Deal Deep Dive - Live Break Down Ethan and Eddie

Okay, here we go. Welcome back to Multifamily Strategy Live. Super excited for today's quick lesson and as always the Q&A. As we're always growing this channel, feel free to like, subscribe, invite a friend, uh, but ask questions below in the chat as you enter. Uh, really excited to have everyone here today talking about a very exciting story from a couple of my friends, Ethan and Eddie. We're about to have them on the podcast. I believe that's going to come out this Friday, so hear even more about this deal. But this play is the type of stuff that just inspires me to keep doing the deals that we're doing and how a small deal can turn into a big deal. So on today's episode, I'm going to share with you how Ethan and Eddie came from one rental house to buying an 11-unit, $0 out of pocket, using some conventional and some bank financing, 100% financed No partners. They use this creativity to run the deal for a little under 2 years. They just pulled $750,000 out of the property. It still cash flows. And they took that and bought a 44-unit apartment complex just down the road. 55 units, no partners, one play. Awesome deal. I'm going to show you how it was structured because these are the type of deals They get you very wealthy. By the way, the cash flow from the two combined deals, granted they have a little bit of project to get the management going on the 44, within about 6 months, those two will be financially free. Their net cash flow from those two buildings are going to be about $15,000 a month. That being said, they also have an 8-plex, 24-plex, a 12-plex, uh, and a small cleaning company that they've been growing that helped them get through. Uh, actually, I'll share a little bit about that story here as we progress, but Um, super cool deal. So I'm gonna, I'm gonna go right in and just break down the deal. So they're in Huntsville, Alabama. They bought an 11-unit building, had some serious management issues, so very low rents, little bit of disrepair, actually quite a bit. They had a lot to do on interior and exterior beautification. Being said, they got an amazing price. Seller was in a position where he was willing to finance about half of the deal. So he's like, well, I can seller finance, but I can only do, I need 50% down. Now, if you're sitting here on this call or you're watching the recap of this call and you're like, hey, wait a second, 50% down, that's like all the crappy seller finance deals I see online. I can't do 50% down. Instead of saying we can't do it, they did my favorite thing. They asked, how could we do it? The answer was simple. They went to a bank and said, we need 50% down. They called the seller and said, are you willing to be in second position on this because we have some work to do? He's like, I don't care, I want half the money up front. I want to see that you guys are invested in the deal. I want to get my cash out of the deal. So they go, okay, we're going to fix the problem. Uh, bank, will you come in at 50%? Seller, will you do 50%? Now, a lot of banks require some money down from them. What they did instead is they committed to the reno budget. I'm going to share how they did this for the acquisition of the deal. They said, okay, whatever renovations you want to do, we're not financing those, but as the bank, we'll come in We'll give you your 50%. It's a great location, love the asset. 50% is a low, low, low risk point. We'll do it. Seller said, yep, I'll do 50% in second. Everyone's okay with this. Deal closes. Now they do have the renos to do. You have two options for this. If you don't have the money, you can bring on the partners or other people who have the money. You give up some of the equity, but you get to move through the project quickly. Everyone gets the win. And on this, it ended up being a huge freaking win. However, they opted to do something else. 2020, they started a cleaning company. Eddie did, Ethan joined. They're cleaning and sanitizing the airport during the pandemic, and they're using these contracts to stock away earned income and pay for the renos. And they go through with themselves and a team, one unit at a time, turn the unit, turn the unit, turn the unit, turn the unit, get the income up, get the income up, get the income up. Painting the exterior of the building. There's, uh, one— and I'll actually post— I posted a couple videos of this before, but they actually dug a 100-foot by 4-foot deep trench fixing the drainage of this building. They went through and they did it with sweat equity. They worked for the money, they earned the reno income, but they got the building $0 out of pocket. I want to point out their qualifications was one rental house. They had both left their jobs. The bank lent to them because they believed in them as operators. They told them a story that made sense. They didn't have any major credit problems because they didn't have a lot of credit. Um, so they came in and said, hey, look, we've done a few successful flips. I've run a single-family house. They have been a part of an 8-plex. They've done a 12-plex in partnerships. Like, this is our first solo deal. You, as