How to Find Seller Financed Deals - Creative Finance Live

We are live according to, uh, YouTube Live. So if we screwed this up, this may not be working, but if it's working the way I think it is, we're going. So welcome everyone to our Whiteboard Wednesday Live episode 4. I got Cody here. We just had a friend, Beth Johnson, from Family Lending— my goodness, a lot of Fs— uh, here recording her BiggerPockets episode. So she just left the studio, so we started 15 minutes late today, and we are ready to roll with a new set of questions. Feel free to post in the chat below and we will answer as they come.

And this is our first time recording not on our phone, so we're gonna do our best.

So keeping an eye on the chat, it looks like it is live and we are going. So I'll open with the first question here. Uh, this is from Lucas. How do you organize, uh, your follow-ups? Are there any systems that you guys are using, uh, to follow up with owners, investors, etc.?

No, we keep it a lot more personal than that. No is a full sentence, and that is the way to put that. We're not systematizing our relationships at all. When people come to mind, we reach out, and it is just that simple. I'm not logging it in some Follow Up Boss, or, you know, a lot of real estate agents use stuff like that and CRM. So, oh, I got to reach out to this person. We don't do that. When we start learning about people's stories, when you start learning about people's stories, you're going to just go do things in your life that remind you of them, and it's just going to be an opportunity. Hey, just wanted to follow up with you, and, you know, I, I did what you said and it worked. Amazing. Worked for you, worked for me. Well, there's just going to be pieces like that that pop up in your life after you start building these relationships. If it's transactional, then yeah, you probably are going to need some system, but we don't systematize our relationships.

And we're very isolated. Like, we choose the markets that we're going to be in very specifically, and Cody and I are always talking about this. So our plan is top of mind. All of the relationships we have, because they're relationships, they're top of mind. Uh, the one tool that we do use a ton is just our Google Calendar. Partners, we have a shared calendar, uh, so we remember events. But outside of that, um, it is just so important to us. It's the one thing we really don't have to systematize because we're always working on it. Uh, same, uh, same person— this is from Lucas— uh, he had a second question. Um, do you guys have a team, and what does that look like for you?

Well, you're looking at one of the teams right now. We have teams for every organization that we've got right now. We've got our real estate company, which is Christian and I mainly. We are the, the main operators. There's a couple people that invest into deals, but we are the day-to-day operators. Then we've got property management, and property management, we've started adding more people to that team. We've got a young lady, Hannah Caldwell, who runs property management. She is the best, the best. She is amazing at what she does. And at the end of the day, you go out and buy real estate, well you have to be able to manage it. And she is absolutely the best person to be in that role. And she is a great leader and a great team member. So she's on that team. And we just hired someone else, a new buddy of mine named Brendan, who's helping out with coordination of contractors, of maintenance requests. So we're starting to offload some of the responsibilities from Hannah, and that makes it easier for her to operate at a higher level. And we're starting to build out the team because in the beginning it was literally just me. And then I met Christian a little over a year ago, and we partnered about 10 and a half months ago. And that is what this has evolved into. And then consulting is just Christian and myself.

Yep, we try to keep that pretty simple. Um, I'm gonna ask you this question because it's funny, um, but we try to keep it extremely, extremely simple. And that's the, uh, that is the main rule that we follow. Cody, I got a question for you. This one's a little bit funnier, um, however Um, we had, um, Price and Pride. Cody, are you an only child?

No, I have a, I have a younger sister and two younger stepbrothers, one of which is actually named Cody.

Oh, there we go. Uh, let's see here, we have a question here from Mason.

What metrics do you look at in Moses Lake that made you want to invest there?

Oh, I love this question. So In multifamily, and this is why we invest in multifamily, because it's so stable. Everyone needs a roof over their head. If people are moving into the market that you want to invest in, that is the number one thing. I would say 95%. There's other metrics you can look at, what type of jobs are there, what's the average income. They're good to know, know your market. But ultimately, if the graph looks like this, going up over time for population growth, very likely a market you want to invest in. If you want to have a website recommendation for that, World Population Review, you can type in any city in the US and it will show you over time what does their growth look like. That is 1000% the main thing that we look at.

I also look at an affordability scale. So in Seattle, in most places, right, I was born and raised on this side of the mountains, the Seattle side, just south of Tacoma. Most property managers want to see a 3x rent-to-income ratio. So if your rent's $2,000, you need to make $6,000 a month. Well, looking over in Moses Lake, the average rent when I started buying there, you know, $700, $800, and the average household income was $5,500. I was like, well, that's a lot more than 3x. So it was a lot more affordable over there for tenants, which means they're likely more inclined and more able to pay the rent. And I really like that looking at it. I was like, okay, the population's going up, people are paying their rent. Not only are they paying, they have expendable income, disposable income, to where they've got nicer vehicles than I do and they're living a better life overall than folks over here. So that is some of the stuff we looked at. Should I buy a suburb property in Tennessee that houses a building built in 1930?

Oh, okay. I have multiple thoughts on this. First of all, suburb in Tennessee. Likely excellent place to buy. Based on our last question, I'm going to guess population is going up very steadily over time. My first building that I ever bought was a duplex built in 1911, and it is a phenomenal property that cash flows really, really well. It has served me extremely well. So age doesn't matter, condition does matter. So know how big of a project you want to take on. I don't know how many units that is, um, but it's a house. It is a house, I think so. Okay, the one thing I would recommend is buy more units, even if it's just the duplex. Uh, multiple units is going to be easier to scale. The bigger the better, generally speaking. Now there's a difference between doing a duplex and 100-unit property, but if you can get closer to 5, 10, I like those projects starting. Um, that's my one thing about houses, Tennessee suburbs Awesome. $1,930,000. If you love the property and it cash flows day one, go for it. Let's see here. I'm going to ask you this one.

Yeah.

How are you finding seller financing deals? I think I'm going to title the video this because this is going to be a good topic.

