Finding On Market Deals in Any Market - Live Deal Analysis

We're going to get rolling. We have 3 major topics we need to cover. We're going to be covering the 50-year mortgage. We're going to cover that live. That is an option that is going to be probably rolled out here. I think I have kind of a unique take on it, so I'm going to share that. Good. See, people can hear me. That is a very positive start. Second, we're going to talk about rent control and rent freezes. So that's an actual crazy thing that looks like it's going to be happening in New York. And third, last but not least, we're going to go over exactly what I'm doing to find deals on market. Every time I choose a new market, I've helped mentees line up deals all over the country. I will help you guys do the same thing. I'm going to show you the methods that I am using that consistently gets us deals, how we're doing it. I'm literally going to run through the process with you guys. I'll screen share and show you exactly what I'm doing. It will take like 10 minutes. If you're not doing deals this way, it's going to blow your mind. It's literally the simplest thing I've ever done. So I am hoping that this is everything that you wanted and more out of the live. Ask questions as we go. I have the chat right here. I can post it here. So I hear some start all over. Yes, sir, Adam, I'm starting over and rolling. So, um, this is exactly the strategy that we use. Let's first break into this 50-year mortgage, and then we're going to go down the line. By the way, uh, if you guys are not part of it yet, there's a Free School community where there are thousands of members who are weighing in on their deals, sharing their wins. I'm actually posting more deals that I am finding to that platform, as well as other people who are partnering up funding deals together. If you are looking for momentum, a community is completely free. I will never charge for this community. SKOOL. There's a link here on the YouTube video. You guys should check that out. That community is growing like crazy. You should be a part of it because it costs you nothing. If you're here on a free live, why not? Okay, 50-year mortgage. I've had a bunch of people post saying this is the dumbest thing that they have ever heard of. I have a contrary view. I completely disagree this. So 50-year mortgage, you have options and you have obligations. And when you are a business owner, when you're managing your personal finances, you are trying to manage your obligations. Now you can, on a 30-year mortgage, pay at a 15-year rate. Dave Ramsey will say, yeah, you can, but no one ever does. If you have this much discipline, you can come up with a game plan to go ahead and pay your mortgage down early when you're doing really well. And if you have a fallback, I think a 15-year or shorter AM on a mortgage is a stupid idea. What happens when you lose your job? You have this big obligation. Now you're at a greater risk of losing your house. I don't like risk. If you're risk-averse, a 50-year mortgage doesn't really change too much except that more people qualify and your payments will be a little bit lower. Now you have two options with lower payments. You can invest the Delta at, let's say, 8% in the stock market, not even going into real estate, a measly 8%. As long as your interest rate on your house is lower than 8%, you're going to make money on the money. 50-year mortgage makes more sense. If you lack that discipline, you can just pay it off faster, but now you know, hey, my monthly payment is lower in the event that anything happens to my game plan in the next 50 years. What realistically ends up happening though is partway through this mortgage, just like the 30-year 5, 7, 10, up to 12 years later. Basically everyone moves somewhere. Almost no one pays off their 30-year mortgage ever. So to Dave's argument of, oh, lack of discipline— no one pays at a 50-year rate— it's the same thing with the 30. No one's going to actually pay the thing off except for a select few. So lower your obligations, max your options. I want to be obligated to pay as little principal as possible so that I get to choose How much principal I want to pay every month. So I think it's going to be a great thing. I also don't think it's going to massively affect the market. Probably going to be a little higher interest rate than 30-year. Some people will take advantage, some people won't. Should be good for the housing market. So prices will go up probably a little bit, but people are talking about it like the dumbest thing ever. They said the same thing about 30-year mortgage. So that's my opinion there. As far as rent controls go, I started in Washington State, which has now introduced rent control officially. Like every state that has ever tried it, ever, with no exceptions, rents are skyrocketing, rocketing, and the cost to repair is going up. When you are rent capped, you get supply inefficiencies. You have families who shouldn't be able to afford to live in this 4-bed who might have had 2 kids move out. Now you have 2 people, but they can't afford to move because their rates are locked. You get market inefficiencies. This pushes down supply. If you didn't follow that, You have people who have a space that's bigger than what they actually need. As their family changes, they have all this extra space, but if they move, their rent goes up to market rate. If you have rent controls, you have these random market inefficiencies where families actually have a harder time finding units. For this reason, market rent keeps getting pushed up. Inefficiencies— you have less supply, same demand— it pushes prices up. What happens when you do that and expenses keep rising and owners are afraid of falling behind in rents so their buildings get devalued? Everyone maxes how much they can raise rent within the rental parameters. If you have endless upward pressure on rents and you are messing with the supply, you're reducing supply and creating inefficiencies. Economics dictates rent always goes up. Rent control is always bad for the tenants. It's kind of awesome if you're a landlord who already lives there and already owns there. Um, in my leases now, I've just disclosed to