Dealing with Squatters and Criminals in your property- Live

And we are live. Welcome back to Multifamily Strategy Live. Today, joined by Caleb, who's going to be speaking with me in Vancouver, Washington in the next, uh, like 2 days from now.

Yeah, 2 days or less.

NW Action Summit is 2 days from now. If you haven't booked your ticket, do it now. Uh, in fact, we opened up a few more seats, so there is a discount code LIVE10. If you are watching this, uh, you are still invited. I'm going to reactivate that discount code here, uh, now. So if you guys go to nwactionsummit.com, type in the code LIVE10, you are ready to go. Now we are streaming to Caleb's channel, Believers in Business and Multifamily Strategy, for today's joint episode. So super excited to talk about some of your guys' questions, answer things. As you have questions, post them in the chat. We're going to spend— I think today we're scheduled for about an hour. We're going to answer questions, but first we're going to talk about some of the fun drama in the universe of real estate. I executed my first option agreement. Now, it wasn't me purchasing on an option, but I actually had a partner buy me out with an option agreement. The structure was very interesting. So we're working on solving this. But what we did is two properties, one of them massive water damage insurance didn't cover. He's like, hey, I'll take that building. I can go ahead and repair it. Gave him that building, sold him our equity, seller financed on a note. He then said, hey, you know what, if I'm going to execute this, I actually want to purchase you guys out of the other building. I don't have the cash right now. I want to do an option contract. He actually assigned his interest over to us as collateral, which means I went back to 100% owner of the building in question. And we went to auto, auto camera apparently. So it's on me. It's on Caleb now. We'll get that adjusted. This is the fun thing with going double with a, with a smart camera. But what we did here is really creative. We did the option contract. He then decided after we executed, I got the equity back. Hey, I actually don't want to buy this. Well, generally speaking, you're out of luck. We're working right now on solving it with a note. So we will owe him some money back. I will get full— I'll get full ownership of my property back, but I have like 5 years to pay that. So a really weird turn of creative finance events. One building had a massive expense, traded it, someone else seller financed, sold my building, or at least the rights to it on an option contract. And within a week, the option canceled and we renegotiated. Now I'm buying my building back seller financed. So I seller financed my equity in one building. He seller financed his equity in the other. I got the bigger building. I'm a happy camper. Super fun. This all goes to tell you, you get what you negotiate in real estate. Creative finance is just that. It's look at everyone's objectives, your liquidity, your cash flow, and your equity. And those pieces can be traded for each other. Kind of a fun week. Lots of drama, but we got it all figured out.

How the turntables have.

Yes. Let's see if I can get the hand motion on the camera. We're static. I can move it, and look at that, we're back to, uh, back to normal. Uh, remember on these cameras, Caleb, uh, let's not give it a flat hand because that tells it to track your face.

I know, I haven't seen that camera. I'm on the ball.

Uh, all right, so, oh, we have a lot— uh, what is it called? Uh, Northwest Action Summit, uh, discount code LIVE10. We have that coming up here this Friday. Caleb, uh, what are you talking about for this?

I am on a lending panel, and I'm basically the most, most unqualified person to be on the panel conventionally. Like, something— taking a look at me conventionally for a loan, I mean, I didn't even qualify for my own apartment building to live in, so I couldn't even qualify for a lease, let alone how I qualified for $6 million of debt, which is insane, by the way.

Um, so you came from California, uh, you, you did not have a job. Nope. You had bought some apartments, you had a startup company.

Yeah.

Didn't take too long. You're living in an awesome tower in Dallas.

I'm living in a cool spot.

He has the— I'm not kidding, this building has like a steam sauna, it has a normal sauna, it has a cold plunge, it has a full gym. Um, Caleb's really made it happen. What was it like? What was the thing for you that got you to think like, hey, you know what I need to do? I drop out of college, buy real estate, move out of California. Like, that's a lot of— there's a lot of big steps.

Yeah, so I mean, everything was kind of in proportion. Uh, the drop out of college thing kind of happened when I realized none of these majors will make me as much money as I want to make. I'm just— it's changed my motive for doing things. But at first it was like, how much money can I make? I'm like, I don't want to be a finance major and make $70,000 a year.

No thanks.

So that was the first step and kind of fell in love with baseball. So dropped out of that, went into real estate, bought 28 units kind of simultaneously across a few buildings, created my sales company after that, which is kind of like fell into that pretty much like God willing. And then after that decided, I feel like I'm being called out of California, moved to Texas, house hacked a 25-unit, and that was about what, 6 months ago, 6 or 7 months ago or so, around then. And then, yeah, then decided, hey, I'm moving up to Dallas. So that was about 2 months ago.

Perfect. We actually have the first question in here from before even logged on was about, uh, you, Caleb. So, uh, funny enough, here we go. Um, everyone says, hey Christian, uh, curious how exactly Caleb doesn't qualify for a bank loan with that many units. Uh, can't he obtain DSCR debt? Uh, Caleb, why haven't you utilized DSCR debt yet?

Yeah, it's basically just the products we're looking at. The product I went with on my last deal, um, type of loan product wasn't going to be that. It was more qualified. It was— it actually, there was a DSCR qualification on it, but I also didn't qualify for the loan myself. Um, that's what they wanted to see. So the part of the qualification that was interesting, so you had to hit the liquidity— I'm not gonna throw a hand up, I was about to do that, camera's not gonna track me. So you had to qualify for the liquidity, qualify for the amount of the loan, and the third qualification on that, since the local credit union, somebody had to be local.

Yeah.

And so I actually did help qualify for part of it, just not the part you'd expect.

Interesting. Okay. And that's how it's been for me on a lot of deals, like the, the conventional bank deals. Until very recently, I didn't qualify because I didn't have the 2 years of track record for a lot of my LLCs.

