How to find the right real estate partner - Creative Finance Live

All right, and we are live from Moses Lake. Legit.

And the audio's on?

Audio is on is what the computer is telling me. If we see anything else, anyone help us in the chat because we are going remote with our mobile station and Christian's going to come on the screen. Yes, sir.

So we got a few questions today for Whiteboard Wednesday. We're taking this from Moses Lake, which is, as you guys know, where we do the bulk of all of our investing, where we really built the journey up. But starting out with some questions for Whiteboard Wednesday. Let's see. I— from Dividend Dave. I definitely look at the money, the down payment parentheses first, but I'm trying to get myself educated on how to find options that move it on the back of the line. Okay, so what he's saying is how do we move it from our priority stack from the front to the back?

Oh, as far as the money goes, well, what you look at is you look for the opportunity first. So if you're focused on the money, what people tend to do is they get caught up in, hey, I need to do this deal structure, I'm going to need this much down to buy this property. The fact is, if you're implementing creative financing, you might not actually know how much money or where that money is going to come from until you actually have the opportunity. So just shift to the— it's kind of a paradigm shift. It's just look for opportunities and then start thinking about, well, what would make this opportunity work? And that will tell you what money you need, and it automatically just shifts that money to the back.

And then from Caden, what amount or percent of cash reserves do you guys typically hold a few months of PITI, meaning principal, interest, taxes, and insurance, for the total portfolio monthly payments? Okay, that was a question. Uh, so the way that we quantify it is we stack everything until typically we have 3 months where we can pay everything, meaning that if our total expenses on the portfolio are $50,000 a month, we'd want to have $150,000 in cash reserves. Are we there right now? No, because we just did a ton of renovations. When you're in growth mode, you're not necessarily going to have the same philosophy on capital allocation as when you're in stabilization mode. And we just went through growth mode. Now we're in stabilization mode. So we're stacking up our cash reserves. I think we might spend a little more than $50,000 on the portfolio. So for us across the board, if we stack $150,000, $200,000 in cash reserves for everything, and that includes some of the stuff I own without Christian, that we're going to be in a really solid spot. Someone asked what your Instagram is, Christian.

Oh, um, yeah, I watch a majority of our messages, so if you want to reach either of us, I'm probably the easiest one to reach. It's just @ChristianOsgood. The other reason we use mine is because it's just my name and super easy to remember.

Mine is Doing Cody Things. Speaking of, we have someone who just flew in from Hawaii. You want to come in?

Yeah, come on over.

Wearing the Cody Things shirt. If you don't have your Cody Things shirt, you should get one. They're not our shirts, but they're funny and they're online, so we'll drop a link down below. Yes. Where are you coming from?

Hawaii. Maui, Hawaii.

And what's your name?

I'm Vukomir. Vukomir.

Yes. And so you're getting into real estate now?

Yep.

So trying to buy stuff in Hawaii?

Uh, Columbus. Columbus is my goal.

So all the way over in Ohio? Yep. So it's exciting.

Yeah, it is.

Well, we appreciate you flying in. Well, if anybody has any questions from Vukomir, put them in the chat below, but thanks for flying over.

No, thank you for having me.

And also Cody shirt. Yes, he surprised me with that at coffee today.

Get the shirt, get the shirt.

It's just fun. Yep.

Not ours, but I think I have a link in the description preloaded because I have learned how to do that. So as you guys have questions, we're going to have Vukomir do the narration here for us. So we appreciate that.

And then. No, we have, uh, on your video, Christian, how Christian went from 0 to 55 units without syndication in 1 year. Thank you, Christian. This is very helpful. I want to have more times with my kids too. I'm interested in joining your online course. Is it just video to watch or do we get one-on-one?

Oh, great question. So we actually use a system called Lightspeed VT. Uh, it is a system that lets us organize about 200 little mini videos. Some of them are going to be 45 seconds, some are going to be 4 minutes. We have a few long videos in there, but most of it is going to be a series that walk you A to Z how Cody and I did everything we did, from analyzing a deal to how you're going to talk to owners and brokers to navigating your first meeting and so on. So that is a system and something you can hop in anytime. Uh, it starts at $349 a month if you want to do that.

And then from Joshua, do you guys have a contract for partnering on deals? Yes. And typically what that's going to look like, you're going to have an LLC operating agreement, and that's gonna outline what the expectations are for all the parties. What happens when stuff doesn't go right? Things don't always go right. Not everything goes right with Christian and I. Mm-hmm. Then we feed me and things are back to normal. However, uh, you have an operating agreement and you should have that drafted up by an attorney. Are there boilerplates online? Yes. Are they gonna be very good? No. No. So you should have an attorney draft one up for your specific situation. And do we have any questions rolling in the chat?