the bank, when you invest into us, you can tell we're movers and shakers. We've started companies. We're doing small deals. We're scaling our business. We have some experience. We need someone to take a bet on us. They found a bank who will do it. It's not as hard as you came up with the debt product, they closed. Instead of bringing on partners, they did the right thing. They earned the darn rental money. They spent about $150,000 on this thing. So over the next year, they flipped a couple properties, they did the airport cleaning business and sanitation business, they stacked all the capital for it, put in this building $150,000 of their money over 2 years into the deal. They pull out $750,000 of the refinance. They knocked it out of the park. They got an appraisal which I think could have actually been a little bit higher, but they got a little bit lower appraisal. They had a deal that they were working on for 44 units they were going to have to raise capital for. This deal needs about $700,000 to close. The 11-plex bought the 44-unit building and there's a little bit of money left over. Now they have a management plan to execute, so they're going to start working the project and getting through that project. On this one, they were able to take their income and the actual cash from the building through their operations on 11, turned into a 55. It cash flows day one. It's going to cash flow a heck of a lot more after they execute the rest of their plan, but they are now 1 to 2 years away from being able to retire. Ethan joined Multifamily Strategy when he was 23 years old, I believe it was. By the time he's 26, he will be completely work optional. The rest of his portfolio is also stabilizing and doing very well. These guys have a partnership that is going to be generating in their first 3 or so years of business about $30,000 a month. An unbelievable deal. But what I wanted to focus on is how simple the deal is. This deal has been on market for a while. It doesn't work with the 11-plex. It was on market for a long time. It did not work with bank financing because of the bad books. You would have to come in really low loan-to-value, which is what they eventually did. Seller financing— no one wants to put 50% down on a seller-financed deal. No one wants to do it. I think it's the most ridiculous thing. So when you're putting these all together and you're trying to get the right deal structure and you're trying to put these— like, you're trying to really get into the deal Negotiating and structuring the right way isn't just the one thing, it, or isn't just the main thing, it's the only thing. The difference between them and everyone else is they just asked, how would we do this deal? And that question made them $750,000 in cash. And they took that and they built it and built up their business. They did absolutely phenomenally. I'm super proud of those boys. So that is the deal that I wanted to break down today. There are so many deals out there right now. I have on the mentorship calls that we do— my last week I just live called. I said, hey, look, give me a market, I'm going to cold call. Cold called markets all over the country. Here's what we found. I had a ton of fun doing this, by the way. Every time we've done this call, I found actual live deals that are absolutely closable. Your goal is not to determine is it a good deal or bad deal. Your only deal— it's your only deal— your only goal is to get in here and go, how would this be a good deal? What would make this a good deal if I was to work this? And what makes this thing cash flow day one? And how can I hold this forever? And how do I get the seller everything that they want? The guy wanted 50% down. They found a way. They found a bank that was willing to work with them. That's simple. That decision turned $150,000 into $750,000. That $750,000 is going to build about $1.5 million of equity in their next deal. They're going to turn $150,000 in 3 years into $1.5 million and into about $20,000 a month of cash flow in that LLC over 50,000 units. 50,000 units, 55 doors, $1.5 million in equity, tons of I'm so excited for these two. They're some of the better deals I've looked at. It's very, very exciting. And this is available to anyone, any market. I'm not kidding. You can literally hop on CREXi, call on deals, and just start figuring out why hasn't this sold yet, and then work with the broker to figure out what it needs to happen to sell. You do this drill every time I have done this, and I record these calls. So the people who are in the mentorship group, if you were to come into Multifamily Strategy, look at the broker live calls, you can go back in time and see every time you give me a random city or a random market in the United States, we find deals on that call. It doesn't mean that first call every time, but you give me 2 or 3 markets, we'll dig up a deal, a literal workable deal. Anyone can find these, anyone can negotiate them, and those decisions can lead to one deal, which leads to another deal, which leads to another deal. And now you're looking at this, and these guys are about to cross 100 doors in their portfolio, probably by the