the tenants, you sign a lease with us, your rent is going up 7% at renewal, period, end of story. That is happening. It automatically happens. Now we can renegotiate closer to the actual renewal, but as a default, I wasn't doing 7% increases. It's insane, but that's where they put the cap. That's what pretty much everyone's going to do. Now New York is talking about freezing rents. I'm also— this for New York City— I'm also seeing a lot of proposals that they're putting through that's going to increase expenses. If you increase expenses and you completely eliminate the ability to increase rent through a rental freeze, the supply problem becomes even worse. No one will buy there. No one will renovate there. That's the worst thing you can do. There's no way out for a landlord. Who is going to inject capital into a business that is actually dictated that it must lose money. It's not going to happen. So if they push that through— that's been a question I got on my channel. Some people have been kind of pissed about the facts, but we're going to turn to ChatGPT and we'll see what it says about rent controls. So don't blame me, let's blame the AI. Let me go ahead and share my screen. I actually typed this in right before this, so I'm gonna allow screen share and let's look up entire screen. All right, you guys should see a whole bunch of me here shortly if that works correctly. I'm gonna try this one more time. The fun of live. Entire screen, select the screen, share the screen. There we go, that should be working. Okay, so short-term benefits: affordability. This is great. I'm a tenant, I'm in here. We've protected our affordability, so rent control caps are now blocked. By the way, let me know if this doesn't screen share for any reason, uh, because I'll be using this again as we go, and I don't do this too often. Predictable housing costs reduces displacement temporarily. Sounds amazing. People vote for it. Every long-term effect— and by the way, I prompted with Is rent control actually good for tenants in the long run? I didn't lead this thing at all. Just, is it good? Is it bad? Rent control is good in the short run, harms tenants in the long run, period. Reduces supply, deferred maintenance, quality decline. Why would you invest in a business that loses money? Landlords won't do it. Misallocation of units. This is what I talked about. You get locked into a unit that otherwise might have become available for a larger family. Inefficiencies. Higher market rent for non-controlled units. You're scared of falling behind. Reduced mobility and opportunity. Empirical evidence— this is every market ever. You have minimum short-term upside as tenants, and for the rest of time, you are absolutely hosed. This is just how economics works. It is all factual. There's a ton of data behind this. But for anyone who votes in a rent control, it's not that your landlords hate you. It's if you fight the people who are trying to provide housing and make it expensive for them. The costs get passed through the consumer or they leave the market and stop renovating. There's no other options. If you think it through, that's how those work. And it looks like the screen share is not working again. So I'm gonna try this one more time, but I did read verbatim exactly what, uh, exactly what it says there. Let's see if I can do a screen share on a specific screen. If it doesn't work, then that's fine. I'll verbally go through how we're doing some of this. I'm going to try to share a specific screen. So if I share this screen, who can see this? Aha, this seems to have worked. Okay, getting some thumbs up. I think we did it right. All right, so hopping back. Sorry, I'm making sure friends on Instagram get their questions answered. Hopping back to our screen. Okay. So I chose a random market. I am not involved in St. Louis, Missouri at all. I have no properties here. I have a new mentee who signed up earlier today. And so I just ran this drill and I thought this is one of the most valuable things that we do. So you pick a property. So I'm going to go through and what you're looking for is not a price. The main objection that I get is there are only bad deals listed online. There are no deals listed online. This is an indication of what someone in their dream scenario would like to get paid to sell their property. All this is saying is this building is open for negotiation, and here's the dream price that that owner might get. There is no such thing as a good deal or bad deal on a listed property because you're going to work the actual deal. So we'll select a building that looks kind of cool. In this case, I kind of— this one looks kind of cool. $4.3 million, 74 units, historic. I'm a sucker for brick buildings, so St. Louis kind of has a lot of advantages here because there's a lot. But there's a 36-unit for more than this. This is actually kind of interesting. So I'll go ahead and we'll click this listing. Let me make it share that screen because it is being a little bit finicky, but that's okay. We're learning together. It's live. Share screen. Let me see if it'll let me share entire screen this time, or if it's just going to say no. I think it's going to say no. I'll have to do it differently, which is fine. Let's share the individual screen. So what we're going to do is we're going to go into this actual listing though. This one right here. Perfect. Okay. So I'll reshare screen by screen since it doesn't want to do a full share. Don't worry about it. This is going to be awesome. You guys are gonna love this. So looking at the actual deal, first thing that I noticed has been on market for 91 days. Many people go, hey, it's been around for a while. No one's bought it. I don't know what this is worth yet. I don't know anything about it. I do see that there's an offering memorandum available. So open this offering memorandum. Now, if you go through this, I don't know about you guys, I don't want to go through 47 pages on a YouTube Live. If I'm watching this, I'm like, okay, well, Christian, this was fun. If you're going to go through all these numbers, I'm out. What I do want to know is what's actually in here. We have unit mix, we have rent rolls. Looks like a lot of