Yeah. So seller finance deals, every single deal outside of one has been seller financed. And that one I use private money. So I bought probably more seller finance deals in the last year than most of the influencers and people online. It's a little bit different than what you're probably going to expect. I'm not calling up everybody and saying, hey, would you do seller financing? What I've found is that in most people's stories, they use some form of creative finance to get to where they're at. And regardless of whether you like your business strategy or not, You can take the best pieces from everybody's story and go apply it. And so when a traditional seller finance deal may not make sense, if you can morph it to other people's strategies to make it just a little bit tuned differently than the average deal, all of a sudden a lot more opportunities become seller financeable, like seller financing first position or second position or third position. There's a lot of ways to make a deal that's not typically seller financeable, seller financeable. I'm only calling people to learn how they got to where they're at. That's it. I want to learn their story. And I encourage folks to learn stories because the story is worth more than the real estate, always. And you can use that to start over if you make a mistake. You can use that to connect with other people. And when you connect with other people, that is where trust is built. And when trust is there, you can do seller finance deals. That is why I'm able to go so fast, a lot faster than most of the other people in the space when it comes to seller financing, because I prioritize the story over everything. And that built a ton of trust with a bunch of different real estate investors and inspired them to seller finance to me. And it was their idea to seller finance to me.

Now, one of the things that we find when people start doing this is is they take their first 2 meetings and they go, oh my gosh, I met with 2 owners and I don't have a seller finance deal. You want to meet— I use a metric of if you can meet 1 owner, just 1 in your market every week, it takes maybe 3, 4 phone calls to schedule 1 meeting. You meet with that owner. If you do that once a week throughout the year, you're going to meet over 50 owners. There's going to be enough people who know who you are, what you're trying to do, and you'll know their pieces where deals will start to flow. So If you do this, know it takes a little bit of time, but people sell their finance, like you said, because they trust you. And so you want to focus on the relationships. Just don't worry about finding deals. The deals will find you if you do it this way.

That Tennessee deal was 39 units. I like that.

I like that a lot.

We bought a 38-plex that was built in 1954. Again, just make sure it's been maintained. If it's absolutely run down, probably don't want to buy it. All right, Bennett, your friend just moved. To Moses Lake. You should tell him to connect with us. We'll put him in one of our rentals.

I actually got one pretty close to Boeing.

Yeah. From Ethan, how much in repairs would you take on if you have no money? Well, zero if you have no money.

Yeah, if you have no money, I wouldn't do a whole lot in repairs. That being said, we've done deals where you should have a pretty generous reserve account, especially on a bigger building. However, if you don't, you have to work with the pieces you have. That 38 that we just brought up, we did not have enough reserves. Yeah, to pick up a project of that size. We had between the two of us about $100,000 to invest in repairs, $50K each.

We blew through that so fast. We were texting with our contractor and I accidentally sent a thumbs up to remodel a unit that I didn't know I sent a thumbs up on, and that cost us $27,000, which was our reserve budget after we fixed everything.

So that was a $27,000 emoji.

Yeah. We're going to make a video on how an emoji cost me $27,000. Oh, but yeah, you want to have reserves. Hmm. Uh, okay. And then have you ever asked for a credit for repairs? You can ask for a credit for repairs. However, seller credits only max out so high to cover X amount of fees. So typically you're going to ask for a lower price or an escrow holdback. To be used. So basically a portion of the proceeds go to escrow and those can be used to make repairs. And out of that escrow account, you could pay the contractor. But something to look into.

There's a lot of ways to get creative for that too. My second deal was a renovation project.

Uh, the—

I used a hard money lender for money. I had a year term, but we refinanced in 3 months. When we did that, we financed 101% because they wrapped in the construction budget with my actual original loan. So you get really creative with those.

All right, Lucas, how many people are you reaching out to a day, Christian?

Uh, about one. I would say one's probably average, maybe two. Um, the thing is I do it consistently, and we've done this enough where we're meeting for the second, third, fourth, or fifth time with owners that we've met before. We're meeting new people, have a few people reaching out to us because your story is more important than the real estate. We've been telling our story to enough people long enough where they're referring us to other people. So this actually gets much, much easier as you go. Myself, throughout this entire process, it's about one a day.

I'm Luigi asked, how many units would you recommend being an LLC before making another? Well, I would not quantify it in units because you could buy 100 duplexes that are completely separate areas. You could buy a 200-unit complex. I'd be more inclined to put a 200-unit complex in one LLC than 100 duplexes. Yep. So I would not quantify it as, okay, this is just going to be X amount of units. I would build up your strategy. Okay, I'm going to put up to maybe $5 million in real estate in one LLC and then move on, which could be made up of maybe 2, 3 properties. Right now we have 2 LLCs with 2 properties in it and everything else is separate. We're looking at buying, I think it's 50 units in that same LLC. So we'd have 3 deals which add up to 72 units. If that comes together. I don't know, we're writing it up tomorrow. But, um, that said, you should really talk with your CPA and lawyer on what they recommend, because from a protection standpoint, you know, what we like to look at is, okay, if we get sued for this deal, could it fuck up everything else in the company? And that's why we like to separate everything. But everybody's strategy is a little different. If you're just buying a few houses, maybe you just do an umbrella policy, you don't even do an LLC. But it comes down to what you want to do and what your legal counsel recommends.

Yeah, for us it's mostly been a per-partnership basis. So we'll buy one deal, one LLC, or give it one partner. If those same group of partners— we have one that we just recently picked up, the 10-plex, we already had a 12-plex with the same partner, we were okay with the same split, same exact contract, so we expanded that LLC. But I would do it by either by transaction or by partnership. Again, not legal advice, talk to your lawyer. I would see here, uh, how does the deal-making process happen? Do you guys agree on general terms, then have your attorneys involved to make things concrete? That from MMVXXX.