Exactly.

So while I could show massive income, I could not show that I was conventionally bankable with a long, long track record of maintaining that bankability. I started my companies, I didn't officially have a job, I just have a ton of work that I have to do to run the companies.

And that's exactly where I'm at. The guy I partnered with on that deal, um, Talk about being overly hyper— over hyper bankable, whatever adjective you want to throw in there. Um, super successful business, been doing it for a long time, super liquid, so easily hit that requirement. And then, uh, final piece was, hey, somebody has to live in the area, and I was like, oh, I do qualify for that part.

So there we go. Yep. And experience rating, something that a lot of banks will look at too. They're gonna look at like, hey, what are our odds that you know how to run this? So they want to see that you're someone who can competently run your universe, be responsible with real estate. You know how to overcome things. They like to see some skin in the game. So there's a lot that goes into it.

Exactly.

That when you have that. All right, popping back over here, see if we get many questions. If we don't get a lot of questions, we can certainly talk, uh, talk real estate event for a little bit and then, uh, talk real estate events, talk stuff going on. One of the most— yeah, one of the most important things I think we should talk about is that I, I saw Pineda saying this. I'm curious your take on this. Uh, so Ryan Pineda, uh, recently came out and he was talking about how he's not really a real estate guy, he's a marketing guy. Uh, he's like, you know what, he's like, business is really something that's done on the golf course. In my experience, business has migrated from the golf course to the pickleball course.

Oh, I was about to say it's not even close.

It's not even close.

Uh, what's more fun?

On a serious note, for those who played sports and gotten active in like the community, Caleb, at when playing pickleball, when going out and meeting other people just out in the community, playing sports, connecting with others, uh, how frequently do you find people either in real estate or in business in general who also are going out and they're active, they're playing pickleball? They're— dude, I love this.

So I haven't gotten any— I haven't used a capital partner from a pickleball event, but I've had many soft commits of like, hey, if you find a deal that looks like X, Y, or Z, in 6 months, let's talk. Let's talk. And then, I mean, just being active and going out, there was, um, I don't know if I shared the story about how I met that guy with all the units.

No.

Yeah, so, um, was going back, I opened a bank account for a company we're starting currently, um, was walking back into the elevator, saw a guy in there, he's like, oh, just started chopping it up, asking how I was doing, all this stuff. Um, basically I was doing, I was like, I was starting the property management company, all this stuff, got a few units. He's like, oh, that's cool, I'm in commercial real estate too. He had 4,500 units. Built it in 5 years. So I was kind of like, okay, there's levels to this game. So I mean, that— and that literally came from walking back into my elevator, going up into my building, and being in the neighborhood I'm in, walking out, going to a pickleball court, met other people, not as impressive, but people who are very liquid, who are much more impressive than me.

Well, that's one of the things that I, I've noticed is I get a lot of comments like, oh, I'm not finding these owners, I'm not getting into these owner meetings. I think the skill that people need to work on is just like, how are you communicating fluidly with other people? Are you able to just be a normal person and talk about things in a just conversational way so it's not transactional? Every time I've seen this, and I literally mean every time, when people are like, I'm struggling to get anything out of the owner meetings, or people don't want to book a meeting—

oh, they're taking it way too sciency.

They're like, well, and they're being transactional. Yes. Which is ridiculous to me. You're trying to build a relationship. You don't build a rela— I hate the dating analogies, but I'm going to use it because it's perfect. You don't start going on a date by someone, by seeing an attractive woman go, hi, I want to date you. Like, there is an actual, like, interaction that you need to have with someone. You don't make friends by being like, I don't have many friends, would you like to be my friend? Like, I feel like that's how people are going after these owners.

Nobody's gonna be here. Nobody's gonna be your friend.

It's, I want to buy buildings, are you selling? Like, that's the same thing.

It's the exact same thing. I mean, for me, I've talked about this a lot, kind of the blessing I have is I just don't shut up. So when I'm out and about talking to people, it's just like, hey, what are you working on? Or like, if somebody's wearing the same shoes as me, it's just an easy conversation starter. If somebody's doing something, just breaking the conversation, break the ice quick, and then you just go from there. And these— what they're working on, who they are, you get to hang out with them a few times. You're playing pickleball, you see them around the block, and you're going to walk or whatever. It's really that simple.

Yeah, homework assignment for everyone who is trying to get into this game: Uh, one of my business partners, Cody Davis, does this. I, I thought it was a genius way to do this as a kid. He's like, I'm not good at talking to people. So when he orders coffee, he talks to the Starbucks baristas, and he's like, I'm going to get better at having a conversation and getting people to engage with me. And guess what? He was horrible at it for a long time until he got very good at it. This kid owned a lot of real estate, like very significant amount of real estate. How did he do it? He learned how to talk to other humans. I think it's the best skill in real estate. There's two things you need to know: the math, and just basic math. We're talking addition, subtraction, multiplication, division— like basic math.

You learn it all by 6th grade unless you're going—

I don't know what school you're going to, but know enough to see a deal when you see a deal. Like, know how to underwrite a deal. That doesn't take very long. Uh, someone can learn to do that competently in about a day. And then it's going to take practice to— I don't like anything else, but it's going to take some practice where you can look at a deal, you can see a deal, hey, I like it, I don't like it. Get immersed in that. Outside of that, the only other skill that I think is critical is beyond salesmanship. It's just the ability to communicate the things in your head in a relatable way to another person and to listen to that person.