stuff that is all just market projections. It's interesting, but not all that helpful for a quick analysis. What I want to do is I want to actually take this data, quickly compile it, and then I want to call the broker. So first thing I'm going to do is I'm going to download this. Now you can do this in normal ChatGPT. We also have a custom GPT in Multifamily Strategy anyone can use called Osgood. I'm going to go take this that I just downloaded Here's our brokers. Can pull their phone numbers here as well. So perfect. I have this guy I could call. Before I call him, let's go ahead and plug this into ChatGPT. Share my screen one more time since we got a system down now. Welcome. We've made it to ChatGPT. So I ran this similarly, just a little bit ago. Let me try a brand new one. So I'm first going to attach what we just got. There's our offering memorandum. Summarize this OM. And let's assume it would be bank financed. Let me know if the numbers are pro forma, which means guesses or projections of what it could be, or actual numbers. Also estimate value at a 1.25 DRR. SCR. You guys can go back, I'll post this video so you guys can copy this exact prompt if you want. Um, assuming 75% down and a 6.5% interest rate on a 25-year amortization, which is a pretty standard debt product for this size building. You can always change your thing. So in two sentences, It's going to break down all of this and summarize the basics. So I have some intelligent point of where I'm calling. So first thing it's going to do, it's going to summarize this for me. So it looks like this is actually 4 properties, 24, 25, a 2, 3 24-plexes and a duplex. Not super excited about the duplex, but that's fine. They're asking for this. They're built, uh, they're older, which makes sense. They're historic. Average market rents are a little lower. It is Missouri, if that makes sense. We have some occupancy. They're all pro forma, so it looks like we have some actuals but not a whole lot. It's mostly based around occupancy. Most of our numbers are based on pro forma, so we know that this is a best guess, but it's really good to look at ultimately. And if you guys are overwhelmed, it's like the good news is this is doing all the math for you. What's the summary? It's probably worth about $3.6 million is probably the price based on what is hinted here. If we were going to get that close, now you could pay up to— if you do it just right, it could be worth up to $4.8. That's a huge range, but we have a pretty good idea of where the bank loan is actually going to come in. So we have to assume the pro forma is real. We know that's not true. This is going to give you next steps, but this gives me a good run-through. So I know I'm calling on 4 properties, a bunch of 24-plexes, and I'm probably thinking it's going to be a deal closer to 3.5. I don't need to know more to call a broker. Here's what I've just done. I've summarized the deal. I know where the parameter's on. Are on this, but we don't know anything about the deal. Now what we do is we go back to the broker. I'm going to ask them, one, is the property still available? Two, this has been around for 91 days. Stop my screen share here. It's been around for 91 days. For a deal that has been on market for 91 days, there's some reason people haven't bought it. I don't want to open with that, but I'll ease into it. It's like, okay, this is the type of building that I want to buy. So I tell them a little bit about myself as a buyer. My mission here is to establish myself as a ready, able, and willing buyer. So as I'm having this conversation, hey, my name's Christian Osgood. I'm looking at this deal. This is exactly what I'm looking to buy. It's the right size, it's the right unit count. I love the building. Couple questions for you. First, is it still available? If they say yes, awesome, proceed. If they say no, it's like, oh, okay, awesome. I saw this listed on CREXi. I am looking for buildings like this. Is this for sure going to close? Is this Just curious why it's still online, because this is what I'm looking for. Often you can get in a second position to buy a deal. I've actually closed multiple deals that way, but knowing if it's available is really important. Always open with that. It also tells them gently, this is the deal I'm calling about. It lets you intro yourself. It's a, it's a very safe question to ask. And we start talking about the property. If they've had a lot of interest in it, I want to know like, okay, it's been around for 91 days. What's kept this from selling? I'm looking at it. I'm not seeing major pricing issues. Um, I had a chance to look through your offering memorandum. Talk to me about what's happened on the first 91 days that has kept this around. Is there a problem that I am trying to solve? And we're going to get right into the problem-solving part of the deal. What we want to do is talk about the opportunity. This is usually where they're going to let you know, hey, this is a snag we've run into. The income doesn't quite justify what it should be doing. Okay, so we're lower in rents, or we have some deferred maintenance. It's scaring some investors away. There's a partnership problem with the owners, and they're trying to figure out how they want to work the financing. It could be a myriad of things. None of them will show up on CREXi or LoopNet in your offering memorandum. You don't know. That's why you summarize the deal. You get the facts, you pick up the phone, and you start working the deal. I think people who are getting started in real estate or starting to build a portfolio, your most common problem is you think that you are a buyer and they are a seller. You're a problem solver and they are an owner. Completely different mindset. I am fixing something. There's a reason that they are selling it. It is too much time, it's costing too much money, they're doing a poor job running it, they have a partnership pain. There is something where they bought a building and they wanted it and now for some reason they no longer want the building. You need to figure out on this call what they want. What you want is long-term cash flowing, fixed rate debt. It's very simple. You want to buy a deal and you