Okay, uh, well, as far as deal-making process, we throw an idea out there, or they throw an idea out there, and we either say yay or nay. And if we say nay, well, if we want to do the deal, we're going to find a way to make it work, and we present terms. We're doing that on a a deal right now. We can't give too many details because we don't want the deal to blow up. We're very excited. It would be the biggest opportunity we've ever worked on, um, and that's actually closer to where we live than the Moses Lake portfolio. But we threw out a one-sheet— it's just a little one-pager— and the one-pager said, okay, we want to do this, this, this, and this. And they said, uh, this works, but we're going to change a couple things. And so it's just a little back and forth, and as soon as that's all concrete What we're going to do is we make a purchase and sale agreement. We are agents, so we can do that for ourselves. However, if you're not a real estate agent, you don't need to be, get a real estate agent to write up a purchase and sale agreement for you. And then during escrow period, meaning you're under feasibility, you're getting closer to the closing table, typically you're going to have an attorney draft up— in a seller finance deal, the standard in Washington state is a promissory note and a deed of trust. There's other methods for that. But to keep it simple, the attorney is going to draft that up, draft up all the legal docs, the closing docs. You're going to sign it at closing, and then you get the property. And that's the process. As far as negotiation goes, you just have to know what they're looking for and what you can make work, and then find a compromise if you have to compromise in the middle.

Now, a question that we get that's parallel to that, by the way, is, uh, LOIs, letters of intent. Some people send a lot of these on every deal they want to do. I have personally never used an LOI. Cody, have you ever used one?

No.

It is because we are relationship-based and that's what we push. I prefer to negotiate direct with the party, or if it's listed, I use the broker as an intermediary, but we typically verbally come to terms. And when they're like, hey, send an LOI, it's like, well, do you want an LOI or do you want an offer? And I'd like to just say, this is exactly what we agreed on, let's roll. I tend to skip LOIs if you guys are wondering about that. One-pagers or conversation is always what we do.

Our good friends in the chat, Narayana.

Hey, I know him.

How are you investing in the current market conditions? Well, the same as we were before. We have two qualifying criteria. Christian, what are they?

They are how do we buy it and how do we never lose it.

I mean, what's the first one? Like, how do we buy it?

Well, we were just talking about how we find deals. You build relationships and you find out what is important to the other party. Before you do that, you've already quantified where you want to invest and what is important to you. As long as those criteria can blend what they want and what you want, you can figure out how to write up and acquire the deal. Cody, how do we never lose it?

Well, it's based on cash flow and long-term debt if you're using debt. Now, if you're going debt-free, it's a lot easier to not lose stuff because it's easier to make cash flow. But what this all revolves around is positive cash flow. If you have positive cash flow and you don't have any short-term balloons, your odds of success go way up. Now, when you own it outright, typically your cash flow is a lot higher. And by typically, I mean it's always higher than when you have a mortgage payment because it's just all profit when it comes down to what the net operating income is. So the more cash flow you have, and we're doing creative finance, keyword finance, we have debt. So we just have to make sure we can write the deals where they cash flow over the long term and we don't have any short-term balloons because if we have short-term balloons, things go pop. And when things go pop, it's not fun. All right, from also from Narayana, what metrics are you looking at to invest? Oh well, to invest with confidence, cash flow, long-term debt. That is what we're looking at. Lucas, can you do a live seller call at some point in the future? How do you give enough value to a seller to have them meet up with you?

Well, so for the, for the live call, we actually make the decision not to do those unless, uh, we have the other person on the call Giving consent to be recorded. I would hate to have a seller, especially if we did an amazing transaction with someone, they find out later that we just recorded it and threw it online.

Yeah.

We make a conscious decision not to do that. And I know there are some awesome content creators who do that and it is excellent content. It is something we made a decision not to do. We mock it up all the time. We'll share everything that happens there. It is one of the only intentionally closed curtain things, that relationship we don't violate.

Yeah. If, yeah. Turns out that's not really relationship-based to just throw our conversations on the internet, but I do appreciate it. Yeah. And a lot of people just do transactions, so it's okay for them, but for us, that's, that's not our thing. Okay. And then how do you give enough value to a seller to have them meet up with you? Well, there's a point in time where folks have more money than they have time, and it would be a greater gift for them to be able to share their story and help out the next generation than it would for them to try and sell or just keep everything to themselves. You have to find those people, and that's going to come from a few phone calls. They're not always going to pick up, so you maybe have to call them back. But there is a point where people just want to help the next generation, but nobody in my generation is asking because very few people in my generation— I'm below Christian as far as—

yep, I'm a millennial.

Yeah. Millennial, I'm below that, whatever that is. But nobody in my generation that I'm seeing wants to work right now. They want to go have fun. And that is what a lot of the prior generations feel is the case. Now, if it's the case or not, I don't know, but that's how they feel. And so when I reach out to people, it's great for them. They're grateful because they are— they want help, but no one's asking them for help. Right now, a lot of people are under the impression that you can do this on your own, and maybe you can, maybe you can't, I don't know, but I don't want to do it on my own. And so I'm going to ask for help. And they want to be the person when you're making that phone call.

We have some amazing mentors who helped us early on just because we shared a basic story. I mean, I was like, hey, I picked up 2 duplexes. I'm trying to scale. And that was enough for them to go like, oh my gosh, we started small. We had luck in the bigger things. And here's how you creatively finance these.

All right. From Bennett. How do you cover any fees on your end when doing these deals, especially if going into a deal without much money set aside? How do you recommend having money set aside? If so, how much? Okay. Um, in that scenario, so you have a deal, then you got to find the debt. If you're playing the debt game, which creative finance we are, and then you gotta find equity. If you don't do 100% debt, now you can't do 100% debt if the deal doesn't cash flow, because regardless of what happens, you have to pay your lenders. If you bring in equity, meaning a partner, well, if there's no dividends, there's no dividends. So on high cash flow deals, you can just keep borrowing money as long as you're not over-leveraging. And in this scenario, if you talk about money set aside covering fees, if you're buying a deal for a million bucks, let's say the seller financed $900 grand. And let's say you have $10,000 in closing costs. Well, you're going to need to come up with $110,000 for the down payment. Now, if you can borrow that into cash flows, great. That is the basics. And that's the premise of what I did on my first deal, where the seller financed $1,012,500 on my first 12-plex. I raised $125,000, bought it for $1,125,000. And so I had just a small 5-figure buffer in the bank account when I bought it. And I spent that because I had things that popped up. It's good to have reserves. It's good to have cash flow. If I had to pick and choose, I'd rather have a really high cash flow and less reserves. Really high reserves and no cash flow.