That's really that simple. You aren't trying to go sell them your life story. Like, I think that's a big mistake people make when they're on the phones, is they're like ridiculous. Hey, I just want to meet you. I want to buy your buildings. Here's why I'm going to buy your buildings. It's like you just have a conversation. You keep it very simple and honest. If you kind of feel it tapering off and they're kind of pulling back, then you probably cut the combo there and you're like, hey, if I come down to blah, blah, blah city and I'm there, would you like to grab a coffee? Yeah, sure. I hardly ever get a no to that question. And it's just kind of feeling the room, just talking to people over and over. And like Christian said, if you're out and about, just make it a point everywhere you go just to say something. Just make somebody laugh. Just get something down. Just say something about whatever they're wearing. Just like, oh, nice shoes, whatever. Oh, nice hat. Oh, like whatever, like they're wearing a sports team hat. Just say something and just put yourself out there.

One of the, uh, one of the, the bigger business relationships I got was someone, someone actually, when I was walking my dog, they go, dude, I love your hat. At the time I just got out of a, uh, 10X event, so I was like, she's like, dude, Greg Cardone, I see the guy online. They're like, are you a Cardone fan? I was like, no, not really, but, uh, comfy hat. Uh, just at this event, we started talking, ended up getting dinner with him. Uh, did that turn into like this amazing partnership? No, it didn't.. But that's a legitimate way just to meet people is to be social. I think especially if you're in the PNW. So if you're in this area of the country where we traditionally just don't talk to each other, like Seattle's famous for this, we don't look at each other, we don't talk to each other. You need to learn that skill, go out and learn it. Back to the pickleball court, fantastic place to learn how to talk to people. You talk to people between games, you communicate with your partner during the game. People who can interact with other people are successful across business, just in general. Yeah. If you are struggling there, 9 out of 10 times you personally have a communication issue. Work on your communication. This isn't like, oh, I'm going to read a self-help book. It's like practice daily.

Yeah, the only way you're going to get better is go talk to people. If you start fumbling over your words, you're going to make— you know, happen a couple times. Make yourself uncomfortable. That's the only way you're going to grow.

Uh, I just talked to Aaron Novello. We have a podcast episode with him coming out next month, so stay tuned for that. Pickleball player. Pickleball player, stellar man of faith, father, excellent salesperson. I really enjoyed, really enjoyed that interview. One of the things that he said in there, I love this. This is a parenting thing that he taught to his kids. I think it's fantastic. So his son's a really good soccer player and he's just about to go into high school. He's like, hey, I want to play high school soccer. And I was like, well, what do you think that looks like? He's like, I think I'm good enough to be on the JV team. He's like, awesome. If you want to be on the varsity team, are you ready? And immediately his son's like, no. He's like, what would it take? He's like, well, I would need to start lifting weights because those kids are all bigger than me. I need to put on some weight, and I'm going to probably need to practice probably twice a day for a significant amount of time. And I would, in addition to that, I'm probably gonna— I'm gonna need another coach. What I love about that is he— so he's like, okay, you know what you need to do if you want to get to the next level. So now from that point, he's like, okay, son, now it's no one else's fault but yours if you don't get there. I love that.

I mean, the same thing with business, right? You put your goal out there and you just take steps back. Okay, if I want to be worth X amount or have X amount of units, how do I get there? And you start doing the math backwards, then you go down to applicable steps.

What do I need to do today to get there? Yeah, it— I'm not a huge owner of real estate. I have a couple hundred rentals. Um, it looks like, it looks like we're gonna be going under contract for, uh, 100 more here very soon. Uh, fingers crossed. But, uh, we're working on a big, a big opportunity in Texas. Probably going to be at 400 or 500 units at the end of this year. Am I a titan in real estate? Absolutely not. Miles from that. But am I ahead of a lot of people? I think so. Why is that? I live, breathe, work this. If you're, if you're watching the YouTube channel being like, I followed these steps, I didn't see immediate success. You're not going to. Neither did I. I heard it. I worked at this. I worked at the CoStar Group for 4 years trying to learn how to network with property managers, with bankers. It was the wrong way to go about it. But I spent 4 years trying to hone the skills before I actually went out and bought a piece of real estate. Then my career really started in daily practice of honing the skills, of talking to others about real estate, of being around real estate events. Is every one event a good use of your time? Absolutely not. Most of them are a waste of time. But if you're the person who's sitting there being like, hey, I did these owner meetings, I haven't bought anything, I went to 2 real estate events, I didn't make any connections. You're not doing an A-team level of— you're not, you're not the NFL. You're not training twice a day. You're not going to get twice a day training results. Just expect that. Set your expectations to what you're willing to do. If you're like, hey, getting 1 or 2 rentals this year, grabbing a couple duplexes, maybe getting my first 12 this year would be a huge win, you don't need to drill this every single day.

But if your goal is hitting a few hundred units by the end of the year and scaling up exponentially, You have to live on the saddle. You have to be in the game every single day. You have to be learning your craft, you have to be perfecting your craft, and that only comes with just practice and putting in reps.

Yeah, going off to a question here from Luke, uh, for, uh, an equity contribution, say $200K, if I have $80K as equity contribution, would I only pay interest on the $120K as debt that I owe? Yes. Oh, you're only going to pay interest on what you borrow. So if you put in $80,000, you're not going to pay yourself interest on that traditionally. Now, sometimes if you're doing owner distributions, you'll get dividends in proportion to your equity, right? You'll get what you negotiate there. Um, so generally speaking, yes, you'll get an even return to people based on the money you put in. Even syndicators do that. Yeah, they'll invest as a limited partner in their own, uh, in their own syndication, and they'll get distributions like their other partners. That is not unlike that unless you specifically negotiate something different. What Caleb and I have done on deals, since we have— and I'm a huge advocate for active income, by the way— since we both have active companies and active income jobs, like I run a property management company, uh, we, we're running sales, we have a whole bunch of active income. I have an investor put money in even when I do put my own money in. I go, hey, um, we're going to go ahead, you get all the cash flow until all your money is back out, and then my money will come back out, and then we'll— that could be out of cash flow, it could be out of refi, it could be out of, you know, I could just earn a bunch of money and pay it down and be like, okay, now we're even, we're gonna go to this.