want your income to go up for the rest of your life, right? That's not a complicated— your side's easy. If you can find everything that you want— long-term cash flow, fixed rate debt— and you can give them everything they want, which is solving their problem, you will buy the deal every single time. You just have to figure out the bridge between A and B. That's it. Congratulations. That's all of real estate. You are a problem solver, a real estate problem solver. They are an owner of real estate who has some problem that you need to alleviate. That is it. Don't care about the price they listed. Don't care about their pro forma. I care about nothing on that OM. It's just giving me a basis of where I'm going in. So tell me about the, tell me about the deals. Tell me about the management structure. We talk about the deal briefly. Now you get into the financing question. I've shared this on many videos. You now get into the bankability. Have you had a lender look at this yet? What are you looking at for a loan-to-value? Are we coming in 70% LTV, 80% LTV? You're asking all the rest of the questions in one question. Is the price right? Is there deferred maintenance? Do they have crappy bookkeeping? They have to— they're going to have to explain their point. So if the bank, like, yeah, we're probably gonna look at like 60% loan-to-value with the bank, something's wrong with the property. It's overpriced, or it's underserviced, or their bookkeeping is bad, or there's deferred maintenance. It's like, okay, that's not a great leverage point. What's holding them back from wanting to lend more? And the broker is going to have to justify how they came up with their pricing. What you're doing though, is you're going through a natural sales cycle. Here's who I am and what I'm doing. We're talking about the property, we're talking about the deal, we're talking about the owner motivation, and we're talking about the bank financing. Closing questions. What you've done is two things. One, you may have found the pieces to submit an offer on this deal where it would work. I can come in at the end of this call because I've already done some research on it and I can say, hey, my thought is I would like to come into the 75% leverage point, which means I think the bank's probably— I can double-check this for you guys, but I think the bank's probably going to like this around $3.6, $3.7 million. You're asking $4.2. So I, I have a little bit of price hesitation on this one. If you guys would like us to submit an offer on that, I can get back to you today. Um, if you have some real, some actual numbers for me to run, that'd be very helpful. Um, if that's in the conversation, I can get an offer in. I often win those deals. That's a common thing for them to accept. Or they say no, they're really set on this price. So I haven't solved the problem yet. That's where we get into creative finance options. That's where we get into the negotiation. Or sometimes even better, you can respectfully say like, okay, I am a buyer for this, probably in the 3.5 to 3.7 range. I am a buyer for this asset. If this isn't the deal for me or the owner's not at that place yet, I'm okay to wait. What else do I need to be looking at? You've now proven that you know what you're doing. You've proven you can go through the cycle. They've given you information. You have given them an offer. I was a broker for a couple years, but as more importantly, as a deal buyer who's bought hundreds of units, what I found is when you have these conversations, you're actually able to negotiate, talk, submit offers. A broker is going to move you to the top of your list. They're like, hey, this is the guy or gal who I spoke to who negotiated and offered on the call. When I send them deals that work they close deals that work. I believe that they can buy this. This is where they stop asking you for proof of funds. They stop asking you for all— they just go, hey, I'm ready to write this up, let's go. They send you a contract, you sign it, you're buying real estate. This is how I'm finding the on-market deals, and this has been game-changing for me. Now diving into the questions. Oh, and I have one. So you guys start asking more questions. I'll get the first one. We'll go— I'll bounce between Instagram and, uh, YouTube and all the other places that we kick out to. Are we running a Black Friday sale? I have made a decision on this. I'm a little bit later on making a decision on this. We don't usually do any sales in Multifamily Strategy ever, and in fact, uh, we haven't done in quite some time. We will. I just decided this. My sales team will hear from me tomorrow. So yes is the short answer. If you are interested, book— here's what I'll do. I'm getting together with my team after this call. I'll send them a message. Also, there is a webinar that you can register for on creative— not creative finance. That's a lie. On creative real estate.. It is the debt and equity structures that I use. I've only actually run this one presentation one time before. I'm probably not going to run it again. So if you guys want to do this, this will be a live presentation upstairs in my studio right after this. So top of the hour, you can register for it. I think we still have, we have limited spots, but I think we have like 20 spots open. So ostensibly most of you guys can attend that. It's going to go through creative finance. It's going to go through creative deal structure. How to close deals with or without partners, with or without banks, with or without money. Uh, it's multiple strategies, but I've simplified what I've done in past webinars. We haven't run a webinar series in a long time. I'm running it right after this call. You guys can register for that. Um, I'm not selling anything on it. It is all information. At the very end of the call, I will give you an invitation to book a call with my team if you're looking for direct mentorship. And if you're not, you'll get everything you wanted out of the information. If you book a call with my team there, they will go over the Black Friday pricing. So I will make sure that they are aware that you will get the— anything that we run for Black Friday next week, if you want to