Handling Stress and actually closing the deal

And here we go. Welcome to another episode of Multifamily Strategy Live, joined again by the one and only Caleb Hommel with a timely topic this week because both of us have a ton of stuff going on. We're talking about the number one reason people do not buy real estate, and I believe that is stress. There is some unknown or something holding them back or something where they just do not pull the trigger. If you are one of those people, this episode is for you. Caleb and I are in an unusually busy time of our business. We're going to be talking about how we deal with it, what the difference is between someone who buys real estate and someone who just wants to buy real estate. And then as always, we'll open it up for questions. Caleb has limited time, so we will dive straight in and I'm going to start interview style. Caleb, some people can handle stress. Some people cannot handle stress. I've seen people freak out over a $1,000 payment on a duplex where I'm like, I have a million dollar problem. What is the difference between people? First question, big question. Throughout your life, your limited 21-year life, what is the most stressful situation that you've had to deal with?

Most stressful situation I've had to deal with is when I was first getting started in real estate.

Um, hold—

what is that, year and a half ago or so? Um, part— had some different partners, all this stuff going around. Um, and we were out of money. I got started, I was like, uh, we are out of money and we have problems to fix. And I didn't— being 8— was I 19 at the time? Had no idea where that money was going to come from. So from there, that was the most stressful time, being 19, not being from a lot of money, having been in real estate for a very limited amount of time, uh, not even being able to legally drink yet. I was absolutely miserable. I had no idea what was going on. I was stressed out of my mind and could barely function.

Uh, for me, and I've heard the story on the channel once or twice before, but I was in a, uh, I started a church that turned into a horrible cult that didn't let me speak for a long time, stole all my money, and I had to go start from literal zero, which sucked. That was highly stressful and took a little bit of adapting. I have found there's nothing in real estate that is nearly as stressful as not having any food or human communication for 100 days.

So that would make sense.

I have noticed that people who have yet to go through anything challenging in life usually have a lot of trouble in real estate. Just had someone for the Multifamily Strategy Podcast. That's right, it's a podcast now. But his name's David— I always mess up his last name.

If you're going to do a shameless plug, man, you got to be on top of it with the last name. I'm sorry.

Yeah, it's French, so it had a different pronunciation than how it's spelled. But I'll link him below. Fantastic investor. He's going to be on the pod, so look for someone named David who's just awesome. He has this amazing beard that I wish I could grow. Um, military guy. We're talking about handling stress. He's like, oh yeah, no, I've been in a, you know, I've been in a car where it gets blown up. Um, people like that you find typically are the lowest stress people because they've handled something a lot bigger. So if you're starting in real estate and you haven't had anything stressful, ever happened in your life, which is a shocking amount of you guys. It's ridiculous. Go get yourself some adversity. And if you don't have any, know that other people are doing harder stuff and you can in fact handle it. If you want some tips on how to put this in a box and separate the emotion from business, I'm going to talk a little bit about stress just for a second. Stress, it is meant to keep you alive. It's a survival thing. It has literally no use in business whatsoever. If you have some sort of feeling in business of, oh man, this is— I have this like pit of my stomach, like, oh, what if this happens and what if this happens? Uh, that is not designed for business. That is designed for like, hey, hunter-gatherer. Yeah, that is like, am I going to get attacked by a bear in my sleep? Good news with real estate, very infrequently does someone die. From real estate. It does not happen often. Now, if you have this feeling while evicting a tenant who is dealing meth, that may have some survival impact.

We are calling 911 ASAP.

If you are anyone else, stress doesn't have a place in your business. You are buying assets with money. No one's dying with money. Don't raise money from people if it's their last dollar and they could not afford to lose that money. Now granted, don't lose people's money, but don't put yourself in a situation where you're going to seriously alter someone's life if something goes wrong. Outside of little practices like that, identify things in the bucket that they belong in. I think I've talked about this once or twice before on the channel, but you have things you can control, which if you're stressed and you can control it, shame on you. Go control the thing that you— if you're just avoiding something that you could do and that's what's causing you stress, go do the thing.

Right now.

Easy. Those are the simplest ones.

Yep.

Things that you could influence. So maybe you can't control it, but there is an action step you can take to move it along. For me, that's often an insurance claim. It's something to do with a legal team where I can't represent myself in court. Well, I mean, you can, but that'd be stupid. Um, yeah, it's not—

not building real estate tips and tricks.

Yeah, exactly. But you can influence it. And the last thing is you can't do anything about it. And those are the ones that tend to stress out people the most until you realize and actually put in the bucket of I can't do jack about this. So I'm going to go ahead and just leave it up to God and I'm going to move forward and do something else that I can either control or influence. If you keep your entire universe as, okay, what is my mission in business? I am going to create more income than I have expenses and I'm going to continually do that again and again and again.

Yep.

And in the meantime, I'm only going to deal with things that I can either control, impact, or do nothing about. Stress doesn't have a place in business, and I can honestly say I rarely have stress in business. Doesn't mean it never happens, but when it does, I can identify it, put it in a bucket, and just move on. And what I found, that is true of every single person who owns real estate. Caleb, would you agree with that sentiment?

I would, uh, especially now. I mean, a little bit beyond— I don't know how much we've touched on this, Christian— is previously my family has a long history of stress, to the point where my mom even had a heart attack before the age of 50 due to stress. So it is a, yeah, runs in the family. But at the same time with stress, what really changed it for me was actually we had a conversation when you introduced me to Jesus. And that changed my entire life. When you realize that you actually have no power over really anything in your life and it's all in somebody else's hands, that tends to take away stress. At least for me it did. Just knowing somebody else is looking after you and looking after everything you are doing. Stress tends to dissipate.

It does change the perspective in which things happen. If, uh, so I would say, yeah, so your thing for stress are if you have not yet, find God immediately. Um, that, that is going to— it doesn't fix your stress, by the way, um, but that's going to provide a different context for how things are perceived.

For everything.

As a business person or for anyone else, the practical steps internally are going to be categorizing what is causing the stress and then actually addressing it. The thing that people tend to do, and this is where you get stuck, is you take inaction because of stress, and then the stress doesn't go away and you don't move forward. And that is where people who are unsure about a deal end up in their 5th mentorship, reading their 100th book on their, you know, 700th episode of BiggerPockets without buying a deal, is they're like, oh, I just need a little bit more information, or a little bit more will make me feel better to Your feelings do not care about money. Money does not care about your feelings. Neither are going to help each other. Do deals that make good math. If you want to eliminate stress, get better at underwriting and you will feel more confident about your deal. And that is about it on the stress handling. If you have not been through something really difficult yet, real estate will likely be very stressful for you. That doesn't mean you can't do it. It just means Be ready for that. If you're someone who has gone through some pretty tough adversity, you'll probably find that business in real estate is a lot easier for you. That is just a generalization, but I found it to be very true. I just recorded the 10th. I think we only have 2 live, getting the 3rd one out today, but Multifamily Strategy Podcast available everywhere that you podcast, just Multifamily Strategy. That has pretty much been true of every single person interviewed. Is they are someone who has been through something that has made them who they are today. So excited to have the opportunity to share that because I think that's what most people are being held back on. Uh, quick housekeeping items, then we're going to dive right on into the questions here for y'all.

Oh yeah, you cannot say— real quick, you cannot say that you don't live in Texas yet. Let's relax. You're not down here, you can't start saying y'all until you're down in Texas.

Dude, I've— I, I have been saying y'all for about 32 years. Yeah, when you're from Washington, you can, and I do, because in, in Washington State, you can identify as whatever or whoever you want to be. I identify as a Texan. Um, I'm just moving to Texas. When, uh, what was I gonna say? Oh yeah, Husky Badams. I want to see more of you all in person. We have the event. Caleb is now on the roster speaking, so Caleb and I will both be at this event.

Come check it out.

As will Cody, will be there for one of the two days. Uh, my wife Dani is going to be there, though not speaking. Um, she will absolutely be present. You can meet the team, the group, the people who I do business with. Uh, there's also vendors, lenders, uh, property managers. There is a whole plethora of people who are going to be at the Northwest Action Summit. It's on the border of Portland, Oregon and Vancouver, Washington. Absolutely the event, the real estate event to make it to this summer if you want to network. Should be about 250 people, packed room, great food, great venue. Uh, tickets are selling out. They're not sold out yet, but they're selling out. Get yours now. The link is in the description. I put it in before everything, so nwactionsummit.com. With, uh, those line items out of the way, let's dive into some questions before Caleb has to go. First question is directed at Caleb. Hey Caleb, what metrics do you look at when marketing for, um, companies, and how do you go about looking at new companies/jobs coming to an area?

That is a great question. So I think, um, you can correct me if I'm wrong here, Christian. This is basically how am I looking at markets, how am I identifying it's a good market with jobs coming in.

I believe so. If not, Dylan will correct us. I will look down the, um, I will keep an eye on the chat to see if we get any more clarity on that as we, uh, go. But answer the question as, uh, you perceive it.

Perfect. So I mean, their jobs come from a different— I mean, population and jobs are pretty much the same, but they aren't exactly the same. For instance, if you're investing in a college town, you're going to look at the size of the school and the growth of the school, not just Hey, what jobs are coming to the town? For instance, where I invest, college town, college is going crazy. That brings more stable jobs with the school. And you also look at what else is in place in the area. For instance, another area that's grown a lot, Columbus, Ohio, college town up there at The Ohio State University. Also, you look up any article about data centers, you are going to find someone is building something near Columbus. So that is— I mean, I love those types of jobs. Christian can second that. You like big stable jobs, Moses Lake where Christian and Cody invest. What do you have, Christian? You got Amazon, Microsoft, bunch of those companies up there. That's what you're looking for. Ways to find these, maybe a quick Google search. For instance, if it's just like Columbus, Ohio jobs, like it'll probably pop up, or new jobs coming to Ohio, new jobs coming to Texas, whatever city you're looking at, you search that in on Google, you're probably gonna find the information you're looking for. And that also comes with worldpopulationreview.com. You wanna make sure the place is growing. If it's a little stagnant and there's not much growth, I'm probably avoiding said area.

And there's usually some local news channel or station that will announce what companies are coming in. Like if you look for Moses Lake, it's called Basin Herald and it is the— and 95% of it is like, here's what our high school baseball team did.

But then you get to see the news of like, hey, don't hate on high school baseball.

Well, yeah. It's all they have going on out there. I'm not kidding. It's like half the post. I mean, the amount that I care about, uh, Central Washington baseball is very small. Um, when you're looking at, um, a market and the jobs coming in, find out where the local news source is. And I look at that— that's how I knew, um, as soon as the battery factory was coming in, they're adding 600 jobs. That's great for Grant County, Moses Lake. I saw the same thing, um, with the— they're building a new hospital district, and that's a problem in Grant County, is if you are seriously sick— so let's say, um, like one of my business partners in Moses Lake has cancer right now, it's something he's battling— he has to drive over an hour to Spokane, Washington to get the medical help he needs.

Really? Yeah.

Moses Lake is building a huge medical campus, and I mean massive medical district. So all those jobs are going to be added into that city. I know that because one, I actually go to the business of like the Chamber of Commerce business events. So I actually meet all the business people. They host them quarterly. I go to one of them a year, but I go and I actually network and get to know the people in my city. And then I read the news for the city that I invest in. It's one of the advantages of being hyper-local. Caleb knows a lot about what's happening in his market because he's investing in Stephenville. He knows all the players down there. So he talked to the owners and he knows what the school is planning on doing, what is being developed, where new Starbucks are coming in. You didn't find those online, I don't believe. I think you found that all from individuals, right?

