Development? Whiteboard Wednesday

Work or it's not. I am at the 38-plex. As you can see, got a little bit of land here, and we're gonna do Whiteboard Wednesday from this land. We just got a brand new development going in way over there. Got a very loud dog and a brand new wall that got put in by that developer. But we are standing right now, we being me, because Christian's working on the cabins over in Union. I'm standing on our future development site. We are going to be building a bunch of brand new townhomes here. This is going to fit in with the brand new housing development over there. And the goal of us playing the little Monopoly game in Moses is to buy apartments that cash flow day one with upside. And we want to pick up enough land so that we can actually build onto it and make it better than it was when we first got it. So we've got 228 feet of highway frontage here. We've got our 38 apartments over there. And right here We've just got this huge chunk of land that is pretty useless. However, we are going to come in. I'm working with our builder right now, working with the city, and we're going to put 18 townhomes up here. And the fun part about that is once we get that knocked out, we're going to knock down that front 13-plex, which is an absolute turd. And we're going to put up 60 townhomes over there. So we'll have a 97-unit townhome development, 97 total units. And we got our 24-plex, of course, right there. But happy Whiteboard Wednesday. I see some people in the chat. I'm on my phone so I can read it as you chat and I'll try and scroll through, but if you have questions— happy Whiteboard Wednesday. All Nighter said traveling in automobile, so not much chat for me. Hit the like button though. Hey, appreciate that. Ryan Mitchell, hey. Does anybody have any questions about this site? Because this right now is pretty lame. Piece of dirt, but smack dab between freeway and brand new development. So super stoked about it. The goal, if you can see this little wall here, they're going to extend that wall all the way over to the tip of our land parcel, which is way over there. We actually got water and sewer right over there because they brought it in for the development, and we are going to build a bunch of townhomes from basically that car all the way over, and then we're gonna build another 6-unit over here. Ryan said he closed on first investment property yesterday, triplex. Oh, a lot to the channel. You don't know anything to this channel, Ryan. Congratulations, super stoked for you. Austin said stick with townhomes or prefab townhomes. Uh, so we're doing stick build, and, um, the reason for townhomes over just building multi-story apartments is, at least where I'm at, if you do townhomes, you can avoid the sprinkler systems. And the sprinklers for all the water is where it can really cost you a lot of money. I learned that from one of the guys who actually helped me get started in Moses Lake. He was the first person to ever sell or finance anything to me in Moses. And he said, Cody, you can build apartments. You can do 2, 3-story apartments, put people on top of each other, but it gets super expensive when you want to put in the sprinkler systems. And you got to do that if you're doing multi-story. So the townhome is the way to go. At least for where I'm at. Curious if anybody in the chat's ever done development. This is going to be our very first time trying this out. I don't see any other questions though. This might just be a, a live from the field little video. If nobody's had questions, then happy Whiteboard Wednesday. But I appreciate the 10 people we got tuning in. And if anybody wants to come to Moses Lake, we're going to be doing this development project, and eventually we're going to be knocking down the front building because that's an absolute turd. But if you want to come to Moses Lake with us and you're not in town, or you can get to town, you should definitely join. I'd love to show you around the area. We are the largest property owner as far as multifamily goes by building count in the county. We just passed up the housing authority not too long ago. And about to do a lot of changes. So if you want to see Moses Lake before everything changes, before all the old apartment complexes get flipped, we'd love to have you come out. If you want to shoot us a text message or shoot us a DM on Instagram, and we'll do a Moses Lake day. We can all pile up in the Tesla and I can show you around. And yeah, there's actually some development sites over there too, but Since we don't have any questions for today, main lesson: buy apartments that come with land and make sure that you can cash flow it. But if you can get the real estate to buy the real estate, it's a good deal. Alternative B: I'm in Soap Lake, would love to see what you're doing. No kidding, I was just in Soap Lake the other day. I looked at buying— there's the Lakes Apartments. Didn't end up buying them. They're kind of a turd. But yeah, I was just over there. You should definitely come say hi. Charles, how would you recommend the best way to get a HELOC? Well, if you want to get a HELOC, a home equity line of credit, you should probably get a home and you should probably have some equity. If you don't have equity, you can't have an equity line. It would just be zero. And so you need to get something with equity. So if you want to buy something and you don't own anything yet, deal with that equity. You find a piece of real estate to buy. You're probably not buying a piece of land right now. You're probably buying some turd apartments like the ones that are back there, but those are actually going to be quite nice when they're all done. The main front building is the worst one, but you buy the apartments that no one else wants to take on. You find, okay, what's the project that I can afford to do right now? And once you get into that project, you make it nice. You don't just hold apartments where they're at. You got to make it better than when you come in, and that's what allows you to build your equity. Once you have some equity, whether you do it with a house, whether you do it with apartments. I'm going to recommend you do it with apartments. Totally up to you. There's just more scale. Once you have the equity, then you can borrow against it. Doughton, what math do I study to get good? Well, it's really quite simple, and there's just a couple things you got to know. If you have your income on an asset, income less expenses equals cash flow. And as long as that's a positive number and you're happy with how positive it is, that's really the only math you need to know. If you want to get really deep on it, you can look up what a loan factor rate is, and it's the true cost of capital. As long as your true cost of capital is less than the net income an asset produces, you're positive, as long as you're working with the correct numbers. So just make sure your cash flow's positive. Alternative B said, I own a fourplex. If you own a fourplex in Soap Lake, we should definitely meet up. I love meeting up with owners in Grant County.