join the mentorship, I will honor that on this. I'll let the team know going in. Good question. So I have not advertised that. There are no ads for this yet. Um, I will run a Black Friday promotion and it will be Lifetime access to everything that we launch on Multifamily Strategy forever. No upsells, no subscriptions, small discount. Elijah, how do we raise the money though? So you always start with deal debt equity. Conveniently, this will be what I cover right after this. So if you have an hour after this, I'll probably go about 90 minutes, but I will go through the, like, the exact technical strategy of how you do this, but The quick summary is you're going to start with the deal, you're going to look for the opportunity, you're going to do exactly what I just did here, and you'll work directly with owners. Those are our two main pipelines. You find an opportunity, you find the most appropriate debt product, and there's a lot of them in commercial real estate. So there's seller financing, there's bank financing, there's direct-to-Fannie Freddie financing, there's DSCR loans, there's private capital, there's bridge debt. I can go on and on and on and on and on and on and on. But ultimately, you're going to look at a deal, what the owner wants, what you need. You're going to select the available debt product that makes the most sense. This right here is 70 to 100% of your money. I've done multiple 100% financed deals. Many of my students have done 100% financed deals. So you could be deal debt done. You may not need to raise any additional money. It happens more frequently than you think. It's rare, but not that rare. If you have additional capital and you have a deal and you have a debt product, you've already figured out most of the money. You have the opportunity, you have a deal that's going to make money. I promise you there is not a lack of people who want to make money in real estate. I absolutely promise you. 5 years of running Multifamily Strategy, and we're a 2,500-person community. I teach 50 students maximum at a time. We have never seen a failed capital raise ever in the last 5 years. When you negotiate an opportunity and it makes money, example, you find a deal where you need to raise $300,000. You've never raised a dollar in your life. And you absolutely believe and can show mathematically how your deal is going to make $1 million, everyone here would find $300,000 if you knew you were going to make $1 million. If you were 99% certain that you were going to make $1 million, you could find $300,000. The capital raise, I promise, is not the problem. It is the scariest part if you haven't done it before because you're like, where's the money going to come from? How do I— the money will come from your opportunity. You have to have a product to be able to raise capital. Otherwise, you're raising for nothing. You can't pre-raise for real estate. That is a myth, and that is a horrible strategy that I see perpetuated online, uh, for the last decade. Do not pre-raise capital. Those people, when you actually ask them for the money, 99% of the time flake. The money you thought was in isn't in. You have a deal, you have an actual product to pitch that will actually make money. You present that to interested people who want to make money in real estate in your area The deal is all of the value it will unlock. That, uh, there's a request for a link. The links for both our school community and for the, uh, for the webinar is in the, uh, video description here. I can also post it here as a comment though. It's multifamilystrategy.com, and turns out I cannot, uh, talk and type at the same time. So multifamilystrategy.com/workshop. Workshop because I messed up my webpage and /webinar doesn't work anymore. So multifamilystrategy.com/workshop, uh, will take you to the webinar. I'll post that in the chats here as well. And that was the other, uh, question here. So yes, absolutely. Those are, uh, that was posted here in the chat and is available in the, uh, video description as well on, uh, should be on all platforms. I'm not sure if it shows up the same on Instagram, but Sure, can we JV deals with you? Now I am very specific, and I think everyone should do this. You need to know what your buy box is, which is essentially what are the parameters that I buy. I buy in a 2.5-hour radius around Dallas-Fort Worth, and very, very, very specifically, if you have downtown stuff— because I own a lot of downtown Ephrata, Washington, in Central Washington— if you have a mixed-use building in downtown Ephrata, I own most of the rest of the buildings. I'm still buying there. Only places that I'm going to buy. To partner with me, I don't partner with people on their first deals because I train people how to buy their first deal. I do not want to take your money. I want you to buy your deal and I want you to own the deal. And that is my entire life's work has been educating people how to buy deals with or without money, which means you don't need me to be a partner with you on your deal. If you happen to want the operating support, and you're within a 2.5-hour drive of DFW, I could be opening to partnering. I also have a property management company that can help you run the deal where you don't need to give me any equity. So yes, I'm open to partnering. Most of the time I'm going to be doing my own deals, and when I do partner, it's with people who've done a few deals before where we're actually both bringing something to the table. Otherwise, I would rather give you all the tools to buy it yourself. Looking through the, uh, other questions. If you have any other, let me know. I'll hop over to Instagram too. So anyone on, uh, any of the horizontal posts here, I'll see it here and be able to post it to the screen. For everyone else, let's jump over to Instagram. I do have a few here from Nate. What about solar finance terms? I've come across numerous brokers that are either not wanting to present it or just telling me that the seller won't go for it. So seller financing is not available on every deal. That is a myth that you can magically get seller financing every single time. Seller financing is for someone who has a high equity position and wants to seller