Friday Live With Dion Mcneeley - Dion Talk - Creative Finance Live

Everyone going live on the YouTubes right now. And here we are. We're live on both. All right. This is our first time attempting to go live on both Instagram and YouTube. So I have a camera here.

I have a camera here.

I have a Dion here, which is completely new to our lives. So Dion, welcome to the channel. We're going to talk real estate. And while everyone filters in, we're just going to have a conversation on, on some of our real estate strategies. And then we'll start answering questions. So as long as the chats are going, we will, uh, we'll just keep delivering.

Yeah, I'm excited for this. I'm looking forward to figuring out how answering questions on Instagram works because I think we lose them after a second.

Yeah, I guess just one of us keep an eye on that, uh, that phone. If we see something, answer it quickly because it will disappear pretty darn fast. All right, well, we have all of 2 or 3 concurrent viewers on YouTube. We have 10 people on the Instagram, so I'm going to say we're We're ready to rock.

I think so.

All right. Well, if you guys haven't seen Dion, first of all, I don't know what rock you're hiding under. His channel is fantastic. He's been on our channel several times and vice versa. But Dion, what is your general real estate strategy? I love your branding.

I like to do the least amount of work possible for the most amount of it. I call it lazy.

Yep.

I retired about 3 months ago and my goal is to not have to go back to work. So while I invested in real estate, my goal was to make it diversified in such a way to where even something like a pandemic, stock market crash, government shutdown wouldn't make me not make enough money to where I'd have to go back to work. Because you guys might love work, but work sucks. This is not my thing.

And if you guys have followed us at all, Cody and I love pain. Um, if there is a deal that is going to be active and difficult to do and hard to put together, we We are all up and down it. Like you, I don't wanna do that for very long. We're putting in 10 years of work on the front end so that we can just jumpstart the acquisition piece. But Cody and I are actually starting a cycle to try to get closer to where you're at. I set a 90-day target last week where you guys can follow live on the channel. We're gonna be posting all about this, but we're gonna stabilize our existence. So we're gonna add some new employees, we're gonna add some new systems, and we are gonna try to make a business where Cody and I would have the option to not have to work 14 hours a day to keep our universe alive.

Yeah, sometimes I struggle with the 2 hours a month that it takes to manage my portfolio. It's kind of rough. So I look forward to you guys getting there too. The funny thing is, uh, if someone talked to me a year ago, I probably would have said consistently what I had been saying. I used to make this joke, funny to me because I like dad jokes, but I would say I don't think I'm ever going to retire early. I'm probably one of those guys that's not even going to retire late because I thought I would just work until I died. I enjoyed work. I love the job that I had, but time freedom won out. And if you're investing the way you guys are, super active with, you know, a lot of value add, that first few years has to feel like a mountain to climb. And once you get to the top though, everything changes. So I've been retired now a little over 3 months, maybe 4 months now, I think, July, middle of July was the last time I had a W-2 job. And I've been trying to explain to as many people as I can how it's actually better than winning the lottery to reach financial freedom on your own and then make work optional and actually step back and retire, even from a job that I loved. Time freedom won out to where, ask yourself this, what would you do, the viewer, if you won the lottery? Like tomorrow you win $10 million, you never have to work again. The smart answer is, well, I would learn how to invest, put the money to work, and have a stable future. 70% of the time, people who win the lottery are bankrupt within 5 years. So it's not always the best thing to win the lottery. You can't repeat winning the lottery. Here's the mental piece that comes from reaching financial freedom by making investments. It took me about 12 years of investing. At 8 years, I reached financial independence. 12 years, I finally retired. So the average person can reach financial independence in 10 years or less, even if you're not starting from the best position. That's, that's what I'm trying to share with everybody. But reaching it, quitting the job and having all of this time freedom, it feels like I'm having to drag people kicking and screaming into financial freedom. So many people will say things like, oh, I would never want to own real estate. You might get a call at 10 o'clock at night because of a system problem, or, you know, a septic problem at your, your property. So instead of that one text that turns into an email and two texts to solve the problem that you pay for with the tenant's money, you want to work 40 to 60 hours a week instead for the paycheck. And so like I said, it feels like I'm dragging people kicking and screaming into this world where it just seems like money is not even real. And as soon as you realize it's not real, it's really a lot easier to make money.

Yes. Yeah, no, and I, I've seen that too. For, for Cody and I, we did the— we did it the hard way, which was just grind out all the acquisitions. We did with creative finance. One thing that I really like about your model, and I actually— we just talked to Matt, Lumberjack Landlord, on the channel, uh, video to be posted next Friday. But one of the things I told him, and I'll tell you the same thing, I love your strategy because you own your stuff. You don't have to worry about the LLC thing. LLCs don't make sense to me if you're not doing a partnership. People who ask that question, that's— that is the answer. LLCs are designed for partnerships. You need an operating agreement. If, if not, do you do the whole trust thing or you just own them all personally?

How do you— how do you— so I absolutely agree with you. If you have partners or if you want to use hard money, an LLC makes sense, even though you've probably seen my LLC rant video, if you're familiar with my content, all the reasons why I don't have an LLC. But those are the two times it absolutely makes sense to have an LLC. An LLC. I don't currently have a trust, but I will. And I'm going to go off of the model that the lumberjack landlord has where a trust doesn't do anything like give you tax benefits or give you asset protection. An LLC doesn't do either of those things either. What a trust does is it makes it easier for your inheritors to get your portfolio. That's the purpose of a trust.

Perfect. So one of the things that you guys did, though, that's really cool is that you own your buildings. Like, it's, it's your money in the deal. You don't have other people. You guys self-manage. Now granted, Matt manages like 130-something units, which I think is absolutely insane. However, he added the systems that lets him do that, and he really enjoys having the active role in it. Like when I was talking to him, he's doing what he wants to do, which is the main thing. For you, investing the lazy way— I saw a comment run up here like, Leon's doing the lazy way, but I see him on every channel everywhere.

So, so what do you think is harder, getting on YouTube and sharing your information with somebody, or working 50 to 60 hours a week? I had a very easy job. I was the president of a truck driving school. So I was managing 60 people, working with employers, state agencies, legislation changes. Um, so I think anything that I can do in social media or on YouTube to share this information is going to be 1,000 times easier than the jobs that I've had.

Um, also, listen to this guy's voice. I mean, you gotta be kidding me. It'd be a crime to not have him on, uh, on all the platforms of social media.

I think Christian just said I had a face made for radio. But so here's the thing that I really like about reaching out to different content creators like Matt the Lumberjack Landlord, Michael Zuber from One Rent Out at a Time, Millionaire Mike, you and Cody, like the different strategies, one element of the way everyone's doing things can be applied. So I would not teach somebody how to invest at a distance. I would literally say, here's Millionaire Mike, go ask him all kinds of questions. I have never done seller financing. I have never done creative financing. I've not done all the stuff that you and Cody have. So I would say, look, Christian and Cody, multifamily, here's the channel you go to. Michael Zuber has systems and he uses property management. The one thing that I do that I'm hoping to share with as many people is I'm able to buy cash-flowing properties from the MLS using traditional lending because I have that strategy that gets the tenants to ask me to raise the rent. And it's a lot easier to buy properties that cash flow if the tenants come to you and say literally the sentence, 'Will you please increase my rent by $450 a month?' And when you say yes, when you acquiesce, the tenant says, Thank you. When you go into a transaction confident that that's going to be the outcome, it's really easy to look at the MLS and know which deals are going to make sense and which ones to ignore.

Yep. No, 100%. And another thing that I wanted to cover on here, by the way, you have both me and Dion on the same thing. So if you guys have any questions for us, we have two wildly different strategies. So post the questions below. You're exactly right. There's a lot of different ways to do it. One thing that I still— I think you should just do a creative finance deal. If you're trying to do it the lazy way, it is— you should see the docs you sign for a seller finance deal. It's like this thick.

So I am making seller financed offers with all of my deals since about May of last year.

Oh, I love that.

And I've had one accepted, but it fell through because the property needed too much work. And then another one was accepted and I backed out. But so I'm absolutely open to the idea of seller financing. I just, I didn't know it existed. And when I first started investing, the first 5 or 6 years, I didn't know what a DSCR loan was. I didn't know what asset-based lending was. I didn't know seller financing was an option. What are you— Where are you living? Trying to make sure that these aren't questions for us. So we're in Washington State. That might've been for someone else though. Here's a question.

Raise the rent? Sure. I don't know how to answer the raise the rent question other than—

So the tenants ask, for their rent to be raised. And if you really want to know that, Spiritual Huntsman, awesome name, here on YouTube, look up the binder strategy, binder, like a 3-ring binder. And it so far has been 100% effective. The tenants will ask you to raise the rent, their own rent, and then be happy when you do. Yeah.

Yeah, that is, I think we have a video on our channel with Deon talking about it, and you go way more in depth in your channel. By the way, Deon's channel is, Dion talks financial freedom. I get that right. Is it talks with an S?

Nope. Single talk.

Oh, well, I will be reposting those.

That's okay. We don't edit financial freedom.

So especially on a live, you can— exactly. Uh, what else do we have from the, uh, the Instagram here?

We do here. I would love to be at your level. Currently in a W-2 residency after med school and about to house hack our first home. That was That's where we're in now.

What is your, what is your opinion on house hacking? You've done that. I haven't.

It's the one reason why I was able to retire. So just really quick for the people, especially on Instagram, who are probably not familiar with me because I am in the wrong age bracket to have anything on Instagram. Yes, I made it to 40 without ever having $1,000 in the bank. And I found myself at 40, a single parent with 3 kids. I had been laid off from a police department in 2008 because of the recession, because when there's no tax money coming in, we know there's not going to be any more crime, so we can lay off a bunch of cops. I went to drive a truck. That company went on strike. So then I went to a CDL school and started teaching truck driving, making $17 an hour. So I'm 40, $17 an hour, found out about $89,000 in bad debt in my name that I didn't know existed till the divorce. And because of house hacking, 8 years to make work optional, and then retired at 12 years with, um, and I, my portfolio is small enough to actually share transparent numbers, so don't sue me, bro. Profit for 2022 unless everyone in December decides not to pay their rent. And I have a random bill that I don't expect, but I haven't seen it yet. I'm going to profit $203,000 with 16 rental units.

Oh my goodness, that is so good.

Six figures of income without— I came to your house today, so this is one of the first days in a few months where I think I've had to put pants on. But, but it can be that easy. You can be. And I have so much respect for you Cody and Millennial Mike and Zuber and Lumberjack Landlord have these massive portfolios and these goals of even bigger portfolios. I'm not even sure I want 16 units. At 16, if I were to sell 1 or 2, pay off 1 or 2 of the mortgages, I would increase my cash flow and have more than $200,000, $203,000 in income next year and have less properties to manage. So both strategies work. A big difference, if you've noticed, I think you could be my grandkid. Like, age-wise, there's that much of a difference between us. So I might not be in growth phase as much as you and Cody are in. Like, you can build an empire. I was 40, and a lot of people in their 40s think, oh, it's too late, I can't start investing. Well, if I didn't start at 40, I'd still be working in my 50s.

I love the idea, by the way, of paying down debt.

No, no. So that's not—

I like that strategy of maybe off one or two. Cody and I have had that thought of we have some bigger assets The fun thing with those is you can saddle those with commercial debt and you can use that money to pay off some of your small things. I love that. That is a great strategy. Let's do one from this and then one from YouTube. We have Instagram here, YouTube here. We're trying both at the same time, so give us some grace.

That one if you want.

All right. How do you guys work your seller carryback or subject-to deals? Neither Deon or I have done subject-to, and the reason is I have never had to work with someone who had debt on their property. Cody and my strategy is go after people who have— by go after, I mean meet with and learn from people who have already mastered the game. If you're looking at people who do a lot of subject-to, you're typically looking for distressed properties. Now, if you're looking at distressed properties, you're looking at people in trouble and you're probably doing one transaction. Most people who are in a bunch of trouble don't own a ton of real estate. I want to learn from people who have mastered the game. Most of them tend to be a little farther in their investing career. They tend to have much larger portfolios than we do, and they tend to have much less debt. So every deal that we've done on a seller carryback has been 100% seller financeable. Now, we've done contract for deed and seller financing. We go deeper on the separate— the difference between those on our channel. However, um, the way that we do that is you treat every single person that the internet tells you to think of as a seller you treat them as an owner and you go into those meetings as, I want to learn how to do something that you have done that I have not. And so for Cody and I, when I had a duplex, that was buying a 12-plex. When we had a 12-plex, it was buying a 38-plex. When we got to 100 units, it was buying a resort. Thank you, Dion. Dion told us to check that out. He said it might be zero down. It was a million down. We added a couple zeros and a 1 to that. Rounding error. A huge, huge rounding error. But that's how we do the seller carryback. It's structured different every single time. The beauty of creative finance is everything is made up, which is why I think we're going to— I think you're going to get more seller-financed opportunities because a lot of those deals that used to work at 3% interest don't. When the bank debt doesn't work to buy a property and people still want their price, What financing are you allowed to choose your own interest rate?

Right.

That's it.

So with subject-to right now, you're going to see it almost as purchasing an asset because the mortgage that they currently have is at such a low interest rate that the mortgage is the asset. Yeah, I was on the other side of subject-to in 2010. I was trying to give away my first rental because my first year of investing went so bad. I thought I was going to be a complete failure at real estate because there's no way I could do this. I did everything wrong. Oh, well, I'll quickly share the Cliff Notes version of my first couple of years. So I had the $89,000 in bad debt, was making $17 an hour. So bad debt-to-income ratio, not a lot of income. How do you buy a rental? You're just stopped in your tracks. Yeah, you would think DSER, asset-based or seller financing, but I didn't know any of those existed. So I moved from my house into an apartment and I rented the house out for 2 years to get tax return to get rental income on my tax returns for 2 years so that my debt-to-income ratio would no longer matter. And I can actually house hack a duplex so that they would look at the rental income from the house, the rental income from the other side of the duplex, and my debt-to-income ratio, make it possible for me to buy a house. But when I started, I hadn't found podcasts, YouTube, audiobooks. I had not educated myself. So I thought, there's no way I could rent to a stranger. Who can trust a stranger? So I'm going to rent to a friend. Since I'm renting to a friend, who needs a lease? Right, we just had a handshake. And I rented to a guy who was a single parent like I was. And so when rent was late, I understood. I get the struggle. Late became never. And when I finally went to the house to have a conversation and say, hey, you're not paying the rent, he didn't live there. He had moved out, had rented the house to someone else, and was collecting the rent. So he had a really good business model set up. And so that first year went so— and trashed the property, put in half a wall, built a door at the top of stairs not to code, like all these things that I had to fix. And I thought, okay, there's no way I could do this. I'm not smart enough for real estate because I wasn't doing what you guys are doing. I was taking in no content. I thought I was going to replace my income with no education whatsoever. Just jump into real estate. It's going to work out, right? So of course I failed. And I was trying to give the property away. I owned at the time $138,000 on a property where property values in 2010 had crashed. It was worth around $100,000. I couldn't even give it away. I couldn't find somebody to subject to my loan. No money down, no nothing. Just take over the freaking payments. It's yours. I was— we put it on the MLS. I had a realtor friend who put it on there at no charge. Just come to dinner at El Gaucho. So I guess there was a charge, but he listed it. He said, just take over payments, you can have the house. And nobody would because prices had come down so much. I couldn't do it. Luckily, I was stuck with that house. And at that point I realized I'm the problem. It's not being a landlord, it's not owning rentals. None of that's wrong. What I'm doing is wrong. So I went through, you know, Rich Dad Poor Dad books. I found BiggerPockets. They weren't really doing so much YouTube back then, but they had more like literally articles. Michael Zuber was a writer for BiggerPockets back in the dinosaur days. I didn't know that. That's how he interacted with them. And I found out about house hacking and the duplex idea and how to get a lease, how to screen a tenant, place a tenant, how to actually be a landlord. And like I said, I luckily couldn't give my house away, otherwise I'd probably still be working. And that sucks.

Yeah, I don't— oh gosh, I can't imagine having a boss again. I hate having bosses. That, uh, some, some people— and I have some employees who actually turn down leadership roles because they actually really just like doing, and they don't like that. That was the actual request. We had this conversation last week. Someone said, hey, can I step down from leadership? I love just having a list of things to do and knocking them out and going about my life. And that is totally fine. If you are like me or like Dion, I am, I'm just going to make the guess that you don't like being told what to do.

No. So here's an example. Yeah, I don't have a budget. I've never had a budget. I will never have a budget. Instead of looking at expenses like streaming services and I don't drink latte, but the latte factor of eliminating those kind of expenses, I don't do that. That's why house hacking was so powerful. Reduce or eliminate your largest expense and you never have to worry about the little expenses because what a budget is, is me telling me what to do, and I don't even like that idea.

