In this Whiteboard Wednesday episode, Christian Osgood and Cody answer viewer questions about acquiring rental properties without cash. They explain how Cody funded his first two deals by using seller financing for 90% of the purchase price and a private investor for the remaining 10%, structuring the latter as a second mortgage lien on the property. They discuss why lenders may accept such arrangements, emphasizing the importance of presenting a clear plan for rent increases and maintenance. The duo then covers how to structure private second loans, recommending the use of Washington State’s Form 22‑C as a template but stressing that all documents must be reviewed by a qualified real‑estate attorney to avoid costly mistakes. They note typical legal costs (around $1,000 for full‑cycle services) and warn against skimping on legal fees. When asked about property age, they explain that age itself isn’t a primary criterion; instead, investors should assess the condition of systems (plumbing, electrical) and budget for necessary capital expenditures, treating older buildings as opportunities for value‑add renovations. Finally, they provide contact information, directing viewers to their Instagram handles and Facebook page for further questions and support.
Chapters
Hello YouTube, we're back. It's Whiteboard Wednesday, Episode 14. This is going to be a stellar episode. My favorite question here. We're going to go over how you collateralize your first loans when you have no money and no real estate. We're going to go over Cody's first 2 deals. Before we get started, just want to invite you right now, like, subscribe. If you have a question related to real estate, put it in the comments below. We're going to get to it next week.
Question number 1, which is a little bit of a goofy question, but we're starting out. A whole bunch of people asked us, where can you get your Cody shirt? If you want to do Cody things, I like doing Cody things, and I am Cody. So if you want this shirt, we're gonna drop a link, but we're gonna move on to the real estate.
Yeah, we get the question all the time. If you want to have the shirt, it's on Amazon. We don't own them, just—
it's not ours, but yeah, buy it online, join the squad.
Send us a picture of you wearing the shirt, that would make my day. Moving on to real questions. Cody, how did you collateralize the down payment you gathered for your first 2 properties?
So I collateralized my down payment as a second mortgage. In Washington State, it's a lien theory state, and the way that that works is the order you get your mortgages is the order that they get paid off in case of a foreclosure. It goes to sale, you gotta pay back the investors and the seller. And so in that case, I had a seller who financed 90% of my purchase, and I had an investor fund the other 10%. And the 10% was structured as a lien against the property, meaning that if I defaulted, they would take over the property. In essence, I would just sign a deed in lieu and give them ownership to the LLC, and they would run the day-to-day of the property at that point based on the price I bought it at in 2019. Now the beauty of my first deal, it was long-term seller finance debt. The property cash flowed above what I was paying the investor, paying the seller finance note, paying all the bills. And so if they took over the property from me, they would just get more cash flow in the future. And that was the incentive for that loan to fund. And I collateralized it with the actual asset.
And in addition to that, you may be wondering, okay, well, Why would they do that if the only collateral is getting the property they wanted to get rid of? It can help if you submit some sort of plan of this is how I plan to increase rents a little bit, this is some of the maintenance I'm gonna do to the property. If they understand who you are and what your goal is with that property, it can help illustrate, hey, in the event that I fail, you are taking back a better property than you sold me. Moving on to the next question.
Yeah, next question is in regards to structuring your private second loans. Okay, not just the collateralization, but how are you structuring it? Are you using state realtor forms, or is there a good website with templates?
Ah, so what you want to do for this is, if you're doing legal and you're learning it for the first time, find an excellent real estate lawyer. So I will not give you legal advice here. Now, in Washington State, you can put the basics on Form 22-C. It's an MLS form, but your actual notes and the, the structure that is It needs legal review. You want legal counsel. And at the end of the day, if you mess something up, you want to be able to go back to a legal professional and say, you drafted it, my clients had their lawyer review it, where do we go off? You want to create safeguards here. One of the things that can really delay you or just completely derail your investing is doing the legal wrong. We use a lawyer for everything we do. Even when we have a template that we're working off of, it is still submitted for legal review.
Yep. And if you're drafting up forms, if you're an agent and you're filling out the 22C in Washington State for seller financing, when that goes to escrow, they're still going to have an attorney draft up the actual documents, the promissory note and/or deed of trust. It's not like you're drafting that up as a real estate agent. You're drafting up a template for them to use for the price and the terms.
It might cost you $1,000 to use a lawyer full cycle, maybe a couple hundred bucks depending on where you're at.
It will cost you a heck of a lot more if you do it wrong though. So make sure you're actually going to an attorney. Spend the money. If you're skimping out over $1,000 to make sure your legal is correct when you're buying a piece of real estate, you may not want to buy a piece of real estate.
Don't save on $1,000 when you're buying a million-dollar property. It doesn't make sense.
All righty, next question.
All right, from Elvo Zelka: Do you guys consider the age of the property? I personally avoid anything over 30 years old.
Well, our buying criteria doesn't consider age. Our buying criteria is how do we buy it and how do we never lose it. Now that said, with age coming into the factor, if it's 100 years old, you probably should budget for some more maintenance items unless a ton of CapEx has been done. If all the plumbing's new, all the electrical's new, well great, you basically got a new building that's just pretty old. It's been around longer than we have, but it is newer than some of the new builds down the street. So you need to look at what's actually been done. You can do that through a property inspection, but the actual age is not a big factor for us. It is irrelevant for us. We just need to factor for it in the math.
And we've made a majority of our money— I mean, the market that we're in has a lot of 1950s inventory. I mean, that's a lot of what we have. You factor for it, but the nice thing is if you have things like old plumbing and old electric, and you've budgeted for repairing those, well, when you replace them, there's no old buildings. Yeah, now I'll have 2022 plumbing and 2022 electric. Now it's just the new building. So it depends on what it is that you want to do, and you certainly don't have to buy old buildings, but we absolutely don't discount those, and you can make a lot of money revitalizing old buildings.
And our last question for the day: where can you be reached, and do you have a Facebook page?
Well, we do have a Facebook page that's open to anyone who's in our courses, but you can reach out to us directly on Instagram. It's probably the easiest way to reach me, @ChristianOsgood. You can also reach out to Cody directly, CodyD2020.
And if you want to get adventurous and you want to just give us a phone call, How to Find Any Property Owner Ever— we did post both of our phone numbers in there. If you find it, just make sure you're watching all the way through because we did post our numbers there. We showed you exactly how to find it and how you can do that with anybody else. Check that out, give us a call. We're taking calls any time of day, as long as you're not calling us at midnight. I will decline you, but give us a call during the day and we're happy to chat anytime.
Yeah, link to that video below. Like and subscribe if you haven't already. We will see you next week.
And play with a Cody shirt.
Yes, show us your Cody shirts and post your questions below for next week's Whiteboard Wednesday.