Um, well, let's see, we have a few stuff being said, some statements people can hear you. Um, but the first question is from Root R00T. Yeah, you guys still on for a Zoom to go over finding the owner of a PM company?

Yes. Yeah, let's set that up for this week. I am moving tomorrow, so it's been a little bit hectic. Um, we just got under contract on the Seller Finance Resort. We've been kind of sharing a little bit about that, but I'm going to start filming this Saturday. We're going to release that in the coming weeks, but I'm moving to the resort tomorrow, so we've been a little bit scatterbrained. That's about to change. So if you want to hop on a Zoom this weekend, just shoot me a message on Instagram. I know we've been chatting about that. Awesome. From Kali Kali, uh, great video. How would you relate to a guy that only built his buildings from scratch, never bought anything, and now just wants to offload all of them? Okay, well, relatable point. You need a buyer and a seller to do a deal. If they're the seller and they want to sell and you're the buyer, well, great. We don't go into relationships being transactional, but there's a point in time in that relationship where you can do a transaction. If they want to start and front-load the relationship with the transaction, cool. But your ability to negotiate great terms is a little bit limited typically by the extent of your relationship. So if you can get great terms on it, Phenomenal.

And when you're doing relatability, the main point behind it is getting to the why behind it. So why did they start building properties? How long did they hold them? What was their ultimate goal and how did they reach it? Those are the pieces you're probably going to relate on through that conversation. So when you're looking for relatability, figure out why they built what they built.

And I'll let Christian read this one because I've been reading them all.

Oh, there we go.

Okay.

So we have, I've followed you since BiggerPockets episode, super motivating man. What do you think about an expensive market like New Jersey, specifically the South? I'm thinking about going out of state.

Okay. So you're buying an expensive market. Well, the good part for you is price is the least important part of any deal. It doesn't matter. Price on multifamily that cash flows just determines how long it's going to take you to pay it off. So yes, will it affect cash flow?

Sure.

But with the seller finance space, If you can borrow 1%, 2%, your payments are going to be lower. And if that whole market's just more expensive, that means it's more expensive for everybody. And the appreciation bumps on the higher numbers bigger. Like if you're appreciating 3% on a million dollars real estate, you're going to make a little more money than if it was $100,000 real estate. So don't buy on price. That's what most people try and do. And that's why they get stuck buying little deals. There's a lot of people out there, even some really big gurus in the space, You get stuck buying small properties, you know, house, duplex, triplex, fourplex, and there's nothing wrong with that if that's your strategy. However, if you do want to scale up, buying on price is not the way to do it. It's a great way to flip stuff, but we're not here to flip it.

And do we like some markets better than we like others? Absolutely. However, no matter where you're buying, someone's going to own that real estate. If it's a market that you want to be in, it might as well be you.

Yeah, do we have any other questions in the chat?

Uh, yeah, we're starting to get a few more. So the next question is from Troy Moss. He said, have you guys looked at the 13-unit on 10-531 Aurora Avenue North? It looks like a good deal, but I wanted to get your guys' opinion on it. FYI, it's on LoopNet. What's the address?

Uh, 10-531 Aurora Avenue North. Aurora Ave North. Yep. Is that in Seattle?

Uh, you didn't specify it.

Uh, make sure if you're dropping deals in the chat, you put the city. I did find the one though in Seattle. Looks like that is what they're talking about. So yeah, I actually did see this online. Uh, okay, it looks like they're at $1.7 million, uh, 6% Cap rate, 13 units. So for those of you who don't know how to bang out NOI, net operating income, take the price, you multiply by the cap rate. So they're saying it's a 0.067 cap. So we're going to just take that, multiply it by the $1.7 million price, and you get an NOI of $103,000, which means every single month the property nets $8,599. Amongst 13 units. So that's, that's probably feasible. I mean, they're, they're netting $661 a unit.

Yeah. And what they're listing is— I'm guessing that's a little bit off, but they're saying that rents are supposed to be around $750 average.

Okay. So they, they don't have a lot of expenses listed because there's no way if you're renting it for $750 that you're netting $661. They're saying basically they have $90 a month in expenses. Now, they per unit, their taxes are probably higher than that. So what that tells me is the broker on that deal is either grossly underrepresenting the expenses, underrepresenting the income, or doesn't know what a cap rate is, which we see a lot.

It's not always the broker being dishonest.