Yeah. So for me, it's being down there. I mean, nothing beats human interaction, right? People are gonna have the details before they go online, just word of mouth. For instance, down there, we— I know about the new basketball arena going in, knew about the new medical district going in, this like Starbucks. I'm like, I knew there was construction there. I asked one of my owner friends, what's going on there? They told me. Like, in a sense, you get other things too. It's like buildings are on the market, you ask about it, hey, I was going to buy that, but X, Y, and Z happened. Don't do that deal. And that's how you find out all this info. Christian, I have a question for you actually about Dylan's question is, what are your thoughts on the surrounding areas of a major market? For instance, you have Moses Lake. I know you have Quincy, Ephrata, some other markets around it such as Soap Lake. Are you do you care as much about the jobs going directly into those, or do you care about more of the county seat or the head of that area getting the new jobs?

I like the actual locality. There's stuff that happens in Ephrata, Washington, which is about 25 minutes north of Moses Lake, that does not affect my rents in Moses whatsoever. I want to see things on the most local basis possible. All the jobs going into Moses, while, while it will have a positive impact on Ephrata housing, it's not going to be nearly as significant as the housing right next to all the projects going in. Exactly. I, I really care, like, I do care what's happening in the county, but I really care what's happening at the city level, especially as if you're doing optimization. So you want to add a unit or you're, uh, changing use, or you're doing like a hotel conversion, for example. Some of these projects, sure, there's county and state regulations, but the city is really where stuff gets done. And Couldn't agree more. Yeah, city news, city jobs, city development, all those things are what I want to know, and it is a city-by-city basis.

Yep.

Uh, jumping to the next question here, um, what are your pet fees and late fees? Uh, believe it or not, even though I own the PM company, I don't know. I have a, uh, a Corey and a Danny who know those exact things, and they are a little bit different per hospitality and multifamily, but they are in my system and Appfolio manages them. I should know, but I have absolutely no idea. From Matt—

You know what, I was going to touch on the last point too. It's very interesting is I was talking to one of my owner relationships in Stephenville, owns a plethora of units down there. Asked him about what he's renting certain things at. He didn't even know because he's that removed from it. Like, same thing with you. Like, that, that might be a little extreme, but I asked him about what he's renting something at. He's like, you'd have to call my PM office. I don't know.

Yeah. And well, the funny thing is that happens like quite frequently with a lot of owners. I am very involved. I think because of multifamily strategy and because I coach this, it is so important to me that I'm not some stupid online guru, that I am in the field and I am excellent in my field so that when I teach, it's because I'm teaching from experience and stuff I've actually been through. I don't teach things in theory. If on the rare occasion there's something that I have just totally not done that I'm not the one to speak on, that is the only time you'll ever see a guest speaker in Multifamily Strategy. If like, if I'm going to an accounting—

I also help with filling in sometimes.

Oh yeah, I mean like sometimes you'll be on a plane, but I mean outside of that, like I won't teach on something that I don't know.

Yeah, that's really important to me.

And by know, I mean like I've studied it and then I've put it into practice and I've done it in my own portfolio. And so for me, being active is really important. But some of the, the more nuanced things, like what do you charge for pet fees? I don't know, but I know the system's in place and I've hired the people in place to make sure that those are always implemented. And I do get a delinquency report when those fees are not collected. Uh, so from Matt, I'd love to see how you guys analyze a deal, uh, when you come across one. What do you start looking at first? Revenue, rent collections, P&L, leases? Caleb, you're looking at a— Caleb's talked to me today about 3 deals that he's looking at, and all of them are exciting, and I think all of them have some potential. What do you start looking at first when you see a deal? And it doesn't even have to be anything listed here, by the way. You see an opportunity, what's the first thing that you look at, Caleb?

So the first thing is the market. You can change a property, but you can't change the location the property's in. So first thing is the market. Once that checks the box, other than that, it's a bunch of pieces that come together to fill up a whole puzzle. Like, you have your revenue, cool. You know what the rent roll is. If you don't know what your expenses are, it doesn't matter. So it's a whole combination of everything. So I obviously look at the rent roll. I dive into the P&L typically first, go through, make sure it even makes a lick of sense. And then from there I'll be like, okay, there could be some potential here. Let's take a look at the rent roll as well. Look at the rent roll. If it's 50% vacant and it makes sense, and you've got 50% of the units to fill with upside, you're probably looking at an opportunity. But that's the first thing, is location. Then you start piecing everything together. But it's not just that number tells me everything I need to know. That's not the case with any deal ever.

Yeah. And for me, the first thing I'm looking at is, is this the type of property that I want to own? I mean, that's the first thing. Before anything, I look at the building and go, do I want to own this? There is stuff that comes across my desk— in fact, there's a deal that put across my desk not long ago where it was like, it's cool, but it's small. Do I need more small things? Not really. It was an okay.

I know exactly what deal you're talking about.

Yeah. Beautiful building. Like, would I be okay owning it? Yes. Does it change anything in my universe when we close it?

No.

Is it going to be super easy to close?

Maybe.

I, I don't know. Well, maybe. Uh, it was a lot, it was a lot down for what it was. And so looking at the deal, I was like, you know what, I don't care enough on that deal to be like, let's go through all the hassle that it takes to close the deal because it doesn't move me forward. Would it move someone else forward?

Um, but if that's your first deal, awesome. But yeah, that size deal isn't going to move either. Even where I'm at currently, I don't think that size deal would move me forward enough to be worth my time.

Yeah. And so it's just, uh, it's just keeping the metrics, uh, you know, keeping the metrics in front of you and knowing what it is that you want to do. Um, After that though, this is, this is not like a metric that's going to super, it's not going to be very important, but when I'm doing how I honestly analyze a deal, I'm looking at what is the price per unit. That does not mean that it's going to be a good deal. That is not a metric that you close on. But for me, it's a quick look at the thing. I'm like, okay, do I think this is interesting? I know the average cost per unit, so I know where you can get buildings in all the markets that operate in. And so that's the next thing I look at is how much upside do I think there could be on this deal? Then I dive in the numbers. The next thing that I would want to see if I'm, if I have access to it, is I want to see that P&L. How is the property currently performing? Because then I can start doing the analysis of, okay, what do I think it's going to take for me to get it from the price per unit I'm buying it at to the price per unit that other things like it are trading at? And if that delta can be reached, I know how much upside there is in my deal. That's, that's how I analyze them for napkin math. That's the first thing I look at. We obviously get much more involved in due diligence.

Yeah, but start simple. Yep.

Well, from Dylan, how much reserve should I have before raise insurance deductible?

I think that depends on the deal, right? I mean, if you're buying 100 units, your reserves are going to look a lot different than if you're buying a fourplex. That's where I would go with that.

Absolutely agreed. Absolutely agreed. The amount of reserves you should have, you should have, are enough to run the property's entire expenses for 3 to 6 months is the correct answer. That is not a reason not to buy a property. If you start without money, you do in fact have to buy assets and start doing the— you have to start playing the game, and your risk is a little higher when you have nothing to lose. And fortunately, you have nothing to lose, so That's how you do it. Now, as you get larger in portfolio, there's a deal that someone called me about that said, hey, would you do this deal with me? It's 250 units. And my answer is absolutely not. It looked like a pretty good deal. Why wouldn't you do this? This would double your portfolio. I'm like, because if we're wrong on this deal, I have something to lose now. It is too big and being wrong could tank me. You change your risk portfolio. You don't play defense before you play offense first, score some points. But when you have stuff on the board, Take measured, cautious steps. So Dylan, in your position, when you're starting, reserves are important. You ideally want to raise those as part of your capital in the first deal. But make sure that you close the darn deal. That is the most important piece. If you can get some reserves put in place, it very much depends on how much project you have, but make sure there's enough to cover 3 to 6 months full expenses. If you brought in no income, and you should be just fine. What's land assemblage? That's where you put, uh, two pieces of land together that are next to each other, adjacent land. You just go assemble as much land as possible. The more pieces you have touching, the more they're worth, because the more people can control an area, control rents, build on them. So as you put together assemblage, your values go up, much like the game of Monopoly. In Texas, uh, should I have 'all my leasing agents be bilingual?' Or, uh, 'Should I—' I'm just making funny— 'Or should I record screenings?' Um, Caleb, bilingual or not? You are in Texas, you manage some stuff in Texas. What's your thought?

Yeah, um, I don't think it needs to be that the case whatsoever. Um, yeah, I just— not something I've run into. I own in primarily Hispanic areas and certain things, and it's just never been a necessity. That's not the first thing I look at. Granted, if they are a bonus, but that is not the first thing I look at whatsoever.

Our first property that Cale— sorry, that Cody and I bought, 38-plex, we had about 60% of the tenants only spoke Spanish. And the family that owned it, last name of Perez, was a Spanish-speaking family, and they basically filled it with a whole bunch of their non-paying family members, and none of them spoke English, and it was very difficult. To get through that. Cody speaks some English. We figured it out. There's no one on property management who spoke Spanish as a first language, and that's in Washington State. Texas, same thing. There's so many cool translating apps and you can always communicate through writing. Yeah, that's— yeah, there's a lot of ways to do it. I have not run into a— it's not that it's never come up. It has come up in my portfolio. It's never been a significant roadblock.

That is not the straw that's going to break the camel's back, let's put it that way. Yeah.

Matt asked Dylan, what part of Texas are you investing in? Let them do their little communications together. Yes. I actually have a fun announcement here. This is just for everyone. The Multifamily Strategy Facebook page, that is a group that traditionally has been people who have gone through the mentorship program. So we have about 500 active members of that group. We are opening that up to the community. It's still something that you have to be invited to, but you can absolutely request to join. But Multifamily Strategy, the Facebook page, we're starting to get more, uh, lenders in that group that actually want to lend on deals. We're getting more comments back and forth on deals. I am going to, as of today, this is the announcement for the 20 of you that are watching right now, uh, we're opening that up. Check out the Multifamily Strategy Facebook page. That is a place where we're actually going to start building national community and you can connect on your deals on if you want advice on them. If you want to connect with other people in your area, we are going to be actively building that out now. So Matt, Dylan, that is a great place to have the opportunity to go ahead and connect and absolutely reach out. I just hired a moderator for that page. So I am actually like putting the employees and resources into building that out. That is a thing for you, and I will not be taking deals out of that page. I hate gurus that come on and they're like, I'm a social media person, my mentees find me deal. I'm— that's not gonna be me. So this is a community space, uh, for you, and I will contribute everything that I can to it. Are you and Caleb going to be living in the same city? No, we are not, but we will be both in the DFW Metroplex.

Which, if you count DFW as a city, which is to count it as a Metroplex, uh, then yes, we'll be living in the same general vicinity.

The population of DFW, like the, the Metroplex, is greater than the state of Washington, like by actually a reasonable margin. So that's like, that's like saying, oh yeah, no, we both live in Washington State. Uh, DFW is huge. Uh, but Caleb is on the Dallas side, I am on the North Fort Worth side.. So I'm opposite sides of the Metroplex. What is it from your place to mine?

Like 45-minute drive? 35.

Oh, that's not bad. So we're close. We're close.

In Texas, everybody loves to drive for some reason too.

So it's nice and easy. There's— Texas is a 35— it's like a 35-minute drive from anywhere to anywhere. The most part.

In the Metroplex.

Yes. Trey. Trey, good to hear from you, man. Hey guys. What's a great way to contact you? Best way to contact me is on Instagram @ChristianOsgood. I think I even have a way I can pop that up on the screen. Boom, look at that. Um, I'll have to take the— make this a little bit smoother. There we go. Boom, there we go. Those are the places to contact me. The Instagram, that is the easiest way to contact me. Caleb, how would someone reach out to you?

Um, same thing, Instagram, @Caleb.Hommel. I wish I didn't have the dot in there. The guy who has the name without the dot would not sell it, so @Caleb.Hommel is the best way to reach me.

The guy who had, uh, Cody Davis, like the, the original Cody Davis, which is a very common name. Cody tried to get that one. I think they wanted like $30,000. It was like obnoxious, negatory. All right, diving back in here to the question.

I've got time for about one or two more tops.

Okay, well let's go get, uh, let's go get some good ones. Matt verifies we both responded. He is not a plant. That was, that was done before he asked the question. So we are, uh, yep, that's the place to do it. Vincent, watching from the operating room. Hope you're all having a good evening.