finance. You're almost never going to convince someone to do seller financing. That's not a thing. So when I'm going about seller finance terms and I'm talking to the broker, I'm going to go through what the conventional financing looks like. I'm going to go in the order of operations. Is it available? Let's talk about the deal. What has it stuck on market? What problems are we solving? How's the bank going to look at this? We're going to assume conventional financing all the way through. You're establishing yourself as a buyer, not as a broke person who needs creative finance. If you bring up creative finance early, it says I don't know what I'm doing. If you bring it up as an actual solution to an actual problem you usually get a yes on it if it's available. So with seller finance terms, if they don't want to present it or the seller won't go for it, then it's not available on that deal. It's not a viable solution for what you're doing. However, and I will cover this in more detail with an actual like slide present— actually put together a whole presentation on it— I will share in that webinar that I just referenced how we're framing the seller financing and how that works as a solution on a technical level, we'll run through that. But that is how you're going to do that every single time. You're not going to convince someone who doesn't want to sell our finance. If I want to be cashed out, I want to be cashed out. There's— that's the option that's on the table. Deal, uh, deal debt equity. So it is or isn't on the dropdown box of things that could work as a debt product, but it has to be a solution that makes sense to the seller. Yeah, great question, by the way. From Elijah here, what is the cash-on-cash return, or what cap rate are you looking for? So cap rate, actually, this has been one of my, uh, my, my least liked videos back when I was on BiggerPockets consistently. Cap rate does not matter. Now, there's two cap rates, and I think a lot of people don't know this. You have a deal cap rate— that is what your deal is doing— and there's a market cap rate. They are not the same thing. Market cap rate is how you're actually valuing the deal. Your day one deal cap rate is going to change immediately after you close. You're going to have your own management plan, your own expenses, your own income. Likely, if you're coming into a property, your mission is to be a better manager than the last person. What that means for you is that you are actually going to increase the NOI and your cap rate is going to do— you're going to have a better cap rate, a higher acquisition cap rate, uh, as you push up your actual books and numbers. So you're doing two pieces of math. You're doing day one math and you're doing future math. I'm not going to buy off a cap rate. I'm going to buy off of cash flow. If I have a low down payment, lots of cash flow, that's a deal that's going to work. I'm trying to buy deals that increase my income. And structure them in a way where I'm never going to lose them. The only place that cap rate comes into play at all is market cap rate based on where my deal is going to be. If I have X amount of income, I get X amount of value, I know that I can refinance. If I have a 7 or 8 year debt product and I know I'm going to try to refinance around year, let's say, 5 or 6, so I have lots of margin in there, I need to make sure that my number is going to look really good so that I can get into a long-term and continue having long-term debt products with fixed variables in the future. So not necessarily looking for a specific cap rate. I think that's a— it is not the best way to look at a deal. What really matters is that debt service coverage ratio, DSCR. If that is high, that is your total amount of money that you make in the deal, your net operating income, in proportion to your debt. How much money do I have left over to pay my obligations and to pay myself. If that is at a great margin, let's call it 1.25, maybe 1.3 or higher, I try to hold those so stabilized 1.5 or higher. That means I pay myself at least half of what I pay in a mortgage on a property. If I have that on every property, I have a lot of margin. It is very, very, very hard to ever lose a piece of real estate that is sitting at a 1.5 DSCR, and that has guaranteed me With the 1.5 DSCR, I am definitely cash flowing. I can definitely hold it. That means I've increased my income for life if I'm holding at a 1.5. That is a better metric than trying to chase a specific cap rate, because cap rates will change on you. Really good question too. I think that's been one of the things that got overpushed by BiggerPockets. Uh, from Backup Videos 5164. Are balloon payments based on, um, what a 30-year mortgage payments would be in terms of principal interest? So the balloon— balloon payments is essentially a common amortization in commercial real estate, are most commonly 25 years, sometimes 30 years. The balloon is when that note comes due. So you're paying on a schedule as if you're going to pay it off in 25 or 30 years, but most balloons in commercial real estate, most of them are 5, 7, and 10 years. That's the most common. Very few go beyond 10 years, though there are 30-year debt products that are technically available. They're not very common and they're usually not very good. So I'm looking at long-term debt is going to be 7+ years. So I'm looking at 7 or 10-year debt on commercial debt with— which is your balloon on a 25 or 30-year amortization schedule. Occasionally, and preferably, you stack a couple of years of interest only on the front end of those. Many banks and, uh, Fannie Freddie debt is usually negotiable to add that. You want to start with the lowest, just like the 50-year mortgage. Paying down your debts is awesome. Lowering your obligations and increasing your option to pay down more principal is really what you're trying to do. So what I want to do is have the lowest obligation. And if I have excess capital, I can choose to pay down my mortgages faster, or I can use it for business expansion, or I can pay off a different loan from all my other lower— you want as close to interest only as you can possibly get. Always go for the longest AM or interest