And we'll get a lot of people because we do— we didn't have money when we started partnering together. Like, we had a little bit and it got dumped into the 38, we're out of money. So we share a lot of content on how we bought no and low money down. If you have the advantage of having money, you should figure out how to place that into real estate or into an asset that is paying consistent cash flow, because dollars are a poor place to store money. Just make sure you store Enough. It'll be easier for you if you do.

From Ethan Wilson, what do you guys eat?

What do we eat? Well, we just ate at Loco Chon with, uh, Beth Flynn, one of our good— or sorry, Beth Johnson, uh, part of Flynn Family Lending.

Um, I like Mexican food a lot.

That's probably our favorite by, by a large margin. That is our most eaten.

However, I have managed to eat Mexican food and stay at a calorie deficit for the past 2 months.

That was very, very impressive. We also do a lot of Thai. Uh, if we do Thai food, I'm not gonna be a calorie deficit of any kind.

I have a Thai food dinner tonight, so that's happening. All right, Dion. Hey Dion, every time you hit the like button, an angel gets its wings.

Heck yeah, that is a fact. We've, um, truth over facts. Yeah.

Davron. Hello, what's up guys? Just joined.

Hey, Davron, good to see you, man.

All right, what tools do you guys use to run your numbers? Excel. It is just that simple. And really, it doesn't even come down to Excel. If I just go on my phone, I just use the calculator and I'll just plug it in because at the end of the day, it is so simple. It's income less expenses equals cash flow. That's it.

And we like to look at cash flow as a ratio to the down payment. So we'll just take annual cash flow, take that cash flow, and we'll multiply by 12, divide by your money in the deal, and there is your cash-on-cash return. So I want to see that number. If I'm not bringing in any other debt, I want to see that north of 8% before I'll consider it, or for representing a client, before I want to show it to a client. 8% is kind of my magic number of I'll consider it as long as there's this much cash flow or greater.

Now that said, I have built out my own Excel spreadsheets. I have some pretty fun ones. However, it's really simple and Like the, the 47-unit, which is getting converted right now into a 50-unit. All the math I'm doing to buy that is on a calculator. It's just on my phone. I'm not using any crazy spreadsheet. I don't care about the IRR, despite BiggerPockets people saying that, and cap rates are the most important thing. It's not. You just have to underwrite for cash flow because if you can figure out how to buy a bunch of real estate and how to never lose it based on long-term debt and cash flow, you're going to wake up richer one day than you are today. Yeah.

The cap rate is definitely the one that doesn't matter. We got a bunch of flack for that. Um, we bought on a cap rate of about -1, uh, day 1 for the 38, and we made $1.1 million in 9 months.

So I'll do that deal again.

Yeah, so nothing matters to me other than cash flow. Where are we at day 1, and where are we going to be in 6 months, 1 year?

Oh, Johan. What would you guys outsource first in terms of hiring, if you both do any hiring for your business?

Well, we do, we do. Hannah Caldwell is our director of property management. She was our first hire and by far the most valuable member of our team. In fact, her management of our portfolio has made us more money than I think Cody and I combined. Her management takes so much. One, it gives us a ton of time back. Two, her management of keeping tenants in place, keeping them happy and managing responsible rent increases to keep us competitive has, one, made us a lot of money, two, saved us a lot of time.

And it's put us in a position to where we can help her buy her own real estate. We're working on the biggest deal we've ever done before, and we're going to bring her into that, assuming we make it happen, we go mutual.

And if we don't, we'll find the next deal that's perfect for her. We will bring her into real estate, help her move forward, and we pay her a salary. So that is the first thing that I would outsource, being us, is management. Is needed, and it's not very helpful for us to go out and build relationships if we're busy and managing.

The reason that we did start our own management company was because we wanted to dictate rents. A lot of the property managers over where we buy keep rents a little bit lower because they're used to them being lower, and they're not— all of them are in tune with exactly where everyone's income is going because a lot of incomes over there have been going up. Quite a bit, and as a rent. So we wanted to make sure that we had control over our portfolio and that it wasn't up to someone who was used to those market conditions from way back when.

It's hard to find an excellent property manager, but if you have one, you don't need to hire for it. You can just bring them on. Um, but as you scale, just figure out the things that you really excel at, identify them, write them down, go, I'm good at this and I enjoy this, and try to stack those things onto yourself and outsource the other things.

Do you guys do cash-out refis, or is that more for single-family homes? Well, it is for apartments as well. We will do cash-out refis to improve properties, and that's just about it. Maybe to improve liquidity. We've done it once. We pulled some money out to go buy the 10-plex, and that allowed us to buy it zero money down. However, we don't recommend just going and borrowing just to borrow. So if you're going to do it, which you probably shouldn't do a ton of. If you're gonna do it, use it to increase your cash flow position. And if you want to keep scaling, then yeah, pull it out, but don't be reckless. Even if we're doing cash-out refis— we're doing one right now— we're taking our building to 60% loan-to-value. We've pulled out a total of $350,000. We're taking it to 60%. That's it. Like, we don't want to get reckless where we're going to 80%. There's a lot of people doing that, and that is irresponsible. We would never take it to 80 just to put money out. I'd rather keep the equity position, keep the cash flow, and keep the security of knowing, oh, I'm not going to have to build this again. Because if Christian and I had to start over today, we could, but that would be—

that would be so hard.

That would be the worst thing. Yeah, no, we're—

yeah, yeah, we're not gonna start again.

