 million out, 1031 that $15 million. Is a heck of a down payment on another property. It's that— that's how he's playing the game, and it does make sense to do, and it's all tax-deferred because the 1031s it up. But again, different strategy. Do I want to play that game? No, not at all. I own my financial freedom right now. Why would I— why would I keep trading around pieces? To me, own your stability, pay off all the debt. Now you just cash flow more because you have less debt. If you already owned it while you had the debt, like now you're like, oh, I'm just rich. To me, being rich is good enough. I don't need to be Ben Mala. I don't need to have $100 million. One thing that I realized very early in life was that everyone's going to die. Whether I have, you know, $200 million or I have, you know, $50,000 a month income. I'm financially free either way. I can do virtually the things that I want when I want outside of like buy a yacht or a private jet. I'm not there yet. Don't know that I care to be. It doesn't hit any of my goals. So again, tailor it to your goals. If you're like Ben Mala and you— I imagine he has a great time doing what he does. That is probably very rewarding for him and he should keep doing it. Um, I don't think that's everyone though. Christian is the backwards hat man. My hairstyle is hat, by the way. Um, that is— yeah, I agree. That is— if you notice, my, uh, my logo for Multifamily Strategy is literally just my eyebrow because I always talk with my right eyebrow. It's my eyebrow, my hat, because that is literally, uh— if you look at my logo, it's literally just a hat and eyebrow. And everyone keeps giving me the feedback, oh my God, it looks exactly like you. I'm like, it's only an eyebrow and a hat. That's, uh, I am nothing if not consistent. Heiner, how do you explain to a partner, uh, you're going to use agency debt that he needs to submit paperwork as well? Well, you're getting bank debt. It's that there shouldn't have to be an explanation. If you're getting conventional debt, they are going to underwrite the loan. That, that, um, I don't think there's really much explanation needed. Just let them know, hey, there's conventionally financed, so I'll get paperwork over to you. Dylan, could you give examples of the hardest things to overcome in business and your mindset of getting the solutions done for problems? Okay, so my mindset— we don't often cuss on this channel, but I don't know if you can see that past all of my stuff. That might— my light might be in the way, but it's optimism, pessimism, F that, we're gonna make it happen. That is very much my policy. I don't care how we're feeling or how hard it is. We have things that we need to get done. So we're gonna get them done. Some people wired that way. I'm wired that way. A lot of friends that are wired that way. I have some people who aren't. My favorite Musk quote of all time, possibly my favorite business quote of all time. I could sum that whole thing up in one word, by the way, finish. That is the, that is the motto of every company that I have. Um, that is going to be— I'm not one for like writing motivational words all over the place. If I was to put one word up in the office, it would literally just be finish. People get stressed out and get projects halfway done. People get 95% done with a business and then move on to another business. It's like, just finish the projects, and it works really well. So, uh, hardest things that I've had to overcome, um, Robinhood Village Resort. We have an amazing debt product. It took us 2 years to really figure out how to get it running. So the million dollars I borrowed, when we, we have to pay off the partner, the deal made money, but not enough for me just to write a check for the down payment like it was supposed to. Uh, interest rates went up, so I can't refinance the Robinhood. So I have a deal that is performing well, bought at market price and way better than market terms, astronomically better than market terms. But in the timeline I'm supposed to pay back the investor, there's no way I have to do it. What do we do? It's like, okay, if you owe someone $1 million and you have 2 years, you have to go make it. You have to make $1 million in 2 years and then you have to give it to that person. Now, the nice thing is, is when I refinance Robinhood, I do get that $1 million back. But that was $1 million of liquidity that I didn't have that we had to come up with a plan of how to earn. And then we went out and we earned it. Cody had a similar thing where he had a— like when he first started to get to his first 30 units, He had a partner who didn't do anything except cause lots of legal problems. Cody had to, at a very young age, like 20 years old, have to overcome $500,000 to get rid of that partner. Cody had brokered maybe, maybe $15,000 of commissionable transactions. Like, he, he, he was a baby broker. He'd never made any money. How does someone without any money, any way to earn that money, or any time in business at all, like fresh out of high school, how does one go and pay off half a million dollars in 6 months? Well, that's what it takes to get rid of the partner. So then we teamed up. That's why Cody and I partnered originally. We bought a bunch of real estate. We figured out how to maneuver the real estate. We pulled out the money. We paid off his partner. Christian got to keep half a million dollars, which is freaking awesome. And Cody got to pay off all of his debts. That was a legitimate way to structure the deal. But those are some of the hardest things we've done is like, hey, if things don't go exactly to plan, how are you going to pivot? What do you have to do? And for me, the answer to the hardest one was, hey, you're in a really good position with a lot of equity. You can't instantly sell it or refinance it. Write a million-dollar check. We pushed through, we finished, we got it done. That is the best advice I can give though. Finish. When you