beginning of next year. They're one deal away. Their business worked. I mean, who wouldn't want to do that at 25, 26? I started at 28 years old learning all of this stuff. It's still crazy to watch these guys do this at 23, 24. We have 19-year-olds who come into the— just join the channel, ask great questions. I freaking love it. Uh, as always, we open this up for questions. So if you guys have any questions on today's You're free to ask them. If not, then of course you don't have to ask them. It's simply a suggestion. Uh, did less marketing on today's episode, but we are rolling our new webinar series, completely new. I stopped it for a while. We filled up the mentorship. I do not sell— it's a mentorship, right? So I don't sell more spots than we have. I hate it when groups do that. The goal is not just to grow, it's to be the most effective group of all time. Multifamily Strategy, if you're going to join, Why should you buy real estate? That means you're gonna need some of my time. So, uh, that is reopening. And with that, I'm sharing a brand new webinar series. What I'm going to be running through is the actual models that I have used to structure deals, a model that has worked for me. And if you follow, will factually make you a lot of money. If anyone can disprove me on this, I would love to hear your thesis, because I think the thesis I'm going to share here on how to build your portfolio is impossible to argue with. I'm going to share methods for creative finance. I'm actually going to share a creative equity structure that is very similar to what Ethan and Eddie did on this deal. In fact, I might just add this deal as an example of how you actually combine the bank and the creative finance all into one thing. At the end of the day, everyone joins the webinar is going to learn something major, which is it's not just creative finance, it's creative deal structure. We're not a creative finance group. I think we've been mislabeled because of the YouTube algorithm. It's creative real estate. So little of your deal is just based on the debt structure. I, I love creative finance. I love doing deals no down, no credit. There's lots of great ways to do it. You can also play those same games with the banks. You can do it conventionally. But what I think the internet hasn't focused on and a lot of people haven't heard is that it really comes down to deal structure. A lot of that happens on the equity side. Are you raising capital? Is it earned income? Debt products is pretty boring. You're going to select the best debt product available for your deal. Sometimes it's seller financing. We love to talk about that. We love to structure that. Sometimes direct to owner, sometimes extra broker. There's not a right model. But if you're looking for deals, finding deals is very, very simple. When you know how to negotiate a deal, you find the best debt product and you go, okay, if this still makes a bunch of money, how do we structure the partnership? How do we structure the deal? That's all this is. This is creative real estate. You guys have any questions, let me know in the chat. If you don't, that is perfectly fine. I will see any of you and all of you hopefully on the webinar. I got the first question in from Oscar, and then we'll kind of go down the line from there. Oscar, how do you explain the option contract to your attorney, specifically on the option to buy out investors? So that goes into your operating agreement. So when I partner, I don't want to be partnered with everyone forever. I love my partners, most of them. I love a lot of my partners, and I love working with people. And hopefully you're only working with people who you really know, like, and trust and want to work with. With. However, I don't want to partner forever. I want to own the real estate for the real estate to pay for more than its expenses so that I have cash flow, so my income goes up every single time I buy a deal and stays up for the rest of my life. Simple model, right? So if I'm going to do this, people are variables. I don't want variables in my portfolio forever. If I'm going to have less people, I need an option to buy them out at a fixed price at a fixed period of time. So when I talk to my, uh, my agent, they're going to put it in the operating agreement. It's actually an addenda to the operating agreement that I do as my option contract. It's another contract that we sign, we notarize. I have the explicit right within— example, within the next 4 years, I have the rights to buy out your position for $200,000. Now, you may have only put in $100,000 for the deal, but we're doing a value-add project. We've got through the project, I've increased the equity, I'm going to refinance. And options are all optional, so you need to say what happens if the option isn't executed. So what's their security? If I fail to buy them out at the end of 4 years, I have to sign over my equity to them. I will buy them out for this price, or they're backed by my equity, or some of my equity, or backed by something else. It can be a personal guarantee, though I'd like something stronger than that. It could be another piece of real estate. It doesn't