There's a lot of brokers that don't know how to do this because, you know, What happens typically, they're doing, so they're doing a 1031 where they're exchanging out, but what typically happens is you're a residential broker and then you get a phone call from a buddy and they're like, hey, I got a multifamily deal, will you help me sell it? This is what the cap rate is. And they just get told, I'm not saying that's for this deal. However, that happens a lot in this game.

Yeah. Looking at this, it's, there's no way it's going to be a 6 cap day one. Also looking at this for that location, Aurora Drive can be a little bit rougher, but rents, market rent is a lot higher than what I am seeing here listed.

Yeah, they're saying the one bedrooms are cheaper than the studios. So there's something going on there that could pencil out. They may be looking at a 6 cap once it's stabilized. And a 6 cap in Seattle, I mean, that, that can be pretty good if you want to buy there, but we don't want to buy there. So yeah, it's up to you. And if you want to develop that, it looks like it's It's got some land where you could redevelop in the future. You got some 3 and 4-story buildings next door. So there's an opportunity there, but pick your game and don't get the shiny object syndrome. If you want to develop, that could be a great site. Yeah.

I first look, it does look interesting. There might be legs on that. All right.

What do we got next?

Let's see. The next question is from Darius. And he said, how did you guys get started on your real estate journey?

Cody, I'm gonna let you launch first. Yeah.

So I started real estate agent at 19 years old. Some guy I never met before messaged me on Facebook because I put a post online looking for a mentor. He said that I should check out his office. I checked him out. I got my real estate license a month later, and it took 2.5 weeks start to finish to actually get licensed from when I started to when I was licensed. And I didn't proceed to sell anything for 6 months. 3 months after that, I bought my first 12-plex seller financed. It was on the market. In a little town called Quincy, Washington, on the market for 551 days. You can still check out the listing, still on the MLS, it's just sold. But that was on the market forever, as have my best deals have ever been. And that kicked off the career. And 3 years later, as of next— oh, 3 years later, as of October, I will have been in the game for exactly 3 years.

Uh, for me, I graduated college, went into sales, uh, partway through was working for a company that got acquired by the CoStar Group. They own Apartments.com, They're kind of a big deal. Yeah, 10X, LoopNet, and all the commercial data. Um, total monopoly on data. Worked for them for 4 years, uh, selling data to brokers, owners, and banks, helping them prospect and do more deals and do informed deals. And realized 4 years in, oh my gosh, I'm on the wrong end of the table. These guys can afford this massively expensive data out of the cash flow of their properties. For me, um, I got analysis paralysis. Like, I feel like a lot of people we talk to did, where it's like, gather information, gather information, I want to get into the game. And all I ever did in that time was I did a live and flip in one little condo. COVID hit, and that was finally the kick in the butt for me to go, you know what, I'm gonna go on an adventure, I'm gonna buy a duplex. Bought a duplex, met Cody. Cody's like, hey, it's cool you have a duplex, you should get a duplex in my market, there's one across the street. So I became property neighbors with Cody, drafted off some of his momentum, and shared a goal where I wanted to get to 30 units by 30. Cody's like, well, I can't help you there, but there's a 38-plex that is too much for me to take down by myself. It'll get you to 42 units though. And so I jumped from 4 to 42 units, and we never stopped buying throughout the last year together. We have—

I'm at 95 units, Cody's at 105, and we set out the target that we were going to get to 100 units between the two of us. And between the two of us, we have 107 total. Plus his house.

And it was bill year.

We were going to build, build, build, get to the goal. We crushed the goal. It was actually a 2-year goal to get to 100, but we did it in 10 months. Now we're wrapping up the end of the year with a resort that I'm finally on a contract on. I'm moving in tomorrow, and, uh, that's stabilization.

Yep. Unfortunately, resort doesn't count as additional units even though there's 20 cabins. It's its own project. So I'm not quite over 100, but it's still pretty darn cool. 95 in a resort, I will take. And yes, Cody is, and it's a fun story.

I'll catch up. If you want to visit the resort, we said it on our last live, you're welcome to book. We've got kayaks and eventually jet skis.

Okay, next question from Caden Kuzma. Yeah, saying when you're doing a seller finance deal, does the seller need to own the property outright or Or are you taking a second position on the property?

Um, well, you can do both. It's— you're typically not going to inherit. I'll give you an example. We're looking at a mobile home park. We talk about stabilization here. Well, we're always open to ideas when things come up. So there's a deal where they owe $370,000 on a mobile home park, and it's a buddy of mine who's selling it. And we're going to assume, if we buy it— we're talking with them right now If we buy it, we're going to assume the $370,000 mortgage, which is a seller-financed mortgage actually with the previous owner. And then we're going to have a second mortgage with these guys to match the first one. So we're going to buy with two seller-financed mortgages. You can do it where you don't have to pay off the existing mortgage. If it's a traditional lender, they're going to want to be paid off. However, you can also do contract for deed. Think about subject to. A lot of people love that clause right now. And so that's a clause on a contract for deed or a real estate contract. And that's a way that you can buy stuff without paying off the existing mortgage. You can also do a lease option while the loan amortizes and then buy it seller finance later. And we've done combinations of all of those.