No, I'm a tough boss for myself. I get that too. But, uh, yeah, that's one of the main things I have found, that it's astronomically easier to bring in money than it is to save money. I, I do not believe that there's a way that you can save your way to being wealthy, even if you have a six-figure income. Um, I know a lot of very, very, very broke people who make $200,000 a year. If you are low on money, you can try to make a budget and save your way there while they're devaluing the dollars that you're saving. But my thought is it is just there's so much darn money out there, just go make new money and then you don't have to budget.

So you were at the Michael Zuber's One Rental at a Time first in-person live meetup that wasn't done in presentation form. It was more done interactive audience form.

It was like YouTube Live form, kind of, but in the room, right? Yeah, it was super cool.

So one of the first things I covered was, you know, the first step to investing in real estate is saving. But the first step to saving is increasing your income. That's the part everybody's like, I'm going to save, so I'm just not going to spend. And whatever I don't spend, I have. But if you're not making any money, there's nothing there to have. So for me, it was, you know, of course, over time trying to climb the corporate ladder. Some people make more money by changing companies now than staying at one company for longevity. Yeah, but it's developing side hustles. I actually played World of Warcraft and sold things online.

Oh my gosh, that doesn't surprise me at all.

$300 to $500. I mean, you've seen my studio, but $300 to $500 a month side hustle while playing a game with my kids. So we actually had a hobby together, but I generated revenue from it so I could save. So you're absolutely right. Increasing income is the first step to saving. Kind of like there's a question here. I want to jump in really quick from Drippy67. How much money did you start with when investing in real estate? So I want to turn that question on you as soon as I answer first and then ask you the same thing.

Do it.

So I was 40. I'd never had a $1,000 to my name, decided to take charge of my finances, developed some side hustles like World of Warcraft, expert witness testimony, overtime at work. I was making $17 an hour, um, moved into the apartment, rented out the house, and I was actually still paying— I was paying $1,500 a month for the apartment and renting out the house. So for the next 2 years, I saved. It took 2 years to save enough to have the down payment for the duplex. I think in those 2 years I had around $22,000 something. In savings. I had to use my— which I no longer would want to have— my retirement account as a reserve. Lenders are going to want you to have 3 to 6 months of reserves for any mortgages that you have in place. Since I had the house, I was buying a duplex, it was kind of significant. They will look at 50% of a reserve account as a— 50% of a retirement account as a reserve. You don't have to touch it, tap it, or take it out. You just have to prove it's yours, it's fed, it's been in there. It's a It's been in there for a while. That's right. It's your money. And so a little over $20,000, did a 5% down owner-occupied purchase of a duplex. Those loans still exist. You just have to lender shop until you find one that does that. If I couldn't have found one, I wouldn't want an FHA loan, but it would have been the only other option if I couldn't find a 5% down loan for a duplex. Not the only other option. The only other option I knew. Yeah, I didn't know about seller financing, DSCR, asset-based, all the other ways you could do this that I've learned since then. And so that gave me the down payment. One side was fixed up and ready to rent out. One side was trashed and there was over 70 holes punched in the walls, doors broken because that tenant didn't want to leave when they sold it. But it was empty when I moved into that one and took my own time to fix it. So out of pocket wasn't very much. Over the next year, I fixed everything up in that unit. So around $20,000 when you started, how much did you have?

Funny enough, I actually did the same thing with the IRA account, except I made the decision early on, I'm going all in in real estate. I don't like stocks. I don't like it. I really don't. I don't believe in assets that I can't touch and control. So I'm like, I am going to instead of invest in other people's businesses via the stock market, I'm going to start my own businesses and buy my own real estate. And so I actually just paid the penalties. I cashed out my IRA completely. I said, I'm going all in. I pulled about— it was almost exactly $100,000 was my starting point, which is more than a lot of people and less than some people. But that was my starting point. I used that money to buy my house that I live in. I didn't house hack. I bought my house because my wife wanted a dog and the dog needed a yard. So I literally bought a house for my Frenchie. Um, smart? No.

My duplex has yards. Just saying. You could have—

oh no, no, I could have. That was, that was big. That was big for her. She's like, I— she's like, the one thing I don't want to do— you can go crazy on investing, however, I don't want to share a wall with anyone. That was big for her. And so that's, that's what we did. Then I bought a duplex, my first one, um, with $30,000 down, uh, Bremerton. Cash flow about 12% day one. And I've just held that thing. I probably should raise rental. I haven't bothered with the binder strategy. It just makes money and I haven't really touched it. I'm probably $1,000 under market rent right now.

I'm going to send you a link to a video I'm making next week. So in future, after you watch that video, I want you to tell me what you do with rent. Okay.

Yeah. I'm astronomically under market rent, but I have a great couple of tenants in there and it's anyway, great investment. Then I spent $50,000 on a Total fixer-upper, I got a duplex in Moses Lake for $212,000 with a $7,000 credit back to me. So that was a great deal. I got absolutely wrecked on appraisal. That was when I was starting and I was like, I'm going to bird this, let me get my money back. My money stayed in it. Still a fantastic rental. That cash flowed about 30% once it was stabilized. I got the top of market rents. That was fantastic. But that was all of my money. My $100,000 went into a house, duplex, another duplex, 4 units and a house. The cash flow from the 2 duplexes paid my mortgage. So I got right to a place where my real estate bought my real estate. And that is where the light went off for my business strategy with Cody. I partnered with Cody on a 38 right after that. But I was like, wait a second, on long-term fixed rate debt, if your real estate buys your real estate, it is effectively free. Now, I traded a ton of time to go as fast as we did. What you do with your time is up to you. I love this. I think real estate plays like a board game and I love board games. So for me, building this business is extremely fun, is extremely engaging. I love the social aspect, the strategy. So I'm having fun. That being said, you can do this the Dion way and do it one rental at a time. Literally, it's like, hey, every year I'm going to buy a duplex, a fourplex. I'm going to do a deal one or two a year. And I'm only going to do stellar deals. And Dion, while it took you more time, you had a job you love, you built the portfolio that you wanted, and you didn't have to raise capital from other people unless you did something I'm unaware of.

You just saved the money. So I ran a CDL school for the last 13 years before I retired, and there's something that I took away. The average human can retain 3 new things. As soon as you get a 4th bit of information, You don't lose the fourth, you lose all four. So I'm about to share something that if you're driving, don't write it down. Come back and watch this video again. If you have the ability to write this down, I want you to understand these two different strategies can very easily be summed up in— the first thing is there's no one right way to invest in real estate, but there's one right way for you. So choose one of the two that I'm about to talk about that works best for you. Both of us are investing in real estate with $0 in the real estate. The real estate will buy the real estate. The first version is called recycling capital. That's where you take appreciation, principal paydown, and you have increased the equity on a property and you have a few options. You can sell it in 1031 into a larger purchase. You could take out a home equity line of credit, or you can refinance your mortgage or take out a second mortgage to pull that equity out, give you cash to reinvest. I don't recommend doing this. On the first or second deal until you have reasonable confidence in your ability to get a good return. But that's called recycling capital. That is what Matt the Lumberjack Landlord, Michael Zuber, and you and Cody are doing. You're taking the money that the properties produce in equity and putting it to work. The other way that I did it, I have never recycled capital. I have never sold a property. I have never taken out a cash-out refinance. I've never done a home equity line of credit. I am getting what Matt the Lumberjack Landlord would call a terrible return on my equity. And it breaks his brain every time I talk about it.

And that is— that's fair.

But what I have done is recycled cash flow. You can recycle capital or you can recycle cash flow. So what I did for those first 2 years was save from my job and side hustle to get to house hack. Once I started house hacking, I took that $1,500 a month payment for the apartment down to $300 a month for my portion, my side of the duplex, adding $1,200 a month to my savings rate. Continued to save for 2 more years, purchased another duplex that cash flowed, increased the rent on the house, increased the rent of the duplex. And now I was paying nothing. I was increasing my cash flow. So less than 2 years, I buy another duplex and then I house hacked another fourplex. So I've moved twice, house hacked twice. That's all it took. I didn't have to keep house hacking every year. I've only house hacked twice. But every time that the income increased, rents go up, mortgages stay the same. 2020, I did a couple of things. One, If you were around in 2020, hopefully you took advantage of being able to empty out your retirement accounts without paying a penalty up to $100,000. Could have saved you 10%. Timing. No, that was a thing. That's a bummer. So I did that there and I refinanced when rates made better sense. Rates are all my mortgages are under 4%. One of them, I think it might be at or right around there, but they're like around 3. So I increased the cash flow so much so that Over the last 12 years, I've invested $320,000. My down payments and my investments would make it around $600,000. But the other $300,000 came from the rentals, right? The rentals have kicked off to where I have right now about half a million dollars for the next investment. So if I don't buy another investment and I sit back with my half a million dollars, that covers my $320,000 investment. I have $0 invested in real estate to make over $200,000 a year in profit. You are taking the equity to buy more properties. Those properties are buying the properties. When we first start investing, it feels like our money. And the first concept I hope people understand is when you buy a rental property, you don't spend any money. That's the thing that trips so many people up. This actually stopped me from investing for almost 10 years. My brother used to say this one sentence stopped me from investing for a decade. He said, Every time I buy a rental property, in 11 years I get my money back. That sounded stupid. He had his money, like it's already his. He buys a property so in 11 years he can have that money again, like he already had it. That's dumb. Until I realized the way he was saying it is what was stopping him. He had his money the whole time. He took the money from the bank, he didn't spend it, he moved it into a property. It's still there. It's still his. He can sell, he can cash out, refi, he can home equity line of credit. That money is just in the property working, creating a return instead of sitting in the bank earning 0.02% interest. And that was kind of the game changer for me is when you buy a property, you are not spending money, you're moving it from the bank into the property. So I've not recycled capital because my goal is to save the money, put it into a property to put it at work and let the cash flow increase because the other element is time. Every year that you own your properties, cash flow will increase, values will go up, principal pay down. And any time you say something that sounds declarative like that, people will say, well, properties don't always go up. We don't care if they go down because we're going off of cash flow from rents, not cash flow from equity, which makes me really excited.

We are not a channel that does the, oh, the market's crashing, but we're seeing a pullback and I'm actually pretty bleak on 2023. I think 2023 will be a rough year for the economy. Which I'm really looking forward to. I hope that's the case because we've had a 12-year streak of just artificially stellar market. And there's enough people online, and I'm sure their channels are getting more than the 10 watches we're getting right now. But the— I really think that there's a lot of people out there who just made money because the market's gone up. They've banked on appreciation and they're getting wiped out. And I'm actually really looking forward to clearing out some of that garbage And when you have strategies like this where all of our rents, Cody and mine, are under market rent, we have a lot of Class C and some Class B properties. People in a down economy, people move from B to C. That happens. People move from A to B. People in Class C properties don't go into the slums. I mean, just, just typically what happens is you actually get a better, stronger, more qualified tenant pool. That will move down into your properties and down economy. Rents don't go down historically. Look it up. Like 2008, terrible real estate market. Did rents actually go down in that time? No, they skyrocketed. We're printing money like crazy. I expect rents to skyrocket again. That said, if rents pulled back 20%, 30%, we're under market rate. The rest of the market can come down to where we're at. It doesn't affect my business. So for guys like us, we will get paid to wait through any economy. I have a lot of 5, 15, 30-year debt. Yours is like traditional bank debt, so I'm guessing you have a lot of 30-year fully amortized, 30-year fixed rate. Oh, see, Dion's even stronger than ours, but both of us are set up so that we can weather any economic downturn.

So, so there's a couple of ways that I diversify that are beyond going with fixed rate debt with. And you can actually verify what Christian said since we started tracking the data. You can find charts on the internet from 1940 on. Rents have never once in a 5-year period ever gone down marketwide. There are some local places where if you invested around Detroit and all the car manufacturers move away, yes, rents crashed. If you're around Silicon Valley and the dot-com crash happens, yes, rents go down. But if you diversify your investment, because like Christian, I don't like stocks, I wouldn't own any if you gave any to me. I'm waiting. To completely empty out the rest of my retirement accounts because I hate the idea of money being locked away. And since I don't understand the asset, I don't want to own the asset. Doesn't mean stocks are bad. It means I don't understand the asset, so it's not the asset for me. So I'm 100% in real estate and I want to be able to sleep at night. So I call this the swan investing style, sleep well at night. I diversify my properties by keeping them at least 10 miles apart. So I don't want one investment of 10 units. I would rather have 5 duplexes, right? As your portfolio grows, you guys have several units like that that are larger. That totally makes sense because they're not all in one spot and they're not all just one building. But if you have a 10-unit apartment complex and it's your only part, it's your only part of your portfolio, you're probably drawing all of your tenants from one area. I keep all of my properties at least 10 miles apart. You guys have Eastern Washington, Western Washington, Union. Like, you guys are very spread out, very well diversified that way.

Yep. I could ask the King County. I have 7 units in King County and that's— I see Cody just entered the chat.

I agree with this. I wouldn't own King County. Someone gave it to me. King County is like owning stocks.

Oh, so the regulations that they just make up and it's not even the deal that we did. We bought $200,000 under market price, 3% interest, 5-year note. A custom principal paydown that's actually lower than if we just did a standard AMM. The deal is stellar, the cash flow is fantastic, the location. But man, the amount of work that it has been for— we had a city inspector come in to get your King County business license for the city of Tukwila. They decided they didn't like the flooring. There was an actual problem with it, but they actually required we replace the flooring in 2 units completely because it was ugly. That is an actual thing that happened in King County, and it took us about 7 weeks to get a hold of someone to contest it. Once we did, they were willing to work with us. But that is the systems you work with in King County. So choose an area matters.

So I have something that will actually make you feel good about owning in King County. Yeah, I'll get to that in a second. So remind me if I completely forget. Okay. The first way to diversify was to keep your properties at least 10 miles apart. The second way is I diversify my tenant base. I invest, I have several properties around Joint Base Lewis-McChord. So it's one of the largest military installations on the West Coast. I make sure to never have more than one-third military tenants. What if the base closes, moves away, there's a BRAC meeting and something happens where they start to— or they develop 100,000 rentals on the base and on-base housing becomes more of an option than off-base housing. All these things that can happen. So I keep about one-third military, one-third Section 8, one-third working or retired so that I have different sectors of the economy covered. By tenants. Here's why. Well, I wouldn't own a property in King County because King County keeps making laws that hurt tenants. They did, they did some rules that were so bad, like you have to give tenants 6 months notice before you give them a 10% or more rent increase. And if the tenant doesn't like it, you have to pay 2 or 3 months rent to the tenant to help them move. Like, sounds great. Sounds like it's protecting tenants. Seattle lost 3,000 rental units. They became short-term rentals, and now there's no places to rent. So you create laws like rent control forces owners to raise the rent every year. Where I know owners who have not raised the rent in 10 or 12 years. But rent control would be bad. So there's things in King County where I wouldn't want to own, but here's why investing in King County or an area like King County might make sense for you. And this is something I took away from Grant Cardone. Grant Cardone did 2 BiggerPockets episodes, maybe 3 by now, but I haven't seen the 3rd one, but I know he did 2. And one of those first 2, he was talking about, and I'm not going to say colors because colors can demonetize your YouTube channel, but let's say there's one political party that leans one way and one that leans the other. And one political party is landlord-friendly. So everybody wants to invest in landlord-friendly states.

I wonder which color that is.

They allow building, they don't— they allow evictions, they don't allow rent control. There's all these things that make it sound better for landlords. Grant Cardone said, I like to invest the way that leans the other side because they limit and restrict building. They do things like You have a rental, you want to do it here, you have to put in the flooring that we like because the first one was ugly. So owners pull back and just don't build, don't do that. Michael Zuber tried to add an ADU in California, and California said, sure, no problem, but you have to put $16,000 worth of paneling on the top for power, whatever that solar panel on the roof. And he said, that too much of an expense kills my ROI. So he's not going to build an ADU. Since they limit building in those areas, it increases inflation. Or appreciation. So while the state of Washington's on average of 19 to 20% appreciation in 30-plus counties, King County saw 30% appreciation, Seattle was 31% appreciation. You see much more appreciation in the restrictive areas. So while I wouldn't want to own there because of the regulations, if you're somebody who's going to recycle capital, that might be a better investing strategy than going for the places that are landlord from them.

