Christian Osgood and Cody use board games to explain real-estate investing through three resources: equity, cash flow, and cash. Cody built a 12-plex generating both equity and cash flow, then traded his equity to partners for liquidity in a buyout that netted him millions.
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Hey YouTube, you want to be rich in real estate? Well, there's only one way to do that and 3 resources that matter. If you want to play this game, and it is a game, this is how you do it.
Welcome back to the channel. My name is Cody. This is Christian. And today we're talking about the game of expanding your portfolio. We love real estate and we love expansion. And there are only 3 things that you need to figure out in your game to be rich.
Now, Cody and I started as board game players and card game players before we got into real estate. We both used to play Magic: The Gathering and a ton of other nerdy games. This is why we love real estate, because it plays just like a strategy game. The one that really matters is resource management. The one who manages the resources the best is the one who wins. Now, there's only 3 that matter, and we're going to illustrate this in a second. But you have your equity in your real estate. This is usually going to be the bulk of your net worth growth. This will unlock all sorts of things for you down the road, such as different loan products, and very helpful, important to have a strong equity position in your portfolio. Number 2, you have cash flow. That is the actual monthly income. This is your lifeblood and what keeps your business alive. You cannot go without cash flow. And number 3, you have actual cash on hand. This helps you weather emergencies make large purchases. When you have all three in some level of balance with each other, that is when you're considered rich. Now, Cody, when we started, what pieces did we have, and how do these pieces move as you go up and down in the different resource pools?
Well, I had nothing in the beginning, because when you're buying real estate, liquidity, and cash, $3,000 isn't going to cut it. I don't care what you're buying, it's not enough.
Fact.
However, I went into a lot of debt. I bought an asset and it had a little bit of cash flow. So now instead of having none of those three sectors, I had a little bit of cash flow coming in. And 9 months later I bought another 12-plex and that one had day one equity and cash flow. So now I had two of the things. Fast forward about 4 years and I'm finally starting to build up that third section, which is liquidity, actually having cash. That one, if you don't have a high paying job, or you don't sell your real estate because we don't like to sell. If you just keep buy and hold as your main business model, cash comes last.
So as you have these pieces and I'm going to reiterate them, so you have equity in your portfolio, you have cash flow and you have cash. Any of these resources can be traded for each other. So I have an illustration here for us. We have your 3 resource pools, Settlers of Catan, if you guys have ever played. Play it.
Yep. More.
Exactly, play it more. If you haven't played, play it once. Classic resource management game. You have 4 resources in that. I only grabbed 3 of them because that would not make sense for this illustration if we did anything else.
There's 5 resources. Are there?
Yeah, you've got ore. Oh yeah, there's ore. Yeah, you have all sorts of resources.
Real estate is simpler than Catan.
Facts. So, as you're playing this, here's 3 resources that I chose to grab. We can trade them for each other.
I have all the wheat. If he has all the wheat, this is my equity. I've got a bunch of equity, but I don't have any cash flow because I bought in Seattle. That was a mistake for a lot of people.
Yep. Now I'm sitting very heavy on cash flow and on cash. Now if Cody has a capital problem right now, he has a whole bunch of equity. What would he need to do to solve that problem? What resource do you need?
I need instant cash. And so what I'd probably opt to do is trade 2 pieces of equity for 1 metric of cash. And now I can pay my bills.
Now that's something to note. When you need something, you may need to trade more of one thing to get another one. Just like in Monopoly, just like in Catan, when you are making your trades and you are moving around resources, when you need something, you may trade something that you're heavy on at a discount to get what you need. When you're getting started, that's often what you're doing with the other party. They may be trying to offload a property. They may have the cash flow and the equity, but they just want cash. If you have the ability to find cash, even if it's not your own cash, you might have to trade for the cash, right? But if you can line up the pieces, you build, you build that equity, you build that cash flow. If you find yourself low on cash, you may trade some of those for more cash, which could result in selling a property to someone or selling out equity in an LLC, which is part of how our partnership started. You had a situation where you were dissolving a partnership and you needed cash. I didn't have a ton of cash, but me and just a few other individuals actually bought into your existing portfolio, buying your partner out essentially. Yeah, but we took that equity position that you had built up, got you liquidity, and that's how we started building a business together as we got on the same side and we aligned goals. And you have to be careful when you do this on who you work with. But Cody traded his hard-earned equity for the cash he needed to reposition himself. And then you start again and you keep rolling these until you have some balance of all 3 resources.
And you can trade any one of them. You can trade cash flow up by borrowing against your equity. So you have a little bit of equity because you're taking that out as a loan, you get cash and your cash flow goes down. There's lots of ways to play this game, but if you can manage these 3 pieces,, you will absolutely win in the real estate game.
If you want to keep it this simple, and it really is about this simple, distill it to your resource pools. If you're like, I'm out of cash, what do I have? Do I have cash flow? Do I have equity? When you start with nothing, you're going to have to build relationships and trade your way up, and another player may need to tag you in. And that's just how you get started. It's why that first property is so hard to find, because when you start with nothing, I did it, he did it, almost everyone does it. Most people don't have that rich uncle who, or inherit the big portfolio. In general, you start with nothing, you start the game, you get a resource. As you keep playing, you get more resources, which unlocks more combinations, which builds a more powerful board game. It does take some time to do this. Keep those trades, keep those balances in order, but you're trying to keep all 3 in balance. When you're missing one, Calm down. Go, okay, there's only 3 resource pools. How am I going to do this? Can I take on additional debt, which lowers my cash flow, to raise my cash? Or additional debt to raise my equity in real estate? Because you can buy real estate with that. All pools can buy all pools. You have to decide what pieces you need and what you have that you're willing to trade to get what you want.
Keep it just that simple. Don't add steps and master this. If you need to rewatch it, rewatch it, because this game is simpler than Catan. If you wanna play real estate, it is simpler than most board games that you can find. It is not that difficult. It just takes a couple steps. You can make this happen.
If you want the rule book for the entire game, you can go to multifamilystrategy.com and check out our course there. Until next time, like and subscribe, and we'll see you guys on our next video.