Um, wow. Well, welcome, welcome. Let's be careful. Let's be careful in the, in the operating room.

Yeah, if you're being operated on, I'm sorry, and please recover. And if you're doing the operating, um, uh, don't watch this too closely. Look at your hands, Jake. Uh, where do you go to raise private capital, Caleb? This is an excellent question for you to end on, as you have raised a significant amount of capital as well.

Um, yeah, so raising private capital is actually the easiest part of the business, at least it is for me. I find that to be the case with most people. Um, it's— for me, it comes from, one, owners, and two, talking about what you're working on with absolutely everyone. Um, for me, the good news is I never shut up. I always talk. And so when I'm talking to people, I talk about what I'm doing, what I'm working on, what opportunities I have. Um, and if you're talking to people and you're talking about real estate and they're like, oh, I'm interested in getting into real estate, then boom, you have a connection. Or hey, they might know somebody who's interested in real estate and they connect you to— so it's just talking about what you're working on and owner relationships. I'm actually looking at 2 deals right now where owners could fund both of them. So super fascinating there, and that'd be the first time that's happened for me. Christian, I know, has worked with other owners in his market before as capital partners as well.

Easiest way to find every contact is to meet with people who've done the thing that you want to do. Say it every single episode, I'll continue to say it every single episode: meet with the owners who have done the thing that you want to do. Uh, a lot of those end up being my capital partners. I don't know about going after them for capital, I'm just meeting people and putting together connections. And when you do this On repeat, you start having more and more success. I have found this very, very, very, very consistently. You can also go to private money lenders. I was supposed to film it over the weekend. I apologize. I did not. I am filming this for the YouTube channel. It should be out in the next 2 weeks. I'm going to share 10 different ways to do deals zero down, and a lot of them have different structures of private capital. They're very simple. They're super repeatable. I think it might be one of the funnest videos I got to put together. Because there's so many ways to do it. Some of them I— almost all of them I've done. A couple of them I don't do for a very specific reason. We will talk about subject to there. It is a legitimate zero-down strategy that I don't use, and there's a reason. But there's so many different ways to raise it. It all comes down to relationships. If someone trusts you and you are a— you have an actual relationship, you get to know them. They're not a wallet, they're not an owner, they're not, you know, someone who you're going to get a property from. Exactly. They're an owner. And if you treat everyone like that, raising capital is the easiest part of real estate, period. I'm not saying it's easy. I'm saying it's easier than everything else. Agreed.

And that is where I am going right now. I actually have an owner meeting, so I'm signing off here. Thank you for having me, Christian. Yeah, I will hopefully be back next week. All right. All right.