really matter, but you have to have an if-then. It is an option. So if I execute this option, here are my terms, and you just give them the basic terms of the option. What are we buying them out for? How much time do we have? What happens if I don't buy out the option? They put it all as an addenda to your operating agreement. When you close, that's in there. Nice thing with this too is you can find and negotiate this after you're under contract because your operating agreement is done after you're working the deal. So once you're under contract, you find the partners. When you draft this OA, this is when you negotiate exactly what those options are going to look like. I guess a better way to phrase that would be there's 3 parts: what price, what timeline, what collateral. If you can include those to your lawyer, they'll help draft that. I like to attach it to the OA, but this is technically a separate option agreement. How much should PM be paid? 6% of net. It's actually gonna depend on building size and the project. On smaller multifamily, so let's call it 50 units or below, 8% is pretty reasonable. I had a PM just try to raise the rates to 9.5%. That's a PM that is less likely to retain any business because there's competitors who have better leasing track records in their market who are charging 8%. Now, as you get larger, it can get down to 6%. If there is on-site management, often you'll start to get into models where it's direct compensation. So for example, if I'm managing a 100-unit building, I have clients who I do this for. They need on-site employees, but they don't want to do all the hiring. So my service, I come in, okay, you pay the employees, I will hire them, they work for my company, but you will reimburse their salary, which I often do $4,000 a month for an on-site full-time property manager. So let's say we have one employee in the office, they're $4,000 a month plus either 3 or 4% management fees. The goal is not to nickel and dime clients. Uh, but to have a compensation package that matches, so it will depend on deal size. If you're doing like a huge 200-unit Class A building in Dallas-Fort Worth, you could be looking at 2.5% management fees because there's a ton of money coming in and the rents are very high. So you're getting a smaller percentage of a ton of money instead of a larger percentage of less money. So it really does kind of depend on your project. But to answer your question the most directly, assuming that you're buying between 5 and 50 units. 8% to maybe down to 6% is about what you would look at. Um, often if it's one of my friends or someone from the YouTube channel, if you guys reach out, um, I would absolutely entertain 6% on a building that's not absolutely tiny. I just need to manage something that is a 12-plex or above. If you have a 10, I'll look at it. I'll look at it. 2.5-mile radius around DFW. And our company's growing like a weed. We hired some of that. I actually just acquired another property management company and rolled it in. Uh, we have some crazy talented staff. We've got 2 questions here. Where does the lawyer and inspection cost come from? Second, uh, getting traditionally financed as new LLC. So, um, all your bills— I'll start with the first one. All your bills will come from, you guessed it, it will come from money. Uh, now where that money comes from is completely up to you. It could be earned income, it could be saved income, it could be borrowed in, uh, It could be borrowed money. It could be, uh, there's a ton of different ways to pay for it. Uh, one of the more common ones is if you are going to be doing a capital raise and you are bringing on partners, which is an option, if you bring on partners, um, they can fund some of the initial things. So you would pay for inspection costs, legal usually as a retainer, but a lot of the legal fees are actually paid at close. So you have time on that. They'll be out of your capital raise anyway. The inspection cost and some of those like mid-process— so your sewer scope, your property inspection, if you have to do an environmental study— paying for these is usually an out-of-pocket. If you don't have the money, you can do a zero-interest credit card. It's an option. I don't— they usually have a promo period for like a year, then when you close, you pay off the card. I've seen that done a billion times. I don't love the model, but it is free money effectively. I just see people mismanage it and then they get stuck years later with a 24% interest rate. So if you're confident that you can just pay it off at close, you can do that. You can use a little credit card hack. Um, but often what you do is you give a little extra incentive to the first investor to fund the account. So if someone comes in with a little bit of seed money, also they're usually the same person who helps spot the earnest money they get a little bit more of the deal than any other partners if you bring in more people. Okay, because you're first money in and the risk profile is different, if you believe in this deal, I offer you this, and your money is refundable if for any reason we back out of this deal. So as long as you secure it