All right, Christopher Foley: I live in Utah. I want to buy multifamily properties in the Midwest using seller financing. Will my Utah real estate agent be able to see listings in other states? Probably not. However, uh, they're licensed there, so if you want them to work for you elsewhere, tell them to go get their license elsewhere because you could do that. Now, some states are easier to get licensed in two states than, you know, some of the other ones. However, if you want to work with them, tell them to go get their license. If not, you're gonna have to reach out to some other agents, and that's just fine. We're real estate agents, yet we don't write up our own deals typically. I used to. I thought the commission was important. It's not. It's more valuable for me to have someone else represent me for the transaction because I'm going to see things differently when someone else is bringing it up. And so I would just work with someone else unless they're family. If you want them to really do it, then tell me if they're licensed.

And if you are an agent, then just build out the, uh, the network in other markets. Referrals are relatively easy to do. It's a one-page paper for you, and you can have them send you deals and serve your clients the same way. So if you have an agent who's good at networking, or if networking is not your thing, your agent can outsource that too and build that relationship.

From Cade— Cade's flying in. If you guys want to meet with us, just fly in. Cade's doing that. He texts us on Instagram. It's like, I'm flying in. I was like, okay, uh, what one thing— what's one thing about each of you that you wish more people knew?

Oh boy, one thing about me that I wish more people knew. The funny thing is we're so public and we're so open with everything, I usually just say it. Um, I have the coolest Frenchie of all time. She's never been featured on our channel yet. Little French Bulldog. She is adorable. She is hyper. She's 5 years old and her name is Charlie. Everyone should know her.

Uh, one thing about me that most people don't know, because a lot of people think, oh, you scaled a whole bunch in real estate, you got all these apartments, all this cash flow, money coming in— I still live in a 500-square-foot apartment in Renton where I pay like $1,700 a month and change in rent. I'm still doing that. I'm not doing the house hack thing. I'm not buying a house. I'm not living with parents, not living with friends. I'm on my own. And a lot of people think, oh, you start getting a little bit of success, you can start upping your lifestyle. That's not true. You shouldn't be doing that. So myself, I'm still living in a 500-square-foot apartment with one couch, one bed, and a cat. Uh, scratch that, my apartment doesn't know I have a cat. I'm living with my cat, so that's it. Uh, hopefully Beckett doesn't see this. All right, don't improve your lifestyle until it doesn't matter anymore. All right, how do you finance short-term loans on your deals for repairs or for down payments, for example? Well, there's a lot of different ways to do it. You can bring in an equity partner to help finance that. It could be as a loan against title. It could be a personal loan. I've seen people put down payments on credit cards. You do an advance if you're buying some cheap buildings in the Midwest. A lot of different ways to do it, but at the end of the day, don't do a bunch of short-term stuff because when you have balloons, they tend to go pop.

Oh, I like the next one. Would you mind sharing how you made $1 million off a negative cap rate property? Yes. So when you identify an opportunity, you have to figure out, okay, where is there room in this property to improve problems? What was actually wrong with this property was not— I mean, the rent roll was super low, about half of market, maybe a little less. However, they were collecting on about half their units. We had relationships already with Grant County Housing Authority and some other organizations where we knew we could collect some back to rent. We can get people on assistance. We're very good at playing the low-income game. So when we picked this up day one, the property, even without debt, was losing money. Just its general operating expenses—

yeah, taxes, insurance, and utilities killed the income. Month one, we made $5,600. Might have been a little less than that on 38 units. That's terrible. Now the rent roll is like $26,000.

The reason we did this, because I don't recommend just Starting on a building like that, that was a Class D- property with a lot of problems.

That would have tanked us completely. Right now we're in the upper— it's probably like a C+. We're getting more stuff done. We'll do paving. We'll take it to a B someday.

I had just finished a renovation project. It was only 2 units, but it was a full renovation— roof, interiors, bathrooms, kitchens, the whole nine yards. So I had just done a project with a team in that city just down the street. So I had some experience. The big piece was Cody already managed 30 units in Grant County. 2 of those buildings started in really rough shape. So Cody had a great idea on how do you rehab these, how do you do tenant relations. In addition, we brought on Hannah at that time. Hannah is amazing at the relationship game. So we knew we could brand, we could serve the tenants, we can handle this project. I would not start with that project. I would have the requisite experience, or if not, the requisite partners and team to take on an opportunity like that.

Christian, how did you find Hannah, by the way?

So Hannah was actually working for a company that shall not be named. A company, yes, I was going to say a company that I was aware of. And they shut down their property management operations almost exactly the time we were scaling up ours. So it was right before she became a free agent. I've never met someone quite as skilled as she is at doing the property management game. So we went out to breakfast actually and proposed the crazy idea of, what if we started this company and what if we just gave you ownership and we will start you with a portfolio that we have 100% control of because we own the properties. She came on and, um, that's how we did that. But we just had the privilege of working adjacent to her for a while, and the timing was perfect.

And as far as having one manager at each multifamily property, well, Moses Lake and Quincy are pretty close to each other, so we've got people that are boots on the ground, and then we've got Hannah who oversees it all, and then we've got Brendan who helps with the coordination. And then of course we're all over the place all the time, so we see the properties quite often. But we don't just have an on-site manager for each individual property because you don't really need one on a 6-plex and you don't really need one on a 12-plex. But we have some people that are there that stop by quite often to help with landscaping, help with tenant issues.

Dion wants to know top 2 goals you want to hit by the end of 2023. Well, I'll share one that we need to hit by the end of 2022, and this is the most important one as a company because it was an original goal and the last original goal that we still need to hit. Cody, This is with, uh, your mother. We need to get her retired.

