How I Bought This Apartment Building With $0 Out of Pocket

Hello and welcome to my office here in Abilene, Texas. My name is Christian Osgood, host of Multifamily Strategy. I own over 650 units in buildings that look like this. Beautiful properties, beautiful areas. You're in my roughly 5,000 square foot office that came with this building with day one cash flow. Today's video is going to go over how to get creative. And it's not just how to get seller financing or seller financing is the key. In fact, it's not just one strategy. It's actually much simpler than people think., but everyone goes about it wrong. The common thing that I hear from a ton of investors, how do you get seller financing? How do we negotiate? How do I ask for it? How do you convince the owner to give you seller financing? You're already going about it wrong. I'll show you exactly how to do it and why seller financing specifically is not what you're looking for. As an addition, also walk you around the property so you can see what you can buy if your budget is $0, because this is what I bought. With $0 in my pocket. So follow me. First of all, it's the negotiation. You're not negotiating or asking for seller financing. You would never do that. If you ask for seller financing, especially on that intro call, what you're basically doing is putting a sticker on your head that says, hello, I'm new to real estate and I also don't have any money. If you want to convince someone that you are a ready, able, and willing buyer, you're very unlikely to get them to believe that if you open with, hey, let's talk about financing. For what deal? You don't know any of the facts. How could you possibly discuss financing. You need to ask everything in order. So your mission is to negotiate every deal the exact same. Where does it work conventionally? I want to get the same financing, 25% down at today's interest rates. Where does the deal work? I want to call, talk to brokers, talk to owners, negotiate the deal based on par for the course so every single conversation looks exactly the same. Now, if you're like me, I like that boringness because I like my money to be boring. I want to be consistent. Now, when you benchmark there, what you're doing instead of giving the seller your problems is you're now saying, hey, this is where the bank's looking at the deal. Does this work for you? If it's a truly good deal, you can close it conventionally financed. I'll actually tell you how to do that on this video as well. However, start where the bank would want to lend on the property. That's where the deal works. When you make this offer, they may say no. They may want a different price. They may want different terms. They may have a different idea totally. But the difference is I'm not starting with my problems or how much money I have. I'm starting by where does the deal make sense conventionally? And I'm getting the seller to give me their pieces. The marriage of what works for me and what works for them is where we have a deal. Now, in my case, I know what I want. You should write this down if you don't already know this. Long-term cash flowing fixed rate debt. I wanna buy a property that pays me day one, that I can hold forever, where the rate is fixed so that my expenses don't change partway through my deal, which is how a lot of people got wiped out here in this last market cycle. Long-term cash flowing fixed rate debt. That is all it is. If I get that and identify what they're after, now I can add a little bit of pizzazz to give them what they want. Now, this property behind me was actually— 70% of it was owned by the bank. The bank was actually the partner on this deal, which isn't super common, but it happens from time to time. They were willing to lend on custom terms, 7% interest only, to transfer the property to us, let us finish the lease-up, which we're now 100% occupied, so that we could refinance into an even better debt product. Now we're almost done with that loan process. Our interest rate looks like it's going to be about 5.1%. That is long-term debt. But we were able to close this seller-financed-ish. It's bank financed and seller financed at the same time, which is a super interesting debt structure. The point is, I didn't negotiate this saying like, hey, can we get creative on the financing and then start talking about the deal? In fact, the price on this was unlisted. So you go to a website like CREXi or LoopNet.com. The great thing about this model is that every deal, we don't care about the price. We're going to figure out where it works based on the deal's own merits. So you'll see a lot of things that say unlisted. They may be deals, they may not be deals. We don't know. I don't care what the price is. You may say, hey, this looks really expensive for what it is. All you're doing when you're looking for deals now, you're looking at the picture and go, hey, does this look like what I want to buy? Does the broker who represents this likely list other properties that look like this from time to time? If this is what I want to buy and this broker is the one who has the deals, we want the relationship. We want to start making offers. They'll start sending you stuff that looks closer to what you want, but If you're offering conventionally and you're offering consistently, and I mean like one time a week on a deal that could get accepted, what ends up happening is 3, 4, or 5 