correctly, that's a common way to do it. The other way to do it is earn it or save it. Of course, um, those are options, but that's usually where they get paid. Second, getting traditionally financed as a new LLC. Is it for me now as the LOI gets accepted? Uh, no. So I usually, if I'm doing a capital raise, I might not know everyone who's going to be on the deal when I go under contract. Um, I might be bringing on a few more partners, then I'd have to amend the OA and refile stuff for the LLC, and it's, it's a mess. Most typically what you do is you put it under contract in your name and/or assigns, or if you have a partnership that has a holding company, that company and/or assigns to your other LLC, and then during the process you'll file that LLC, add members. If you already have all the members for your LLC and all of your capital on the front end, then just go ahead and put it in. As far as getting traditionally financed, they don't care about the age of the LLC at all. They, they care about the experience of the members of the LLC. From Oscar, how do you verify expenses and find the numbers for expenses? We asked for a P&L, rent rolls, T12, I look for inconsistencies reviewing bank statements. Uh, what else? Comps, call PMs. Uh, so verifying expenses, you're going to want to actually look through the bills. So I want to see the P&L, the bank statements, of course. Um, but like utilities, I want to see your actual utility bills. You're sent them every month. So what's the water bill? What's the gas bill? I want to see, like, I want to go through all this. You'll need to see their insurance binder for the loss runs. So you'll actually see some of their insurance billing. Uh, but as you go through, that's the easiest way to verify expenses. You come in and look at their books, look at their invoices, and you go through them one by one. For rent comparables, interviewing a PM is the best thing you can do, but you can also get a really good initial take on it by looking at two things. If you look at Rentometer, there's rent comps. It's rent trends up, and it's historical data. It's recent but historical. Rentometer is usually a little bit below market rent, usually. Listing sites like Apartments.com or Zillow, if you look through the multifamily there, those are asking. Asking is often a little higher than what actually gets negotiated. So if you look at similar properties that are listed, go down a little bit from rent, that's probably around your market rent. If you look on Rentometer or at historical data, look at the market rent, probably use it because I like conservative numbers, but know that your actual market rent is probably a little bit higher. Than what you're seeing if you're looking at historicals, uh, versus asking. But remember, asking and actual is not the exact same thing. Best thing you can do is interview 2 or 3 local PMs for what they think they could lease, because that is really what's most important, is what price gets people paying in here consistently and gets the right tenants for me. Do you advise we ask brokers, uh, if they know lenders they can, uh, Yeah, I usually, um, one thing it actually helps you transition in out of in the original pitch is when you're talking about the deal to talking about closing and financing is I ask them, hey, what are your thoughts on the financing here? Do you guys have a lender who already likes this? Do we know what we're looking at for projected loan to value? There's a way to ask them, is there deferred maintenance? Are there good books? Is the property in good repair without being a— without coming off unprofessional or asking a million questions? But it also does open it up for them to say, hey, yeah, we actually did have a lender. We've talked to this with a couple lenders who have sized up the deal and have thoughts on it. We can connect you with them. I think it's a normal professional question. I never start with that. Get through the talking about the deal first, and then you transition into the financing. But that's a great question in the financing section of that flow, which, by the way, we train on pretty extensively on Multifamily Strategies. So that is, uh, we actually run and drill this all the time. That broker script has made me so many millions of dollars, and it's such a simple flow. I love— by the way, I love finding them at functions as well. Um, I do that all the time. I think they're a fantastic way to get connected with people. Uh, but I would do a good mix of both. The easiest way to contact a broker or to get in touch with lenders is to just be around the people who are around lenders. If you go to any event, it's like all the sponsors are lenders. They are aggressively trying to sell you money. That is their job. It's the only product I haven't sold, is just like, hey, I will sell you money, uh, it's a great deal. They have a good gig. Uh, real estate functions are a great place to meet them. If you guys are in Washington, WARI Flynn Family Lending. I've used them. I borrowed like $15 million from the Flynns over the years. Meta Meta Ben, we want our cap rate to be higher than factor rate. Cap rate always needs to