submit an offer as a newbie, or would I submit an offer as a newbie if half the units are vacant and it's a big lift? Yes. Yes, I would if my price reflects that. I just looked at a deal very recently where half the units were vacant and it wasn't even a big lift, but the price being paid was basically market price when you're done with the project. So it's almost like you're paying the seller for all the work that you're about to do so that you can get the deal to what it would have been worth if the seller just did all the work. Um, you have to get a great price on those. You, you can't just have a half vacant building and be like, oh, I, I got like market rate price as if it was all full. I see it happen too much. You don't want to start underwater on a deal, or at least not massively. You can do a slight overpay for amazing long-term cash flowing debt. Like, that's a good— that could be a great deal. You can buy income by slightly overpaying for a deal over a long period of time. That's fine. Doing a big overpay for a deal and trying to overcome that as your first deal, start out with negative net worth. Oh man, you got to be really careful with it. Pricing is going to matter astronomically if half of them are filled. That being said, I was 2 duplexes and 1 house in when I bought a 38-unit that had a lot of vacancy and a lot of reno and a huge lift. We made $1 million on that deal in the first year, and then we made $1 million on it again over the next 2 years. It's a fantastic deal, and I did it as a newbie. That's my, that's my 2 cents there. Yes, you should do it. Yes, you should be careful. Yes, that is the type of thing that one— not an advertisement for me, for literally any mentorship group— that is one where you should have a mentor, someone who's done what you're trying to do in your corner to cut down on your stupid tax. If you want to be me, multifamilystrategy.com, check it out. Um, but there are tons of groups, tons of local investors, tons of people who can help mentor you through that. I would not do that by myself as a newbie and do a huge lift because you will make mistakes and it will take longer and You don't want to implode on your first deal. Like, what a stupid way to go out, right? So be careful with it. But I did it. I made a lot of money doing it. What's the best approach to obtain a piece of land for sale by owner? And the best way to handle— well, a piece of land, best way to approach a piece of land is to call the owner. I don't know what the objections are, so I couldn't tell you off the top of my head how to handle them, but handle them directly. With a controlled tonality. I would practice your speaking and your tonality and any objections you anticipate in the mirror, often every day for years. Um, not before you get started, but I mean, I would do that for years and sharpen the skill. Um, practice with other people. But I learned how to pitch by pitching. I had 8 years of sales jobs, and I've sold everything from t-shirts to data to ad space Um, I've sold a lot of different products. The ability to pitch comes from a lot of at-bats and a lot of practice. I would say more than anything though, if there's objections, uh, do not skirt around them. Answer them directly, answer them confidently, and do not over-answer them. Example, uh, I bought a building and there's a homeless camp on the back, among other things. That was what the investor was stuck on. He's like, how are we dealing with the homeless? It's really hard in Washington State. Answer: it is really hard. This is why we're getting the price that we're getting. We are all over it, and we are committed to getting this figured out. There are a couple other owners in town who have dealt with this problem who are going to be helping us. This is one of the biggest things, and it is not a total, like, It's a slight unknown for us. We don't know exactly how we're getting rid of them. We do know that it is possible, and we'll solve this all before we close the deal. We'll have a solid game plan to you, and then we move on. I've addressed it, I validated it, I've let them know that there is a plan. I've kept my confidence high, not arrogant, just confident. And then guess what happened? We figured out how to get rid of the homeless camp. We talked to the neighboring property They happen to own a lot of land they were just about to build on. They and us worked with the city to help us remove the homeless camp because they kept switching lot lines. That was why they're hard to get rid of, is if I kicked them off my property, they'd go to the vacant piece of land right on the other side of the property line, and now I can no longer do anything in Washington. So we just teamed up with the other owner. We got it solved. And with the homeless camp removed, us and the other owner made the decision to build a wall around the property. So now there's no line for them to jump back and forth across. We have a 5-foot or 6-foot brick wall. That was our solution. It worked. The other owner paid for it. We did the thing that we said we'd do, but the objection was handled directly, quickly, and we moved on to other work. I have time for one more here. Brad, stupid tax can be big. Yeah, my biggest stupid tax was, uh, it didn't cost me a million dollars because it went, it went back into principal, right? Like when I, when I paid off the person who I owed the money, I got all of their equity in the deal, which was worth a million dollars. So it's like, while it cost a million dollars, I didn't lose a million dollars, but I took a million dollars of liquidity, which by the way, if you started with no money, is a really freaking big deal to have a million dollars. And then be like, well, know where this is going. Turning that into equity instead of liquidity was really painful. That's a big stupid tax though, being like, oh well, uh, side note, a couple years we got to earn an extra million dollars and we have to keep it in cash