Exactly. And talk about it like, like a competitive advantage. I mean, I'm all for that, compete, creating your own advantages. It's like, yeah, when you have a capital partner, you're like, hey, I'm actually not going to touch any of the money, it's all going to you.

They're kind of like, what?

Yep.

Really? Yep. It's an easy pitch. You get a lot more equity because it's like, look, I'm— I mean, I— let's say we bought this deal down. Last, last two deals Caleb and I did together, zero down. We have no money in the deal. You're bringing in the money. We found the opportunity. We lined up the financing. We lined up the bank. We're doing the property management. We're going to manage the refi. Like, we— this is fairly hands-off for the individual. They're going to approve some invoices, their quarterly meetings, and that's about it. When you have a partner like that, it's like, look, I have zero dollars The LLC's only mission right now is get your money back, is get your money back. So both of us have $0 in the deal. From there, we're going to split it up by equity. And I think generally speaking, if I get half, you get half. Your money that you saved and work hard for allows us to do this deal. And our experience, deal capital management experience, allows you to get that money back to reinvest. We're both going to keep the asset like this, but I don't get paid, period. Until we have even contributions of $0 in this deal. That's something that's worked really well for us. That only works, in my opinion, if you have enough passive income to live on and do what you want to do, or you have the active income. I have all my active incomes are real estate related, so I'm just in real estate all day working, but I have active earned income from being a manager. The hundreds of units I manage for myself and my clients is what I live off of. Everything else gets reinvested into the universe.

And you want to talk about relationships coming full circle here? Investor on the last deal, met him at an event, um, actually BPCon San Diego. Oh, there you go. From just chopping it up with them in the lobby.

Yeah.

What is that, like almost a year and a half later? He's that investor on our last deal.

How much you paid for that BPCon ticket, by the way? Zero.

We won't blast that everywhere, but yeah.

No, we are going to blast it everywhere. Uh, someone dropped out. He's like, hey, my friend isn't here yet. Uh, they gave Caleb— because Caleb lived in San Diego at the time— they gave him a pass for— oh, I don't remember the last name, but I already got it. Slobodan Todorovic. The Slobodan— yeah, that one. So Caleb was Slobodan for 3 days in, uh, in San Diego learning the ropes and made a connection that got a deal done. Yeah. Uh, is it ethical? Probably not. Is it a hilarious way for a broke 19-year-old to get into an event and learn a bunch about real estate?

Was I a Christian then? No.

Would I do it today? No. Uh, That's funny. That's funny. Uh, from Eric, uh, can you talk a bit more about sharing equity with partnerships? Can you share some examples of how these are structured? Wow, I actually— I think we got my accident.

We just went over this.

Awesome. I, I, I know it'll depend on the goals of the partners. So first of all, you said the most important thing there. It depends on the goals. Exactly. Uh, just like a deal, a partnership is you're trying to match the right objectives to the right opportunity. Some opportunities are really high in cash flow. If you're looking for someone— and I have clients like this— we're like, I want income now. That is what I'm after. I want cash flow. That's all I'm after. I'm going to have to find a higher cash flow deal or a deal that cash flows very early in the game. And that's what it is. A lot of my wealthier investors are like, I already have money spoken for. I'm trying to multiply what I have. I am patient, but I need large multiples of money. Those are going to usually be projects with lots of upside. My specialty is I'm a very good manager of real estate. I can optimize real estate very, very well. And I have companies and employees that can help me launch this. So when I go into mismanaged properties, I can look at a property and say, look, you're going to partner with me because I'm a specialist. I'm going to take the NOI from X to Y. And when we do that, this is how your money's coming back. It's going to multiply. That could be a buyout of equity where I literally go, hey, I'm going to multiply your money. I'm going to refi. I'm going to basically the BRRRR method on commercial real estate where I'm going to increase the value. I'm going to pull your money back out with a return and away you go. Now, with rising interest rates, those are harder to pull off. They're less common to do it that way because the refi The debt costs more than twice as much. So what do we do now? I do a lot of like, okay, well, do you want to ride on this deal for a certain period of time? And so we'll go on as equity partners. Uh, the buyout gets kicked out longer, but it's going to be, hey, um, we're gonna get all your money back out of the deal, then we're just going to cash flow this until there's an appropriate time to exit. And either you'll buy me out or I'll buy you out. And we understand this partnership's not designed to last forever. But the goal is that we both don't have any money in it, so no one— who cares?

I mean, exactly. I mean, talk about the deal we're working on right now. We don't go into specifics, but it's pretty much that same thing. Day one, is there an absolute crap ton of cash flow?

No.

And were we getting it? Is there going to be? Yes. Is the NOI going to go up exponentially? Yes. It's that same kind of project where there's a specific type of investor we're looking for on that. That's— it's a longer-term hold. It's not a quick flip thing, which we are working on a quick flip right now as well. Um, but that's not— there's different projects for different people.

Yeah, absolutely, absolutely. Um, so different partnership structures, uh, you can structure as a blend of debt and equity. So, uh, one thing I like to do for tax reasons so that I have a contribution, uh, where the contributions to the LLC are even, is they lend me half the money before the transaction. And it's usually like minutes before the transaction. So we sign papers first for the loan. Now I have my money, I put my money in the deal. Uh, so my money's spoken for, they put their money in, so half their money is equity and half their money is a loan to me.