Yeah, and for Cody and I, I love competing in places that are more difficult to compete. No matter where you are in the country, someone does in fact have to own the building. You run into things— it— because it's difficult to compete, especially in the creative finance space, if I can get terms that no one else can get and I can make these deals make sense where they cash flow day one in a market that happens to be high appreciation because we limit buildings, we make it difficult to be a landlord, and we create artificially hard competition. If you're one of the people who is leading your market like Cody and I do in Grant County, I— it's very, very, very hard to compete. We're in a tough-to-compete-with state. You have difficult laws, and we're dominating that county. Well, now we basically get to choose rent for studio and one-beds. It's really— and then we property manage all the other ones that we don't own. So, I mean, you get to come in and just go You know what? We've printed a lot of money. I think rent on our 100 units is now just $100 more. And on a six-cap market, that's $2 million of net worth that just— it's harder to do that in a lot of the states that are easier to compete in because you have everyone flooded to those states, especially in 2020, 2021. They just mass dumped money into those markets. Now they're expensive. They're hard to compete in. And we're in the places that are traditionally not fun to invest, and we're doing— it's kind of easy street for the last year or two. Just as far as acquisition is, uh, we just meet people, get coffee, and occasionally someone asks, hey, um, would you take this building if I figure out the financing? I'm like, ah, sure. Find the deal, line up the debt and equity, you're done.

Imagine where you would be right now If in 2020 you went to YouTube and you went to all the fear porn channels that talked about a crash and an eviction moratorium and a pandemic and all of the reasons why you shouldn't buy, and you missed out on 2 years of appreciation that have been the best appreciation that I think we've seen in decades. I think so. I feel really bad for the people who've been constantly for the last decade. Every single year there's been a reason why you shouldn't buy. In 2014, we had this thing called the silver tsunami. A certain number of baby boomers were going to hit retirement age. In 2018, interest rates went above 6%. So there's then the pandemic. All of these, every single year, there's a reason why you shouldn't buy real estate. But if you go back, there has never been a year where we wouldn't now like to pay the prices that we could have right now. People would love to pay 2008 prices. Just before the crash. Imagine paying $200,000 for a house that right now is worth $400,000. We would love to do that. But everyone in 2009 was saying, I'm so glad I didn't buy 2008. That was the peak of the market. Right now people are saying, oh, if you bought in the last year, you're—

you're—

can you say screwed on YouTube? You're screwed because you bought at the peak of the market. Well, since rents don't come down and we don't care what happens to prices, and everybody who's saying you bought at the peak of the market is guessing. We won't know what the peak of the market was until 3 or 4 years from now, if we've hit the peak.

Yeah. And even if it prices out, it's like, what's the reason not to buy now? Interest rates are so high, we can't, we can't borrow. There's always a reason not to buy because the market is a market and is based on supply and demand. Granted, real estate's an imperfect market, which is why we can get unproportional returns. You get to play this game in a way where it's like there's always a fear reason when interest rates are low, prices go up. That's what happens. It's now easier to buy at a higher price. So then everyone goes, oh my gosh, prices are too high.

Yeah, but the money's free. And then everybody made the mistake of saying, don't worry, wait for interest rates to go up, because that will cause prices to come down. That's half the statement they would say. And Meet Kevin and Graham Stephan said this a few times. And then in the last, like, year, they've corrected it and said it's the right way. But originally, they were saying every time interest rates go up 1%, home prices come down 10%. They said it over and over and over, because that's math. What happens is interest rates go up 1%, buying power goes down 10%, not purchasing, because less transactions will happen. You'll have less people buying, but the people who do buy are paying more. Everyone will say right now prices will crash because we're down 50%. They're going to play with the numbers until you hear we're down 50%. From last year to the peak this year, we went up 14% marketwide. We're now only up 7%. So 7 is 50% of 14, but we're up 7% year over year from the year before. That doesn't mean it's cheaper if you waited a year to buy properties. It means you're only paying 7% more.

Yeah. However, you've lost a bunch of buying power if you're playing the bank game.

Buying power.

Right, exactly. And so I do— for me, my response would be like, well, geez, I shouldn't buy now. Everyone's waiting, which means you get a little bit more ability to creatively structure a deal. You have more time and you have a little bit less competition. Right now is actually one of the better times to buy. When you have a shift, businesses tend to freeze, individuals tend to freeze. Everything on YouTube and Instagram and TikTok and whatever your chosen platform is, it's going to tell you wait, hold. And while everyone else is holding, that is when we like to expand, which is ironic because actually I got that from Cardone's book 10X. Expand when others contract. And right now, if you follow his channels, he's going, wait, which I was like, come on, dude. Right. But right now is an excellent time. If you— price increases have slowed down a little bit. If you bought right now, and I think interest rates will keep going up a little bit through 2023, we'll see. Maybe they don't. But when interest rates pull back, because at some point interest rates are cyclical too, you buy today's price, rates drop, which drives price back up. Increases the rate, the price goes up, and then you refinance at the low rate. Now you get both. You got the price and the terms.

It makes sense both ways. Let's say the rates go down and you refinance to a better rate and you increase your cash flow. And everybody says, oh, that sounds great, but what if rates go up? Well, right. Buy now before rates go up, because that would be the sucky time to buy. Because when rates continue to go up, that doesn't mean prices will come down or they would be down. We've doubled the interest rates in the last 6 months. And we're up 7% year over year. We've never— we went up, what, from 3% interest rates to 6%. So we're going to say we went up 3 points. So home values should have dropped 30% and we're up 7%. Like, we literally have factual evidence that prices don't come down when interest rates go up. But everyone says when interest rates go up, prices will come down. And that's not what happens. In the 1970s, before I was buying, I was alive, but before I was buying, I was not. Interest rates were 18. So interest rates doubled, home prices tripled.

I want more of that. The fun thing is when you buy and you hold for long term over any given point, and this is true for the stock market and pretty much anything else because we keep printing money, like the value of money goes down, so the price of everything goes up. Especially if you're in a state that limits development, like you said, you wait long enough and you hold long enough on a cash-flowing asset, you just make money and you outpace most other assets if you're in real estate. That's why I actually love buying supplemental businesses. Cody and I own a wedding venue, we own a resort, and we do a lot of events at our venue, but we're building that business out. We do an education thing, but everything is based on real estate, the management of real estate vertically integrated around what I believe is the single best investment asset.

So I'm going to ask you one question before we get to these two questions. Okay.

But so the question I'm going to ask one of the ones from YouTube because we owe YouTube an answer.

So for the people who ever think stocks versus real estate, how much money do both of us have invested in real estate? We talked about it earlier. The real estate's buying the real estate. Yeah.

So we have our initial little bit. So, you know, $20,000 of $100,000 all in on real estate.

Okay, how much would we have to invest in stocks to generate the net worth that we've generated from real estate?

Oh my goodness.

Yeah, that's not even—

oh my goodness. Yeah, millions. So go ahead with your YouTube question. So, Kevin, if you're still here, thanks for hanging out. But you had an earlier one too. Oh yeah, this is the one. Best way to inform a seller on interest rate. A seller wants 12%, does not fit cash flow. So The first part of any deal is deal, then you figure out the debt and equity. One of the fun things about seller financing is you knock out the deal and a majority of your debt at the same time. If you figure out the seller finance deal, it's like, well, how do I buy it? There's your deal. If it's 90% seller financeable, it's awesome. However, some deals just don't work. If they want their price and they want a 12% interest rate, I will tell you right now, you need to adjust one of those inputs. Everyone and their sister negotiates on price. That's why Cody and I go after terms. Again, red ocean or blue ocean, if you're bringing it to bank debt, you have to be able to appraise, so price matters. If you have creative terms, everything is made up. The money's made up, it's whatever works. So the way that you talk to that seller is you need to actually understand, and by seller, I mean owner, the way you talk to that individual is you're going to just figure out what is actually important to them. There are some people who are just out of their mind and want price and terms, and it's like, yeah, cool, and no one will buy it, which is great because 5 years from now you can come back and maybe they'll be reasonable. It's not going anywhere is the good news. Um, but I don't do a lot of informing people where rates are at because it's irrelevant to my deal. I start with the deal And I go, okay, like we just proposed this and got a tentative accept on it. There's someone's deal was overpriced and they said, hey, we'll do a 7-year term and I need my monthly payments. This was for one of our mentees in our program actually, and I helped them through the negotiation. 118-unit acquisition. They go, we need $36,000 a year. That is the number that we need for us to exit the property. So we need to have a 5 or 6% interest rate on this. What we came back with was, okay, so you care about the price, that's important to you, because they levered up ridiculously on the property. So they needed to make— they needed to make some money, uh, to be worth selling. So price was important and monthly payment was important. So now you just look at this creatively as What do we adjust if I have to hit a $36,000 payment? Sure, I can do that in interest. But what if we did 2% and we did a custom principal paydown? Well, now in 7 years, the way that we wrote it, they'll pay off $2 million of the loan amount in principal paydown, paying 2% plus a big chunk of principal. The seller gets their price. And their payment, you just can't get everything. Negotiation, you do in fact have to write a deal that, one, cash flows day one and through the entire life of your note. And two, if you have a balloon, there's two pieces of math. Where am I day one? Does it cash flow? How the heck am I exiting this? And you need to have more than one way to understand how am I going to hold this asset forever. You need to be able to pay it off over cash flow, you need to be able to refinance, or you need to have the ability to renegotiate. We do a lot of seller refinancing. We just go back to the seller and go like, hey, how have you been liking the arrangement? Do we need to adjust for interest rate? But I never inform people where the market is because it's completely irrelevant to my actual deal.

So what Christian said, where the gold lies, is finding out what matters to the seller. This is something Lumberjack Landlord does. He basically asks 3 things that matter to the seller, tell me what those are, make sure he can come close to meeting some of this. So if this seller has specifically told you, I need to get 12% interest on my money, That means negotiate price because 12% is where they're stuck, or negotiate the length of the paydown. Sure, I'll give you 20% interest, but I want a 50-year mortgage, a fixed rate. My payments are less, I'm going to cash flow. I don't care if the property's ever paid off. Principal paydown is not as important as appreciation is going to be if you ever go to exit a property in the future. But I don't care about that. I'm looking for cash flow. What are you looking for? Are you looking for the property to get out of in 5 years? Then you're not going to want to do that because you're not going to be creating a big gap for an exit strategy. But if you look to buy and hold better than both of my marriages, actually until death do we part, then the length of the mortgage might be important. Give them 12%, but 30, 40, 50 years amortized as long as you will make the cash flow that you're looking for.

I think that's the big thing.

Here we are on Instagram. When you— from the site Doc— when you seller finance a deal, is the owner essentially pulling a new loan and providing the down payment? Or are you taking over the current note? So I'll answer the uneducated version. They don't give the— you've done it a lot too. So seller financing, if there is an existing note, generally the buyer is going to get a mortgage to cover that note. So there's a strategy called the 50/40/10, where depending on the amount of equity the seller has, you get a regular mortgage for up to 50% of the value. The seller carries a 40% note. That's if they have a mortgage. So the trick to seller financing is finding somebody who's owned it for a long time, has a lot of equity, doesn't have a lot left on a mortgage. So they're not taking out another mortgage for you to then cover. You're looking for properties that don't have that existing mortgage to do the seller financing. But if they do have it, there's two things you need to cover with your down payment. And your down payment might be the mortgage you take out for the portion that they have left, that they still have debt on. And agent fees. You basically want to be able to do a down payment that makes it to where the seller isn't writing you a check to give you the asset. So your down payment is going to be generally taking care of anything that there's on any note that's left. So that's why you're looking for one that doesn't have a large note left, agent fees, and sometimes the seller will want a certain amount of money to walk away from to take a trip, take a vacation. They usually don't want too much because the goal for seller financing to the seller is to avoid that capital gains hit. That they would get all at once. They want the consistent payments and to pay taxes on only what they make that year. Uneducated answer.

Educated answer. Let's see here, man. I was so wrapped up in your answer to that question, I was like, oh, it wasn't the original question. When you sell our financing deals, the owner essentially pulling a new loan and providing the down payment, or are you taking over the current note? So yeah, the current note would be— if you're taking over the current note, that's an assumable note, or you're doing something subject to, which I tend to steer away from because it adds a whole bunch of steps that we don't need. So essentially, the seller is typically going to come in in first position, typically. So let's make the assumption on seller financing, there's no debt, otherwise you're getting into contract for deed, and that's another conversation. But on a true seller-financed deal, they are the lender. They can come in in first and second position, and we've done that before where they wanted a shorter balloon on some of the money or different interest on the second so we can pay that down faster. But it's really, it's whatever you negotiate. Typically what it will be though, you're going to get a note and deed of trust. You can get those drafted by a lawyer. That note will be the note for the— that is like your— that's your bank loan there. The seller is the bank on a seller finance deal. Now, I'll add to this, you can blend bank and seller financing. Matt the Lumberjack Landlord just got his first seller finance deal. It's 50% bank, and that's the first position. The seller then carried 40% in second. We're going to launch this video next Friday, so stay tuned. Then he came 10% down, because if you're working with a bank, they're going to want to see some of your money leave your account. They want to see a personal investment. I've never seen a bank that didn't require that. I've heard of people getting them, but I have never personally witnessed someone who pulled that off. You'll need to put in a little bit of money. You can blend seller and bank and personal. You can come up with a lot of different ways to make these happen. But that is generally— it's going to be a note, deed of trust. That note is direct with the seller. And on a typical transaction, you are the first position note with them.

Question from YouTube land from Financial Firefighter. Aloha, Mark, in Hawaii. Christian Osgood, do you and Cody do seller finance deals out of state?

I help people do them. So if you guys haven't yet, follow Caleb and Chuck. Man, I'm giving a lot of instructions today. Follow Caleb and Chuck, their YouTube channel's Caleb and Chuck, very easy to find. I love to— I'm glad they got that name. It's, it's easy to remember. They are 19. They graduated high school, jumped into our mentorship group, and they live in San Diego. They don't want to invest in San Diego. I understand that. They I just was at BPCon down there in San Diego. I'm sorry if you're from there, a very warm city, kind of smells like pee. I'm not a huge fan. They don't want to invest down there, they want to invest in Texas. They have done 3 deals in the last 3 months. They're at 28 units, all of them cash flow. One of them, they got really creative. No, the debt service doesn't start until 6 months in. It's not deferred, they're like, we have no reserve. So we would like to just keep all the cash flow as our reserve for 6 months. Super creative. Um, but, uh, short answer, we have not done any. We have stayed in Washington because I do not want to spread out my team. Cody and I did a lot. If you buy 100+ units and a resort in one year, I do not recommend then trying to expand out of market the same year. You will probably implode because my team is maxed, and I'm aware of 2 people in my org outside of myself who are actually having a hard time with their workload right now. You don't want dissatisfied team members. So we will do it. We're not doing it today. All right. That's perfect for your channel, but not today. Exactly. I'll edit that out later and use it. Yeah, no, that is, um, uh, we will do it. We help people do it. We don't personally do it yet, but we will.

So from Mitchell, What is the habit that helps you out the most with your success?

Oh, you start first.

The habit that helped both most with success, I want to say it would be patience, but I think the habit that helped me the most with success is being lazy. And people don't understand, it's the right kind of lazy. If you want to find the easiest way to do something, ask a lazy person and they'll show you. This is the easiest way to do this. The motivation that comes from being lazy is more powerful than any other motivation I can think of. Maybe parenting, that had some motivation to it. But I want control of my schedule. I want to, to only work if I feel like it, not if I have to. So I want to never have to work again. That came from working really hard for a decade, all the overtime, all the side hustle, all the investing, all the putting the money to work, to be able to turn the switch off. That's what mattered the most to me, was knowing that lazy is my motivation and having decades— as long as I don't die tomorrow— of free time, because I spent a decade caging, ignoring, beating down the lazy for that decade. So that for now, for the rest of my life— believe me, nobody's gonna— not too many people want to do what I did for the last 10 years. But almost everybody would like to do what I'm going to do for the next 10 years because it is literally anything I want every day.

I think for me, my biggest thing would just be— biggest habit, I have two. I'm trying to figure out which one's bigger. It's either obsession, which I am, I am obsessed with playing this game, or it's being competitive. So we'll say being obsessed with being competitive. I think about our business all the time. There's like, when I was younger, I used to play, not obsessively, but I played some video games and I get really into them. Like, if I am doing anything, I'm doing it all the way. If I buy a board game, I buy expansions until I ruin the game. It's very easy to do that. But like, I will go all in on one thing. I chose to go all in on real estate and it is, I think about it, I dream about it, I push for it. I mean, this is what I do. If I'm awake, we're learning how to play the game at a higher level. The competitive piece of that comes in— actually, this is not PC, so I apologize everyone. Um, we had a few people on the team early, like brokers who were just really nice people who'd help us out. And Cody and I, I use the analogy of like, you know, it's kind of like the chubby kid on your, on your soccer team. If you guys play soccer, uh, whatever sports team, is the one chubby kid who's not very coordinated, he's not very good, but you have to pass the ball to him so that, you know, they're a member of your team, you want to build them up. And so we had that mentality for a while, and I went out to meet one of, uh, one of my brokers with an investor, and I was like, hey, we, we try to throw him a bone every once in a while, he's a really good guy. Um, yeah, it's kind of passing to the fat kid. And he just goes, I played select, I never passed the fat kid. It's mean, but at the same time, there's no professional sports team that has out-of-shape players. We made a decision: I want to play with A players, and if you're not an A player, I'm sorry, you're not on the team. Will we help you out? Yes. Will we be kind to you?