That's awesome.

Dowden said, and you really knew nothing. "When you went into your first seller finance deal?" Absolutely, my hand was shaking when I signed that deal. No family had ever done it before. Still, I don't have a family that understands what I'm doing. I try to get them to understand, but they don't. So it was a journey, and when you don't know a whole lot, you can be naive and you can make mistakes, and you will make mistakes. I made a lot of them. But you buy one building and what I did to try and boost my confidence is I met with property owners that had done the things I wanted to accomplish. The first person I ever bought from in Moses Lake, he's a developer, he said, you get your 40 apartments or whatever it is for you that cash flows, and then you go into development because developers are the richest people on planet Earth until they're not. And they're not when they can't afford to hold their projects. So his thing was buy your 40 apartments and then go develop because you'll have the cash flow. For me, it was 110 apartments and now I'm starting to develop, but that's where the equity gains are going to start coming into play. And that's where I go from small multifamily guy with 110 units in a resort to tens of millions of dollars of real estate and equity, not just tens of millions of dollars of real estate. Super important to build your base though, so you don't lose it. It's one thing to buy, another thing to never lose it. Charles, did I have the equity in my current home? Oh, just call up a lender. So if you're in Washington, I use Heat and Ren, and by I, I mean Christian Osgood, because I don't have a house, but I refer to Heat and Ren. He's in Washington and he can place loans up to $100,000 for HELOCs with no docs. So if you're not super bankable right now and you have equity, go up to $100,000 and you don't have to do any documentation to work with him. Christian got his money in less than 3 weeks. When you cold call for an owner, how do you script it such that it doesn't sound like a robot? Will you be a human? If you overscript it, people will know. A perfect script doesn't sound like a script. So when I call people, I let them know where I'm coming from and what my goal is. My goal is to book a coffee meeting. If I didn't book a coffee meeting a long time ago, I wouldn't own any of this. There's 0% chance. I wouldn't own any of the apartments in Moses Lake. I'd have my 12-plex in Quincy and I wouldn't really know a thing about anything in the real estate space. You can get lucky buying real estate, but if you want to be really good at this, you got to go meet with the players. And so I just, when I call people up, especially in the beginning, I didn't know what I was doing. I called them up, let them know what I was working on, what I wanted to do, where I was coming from, and that I just wanted to learn how they got to where they're at over coffee. You're gonna get a lot of nos, especially if you don't know how to talk on the phone. You get super nervous, and that's fine because the people that take your meeting, they're not really gonna care. They get sales calls all the time from brokers. I've got brokers that help me find deals, and they call all the time. My script's gonna be different than theirs, but I just let them know where I'm coming from, where I'm going, and that I really appreciate time to meet with them. Just be genuine, be yourself. Wow, I missed a lot of these chats. All right, Ryan would love to come out and see what you're doing. Moses Lake will DM you after. All right, send me a DM. Dividend Dave has entered the chat. Now we can actually start. It's a little bit dusty out here. All right, Austin would love to hear some Creative clauses. All right, so something I'm doing right now, the, the owner— and I'm doing a refinance on my very first 12-plex, actually, with the same guy I'm telling you about that's helping me develop here. And this guy, I'm doing my refi. I owe him about $550,000. I got to write him a check. What we're talking about, he's gonna help me build here, and we're gonna substitute collateral. So we're gonna move his note to this parcel where I'm at, and he's gonna look at letting me use the half million dollars to put up townhomes, and he's gonna help me build it. So there's a, there's a lot of creative clauses. You can do substitution of collateral, but look, if you're building your business off of clauses, go be Santa. I don't think you're gonna build a massive portfolio off of of just all the creative clauses. If you can just figure out how to buy a bunch of real estate and how to never lose it, you're gonna be better off than everyone that gets stuck in the weeds just trying to be the most creative person. Try and keep it as simple as possible. There are ways to get creative, how to play with money forever. Even when you refinance, you hold on to the notes. But look, if you can just figure out how to buy stuff like this, doesn't have to be perfect day one. Figure out how to buy it, how to cash flow it, how to upgrade it. You'll be a lot better off. All right, when you guys contact other owners in the area, what other sites do you use to find their phone number? So I use Google. We have a video on, on our channel, how to find any property owner ever. My phone number's in there, but you can literally use that to find anybody. Just check that video out. Did you ever do wraparound mortgages? No. I haven't had to. It's dusty. I haven't had to. You can definitely do a wraparound mortgage. I've got some buddies that do wraps and that's fine, but I haven't needed to. And if you want to play that game, you can definitely buy some real estate, but I haven't bought $21 million in real estate to this day. I've still never needed it. So totally up to you how you want to build your business, but I haven't needed it. When you calculate rents and vacancies, do you Contact property managers in town. So I've, like I mentioned earlier, I've got more multifamily today than, than most. I have some small buildings, like there are people with much bigger assets than I do in Grant County that have way more units, but I've got a lot of the small buildings. And so I have a good idea what rents go for, but I just asked the other owners. When you're calling up these owners, you build relationships, they'll usually just tell you if you develop a relationship with them. They always ask me. I'm the, I'm the one that leads market rents in Moses as far as the small stuff goes. So we're the first person to break $3 a foot in Moses Lake, and then we eased off of it. We just did it to say that we could. But, um, I just asked the players. All the players in the space are the people you want to chat with anyway. Rob, what was the development steps, plans with the city approval, or did you talk to the city first. Well, city of Moses Lake's a little difficult to work with. And everybody here knows that. That is what it is. I mean, small cities can be very difficult or they can be super easy. Grant County hasn't really been easy from what I've heard from people. So we're working through that right now, but we're working through an engineer. They're gonna help us out. And as you can see, this project is far from done.