be higher than factor rate. Yes, but if you close the deal and you're at a small negative debt yield, this is getting complicated parts of the real estate calculator, which is free on Skool, by the way. If you guys aren't a member, check that out. That's Skool. Um, it's Multifamily Strategy Community. There's a free calculator there. Uh, but in part of that, you have your actual yield. Uh, so your, uh, loan factor rate is your true cost of capital compared to the cap rate. The delta between those is how much money you make on every dollar borrowed. If that went way over your head, that's why we have a mentorship group so I can go into this more depth. But your dividend should be higher. You should have a positive spread on every dollar borrowed. Sometimes you have a deal where it's a slight negative, but it's good to benchmark it when you're looking at your exit numbers. Where your deal is going, that number should be intensely positive. Do you have a deal that is purchasable? I need day one cash flow. I want to see a debt service coverage ratio above 1.25. If you hit those two things, you're already in a very good spot. Um, so it doesn't have to start there, but you should understand those. Um, that's the, the main significance there is just showing, hey, if I'm borrowing and it effectively between principal and interest cost me $100 a month, made-up numbers, but the deal yields $120 a month of income that is available to service my debt after expenses. Well, then I have 20— that I'm at a 1.2 DSCR. That's great. It's also telling me that I have margin. Now, if I found that my cost to borrow, my true cost was 6%, but my cap rate was 5.5%. Well, what is a cap rate? A deal's cap rate is the cash-on-cash return for every dollar invested in the deal. So if you bought the entire deal in cash, your cash flow would be— you guessed it— 5.5% on the money you invested. So the return on cash is your cap rate. If your debt cost is 6% and your return on cash is 5.5— so we'll call it your cap rate— every time you borrow a dollar you're losing 5% or half a percent on that dollar. That's what your loan factor rate is. What is the true cost if you were to actually add the cash flow or negative cash flow from that loan factor rate? So like, okay, I lose half of 1% on $100,000 borrowed, and on the other $100,000 I put on this hypothetical deal, it's all cash, so that money is making 5.5%. That number, you multiply that, will be exactly what your cash flow is. You multiply that by the amount of cash in the deal, you're like, wait a second, this is exactly what I'm getting in cash flow. That's what loan factor rate is. It's easier with the visuals. I cover this in the Multifamily Strategy Course in depth because it is— it's one of the things where it's really simple, but it won't click unless it clicks. And final question. Ooh, okay. How do you verify? Where— for how do you ask for an owner meeting? So it's all about building a relationship and you're going to book a meeting over the phone. So this is like, how, how do you actually ask for the meeting? I just call and I let them know a little bit about what I'm doing. I don't want to cold call them out of nowhere, but I don't want to come off as some buyer because I'm not. I want to try to build the business that they're building, which is true. But I don't want them to feel like I'm trying to take anything from them. I want to learn from them. I want to build a relationship. I want the connection point. So what I call, prepare what your story is. And the mentorship group, we call this the Circle Drill. But I map out, here's all the things I've done in my life and the lessons that I learned around this. And this, this is what's made me, me. And so one of the most pivotal things for me, and I share this many times, is I wanted to retire my wife. That's— she injured herself as a kindergarten teacher. The school district covered it up, uh, for political reasons. It had to do with, with skin color of all things. And it was— I'm like, I— we don't want to be a part of this. This is, this is an awful, super racist program that is going on in the city of Seattle. And we're like, we're gonna get— we're, we're not doing this anymore. So I had this urgency to retire my wife. That's a key point that I often bring up is, hey, my wife got injured as kindergarten teacher, I'm trying to retire her. I've bought 2 duplexes so far. And when I drove past your 20-unit building last week, I haven't been able to stop thinking about it. So I looked you up and I called you, and I know this is out of the blue, but is there a piece of advice that you can give to me as an investor who has a couple duplexes for the difference between getting to a duplex to a 20-unit? Because I don't think I'm going to do this one duplex at a time. I need to learn how to scale. Less than a minute, quick story, makes total sense why I'm calling you. It'd be kind of weird to hang up on me because it's like, got shot by a tire, his wife. I'm ahead of them. They'll engage in dialogue when there's momentum. This isn't supposed to be a long call. When there's momentum for someone who engages with you, they start telling you