Yes.

Are you on my team?

No.

And the decision to start playing with all A players astronomically skyrocketed our business. Instead of looking for the beat-up house with the guys, "Oh no, I'm losing my duplex. Can you subject to?" We started playing with the guys who have 200, 300, 400 units, 1,000 units. And we met with them and said, "How the heck do you do what you do?" And we started working with them. And a lot of those people now, we have multiple owners who own hundreds of units who have given us their word and have been good to it on Over the next decade, we will sell you everything that we have, and we will do this because you do a good job with the properties, you fix up the properties, you run them profitably, we get our mortgage payments every month, and all we want to do is convert these massive portfolios into notes to pass to our heirs because our heirs do not want anything to do with 1,000 units they've never been to. That's, that's just something that's happened to us. So that decision that Cody and I made a while back on we are going to work with A-players. That is where we really started networking with Deon, with Matt, with Zuber, everyone from the One Rental at a Time network. There's a few key players on BiggerPockets that we network with who really know how to play the game. If you guys don't follow Terrence Doyle, we're going to be on Multifamily Mentor Season 3 coming up here.

He—

and I don't like syndication— he is a good syndicator. The way he runs his business is inspirational. You should check him out. When we started playing with those players, we learned strategies to play this game at a whole different level, and that is what allowed Cody and I to do— we did what people did in 50 years in one, because the people who did it in 50 years told us how to do it. That was really winded, but I, I think it's the best piece of advice that I have, is if you don't have any players on your team, just get new players, and it's going to feel a little bit brutal.

But I forget which rule from One Rental at a Time it is, but it's audit your network. Yeah. The whole you become the average of the 5 people you spend the most time around.

I like that better than don't pass the fat kid, but it doesn't have the same sting. It doesn't have the same sting, but I don't know. Well, ours might be more marketable. We'll find out.

Andor. Andor.

Question for you. Oh, just finished. I know it's Andor, but man, I just finished Andor and that was a great show.

I'm a Star Trek fan.

Star Wars, whatever. Incorrect. But there's, uh, best way to find potential sellers without going to the MLS or a broker with an active listing. I will start on this one. Best way to do this, hands down, and this is better than any MLS finding active listings, go build those relationships and build your, build your A-team. Talk to people who've played the game. When you call people who could sell their property, do not call to buy the property. I, to this date, have never asked anyone to sell anything. I just call them and say, how did you get to where you're at? Here's where I'm at. This is what I want to do. Can we get coffee? Almost everyone says yes. I've done this enough times where my talk track is not lame. The only way to do that is to just call people with some level of consistency and go get coffee. And learn and stop asking people to sell. If you want to find opportunities to buy stuff, really simple. Mike, funny, this is exactly— Zuber does the same thing. Uh, he goes, hey, you got to make 2 points of contact, you meet 100 people. I, I'll distill that all the way down to, if you've chosen your market, if you commit to meeting 1 new owner every week— everyone has time for 1 cup of coffee for an hour— you invest maybe 30 minutes calling new people, you book that one meeting and you make that one coffee meeting, you will meet with 52 new owners in your market. Let's say you have two holidays there, 50 people who you've learned how they played the game and you've just casually communicated your goals. This is what I'm trying to build. I really aspire to get to where you're at. Let's, let's meet up. Your only rules there is you have to have a takeaway. And you have to have an objective going in. They don't have to be the same thing. Your takeaway can be different than your original objective for meeting. But if you get a takeaway from one person in your market, everyone knows who you are and what you're trying to build. I promise you, you will find the deals and then you figure out the debt and equity and you're done. That's at least for our model. That is how we have played it.

Okay.

Devil's advocate.

Okay, let's do this. All right. So, Ander, best way to find potential sellers without having to go through an MLS or a broker. With an active listing if you're trying to grow and scale like the Lumberjack Landlord or like Christian Osgood? That's a great question, and you should figure out all the different strategies that people use— driving for dollars, checking tax records, um, skip tracers— like all these different strategies that are out there. Google them, look them up, figure out which one works best for you. For me, for some reason I'm going to cough again.

Permitted, we're live.

For me, none of those. All of my deals are from the MLS. Anybody who's brought me, or I've even heard whisper of an off-market deal, it's been ridiculously overpriced, and that person was smart because it would be embarrassing to put that priced property on the MLS. But if you only search with one agent, you're not going to find very many deals. Searching on the MLS is nuanced. So while there are strategies that will work for the person who wants to grow that much, but for the person who's looking for one rental every year or every other year like I started out, I went to at least 3 agents. So at a minimum, have 3 agents with auto searches set up. If an agent is working with a homebuyer, that's going to take them to 10 showings and take a bunch of their time. The agent is going to want to sign an exclusivity agreement where they, they can only work with that agent. But if you're an investor and all you're saying is, I want you to set up an auto search, you're never going to hear from me again till you send me the deal that I want to make an offer on. And then when you send me the deal, you're going to be the one to get the work because you sent it to me. So with at least 3 agents always having their auto searches set up, in 10 years, in a 24-hour period, I have only one time had this agent send me the same deal in that day. I have eventually, once it sat on the market for a few days, seen every deal from all of the agents. But for the last 2 years, more so than the next 2 years, speed has been our friend. And you wanted to get an offer in quick if it was on the MLS with a letter of prequalification from your lender. All of your stuff in within hours of it hitting the MLS. That was only going to happen if you had multiple agents with searches set up. So for me, all of my deals coming from the MLS, I use agents and I have not used any other strategy to find properties. There are some that are very effective, but it depends on your goal.

Yeah. And, and I'm doing my best to answer the question of, you know, how do you do it without going to the MLS? The short answer, half of our deals have been on the MLS. Opposite from your strategy, almost all of them been on market over 100 days. I have that sweet spot where they might post something unrealistic that's kept it around, and I'm like, cool, there might be another term we can negotiate here. And that's where we get a lot of the creative financing terms. Deals that didn't sell conventionally, that the people playing the bank game, which is most people, couldn't figure out how to make sense. When you get to come at that at a creative lens, that's where our strategy really shines, is if it's sat around for a while you probably have more ammunition to negotiate. On-market listings are very important, and those broker relationships are important. My one thing is I want to be the person they call when they have a deal. Most states, not all of them, but most states, you're not supposed to pre-market a listing. But to be fair, every broker does if they know that you are the guy who's going to buy it. I get a lot of calls to go, hey, I'm listing this tomorrow, do you guys want to write it up? And I know within 10 minutes for my markets, tell me the price, tell me the terms, what do they want to do, I can tell you if it's a yes or no on that call immediately. That's the speed I like to work with. I don't like to compete with people on the MLS. So if you're doing the broker game, you need to have them believe that you're ready, able, and willing to buy whatever deal they send you, and you will in fact close on anything that you write up. To date, I have never written an offer that we did not close. We have never renegotiated any term or any sell from our initial offer, and that is our reputation. How much do you think brokers like working with us? If you send me a good deal, I will say yes, I will write it up, I will not retrade, we'll close in 3 weeks. We get a whole lot of deals. That's how we play the broker game. If you want to learn more about that, themulti-familystrategy.com. I'll do that without stuttering. themulti-familystrategy.com. We have a whole section in there on the 5 questions we ask brokers and how you actually build that confidence. But that's my main thing with brokers. You should have those 3 people. I just don't like being on lists because I don't read my email.

So to me, it's like a lottery ticket. Yeah. Every time I open up my emails and I look through there, it's like a scratch ticket. I'm opening an email that might be the next form of cash flow.

So I love how you look at it. And that's one of the things that I love about networking with Dion and Matt and Zuber. All of us play the game a little bit. Differently. Uh, Dion, you probably play it most differently from all of us. Um, and all of us can retire multiple times over on the portfolios we've built. Mine is much more active and going to take some time to add some systems to, but the strategies— figure out what works for you and then do all of it is, is my thing. It's like, you want to get on a bunch of lists and get a bunch of coffee meetings? It's not that hard to retire if you have a few a few streams of deal flow, you're pretty much there.

Rob has a merch idea that I really like. Uh, he says it's, it's just, he's just Dion doing Cody things. So you guys need a t-shirt where the name is blank so people can type in what they wanted to say. I'm just James doing Cody things. I'm just David doing Cody things.

I think it's a great idea. I want to do that so badly. And we have actually talked about that one. And then we need to make apparel for the Robinhood Resort. I actually think I started the maximum amount of businesses that a human can handle without more employees. I have 14 W-2s.

So how do you scale?

That's the trick. Yep. And I have 5 1099s who exclusively work for us. And so on a 20— or sorry, that's bad math— on a 19-person team, I have zero.

Yeah, I'm so happy.

Oh, it is Brutally hard to get started. Uh, 1 out of 5 stars, would not recommend to a friend. That part is very, very, very difficult. Um, I want to do the apparel thing. I literally— it's been on my mind and I have not had the 5 minutes to figure out how the heck you get into the apparel game. We will do that, but not today.

Just Be True to Love, great name. It scares me, but it's a great name. How do you pick your market? What is your buy box?

Ah, I love this. I hate the term buy box. Really? Everyone uses that. But my buy box is how do you, how do you buy it? How do you never lose it? Is it going to be fun? That's not really a box. That's an open-ended thing. And I don't like to limit myself. I would not— the resort is the hardest property we have. It is hands down ridiculously the most profitable property we have.

So you're welcome. And I'm sorry.

And we would not have done that adventure if we had a buy box, because this does not fit in the box of we buy cash flowing multifamily day one on long-term leases. I love the adventure. It's pushed my team and my business to all new levels. If we had a buy box, I would have just said no to Dion as soon as he said, like, you guys should check this out.

And I had a buy box, which made me go No, but I know some guys.

So the buy box for, for Cody and I, if you want to call it a box, is how do we own it? How do we never lose it? Will it be fun? We added will it be fun because we bought a couple deals on that make money that are great deals. And I wish I didn't buy them because they take some time to manage. They took some time to stabilize and they're so boring because it's a tiny little triplex and we have 100 other units. It needs someone who wants to give it attention. And it's a rounding error in the portfolio.

Where's that one located?

That's Moses Lake. Okay. And if someone wants to buy a tiny little— yes, I do. I'll do that one.

Okay. You want to talk about it right now?

I'll have paper later. Yeah. Cody, put all the numbers out. Everyone. Okay. So, yeah, real deal. Anyone can beat Dion to this, too.

But here's the phrase that works for me. Boring is sexy. Because boring made me able to quit work.

Okay, tiny goals.

Yeah, I love duplexes, middle of nowhere, it's great.

So I got a triplex, it faces the water. You can't build on the other side, so it's the other side of the street, but it will always be water-facing. Um, they're tiny units, they're studios, they're about 400 square feet. Okay, so you're, you're talking a building that is just— we bought it in Beans LLC, we call it the Beanplex because it's the tiniest building we own. Um, each separate meters? 7 meters.

Yep.

Legal triplex. Legal triplex. All the water heaters are in the middle unit though, and they stopped paying their utilities for a while, so we had to get that fixed. That is, that is resolved.

Okay.

When we bought it, one vacant unit, two nonpays, and the government was subsidizing the nonpays so that it was cash flow positive without anyone paying, which is why it didn't get any love for 6 months. I was like, I don't care. It gets no money, no money. Government check for the last 3 months and the future 3 months, and then we wait 3 months.

And fair enough.

Yeah, that was, that was the thing on it. We've decided recently we're far enough out of acquisition mode, I just don't want to take any more government money. There's all sorts of programs, uh, they can catch up people for not paying. I don't want to reward bad behavior, so we kicked them all out. Um, that's something we did recently. But on this one, uh, renovated unit, The other non-pay just moved out. I have a paying tenant now in the side and the right side. Beautiful cash flowing. I don't know that much on it. We're probably looking at $100,000 a unit, so we're probably in the ballpark of $300,000 purchase price. No bank's going to have a problem with that because duplexes are selling for 4 right across the street. I've sold some of them back when I was a broker. Simple deal, easy. You just need someone who wants to come in lease the units and do some flooring and paint renovations on the middle unit, and it's completely turnkey after that. So yeah, you should buy it.

Well, I'm serious. Let's talk. Okay. We'll do that. So the first part of this question was, how do you pick your market? Here's my advice on picking the market. First, it's a lot easier to learn the strategies of investing in real estate in your backyard, but not everybody lives in a place where it makes sense. Millennial Mike, for example, is a public worker, if you call law enforcement public working, in and around Seattle, that area, right? So investing there doesn't make sense to him. He does house hack a duplex, but then he invested at a distance. I invest all within an hour's drive of where I live because a little bit of a couple of things. One, I don't like property management. There's a massive hidden cost to property management that most people don't understand. And I want the binder strategy to be effective, so I'm in charge of So I invest within an hour of my— where I live. For you, for the person picking a market, here's the most important factor: boots on the ground. It's the most important factor for me too. The boots on the ground are mine. I know the neighborhoods and other areas. I've lived here for a couple of decades. I know the streets I wouldn't own on. I know all of the aspects of the two counties that I invest in. If you're going to invest in another state, you need to have that boots on the ground. It needs to be somebody who you trust so much that you think they are going to come to your funeral. That's the level of trust you need to have with this person. They, they can be, and also some way affiliated with the business— contractor, handyman, property manager, realtor, something tied to real estate that you know. Because think of this, in every town, no matter where you live, there is a street an area, an apartment complex, or a side of town, sometimes the whole side of the town, where the cops can't go alone. Would you want to send a property manager there to collect the rent if you knew the cops couldn't go there alone? Would you? How would you feel about that? You don't know where that area is in most areas if you're investing at a distance. So to pick a market, if it's not going to be the market that you live in, because some people say I live in too high a cost of living area, I love that the area that I invest in is a high cost of living area because with 7 properties, 16 units, I'm able to generate over $200,000 in profit every year. If I invested in Gary, Indiana, like Millennial Mike does, it would take a lot more than 7 properties to generate that much money. So for me, most amount of cash flow, least amount of properties, the more expensive area made sense. That might not be your goal. But if you pick a market, it starts with where do you have trusted boots on the ground? Then everybody gets into the research of— you can actually go to U-Haul. U-Haul has a website that tracks migration. Where are all their trucks going to? Where will they pay you to bring a truck back from? Because they're all there now. So you want population growth, then you want several economic drivers. I like to invest in a place that has several things like a base, a port, college, hospital, Boeing, Amazon, large population, like all of these things that mean there's going to be renters if something changes. Like if you're in or around Detroit and all the car manufacturers move away, no one left, not much left. So that's still— there are still areas that are recovering. From that. So diversified economic drivers in an area, population growth, but all of that comes after, you know, where you have trusted boots on the ground. And that comes after your boots, your backyard is almost always easy. And within an hour or two from your place is the easiest way to learn real estate. Yep. And a lot of people say, well, I live in LA, there's no way I can invest. My brother owns properties. He invests in Rosemont, Kern County, edge of LA, has all the commuters that come up there, tons of demand for his properties, prices that make sense. So it cash flows on purchases right from the MLS. California is huge and there are parts of LA that you might not want to own in because prices versus rents doesn't make sense. But travel an hour in any direction and see what you find.

And that's really what I am. I always recommend that I have friends who invest out of state. Some people do it very, very well. Millennial Mike being one, Caleb and Chuck being another. That being said, I like to be able to actually go out and touch my stuff. Like, I like being able to drive to Moses Lake, and it's much easier for me to do the hiring. We're actually adding our first— I have contractors that I trust implicitly that are boots on the ground. I have tenants that do more work than me, for me, than they probably should, that I absolutely trust. But we're adding our first full-time employee into that market, uh, the first week of January. That's exactly what you need to do. You need people who are on site ready to go. Moses Lake is 3 hours away, and sometimes the pass closes down, which means I can't get there, which means I need to have people there who can touch the properties.

There are quite a few people who agree with, agree with your opinion on not wanting a box because you want to be open to all things that show up on your radar, right? So it doesn't mean anything though, by the way, boxes are focusing not on anything, but I mean some more things like, like you would have heard of paid attention to Robinhood. And then Avenita says, been telling people like that, just know they don't have a box because they like to think outside of the box. I mean, that all makes sense. Have a strategy, though, and be willing to adjust your strategy. If you— my original investment strategy was I'm going to buy single-family houses, house hack, live in it for a year, use an owner-occupied loan to buy it every year, move into the next one. But in this high-cost-of-living area. Single-family houses really don't cash flow. So I had to shift my strategy in that market. And the concept I like to reference is if you chase 5 rabbits, you are going to starve. Know which rabbits you can chase, which ones are in your bandwidth. So when people talk about having a buy box as an investor, don't be limited by it. I think it's a brilliant strategy to say what else is out there, but figure out what you're going to pursue. Kind of like Christian said, I don't have a buy box, but if I came to you right now and I said, I've got the best stock investing tip you've ever heard in your life, give me $20 grand.