It's just a scrap field.

But as we progress through this, you guys will be the first ones to see it, what's going on. Rob, what kind of borrowing on your assets are you doing? So the debt products I have are traditionally seller financed. I guess traditionally and seller finance don't typically go together, but I think they should. This building is with a credit union. It was originally seller financed. And we refinanced this after we owned it for a year. It's crazy to think that we've had this going for a year. But yeah, so we have a credit union that's financing this currently, and everything else is seller finance and/or private and hard money. All-nighter hider just parked walking into credit union, for those interested in my play-by-play. Great ear candy. Oh, okay. If you do out-of-state investing, do you have to visit the building or can you get inspectors? I would visit. Personal preference. I want to see— I bought stuff without any money. If you want to play that game, and it's not truly zero down, if you have to bring in other people's money, you should probably know what you're raising money for. It would be unwise to say, hey, I need half a million dollars, I've got a project, I've got a vision, and not even be able to see that vision all the way through because You just never saw the property. It's one thing for me to say, hey, I got 228 feet of highway frontage, we're gonna do a $20 million development, it's gonna cost $12.5 million, and we got $10 million of upside. That's exciting. However, if I never came here, I never saw it— like, I had to see this vision before it ever happened. I knew that all those houses were going in before before a lot of other people did, because I talked with the city about it. We figured that out as we were closing this deal. If I never came and saw the site, I, I wouldn't really know that. I wouldn't know because I didn't check it out. You got to go see your stuff. Some people do the sight unseen game. That's— look, you can build your business model off of that, but that is not the smartest way to play the game. If you want to really make it happen, you need to be present proactive and do, do all you can to get a full understanding what you're getting into, because what it looks like and what it actually is, it's not going to be the same thing. Like, you really have to be there to internalize it. So we will wrap up on that unless anybody has any other questions they want to drop last minute here, then I will end up— because we will end short for today's Whiteboard Wednesday. Oh, there we go. All right, got some questions. How did Caleb and Chuck get their properties in Texas? They called every broker in Texas until the brokers knew who they were. Then they flew out to check out the properties. They, they're some of the first mentees I ever had. Christian Osgood and I took them, took them on, and they got discouraged about halfway through taking these calls because our mentorship calls used to suck. We didn't know what we were doing. Done's better than perfect, but we were far from perfect. Come a long ways. We used to meet every other week, but we just kept telling them, hey, just keep doing what you're doing, call the brokers, build your relationships, and you'll make it happen. And they did. So they called every broker until every broker knew who they were, and they got an on-market deal, they bought an off-market deal, and 28 units later, they're working on a huge deal right now. So And we'll talk about that if they get it under contract, because that, that would be big. They'd be bigger than us at that point. Got some loud dogs here. Vicious. All right, Ryan, when looking at an owner and you find that it's tied back to a law firm, are you calling that person or do you keep digging? Well, I would just call the attorney. Attorney could be the owner. I've seen that happen many times. But if you got a phone number, I just call it. I, I mean, maybe that's not the best way to do it, but I see a number, I hit dial. All Nighter Hider: What kind of vacancy rate do you consider conservative when running your numbers? 8 to 10%, but in Grant County, 8 to 10% super conservative. It just depends where you're at. Alternative B said I'll DM you the Soap Lake is builder-friendly. That's what I've heard. I've heard it's super builder-friendly over there. It's not where I'm at. So, uh, Moses Lake, you can build a lot, but getting through the city can be kind of a pain. Is Caleb and Chuck under contract in El Paso? I don't think they're under contract in El Paso. You should ask them, shoot them a message on Instagram. They, they work on so many deals. We just got under contract on 12-plex today. Christian's not on that contract, but I'll assign it into our LLC. But we just did a 12-plex deal off-market seller finance in Ephrata. So when, when we chat about meeting at Soap Lake, then maybe we can go visit that one. Do you plan to invest and develop in Seattle? I own a 7-plex with land in Tukwila, so that's just outside of Seattle. And, uh, man, these dogs are obnoxious. Little dogs are louder than they should be. Yeah, so I've got a half acre in Tequila, and that, uh, that's going to be a redevelopment site where we could build vertical, but we're not there yet, so I don't worry about it. I've got a rule that if we're not there, we don't worry about things, and that's just how it is.