Well, now that I have the whole screen to myself, let's zoom in. I'm going to see if the AI camera knows the signal. Oh, look at that. Welcome technology. By the way, private capital, we're going to start pushing this harder on the Facebook group, so be involved. I'm actually making some calls today to get some of our best and brightest members of Multifamily Strategy more active on that Facebook group. So we're going to start rolling that out. Be ready. That's going to be fun. What do you mostly look for in due diligence? I'm making sure that no one lied. So that's basically what you're doing. You go under contract based on certain assumptions from what you've been told, that a deal looks the way that you have been told it looks. So I've been told I'm buying a property in good condition and that the P&L, the profit and loss, looks like X. I'm going to be looking at bank statements. I'm going to be doing a physical inspection of the building. I'm going to be looking at the rent roll, doing tenant estoppel letters. Why do I do all these things? By the way, full checklist on multifamilystrategy.com. But why am I doing all these things? So that I can verify that the things I've been told are true. And if they are, we close. And if they're not, we adjust. That's what due diligence is for. Now, Cody and I are getting the money back. I actually just hit our account today, $100,000. When I had $150,000 in my bank account, I put $130,000 down. So basically all of my money down. On a 60-unit deal, 3 different transactions. They didn't sign to close and they kept the earnest money. I'm not kidding. You can't, you can't make this stuff up. They literally kept it in escrow saying, hey, we thought these contracts were contingent on each other, which they're not. And so until the dispute's solved, which takes about 18 months in Washington, we're just going to hold all this money in the escrow account. We just settled to get $100,000 back. I lost $30,000 and spent $32,000 on legal fees to get, uh, $100,000 of my $130,000 back. That is what you call a terrible deal. Um, however, had we closed on that, because we, we had some small changes during due diligence, had we closed on that, that would have been a huge problem. And had I identified that they were going to commit fraud before that, if I hadn't already put it in escrow, I could have just walked on the deal. So what I always do as a precaution to avoid you having a 6-figure mistake— granted, it cost me a total of like $62,000, but that's a lot of money to me. May not be for everyone. If you want to avoid catastrophic things like that, make your due diligence or your earnest money due after due diligence. Now, some states you have to put some money down. To open a transaction, like in Texas. I put $500 down to open the transaction, and the rest of the earnest money is due upon waiver of feasibility. That will help protect you so you can keep the money in your account and not get into stupid legal with people who are wrong when they're rich enough to afford to be wrong for an extended period of time. So I'm chewing gum in a podcast. What am I doing? Excuse me. Foolish. Foolish is what that is. From Greg, I live in an expensive area, Denver, Colorado. I do as well, Seattle, Washington. Should price deter me from investing locally if I am taking the seller finance route? No, it should not. The nice thing with seller financing is you name your terms. Now, Denver, Colorado, people, and especially more expensive markets, people tend to use more leverage, which means your ability to get a large amount of seller financing may be less. What I see more, and I'm going to talk about this on that upcoming video, what I see more frequently in major metros, especially in blue states, but places where there is more debt than equity in the market is the 50/40/10, which is where you go 50% bank debt in first, 40% seller financed, because you'll find a good deal, people have 40% of the equity, and 10% down. And that can be either additional debt or that can be an equity partner, or if you have it, that can be your money. There's multiple ways to structure this depending on how much money you actually have. But that is a way to use seller financing where banks are usually happy to go in first. The seller, while maybe a little less excited to go in second, is still only 90%. There's only 90% of the financing, so they're still very likely to get paid back in full should you fail. And with 10%, you have skin in the game, so both parties can see, hey, this person is invested and will not want to lose their money. That's a structure that works very well and is very, very easy to present. Almost every bank will approve that as long as they're not a large bank like a regional local bank or credit union, even a larger regional bank. 50% down in first position, like lending 50% LTV, that is an awesome place for a bank to be. Banks love that. That's pretty easy to get approved. Just a thought. I think you're going to have more luck there than you would on that strategy than you will going 80, 90% seller financed. And it should be roughly as easy to get done. Just give yourselves another 15 to 30 days of contract time to actually close the deal because banks take a little longer. Thoughts on investing in South Florida where people are worried about insurance costs and hurricanes? It's factored into the price of the buildings for the most part. So when you have increased costs like Texas, we have 2x the property tax that we do in Washington. And people complain about that all the time. I'm like, yeah, but your prices are like half. It's a free market. People do not buy properties, like properties don't just trade at something they're not worth. They're worth what people are willing to pay for them. So if you have high expenses like insurance, that is totally fine. You still are buying for long-term cash-flowing fixed-rate debt. That's ultimately what you're after. And if you can get that deal, to cash flow for you and you can afford to hold it for the long time because you have long-term fixed debt, it's a buy. How do I identify if a market is a good opportunity for Section 8? You call the local housing authority and you ask them two questions. One, how many vouchers do you guys— I like to ask how many vouchers they have currently available. So how many people are they actively trying to place? Now in that question, I'm asking, you know, a very basic Simple question. I'm also gauging how much need there is right now, but the housing rep almost always additionally will tell you like, hey, we're really trying to push this, or hey, we, we've pretty much housed everyone. There's not a huge need. They usually let you know when you ask that question. The other big one that I want to know is how many housing vouchers expired last year, which basically means how many people qualified for housing and were unable to find a suitable place to live. If we find that there's a bunch of these things expiring, there's likely a very high need. For more landlords to join the program and get Section 8 rolling. We found that in, for Caleb's deal, Stephenville, his first 25-unit, Erath County, where that is based, doesn't have a housing authority. However, there's a neighboring city, or I'm sorry, a neighboring county that does, and they need to place people, and they will place them in Erath County. So we actually opened up an area that doesn't even have a Section 8 program We have Section 8 tenants paying at about double, is what Caleb's saying, about double what rents were when he bought the building 7 months ago. Live in expensive area. Uh, oh, that question came up twice. Uh, Coach Carlson talked about presenting 3 offers to buy a house. What is your thought for multifamily buying? Ask for what you want. I hate the multiple offer thing, and I've, I've had back and forths on this, and you'll see this on the Multifamily Strategy Podcast. Seriously, someone subscribe to that because I, I launched it and it's going to be fun. Um, but the Multifamily Strategy Podcast, um, I've had, I had this conversation recently. It's going to be on an upcoming episode. We're talking about, you know, I, I have a, a seller-financed offer and then I have a cash offer, or I'll have, I have all these different things that people do, and it feels gimmicky to me. I don't like sales tactics in real estate. Now, be a good negotiator. I love negotiations, and there's a huge sales piece to that, but I don't like anything that's like, hey, this is the cheat code to succeed, or hey, follow my 3-step rubric or my 5-step process to do anything like that is going to be gimmicky, and you're not going to be as successful. Your ability to come in and be a real person and be organic and just have the general social skills to negotiate is going to be how far you get in real estate is realistically what you need. It's more of getting into the flow than following X amount of steps. So if you're doing multiple offers, it means you're not offering exactly what you want. You're just trying to come up with different ways that the deal could work for you. Here's what I do. Meet with the owner. Find where the goalposts are. I know for me, my criteria is a deal that is interesting to me that is long-term cash flowing, fixed rate debt. So if I get paid to own it and I can own it for a long period of time without losing it, and I want to own it, I'm going to buy it. That like, all I have to do is figure out what do I need to do for the seller to make that happen? Are they looking for a certain amount of income, which I could do seller financed? Are they looking to be cashed out? They want 1031. What are their objectives? And then we write a deal that meets their objectives, that hits my criteria, which is pretty easy criteria, or simple, I should say. Long-term cash flow and fixed rate debt, put them together. That is a one-offer scenario. That is not a two-offer thing. Yeah. And I do have a— there is a video on the YouTube channel, by the way, that you can watch. For the Section 8 thing. And in Multifamily Strategy, the course— I promise I'm not just plugging all my stuff today, but this is relevant— I just launched the Section 8 masterclass. I've been getting this comment. This is why I bring this up. There are multiple groups and some of them are pushing marketing really hard. So you may see this start to come through your feed. There are a few people who just focus just on Section 8 or just pushing, pushing, pushing. Oh, I have this little used strategy that Made me a kajillionaire. Anytime you see an ad where someone is flexing their yacht or their mega house as like the, look at where I'm at, you can be here too if you do this, always guru, almost always a scam. You want to see people who are just doing the stuff. Section 8 is a strategy. It is not the way to be infinitely rich. It did make me over a million dollars. So I share how to make 7 figures using Section 8. But I think Section 8, like any other strategy, should be a tool in your tool belt and something you can do. You really need to be able to operate a standard market rate property before you try any other strategy— midterm, short-term, Airbnb, um, Section 8, any other flavor of just student housing, like any other flavor of multifamily. You should be able to do them all, but don't do any of them if you can't just get a standard market rate person in a rental and know how to run That's what you need to learn how to do. And within that, you can add other strategies. Section 8 is awesome though. I love it. Government guaranteed checks. But there's one thing about them that everyone should know. Guaranteed late. I, I've never had a housing authority pay on time. It always comes mid-month and it screws up the bookkeeping. They have their own problems, but it is a check that usually comes in every month on time. Well, not on time, but, you know, within the month. And private capital is being more focused on private capital. By the way, seller financing is private capital. There's so many different types of private capital, but private individuals who will fund your ventures, there is so much more money than there is great deals. There's so much more money and we just keep printing it. So, um, ask away on private capital. It is the, uh, simplest and probably most feared piece of real estate. We talk about stress management. Borrowing money from someone else believing that you can return it in the future. That causes a lot of stress and that takes a lot of confidence. So your stress management skills are gonna be really important there, which is the topic of the day. From Trey, just wanted to let you know I've texted you on Facebook, would love to hear back from you, no pressure. Uh, so Facebook, uh, there's a problem that I've had with Facebook and if anyone has a solution for me, I would appreciate it. Facebook Messenger when I accept people, because, because I do advertise and I am by no means some massive influencer, but my— I am public enough through the going live and being, you know, a public speaker. I get about 30 to 50 friend requests per day. I have a problem where people will look like a legitimate account, have a normal name, and as soon as I accept them, they change their name to somewhere out of the Middle East and they immediately start spamming me with Venmo here, Venmo here, save the children. Um, I do not know how to get that crap out of my Facebook Messenger, so I am rarely in Facebook Messenger. If you want to reach me, Instagram is the place to do it. It has a fantastic spam filter and I can actually get to your message. So if you message me on Facebook, I'm sorry, You're getting buried by a bunch of scammers out of all over the world who have just decided Facebook Messenger is the place to spam people. So, um, Trey, if you can send that same message to my Instagram, I will find it and I will answer you. I'm gonna add one thing to that. On Instagram, I do get a lot of messages. I personally answer all of them, but I do have a 2-person team who reads every single message and tells me, hey, you need to respond to this, this, and this. They get forwarded to me. So I just want you to know, if you hear from me on Instagram, I get back in a timely manner because I have actually employed people who make sure that Christian gets back to you in a timely manner. So I— that is the place to message me. Joe, what are several strategies you can use to have a deal seller financed if a seller has a remaining mortgage? Well, number one, you have a down payment that's high enough to pay pay off the remaining mortgage. That is the main way. Uh, two, you have a bank take out the remaining mortgage. So something like that 50/40/10 rule that we talked about, or a method where the bank will do 50% loan to value, the seller will take 40%, you put down 10%. That's a great strategy that can overcome, you know, if someone has a decently high equity position. If they have no equity in a property, they can't seller finance because you can only seller finance what you own. So that may be off the table. I'm just thinking of some other things. Another thing you can do if you need to buy more time is to take it out with a bank loan and you want to basically 100% loan to whatever you purchased it for. Something that you can do is either a lease option or in Washington State on multifamily, a master lease option is actually not legal. You can do what's called a management option where they manage the asset and they pay you an option fee. That just happens to be financed monthly. So it looks like seller financing, it feels like seller financing, but title doesn't actually change until the option is executed, which is usually done at a financing of the property in the future. So if you have a property that is maybe not able to hit their metrics or otherwise not seller financeable at the time, it gives you direct economic control of the asset and path to own it. Just make sure that follows the general rules, you know, deal debt equity, long-term fixed rate debt, all that, all the good stuff. Make sure that you have a path to buy it and own it. But option agreements are a way to get around that. Avoid subject to if there is a due-on-sale clause in their note. They do get called. I know there's so much controversy online on that. Subject to is only a tool that should be used if there is no associated due-on-sales clause, which is very rare. However, if there's no due on sale, then subject to away, it's a fantastic legal strategy to do that. That's just a few, by the way. That's not all of them. That's just a highlight reel. That's as deep as I want to go on that. Otherwise, we can go way in the rabbit hole. There's a million ways to buy things zero down. And I know people think that Pace Morby and Christian Osgood are polar opposites. It's not true. We're both creative finance guys. I don't like subject to, and he branded on it. And we disagree on some stuff, but I just heard on a podcast with him, he actually shared this, like another way to do creative finance that he's doing where they— I'm sure he's doing it legally because he's actually pretty careful with his legal, but he's receiving title physically, locking it away, but they don't record the title so it doesn't trigger a due-on-sale. Now, I don't know everything about that strategy yet, but I just saw a short video on it and I'm like, huh. It just reminds me, I can probably think of a, if I had to write 'em down, 25, 30 ways to buy a deal without having any money. But it's just fun that like even now I hear things where I'm like, I've never heard of that. And I want to look into that because that sounds, it sounds shady. And then you look it up and you're like, well, I'll be darned. There is another way to do this legally. So he's a smart guy. He's a smart guy. Pace Morby has more ways to buy deals than I do. Mine are— I like to keep it simple. I want it to be— I don't want the brain damage. There's too many ways to buy deals. But smart guy, he's worth a listen if you want to get real creative. Just remember, the more creative you get, it's a double-edged sword. You get too creative, it's a good way to lose a property as well. Peter Navarro III. There's a vacant duplex near me in a good neighborhood, and it's been almost a year now. Anything sus about this? Uh, it's been off market. Anyway, to look into the owner and status of it with public resources, absolutely. Go to a county assessor. You're looking for the parcel map wherever you're at, and typically you can click on the individual parcel and it will tell you who the owner is. If it's an LLC, plug it into something like True People Search or only OpenCorporates, or there's a bunch of— a whole bunch of very specific, essentially, skip tracing sites for corporations, but they're not paid skip tracing. You can find almost everyone for free. When you find who owns the entity, Google their name, the word phone number, and the city that the property's in. You almost always find an active number for that individual. You can reach out and attack it that way. If you need some help on it, Calling a good local broker to help you track down the owner is another great way to do it. Just make, you know, make up with a little fee. Luke, my good friend Luke. Also, Luke, welcome to Multifamily Strategy. It's been fantastic having you as another member of the course mentorship and in the community. Really fantastic getting to meet Luke recently on the New Jersey meeting. Um, Luke, if seller is willing to extend a balloon after interest only, uh, does that mean they're willing to finance the whole deal? So if they're willing to extend a balloon after IO, um, it doesn't necessarily have anything to do with the financing of the deal. Um, it usually just means it goes onto some sort of amortized schedule and could have a new balloon An extension is basically just, I mean, it's just that. It's an extension of the existing debt and it usually has some sort of term. So it's either you pay for an extension, so there's a fixed fee and the note will extend. There may be an adjustment to interest rates. It may switch from interest only to amortize and it may get a new balloon of 5 years out, of 10 years out, of 15, of a 2-year extension. It's just another negotiation that is part of the deal. But if they're willing to extend the balloon after interest only, the way that's worded makes me think that they want to move to some sort of amortized schedule. It depends on who they are. It's very rare to get a fully amortized seller finance deal, but Cody has one and they do happen. I've met plenty of people who've done it. So very possible. Do you typically use a cash only, a cash out refi for your properties you pay over market value? Any examples? In the top of your head, um, see, do you typically only use cash in refinance? Oh, I see, cash in refinance. So like where you have to put money down to refinance it if you pay over market value? No, um, I only— I don't overpay for properties. Now if you went on terms and you overpay based on where it's at today, that's one thing, but I only buy properties that have the ability to get the equity up. I do not want to do zero equity deals, which is another reason I try to avoid subject-to. It's typically only used, typically, on distressed properties. And so you end up getting low equity deals, $0 down, and you may be able to get them to cash flow a little bit. So when you're looking at doing a refi, the real estate needs to buy the real estate. When I put money down on a deal, that is the last time I'm injecting my my capital to the deal. So I'm going to raise enough on the front end, and that is the first— that is the first and only capital outflow from me is the closing of the property. Everything else, the real estate needs to support the real estate. Otherwise, you just don't have a deal, and there's more negotiation that needs to be done on your price. So it needs to have enough upside. If I'm overpaying for where it performs today, there needs to be an ability to outperform where it's at, get the value up, and at that point, cash out refi. Otherwise, overpaying for an income stream just to win on terms puts you in what's called a negative equity position. You can actually lower your own net worth by overpaying for a deal that pays you to own it. Shiloh, when analyzing a deal, you're looking at financials. How do you know what to eliminate as an anomaly so that you're close to being accurate on your assessment. Um, it's usually the one-off thing. So if they just replaced a roof, it's very unlikely that you're going to be replacing that immediately. So you want to understand what is, uh, like one-time CapEx and what are recurring operating things. Really what you're looking through is on a one-year bank statement, what fees are recurring every single month and which only seem to come up every once in a while. If you can figure out what things are coming up once a year, basically all you're trying to do is highlight what are the anomaly things.. And that's usually a conversation with the owner. If there's any larger line items that are specifically on the P&L that came up once, it's going, okay, what was this and is this something that I should be looking at again? As you figure that out, that's all part of due diligence. We're going to find market cap rate without going on CoStar. Best way to do this, and there are multiple ways, best way to do it is to go to a local broker. That is the, you build the broker relationship and you let them know, hey, I'm looking at this deal in this neighborhood, in this area, what are you seeing for cap rate? You can also do it with local lenders. They are obviously— they have a pulse on the cap rate because they're looking at those evaluations every day. But a broker or lender in the market has the data. They— it should be top of mind. And making that call is going to help reinforce your relationship. Uh, to the earlier question, uh, to Matt, uh, much, much earlier in the, uh— I think it was much earlier, but, uh, Dylan's looking to invest near Houston. There's a 10-unit deal in Houston that I actually have a pulse on. Let me— Dylan, I may be able to make a call for you on a 10-unit. I have a thought of a deal that is active in Houston. I need to do a little bit more research, but remind me. We should touch base on it. Oh, thank you, Luke. Jonathan, pros and cons of apartments versus mobile home parks. You've discovered owning both mobile home parks. Well, mine's in the middle of renovation and fixing a collections problem. So my experience has been like they're all late on paying, but also that's what I bought. You can get that with an apartment complex. Mobile home parks are cool because the cash flow is typically going to be higher. They sell at a higher cap rate. So you typically, you're going to get more cash flow per your dollar on a mobile home park if you buy correctly. Another advantage of mobile home parks, the pro, is, uh, like, I've sold 3 of the RVs to the tenants, so I've opened up more capital. Uh, by owning individual pads, you can sell or finance them back, you can create new revenue streams, and then there's less maintenance because it's pad rent. You're responsible for the utilities and the concrete slab that the RVs or mobile homes are. So those type of projects, they're really simple. They're easy to get started. They tend to get less appreciation than multifamily. You don't have that structure that is appreciating. So typically more cash flow heavy, less appreciation heavy. It takes more time to get massively rich in mobile home parks, but it takes less time and effort to get a base of cash flow and financial freedom, which to be fair is most people's initial goal. So I'm fully an advocate for Providing housing for humans, mobile home parks do fit the bill. Just know the type of person you're renting to is usually someone who's going to run into more financial problems. You're going to have more collection issues. It may be a little bit more management intensive for the people side, but the actual building side, more creative finance open, typically higher cash flow. Fantastic place to, in my opinion, to get started. A good place to check out, um, There's a course on it, and I just participated. I don't, I don't own it. This is my course. This is Yon, uh, Yon, uh, Wanot's course, who owns a lot of those. If you want to check it out, it's called, uh, MH Parks Academy. So mhparksacademy.com. Um, I had— I got to do a full section on creative finance as part of his course as a guest speaker, and it was a collaborative— it was fun. But the mobile home park operation strategy, if that's something that you're looking at, check that out. MHParksAcademy.com is worth taking a look. Can you offset recapture? Recapture is going to be the tax that you have on the depreciation or recapturing depreciation. The easiest way around recapture is to do a 1031 and you roll those recapture tax it's just another thing that gets rolled on the next deal if you don't claim things. Uh, you can delay or postpone indefinitely recapture tax if you're doing a 1031 strategy. Otherwise, recapture is recapture. You're— there's not a great way to offset recapture, um, other than having a loss somewhere else to write off against it.