Yeah, not interested.

Not interested. So he's got a buy box.

It's real estate.

Yeah. Then maybe you focus down to— you probably don't want commercial in an industrial area. You're looking for residential. You're looking for rent that you understand. Like, it kind of gets narrowed down a little bit like that. Then there's people like me that are literally small multifamily. These two counties don't hear about anything else. Yeah. Right. So don't limit yourself like I have. I think it worked for me because I have different goals than most investors.

Everyone, yeah, everyone needs to have targets. So your buy box is what it is. I just don't like the term buy box. I don't like the idea of being confined to a box. We're in the creative finance space. And so there you just go like, what is in the box and what is out of the box? I like to live out of the box. So I mean, sure, at some point you can have a giant box, but I don't even like to recognize that I'm in said box.

I think it's the realm. Matt Gary wants to talk at the Tacoma FI meetup because they have an apparel company here. Oh, there you go.

It's all about— that would be helpful. I need to remember that name so I can come back and find it.

That screenshot. Yes.

I just want to make sure I don't mess up with everybody. Yeah. What if I actually turn it off? That's the, that's the risk. Okay. The Real Matt Gary. Two Rs. I can remember that.

That's something.

Oh, yeah.

Well, just take a picture with the other phone. There.

Yeah. Yeah, I will, I will reach out regarding that. That's— that is awesome. I appreciate that. All right, readjust the camera and let's see here. Okay. What about a rent box? Inquiring Matt wants to know. I do like that. I actually really like that. The, the rent box.

Lumberjack Landlord talks about the rent box. Rent boxes. You have a buy box, you should have a rent box. And for me, for years, I would do a 5% every other year rent increase. And I can move over a little bit, pretend I like you.

Oh, there we go. There you go. We'll snuggle.

So, uh, but in 2020 and 2021, rents went up so much that a 5% increase every other year didn't work. So understanding my rent box, what is going on with rents in my area, and for 5+ years, Rentometer was a good method. They had historical data, they showed what was happening with rentals in the area. And then on a slow trajectory, it worked great. When we had the spike in 2020, 2021, where my tenants across the board requested a 20 to 28% increase in their rents, that's a huge spike that Rentometer didn't adjust for. So to do the rent box, I like to— when I'm going to be turning a property or buying a property to compare what my yield is going to be, I look at actual places people would rent a property from. I don't go to any one platform. Go to Apartments.com, Zillow, Hemline, Craigslist, Facebook Marketplace. Look at the same number of bedrooms per unit that you're looking at renting for. Watch for at least 2 weeks. What rentals are posted at means nothing. Right now you're hearing a bunch of people say rents are dropping. That's never happened. And I just interviewed Dana, the CEO of Hemline. I can connect you if you'd like to. They've got a great product that I'm using. And they manage 18,500 rental units. They have 3,000 owners. Not one, not one person, not one owner has renewed a rental lease at a lower amount than they had last year. So what's happening is people will post something for rent, hoping to get it, realizing rents didn't go up that much, and then they'll adjust to where somebody will actually rent it. That's higher than the rents in the other area. It's just not as high as they originally listed for. Before. So every time you see a video right now that says rents are dropping, I call BS. So Lumberjack Landlord has 135 units. I have 16. Millennial Mike has 10. Like, we put all of our stuff together. Not one of us— like, physically, we know the information because it's us— not one of us has renewed a lease for a lower amount than we had leases going for last year. So rent decrease is a lie. I'm going to ask you guys, have you lowered the rent? Now, it doesn't mean listed one and then dropped the rent. But have you renewed a lease with somebody and said, hey, we're going to lower your rent by $100 compared to what you were paying last year?

Well, no. And the 38-packs, I mean, there are people paying $350 a month in Washington. There's nowhere to go down.

But you could just give them some money.

Yeah, for the— yeah, I guess I could start paying them to live there. The— for the most part, we bought properties that had initial rents that were fairly low. Since we started buying 15 months ago, our rents are up about 65%. Now, granted, that's not market rent. That's our rents based on what we bought and how other people manage their assets. So yeah, those go down, but there's never going to be a point where I will lease a property for less than it was originally leased at. We're printing too much money for that. It doesn't— it does not make sense to do, and that's not how rents work.

So before we get to— it moved— Divergent Minds podcast question here. Yeah. And people have attacked me when I say this in the past because it's a little nuanced of a statement, but they say it's not true. Let me caveat it with in the last 2 years, we've printed 80% of our currency. And if you want to talk dollars in print, yes, that's not accurate. But if you talk about the assets that the Fed purchased and kept on their books to support and prop up, we printed 40% of our currency in 2020 and a little over 30% in 2021 of the larger amount. So we had a 40% increase which increased it. And then of that amount, we had a 30%. So it's almost an 80% increase in currency. For people to expect the cost of anything to go down, their brains are broken. We had 8% inflation. Now we're down to 7.7%. So, yay, inflation is down. People are saying, well, I'm going to wait for inflation to go down to 2% so I can buy something cheaper in the future. And that's not how it works. If something was $100,000 and it went up 8%, it's now $108,000. So you want to wait for inflation to come down to 2%. Magically, poof, let's say it does. I don't think it's going to, but let's say it did. So now inflation is 2% next year. You're going to add 2% to the $108,000. You're not going to take anything away. It's not going to go down. It's just going to go up less than another 8%. But here's a good question from Divergent Minds Podcast. What exactly is a yield? Would you like to, or would you like—

Yeah, well, a yield is your return, and there's different types of, uh, there's different ways to measure yield, and there's different yield metrics, one of the ones that I think we both use the most often is your cash-on-cash return on investment. That is a yield that you are making on your property. Essentially, you're taking the net cash flow, that is income after all expenses, and you're dividing by the money that you have placed in that deal. That is a yield. And I look at that and I go, okay, that tells me how much this property is going to yield on the money that I have in. Another thing, and this is where Cody and I make a lot of our money, is the actual yield that we get from the debt, where I will look at, for example, if we're borrowing, let's say interest only so we don't have to get into factor rates. I'm happy to dive into factor rates, but if I'm borrowing interest only and we're going to say 3%, we're going to sell our finance. Now we can sell our terms. We've done this before, 3% interest, and the property is yielding 8%. I'm just getting a spread for every dollar I borrow. I make that spread between the 3% and the 8%. I am now incentivized to borrow as many dollars as I can to do this deal. So you have different yields, but anything that yield is, is what is the margin of return.

So there, you're right, in accounting there are several different ways to look at yield. ROI, return on investment, can be time investment, can be sweat equity investment, can be all these things. But in real estate, the one referred to the most. And I'm going to give an example at the 1 hour and 29 minutes. So in the future, if you want to come in here, this Cliff Notes example of what the yield is, 1 hour and 29 minutes into this on YouTube, not sure about Instagram when we started. Yield or cash on cash return on investment for real estate is annual profit divided by cost to acquire. The cost to acquire is down payment, closing costs, immediate repairs. The annual profit is all of your rents and income. So if you have a coin laundry or something, you're going to add that to the income and then you're going to take out the expenses like principal, interest, taxes, and insurance and setting aside for property management, repairs, and vacancy. So you take all of that money out of your gross rents. What's left is the profit you talked about divided by your cost to acquire, which will give you a percentage. The idea is to study your local market, learn what an average deal gets. So, and so here's how the numbers break down in my area. Out of 100 listings that I see on the MLS, 80 suck and would lose money. So I take them out of the equation. There are 20 left that on average that are decent. Most of them would get somewhere between a 7 to 8% return on investment. I look for tens. If you study your market and the average is 3 to 4, you look for fives. If you're the lumberjack landlord and his average for a while was 25, you'll look for 30s. Learning what is average in your area will probably take 60 to 90 days. A lot of studying, knowing what the rents are, knowing what your prices are, looking at interest rates, comparing it weekly, but then figuring out my cost to acquire. What is my annual profit going to be? Divide annual profit by cost to acquire to get your yield.

That's an excellent example, by the way.

Thank you for that. That's why I tried to do like a minute clip where we could pull it out and stick it.

That is, that is very short. That is very smart. We're going to have a few shorts out of this. We can, we can only divide this into several hundred shorts. Let's see here from Rob Christian. When you acquire a seller finance deal, do you have a reserve capital requirement that you account for on the deal? Well, there's do I and there should you. Should you? Yes. I actually— this is one of the few Dave Ramsey things that I absolutely love. 3 to 6 months of emergency funds in the account is the right thing. That means you can service the debt maintenance. All your expenses for that asset should be held in reserve for that asset. Very easy to track for us since we buy each asset in its own LLC. It has its own bank account, its own company, its own tax return. It just goes in one little silo for the property. That being said, Cody and I started with no money. I spent all my money on two duplexes. Cody never had any money. He's never had a job, um, which is a blessing and a curse, trust me. But Cody and I, we don't have money for reserves. So what did we have to do when we started? We had to buy deals that were heavy on cash flow, and we have to sideline that cash flow and start building that reserve as fast as humanly possible. When you're first starting You don't have any passive income because you don't have any real estate. I would solve that problem first before I start worrying about how do I defend this with the right reserves. So this is a straight Cardone thing, but it's, it's like, okay, you don't have enough top line to worry about your bottom line yet. So let's go buy a bunch of non-recourse debt. Let's go get some deals. Let's get the cash flow. We're now at a point where we have some good appreciation on the portfolio. We manage it extremely well, which really helped the forced appreciation. But we've made a few million dollars in the last year, just like everyone else. Yeah, just like everyone else. In 8 years of working a job, I did not make that. This is actually hard enough to recreate where I'm like, okay, it's time to start implementing the facts. So now when we buy, I'm buying with a 3-month reserve with a cash flow plan to bring that up to 6 months. And that is how I buy. So when you're starting your objective is not to add in all these pieces of who's my lawyer, who's my property manager. You're not going to buy anything. You're going to overcomplicate it. So if you have money, save a reserve. If you don't have money, come up with a cash flow plan to start saving for your reserve to get to 3 to 6 months.

Yeah, great. And so in the beginning, when you're really struggling— I did this twice— yeah, you might end up actually having to use your retirement accounts as your reserve to satisfy the lender's requirement if you're using traditional loans, even seller financing, mentally you could say, yep, I can drop down. When I purchased my fourplex, I dropped down to $200 to my name. I had credit cards that weren't used. I had a retirement account that I wasn't touching. So I guess to my name is not accurate, but I mean in cash that I could use because I knew the cash flow. I wouldn't start with that strategy, but I knew that I was closing on the 6th. I was going to get all of January's rent. I was going to get February's rent before the mortgage on that property came. I had the cash flow from the properties. I still had a job. So within a month I was over $10,000 in that savings account. But, but when you're starting out, you don't have those other assets that are going to kick out that cash flow. So it starts out very different than when you're— look, now in your preservation mode and you want to create that, it's very different than when you're starting stabilization mode.

We're going to do this in a year. Now we're doing it in 90 days. We've committed to that. So I'm adding more employees, more systems, more software, and I'm actually using the cash flow now to buy my time back. And that is our model. It's trade your time for money for like a year and just go all out. Then you have to stabilize. We were going to do that in a year and Brandon is like, oh, stabilization year. And we had a friend of ours, Johnny Nyland, uh, was like, well, all your channels are going to get super bored if you guys are stabilizing for a year. He's like, but if you do it for 90 days, that's going to be so hard that people will actually watch. I was like, no. So that's what we're doing. 90 days by my birthday, February 17th. We will be in ownership of our time. I don't want to have to work more than 10 hours in a week to stabilize the portfolio. At that point, that's not truly passive income yet, but in my universe where I'm used to working 80 to 100, working a tenth of my time, I mean, I don't know what to do with the time yet. We're going to have to start making apparel because I don't know what to do.

There's Landon here has, I live in Kentucky in a small town. I am, I am and I'm hours away from places that even have a 10 to 40 unit buildings. I'm very interested in creative finance. Should I be looking into what Caleb and Chuck are doing?

Oh, I love that. Caleb, Chuck. And then in January, we're going to be joined on our channel for a 6-week series with Sole Cayetano. Her Instagram is Lattes and Leases. If you haven't checked her out yet, I would absolutely do that. They both invest out of state. She invests in Cincinnati and Augusta. They invest in Texas. I really want them to focus on one market. They're right now in McAllen, Laredo, which are pretty close, and now Houston. I, I don't recommend doing that piece, but the rest of it, check them out. What they're doing is actually incredible, and the way they have to buy to buy out of market and be truly passive, I would argue, is a better business model than Cody and I have. They're not actively managing their property. They're spending about 10 minutes a day if you average it out managing their property managers and getting updates on their property. They spend about an hour a day on YouTube, and then they actually have been helping me take a little off my schedule and talking to people about our course. So if you guys want to learn about our course or the mentorship group with Cody and I, I would actually reach out to Caleb and Chuck because they can tell you just as a testimonial, they're unbiased. They'll just tell you, hey, um, This is what they do. This is how we learned it. So if you guys want to learn from anyone, check out Caleb and Chuck. Do that channel. What they did worked. Not every area in the country is somewhere that you want to invest. I'm a huge advocate for investing in your backyard. That being said, if that's not what you want to do, follow people who are doing exactly what you're trying to do. So Caleb and Chuck, I— unless you know someone I don't, I don't know of any other teenagers who have bought 28 units without family money. What they did, I believe they're actually the fastest people to ever do this in the creative finance space. So I would definitely follow them. And then, so he's done a really good job with her social media and partnering with BiggerPockets talking about her process for how she does these. If you're looking for building systems, I think she's your gal.

So Carl Paulson, is there any case I would want to get traditional bank financing in first position and owner financing for second position. I can come up with a couple of deals using that, but not sure if I should. Yeah. So the first thing you want to do is reach out to Steven Dow of Velocity Mortgage. They actually have a product designed for this. The expectation is that the buyer will come up with 10% down, they want you to have some skin in the game. But they will do up to 50%. The reason they want to go 50% or less is because that gets you the best interest rate. And what you want to do with your seller financing is get a blended interest rate. So 50% loan-to-value or less will get you the best current interest rate. So whatever that is, you can compare lenders to find out which one is the best. But then the seller takes second position for up to 40%. And then you put in the 10%. So the seller walks away from the table with the 50% from the lender and the 10% for you. So they get up to 60%, which can cover agent fees, any loan that's left, so they can take care of any mortgages, title will actually handle that. And then they carry a note for 40% that's remaining. The interest rate on the seller finance is where you can make your blended rate. So if current interest rates are 6% or 7% from Velocity Mortgage for the 50%, you can go to the seller and say, here's the price, I'll give you the price that you want, but I want to get a 2% interest rate on the 40%, lowering the average of the interest rate on the amount of money that you've borrowed.

Will they do commercial and residential loans, or are they all for the— are they for the smaller properties?

Honestly, I don't know. Steven Dow, Velocity Mortgage. He'd be the guy to reach out to and ask. He's one of the recurring guests on One Rental at a Time, and Zuber's done that product. I think that's the one that Matt just used, the 50-40-10, which is literally a strategy designed to do exactly what your question was asking.

Yeah. And to answer the question of should you deal, then debt, then equity, if you can figure out the deal, debt, and equity, and it works and it cash flows and it's long-term fixed-rate debt, then the answer is yes. You don't have to seller finance everything 100%. That's just what Cody and I do a heck of a lot of. We do a lot of 90% seller finance notes or 95% seller financed, which takes care of the majority of it. And then we traditionally will bring in either our own capital from our cash flow or an equity partner with a fixed buyout. So basically my partnerships outside of Cody, they all have a balloon of a time where I buy them out and we own the property. However, worth mentioning, Matt Lumberjack Landlord has basically the exact same unit count we do, but he owns them. Cody and I own them 50/50. So right there, I'm half as cool as Matt. And then I have equity partners with a fixed buyout, which means until I reach all those buyouts, which we're doing some of them right now, and we own some stuff ourselves, but we're roughly 50/50 with a lot of them. So as cool as our story is, and as much as people love to flex unit count, I'm one quarter as cool as Matt, and my cash flow is for an astronomically larger amount of work is not that much larger than your global cash flow. So if you're building your business, the guys who've been doing it with longevity and actually own their properties— that is the end goal for everyone. Follow our journey, but Cody and I haven't made it there yet. We're not—

where you take a little bit of what every one of these investors that is sharing their information and figure out which strategy works for you.