Yeah, I'm gonna help my mom retire. I'm making that happen by taking away her mortgage. And the really cool part, I sat down and talked with her and we looked at rents for where she lives. And the cool thing is there's a garage in the back that we can convert into ADU. So what I'm going to do is start taking over her mortgage payment so that she can start stacking cash, and we're going to convert the back into an ADU that'll rent out. We gotta do a little bit of work on the the house that she's in, but the front house on today's numbers could rent for $3,500. And the back house, if we convert it, could rent for $1,500. And so that'd be $5,000 a month in passive income. She's on a 15-year amortization. So we get that paid off. And all of a sudden when she moves out, she's just gonna have a rental portfolio that kicks out $60,000 a year in addition to the stuff she has saved, which will make her set. And that is what we're working on right now.

A goal by the end of 2023, Cody and I were talking about this today on our way to grab soup from Safeway. Um, we want— all of our companies are cash flow positive. However, property management still needs direct input on a daily basis from Cody and myself. I don't count it a business until you can walk away from that business and it will continue to grow and thrive without your input. So I think the biggest goal for me by the end of 2023 is to migrate property management from a really awesome job into an actual business where we have more employees, more boots on the ground, and, uh, additional systems to increase, uh, passivity.

All right. And then a personal goal: I'm getting my 8-pack. That's coming in. All right, cool. You're gonna fly over? Sweet. What's your cat's name? My cat's name is Oreo. She's black and white. She looks like a Double Stuf Oreo. And he's got two.

I got, uh, Loki and Zazz, which are Maine Coon mixes, but they're mixed with something really small because they're not very big.

What do you guys plan to accomplish? Hey Isaac, what do you plan to accomplish by the end of the year? Well, by the end of the year, the goal is to have a 7-figure consulting company. Right now it's valued over 7 figures, but the goal is to have it produce over 7 figures in income. And the thought process is, okay, if we help enough people with consulting, we can use the money to start paying down even more of the debts expand the portfolio. And the more we expand the portfolio, the more it grows property management, which allows us to hire more people and provide job security for more people. That's what we want to do. We want to build a machine. We had Dion on a video recently and talking about you need to buy for your why. Well, we're building a machine so that we can help a bunch of people reach financial security. And regardless of whether your goal is— that's our goal. And so we want to scale up our company that produces income so that we can stabilize the portfolio and grow that so that we can provide provide more jobs for the property management company and pay people more. That is, yeah, one of the big goals for this year.

We call that— it's vertical integration, if you're familiar with the business term. But essentially, when we buy a property, we get to tell the story of that property, and that marketing brings more people into the mentorship, which helps more people. That generates some income that allows us to go back and buy even more property or do renovations, which tells a new story, and it's just—

it's a big loop. And when you can figure out how to make vertical integration— I learned this from Christian. I didn't go to business school, he did. When you can loop everything together, it just, it does better. It's amazing. Everything gets lifted up and all ships rise with the rising tides. All right, from Bennett: Curious how you guys each describe your habits. Do you have strict morning rituals? No, no, I usually have coffee.

But I always have coffee.

We just get stuff done. If there's something that needs to be done, we make it happen and we implicitly trust each other to get the stuff done. Sometimes I forget that's my job that I do very well. My job is to forget everything and to bring in a lot of fish to the boat. His job is to not forget everything and make sure the fish don't jump out of the boat while he builds it. Yep.

Um, we, we have a delineation of tasks, but essentially, and this is different than a lot of entrepreneurial stuff, we're not W-2 employees. So I'm not competing with other people within a company. The schedule is flexible. However, we'll both do whatever we need to do. If I need to wake up at 4 to drive out somewhere and fix a problem, I'll just do that. Ideally, I like waking up at 7:30, but we will just do whatever needs to be done, especially this year, which we labeled build year. If we get to work a 10-hour day, awesome. If we have to work 20 hours and sleep for, we'll do that too. So it's more of a whatever it takes, make it happen.

Yeah.

Rituals?

No, not as much.

We do like to make bacon in the morning together when available. Blackstone grills, highly recommend.

Heck yeah. Davron, if you guys were to start over again with the knowledge and experience you have today, what would you do different?

I would have bought bigger. Yeah, earlier.

I had to slap him around. He bought duplexes.

I bought two. I bought a house that I live in and then 2 duplexes. I would've bought a 12-plex that would pay the mortgage on my house, and then I would've started buying—

Take bigger swings. Yeah. I started with 12, and I look back on it, and I bought some duplexes to help build the story. I bought a 6-plex. I bought whatever I could, and that was the right thing to do when I didn't know what I know today. Knowing what I know today, if I had to start with no real estate, I'm 100% confident that I could start with 40 units because I've done it before. That said, that would be the worst thing to ever have to do. Some people have their comeback story and it's powerful. Just skip that phase if you can. 10 out of 10, don't recommend.

Yeah, I know one other thing that I'd add to that too. Um, Cardone says like, as soon as you can, no one documents their story. So if If you actually look back on our YouTube channel from day one, I was so awkward.

I still am, but it was so awkward. I had to film 10 times to get a minute 23-second video. Awful. My buddy had to push me to do that too. We did it in his fourplex.

And if you see where I joined the channel, I'm really slow and really awkward. And while I'm still pretty slow at talking and pretty awkward, we've got a little bit better at this. I would take the skill of telling your story and I'd document more, more photos, more videos, more discussion around what you're doing. Because when you look back, it's so fun to to be able to go, I marked my entire journey. You can watch your progression and others appreciate getting to join that.

Thanks, Johan. I appreciate that. Uh, if I can help you out building your strategy, happy to do that. Isaac, perhaps. I like long-term rentals though. If we're doing Airbnb, we're buying resorts. Yep. All right, Lucas, do you guys have any interest in out-of-state deals?

Yes.

Yes. But we're not there yet. And so we're not gonna worry about it. We have a rule that you don't worry about things if you're not there yet.

We have looked at multiple out-of-state opportunities. They have never come together. The things that just every time we look out of state, an opportunity comes up in-state that is a better opportunity for us. I would love to find something out of Washington, um, because it's not the best landlord state, but go where the opportunities are. We have a huge foothold in Grant County. We're established where we're at. And so go where the opportunity is.

