Cody and Christian Osgood walk through their 10-unit Washington building: $900,000 purchase with $180,000 down, seller-financed at 5% interest-only. It generates $8,500 gross rent monthly, $2,500 in expenses, leaving $3,000 net cash flow. They're keeping rents below market to minimize turnover while the property stabilizes.
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If you have a nicely renovated building, very simple, clean, nice place to live, and it's a little bit under market rent, you're not going to have many people who move. Reason being, they're going to have to pay more to live somewhere else that may not be quite as nice.
Welcome back to the channel. My name is Cody. This is Christian. We're talking about our 10-unit purchase, specifically the numbers on how profitable a 10-unit can be. And we talk about cash flow, we talk about appreciation, but let's talk about the actual deal on this one. We bought this property for $900,000 and it was 20% down.
Down.
Now, how do we come with that 20%?
We actually had our other real estate buy the real estate. This is a really fun thing you get to do a little bit further in your journey. We had at the time a 12-plex, it was one of Cody's first ever purchases. Along the way, I bought in and the two of us along with one other partner pulled money out of that one after repairing the building and use that to buy the next building seller financed.
So we picked that up, it was $180,000 down. What we negotiated on the seller finance note was 5% interest-only debt for 15 years, which is a very long-term fixed-rate mortgage. So our total payment on that was $3,000 a month. A $3,000 a month payment on a 10-plex works in Washington State. Mm-hmm. Our average rent right now, we just did a couple rent bumps because we did some repairs to that building.
Small ones, yeah.
Yeah, so our average rent's about $850 a month, meaning that our income is $8,500 a month and our payment is $3,000. But that doesn't mean that we're cash flowing $5,500 a month.
Certainly doesn't. Your mortgage is usually your largest expense. It does not mean it's your only expense. Now So this one's hooked up to sewer, which means our actual sewer fees are a little bit higher than something that would be on septic. Uh, we have things like basic maintenance and repair. This actual building is pretty nice. The units are big. There's not a lot of big repair items, but whenever someone moves out, there is some repair to do. We've been fixing the laundry room, repainted the building. So while it's not massive expenses, there are some ongoing maintenance expenses, especially on an older building. This one was built 1954 and is a fantastic asset. That being said, it's been around a while. There are some expenses that you're gonna have there just maintaining Luckily, it does have PEX plumbing, it's got a newer roof, it's got some newer windows.
It is doing pretty well as far as a 1954 asset goes.
That it is.
Our ongoing average cost of ownership is about $2,500 a month. That includes the maintenance averaged out, that includes the utilities, the management, the taxes, the insurance. We add all that up, $2,500 plus $3,000 a month, our total cost on the asset is $5,500 a month. We're making about $8,500 a month, meaning we have a net cash flow when it's fully rented out of $3,000 per month, which is pretty phenomenal because we put $100,000 $180,000 down, but it was actually free to us because that came from another one of our assets.
Now what gets really fun is you start to get more chips on the board is you actually can adjust your pieces. Now we have an LLC that went from 12 units to 22 units. We have a 10-plex cash flowing $3,000. What we did at that time that adds stability to the other one, we actually took a few of the tenants, moved them to other properties. We had a couple of people who were a non-pay problem, a couple of little things that were tweaking over there and some relatively heavy renovation that we wanted to do to some of the units. We did all of that after built the new cash flow over here. So that $3,000 a month here allowed us to remove income from another building to improve it further. And now we're in the phase where we're almost fully leased up in that building. So now we're going to have two assets in the same LLC performing absolutely optimally.
And we were able to stack some cash flows from all of that real estate and we ended up buying one more duplex out of that. But that's not the topic for today's video. You get the real estate to buy the real estate. This real estate certainly did that because with $180,000 down, it cash flows $36,000 a year and we are still about $200,000 $1,200 under market rent per unit, which is awesome.
We have a ways to go. We don't typically bring these all the way to market rent. That's something that's worth adding. If you stay a little bit under market rent and you provide a little bit above market quality for that type of asset— again, 1954 build— if you have a nicely renovated building, very simple, clean, nice place to live, and it's a little bit under market rent, you're not going to have many people who move. Reason being, they're going to have to pay more to live somewhere else that may not be quite as nice. Why would they do that?
And they're going to pay to move, to pay more every month, to pay a higher deposit to live somewhere that's Not as nice.
Yeah, one of your biggest expenses in real estate, if you want to kill the cash flow on a 10-plex, is have a lot of vacancy or consistent turnover. So you want to get stability. But $200 in rental upside on relatively low-cost units is a huge margin where we have more room for rent bumps, which means the asset will continue to make more and more money year over year until we get a little bit closer to market rent.
Now, completely stabilized right now, that asset is worth a little over $1.1 million. Which is phenomenal. We're about $110,000 a door because we bought it for $90,000 a door. We've made $20,000 across 10 units, so $200,000 on our $180,000 down, and we doubled our money.
Worth mentioning too, we do this in Washington State, which is a notorious hard place to do multifamily or be a landlord in general. It's a difficult state to do business in. You can do this absolutely anywhere in the country and absolutely any market. Figure out where you want to own and you can find a 10-plex there. Now, will the numbers look exactly the same? Absolutely not. If you buy in Gary, Indiana, in the Midwest, your cash flow is going to be way higher and your appreciation is likely going to be lower. Your rental upside, there's not as much room usually because the rents are just really, really low over there. You need to look at the assets in your market. But this is what we look at at a 10-plex. And this is a perfect example of a deal that I just absolutely love. We bought it a little bit under market price, fantastic long-term cash flowing debt. I love the asset. I would do a deal like this every day of the week.
And is it a risk because we did interest only for 15 years? We're not paying down that principal.
Oh no, interest only. What do we do? Where does the money go? The fun thing with an amortized debt schedule is that your required to pay down the loan over time. If you're paid interest only, there's nothing keeping you from paying down your loan. What it gives us is flexibility. Again, this was an LLC, as we mentioned, that has multiple assets. We can choose where the money goes in the portfolio. It can pay down our debts, it can upgrade that building, it can upgrade other buildings in the portfolio. There's a lot of flexibility. You need to be responsible with it, but it's a cash management game. Paying down the debt— some people get really worried about interest only. It just means that you have a lower monthly payment, and that principal that you're saving, you get to choose whether it increases the value of your building or pays down the of your debt. I think that's it. If you found this helpful, please click the like and subscribe button. Share this with a friend because we do this 3 times a week and we go live every Wednesday at 3 PM Pacific. Pacific. If you have questions, you can post them in the chat there. We will answer them and we go until the questions are all answered. Until then, see you next week. Now, if there's one YouTube channel that you watch to learn creative finance, multifamily investing, I'm going to recommend Cody and Christian Osgood Multifamily Strategy.