But in the eyes of the— like, on the LLC balance sheet, you put in half, they put in half, helps out taxes.

Now, if you have personal cash flow to give where you are servicing that note, and better yet, if you're half of the property services that debt, it's a way to give them more cash flow. Say, hey, you're putting in this money, uh, some of this is equity and we're going to wait to multiply it when we do the project. Some of this is debt, so you're going to get a monthly payment on some of it. And the rest of it's going to be patient money. It's a good way to say, hey, I can pay you throughout. I'm on the hook for some of the money. The rest of your money is equity in the deal. But either way, I have to pay your money back and then we're going to refinance out the deal. It's a good blended way to do it. And for tax benefits, one of the best ways to do it. Couldn't agree more. Bonus question here, by the way, our bonus answer, I should say, with, with taxes. Uh, just learned this with my CPA. When you have, uh, like guaranteed debt, like when you're backing the note, which is basically all bank debt, it's going to be secured debt, uh, you actually get some write-offs based on the debt. So if you run a cost seg, your basis actually changes by the amount that you owe. It is in your— because there's secured and unsecured debt. A lot of people love to talk about unsecured commercial debt where it's like Man, if I lose the property, they just take the property back. There's no personal guarantees. I did the hand gesture, I'll get that fixed. But like, there's no personal guarantees. It's a very simple way to do real estate. People love that. Like, I lower my liability. What you also do is you lower your tax write-offs on deals that are zero down, but I am the guarantor of the loan. I actually still get massive benefits from cost segs.

I mean, if we're going to take that a step farther, right, people who are really doing these like they aren't on the hook for the loan, they're not a guarantor. These are the types of people that are letting their deals go. Yeah. And that's not what you're looking for as an operator. If you're like, yeah, I'm not willing to back that as an investor, you're just like, why? Like, that's the first thought that sparks your head. If it's a good enough deal, why wouldn't you back it? Why wouldn't you go that extra mile? Is the first thing that pops into my head. Yeah.

And now there's something you said about personal guarantees, they're very hard to enforce. Not that that's a reason to abuse them, um, but something to know. It's, it's really muddy waters, but you should be backing your notes by adequate collateral. And if your deal is something that has a lot of upside, you're probably doing something along the lines of a personal guarantee or backing it with another piece of real estate that has higher equity, specifically because day one, if you drop the ball, the lender is just out the money. That's, that's not a good place to be. Yeah, that's not what we're looking for. Um, let's see here, we're 26 minutes in the live, not getting a ton of questions from y'all, but I do have some people in the, uh, in the comments here. So if you have a question, post a question.. And, uh, we just got one in from Luke. Luke, thank you for keeping the chat rolling. But seriously, if you have something about real estate, drop it here. We're going up to an hour today. Uh, if you have not yet— all this is going live. There, there's one speaker in the entire event this weekend, Friday and Saturday, who do not— this is, uh, by the way, Northwest Action Summit, nwactionsummit.com. Uh, LIVE10 discount code, get 10% off if you're going to that. For the event this weekend, there's one person who has not done Creative Finance. His name's Dion. He's a good friend of mine, and he's going to share some awesome stories about why he hasn't done that. You want to learn this game, you want to learn from amazing speakers, do this networking thing that we were just speaking about, show up at the event. If you're watching this and you have a course or a mentorship group that you want to sell, DM this guy, Caleb Pommal.

And yeah, I'm actually looking at you right now as we're on the live, so—

oh, there we go. Yeah, this is a— we, we do We practice what we preach. Uh, Luke, uh, was at a meetup today. Yep, today. And people said they just buy mobile home parks that are 55+ units.

Is this the case? Is he saying— I don't think he's saying 55+ units. Is he saying 55+ in age? That's what I'm thinking. Oh, because I mean, I've looked at deals like that. I'm actually working on a deal like that, not a mobile home park. Oh, apartment complex, 55 and older community as well.

Oh, that's probably what that means. My buddy Yon actually has a— he only buys mobile parks that are 50 units plus, which is why I figured that makes sense. Uh, Luke, give me a clarifying answer here in the chat here so we know what we're answering. But, uh, so parks for older people, that usually does have a better tenant mix. My, uh, my aunts and uncle, uh, have a beautiful mobile home and that's all they do. They have 2 pads.

Are they up in the Northwest?

Uh, no, they're in, uh, Arizona. Yeah, they love it though. That's like, that's what they want to do. Um, no, ours, uh, oh well, funny enough, I don't think we have anyone under 55. They're all a bunch of old people. Um, I bought a mobile home park, 28 units. We're taking it down to 25. I think 28 is too taxing on the septic, so I'm, I'm making the decision to lose some units. Um, we purchased it for $300,000. I mean, it was like peanuts is what we bought that for. Uh, it cash flows thousands of dollars a month right now. We leveraged it 165% loan to purchase price. Wow. So I bought it for about $500,000 of debt, but the purchase price is $300,000. So I cashed out $200,000 at acquisition. That's a little nuts. Yep, that's just a check for— a check for me. Uh, granted, a lot of that goes into redoing the septic, but I did— we, we cashed out. We got paid to buy this deal. I keep doing the hand thing. I, I need to work on that. I know you're being obnoxious. I got paid to buy this deal. Um, we bought it with 13.5% hard money, and it cash flows about $4,000 a month with 13.5% debt, uh, 165%.

I don't know, it was that good of a deal.