So you have a—

you know, if you're doing a cost seg somewhere else, you can certainly If you have enough losses, you don't pay taxes. So you have enough depreciation elsewhere. Otherwise recapture, you're going to get hit with it if you don't 1031. How do I go about finding a, finding duplex rents? I know the market has them, but can't find any listed anywhere. That goes back to brokers. Call a broker and get a feel for, or a property management company and just call the vendors who specialize that. And just ask like, hey, what are you seeing for rents? I'm looking at this building here and trying to get my pulse on the market. Can you help me out? That works very well. Dylan's looking at multiple markets. This is one thing that you're going to see, Dylan. I think this is pretty consistent for a lot of people. If you're in multiple markets, I think where you're at, actually, you can look at a few markets. This is too zoomed in. I'm gonna zoom out. There we go. If you're in multiple markets and you stay in multiple markets, you're gonna have to build your same business multiple times with multiple vendors, property managers, uh, potentially multiple lawyers. Uh, once you find a deal in one of these, double, triple down on that area. Buy everything in that area. That monopoly assembly strategy, just do that, it's going to help you a ton. But I think that's not a bad idea if you choose 3 or 4 different areas and you try to get that first deal done in one of them. That really works. The easiest way to track those again is just talk to the professionals in the area. Boy, trying to catch up on the questions. You guys are asking them fast. How would you pitch a seller on being in second? One, I'd put something, have something down so there's skin in the game. I can't imagine a seller Being like, oh yeah, I'll just finance and yeah, I'm in second position. Hope first position goes well. But you, that one usually happens when you have a lot of trust or you have a long track record and you have some skin in the game. So if you put, you know, 10, 15% down and it's like, oh, you're in second, but I have some skin in the game. I don't want to lose this money. That's an easier way to do it. But sometimes just what makes the deal work. So if they're stuck on price, it's like, okay, I can get a bank to cover X. And I need you to cover Y, or we don't have a deal. That's basically it. Like, it's not too complicated. Just map out, you know, map out the field, find the goalpost, and, uh, you know, kick the ball between the goalposts that are created to get the deal done. Joe, what can you do to reduce expenses on a property when stabilizing? So when stabilizing, um, boy, there are a few things. Uh, who's paying utilities? Can utilities be billed back to tenants in any way, shape, or form? That's an easy way to do it. Energy efficiency. If you are the one paying electric, there's a bunch of ways to improve that with better windows. I like adding mini splits to buildings, but anything that does the energy efficiency, a great way to reduce expenses. In Texas, you can often— they'd like to raise tax, and then you can contest that and often get your taxes reduced again. That's a good way to do it. You could self-manage, but I'm not a huge fan of self-managing. I like to keep everything as I either make a management company, which is a pain but is one way to do it, or put it in a third party. But those are the main things. See if there's any waste anywhere or any systems that you don't need. But those are the main things. It's easier to increase income typically than it is to reduce expenses. But if you can find any, any fat to trim and still maintain the condition of the building, it's usually those sort of billing back things to you, tenant, tenants or fixing something on utilities or taxes. All Nighter is back home and we're officially like in a live. This counts now because All Nighter Hider is here and that means we are able to, uh, to have it live. Uh, Luke and Dylan, We have a message from All Nighter here. He has your email. And sorry, skipping through these. A couple of these highlight Lumberjack. By the way, you guys have to follow this channel. It must, must happen. Everyone who's watching this, Lumberjack Landlord, he has forgotten more about real estate than I know. Fantastic, fantastic, fantastic investor. And, uh, a great friend of me, of Dion and Mike, uh, people who I have very frequently on the channel. Um, give him a follow, Lumberjack Landlord. Scrolling through, I love that you guys are having conversation here. I'm just, uh, give me a second to read through what is conversation and What is, uh, what is a question? What do you think about asking an appraiser for cap rates? I think that's just fine. They're going to be using cap rate. I want to know what things are going to be appraised on. So appraiser is an excellent one to ask on cap rates. Absolutely. From Samuel, welcome to the chat. Would you structure, or would you just structure to cash flow with an equity partner and let the note pay itself down over time? I mean, in general, yes, that sounds great. The real estate has to buy the real estate. So if you can structure a deal where you get cash flow, you'll deal debt equity. One thing that you should note, of 10— of the last 10 people I've had recorded with on Multifamily Strategy, the podcast, every single one of them have had partner problems. Cody and I have had multiple partner problems. One of them ended up in bonus legal expenses that were just a pain. And we were so brutally, ridiculously right. It was frustrating because in real estate or business in general, you have to pay to be right. The only ones who win are the lawyers. We've all heard that saying and it is super true. A way to structure things. If you have a cash flowing deal and debt is not the correct method to take it out, or it's not going to have enough cash flow, you may be looking at equity partner. Just know that in exchange for not having monthly payments, you have another human on your deal, and other humans are variables. Variables are where things go wrong. So just keep in mind, it's another one of those double-edged Double-edged sword things. Is Class A multifamily difficult to sell or finance/very unlikely? It doesn't trade as often and people tend to stay a little bit more levered on it. You're also not going to get a bunch of high cash flow on Class A. What Class A is amazing at is you'll find most people build their portfolios in C and B properties and they make them really nice, but it's consistent and they have the most cash flow. What Class A typically is for is you have already made it in real estate, you want something more passive, so you're going to buy a larger Class A building with onsite management. You're going to accept a lower return in exchange for the passivity that Class A offers. There's also a premium you're paying to have your name on the title of a fancy building. There's the whole pride of ownership thing. People with money like having things they can tell their friends like, oh, I own this amazing building downtown. So Class A has some premiums to it that make it harder to support debt most typically. So to have someone seller finance and have it cash flow as a Class A asset is less common, certainly not impossible., but you're going to see less of it. If you are doing the lower-down strategies, you're more often going to be playing with the Class C and Class B properties. And when you graduate and you're at the end of your career, you can swap them out for Class A, you know, brand new build buildings, and they can be those legacy properties, but they typically are going to yield a little bit less and less capable of supporting debt. Been my experience. Luke, can you tell if you are overpaying for a deal using a loan factor metric? You cannot. Loan factor rate is going to be factoring your true cost of debt. What it will tell you is, are you borrowing at too high interest? The nice thing with a loan factor rate, and this is, this is part of why we have a course, by the way, is, um, this is a video most people need to watch a couple times to get the math, but Basically, loan factor rate is your true cost of capital. So interest plus principal times 12 annualized divided by the total amount borrowed. It's like a cap rate for your debt. You can compare that debt expressed as a percentage to the cap rate, which is— a cap rate is your return your return on every dollar invested. So that's if you bought the deal in cash, that is exactly what it would yield. If there is a spread, like say my cost of capital is 1% less than my cap rate, I'll have a 1% spread on every dollar I borrow. That is an actual cash flow metric. So it's a cash flow metric, not necessarily a price metric, Of course, you will have a better loan factor rate if you borrow less money. You will in fact have, you know, you're dividing by a smaller number. So that's one way you can make a deal cash flow more is you borrow less against it. However, it's not going to tell you if you're overpaying or not on a property. Shiloh, do you find that expenses go up on your properties year by year, or once you stabilize, do they typically stay in a healthy range? Expenses go up a little bit year over year, but it never matches rent. Expenses do go up because inflation and all the vendors and water utilities, taxes, everything goes up over time. But once you've stabilized a property, the cash flow typically gets better and better every year. Your expenses don't increase by the same rate that rent increases, that market appreciation takes over. If you can hold anything for a long period of time, your income will dwarf your expenses. Uh, Dylan, if you want to buy a PM company, how much I expect to pay for one with, um, a few, say, 100 units? It depends on how established they are. There's so many factors that go into it. I'd have to look at their P&L to tell you. I can tell you exactly what they're worth, um, but I will give you context. My property management company in Washington State manages about 300 units. I believe about 285 right now. It is worth about $300,000. If I was to actually sell it though, I think someone would, I mean, that's what it's appraised at. I think someone would come in and buy it for a quarter million, maybe $275,000. That's about what it's worth. So 100 units, that's a really small PM company. You're probably coming in on a company like that, $100,000, $150,000, and they're probably gonna carry a contract on some of that is my instinct for a small PM company. By the way, I am going to like, just fact, I'm going to buy PM companies in Texas. That is, I want to manage my portfolio down there. I am good at doing that particular business. I'm gonna take over DFW, so I'll be doing that exact project. Shortly. Troy Roberts, hey, someone's going to the Northwest Action Summit. Um, dude, excited to have you there. There's a link in the description here, by the way, for that, for everyone who wants to see us there. That is happening, Troy. I am very excited to see you there. I will definitely be there as, uh, Northwest Action Summit is now my event as well. I'm co-hosting that and I put a bunch of money into it. So I know it's gonna be a good event. That was not a cheap venue, I will say that. All night you guys sharing some amazing REI tools for us to learn. Thank you guys. Oh, well, you're very welcome. It's fun having, uh, it's really fun having Matt in the chat as well because this guy, this guy goes live every Sunday morning. He's Eastern time, so I miss his lives often because I am at church, but, uh, Matt is awesome. He goes live on Sundays and is recently retired. So also a huge congratulations to Matt for— yeah, he had financial freedom forever ago, but for finally actually being retired and doing the retired thing. We'll need to catch up soon, man. Sam, what do you do when there is a deal, a seller is willing to sell or finance, but there's not any upside and over market value, but great location? I don't think that's a deal. If they're willing to sell or finance, but there's no upside and it's overvalued, that's not a deal. You're just overpaying for a property, which is bad. Now, a caveat to that, if they sell or finance where it cash flowed and I had 100 years of debt on it at interest only, I'd buy that because I'll be dead by the time that affects me and appreciation will solve it. But unless it's ludicrously long, custom debt, it's not going to work. Realistically, if you got 20-year debt on it and it cash flowed, you can hold that thing for 20 years and overpaying is now suddenly very fine. My instinct is that if they want you to overpay for the property, they're likely not going to extend 20-year terms. That's just my guess. But you have to have insanely long cash flowing debt to overpay for a property with no upside. "Do you have a hard and fast rule for what's considered good cash flow?" No, I don't. My rules are, how do I buy it? How do I never lose it? If I can close it and it cash flows, and however I raise the capital, debt or equity, the debt or equity partner is happy with the return they're getting, and I continue to cash flow above and beyond that, I will buy income streams with no money out of pocket all day long. That is what I'm looking for, something that cash flows with margin. Something that I will look at because this will affect refinance and is just a great cash flow metric, debt service coverage ratio. If it is 1.5 or higher, or I have a very clear and simple path to get it there, that is what I'm looking for. And that is a cash flow metric that matters because it does take into account your debt. Why would people be more levered in Class A, less recession-proof? Class A, it's just typically more expensive. People will buy them, they stay levered in them. Reasons that you may do this, lower the risk of someone trying to come after the asset. If there's less equity on it, you lower your lawsuit risk. But oftentimes it's something that someone 1031'd into. That's the most typical way to get into Class A if you didn't start rich, which is most of us, myself included. So if you didn't start with a bunch of money, you started with a bunch of, you know, Class B, Class C properties, you collected a big portfolio, you then sell the whole portfolio, 1031 to this big new asset, you typically take on additional debt to do so. That's just been my experience. Do people pay those off? Absolutely. There is a friend of mine, Brenton, who is a phenomenal investor, owns a ton of properties in LA. And he has very little debt. He doesn't have no debt, but I mean, we're talking like 20% loan-to-value. A lot of them are Class A and he has big buildings too. The way that you put these things together, just over time, some people delever, some people don't. I've noticed the people who hold the large Class A stuff usually leave a little bit of leverage on them, and it probably is as a safety measure. Do businesses sell on cap rates? I mean, technically sometimes they do, but really what it's done is, uh, it's most, most commonly they're sold on SDE, seller discretionary income. Um, I don't want to be a jack of all trades. I have bought and sold and owned businesses. I actually own more businesses than I talk about online. I love running businesses. I love buying them. I love optimizing them. I love selling them. It's a passion project of mine. I've made a lot of money doing so. Never going to launch a course on it. It's not my thing. Real estate guy. I love real estate, but I can, I can absolutely break that down for you anytime. The way that they get appraised by industry, there's going to be a different multiple that is applied to your discretionary income. Seller SDE is basically your company's total, like, profit after all expenses plus whatever you paid yourself. So it's basically after you've paid all of your company's expenses, how much is left over to pay yourself and to put into reserve. That's your discretionary earnings. Uh, depending on your industry and longevity and number of employees and a bunch of other factors, there's going to be a multiple applied to that number, and that's what your business is worth. What's the— Oh, I am always about transparency. There are a bunch of people online where you can ask them a question about their portfolio and they'll just dodge the question. I'll tell you exactly what I own, exactly where the pieces lie on my real estate portfolio. The total value of my properties before debt is about $32 million of real estate. That covers— I lost the unit count because I just traded a bunch of stuff to Cody and I just bought some new things. In the ballpark, 210-ish multifamily units. I'm safely over 200, but definitely less than 250, but 200 multifamily unit portfolio. I own in that an average of about 33% because I have a few partners. I'll partner with Cody and I might have a capital partner or someone who I'm buying in or out of something. So I have about 33% of the equity of that portfolio. When you math it all out, I have in my portfolio, rough numbers, at least based on what my accountant has, $4.5 million of personal equity. That is actual equity in a portfolio that is worth about $32 million. That is where the things stand. By the way, unless you bought something new big recently, Matt Hawkins is a perfect example. Matt owns more real estate than me. He has less units than I do. How is that possible? Matt owns his stuff without a whole bunch of partners. Having 100% equity of less units is still more ownership. Matt is the bigger investor, hands down, bar none. He owns his stuff. He controls his universe through playing the game longer. People like to flex unit count online. I make sure not to do that, but that is what I own. I have mobile home parks, I have hotels, I have resorts. Again, I've acquired $32 million of stuff in the portfolio that I have direct control over, but I don't own it without other people. And that's about the equity that we've created, more or less. Equity is also a little bit subjective because it's based on— I base it off what I think they will sell for, not what the appraiser says they're worth because they appraise it one thing, but your actual equity, if you were to sell, you have cost to sell and there's other things. So paper money, I have more. In actual net worth, I think it's like 4.5. What COCR would you want for a PM company. I don't know. There's, there's so many things. Honestly, with the PM company, here's, here's what I'm looking at. I'll, I'll just give you the metrics instead of answering the question directly. I wanna see what pieces they have that I want. Do they have employees in an area where I need employees? Do they have someone who's really good at using the AppFolio software where I want to integrate theirs, or do I wanna start my own? What is the actual rate of revenue that I am buying and what is like, who are the people that I'm managing? If it's a whole bunch of single-family homes, I'm out. If they have owners who own a bunch of, you know, 25 to 100-unit buildings, can I grow the relationship with those owners and continue to win their business? That's powerful. So I want to look at their client base. I want to look at their systems. I want to look at their employees. Buying a business, in my opinion, is a lot more technical than buying a piece of real estate. I do enjoy that piece and merger and acquisition is fun. Quite honestly, I like jumping into a market, building my own brand, and then Pac-Man-ing all the other surrounding companies. Andy Florence has a quote. This is the CEO of CoStar, and I really like this. I'm sure he stole it from someone else, but never start a company from scratch and never build your own marketplace. Wait for someone else to do that and then just take it from them. And granted, you take it from them by offering them money and/or outcompeting them. So either have a better product or service or give them something they want, which is usually cash, and let them do the work of starting a business. Most businesses fail. It is much, much, much easier to acquire and build than it is to start a company from scratch. And having done both many times, I do not want to start a brand new company ever again. I will always, always, always buy into existing systems and fix the— fix what is already working. How do you determine if a market is good for cash flow? Is that deal dependent? It is primarily deal dependent. There are markets that are better cash flow than other areas. There's typically the same places that are lower appreciation. A market is always graded by me on population growth, on jobs first, then on job stability, and then we can look at like, okay, let's look at the market cap rate and see how much cash flow an investor would expect on a market rate deal. That's basically it for market analytics. Market analytics are so easy for me though. If we see a ton of population growth in there and we've seen consistent rent growth, that's obviously somewhere to me that humans want to live. So let's invest in those areas because supply and demand, we're providing housing for humans. That is what it is. Does financial freedom mean making money without moving a muscle? No, no, at least not to me. Finan— I think that would be the Rob Kiyosaki technical definition, is, uh, your business is considered a business if you can step away from that business for over a year and you come back and it is larger and stronger than it was when you left, um, which would be not moving a muscle. I have found that financial freedom means you have the money to do the things that you want to do and you are not dependent on someone else for your systems and processes. I I have jobs in my portfolio, but I do have control over my schedule. If I want to do something, I can go do it. And within reason, I can afford to do most of the things that one would want to do. If I wanted to fly private somewhere, I could. I don't because I don't need to do that. Um, but I felt like building a very large house in Texas, and it was not stressful for me to do so. I would consider that a level of financial freedom. Um, I can live where I want, I can work when I want, I have my own schedule. Um, but I have to move a lot of muscles to do that, and I think that is super healthy. You should be pushing yourself and having to do that. But if I took a step back and let the portfolio take care of me, I'm thinking I could work 5 hours a week. There's 5 hours of things that I definitely have to do to stay alive, like to keep the businesses alive. 