Christian Osgood and his partner Caleb bought a 26-unit apartment complex for $1.6 million, meeting the deal during a pickleball game. A bank covered 80 percent, an outside investor filled the $400k gap, and gets 60 percent of cash flow until refinancing returns their capital, then the split flips to 60-40 for the operators. Osgood put in zero of his own money.
Chapters
All right, welcome to the 26-unit. This property we funded over a game of pickleball. I'm gonna explain how this came up. We got 26 units, uh, bought for $1.6 million, so we killed this on price. Really good condition. These are actually fairly new build apartments. Super simple entry-level housing, which is, by the way, my favorite. A local bank on this one decided to fund 80% of the deal, so we need to find the last 20% of $1.6 million. There are about 5 units that needed to be turned, so a little bit of reserve needed as well. We came to one investor, we asked for $400,000 total, and over one game of pickleball. So we found the deal, we put it under contract, we talked to the bank, they were in. So that took all of like 2 days to get there. The day after that, 3 days into this deal, game of pickleball, we're talking about the deal. An investor owns a business out of California, said, hey, that sounds like what I'm trying to do. Would you guys be open to partnering? I'm like, oh, it's going to be about $400,000 to finish the project. Now, our agreement with him, he gets 60% of this deal and we get 40% until we refinance the property and return his original capital. When his original capital is back, we switch to Caleb and I owning 60% and he owns 40%. So we flip-flop the equities after his money's back. Super simple structure, but basically it says, hey, you're taking a majority of the risk. And while we found the deal and lined up the project, we'll give you more of the deal. Once you have no money remaining in the deal, however, we're going to flip it back to our side since we put in all the work and none of us have any remaining capital. Very simple. Now, this is a longer-term partnership. This is one of the only deals that I've done where we don't have a designated way to buy them out. They actually want to do multiple deals with us. I don't usually recommend doing that, but this fell into our laps so nicely and I really like that investor. I'm excited to do more projects with them in the future. So it's an option. If you can get it so that your property just buys your partners out, essentially the BRRRR method, you can do that again and again and again. And it's actually a better practice. However, if you have a property where the refinance doesn't quite buy them out but returns their capital, this can be a way to play a longer-term partnership where they give you money temporarily. You increase the value of the property, you own a lot day one, but then you own even more when you successfully finish the project. Compensates them for risk. And gets you cash flow and equity today. I once again purchased $0 out of pocket, which was in budget for me.
