Christian Osgood explains that each financing deal should get its own LLC to isolate risk, not bundle multiple unrelated properties together. He covers land-banking with cash-flowing multifamily, preparing for owner meetings, and seller-financed balloon structures with creative solutions like bringing in partners who need at least 20% equity.
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Hey YouTube, welcome back. It's just me this week. Cody is on a road trip taking a much-needed vacation, but I am here for Whiteboard Wednesday. I know it's a Thursday. It's been a chaotic schedule. Start with our first question. This is from Jeet Bassani. Quick question, how many properties should I put under an LLC? Well, it completely depends on the transaction. What Cody and I typically do is designate by financing. For example, when we buy 3 side-by-side duplexes, it's one transaction under one owner contract, multiple properties. So what we'll do is we'll assign all those to one LLC, the purchasing entity, and I will leave that alone so it doesn't affect any other property. On our 38-unit, it's 4 buildings one LLC from another LLC, 7 total parcels, but that one transaction falls under the LLC. Same holds true for every other deal that we've done. One transaction, I line up the LLC to the financing. If something goes wrong on that one deal, something falls apart, it doesn't affect every other deal that we've done. Do it on a per-deal basis and you're going to help protect yourself from one company interfering with another one. If you're going out and just trying to acquire a bunch of stuff within one LLC for multiple transactions, just know that you are tying buildings together. If something goes sideways, you increase risk. If you're buying a lot of small stuff, it may be okay to put a series of duplexes in one LLC before starting another one. But that's how Cody and I do it. Uh, next question. Have you guys ever locked down development opportunities through seller financing? How do you structure the deal? So I love picking up land parcels as part of our transactions. That's a great question. We've actually never been asked that on this channel. We pick up land with multifamily attached. We only buy deals that cash flow, which means I'm not buying things just because of its development potential. The deal worked by itself. That being said, on our 38, I have close to an acre of land attached that is completely developable and sewer runs right underneath it. That was strategic. We can cash flow the land. We also picked up a deal that cash flows and does just fine by itself in the Seattle area. It's a 7-plex. It's on half an acre and there's awesome development going on all around it. At some point,. It could be a wonderful development site. We're just not there yet today. I've done this on a few other deals, but when looking for development potential, I'm buying a lot of properties in the same area. And if possible, if the owner owns any adjacent land, I try to wrap that into the same deal and make sure that it still cash flows so I can essentially land bank without losing money holding the land. Our next question: I was wondering if you had questions prepared for your owner meetings. This is from, uh, Tezu Harrison. I was wondering if you had questions prepared for the owner meetings, and could you please post a role play? First of all, we absolutely can, and we will have that incoming in the next few weeks. There's very few questions that I'll prepare when I'm meeting I am focused on learning the pieces that make them them. I'm looking for what we relate on, what their goals are, and the significance behind those goals. If you follow this channel, we call that the circle drill. We map it for ourselves so we can communicate it efficiently. I wanna spend at least 80% of the, that meeting talking about them, where they're headed, and why they're headed there. No conversation looks the same. You can prepare a few questions, basic things like, how did you get started? Or what types of financing did you use? Why did you get started in real estate? What was the end goal? And how do you reach that goal? Like, those are questions that you should come prepared with. But if you over-script this, it's going to sound robotic and it's going to come off very salesy. It's just like any other relationship that you're trying to build. It needs to be organic. You need to talk and connect with them on a human level. Know yourself, know how to tell your story, and then invest your time in the meeting learning about them and their story. If you do that, you'll do just fine. One rule that we know to be true: owners of real estate know other owners of real estate. As you start to get connected with people in the market, you're going to reach your goals because you're going to get connected with the other players. Once you know everyone in a given market, transactions are just an organic byproduct. All right, this from Carson Rife. I was wondering if there's any way for someone to refinance a seller finance deal to get out, to get the seller out with no credit or past deals. Would I need to have someone else's money in the deal? And use their credit and experience. Okay, okay, sorry, I had to think through that for a second. So typically seller finance deals have a balloon. Now we have balloons that are full 30-year amortized loans, but that's not normal. Typically you're gonna have a 5 to 10-year balloon. Your options at that point are to sell or refinance. So what you want to do is you start with your intro analysis. Does the deal make sense day one? And at the balloon, that is your exit. Doesn't mean you're selling the property. You're either going to sell or refinance. Typically, that is with a bank. So what you want to do is make sure that that property is in a place to be refinanced at the end of that balloon. Say it's a 5-year balloon, you need to have all your ducks in a row. And if you're making the assumption, hey, they're going to want 30% down, You need to make sure that you have 30% equity in that building if you don't want to inject new capital. That means you either need to have appreciation, you force it with higher rents, market conditions need to be right, the loan paydown has gotten you to a point where you know you have the equity. You want to use very conservative math, but you want to make sure you can meet that exit. If you know for a fact at the end of that balloon in 5 years, for whatever reason, you are personally still not going to be bankable, there's still room to be creative. One, you can go to the seller and ask if they want to extend the note. That is an option, and that is something that we've talked about with multiple owners. There's nothing about a balloon that says there's nothing that can be negotiated. You can extend or renegotiate terms. In addition, you can bring in private capital if you have someone else who wants to lend you the money or partner with you. Figure out the— start with the deal. Deal, debt, and equity. How much are you raising as debt and how much would you sell to a partner? Lastly, if you need to bring on someone else to qualify for bank debt, typically they're going to need to own 20% of the LLC that holds the property. So you're going to have to give at least 20% of the equity to get them on board and they can join you on the bank application. That's something that we've done before as well. If you are not in a position to qualify, bring on other people who are. So in answer to your question, all the way around, yes, you have multiple exits. Just have a clear plan before you close on that property. Our last question. This is from Rob Lee. Why does Christian always look like he just got the first whiff of a fart? Well, the thumbnails, sometimes we post these and I realized that I pretty much always have my mouth open and it likes to choose photos of me mid-sentence. It's also allergy season, so I'm a little bit nasally. Great question. I don't know how much value that has for everyone, but if you've ever looked at this and wondered why my face looks like I just smelled a fart, that's why. Um, hopefully we get some more relevant questions next week, but I want to answer everything that comes across. There's the 5 questions that I read first, and so that's what I'm answering here. If you want to ask some questions for next week, if you have any ideas of, hey, does this work for a deal structure, questions on partnership, creative finance, ask them here. We will answer everything that comes across within reason. Like, follow, subscribe, and I will talk to you next week with Cody.