only. Mathematically, it is impossible to beat as long as you don't take the extra savings and spend it on the sports car. Your savings from lowering the AM or going interest only goes back in your portfolio to either pay down debt or to increase your income. It does not go out of your portfolio. That is where there is danger in not having an amortized schedule. That's what the bank is trying to hedge against by adding a 25-year. Hope that helps. And Nate asked in chat here, uh, thank you for the clarification on the seller financing. You can add that to school. It does exist in the school course. So for everyone who's already part of the mentorship, there's going to be a whole bunch on the debt and seller financing in there. Uh, if you're already a mentee, there's no reason to attend the webinar. Not because, again, nothing to sell you on the webinar. Literally, I'm not even going to mention the price of anything. Like, nothing to sell you there. Uh, but if you're a mentee, all of this is already covered in the course and in depth. You can break it down in the course, the mentorship. These are things that we cover in the calls. So You can watch it if you want to. It might be a little bit redundant for you, uh, so it's a fun refresher video, but all of that content does absolutely live in the MFS course and mentorship group. A lot of it is the content that we'll go through on a pretty regular schedule, but it's a summary of the creative finance, the creative equity, the deal structures that work, the deal structures that don't work, and how we are actually making sure that we make money on every deal. But the key thesis here is if you only buy income, your income will only go up. Hard to argue. Uh, so that is my base thesis. It has not been proven wrong yet. If you continue to increase your income greater than your expenses, your income will in fact continue to go up. Oh, this is a fun one from David. Okay. Once you start a relationship with the property owner or broker, how do you maintain and nurture that relationship over time? I have a lot of real estate questions that come up. I have a lot of thoughts around real estate. And if you're active in real estate, ask relevant questions. I don't keep a spreadsheet or a schedule for following up. I remember the people who are important. I thank people when I, when I do whatever they advise I do, which has been huge for me. Example, someone said I need to put a new roof on a building in a couple years. 2 years later, I put a new roof on the building. I called them and I said, hey, I just got the appraisal back. That was a fantastic piece of advice. My tenants love this. The building is in better condition. My insurance went down. You were absolutely right. Thank you so much. They then drove to the property. We met at the property. They were very impressed with what I did. They sold me another building because they're like, hey, you're the only one who's ever actually come back and did what I said they should do. This is amazing. Uh, that's one of the main things I do— be grateful to the people who got you to where you're at. Now, I've interviewed hundreds of owners and probably, well, definitely over 1,000 brokers. I've had so many conversations. I don't follow up with every single one of them, but when there is something relevant, I reach out. I always thank them when I apply what they say to do, but I reach out to them with questions on the markets, on, on cap rates. I have them weigh in on deals. You'll find out who your key people are pretty darn quickly. Some people you just don't develop a super close relationship with. Sometimes they just know who you are and you're operating in the same market and you like each other fine. There's other people who end up becoming core people who you go to for advice. But as long as you keep your questions relevant, you ask great questions, and you, you're generally helpful and appreciative, you get really deep relationships with a lot of these people. Many owners have become some of my best friends. I've partnered with some of my brokers on deals. I've become very good friends with some of them as well. So I'd say kind of like you build any relationship, you'll have different levels of closeness with different friends. But when you think of them Let them know when you apply information that they gave you. Reach back out and thank them and tell you— tell them specifically what their information did their business. I actually do have a quick story on this, but my old CoStar boss, I had so many takeaways on how I pitch, how I present, and how to control the deal based on my time at CoStar. I'll name drop him right here, John Hickman. Uh, the guy's a giant. He's like 6'4", titan of a man. He pushed me really hard as a sales rep. I recently called him after not talking to him for years, just thinking about him, called and said, hey, this is— these are some of the lessons that you taught me that I applied. Some of them I've taught to my students, and some of those students have actually bought a lot of real estate off of the lessons that John taught me. Reaching back out to John and actually saying thank you, I don't know that he's ever had any of his past employees do that. I can almost guarantee that I have a stronger relationship with him than anyone else, or probably many of the other people who have worked with them. It's not like a big strategic thing, it's just a normal human thing to do. But if you do that, you know, you'll build better relationships than almost anyone else. Gratitude is a huge thing, people just don't do it. Elijah, I live in the middle of nowhere, literally. Is this possible virtually? I live in Twentynine Palms. Yes, it is. Uh, Caleb Hommel, arguably my most successful student, he's definitely top 3. He bought his first 4 deals. He got to 50 rental properties or units investing from, uh, from San Diego in Texas. And he was in southern border towns, you know, McAllen, Laredo. He eventually did do a deal in Houston and got into more core markets, uh, but he did it all remotely. You can absolutely do it. Uh, your ability to hire the property manager to make that happen is the keystone of that entire thing. Thing. Bad property