Figure out how the automation of all of those, right? Yeah, but figure out how to own your assets. We We have not been in business long enough to have bought everything we did and to be where you are, unless you guys have a better strategy, in which case you just need time to add your element. Oh, the time thing is so hard. I'm not patient.

So this is from Maud. Aside from landlord-friendly laws and population growth, what are other things I should look for when choosing my market to invest in? And I see just above that that you just joined the channel, so you might have missed Earlier in this video, we talked about choosing a market which really is based on where you have trusted boots on the ground more than anything else. If everybody right now said this is the perfect state to invest in, you have to be investing here, it's going to have every element that you want, but you don't know somebody there that you trust and you called and you said, I have a ton of money, I want to invest. Every agent is going to have the best deal you've ever heard of that every local investor passed on for a good reason. And you don't know that reason yet. So trusted boots on the ground is first. And then your question said you want landlord-friendly laws. If you're buying for buy and hold and you're going to have tenants long term, we were talking earlier, that might be the states to go for where it's landlord-friendly. If you take a page out of Grant Cardone's book, if you're going to buy for appreciation and sell in 5, 10, or 15 years, your plan isn't like mine to keep them until I die. You're going to sell. Landlord-friendly might not be the way to go. The tenant-friendly states have the best appreciation because they also limit building. So in places where they limit building, an example is around Tacoma, we had 19 to 24% appreciation over the last 2 years. Seattle, place I wouldn't own property if you gave it to me, had over 30% appreciation in those same 2 years because of limited building.

Yep. Limited building and lack of competition are the 2 things. However, as far as population growth, that's actually my number 1 indicator. We'll see if we just lose all the viewers of the channel if I go macroeconomics lesson. But seriously, this is super easy. Uh, supply and demand. You're providing a product that is housing for human beings. If humans want to live in your market and continue to live in your market, your pricing will typically go up. If you're in a non-landlord-friendly state where they limit the amount of building and they make it difficult to build, and the population's going up, your appreciation is programmed to just outcompete easier to operate in markets. That is something that we look at. Cody and I own in Washington State. Without being political, whether or not their politics agree with mine, I think it's terrible for tenants. However, you as a landlord have a huge advantage operating in a difficult state because you're going to— when you invest for cash flow like everyone on this channel does, And in the network, I love One Rental at a Time's network. So you have Zuber, you have Matt Lumberjack Landlord, you have a whole handful of other investors, you have Deon, you have us. Within that group, everyone buys for cash flow. But when you do this in a high appreciation market, it's a true example. If you get a, what is the term? Have your cake and eat it too. You get to do a good deal of both. The only thing you're not allowed to do is sell. That is a 4-letter word. That is a dollar in the swear jar every time we say it. Uh, we don't sell. I have sold one of my duplexes, and it was to help launch Cody in my business. Cody needed the capital. I bought into his 12-plex, and I doubled my money on the accidental flip that I wanted to hold forever. I could have held forever though. That's important. I sold it, and then we tripled the money in the 12-plex. On a 1-year period, I 6x'd my money making one sell. I still wish I had got a better appraisal so I could have just pulled the money out, kept it, and rolled it in without having to off the asset.

But I've never met an owner that doesn't regret selling, even if the use of the capital from the sale was put to good work. Most, most owners will say, I wish I still had that property.

How do you buy it? How do you never lose it? And I guarantee you the appreciation on our 100-unit 100+ units in our resort is going to outweigh any smaller portfolio because we're just getting appreciation on $20 million of real estate like that. And when we get to $100 million of real estate, guess what? The 8 to 10% appreciation that we see in a sustained period of time doesn't care how much equity we have in that. The appreciation is the appreciation.

Everyone needs to ask, do you know anyone with experience in buying notes? Buying—

I think I said buying motels. I saw notes. That is okay.

I'm old.

That is okay. No, I see how you did that. Hotels though. I bought a resort which plays like a motel. Yeah, they are. So I'm going to talk hospitality because this is a space that Cody and I just got into.

Hospitality.

So hotel, motel, resort. Whatever. I like them a lot more than I like Airbnb. Why? Because it's a real business. You are not going to get shut down running your hotel and your resort like the government can decide to shut down an Airbnb house because they don't like the usage for their city. Your risks are so much lower because you have less variables, and I hate variables. Hence, long-term fixed-rate non-recourse debt. I don't want surprises or changes to my business that can negatively affect me. Um, hospitality, you need employees, which is a headache. This would not fit into Dion's model. I decided early that I would have this skill in my company of I want to be the best manager of humans alive. That is the one skill that I want to work to expand our network. I want to be excellent at managing people. It works for me. If you want to be a manager of people You can get into the hospitality business. The other thing that you have to be very good at is you have to be very good at marketing, extremely good at marketing, and you have to be willing to put in more hours than you would on passive investments. Now, if you're willing to do those three things, if you want to hire and manage people, if you're willing to market and you're willing to give more of your time, the yield on hospitality is higher than multifamily because more risk, more variables, more time, more money, more marketing. In return for that, anyone who buys these assets requires a higher return. Otherwise they would all just buy multifamily. So that's my thing on motels. I buy them technically, it's, it's a resort and it's a very nice resort. It's not a— it's not what you think of when you think motel, but that whole hospitality space, it operates the same way. You're looking for outside yield, like outsized yields on purchases of short-term property. You have to be paid for the risk. Um, I'm buying them, I'm not selling them. So if you, if you're looking for someone who has a deal for you, I will never sell that resort. That is my crown gem of the portfolio. The orcas are in the canal right now. The salmon are finishing their run. So I have salmon running up the stream, we have orcas out there. I mean, it is ridiculous. I will never off that asset for any reason. Oh, there's a long question on tiny font. Forgive me. Would you say there's a consistent amount of sellers, or would you say, oh, there's a grammatical, would you say there is a consistent amount of sellers that are willing to finance without a down payment, or does it depend on the seller and the deal? Sounds like we need to come up with 5%. Very, very, very rare. I would say that a zero-down seller finance deal is a unicorn. Until you have enough assets where they can place second position loans on your assets as your down payment, which is something that we love to do.

You're also doing this without an agent because if you have an agent or they have a listing agent, you're going to have— your down payment is going to have to cover the agent fees. You have title and escrow and all the closing costs that are going to come in. So even Brandon Turner says, you know, in his book, How to Invest in Real Estate with Low or No Money Down, says you don't do it with no money. There are ways to do it with someone else's money, but you still need reserves. Emergencies will pop up. So yes, I think at least coming up with 5 to 10% down because— and here's the thing that some people might not want to say, don't unsubscribe because it's not my channel. I'm a guest here today. If you can't save 5 to 10%, do you think you're all of a sudden going to become good with money once you have an asset? I love that. So, so I'm not saying that to be mean. I'm saying Get Your Money Right. It's the free course offered by One Rental at a Time. I think it was free. I don't know, might be $100 now or something, but it's his first course and it talks about if you don't get your finances right when you only have $1,000, you're never going to know how to manage $10,000. So yes, I think you're probably going to need to come up with 5 or 10% down even on a good seller finance deal, even if it's just money that you have in case once you close, you then find a septic problem.

Yep. That happens to me all the time.

There you go. Or you then find out Yes, the roof isn't currently leaking, but it's at the end of its lifespan. And my insurance said they'll no longer insure us unless you put a new roof on it. You want money?

Also done that.

Those things. Yeah, I've done that once too.

And it did in fact leak before I fixed it. If you have problems, they will come up. That is the biggest misconception. And I'll take responsibility for this.

The—

our channel, a lot of the ways that we buy stuff because we don't always have money is we share a lot of how you buy zero down. What I think people hear when they click on a zero down video is, oh, I don't have to use my own money or have money. The goal is not— yeah, the goal is not to not use your own money. As an investor, you have money in, money out. And if you're borrowing money, you have to remember that money is not yours. So when you're playing this game, the goal is use the pieces you have to acquire and stabilize and keep your portfolio. That is the game. You have to balance all of your inputs. If you're starting low on cash, you don't need money to start, but you will burn money. And so it has to be someone's money. We prefer it to be our tenant's money. But that is one of the biggest misconceptions of real estate. Zero down is not a strategy you don't commit to. And I've heard people do this. I'm only going to buy deals that are zero down. Cool. You're not going to buy a lot of deals. Buy deals that you can figure out how to put together, that you can buy, and you can never lose. And if you can do those things, you will just outcompete 95% of the market. I said this earlier, I'm so excited for the market to pull back because all these people who have been posting for 12 years on, look at my flip, everything went wrong, but the market saved me. The market's not saving you anymore. You have to be a good operator. This is the only way to play the real estate game and not get wiped out.

One of my favorite commenters has a question. Oh, Rob asks, Christian, besides your resort, are any of your units short-term?

Um, well, technically I bought the triplex next to the resort, which, um, we're doing long-term rentals on the bottom, and then the top is an event space which also has 4 bedrooms and the best view of any of our units. So that is a blended short-term. However, I'm leasing it from the resort, so I'm going to say it's still the resort. I'm outside of that. No, I am not an advocate. So this— hear me out. I'm not an advocate for deviating from the business model. Cody and I are Channels Multi-Family Strategy, which means he has a box.

Just saying.

Well, I went out of the box, so now I don't. I have a loose set of preferences.

There you go.

It's not a box. Box is finite. We have— we have— it's dotted lines. It's not— we don't have a solid box. I'm not a fan of deviating from what works for you. Cody and I are very— especially Cody is the best single living buyer of real estate I've ever met. Cody can acquire, analyze, negotiate, and close property better than any human being I've ever met in my life. Our core business model is buying multifamily. I will not buy a short-term rental, hospitality, or anything else that is super fun and creative and higher risk unless we have enough cash flow from our portfolio to cover it. If it makes $0, if no one stayed at the resort, while it would be— it would be brutally painful, tens of thousands of dollars of cash flow negative every month to try to service that. If no one came, we booked no weddings, it just sat empty, our portfolio can fund that property. So what we will do, we will buy enough multifamily next year to go buy, I really, I really want to do castle or vineyard. I just feel that it will just feel different walking into my castle and saying, this is my castle. Um, and I really want to get a little decorative pillow that says, a man's castle is his castle, instead of the home thing. However, these are the type of fun things we want to do. We do not do those without the core business being stable, long-term rentals on long-term fixed-rate debt. We have to have enough of that to go do the fun things. That's my rule. So if you want to call that a box, sure. My box is this big, but I have a box. For those on Instagram, I can't see my hand. The other one's way over here because, right, it's a huge box.

Speaking of having a box, when I misread, do we know it? Do you know anybody investing in motels?

They asked about notes.

I said also interested in buying notes. So first bit of advice If you're looking at motels and notes and long-term rentals and seller financing, and I think you're going to be kind of spread about kind of thin, pick a lane, pick a lane, have 2 or 3 things in the lane, but be in that lane. But second, every Thursday there's a meeting called the Seattle Investors Club. You just go to SeattleInvestorsClub.com. You can join in that mastermind group, which is free to be in as far as being in those mastermind meetings on Thursdays at 11:30 a.m. Pacific. There is a woman named Mariska who invests in notes and she literally goes to note conventions and there's a ton of information on buying notes, which is not the asset that I am interested in or am buying in yet, but that's where I would go. So Seattle Investors Club, join, listen for a minute, try to connect with Mariska.

And another fun thing you can do if you're interested in buying notes, what I prefer to do is if you're going to get into that space, originate the note. I like to have some control over my assets. So if I'm going to do the note thing, for example, you're not super keen on expanding your portfolio, right? From what I've talked to you, you're like, I don't know if I sell down, if I buy a few more.

No, I might add one just because the money, it's so weird. It's a terrible problem I hope all of you have. Every month there is 5 figures of money added to my savings account that I didn't work for. It just shows up because of the portfolio. And I eventually would need to put that somewhere. Yeah. So it could be buying notes, but it'll probably be a rental. Yeah, but I'm not really— I don't want more rent. I have 16 rental units. That's plenty. I might even sell one, pay off that, whatever, just to increase cash flow. The important thing to take away from this moment in time, though, is don't compare year 1 to year 12. Yes. And if you're in growth mode, you don't say or think anything that I just said for the last 30 seconds. Yeah. But if you get to the point where you have the cash flow that you need, and for me that was at least 4 times your freedom number. The really cool thing is, and I'm going to ask this, if you can put it in chat, this is the question I like to ask a new investor when you first meet one and they have no idea what you do, that you have YouTube, that you invest, whatever. I always ask them, how much money would you need to retire? Almost everybody who hasn't done any research will say a number.

And that number is almost always $10,000.

No, before that, they'll go a million dollars, 5— they're going to say a number, not at a recurring.

Oh, really?

Because it's so germane for us, it's just normal. We know freedom comes from cash flow, which is an amount of money that comes in every month that you don't have to sell your life one hour at a time for. In this community, that's how educated the people are who watch these channels. It just seems normal. But if you talk to somebody who doesn't know about the channels, doesn't invest, doesn't know this anything, and you ask them how much we need to retire, it's $1 million, $5 million, $10 million, $250,000. They're going to throw out a number and you're going to go, okay, cool. So let's say this girl that was working for me at the truck driving school, it's one of my favorite conversations. And I realized I never talked to her about money. I asked her, you know, how much would you need to retire? And she said— she said she would need $1 million. And I said, okay, great. We have a cutout here going here because someone is calling us during a livestream.

That's so rude.

Unallowed. Nice. Make sure that it's still going and a little laggy there. Sorry, but you'll catch up. I said, so if you spend $50,000 a year and you have $1 million, that means you're for 10 years or 20 years, you're going to be able to spend. But in 20 years, you're going to have to die because you're out of money. Yeah, right. You can't be retired and live anything without money. And I said, so I explained how a freedom number is a monthly amount of income that comes in, just like your original thought.

Yep.

Most people, it's $10,000 a month. For me, it was $4,000. I looked at the last 6 months. I thought, this is how much I spend. I'm not going to all of a sudden randomly increase my lifestyle. But for me, the freedom number was 4 times the freedom number you find. So if you think you need $10,000 a month because you're spending $10,000 a month, I wouldn't retire from your job until you're making $40,000 $16,000 a month. That'd be great. I was spending $4,000 trying to spend things because I'm still house hacking, don't have a mortgage payment. So I waited until I had over $16,000. Once I had over $16,000 a month coming in that I don't have to work for, I retired from my job.

Back to the note question, I was just thinking this. So do you— because you buy at a lower leverage point than we typically do— when you're analyzing deals, is there a certain yield that you're looking for? What is the right amount for, for Dion, where are you targeting a certain return, where if you were placing a note, what interest would you—

So can somebody on Instagram let us know if the sound is back on? Because we had a phone call where it cut it out. Let me know if the sound is back on, or is there something we need to do? I wonder what the delay is for a message on Instagram.

We will find out.

Can't hear what you're saying. So it sounds like It's back. Okay, good. Thank you. If somebody calls you, I wonder if there's something we should do in the future where we go— I don't know, I can't do airplane mode because you're on Wi-Fi, right? Yeah. I don't know. We'll think about it. Neither one of us is 10, so we don't have anybody here to help us with the tech because that's what we would need. So if you're going to invest in notes— yeah, thank you guys for letting us know the sound is back on. You would think if you invest in real estate and you get a 10% return, that you're going to invest in notes. So you want to make 10%. Yep. But when you invest in real estate, you're also getting appreciation, principal paydown, the tax benefits of depreciation and write-offs. Yep. So it's much better than a 10% return on the note, but it's more active. So there's a balance there on what do you think makes sense to you. So most notes that are for sale, I haven't done the research yet. That was why we were going to set up a call with Michael Zuber, you and Cody, it's Uber and me. Yep. And talk about buying notes and what that's like. And I found that it's generally a higher percentage than what you can get a regular loan for, because you're usually solving a problem for somebody that has something like a balloon payment. Yes.

Right.

So it's not like if the person has an 8% and you want to offer a 6% because you're going to help them get a better interest rate, but you're going to get more than what you would somewhere else. You're solving their problem, so you want to benefit from it. So it generally seems to be a little bit more than what a bank would get, but you don't want to go too high. I think there's actually laws in certain places that make you a loan shark if you go a high enough percentage above what the average bank loan would be. So I didn't get a lot of research for me to do before I would buy notes.

Yeah, typically, uh, typically they cap it at 18% is typically where it's considered like the maximum, uh, That does adjust, but 18% is generally as high as they want you to go before it's considered predatory. Cody and I borrow a lot at 9%, but I borrowed at 18% before, and we've done an equity buyout where we technically borrowed at 100%, which was a terrible, terrible idea. We only made $1 million on that. We could have made significantly more had we structured that better. But you live and you learn, and you accidentally still make money because the market saves you. Well, actually, we did a good job managing that property to, to fix our problems, but timing did not hurt us either with when we bought. The way that you do these is you're exactly right. You're usually fixing a problem. Cody and I, and we'll film this, but it's worth discussing.