5 hours a week is all I would have to do to sustain what I'm doing, and I would absolutely not need money again. It took every second of the last 4 years grinding and giving up everything to get there. I outworked everyone for 4 years. So That's my thought on that. A little bit of a tangent, but you move a lot of muscles to have the ability to not move a muscle. And then, um, anyone who has the bandwidth and competitiveness to get that done is not someone who can stop doing that. That's been my experience. People who want to sit around and not move a muscle typically don't put in the work to get there. Because I mean, I missed friends' birthday parties, I missed a couple weddings for the business, which some people are like, that's horrible. Make it to your friend's wedding. It's like, I prioritize everything into building my team and to making payroll and to building the business that I have so that in the future I never have to miss those things again. And if I have kids, that I get to like be around in a way that my parents weren't around to be around because they had to provide for us. I want to own my time, and I think that's what financial freedom means. Does your end goal portfolio have mobile homes in it? Why or why not? It does not, though I do like them a lot. Here's why not. Mobile homes have weird tenant mixes. I like— my, my long-term goal would be to buy Class A buildings in Class A areas, 75 units or up, within like on-site in-house management. You write the SOPs for that, you hire your staff, it is hands-off. It is the easiest real estate to pass to make generational wealth. I have interviewed, because this is what the podcast is about, I have interviewed the largest owners I can find all around the country. And I do this, I interviewed 3 people this week. I'm going to have a bunch more on the pod. But of those people, the people who have made it and the larger owners who are farther in their business, Almost all of them do graduate to more passive assets. They'll either buy large office, they'll buy large retail, but all stuff that has Class A stuff that has onsite management and is easy to pass off to the next generation with an instruction manual of this is how you run this empire, please hand this to the employees and away you go. That is what I have seen as the winning strategy. And so that is what I'm building towards. Mobile homes aren't going to fit into that. I don't want to have a whole bunch of just entry-level housing. It's just not appealing to me. That's not what I want to pass on as a legacy. But oh my gosh, they're a fantastic way to build there. I mean, phenomenal way to build there. NOI divided by cap rate is true cost of real estate, RE. So does this determine if I'm overpaying? So not necessarily. So that's your true value of the— yeah. So price is based on your NOI divided by the cap rate. That is correct. That is what it is worth based on the income that it brings in today. Now, if it's being mismanaged and you can fix that, it's worth more to you. Than it is worth to the bank on paper based on what it is worth. So there's other things that go into it. Like there, just in a market, there's a minimum price per unit that things will trade at. Our 38-plex, I bought it for $2 million. That's like $55,000-ish a unit in an area where units usually go for $110,000 per door when I was buying. It had a negative— a cap rate was somewhere around negative 1. It lost money in operating. The building is still worth more than less than nothing. No owner is going to pay you to buy that building even though it lost money because it does have inherent worth. There's also future value that you factor in. So short answer, not necessarily. It will tell you if you're overpaying based on its numbers today. It will not tell you if you're overpaying based on what it is that you're buying and what the project is. Oh, one more thing with that, like the hotel conversions, or Matt Hawkins, if he's still here, uh, he, he converted a prison to multifamily, uh, during the conversion process of prison to multifamily, there's no income. Is the building just worth nothing? Did he overpay for it? I don't think so. He had a fantastic project that was just based on the after-repair value. So there's more factors to it than that, but that's a good starting point. What do you think about Tom Cruise, the guy with, uh, with us in Section 8, or the guy who's with us in Section 8 but likes to flex his yachts and cars and house? Kind of iffy about him. It's a live, this is the internet, so I'm going to caveat this correctly because that is definitely someone who can afford to sue me. I hate the Tai Lopez marketing strategy, which is he was like the OG guy flexing the Lamborghinis and the— he's the guy, if you ever saw that, that old ad on YouTube back before YouTube ads were popular, of the more you learn, the more you earn. This isn't about my Lamborghinis. I read a book a day. That, that sort of stuff feels guru-y to me. I watch the content and it makes me cringe a little bit. That's how I feel. Here's who I like learning from. Let's take— Matt's getting a lot of love today. Take a Matthew Hawkins. He worked a 9-to-5 career. He is a father to his kids. He's an excellent operator. He knows how to swing a hammer if he needs to do his stuff. He doesn't do all of his own work, but he's capable of doing a lot of work on a lot of projects. He is a hands-on operator and it is so relatable. He's a father, he's an employee. He's also buying an absolute shit ton of real estate and he knows how to play the game. And that's the content that I get from him. What I see when I watch Matt operate is I see someone who is in the trenches And that's who I wanna learn from. When I see someone who's like, this is my $5 million boat, I'm like, that's not relatable to me at all. And if I'm getting started, if my goal's I wanna buy a big boat, I'm going to fail before I get there. Cuz that's not a good enough goal. So when I see that flashy, like, hey, follow me because this Section 8 is so freaking easy. There's no secret Section 8 method. It just doesn't exist. Section 8 is very, very simple. When I put together my Section 8, I did a whole Section 8 course. I put it in Multifamily Strategy. I didn't even change the price because it's so simple. It took me 15 3-minute videos to go, this is how you play a Section 8 game. There's no magic to it. It's very simple. Funny enough, Matt's the one who turned me on to it. He's like, hey, this is how you play it. Are there different levels to it? Sure. Is Tom Cruise probably very, very, very good at Explaining it, by the way, for those who aren't familiar, this is not the actor Tom Cruise. There's another skinny-ass dude with a beard who's— dude, I don't like the way he markets. I believe he's probably very good, and I've actually heard very good reviews about him and his strategy and how he executes. So Tom, if someone forwards this to you, I've only heard good things. I'm not bashing you. I don't know you personally. I don't know your program. This isn't a review. I personally don't resonate with your marketing. That's, that's all I'm saying. Follow people who've done the thing that you want to do. I haven't seen something online where he talks about what he's done. I've heard about him making fun of non-paying tenants. I've heard about him, uh, using creative but legal ways to get rid of squatters, but none of those are enticing to me or something that's told me like, hey, this guy is a baller operator. What I see is this guy is an online guru because you buy yachts and mega houses and build pools not when you're rich in real estate. You spend the money on real estate for a long time. You buy those when you're making a boatload of money on a course and you need a write-off. And that's where you get all this crazy stuff. Instinct, he makes more money on his I'm going to tell you how to do this than he does actually doing the thing. And that for me is a turnoff. Could be true, could not be true. Um, also, I do the same thing with Pace. We talk about him a lot. Don't hate the guy. We've disagreed publicly on a few things, but there's things that I don't like there, but their programs I hear good things. They could be good people. Who knows? The reason I'm talking about the guy is he doesn't show his own properties. See, that's the biggest flag for me. I actually had a text with Matt recently where you're talking about another guy who doesn't do that. I understand asset protection and like, hey, I don't want people coming after me. And there is like, I've had legal stuff that's very expensive. If you're going to teach it, you need to show it like that. If you have a course and he's spending crazy marketing dollars. So let's use Tom Cruise as a case study for should someone like this show their own properties? Do you increase your legal risk by telling the internet exactly what you own? Abso-frickin-lutely. Are you making, probably based on his marketing spend, an absolute ridiculous amount of money telling people that you're the one to follow? Yes. So that's the trade-off. If you're going to teach people stuff and you're going to make a whole bunch of money teaching people stuff, you need to be willing to show people that you actually do the thing. And if it comes with extra fees, that's the price of paying the game. Just, that's my two cents. If you see someone online and it feels like they might be a guru, and, and this applies to me too, right? I'm a social media presence. I have a YouTube channel. I'm, Posted on social media, look at the content and look at me and go, does he actually own the stuff? Do I see him or her, whoever it is you're following, do I see them on site doing the work? Do I understand they actually have the portfolio? Is this someone who is trying to mitigate their risk by not actually buying the stuff? And this is someone who's talking about something they don't know how to do. Determine that because I think mentorship groups have a ton of value. I've been a part of many of them. And some of them are really bad and they're usually because it's some online person who doesn't know what they're talking about. So that's how I weigh these things. Tom's advertising makes me think that he may be more of the, I'm an online guy talking about something to make money than I'm a great operator, but who knows? Hey Christian, do you think about taking advantage of commercial properties? That are going to take a hit with current rates staying the same or at worst going up? What do I think about taking advantage of them? I mean, I don't care about market cycles. I buy on long-term debt. My expenses don't change massively at any point, but my income does go up over time. If markets take a dip, I bought stuff where they pay me to wait. And I buy stuff where the rent's usually under market value. So if rents dipped 25%, I still have rent increases to do. So I look at my portfolio and I don't even think about it because my strategy has nothing to do with what the market's doing today. It has to do with buying an income stream today that is going to continue to pay me forever. And that works in an up market, a down market, whatever. You buy cash flow with margin and you do that consistently. You can move forward indefinitely. Do you know where Cody is buying in Indiana? I know it's somewhere called, I believe it's Evansville. It's Evans something, could be Evans Town. Um, he owns 2 units over there, but I believe he has intentions of expanding, and I believe that project's going pretty well for them. Luke, market cap rate determines if you overpaid. Again, A little bit subjective because, like, say you have a deal that, um, like market cap 6 and you bought it on a 5 cap. You overpaid based on market value for what it brings in, but you also have to factor in what is the actual project and what is it going to be worth. So factor in the future cap rate as well, and that'll kind of give you a determination of did I really overpay for this, or did I overpay for its performance today to get a stellar deal? 2 years down the road. So there's some factor to it, but that is what you compare it to. The deal's cap to the market cap is the technical. That's how a bank's going to look at it. Us creative guys, I don't care what the bank thinks. You're going to go through a couple of these. Are you seeing cap rates going up because of the interest rates? Yes. And if so, is this affecting any of your projects or appraisals or refinances? Uh, not massively. I mean, obviously I would get more money out had rates not gone up, but our projects have gone really well. Um, Cody finished a refi, I believe today. I'll be finishing a refinance in a couple weeks. Um, the way these things go through, uh, yeah, interest rates will affect it. Values are affected. So buy things on long-term debt where you, you get to choose the timing in which you refinance. Right now isn't the best time we've seen to refinance in a while because rates went up fairly recently and they've been hovering up. So I don't really have any balloons coming up, so it's not massively affecting me. Got a couple properties though where we got the value up and it made sense to refinance. We're just getting a little higher rate, which means we have a little bit less cash flow than we would have a couple years ago. Market cap rate, uh, you can usually find it online. You can use data sources like CoStar, CREXi, uh, but I like to call an owner or a lender in the market and get their opinion of value. Michael, how long on average does it take, uh, people to close on their first deal? I have found 3 to 9 months is the average time, at least for someone getting into multifamily strategy. So when you enter our course, there's a learning phase, and then you may find a deal, but you still— it's It takes time to close a deal. It's not like you find it and you're like, I own it. So usually somewhere within the first— we'll just to be safe say within the first 9 months. It took Cody exactly 9 months. It took Caleb Pomel 9 months. Ethan Wilson had already purchased a deal, a duplex, before he joined the program, but he purchased 4 months in. Logan Pritchett, who I had on the channel recently, he purchased I want to say it was about 6 months in, and he's at 79 units now, and he is younger than Caleb. I believe they're about the same age. Um, really young kid though, uh, killing it. So that's just what I've seen for like a few of the recent ones. We have that Vlad, uh, we have another Caleb who's purchased, Caleb Holt. Um, but like the people who buy, it is usually in that 3 to 9 month period. Um, is what we most typically see. Uh, market cap rate more important than the deal cap rates? Uh, yeah, the deal cap rate isn't really that important to me. I don't particularly care because the metrics I'm looking at are, again, uh, debt service coverage ratio, loan factor rate, things that are, um, things that are cash flow metrics are are more important to me. Now I want to know the market cap rate because that's going to affect my value later. So if I'm doing a value-add project, I need to have some idea what the property is going to be worth when I fix the problems. Um, so I will look at that market cap rate over the deal cap rate because deal cap rate is just a snapshot of where it's at today, not where it's going to be when you have a change in your capital stack, either a sale or a refinance or any sort of restructure. So I'm looking at market cap over deal cap. Oh, Troy, yeah, absolutely. It's a privilege for, uh, all of these people— Cody, Michael, Dion, other Michael, Lumberjack. It's a good group of YouTubers, and all of them, I can say for a fact, are people who actually play the game. There's not an online, you know, guru presence in there. Do you think fixing and flipping single-family houses to fund multifamily deals to pay off existing partnerships is a good or bad business model? As long as it goes back to multifamily, I would say it is a bad business model if I had to. Oh yeah, I'm not gonna mince words. Um, no, if you're going to be good at multifamily, do multifamily. Example, um, I have a loan paydown that I want to do on the Robin Hood Resort, the deal that I wish I didn't do. On that project, I need to put together a significant amount of money to change my capital stack. I am doing a hotel conversion that is designed as a flip. So instead of flipping a house, I'm flipping a 33-unit hotel. I bought it $0 out of pocket, 100% financed both the rehab and the purchase. Granted, I'm putting $100,000 of our money into it. Um, but outside of the $100,000 that I'm bringing in additional, the whole rest of the deal is financed. So $1.8 million of the $1.9 million I need for the deal financed. Pretty similar to a house deal in a lot of areas. Uh, I will be selling it. It looks like I'm expecting to get an offer in the next few months. You know, it's not official yet, but for $2.5 million., which means I'll make $600,000 on one flip. It is easier to flip the multifamily stuff to raise the capital for it. And the yield— there's just not a lot of houses I can flip that I have seen in my market that I can flip for a $600,000 upside. I like doing the larger buildings. If you're going to do multifamily, do it all the way. I am all for doing flips in multifamily to pay for multifamily, but I wouldn't dabble in single family while you're trying to do multifamily. Reason being, one, they're too small, so you have to do too many deals. Two, they are more dependent on appraisal, and they're dependent on what's sold next door to them, as opposed to multifamily, which is sold on— well, market cap rate still determines price. Your ability to outperform and your actual numbers increases the value of your deal since you have more impact on the value-add that you do. I think commercial multifamily clearly wins over single-family if you are trying to free up cash. Uh, would extra passive, uh, be buying out or be buying from a developer then selling before maintenance is needed? Um, that theoretically should be pretty passive. I found there's still problems with new builds all the time. I can think of a couple of Moses Lake where it's like they have more maintenance problems than, uh, than the old stuff I buy. So it depends on a few things. Um, you also, if you're buying from a developer, I've seen people get great prices. Henry Washington just bought a fantastic deal from a developer who's trying to free up cash. Um, but you typically, if you're playing the no to low money down game, you're typically buying something that's been around. You're usually not buying brand new build, though you absolutely can. As a newbie, what are daily activities to do every day that eventually lead to a closed deal? Uh, look at deals and learn how to underwrite. Number one, most important, hands down, especially if you're getting creative. You get what you negotiate, so you know what you're doing. Uh, so learn to underwrite and then meet other owners in the market. If you do only those two things, you, you know how to identify a deal when you see a deal. And you're around people who are doing deals, you will in fact just start buying real estate. I cover that all the time on this channel, but it is the— I would say it's the only thing in real estate that actually is like the secret to real estate, the magic formula. Be around people playing the game and then have an understanding of the rules, and suddenly someone deals you in and you're playing the game. That is the only magic in real estate. Everything else is very, very straightforward and simple. That is the one formula. And Matt says his jail is still in progress. I'm going to have to have Matt. I'm going to have you on the channel and we're going to talk about your jail soon. Actually, we have the podcast. I'm meeting the biggest owners I know. Matt's a bigger owner than me. I've learned a bunch from him. He is exactly the type of person that we need on the podcast. So Matt, we're doing another episode. It's official.