their story, they start talking about the deal. That's where you go, this is fantastic. This is exactly what I need. I'm going to be in town. This time, this hour, next week. I don't know how close you live to the property, even though I always do, but I say, I don't know how close you live to this property, but if you are available and you happen to be in town, would you be open to meeting for coffee for 30 minutes? I want to talk to you about how you built your business. I do not want to reinvent the wheel. That is a very common Talk to— now today, of course, my conversation is different. I don't pretend I just have a couple of duplexes. I have a much bigger portfolio. But you tell them a true story about your starting position and why you're doing what you're doing in way less than a minute, ideally 30 seconds or less. After you say, you know, hello, this is me, I'm calling about this, talk about an individual property of theirs for why you're calling, and then ask them open-ended questions. Get a couple answers. Do not have a long conversation though. The goal is to get off the call with a booked meeting. So as soon as there's momentum, you're gonna take that momentum. Cause, cause if you talk about everything and you ask for a meeting, it's like, I think we covered everything actually. You should be good to go. But if they're right in the middle of it, they're excited, you're excited. Easiest time to say like, oh my gosh, I wish I could talk all day about this, but I will be in town at this date, at this time, at this coffee shop. If you're around, would you be willing to spend 30 minutes for me? I'm buying coffee. Rarely will you get turned down for that. And if you do, so what? You didn't know them before the call, you're not going to get to know them after the call. You rarely will get turned down, but it is a no-cost-to-yourself thing that you can do that will build your business like nothing you'd believe. Okay, final question. Ken McElroy says he sees rates dropping by a quarter point, uh, slowly over the next 6 months, and now is not the time to raise rents or charge maximums, 90%. I agree with this as well. I think, oh, okay. We have one more question after this. I agree with Ken on this. I don't think this is the time to— now, if you have a destabilized property, so you're buying something that's half market rent, get to market rent, but I don't think you should be pushing market rent on your property. I don't think this is the time to cause instability. I'm a little bit more aggressive on how I manage than Ken, but Ken's an acquisition expert. He's one of the best in the world. He's a market analyst. He's amazing. My specialty is deal architecture and operations. So for me, stabilized is 95% occupancy, 95% of market rent. You shouldn't be pushing that. I would rather be at 95% occupancy and 85% of market rent right now and not poke the bear. Rates are dropping. You want to keep your occupancies up. Right now, keeping great tenants is at premium value. So In the transition, I agree. I think I'd focus most of your effort in this market cycle as rates are slowly dropping, as stability seems to be coming in, even with this government shutdown stuff, as, as real estate seems, seems like it's starting to get sexy again. I think we're on the up and up. This is the time. Be stable and focus most of your energy on the acquisition. You want to scale up here because if we hit the upcycle that many people are predicting we will, and this isn't going to be a a boom. There's gonna be a slow, steady real estate's getting hot again. There's gonna be a slow turn up of the temperature over years. If that proves to be true, you want to be loading up on the front end of that the most aggressively. If you really want to stack that instead of just dollar cost average, you want to stack in the down. We've had a rough half decade in real estate. We're coming out of the end of that is what most people, myself included and Ken, seem to think. Don't destabilize. Focus on buying more problems. By problems, I mean properties where you actually can push the rents because they need to be. Okay. Oh, it's Kirby. God, sorry, apologize, I didn't recognize your YouTube tag. What's up, Kirby? Last question: do we trust the broker's lawyer, or are there a bunch of them, that our group is partnered with that we can use for PSA review. So for PSA review, you have a few awesome resources. So not an ad for Multifamily Strategies Live, is not an ad, but I do wanna share what we do. And you guys can copy this in your own business, or you can join my group if you want a mentor. You want information, it's all on this channel for free forever. We're the course killers. You never need to buy a course. We have one for the mentees. It's in the program. Here's what I would do. So I review deals. So if you have a PSA to review, I'll absolutely review it. Now, if you're getting it drafted, broker or lawyer in your market, best thing you can do. For review, depending on the deal size, if it's a large enough deal, Todd Robinson is my lawyer. I will share him with people for the right deal. If it's a really small deal, he's going to refer you