times a year, uh, you actually get a yes where you figure out what they want. In this case, they want to trade the property as quickly as possible with as little friction as possible. They're willing to facilitate the financing. We got this very, very low down. The refinance, which is coming in about 6 months after, is actually a very significant cash-out refinance. So technically we waited 6 months to get paid to buy this deal and we bought it $0 out of pocket. Now, your models that you can use. Yes, seller financing is often a tool. In fact, it's about 70% of my deals have it. We've also had deals where you get creative on the equity. We have an amazing deal. It has the cash flow. The bank doesn't allow second position debt, so I can't use seller financing. Lenders love it. Now they just want me to build a team that has the money. If I don't have the money, I just have to build a team that does. What you do is you package the deal, the opportunity that makes money. We have the debt product, which we have a bank who's conditionally on board as long as we build the right team. And then I find the people who have the money, the experience, the credit score, whatever the bank tells me I need to close the deal. You now go out and find that. Here's the difference. Instead of looking for money first, I'm looking for people who want to make money on a deal that's already making money day one. I've already packaged it. I've already lined up a debt product. I'm just building a team of people who now also want to make money alongside us. That is massively different. Now, strategies that I've used for you note takers: straight up seller financing, first position note. The seller basically just plays the bank. They want a certain price, we meet them on terms, we close the deal, done deal. As long as I get that long-term cash flowing fixed rate debt, I'm good to go. Model number 2: seller does a little bit of seller financing, let's say 30% of the deal. The bank comes in and says, yeah, we're comfortable doing 60%. Well, now we're doing a low down deal. We're 10% down. How easy is it now to go to investors and say, hey, we got a custom debt product, I have a deal, it makes money day one. We have an awesome business plan for how it's going to make more money as we continue to own it and manage it. And all I need is 10% of the capital. Once we get that, we're closed. As an investor, that's a much easier pitch than, hey, if I find a great deal, would you invest in it? You can't raise the capital first, but you can get as creative as you want. Now, the structure for the private capital, if the deal cash flows a ton day one, we'll share a bunch of the cash flow and I'll buy them out later at a refinance for exactly what they put in. We'll structure it very similarly to the structure of a loan. If the deal doesn't have very strong cash flow, still has cash flow, but if it's not very strong cash flow, how do we account for that? Well, we say, hey, we have to find a project that has enough upside where we can pay the investor out of a future refinance and multiply their money. So they either get cash flow multiple or a blend of the two. If you're looking for the magic slider for the both ends of where you put this. If you give someone 8 to 10% of cash flow, they're usually really happy to park their money there. If it's on a stable and consistent backed by real estate, awesome investment. If you double their money in less than 5 years, they're also pretty happy. If you have decent cash flow and decent upside, you can do like 5% cash flow or you blend them. You can say, hey, this deal works really well if I distribute 5% cash flow to you and then give you a 1.5x on your money in year 4. But that's the sliding scale. Somewhere between those two, your deal will tell you what the money needs to be structured as. If you go at it this way, you can call every opportunity with the exact same phone call, negotiate it the exact same way, then start adding in creativity. Now you can also just do conventionally bank finance and just customize the partners however you want. You can blend any type of deal and debt and equity. There's so many options. It comes down to those three things. Usually have a first position note. Sometimes a second position note. You find the additional capital after you already know how the money's going to be made. You find other people who also want to make money who do not yet have a deal, of which there are many, and you close it out. End result, you can end up with a property like this. This is a very cool piece of real estate that I did not have to pay to own. I did the work to put together the transaction. I negotiated, I asked for what we needed, and we found a path to to where every party wins? That is creative finance. It's not asking for seller finance. It's not following one guru strategy. It's not a one-size-fits-all. It's how do I get everything I want and everything the seller needs, and how do we make both statements true at the same time? If you answer that question, you will get a yes every single time on your deals, and creative finance will be unlocked. Hope this helped. Hope you enjoyed the property tour while I talked here. Hope you took good notes. If you apply this deal debt equity and do it in the right order, you will find there's unlimited opportunities in real estate. Thanks for watching. I'll see you on the next episode.