manager will kill your portfolio. A great one can make you unbelievable amounts of money. But it's all— that is the key cornerstone piece. Absolutely works remotely, but if you're going to lose your ability to reach out and often touch the property or be involved in the management, the right management company and person, like key person in that company, is the key to success in that model. All right. And I think, I think that wraps up our questions for today, guys. This was awesome. And we have about 15 minutes, which gives me time to get a sip of water and prep for 90 minutes of, of more going live. That webinar has been— I've actually had a lot of people reach out Um, this is a refined version of what we did a long time ago. I think this is much better, much simpler, and I think the points we cover are all very, very specific. So I'm very proud of what we put together here. If you're trying to get into the creative side of real estate, I absolutely believe this will be the best use of your time you could ever put in your business. It's completely free, and I will sell you nothing on this webinar. I guarantee you. I'm going to talk about creative finance. I'm going to talk about seller finance. I'm going to show you deal examples that I have done and other people have done in correlation to these different strategies. And right on topic with our question from, uh, from Instagram, from Nate, I'm going to talk about when seller financing is not on the table, how do you continue to close zero down strategies with a bank? And I'll give you a hint, it's not subject to and it's not syndication. Those are not the models you're going to use. I've been able to do this at a really high level. And what I found after years and years of pushing through this and making my own sets of mistakes, the answers are much simpler than I thought they would be. So you guys are all invited to that. That is in the chat. I also posted that a little bit earlier in our chat. It's also in the video description here. That is completely free. I do have limited spots, but there's, right before I went in, there's like 20 spots left. So if you guys wanna join that, be an absolute privilege to see you all there. So with that, Everyone have a fan? Oh, I'm actually going to get another question. I might have got one more. Oh, okay, there's a few more questions. Okay, fine, fine, fine. We'll keep that, we'll keep the fun rolling. Um, I will end in 7 minutes so that I can get a drink of water, and quite frankly, I like doing the webinar in my black shirt. I like being on brand, so I'll, I'll swap clothes, get a drink of water. But I have 7 minutes, let's answer these. David, how'd you go about finding a mentor when you got started? My first mentor, uh, was a— I'm gonna get a strike on this video for saying that he was a dipshit. He was an idiot. Um, he ended up losing his business twice over and, um, ethically did not make a lot of— did not make a lot of good choices. Um, I learned a lot about creative finance from him. I learned a lot about how not to buy real estate. Ended up working for his company and then left his company, uh, as his business practices started becoming more apparent. Um, other mentors, much more valuable ones. I looked at the people who've done what I want to do and I joined their group. Some of them have been paid. I've done paid mentorships. I've done six figures of paid mentorships. I, I've learned a lot from some of those people. I've also had some that were a complete waste of time. There's a mixed bag. I have done, uh, so that's part of it. The other part is I just interview the people who've done what I want to do. A guy in Central Washington had over 100 units. He paid them all off. Sat in his office, took him out to coffee. We drove his portfolio. We talked about what he did and best practices. I took a lot of the things that he did and other people have done all over the country, and I just compressed the time. I said, hey, you built 100 units in 50 years. What does it look like for me to build 400 units in 2 years? It took me 5, but I was able to take what he did in 5 decades and compress it into 5 years. Because I did the things that he— I avoided things that he told me not to do, and I did the things that he told me to do. You can take all of this knowledge, just find people who've done the thing. From Emerson, can you manage apartment buildings in the USA and live abroad? Um, do you have any students doing so? Yes, we have students in, uh, Canada investing in America, which is not as big of of a job. Uh, we have, uh, I have a couple students who are in China who invest overseas. Um, I have an Israeli student, I have a couple of European students who are, and they're all investing in the US for the reasons that US has some really cool tax advantage and has a really interesting real estate market. We have a lot of good debt products, and the real estate in the US is really good, uh, for a lot of reasons. All of those students, it's, it's the same thing as investing out of state. Investing out of country is Basically the same thing. I still recommend you're buying deals that are big enough to justify traveling out and at least walking the property before you buy it. Do not raise money for a building you've never been to. It's a physical asset. The beauty of real estate is you can touch the physical thing. It has to be worth the flight over. That is the one rule for out of country. You need to see the building before you buy it. Do not delegate that. Other than that, same rules as out of state. It is a property management game. Get the right team in place. Absolutely, you can do that. I've had people do that successfully through Multifamily Strategy for a long time. All right. I think that is a wrap for real, guys. Thank you so much for spending the time. I appreciated the last 50 or so minutes with you. Sorry for the audio problem at the beginning. Hopefully, hopefully YouTube lets me edit that in the beginning. Otherwise, no one's going to watch the recap of this, but we'll do the best that we can with the pieces we have. Thanks for hanging out here today, and I'll see you guys all next Wednesday, and hopefully many of you in about 9 minutes.