It is the best deal based on just straight numbers. It's the best deal we've done. That's a little bonkers. Um, however, we bought it for 3, we owe 5, it's going to sell for probably 1.2. I'm not a mobile home park expert, I'm a property expert. I would rather 1031 that bad boy or pay off some of my investors early, which is both are good things. So like that, so either less debt or more income, but we're gonna use that money to buy that. We're gonna probably run a 1031 on that. This year, hoping to list in August if we finish the septic thing. That'd be sweet. Yep. 100. So we had— we started with 7 non-pays, by the way. 100% collections now, uh, completely regraveled. We moved, uh, I believe it was— Danny will probably correct me on this, but I believe it was 7 full, like, big, like they bring in a shipping container, uh, 7 containers of trash removed from the thing. Wow. Everyone participated. Uh, we, we of course paid for the trash. Uh, we had to post some bonus notices, but eventually all 25 people participated, cleaned up their spaces 100%, no garbage on site. We cleaned that thing up in like 3 months. Uh, missing collections, trash everywhere, we cleaned it up. Uh, the reward for that, they're gonna cash out like $700,000.

That doesn't—

that's nuts. Yeah, that's, that is, that's what we call a phenomenal return. Um, we have 25+ or 55+ year plus. That is what we call a very passive mobile home park. That is the cleanest type of park from what I hear, is that the older communities, they're usually retirees who are doing that. Um, I like mobile home parks. My good friend Jan— I'm not just trying to like pump product here, but my friend Jan buys mobile home parks, a ton of them.

He just launched a course that I got to do the creative finance part of.

Stop putting your hand up. I do it fast enough, I'm ready for it. Um, but I gotta participate in the creation of this course, so I've got to go through it.

Um, MHParks with an S. MHP Academy. I've gone through it myself. It's, it's really good.

Pretty solid. It's really good. A very inexpensive course, like super inexpensive. Um, feel free to check that one out if you want to do the mobile home park strategy. I love them. I love RVs, love mobile home parks. Uh, I, I actually am a huge advocate. They are a class of multifamily. People try to put them in separate boxes. It is a park. You're servicing a bunch of different families. One could even say multiple families. It's multifamily real estate. It is a subclass of it and it's an excellent subclass.

I like that question. When are you guys going to start having events in Dallas?

Do you? Oh, oh, oh, this is a good question. So by the way, got word my house is going to be done end of June. As soon as it's done, I'm ripping out the floors that they're putting in that I hate. So we went with the cheapest floors ever. Carpet in the bathroom? Yes, I actually did. Yeah, I'm carpeting— everything in the house is carpet because those don't cost anything for me on the build of my house. I am then immediately having a team come in and rip it all out. I'm doing hardwood throughout, tile in the bathrooms. Um, it's gonna be beautiful. I'll be in Dallas fairly soon. I'm Target is early August. We'll see.

I will have—

kicking it back. No, it's been— it started as mid-August and I started— started as June. No, the house is done in June.

It's starting—

we were never— there was never a time ever that I was moving in June. Sure. There is never a time that was happening. We're headed down. I am going to start running events in Dallas probably by the end of the month that I move there, as soon as humanly possible. And Caleb, you've seen me do this and I've seen you do this. When we enter a market, we meet all the players. We're going to be having meetups, we're going to be having events. I'm actually working on building out the studio for the podcast, Multifamily Strategy. We're going to start doing in-person for the pod. I'm going to interview a bunch of Dallas locals. We're going to have people fly in for it. I am so excited for the projects there, but Dallas is specifically— I'm moving there for the, for the heat. For the politics, for, uh, one, for like general business friendliness, and three, because Dallas is central to the US, is an easier place to do meetups and connect with people than Seattle being wedged up in the corner. Uh, not the right thing for what I want to do with this business. So excellent question. Uh, those are incoming. Dallas will be my home. I love Dallas. My intent is to move there and never have to leave. I don't plan on it either. Yep. Let's see if I have any questions through the Instagram. Nope, no new questions in the Instagram, um, and not even from Chubby Chubby Carpet Cleaner. Um, what a name. I know who that is. I— speaking of, uh, meetups, uh, good to see you again, my friend. Uh, just saw him at a Wally event down in— oh yeah, yeah, I know, a guy, great guy, great guy. Um, wow. Okay, that's it for questions. Final announcements here. Seriously, I appreciate running this and sharing the knowledge with you guys. Come prepped with questions. I'm going to start doing preloaded questions for these lives. So what we're going to start doing, starting pretty much immediately, I'm going to post on my Instagram story @ChristianOsgood. I'm going to post questions that you want us to answer. I'm going to start with the question of the day. We're going to run through what you guys have already asked. In the live. So if you can't make this, you can dive on in and see if we answered your question. We're going to start with those before we do anything else. So if you ask a question in the week, it's going to be answered in the front end of the live. You don't have to scroll through the whole thing hoping that we got to your question. If you ask it and it's appropriate, we will answer it. I've gotten some really weird questions, so— and they're usually when I post with my wife and I, so, uh, don't do that. But other than that, yeah, we're really looking forward to that. Oh, perfect, more of a comment. But yeah, if you guys have questions too, Troy is— Troy's gonna be at PNW Action, uh, Summit.

Who isn't gonna be at PNW Action?

I don't know. Um, apparently people are going to Brandon Turner's event in, uh, Colorado this week, exact same day, because he's a jerk and he copied me. No, I'm kidding. I, I like Brandon a lot. Brandon I've met a few times and he's, uh, he's actually a very kind kind, very, very animated individual. I like that guy a lot.

He's a believer too.

He is. And he is, uh, he's hosting event the same day. So if you are not going to Colorado, there is no excuse for you not to be at my event. Also, my event, better creative finance people. I know every single speaker on this panel is going to be— or not panel, but the whole, the whole event. It's gonna be amazing. You're gonna be around all of the speakers that are available to speak. Uh, there's gonna be lenders there. I'm actually bringing— we just booked her like last minute—

Beth Johnson.