out to someone else anyway, though. So you're going to use someone locally. If it's a little bigger deal, Todd's probably your guy. Very good lawyer. Bit on the pricey side. You also have a tool within the mentorship called Osgood AI, and it is, of all of its programming, one of its main functions is rapid PSA review. So what you want to prompt if you have a PSA to review, and you can even do this before hopping on with me, but you can come into the PSA and say, hey, this is, this is my PSA. Can you summarize the purchase and sale agreement for me? And recommend improvements and point out any problems that I may encounter with this document. And it will do a phenomenal job of breaking it down, simplifying it, pointing out things that you might want to add, and it will tell you what things that you should ask the broker or lawyer. We did this, um, we actually did this on a PSA, and this was a big one. This was for, uh, 2 properties at once. This is the 144-unit we've been working on. When we put that thing together, it was almost perfect, but the PSA was like 75 pages. It reviewed all of the documents and it found like one major piece of contradictory language that if it came up, it was unlikely, but if it came up, it would've cost like a quarter million dollars. I missed it. My lawyer missed it. It's no one's perfect. Um, AI caught it in like 2 seconds. So I would do both. I would run it through the AI, not because it's not worth my time, it just, it's gonna see things faster, better on, on a technical level. Uh, then when I review it, I know exactly what I'm looking for. I'll also give a set of eyes on it. Having both sides of it, having the, the AI and a human looking, looking at your deal, best thing you could do. Uh, best thing you could do. So that's what we have for today's live. I'm, I'm super glad for those of you guys who did not make it for the beginning. Shared how Ethan and Eddie, who actually joined the mentorship years ago, how they took an 11-unit deal, $0 out of pocket, half bank, half seller finance, so 100% financed. How they took that deal, managed it for 2 years, pulled out $750,000 while it still cash flows $2,500, pulled out the money and bought a 44-unit with it. They turned $0 into 11 units and turned 11 units into 55 total units in their portfolio. They did it with no partner. Partners. They did it with none of their own money except for their renovation cost on the 11. They could have brought in outside capital. They chose to do it themselves, which I absolutely think was the right choice. But if you guys missed that, I'll be posting this immediately after this. So as soon as this live ends, you can go back and catch the beginning if you missed it. I think it's an incredible story, very inspiring, but also on a technical level, that is the type of play that you should know how to do if you are stacking rentals. You know, turn— if you can turn 11 into 55 units and you can turn 55 into 500 units, all of a sudden you look back and you're like, it's only been a few years, I have a ton of rentals. That is exactly how the game is played. Uh, we talked about that in depth on the front end of this call. So again, if you're joining now and you just missed it and you're like, oh no, I just got here, watch the recap, especially the beginning of that. I will be sharing deals like that and others every single week. I'm going to start every Wednesday breaking down a deal, showing how it's negotiated, showing the math behind it. I'll pull calculators, uh, but this is about to get a whole lot more epic. So I'm excited to see you guys on next week's. And again, webinar starts here in about 20 minutes, is going over the simplest model. If you're already a mentee, don't bother going there because I cover all this in the mentorship. This is going to be redundant for you if you're not part of the mentorship program. You're like, what is this model that people are stacking all the rentals on? I'm going to go through the model, the financing models. I'm going to go A to B all the way through it. I mean, if you're a mentee, you're still invited. You can watch. Uh, better yet, this is an online webinar where I'm not going to sell you anything, period. I'm going to go through it. I'm going to teach you exactly what you're here to teach. This is an educational webinar. I'm super excited to run it. And, uh, yeah, I'm not even going to put a price tag on the mentorship in there. I just, I'm just going to just tell you what the thing is. Totally educational. You don't know how to get creative with real estate yet beyond just the financing. I mean, like, do you know how to get basic creative to close any deal? If you don't, I'll see you guys there in like 20 minutes. The code for that, if you want to register for that webinar, is multifamilystrategy.com/workshop. You can register for that webinar. I think we still have 10 spots left, or we did when I started this. So if you guys want to check that out, I'll be live there. It's not a recording, don't even try to accuse me of that. I'll be me, live from this room, talking to you, uh, but I'll be doing that in about 20 minutes, so I'll see you guys very shortly.