You're volunteered.

I want to hear about the jail. I want to hear about your largest stupid tax. I want to hear about the things that you are the best in the world at. I want an update of what it feels like to be retired. We're bringing, we're bringing Matt on soon. What does your daily schedule look like? You would not believe it if I showed it to you. It is ridiculous. No one should do this. You, I am competitive and I am neurotic and, um, I I apparently like pain. This is not freedom. I just want to make that clear. This is a financial— I'm winning, uh, freedom, 0%. Uh, I go to bed late because I actually do unwind with just time with my wife. I actually very recently, um, my, my previous, uh, most modern game system was a original, like the original Xbox. I bought the newest Xbox. I'm going through the Halo campaign. I did not know that they made more than 3 games. Apparently made a lot more than 3 games. I play that for an hour at night to unwind. Everything else is work. I wake up at usually 8 o'clock, which isn't that bad. Wake up at 8 o'clock. I usually go straight into meetings. I usually have a meeting at 8. So I wake up at like 7:55, roll out of bed, phone meeting, coordinate my teams. I get property management going. I get a few of my other companies that I work on going. I work on multifamily strategy. I do the content, which usually takes me about an hour a day. I prep for any podcasts that I'm going to be recording, which the last 2 days has been 2 hours a day, every day. Once or twice a week, I will drive out to the properties and oversee some of the projects. I travel an average of 4 times a month to speak somewhere around the country. And I also do a boatload of other miscellaneous tasks because people are always calling. I teach multifamily strategy, the actual teaching 3 hours a week. And boy, what else do I do? I do a bunch of other stuff, but those are like the nuts and bolts. Every single day is unique, which is nice. But I am the CEO of property management. I am the CEO of multifamily strategy. I run the podcast, I run the YouTube channel. I'm the head of the companies. And on top of that, I buy a boatload of real estate. So I'm also doing a lot of flying around, signing. I'm buying in Texas and Washington. Washington right now. And yeah, I, I work as much from, uh, the air as I do on the ground. The only time I take off is I make sure I get, uh, 3 games of pickleball in every week, or 3 hours of pickleball I should say. And I get like an hour of screen time 5 days a week. And that has been my schedule for a long time. And yeah, outside of that, I'm working all the time. I eat once a day. That's not recommended. It's just, that's what I have time for. If someone isn't encouraging the creation of value or returns, run. Agree. Absolutely agree. Luke, how do I know if I am overpaying based on a property's project? Does it simply come down to the renovation cost fixing? Yeah. So you're going to do your, you have your actual value and then you have ARV, which is your after repair value, or you also have after stabilization value depending on what the project is. Sometimes it's a management project. Sometimes it's a renovation project, sometimes it's a mix of both. Super conservative numbers. Just assume everything will take 3 times as long as you think and probably will cost 3 times as much. That budget has been almost right on for me on a majority of projects until I got a lot of experience, and now I'm pretty accurate at guessing. But when you're getting started, that is the rule of thumb, and it stays pretty true. 3 times as long, 3 times the cost is about where you're going to come out when you're newer at estimating what projects are going to be. Dye, how much, um, was, uh, how much was the fact Texas was a red state factor in your decision to move your business family there? Uh, huge. Uh, my name is Christian. I am not, uh, secretive that I am a Christian, and not just like a, oh yeah, I go to church once a week. Like, I am a Christian. Jesus is the only way to God, like full-on Christian. Uh, Texas is a little bit more amenable to that than Washington State. However, it has its own problems, but has a bunch of like fluffy cultural Christianity. So different set of problems, but I'll take the one that is a little bit more my pace. Politically, a lot more my pace. They like having business. Um, if you may have noticed, I own businesses. Um, I own rentals. I am allowed to evict people in Texas very inexpensively if they don't pay. I can't do that in Washington. I can remove squatters in Texas, can't do that in Washington. There's a bunch of issues in Washington that I will not have to deal with in Texas. I am 32. The last goal that I have not done yet is I focused on the business before I started a family. I would like to start a family at some point. I would like to be in Texas to do that, not Washington with our ridiculous political climate. Lastly, Texas is warm. Washington is not. I want to be in warm weather. So lots of reasons, but yeah, the red state was a massive factor for me on a business front, on a religious front, on a personal front, um, all of them. Oh yeah, back to the, the Tom Cruise thing. Yeah, he's popping up everywhere though. I mean, he must be crushing it, uh, on the, on the marketing return, on like his return on marketing dollar. Cause he all of a sudden out of nowhere is everywhere. So he must have, he must have hired Grant Cardone's guy. That seems to be what people do. Whoever markets for Grant Cardone, Hermosa uses them, Pace uses them. There's like, it's the same guy who pushes all of these influencers. I'll bet you Tom got on the, on the, on the Cardone bandwagon or similar Tony Robbins project. Cause they all kind of feel the same. Don't know that for a fact. Disclaimer, could just legitimately be doing his own thing. Just my guess is he hired someone who's telling him what to do and he's following the script. 29 people watching, only 1 like. Is there only 1 like on this bad boy? I don't know which platform you're watching on because I do have a lot of platforms to stream to, but if you're on the YouTube channel, everyone hit like. Come on, let's get it going. By the way, if you're having an issue where the chat is in front of your like, you can exit out of the chat, hit like, and jump back into the chat. It doesn't actually kill it if you're watching from your phone. Dylan shows a few more. So, Matt, you may have just, uh, you may just not have refreshed, which would make me happy because I like, I like people being able to just actually see this. I'll hop off the Tom ones. Jump through, jump through. By the way, we'll go to 2 hours today, so like 7 minutes left. So if we have any more questions, I'll try to pick and choose the, uh, the best, but I am getting a little bit, uh, ready to go work on the, uh, work on the projects. I love going through these questions, but 2 hours in is about where I start to hit I hit my reading limit where I'm like, Halo is the best. What's your favorite? Okay, so I am someone who is a completionist. I'm also— I'm fairly OCD, so I had to go through 1 and 2, which I played like all my childhood. I just finished 2, so I just— I'm like, I'm about to start Halo 3, which will be the first time I've done something new in the Halo universe, uh, ever. I don't— I just don't do— I don't game. This is a new thing for me. I was told that it is mentally healthy to not only work, so I am experimenting. So far, having fun. Have not got to Reach yet. I'm, I'm, I'm on episode 1, Halo 3. We will track the progress here on, on Instagram, X, YouTube, Facebook Live. 5 minutes of morning prep. Impressive.