I have—

we have a note on a 12-plex that has a boatload of equity. But I have a lender who has significantly more time on their note but really wants to cycle their money for the investor that they placed the capital with. So I have incentive to— I believe they placed their note at 11% interest. If someone like— what's the going rate for loans right now?

7%? 7 to 8%.

Yeah. If someone like Dion came in and said, I would love a 9% return, and I don't want to have my money tied in for a long time. So I don't like a 1-year balloon. I would be receptive to a conversation like that on a lender where I have a 1-year upcoming balloon at 11%. If Dion's willing to take it to 9 or 10%— now I've said 10, so now Dion's going to ask for 10— but you give a range. Well, I don't need to cash it out, but I want to, and I want to help out a friend, and they would like to— they would like to pull some capital back. Those are the situations where it's like, instead of buying a note, it's like, look, place a note of your own because you get to negotiate your own terms and your own backing. And the other thing with notes is if that would be a note in second position, your interest rate's higher in second position than it is in first position.

That's just more risk, more rate.

And so you have to make sure there's enough equity in that deal. On that particular deal, Cody and I owe about $800,000 on an asset that appraised for $1.5 million. I'm going to say the person in second position is going to be just fine.

So this question down here from Rob, after Rob pointed out that his number is 4,000 times what his wife spends. But Christian, how do you figure the time to set up your balloon payment?

As long as humanly possible. Now, I have some stuff that, that where we cycle low amounts of money that I'm not really stressed about at this point in our business cycle. I have a couple one-year balloons that are less than one month, uh, cash flow. If I stop spending it on repairs, I can cycle it out of earned income predictably in 30 days or less. If you can't do that, don't play with one-year balloons. That's exactly how our good friend Dave Ramsey lost everything. He was playing with 90-day balloons on a boatload of money with one bank, and that bank said, hey, we're done. Lost all the properties instantly. And he's like, well, that is bad. Disagree, but that was his experience. Um, short-term balloons will kill you. They do not answer the question, how do you buy it, how do you never lose it? Will I occasionally borrow short-term on low-dollar amounts? And low-dollar amounts is relative, but on a $20 million portfolio, will I take a low six-figure short-term note? I might do that to cycle debt somewhere else down the line, pay down debts, move investors around. Those are very limited. If I'm doing it to acquire real estate— Cody's first deal was 30 years. The last 10-plex we bought together was a 15-year note with an option to extend. The Robin Hood Resort is an 8-year note where the cash flow of the resort will actually pay off all the debt, will actually go debt-free. Instead of refinancing that, we will actually just write a check for the entire resort. Um, so you need to be able to answer that question: how are you going to never lose it? And that is what determines your balloon. If you are very high income, you can have 1 or 2 balloons that are a little shorter than your other ones. When you're starting out, you are not allowed to take a balloon that is less than 3 years, and it really should not be considered less than 5 because you'll just die.

I can understand why Rob directed that question at you because hopefully Rob watches my content and I just don't see him comment on everyone else's. I don't have any balloons. I wouldn't own a property that didn't have fixed rate debt. 30-year, I prefer 40-year, or I would do 1,000-year mortgages because I don't ever care about having a property paid off. That means nothing to me. I invest for cash flow. So when you do seller financing, a lot of people talk about when they set their balloon. Sometimes that seller doesn't know a balloon exists and you speak it into existence when you say, when do you want the balloon set? Zuber has done zero down or 0% interest 30-year fixed-rate debt on a purchase because the guy wanted a certain number for the purchase. And Zuber said, sure, I'll give you the number, but here's the, here's the terms we're going to negotiate. Yep. No balloon ever. It's literally just 30-year fixed-rate debt. And he actually wouldn't say no balloon because saying the word balloon makes it, makes the person think, well, what is that? What is a balloon? Why would that be in my interest? You just say we're going to do 30-year fixed-rate debt. This is zero interest and they can take it. You could set the rate at 2%, 4%, 8%, whatever percent matters. If you can do a loan without a balloon, don't bring it up. Because now balloons are part of the equation.

And that's a great point. That's, that's something that Cody and I could do differently. I choose a negotiation tactic of I ask people for a deal that I would accept. And for me, I tend to add balloon, I'll make them long-term balloons, and I'll make sure all my balloons don't pop at the exact same time. So if I have a few coming up in 5 years, well, I'm not looking for any 5-year balloons. I want to have a balloon that has to be dealt with after that. So I'll look at 6, 7, 8, 9. But the answer is as long as humanly possible, or you do no balloon, which is rare in seller finance, but absolutely doable.

And he follows up with, so you can do a balloon that has an enforceable extend, that's your 15-year with that option to extend.

Yep. And option to extend usually comes at a little price. So When we do that, we'll do like, hey, 15 years, and for 1 point of the existing note, so 1%, for 1 point, you have an option to extend. I have other notes that have options to extend that have a review period and a fixed set of— The concern that a lot of sellers have, especially advanced players in the game, which is who we work with, they are worried about hedging against interest rates. That comes up with me, every single time there's a seller finance note, they put balloons in place. And most of the time, their goal is— the guys that I work with have seller finance notes that they've been servicing for over 40 years, and they always do a 5-year balloon every time. The plan is to refinance it. They want to have a review period to look at what did rates do and do we need to negotiate the rate. And they actually will go down in rate. They will make a judgment call on what is safe for us to do for the next 5 years and what do we think is fair and extend. So balloons can be for renegotiation. I like to have an option to extend written in though, so that if everything goes sideways, I can write a small check and continue the loan. That is my absolute comfort zone.

So Evan, you need to follow up with a question here. So if I wanted to buy a note from a bank, how would that process go? What problems do they need to be solved? They don't have some problems to be solved. What they have is, anytime you buy a property with a note from the bank, almost, almost every time— there's only one time so far where for me this didn't happen for 3 months— the bank sells the note within 3 days. Sometimes the bank continues to collect the payments and gets a little tiny fee for taking the payments and paying it to the person who bought the note. But the banks rarely continue to own the note. They there's a secondary note market, market, which is really kind of what caused the 2008 housing crash is bad loan products were bundled up together and sold on that. Thank you, Warren Buffett. Yes. So like I said, join the Seattle Investors Club, connect with Mariska. There's an entire market based on buying and selling notes. And the reasons for them being for sale are as many as there are reasons for ever selling a property. And so it's an entire investing strategy that I have not looked into, but I know exists because the masterminds, they talk about it. It's a lot more passive because you're not doing rentals, but you are collecting income from usually rentals.

They typically are going to be lower yield products where you get into high yield there. I read all BiggerPockets books on note servicing just so I have it. I don't know why I did that, but just as an academic study, I actually looked into that. A lot of places where you actually make significant money doing a note strategy would be buying— you have two types of loans. You have, well, big categories, you have tons of different types, but you have performing and non-performing that you can purchase. And non-performing loans, if you set up the business structures and the call center to reach out to these non-performing loans, renegotiate their terms, you can pick these things up pennies on the dollar. Buy big bundles of non-performing loans, and if you can get 20% of them performing, you make money. And that is a business I see a lot of people do. They go, hey, I see you're behind on these. Instead of foreclosing on you, I would like to renegotiate. So maybe you owe $200,000. Well, geez, um, I bought this note for $20,000, and if you can pay $100,000 over whatever term I'm now fine with it. And so there's different ways to play the note game. I just— man, I'm not even a Cardone fan. We just keep bringing him up today. I like the things that he said.

I'm a fan of his energy.

I like to watch Cardone for his— I like his energy. One thing I love that he says, I don't trade paper for paper. I actually love that. Um, I don't want to spend my money to buy a note. That is, that is me.

I kind of like stocks. Yeah, as an asset class. That's something. So the asset class that excites you is the one you should invest in. You're more likely to stick to a plan you're emotionally invested in. Stocks, notes, those kind of things don't excite me. Owning a rental property that's going to appreciate, experience paydown, can be depreciated, it literally goes up in value. And you tell the government it's a year older, so the building's lost value, so you get to write off profit. All of that excites me. Notes are a diversification strategy sometimes for an investor that's very far into their investing or the asset class that some people pick from the beginning, but it's not the one that I would go through. It doesn't have enough of the benefits that rentals do.

[Speaker:TREY_LOCKERBIE] This is my opinion on notes. I think they're fantastic for estate planning. If you are near the end of your career and you've built a portfolio, 9 out of 10 times, your heirs don't want it. As dumb as that is, because I've seen people get 3 years into an empire I don't know if you've ever been— I hate downtown Seattle, but, uh, like Martin Selig, he builds a lot of the skyscrapers there. Uh, his name's all over the city. His daughter's third generation. She's just gonna inherit it all.

It's like, you know, offload it probably. I—

she's a good operator. She's a really good operator.

I think she'll hold nice.

But if you can hold generation over generation, I mean, you, you're unbeatable. Like, I cannot compete He bought a second Rembrandt. Like, I can't compete with that. There's no universe in which Cody and Christian scale to a place where we get to compete with him. I don't think— maybe we'll try. I think it's not today, today. Um, but, but like, so some people, but I'm going to say less than 1/10 of heirs actually want the real estate. If you convert them into notes, what you do is you set up recurring income for your heirs that they can't just go blow. And granted, you can sell notes, but generally speaking, you're going to pass them an income stream. It's a great way to protect your wealth and just convert it into paper. But I would do that when you're 70, when you're 80, if you're still alive. It's like, well, you probably don't have a ton of years left after you're 80. Sorry to anyone who's 80 on the call. Newsflash, you might not live another 20 years. That's where I would actually start looking at what do my heirs want? Do I pass it on or is it time to convert it into paper?

Because that's easier to transfer. Just Be True to Love asks, where do you keep your cash reserves? The bank. For, for me, lumpy mattress, hard to sleep on.

Yeah, it's going to be different for Dion and I. I have 20 LLCs, 19, I have 19 LLCs. Each LLC has its own bank account, each LLC has its own whole It goes in the appropriate bank account. Some of those for bigger assets, I have an account receivable and an account payable. So go into a mix of those two accounts. For property management, I have a trust account, but that doesn't really count, though. Funny enough, a bank will look at your trust account and go like, oh, look at you, have money. I don't know why that, that shouldn't count. That is not your money. However, they will go in the appropriate bank account for that property. However you set that up. Deon, I don't— do you do a separate bank account for each property or do you just have the global bank of Deon?

You can make this as simple or as complicated as you want to. I have a long list of reasons why I don't have any LLCs. I invest very differently than you.

I'm all residential, 4 units. I would, I would do what Deon does.

There's just viable reasons for the way that both of us invest. Yes. And here's what my business structure looks like. So first of all, reserves are kept in the bank because I don't want to get a good return on my reserves.

Reserves.

I want them scratching at the back of my subconscious saying, hey dummy, find a place to put me to work. If I was getting 4 or 5% on my reserves somewhere, I'd be like, okay, they're just going to stay there. But as the reserves grow, I want to think I got to put that to work. So my money is just in the bank and my business, my entire business structure looks like this: 16 rental units on 7 properties. One of them is paid off, so I have 6 mortgages. 16 units, 1 checking account, 1 saving account, 1 credit card that I pay off daily just because I use it for cash back, 1 Excel spreadsheet with a tab for income and a tab for expenses that I send to the CPA and sleep like a baby. And then depending on where you are, you might need to have an account for deposits because deposits aren't your money, it's the tenant's money, and that has to be kept separate. But that's it. That's the entirety of the business. Done.

I've showed you our deck of credit cards. I have a strong Stefan fan, I'm sure. I hate it. I hate doing it. But we hit a point in our business where we have so many projects going on and there's so many bank products that say, hey, 18 months, no interest. I'm like, we borrow at 12% for a lot of stuff. I can borrow from my bank at 0%. This is why I don't advertise this. I don't know why I'm putting this on YouTube. I don't like the credit stacking thing because I think 99% of people can't handle it. And I think 99% of people go, "Oh, it's free money." And you get into credit card debt, you don't pay it off, and you start paying 25% on it. What Cody and I do is we have a proven model of buying cash flowing assets.. I will occasionally pull out $100,000 at zero interest, do repairs on a building, release, pull the money back out, pay off the card, and set it to autopay for life. And then I, I like keeping the credit rolling for your credit score, but I take that card and I lock it in a box and it's never touched again. It's on autopay in case I forgot to cancel anything on it, and it lives in a box. I will never pay interest on that. I do not recommend that as a starter strategy.

So for somebody with the discipline and portfolio to handle it, great strategy. For the average person, buy now, pay later usually turns into buy now, pay late, pay interest.

Yep. I would, I would not advocate for that model, which is why I rarely talk about it. If you are already an operator and you have shown that you can save money and you have proven that you can operate out of your cash flow, if a zero-interest cash injection makes sense in your existing functional cash-flowing business model, I'll make an exception and say rate of credit might be for you. That is not an entry-level strategy. That is not a zero-down acquisition strategy to get started. I have seen people do that. I'm going to buy real estate. I'm going to pull $50,000 off a credit card at zero interest for one year, and we're going to roll the dice and hope I get really good at buying real estate. Idiot model.

Don't do that. I agree with Julie Anderson. Howdy. Who says you and Cody will be billionaires within 20 years? I'm 100% behind that. I don't doubt for a second. All Nighter Hider says, question, do either of you have reserves outside of the banking system without third-party risk? Bitcoin, physical gold, silver. I'll let you— yeah, Cody, we're still here. Good to see you. Uh, the, uh, he's gonna get me lunch though. Like, I don't know if we negotiated that deal or not, but you had me show up before noon and Stay here till after.

That sounds fair. Uh, do either of you have reserves outside the banking system? Well, so Bitcoin, no. Um, I will not touch Bitcoin with a thousand-yard pole. I don't care how it's been marketed. Um, will a virtual currency be the currency of the future? Sure, probably. Will it be backed by some sort of encryption? Yeah. Do I think that there's any indication of what coin is going to win, or coins? No.

So here's the question to solve the crypto investment question. Yeah. Would you buy dollars? Would you give me $10,000 to buy my $10,000? No. What's currency? So if Bitcoin becomes a currency of the future, you don't buy currency as an investment.

It's a store of money.

No.

And you can try to play what you can speculate currencies and that is a crypto.

3 times all of a sudden the crypto bots will show up and start spamming porn on your channel. Just so you know, that's how YouTube works.

Oh my goodness. You would not believe how much of that garbage I delete off our channel. I live in the comment section and half of it is just removing—

That's why I do things like I made All Nighter Hider. He's a moderator on my channel, so he'll go through. And Lumberjack Landlord, they're the porn killers. So where do you keep any money as an observer outside of the bank?

I keep it all in the bank. I have a little bit of silver sitting behind us, actually on my shelf. I have little Star Wars collectible coins. Why do I have them? Because I like them. They're not an investment. In fact, I think— let me see if I can actually grab one of these.

I'll share it with the camera. So while you're looking for that, so All Nighter Hider, I do keep a couple ounces of gold, couple ounces. But then the most important thing is that at least one of those ounces is kept in 10th ounce coins, so that it's easier to trade if you ever actually needed to use it as a as currency. If there's an economic collapse, electricity, power grid goes down, you need to trade for food. I also keep around 13 firearms that you could trade for food. Like, that's the, the sleep well at night, never think about it zombie apocalypse. Because remember, when the zombie apocalypse happens, you don't need all of the guns, you just need one to get to the guy who was actually prepared. Yeah, that's the plan. But yes, so a little bit of gold, but not much. It is not an investment. It is like this, it's coins on a shelf to say, look at the coins I have. Because of the cascading things that would need to happen to where you use gold as a currency. Yep. We're gonna have way more things to worry about than currency when that happens. And the reason I don't look at silver as an investment is there are 2 times in the last 40 years where silver topped $50 an ounce. It's around $20 now. That is the opposite of a hedge against inflation.

Yes. However, this is the only crypto I own. It is a Dogecoin. Instagram will show you in a second. I have the little Doge dog on a coin. I have a Dogecoin. I thought it was comical.

And so it's worth like a hundredth of the amount of metal it took to make the coin.

I like it. Yeah, it's, uh, it's worthless. I find it funny. And when people go, do you invest in crypto? I'm like, I have a Dogecoin and an Ethereum. There's a— they're a, what, a 1-ounce silver coin? Um, they're a decoration for my background. I want. That's how I view them. They have no thing other than I have a little bit of disposable income, I don't like spending, I can justify spending $21 on a coin because I want it, and that is okay. So short answer to your question, no. I have one share of Disney that I didn't sell because I forgot to, and I looked back at my portfolio and I just don't want to move $95. So I own one share of Disney, and some coins for fun. Funny enough, some of my Star Wars collectible coins actually went way up in value. So I, uh, surprise, I made 100% on my Baby Yoda coin. Um, not an investment strategy.