Uh, let's see.

How many of your mentees started from zero to a deal? So we had, uh, vicious—

woof.

All right, um, so we had Evan, Ethan, Caleb, Chuck, and I'm getting like ganged by these dogs. Evan, Ethan, Caleb, Chuck, Uh, my buddy Alex bought a couple duplexes, and, uh, I know there's more. We had Vlad. Vlad bought a 14-plex seller financed, zero money out of pocket. I'm not up in my car, this is ridiculous. Wow, vicious. I guess watch out for those Moses Lake dogs. I made it. That was, uh, that was special.

But, uh, yeah, those dogs can sense fear, as someone said in the chat. Terrified.

All right.

Let's see. Now it's a little quieter. I can actually read through all these questions. When you look for players out of your market, instead of coffee, can you do Zoom meetings? Absolutely. Main thing is, like, you can't build a relationship in person with everybody. But the easiest way that I've found to build a relationship is in person. That may not be the case for you. Vlad did his 14-plex zero down, but he had a VA set up the meeting and then he built the relationship from there. He's going to buy a lot of stuff from this guy. You can definitely do it either way, but I've found success in person and what you choose to do with that is fine. Whether you do in person, out of state, it's okay, but just understand that it's relationship-based approach. Ryan said I have bacon in my pocket. I might. I had bacon yesterday. They probably can sense it. Tour of the 38. We could probably do that. Yeah, we could probably do that. Um, trying to remember the code. I was going to show you guys inside of one of the nice units. I don't— we'll see. I'll walk over and see if I can get us in that one. I'm not 100% sure that I remember the code. When trying to find deals in your specific market in the MLS, can you do debt service for investors if it doesn't cash flow day one? You can do debt service, but if the property doesn't cash flow, you got to pay it out of somewhere. So the main thing is, how do you pay your debt? With money. If you don't have said money, it needs to come from the property. And if the property doesn't pay it, then you probably shouldn't leverage it. But your ability to borrow money and get cash flow dividends off of said money, that's how you scale. People get limited when they cannot acquire new debt that cash flows. Cosmo said, how do you maintain relationships regularly? I call and visit with owners. I just drove around the city with One of the first people who ever helped me get started here. Called him up, met with him, and I got in his truck and we drove around again and looked at properties. But if you do that every month or every other month, just keep in touch, be genuine. Ryan said, could you explain what it means when a property has an assumable loan? Yeah, so some loans are assumable, some are not. Almost all loans used to be assumable, but That's where you got a loan in place. Maybe it's a 10-year balloon, 30-year AMM, and they're 4 years into it. You got a 3% interest rate locked in on a commercial deal. That's better than you're going to get today. Today you're probably going to be at 6 to 7. So if it's assumable, if you qualify for that loan product, they could in theory assign that loan from the current owner to you and you could buy the property. You'd have to come up with money for the difference or figure out some new debt for the difference. Do you reply on Instagram, Facebook, or any social media? If you do, can I send you a text? Yeah, just send me a text, 253-389-3005. I used to be shy about giving out my phone number, but it's all on the internet anyway, and we already put a video how to find everybody's phone number. So it's not public. Just don't abuse that. If you do, then I'll go get a new phone. Do not taunt Cujo. Nice, Rob. Would you ever seller finance a car? First question, why? Just because you can doesn't mean you should. Same with buying real estate. I would not seller finance a car. I see no reason to. If I want to go get a car, I mean, car loans are stated income. To a certain level. So like, I, I stated my income to buy this Tesla. It didn't ask for, for in— or for expenses. It just asked for income. So I put in 6 figures a month in income because top line, when I bought the car a year ago, I, uh, I