Ariana, thank you. You know, I'm here to help you. Christian's here to help you too. We're going to make that thing happen. We're going to help you hit your goal.

By the way, if you guys are here and Narayana's around, best cook I have ever tasted, and it's all vegan, which is amazing because I'm a huge meat eater, but that was amazing. Thank you, Narayana.

Phenomenal. All right, what's up, Cody and Christian? Hey, Kareem. Hey, skies up. All right, G Donzo, how did you meet your private money lender? Well, They sold Christian a duplex and I met them through my old boss, kind of a turd burglar, but the, uh, private money lenders are awesome. I met them through a work connection. He ended up buying a property from them. Just found out that it was them recently. They just met recently for the first time. And Beth Johnson, the— our private money lender, our only go-to as far as getting, you know, really creative on second position loans, actually lives really close to us. So she just filmed her BiggerPockets episode today. That's going to launch soon. You should definitely check it out.

It's very exciting. She is a wealth of knowledge, super fun. Um, but in general, like, that's our private money lender that we go to. But a lot of what we've done is just individuals where we've built the relationship, we know what their goals are. So when the opportunity comes up that aligns with what they want to do because we've built relationships, capital usually finds its way to deals. The rule there is deal, and once you've established your deal, then you can figure out the debt and equity that matches the right individuals.

Do you employ a handyman or do you contract out repairs? Yes, we do. Yep.

I'd like to bring a handyman full-time. We do 1099 with the same group, so they exclusively work with us, but I would like to bring them all the way on board. I'm going to set a target of that right here live, um, within the next 3 months.

All right, how do you get deals coming your way? Are you guys doing any marketing or is it all relationships?

It's all relationships, though we do tell our story a lot and I use platforms. I was never a big social media person, but Instagram, even TikTok. I hate TikTok, but it works. And sharing here with you guys today, telling our story has brought opportunities to us. One of the earlier deals we did was a 7-plex. This is when our channel had 40 subscribers. One of those 40 reached out and asked if we were willing to partner with their son who I grew up with, um, on an opportunity. It was a fantastic opportunity. It worked really, really well. And, um, it's the closest property to where I live by a lot. It's 10 minutes down the street. Um, so we don't actively market, market for deals, but I will say by telling our story, it does serve as marketing and deals have come in.

All righty. From Davron, with private money lenders, do you bring them on as partners in your deals or just pay them interest? I just pay them interest because if they're lending money and they don't get equity, if they want to invest money, well then we're going to be a partner. And that's going to be a joint venture, a JV. But with Flint Family, they just come in as a loan, typically in first position. They can go in second position. They're probably the best out there as far as it comes with junior liens, getting really creative. Not many companies are willing to do that, but they're just so good at what they do, allows you to do a lot of opportunities. But we don't give them equity. I actually talked with Beth about potentially going in on a JV together someday, but, but then we wouldn't be borrowing money. We'd just be bringing in some money from them as a down payment.

And it's impossible to do a good deal with a bad partner, which is why we have very, very few partners.

That's why we haven't done a deal with a ton of people. We have a lot of people that want to throw money. We've got a few people who will accept money from, and there's a difference there. You got to be careful. Some people just take all the money they can get And those are a lot of the people that you see with the comeback story. You got to be careful with that. Yep. All righty. Any books you recommend reading in terms of valuable information and advice? Well, Christian's got some as far as business goes. As far as seller financing and some unknown books that I actually looked it up, kind of expensive. Deals on Wheels by Lonnie Scruggs. If you can read that book A ton of people that I know say it's outdated, but those people aren't buying a lot of real estate. I use those principles to go out and do a lot of what I've done. And it talks about microtransactions, microlending. Let's imagine you bought a mobile home, outdated numbers. Let's say you bought it for $5,000 cash. You still do that in some areas in the United States. You sell it back to a tenant on a contract for $2,500 down. Well, now you get half your money back. And let's say you sell it for $15,000 because they don't know that they qualify for financing otherwise. They get to own an asset and you get most of your money back day one and you get dividends on the other 12.5. Deals like that. I learned a lot about micro lending, micro transactions from that book. Check it out if you'd like. I think it's a few hundred bucks though. So if you can get an ebook that might be cheaper, or if you borrow the book, do that.

As far as business books, by the way, Principles by Ray Dalio, it's a thick book., and it is phenomenal. That's why Cody and I every Monday share our principles, is it's a spin-off of that book. He published all the principles that got him to where he's at, and a phenomenal book, lots of takeaways. Ride of a Lifetime by Bob Iger, he was the CEO of Disney. I had a lot of takeaways. I think the biggest one I have from that is how you take big swings and how you manage risk. Um, but those are two phenomenal books. The one that I know both Cody and I always recommend if you're looking for mindset— Grant Cardone, 10X Rule. Love them or hate them, one of the best books ever.

All right, for Jay Donzo: I own some single-family homes in California, have a lot of equity—

awesome job—

but very little cash flow. That happens in California. You're not going to make a ton, maybe 1 to 4% cash on cash if you have debt. Yeah, I mean, what I would do is look at potentially selling a couple of the single families and buying in a higher cash flow area. I'm not saying to go to the Midwest. I personally will never invest in the Midwest because I want stuff that actually goes up in value. And yes, you can get value-add opportunities over there, but that's not the type of market I want to be in. If you can go into a tertiary market, secondary market in appreciating states, your odds of success go up But as far as building that cash flow, if you want to get to $10,000 a month, $120,000 a year, you just have to figure out how do I earn 6% on $2 million. You could have $2 million in California if it's paying you 1%. Well, turns out $1,667 a month doesn't really get you very far.

And I see that you'd love to fly up and, uh, and work. Do it.

Yep. Do it.

We love to work with people we know. Uh, and if you want to know us, um, feel free to hit me up on Instagram. That's the one that I tend to check the most, @ChristianOsgood.

Yeah. Follow him. We have a competition. He's trying to get to 3,000. 3,000 before I get to 8,000.