Oh, no way! Yeah, I have borrowed— oh, oh Lord, I've borrowed about $3 million from, from Beth. Cody, my Cody, he's on this channel all the time. Cody Davis, my first business partner, um, he's borrowed a lot more from them. Talk about closing deals creatively. Flynn Family Lending. I'm so excited to have her as part of that event.

Um, she's awesome.

If you're looking at how to move money, buy deals with or without money, show up here, the, the people you get to connect with, they're all my people. Like, if you're like, oh, how do you buy hundreds of units? You know the people who are going to be at this event. That's, that's how you do it. From Edmund, uh, would you ever consider investing in Houston area, Christian, or will it be specifically DFW? I will invest in most of Texas. I'm not— I have no immediate plans for Houston. My little sister lives there. I do like Houston. I have a hub near DFW Caleb and I own on the border of Texas. I would rather expansion plan for everyone wants to know, uh, official announcement, we're starting Apex Asset Management. We're going to be property managing not only our own portfolio, which is about to like quintuple.

Yeah, but we got to keep that announcement until it's official.

Yeah, this is gonna happen. I've, I've been on the phone calls with the broker. We're closing that. Um, We have deals coming down the pipe. We're opening property management. It's gonna be based, uh, just south of Dallas. Then we're going to pop all the way up and actually manage in DFW proper. Then we're gonna go straight down the 35 through Waco, uh, down to maybe as low as Round Rock. Then we're gonna go ahead and jump right over, uh, right over Austin for now, uh, manage all the way down to the border, and then probably sweep back up, hit Austin, and, and then we'll cross over, uh, complete the triangle, go over to Houston. But yeah, I'm probably 5 to 15 years, somewhere in that range. I know, a huge window, but somewhere between the next 5 to 15 years I'll probably hit Houston. Uh, but it's the last of the major cities that I'm—

it also, also depends how quick we go. Um, the goal is to go quick. If you have any multifamily in North/Central Texas you want managed, hit us up.

I am good at that game. That is— that I'm good at that. I've worked with Caleb on it. He's done a really good job managing his properties. Uh, that is a project that is happening, and that is— that's like, it's real, it's filed, it's like we are an actual legit company. We manage, uh, nothing so far, but we're gonna be getting our own portfolio here this month, just one family.

And also picking up some third party that we already talked to.

Oh really? Oh, oh, there we go, there we go. Already picking up third-party clients. We are equipped for it. I got the 4-person core team, and then we already have contractors lined up that we've been using portfolio. And Vanessa's Flynn Family Lending only lend in Washington State. I'm based in Texas. Uh, they can lend in a few states. They're primarily Washington. I believe Texas is one they can do. I'm not 100%. I believe, um, I will also be based in Texas though, and I know that they've been talking to me about placing capital, so I believe they are open to it. Flynn Family Lending, they are really good underwriters, so they will scrutinize your deal, but they are the only lenders that I've met hard money who are extremely comfortable lending in second position. So you can actually get first position debt seller financed, and you can pick up seconds with Flynn to close. Wow, I like that. Their money is expensive, and they will not tell you otherwise. It is crazy expensive. But if you have a deal where you really win on price, uh, like example, you know, we're cash flowing through that one deal, 13.5% debt, 100— what is it, 165% of purchase price-ish? That's nuts. Is, is, is at 13.5%, it still cash flows because we bought it on the $19 cap. That doesn't suck. Yeah, it turns out if your deal yields like 19%, you can borrow at 13.5%. Um, so for the right deal, I believe Texas is actually on the menu for Flynn Family Lending. Verify that with them, uh, which you can check at the event. She'll be on the panel. I assume same panel as you, Caleb, since it's—

yeah, I think we're on the lending panel together. Oh, oh, so most underqualified person ever.

I volunteered, and it is my event, but I, I asked if I can moderate that, and they said I'm, I'm already doing too much, so I can't. But I, I really, I, I really wanted to turn that thing into a fun debate between—

oh, me and Beth would have just gone at each other.

It would have been fun.

Different philosophy. We probably still will go at each other the whole time.

Come check it out. Yeah, I, I'm excited for that. Uh, Caleb, what's the hardest thing for you to learn while self-managing? Same for you, Christian.

Caleb, what do you think? Goodness gracious, hardest thing to do, um Figuring out how to post on Zillow, probably, to be honest.

Facebook Marketplace.

If you're going into a market and you're not doing anything, you're going on your own, aren't meeting any owners, it's going to feel next to impossible. Me, I had already met every owner in the area, so I was just like, hey, need X, Y, or Z. Who's your best plumber? Who's your best whatever? Who's your best whatever? Had a drain or pipe break, water pipe, 7 feet below the ground. It ended up turning out— I was like, hey, who would you use for this? Owner got back to me within 5 minutes, sent me them. They were out in 30 minutes. They finished it by like 1 AM and they were done.

Dude, I think the hardest piece of property management for me— oh, one of them I didn't know when I first started, and most people should know this, it didn't come up. I, I didn't know that, uh, I didn't know how all the 1099s worked at the end of the year. So figuring that out—

oh, that is true. I didn't know that last year either.

The nice thing with Caleb is starting the company with me, we're gonna pick up all these third-party clients. I already know how to do it. So Caleb, uh, theoretically will never have to learn how to do because that's not his, not his department, not what I want him to have to learn because it has nothing to— it doesn't move us forward for everyone to know how to do that. Um, learning how to do the technical was hard for me. Getting the right leases set up, the right coverages, especially in Washington. Yeah. Um, I don't know, it was all hard. Learning how to manage contractors, hard, expensive. Learning how to file all the paperwork, hard, expensive.

Yeah.