had $100,000 plus a month in stated income. But, uh, now it's significantly more than that. I've also got a lot of passive expenses, but It's not hard to qualify for a car loan. The main thing though is just because you can get the debt, this is the difficult part. You have to do a lot of due diligence in creative finance because you don't have a banker or someone looking over your shoulder to make sure that you can actually cash flow the deal. The car loan, stated income loans, if you lie and you can't actually afford it, well, it's one thing to buy it, another thing to never lose it, just like the real estate. So don't cheat to buy a car, but, um, As long as your credit isn't completely out of whack, then you should be able to buy a car. Dowden, do you remember the site name that shows population growth? Worldpopulationgrowth.com, I believe, is the site. Edmund, they wanted gross or net income? They asked for gross income, which I thought was ridiculous. They didn't care about my net. And so net income was not important to BECU when I got my car loan. And yes, I do have a car loan on this and I borrowed at like 3.25%. It would be ridiculous for me not to. When you do deals, is there no tenant in the building in the beginning? Typically there's tenants and not all of them pay. So that can be fun. You got to make sure you do due diligence, check bank statements and check who's paying, who's not paying. How have you been building your credit? Well, I got my car loan, but before the car loan, I had a little credit card, $500 secured with BECU. Then I opened a $1,000 line of credit with somewhere else. It was just a little credit card. I never actually activated it, so it was just my little $500 deal. How do you refinance a seller-financed property? Same way that you'd refinance any debt with a new lender or with the same lender. So you can do a seller refinance, or you can go get new bank debt or new private debt, hard money. But you go through a title company or an attorney depending on what state you're in, and then that new lender will knock out the old lien. They'll pay them off, and they'll be the new lien on title. How do you guys screen your tenants? Through your property management? Yes. So there was two questions there. Through PM. And I don't do any of that anymore. I actually have people on payroll that help me out with that. But the main thing is we want to make sure that they don't have any prior evictions. We want to see three 3 times rent, that they can make the deposit, and I want to see a stable job. There are people that have bad credit that have been through a bad rap, but I'm not going to necessarily just hold that against them because I understand things happen. Lumberjack, they know if they did net, they would sell many fewer cars. Facts. They can sling you into debt, they will. I mean, the car sellers, salespeople. Love to see more videos on the property management end and you're operating your portfolio. We can do that. Maybe we'll have a subchannel for the development side. We'll show you as we do more. Thing to stabilize it, and it's completely different business if you want to optimize it. We're focusing on optimizing. We've got vacant land. We're building right now. Our rentals, we're fixing everything up. All the cash flow, we're not paying ourselves. I'm so excited. By the end of this year, early next year, we should be able to pay ourselves $30,000 a month each, we being Christian and I, out of the real estate. But to get there, we have to optimize everything and fix everything up. All the projects that have been neglected,, have been given no love for decades by prior owners. Like, we, we've thrown millions into real estate. Now we're doing hundreds and hundreds of thousands of dollars of renovations. When it's all done, we'll get to reap the rewards. But in the beginning, uh, you have to throw everything into stabilizing it and then optimizing your assets. So we're doing that right now. We'll take you along the journey. Uh, this site I'm on right now will be like a $10, $10.5, $12 million development depending on where it all pegs out, but we'll take you along and show you how all the ops work. How much do property managers typically charge? Typically 8 to 12%, and if you're doing short-term, close to 20, 25%.