Yeah, Cody's a lot more popular than I am. Um, however, that gives me more access to my messages. So, uh, if you guys want to fly up, uh, just hit me up at Christian Osgood and let me know when you want to be in town and we will make it happen. I'd love to meet you.

Hot Shot C: Is access to the MLS worth getting a real estate license? Nope. No, only reason you should get your license if that's what you want to do, and if it's not, then don't do it because there's a lot of agents out there who can create a little portal for you and you can just look You could be on auto-read, like it'll just automatically send it to you and propagate to your email, and you can just check it out as soon as it hits the market. So that's what I would do if you don't want to be an agent. If you do want to be an agent, do it. But that's for letting—

nope, I maintain my, uh, agent status mostly so I can countersign, uh, our company's leases. I mean, it's— that's my main reason for holding a license.

And yes, getting a license is just adding steps. Yes, that's not what you want to do. So that's the end of our questions. 50 minutes in. If you have any questions, drop them down below. We'll give it about 30 seconds because this is a 20-second delay as far as feed goes. But if we don't get any more questions, then we will wrap up for Whiteboard Wednesday. Know that we are going to be posting more content on Friday, and we'll keep you posted on everything else.

As Dion mentioned, if you hit that like button, angels do get their wings. I want to test that. So if you can all just hit that button for me and we'll see if that happens, that would be fantastic. Fantastic. But other than that, we do this every week, so put it on your calendar. We usually start at 3. Because Beth was filming, uh, BiggerPockets on our setup here, we delayed by 15 minutes, but 3 o'clock sharp every week we will be here.

Hot Shot said, how much would something like that cost? Well, I don't know what that is. This is on a little bit of delay. Whenever we say something, it's 20 seconds behind on here. However, uh, if you're talking about getting a license, it's probably going to cost you a couple thousand bucks a year. You're gonna have to hang it with someone, and, uh, they may have fees if you're not selling anything, and they will have fees if you are selling stuff. So it's going to cost you money either way. If you want to do it, go for it. And if you need to retire the license, you could do it, but don't do it just to get access to the MLS. We don't recommend that. We have to be agents to do some of the property management stuff. Yeah, it just works better for our company that we're agents.

Fastest way to be an investor is to go invest. And that's the short and long of it.

All right. Jose, I have capital and looking to invest in my area, West Palm Beach, South Florida, looking Class C multifamily properties, but the properties are expensive. Price is one thing, terms are everything. Everybody wants to look at price. Nobody wants to get creative and do the terms. We bought a deal that was on the market since I was 8 years old, 13 years on market, same price. Never change price. Most people try to beat them up on price. And yeah, we probably could have got a couple hundred thousand dollars cheaper. However, we gave them their price and we still made $1.1 million in 9 months. Phenomenal deal. If you can just look at it, yeah, price could suck. But just to give you an example that is grossly exaggerated, and I'm not recommending you do this, but you could get a million-dollar opportunity. It's apartment complex. They seller finance it to you, zero money down for $2 million. Well, that sounds like a terrible deal. Price is really high. You're underwater. Let's say that they amortize it over 50 years. So meaning it'll just pay itself off, tenants will pay for it. It's in a decent location and you'll cash flow $4,000 a month. I would do that deal because the property will pay itself off. It'll cash flow $4,000 a month net. It won't cost me anything today. One, I'm going to get the tax benefits. I'm going to add an asset. Now, yeah, price is really high. I'm going to be overleveraged as far as loan-to-value goes. However, I could buy something, zero money down, cash flow an extra $48,000 a year, rents will go up over time, and it will pay for itself before I'm dead. That's a good deal. So yeah, price, something to look at. It should be the least important factor out of all the things you're considering because if you can figure out how to buy it, How to never lose it. And it turns out you're going to wake up one day and own a lot of real estate that pays you, which works. Turns out that works. All right. We got more questions. People are getting back into this.

All right. Let's go early. Let's, let's, let's, let's get back in.

How do you ask a seller to do seller financing? Just like this. All right, Christian, you be the seller.

Okay.

I'll be the seller. Are you looking to be cashed out or would you be open to holding the contract? It is that simple. It's that simple. It's about holding the contract. So you just have to ask them. Hey, do you want to be cashed out or would you be open to holding the contract?

By the way, if they're open to being cashed out or if they're open to a contract, let me rewind that. But if they're open to a contract, ask them what they're thinking for terms. People like to jump right to price. It's way, way easier to negotiate terms than it is price.

The 10-plex that we bought, I never asked for price. I asked, hey, what are the terms looking like? And he told us 5% interest only for up to 15 years. I was like, Done.

And then he gave us the price and it's better than I would've offered. So I'm glad we didn't ask about price, cuz it was about $100,000 lower than I would've guessed.

Yeah. I mean, granted, I mean, we gotta do a little bit of work to the property, but I mean, we got it a little under market value. We got a great deal. Seller's happy. They're getting payments every single month. We're happy cuz we're cash flowing every single month. Mm-hmm. We bought on terms, not price, and we got both in that situation. All righty.

How far away is the secondary market? Uh, 30, 40 minutes away from a big city? Well, if you're in Seattle with traffic, 40 minutes away from Seattle is Seattle. Yeah, exactly. Um, it varies. Um, it could be an hour out, it could be 2 hours out, but like a major metro, like a tier 1 market is going to be a core metro. So in our case, King County is pretty much all one metro. It's a, it's a major area.

Hotshot was asking about how much it costs for an agent to create a portal. Oh, $0 because it takes them about 20 seconds and it's set up forever. It shouldn't cost anything for you, which is why we don't recommend getting your license just to get the MLS access. Yeah.

And I think the MLS fees are like $200, $250 a quarter.

So, I mean, but it's going to be different based on where you're at. Exactly. Because everywhere is a little different.

So negligible price.

All right, Luigi, thanks for your time. We appreciate it. Keep up the great work. We will try. Appreciate you hopping on today. Um, thank you guys, and, uh, yeah, we'll see you on Friday.