Seriously.

There's a reason I wear a hat, although I haven't got a haircut in like forever. I cut the sides of my own hair and then I just let the top grow and my hairstyle is hat until I have like a major, major podcast or a speech. And then I will, I'll force myself to get a haircut. But yeah, it's a hat. I have 12 pairs of the same black t-shirt and it's super comfy. And yeah, I have the same Same thing, roll into shorts, black t-shirt, toss the hat backwards, get to work. Usually bother to put my contacts in at like noon. I've heard eating once a day is great for you. I've heard mixed reviews on it. The whole like intermittent fasting thing. I don't try to do it. It's just like, that's what I end up having time to do. And I do eat huge meals. I don't seem to get like super overweight. So it's like, it's probably working. Who knows? Who knows? Oh my gosh, I think we're gonna do this right around the 2-hour mark. I think we're gonna also run out of questions, which is awesome. FA, he's on TikTok every day. I assume there's still the Tom guy. This is interesting. I'll talk about marketing for a second because it is interesting. This is something that's come up a bunch. I know I keep plugging it, but I'm really excited about this project, uh, the Multifamily Strategy Podcast, available on Spotify and everywhere else that you would watch these things. There's a link on my Instagram if you're looking for it. I'm looking for, looking for new subs because that is going to be where to go to basically watch, watch like 200 owner meetings in one podcast. That's going to be the place to be. But something that I found is a lot of these people that I keep finding, they're all over Instagram and TikTok, which makes sense because I'm finding them and they want to be on podcast. I don't get TikTok. I hate TikTok. I will occasionally have my assistant post some of my videos from Instagram on TikTok. Apparently that's where all these people are going off in marketing. I don't get it because if I post something like I'm in the field, it gets like 12 views. But you post the like, hey, I'm on a yacht, millions of views on TikTok. And it's just not me. But if anyone knows how to play the TikTok game and can do it without being a spammy guru bot, I am interested in learning how to do that because I— it apparently works to like reach people, and I do want to reach more people. Do you struggle working all day and just enjoying it? How could I enjoy it more? I'm really competitive. I also, and I've shared this on the channel before briefly, Well, maybe one day we'll go more in depth, but I had like this horrible cult experience that I just absolutely got railed with. I mean, it was a horrible, horrible, horrible experience. But something about it, I have a large chip on my shoulder about a few things. And so getting in and competing and that actual like, hey, we're building something, it feels the same to me as playing a competitive board game or playing sports. Um, it's going out and saying, hey, I'm going to put my best out, I'm going to build a team, and I want to play at an A-level. It takes a lot of work on anything— any sport, any business, any project, any instrument— to become truly great. I want to be truly great at this, but it plays to me very much like a board game. So for me, real estate, there's a lot of strategy, there's a lot of different ways to play it. It's mentally stimulating. And it's challenging and it's directly competitive with other people, which I find extremely fun. It's also a collaborative team sport. Like there's, there's so many parallels to sports and board games. It feels like I am always playing my favorite board game every day. That is how it is for me. I understand most people aren't wired that way, which is why I never say you should replicate my business or start as many companies simultaneously as I started. It works for me and who I am. Build the business that you want to build. If at the end of the day you've built the same thing I do and you hated the whole process and you're not having fun, what was the point? So this is fun for me. It stays fun for me. And I have a wife who does it with me. And so I get to like hang out with my spouse every day building the business. It does it for me. If it doesn't do it for you, Don't copy the exact strategy, just build the portfolio that gets you to where you need to go. Dylan, any marketing tips? I have one for you specifically. 18 years old, Dylan's learning the, Dylan's learning the ropes. She's asking the questions, she's doing everything right. Start documenting your journey, and it could just be on YouTube, it could just be on Instagram. Don't worry about getting on all platforms and blowing up like, like all the young kids are worried about doing. It's not about building the biggest brand. Start documenting the story now, because when you make it— and Dylan's definitely going to make it in real estate— when you make it, there will be a full accounting of when you say, hey, I started with no money. People can go back and go, holy crap, he started at 18. I have the video right here. This guy actually is real. And then you're not going to be in someone else's, uh, you know, in someone else's comment section being like, hey, the guy with the yacht and all the cool stuff, do you think he's legit or just an online guy? Like, people will look at your story and you can look back and say, no, I shared the story before I made it. There's nothing sexier than calling your shot and then hitting it. And the great thing is, if you're someone who failed to hit the shot they called, no one will remember. Everyone forgets. It's not interesting. But if you call it at 18 and you hit it at 21, You're like, hey, I'm here, 200, 300 rentals, financial freedom, and you recorded the journey. That is what you need to do marketing at this point in your career is just get good at talking about it and telling your story. You and Cody need to get another Ferrari for TikTok. Yes. That, you know what's funny? Those videos did fantastic on TikTok. To make fun of all the other gurus. And it was very specifically, it was all parody. I rented a red Ferrari Spider and we drove around Bellevue filming content on like, this isn't our core, our car, or you wanna be rich in real estate, buy my course. Like just a bunch of just like obnoxious to be funny. Like we took a day off and rented a Ferrari and then, you know, we did a YouTube video on like, don't buy the Ferrari until you do ActionWatch. It works and it's stupid and there's no value. If you watch the videos, some of them are funny. I can see why they did well on TikTok. There's no value. There's zero value there.

They're just entertainment.

Um, I am open to doing another one though. They're fun advertising. It is, it's fun to bop around in a car for, for 2 hours and film a bunch of stuff. Um, but that's the correct use of a sports car. You don't need to own a Lambo in my opinion. Maybe, maybe you do. Am I into sports? Yes, I am a decent pickleball player, but I play a lot of pickleball. I would like to be better, but I always have a sport. I do a lot of the fringe sports. So I was a— like, I'm a very good racquetball player. I've won a lot of racquetball tournaments. Those skills unfortunately don't translate into pickleball as well as you think that they might, unless you're trying to hit behind the back, which is like you have to be able to do in racquetball. I can hit some crazy angles, but other than that, different sports. I also play a ton of Ultimate Frisbee, of which I'm pretty good at. Yeah, TikTok's algorithm just— so I hate TikTok, but people are making money there. I should post about networking because it's all I've done Dylan, I would post— if, if you're posting, I would post. Sure, like post about networking things, post about what you're learning, post about your goals, post about the things that are happening. Hey, I almost went under contract for this deal, or hey, I'm, I'm here analyzing this deal. Like post about the things that you are actually doing. So if it's going to network events, do a quick post on it. Hey, I'm here. Learned this really interesting. You've shared strategies where like, hey, there's some people in Texas who are apparently just not paying their taxes. I just heard about this. I would— it's interesting, right? So you can share like on a social media post. Has anyone else heard about this? There's this strategy that someone told me about where they're not paying their taxes. This doesn't sound legal. Does anyone know about this? This is wild. And then tell the story. It's 30 seconds. You're experiencing right now, like you heard about it, it's interactive. And so one, document your journey, but then two, like interactivity, I believe is very important. I could certainly be better at it, but on a marketing standpoint, that's something that works. And Seahawks fan, kind of, I don't really care about football. I, I, and thank God, cuz I'm moving to Dallas and they have the most obnoxious fans ever. I will, I, I will not be a Cowboys fan. I can't do it. Um, I tried accepting that I was going to go to Dallas. I was like, I'm going to be a Cowboys fan. Nope, nope, nope, nope. Um, I like Seahawks. Oh, I watch them. I've never been to a live game, but I'll watch a few games every season. I would like for them to win, but that's about the extent of it. Like, I'm— I wouldn't say fan fits the thing, but like, I am a Seahawks supporter, I suppose. That's it through the questions. We're just over the 2-hour mark, which is about where we like to call it. It's still pretty, you know, for the 25 of you that are still here, I appreciate it. Thank you for supporting the channel. We do this every single week, 3 o'clock on Wednesday. I like to do a lot of bonus lives too, but this is the main live. So if you found this helpful or you liked being here, please like, subscribe to the channel, share with a friend, get some more people in here. Um, if you want to do me a favor, I'm opening up the Facebook group. You can join that, but check out the podcast. I really want to grow that. I am essentially taking the owner meeting of the biggest owners in the country and bringing them to you. Some of the speakers that I have had the opportunity to bring on here, it is insane to me that they said yes to being on the channel. You're going to meet some people who own a a ton of stuff. People who have, you know, 7 or 8 million followers on Instagram or the other, you know, the other platform, the people you see everywhere. I've been able to land some absolutely fantastic owner meetings for this podcast. It only gets to grow if people subscribe to it, so I appreciate that. It— I'll add it to the notes here on, on this live. Also on Instagram, it's on my Linktree, it's in my pin stories. Check out the podcast. I'm really excited to grow that. Feedback's appreciated. That is my ask for you. Regardless, I'll continue to deliver these just as we always do. See you all at the Northwest Action Summit, May 3rd and 4th. And until then, I'll see you on the next episode.