Crafting the right lease that gave us the right protections, hard. Expensive. Yeah, hard, expensive. Uh, going through evictions in Washington State, hard, expensive. Oh, oh, I have another story to tell. This is fun.

Um, are we talking about your tenant this week or last week?

Oh yeah, so this is for a client. We're managing an eviction for one of my third-party clients. In court, there's a lawyer that the state appoints, and this is— I'm actually suing her right now. Um, she ambulance chases. What she does is She sits in the courtroom because evictions are always— it's the second, um, second or first and third Friday of every month. So it's twice a month on Fridays is eviction hearings. That's it for Grant County. She sits in the lobby at the beginning of the thing. These are all people who did not book a lawyer, did not get the free state-appointed lawyer. She sits in the lobby and she goes, who's here for evictions? Who here wants an extension? I'll get you an extension. I'll keep you in your rental. And then she just comes in pro bono, represents them, and then every extension she gets, all of the rest of her representation is paid for by the state. So the tenant gets a free lawyer and we just have to fight this random yahoo. So I'm suing her right now. Uh, fun, fun fact, she threw out a new thing in court today and I thought this was interesting. Today? Uh, no, this was, uh, sorry, I was like, dang, I know the last one. Sorry. So, so on Friday she threw out the— she threw this out. She's like, hey, um, in Washington State, I believe this is a newer law, uh, like COVID-era law, uh, because Washington CARES Act— based on the CARES Act, if you have a federally backed mortgage, you have to post a 30-day pay or vacate, not the state standard 14-day pay or vacate. And vice versa, the 30-day doesn't supersede the 14-day. If I posted a 30-day but the mortgage was not federally backed, it should have been a 14-day, and they can throw out the thing and make you restart completely from square one, like post the first notice again, and their 60 days resets. Now, it happened to not be a federally backed mortgage, but in court, my lawyer and my head of property management do not know what type of loan the owner happens to have on the property and whether or not Fannie Freddie backed it. So she was banking on the fact that she can get the extension and get our taxpayer money to pay her to keep a non-paying tenant who hasn't paid rent in 8 months inside a unit. Fortunately, it's all public record. I swore in and I absolutely thrashed her for about 10 minutes. She questioned, uh, my ability to, uh, understand loan products. Conveniently, I have my, my, uh, through NAOP, my certificate of advanced research in commercial real estate finance. I, I actually have a professional certification in doing this. Um, it's also basic public record, and she knew that. And so she, she tries to throw these curveballs. All that to say, um, we have stuff like that where I'm like, we're an hour into a court hearing for someone who hasn't paid in 8 months Um, our client has already spent $4,000 in legal fees trying to get this person out, and they get a free lawyer who can throw whatever she wants with no time for us to prepare in a court hearing. That's brutally hard.

Bogus.

Yeah, that might be one of the hardest things. Fortunately, um, I know laws better than my lawyer for real estate. It's all— I mean, I, I will out-lawyer most of the lawyers. We thrashed them. It was fun. Can you write off property taxes, um, or does that apply to income tax? Uh, do you got a property tax as an expense? So it goes against your actual NOI on the property. So that is, it is a direct, it is a direct write-off.

Make sure, um, yes, put some money aside to pay taxes. That comes from learning how to underwrite the deal. Yeah, we got something in depth here. He's gonna throw a lot of stuff out here.

What do you think? Here's the next one too. This term for private money lender, it's a bit lengthy, give me a second. Uh, $150,000, 15-year loan term, 14% interest rate. That's very high interest.

Um, well, at the same time, I'll just jump in here. Um, it doesn't— we— that's not a piece of the deal. If you're buying at a 20 cap, awesome, take it. If you're the— that depends more on the deal than it does just the note. Is my first take. First and foremost, you gotta have a good enough deal first. You tell me what you think. I don't love the loan terms either, but $180,000, I don't love monthly payments.

I think that's really expensive debt. My first thing is you can definitely afford lower interest rate.

Crazy.

For sure. Um, anyone who's charging 14% is probably not doing a 15-year loan term. Uh, not that you can't get it, it's just that that feels usurious having, you know, interest rates are 7.5% right now for bank going to 14% on a 15-year term. That sounds crazy. Yeah, that's ridiculous. No, it's expensive. Plus you're giving them equity. I think that's expensive is what I think. Uh, that's, that's my take on it. I don't like it. Yeah. Uh, but it depends on the deal. If your deal is like, oh yeah, cash flow is 30% cash on cash and this gets the deal closed, sure. Take it. But I would find cheaper money because there's cheap— you can get hard money cheaper than this. I've got quoted hard money cheaper than that. And if you cash flow enough to service that debt, you're going to qualify for bank debt. I would rather have a partner to have over 19%, so we'll say 20%, at least 20% of the deal, so they sign on the debt with you. I'd rather have a partner that qualifies for the debt and get this into 7.5% bank debt than I would hold this at 14%. Because if your deal can service 14%, uh, you're gonna have the DSCR requirement to get into a conventional or a non-QC loan. Bingo. Okay, that's it for questions. We're at 48 minutes.

That's—

that's wrapping it up. Yeah, that's— that's pretty decent for everyone watching across all channels, uh, which is— we have quite a few here. Uh, we really appreciate it. So thank you for joining. Uh, see you at Northwest Action Summit. Thank you. There. Yeah, a discount code is LIVE10, all caps, the live, live, the number 10, all one word. We will see you there. Very, very excited. And thank you again for watching. We're gonna do a follow-up episode tonight just on Instagram on either Caleb.Hommel or Christian Osgood. We're going to talk about Dago Sales and some of the other projects we're working on in Texas. That is a personal one, but feel free to, uh, to stay tuned for that. Until then, we'll see you all on the next episode.