after tax. Note to self, um, your stupid tax can be big. Always do stuff with the people, um, who know what it is that you're trying to do. Um, ways that you can exit a seller finance deal, uh, when there's a balloon payment. Well, a balloon is debt due, and how do we solve our money issues? With money. Uh, it could be earned, it could be— so it could be cash out refinance. You can literally earn your way through it in your job and just pay it off. I've seen it done. Um, not common, but you can do it. Uh, you can, uh, find, uh, private money to take it out. You can find a bank to refinance it. Uh, you can— the seller can refinance it. Those are all options. I've also had an investor come in and just go like, oh, I'll just partner with you and I'll buy the note and the LLC can just pay me 6%. So I had a new partner come in and buy the note. So you can have a buyer refinance, a bank refinance, a seller refinance, private refinance, lots of ways to refinance it. If you're absolutely stuck, you can sell the property and pull all the equity out. Which is, you know, the last thing that I want to do. Those are all the things that you can do. If there's no upside on the property and you paid what it's worth and it never went up in value, you probably didn't do an amazing purchase. So on a seller finance deal where there's no upside, no way to increase the value, and you can just kind of buy it, well, you need to have an insanely long balloon because you're not— you're— the only appreciation you're going to get is market appreciation. If you're at market rent, there's no renovation to do, there's no upside. Um, if you've maxed on upside and you're paying market rate, you have to get better than market terms. And if you don't, then you're not going to have a way to pay off the balloon except for one of the refinance or sale options. How do I check the legitimacy of agency debt? Well, agencies— like, it's a long, long process to go through the legitimacy of the agency debt. It's gonna be— you're gonna go through a typically a mortgage broker for that.. And, um, agency is brought on by like majors. Most of it's funded by like major insurance companies. Um, agency debt, you, you and the bank are going to be looking at each other with a microscope. Uh, I wouldn't worry too much about that. Most successful lead generation. First of all, Hunter, welcome, welcome to the club. If you haven't yet, by the way, we have a Facebook group you can join for free too. Uh, that's Multifamily Strategy on Facebook. We're starting to see more deals get founded— like, found and funded there, which have been super fun. Uh, so if you are, uh, already subscribed here, I invite you to subscribe over there. I will, uh, I'll add you to the group. Um, most successful method in lead generation, period, by far: find the people who don't— you want to do and meet with them. Coffee meetings. If you're doing multifamily, it's not like single family where it's like, hey, I found a deal, it's their only house. People who own multifamily own multiple properties, like almost exclusively. You don't usually just buy one multifamily rental. So these are all people with multiple transactions, multiple connections, and it's a smaller community. Again, if you're in the house buying game, relationships are a dime a dozen. In multifamily, especially in small town America, 5 or 6 people control most of the market. Get connected with them. Be one of those players. You can influence market rents. You have exclusive access to like tons and millions and millions and millions of dollars of deal flow with a few connections. So find the people in the town who've already built the business you want to build, get networked with them. Once you get a connection with one or two of them, they'll introduce you to all the other players. You've moved from being an outsider to an insider. The deal flow you get, you get deals before they go out to brokers, you get deals before they go out to other people's network. Someone wants to sell something, they call all of their friends, i.e., you, other buyers in the market who they think might buy it, because that's a lot cheaper and a lot easier than trying to go through a broker or listing a property. So that's the best thing you can do for lead gen, hands down. And, uh, by the way, uh, if this is in relation to the, um, uh, to the Facebook page, it is free. My Facebook page is community. I audit the bejesus out of it because I do not want people advertising BS on my page. So advertise something on there that is not like a deal or community-focused, I will ban you. But other than that, um, that is a free resource for everyone. I do not sell anything on my Facebook page. I do not allow people to sell anything on my Facebook page. If I advertise an event, they are all free events like today's webinar. By the way, if anyone wants to attend it, that is for Multifamily Strategy, the course of mentorship that is paid. My webinar today, though, is free. It is exactly how I am buying, sourcing, negotiating deals. That is at 5 Central Time. So are not Central Time, which I think in Pacific Time. So that's in 40 minutes.. There's a link to register. We have limited spots. I think we have, like, 25-ish left if you want to attend. I'll be launching that via Zoom here in about 40 minutes. And that is for the Facebook group. So that is free. That's not expensive at all because it will cost you nothing. We will sell you nothing there. Other than that, that is what I have for today. Everyone, thank you so much for joining. I'm gonna go ahead and get and get prepped for that, presentation. If you are attending that, by the way, it runs about an hour. You are more than welcome to come. That is also completely free. I just need you to actually register to it. Uh, last time we maxed out on people and I did that, it was like way too many people. Um, so if you want to attend this one, register now and we'll see you guys in about 40 minutes.