The store of my value is, is probably a lot harder for you to break down, but for me it's about $400,000 sitting in this duplex, $300,000 sitting in this duplex, $450,000 sitting in this paid-off house, $1 million sitting in this fourplex. Like there's about $3.2 million in worth of value just sitting in properties that I'm better with it sitting there creating a cash-on-cash return instead of taking it and putting it in something like gold or silver or crypto.

Brendan Turner, who actually— Brendan's one of our mentees. When I first saw his name, like, Brandon Turner, it's Brendan. Brendan's awesome, by the way. If you guys don't know Brendan, you guys should reach out. He's cool. Christian, when analyzing commercial, what do you use to calculate the closing costs? Well, we do everything seller finance, which means your closing cost is basically zero. You pay a title company a little bit. There's no points, there's no lenders, there's no bank fees. It cost us $5,000 to close on a $2 million 38-plex. Closing costs are just not a thing. Commercial. Now, when we did our commercial refinance, I don't even want to think about the expenses. That was a— we bought for $2 million. We did the— we appraised for $3 million, for $3.41 million was what it came out to. We went 55% LTV, so we got basically a $2 million loan, pulled our original principal out. We did a BRRRR at 55% LTV. For that deal, I just, like, I looked at the actual things listed and I just didn't even calculate how much money I was spending on fees because fees are dumb. You have a lending fee, a processing fee, a fee fee, a fee for processing the fee fee. Uh, it's just ridiculous. It is a total racket. I hate banks unless you're a lender. I— let's talk. Um, in all seriousness, you guys did just close on your first bank loan. Yeah, and it is Cody together. Yeah, our first ever loan from a bank was for exactly $2 million, and, um, hooray, we have bank debt now. 1 out of 5 stars, would not recommend to a friend. Uh, they're, they're expensive, they're time-consuming, they— you get a full colonoscopy to get it done. And if you don't have a job like Cody and I, you just run your companies, it took 90 days to finish the underwriting of our portfolio to figure out what we'd even qualify for. For, because we have exactly zero traditional income. All Night Hider: I don't own any crypto either. Bitcoin is not crypto. Oh, I thought it was. Invest about 1,000 hours in learning about it.

Tyler J. Yeah, nice. I leveraged the 0% creative card strategy as well. To close bank loans. Just be aware of the point at which it hits your debt-to-income to make sure it doesn't derail underwriting.

Yeah.

So this is a very confusing strategy that is very powerful if done right, easy to mess up. So easy to use, hard to master. Yeah.

And to be fair, I, I stopped looking at my credit card limit after it surpassed $200,000 and what I could borrow. I think today I have a fine share in this. Cody and I have about $35,000 at zero interest debt out on credit cards, and we're paying it off at about $20,000 a month. So I'll have that for a little bit. I don't plan on using that again. We reached as far as we could, and I needed— we had a renovation quote go way over budget, and I was like, well, we can raise new money at 12%. Or we can get like 5 credit cards right now and just do this. That's what we opted to do because I like 0% more than 12%. Again, if you are not at that stage of the game where you have 100 units of business and all this other stuff, just don't do it to the extent you can avoid using credit cards. I, I'm a huge fan of just not using them. If you don't have to touch them, don't touch them.

Yeah, it's a strategy a lot of people do. And it's, it's funny if you have a YouTube channel like Mindy Jensen or Graham Stephan, and you've used the strategy where, you know, Robert Kiyosaki used a credit card to buy the 18-plex or whatever the strategies worked, the people who are successful at it are talking about it. The people where it ripped their soul out and they lost everything don't make a YouTube channel.

And it's way more than the people who've been successful. Correct. Credit cards suck. The psychology behind them is very, very, very difficult to manage. Let's see, do we have—

it's just Cody. Yep. Cody doing Cody things.

I'm coming as you from Cali. That's funny. So Cody is now logged in as me from California. I can't believe Cody's on vacation and Cody and I have a disease where we can't not work. Cody's sitting here on our live while in California.

That's not catchy, is it? I don't want that.

I want to not work ever. It is a disease. It really is not good. Um, but I said we'd go till the questions dried up, and I think we are there. Um, I'm gonna do the traditional last call, so, uh, we will do one last call. If you guys have any more questions, post them now. If you don't, this has been a really fun 2 hours. We're the day after Thanksgiving, so I knew we weren't gonna have super high attendance, but I, uh, I appreciate the time.

And you get watched in future land when people are on commutes and doing things like mowing lawns and working out.

I think someone's gonna look at this in the future, 2 and a half hours, and be be like, no, not going to click that.

That's what happens on mine is a lot of people look at the length of a live stream and they think 2 hours, no way. But they'll binge watch 30 10-minute clips. Yep.

Isn't that funny how that works? I don't get it. But yeah, that will be what happens. But okay, here's our last few questions. Let's knock them out. So Brendan, can you also explain calculating the cost on 12% hard money loan? Let's say it's for $100K and you're only paying interest, then you pay the— well, I love 12%. Thank you for that example because that makes it really easy. So 12% per year, all returns are annual. That's just how it works. So if your return or yield, all these things are calculated annually. 12% is a nice number because that means you're paying 1% per month. So whatever you're borrowing, it's not the purchase price, it's the amount that you're borrowing. So in this example here, say the loan's for $100K and you're paying interest on that. Well, then 1% of $100K would be your cost of the loan. So Thank you for the easiest math possible. $1,000 per month would be your payment, 12% on $100,000 loan. That was actually like the best math you could possibly give me, so I didn't have to think. Otherwise, we need to bring Cody here so he can do it in his head.

Um, lumberjack landlords that way too, spits out numbers.

It's awesome. See, that's, that's a, that's a rare gift. I don't, I don't either. I need to think. That's a, that is an actual difference in how we negotiate our deals. I can make a decision on a deal in 10 minutes if someone gives me the facts. Speed is everything when you're considering a deal. If you give me the facts, I go, let me run this, I will call you in 10 minutes, and I will call them back in 10 minutes and we'll do the deal. Cody can listen to a deal and before they're done talking, go, yes, that's going to work, it's going to cash flow, we're going to yield 3%, yes, done. And he can just say yes. The difference between saying yes now and saying yes in 10 minutes in 10 minutes is significant in building confidence in brokers and other investors. So if you have someone with that superpower, put them in the right place. They are your lead negotiator. Now, if you're like me and you're the systems person, the rest of that deal, let me manage the moving pieces, keep the timelines going, and make sure that the legal is done correctly. But take your math guys and put them in the math position. No one can out-negotiate guys like Matt and Cody. Because they know on the phone call, right? Yeah, let's write it up. We're good to go. That is an amazing superpower. If you have it, good on you.

It's a good follow-up for this question from City Trips. What are your go-to underwriting programs or spreadsheets?

I have a very simple spreadsheet we use in our course, the multifamilystrategy.com. It's downloadable there, but I basically am looking at— there's 4 things it calculates, which is going to be a variety of stuff with anticipated appreciation, depreciation, debt reduction, and then your cash-on-cash return. The only one I really care about is the cash-on-cash return. I want to see what does this thing cash flow day one. My inputs are going to be purchase price, interest rate, closing cost, insurance, maintenance, taxes, and other. And those are the only inputs I really care about. I throw them into a calculator. I'm looking for that number. That's all I do.

So I rely heavily on— so there's two versions that I would look at. If you have a partner or a spouse, and I'm either because of intelligence and self-preservation, but if you have either one of those and you want to present something to them in the best looking format, the BiggerPockets Pro membership has these amazing looking make pie chart things about properties. So that's one route if you have a partner to convince. For me, not having a partner, I like the CDS rental calculator app. So there's a YouTube content creator named Chandler David Smith, good YouTube channel to check out, but he made an app and it's free on the App Store called CDS for Chandler David Smith, CDS Rental Calculator App. You can put in all your stuff, it'll show you the amortization schedule, it'll show you the cash-on-cash return. It'll let you do things like property management, repair, immediate repair costs, utilities, like everything is in that app, very simple to use. So I recommend using that. And then as far as a spreadsheet goes, I— people email me and I give away my spreadsheet that I send to my CPA because it has what the CPA would need. It's a very simple spreadsheet, just an Excel spreadsheet with a tab for income, tab for expenses. Each property has the date of the expense, the store that it was purchased from. The tax is separate from the purchase because the purchase is a write-off and the tax is 100%. So it's a very different number that the CPA uses. Those usually separate those two out. And then a notes section because there's different types of depreciation. And this is the main reason I use a CPA. I don't even want to know what the words I'm about to say mean, but you have bonus depreciation, scheduled, amortized, like there's stuff over 5-year periods, 15-year periods, 27.5-year periods, 33-year periods for commercial. Like there's all these different things that I don't want to know how it works. But here's the information the CPA knows to put it into what column. So the notes section for me is most important because it tells if it's an appliance, if it's an upgrade, if it's a repair. And so it's kind of a very simple spreadsheet, but it has all the information that the CPA asked for.

Yeah. So you can get as complicated as you want. I also have a second calculator that Cody built that is just insane. You can put in your first mortgage, second mortgage, cash on cash return. It will give you a color-coded, does the deal work or does it not? So you can put in— okay, I'll give you a point here. You can put in whatever your buy box is.

For deal.

And you can literally just put in the criteria, um, am I borrowing private money with this? Is there first, second position loan? Are we looking at interest only, DSCR? And it will tell you what interest rates can I borrow at to get the yield that I am targeting with this deal structure. That's the second calculator we'll use. It's more complicated, which is why we put it in the course with a how-to-use tutorial, because that is another thing that we'll look at Now both Cody and I can do it in our head. Cody can do it faster, but I can look at a deal very quickly and go, okay, what is our actual yield going to be here? Let's go ahead and put this together in real time. If you're not super fast at doing math in your head, a calculator like that, they'll just give you a true/false, buy, don't buy, is a really cool tool to have. Let's see, I had one more here. I'm in Dallas-Fort Worth, Texas, by the way, my favorite market in the world. That is where I want to live one day, but not today, um, because all my stuff is in Washington and I will implode if I move. I have watched people move and try to retire too early because they have the assets they need to retire. I have the assets I need to retire. I do not have the systems I need to retire, and my team would implode. It would not serve my team well. I get that all the time. If you want to move to Texas, move to Texas. No, wrong. Build your business first, and you got to take care of your people. My people are in Washington. I'm going to be here for an extended period of time. That being said, Dallas-Fort Worth, where is the best place to look for big multifamily units? In your case, I would say Dallas-Fort Worth. I love the market. I love the population increase. There's a lot of great places to invest there. There's a lot of opportunity opportunity down there. I know of someone in Denton, Texas. I would not recommend buying from him, but this is an example. He has 2,000 units without debt. He will seller finance you everything. Problem is his properties are hot garbage. But I flew down to Denton to meet with him and drive around Fort Worth, and I viewed his portfolio in Missouri. Those people are everywhere. You have a huge market. With lots of real estate, lots of opportunity. And Dallas is interesting. It's kind of one of those blended markets where it's not as landlord-friendly as the rest of Texas. So you get a little bit of that difficulty to get building permits. You get a little bit of what we talked earlier. You get outsized appreciation and you can still find deals down there that do actually cash flow.

It's compressed a lot over the last 2 years, but I hear a lot of people say I would never own in Texas because the taxes reset every year. People saying that must live in a state like California where they have Prop 13, because in Washington, taxes reset every year. Yeah, yeah. You don't have the big negative.

Let's see here from Nick. Hey guys, trying to increase net cash flow from $1,800 a month with a duplex. Good job on your duplex. That's great cash flow to $7,000 a month. If you had He locked between $150,000 to $250,000. What would you do? Well, I know what I would do. $250,000 is 10% down on $2.5 million.

Yeah, but it's adding debt to the existing asset, reducing or eliminating that $1,800 a month in profit. So I would add time to your equation. That's what's missing. Keep working, save up a down payment, buy another duplex. You buy 3 duplexes at $1,800 a month, you're very close to the $7,000 you're looking for. Whereas if you touch it with a home equity line of credit, the recycling capital method that Christian and Cody have used, and Matt the Lumberjack Landlord and Michael Zuber, everybody smarter than me seems to go that route. But I went the route of saving a down payment, buying a cash-flowing asset where you're $1,800 a month on your duplex is very close to the numbers I'm averaging. I literally average— it was around $900 until December. So December this month, the binder strategy kicks in on 3 more properties, and I will now be making more than $1,000 per unit across the board on all of the property because I don't touch the equity. I don't do the home equity line of credit, I don't do the cash out, I don't do the refinance. But it takes 10 years, right?

That's the difference. I bought about $10,000 a month of cash flow pulling a $100,000 HELOC out of this house, which does not yield me anything. So I pulled this and is that additional debt? Yes. But that debt, which if you get a HELOC to a fixed rate, I didn't, I didn't know better. I'm glad it's only $100,000. I now pay 8% on my $100,000, whereas I used to pay 4%. That being said, pulled $100,000 out of this house, use that to start renovations on a 38-plex, brought the income on that property from $5,500 a month, -1 cap rate, to a little over $20,000 a month. And we just finished repairs on like 5 vacancies. So it's not even fully leased. And we got the appraisal, the new loan, we took cash out of it, and I'm finishing repairs. I'll lease it up. That thing should be kicking out $30,000 a year. In the relatively near future. That is a great way when your note service— like my debt cost about $11,000 a month, give or take. Maintenance on it is shockingly low now because we fixed everything. It was high, but now it's like everything's new. Property like that, you know, takes $15,000, $16,000 a month to run. If it's yielding 30%, it's like, well, buy one of those and you're— you've doubled your $7,000 a month.

So in your situation, you have 3 options. And the question that happens before those 3 options. So first, you can sell it, take all of the money and redeploy it, 1031 into something bigger that will cash flow better. So get a better cash-on-equity return than the current cash-on-cash return that you have. Second, you can do a home equity line of credit, but can you pay it off before the adjustable rate kicks in? And third, you can do a refinance. But instead of doing an actual refinance, I would add a second. So instead of a home equity line of credit, get a 30-year fixed-rate second loan position, take that money and put it to work. So those are the 3 options. But the option that happens— the question that happens before any of those options is, do you have a place to redeploy the funds where you are going to get a return that justifies the sale or the added debt on the asset that you already have? So are you right now looking on the market saying, if I had this $150,000 to $250,000 in cash in my hand and it was mine, can I find a deal that would get a return worth the time, energy, and effort to buy the deal? And to justify the debt or created or the loss created of the asset to get this money to put to work. Do you have that? Do you know where those are? So have you learned to market? Do you have an investing strategy? Just as you have a duplex? So do you think you can repeat the process and get $1,800 cash flow from the next duplex? So that's the first question to answer is where would you put the money to work? Second thing is how do you access the money? Is it the sale, HELOC? Second refi, because you probably, hopefully, current mortgage is at a really low interest rate because either you purchased it in the last couple of years or you refinanced in the last couple of years to those sub-4% interest rates most everybody was getting.

And that clears the questions. We're over 2.5 hours into a livestream without lunch. I owe Dion food.

So I'm a fat kid. I need my food, man. Don't hold back.

I could probably afford to lose some pounds too. The analogy of the fat kid applies to business. Uh, it depends on the position you're in. We can overeat, and I'm okay with that. Uh, I think the biggest question left on the channel is, do we get Thai food, American food?

Okay, good. Spicy, number 4, probably.

Yeah.

Oh, 4?

I'm a 2-star guy. I'm a little— yeah, I'm one spicy pepper away from pain. Well, that, that made that decision easy. Um, but, um, This is Dion. If you haven't yet, and you should, his channel is Dion Talk, without an S, Financial Freedom. He has a bigger following than we do, so keep adding to that. It's fantastic advice. It's consistent advice, which I love about your channel.

You don't deviate. I'm shocked sometimes when I watch like the original interview with One Rental at a Time, a year before I had a YouTube channel, and I'm like, wow, that's, that's the sentence I'm saying in my video from last week. Week because it's very simple. It has to be. I have some brain trauma from Desert Storm where I have some memory issues, so I can't do really complex things. But my system is very simple, very repeatable. The average person can do it. And the funny thing is, just to get my average results, that can all happen. If you want the amazing growth kind of stuff, that's why I'm interacting with guys like this. That's why I'm watching channels like this.

And that's why we called our channel Multifamily Strategy. All we focus on And I probably should narrow down our topics, but essentially Cody and I are the Creative Finance guys, but we don't want our channel to just be about creative finance. It's about finding other people's multifamily strategies, which is why we have Dion and Matt and Zuber and Soley and Caleb and Chuck and all these people on our channel. We want to share with you all the ways that we have found to play the game so that you can craft your own. So thank you very much, everyone, for watching. We will see you soon, and I'm sure we'll have Dion back.

Content was awesome.

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