So if you use subject to, some people like to work around the bank. By the way, we recommend against that. If you're going to be doing anything with a note, don't fail to disclose anything to the existing lender. For everything that we've done, we just typically work with bigger players who have less debt to work with. So typically be their seller-financer. We don't have to wrap around anything. Sweet.

Let's see.

So Ruth said congrats on the resort, can't wait to see it. And then Ambassador for Christ 1018 says, do you dave getting a loan from your LLC as a down payment on your first property? I don't understand.

Do we what?

Do you dave getting a loan from your LLC as a down payment on your first property?

Do you have a loan on your LLC? No. No. Okay.

Let's see. Okay. And then the next question is from Root. He said, is there a specific time of day you like to call owners?

Um, when I'm awake and they're awake.

Yeah, I was gonna say, if the sun's up, that's probably a good time, unless they ask me to call after the sun's down, um, which has happened. Yeah, we typically don't, um, I typically don't overthink that. I've had a lot of sales jobs, so I've tried gaming what is the best time to call each market, and at the end of the day, people are different, people are busy different times. Uh, the best time to call is when their phone number is in front of you. If you see a number, call it. If you overthink it, you're gonna sound robotic and scripted. Just practice what you're gonna say beforehand. Meet with a bunch of people. It's gonna be super natural. Pick up the phone. You're like, hey, that's the owner's number. I wanna talk to them. Dial it. They pick up the phone. You just start talking. That is the easiest way to do it. Okay.

And then Alonzo Franco said, how do you get into your weekly mentorship group?

TheMultifamilyStrategy.com. Right now for the rest of this month, so I guess for the rest of the week, anyone who signs up for the lifetime access to the course, we're just throwing in 3 months of mentorship. So message me on Instagram or let's know on the YouTube page, but just let us know that you signed up and we will send you the Zoom link to meet. That meets 3 times a week and we would love to see you there.

And then Investor for Christ also is asking, what do you think about rural area apartment complex purchases that have low population counts, such as 16,000, as a first deal?

My very first place, Quincy, it had 7,600. Today it's up to almost 9,000. But, uh, I like small town America a lot. There's so many nice people here. I know all of my tenants. And some people online, really big, say, oh, you shouldn't have your tenants know who you are. Some of my tenants watch me on BiggerPockets. You know, it's, it's just different. And the cool part about small town America, there's a lot of landlords who don't take care of their property. I'm not saying that's cool, but what is cool is when you start buying those, the tenants start respecting you more as a landlord or as a manager, however you present yourself. And if you, you know, doing good business and taking care of the place, because they haven't had that before. And what they don't want to do is have you lose the property and it go back to someone like the previous person. So you get a lot more of that here than you do in Seattle. Seattle people don't care. They assume everybody's rich. We make a lot of money, but we also have a lot of passive expenses, passive income and passive expenses. And our tenants know that. And so they respect it a lot more than people at, let's say, the, you know, our Tukwila or Seattle place. It's just a different mindset of people who are living here. A lot more happy people too.

Yeah, we came into properties that were beat up. We actually inherited a lot of non-pays, especially through the beginning of COVID We bought properties that just had non-pay situations. What we found is giving them clear newsletters, being concise on exactly what we want to do with the property, and doing the basic stuff— not even major renovations, I'm talking about like replacing broken fridges and stovetops.

Yeah, just not even trying to fix them, just replace the appliances.

We've never had to evict anyone from our portfolio. 107 units, we've gone through zero evictions. Everyone started paying because we actually put the care into the property. You put the energy in, tenants appreciate that and they go, "Wow, I really don't want to get kicked out or leave, or I'm just going to start paying rent." And we have found that 100% true of 100% of our portfolio.

Yeah. Be a good human. I mean, it's just that simple.

Yeah. Michael Smith, he says, how much experience do I need before buying a 12-plex so I can be taken seriously and get financing?

It's not about your 12-plex experience. I mean, you're not going to have any experience. 3 months after I bought my first place, I realized that I owned it. I was mowing the lawn, I looked at the bricks, I was like, those are my bricks. It's just how it is. I didn't have any experience, didn't have any family that could help boost my confidence because they'd never done it before. And they're still just starting to get it. My mom and dad finally are starting to get it after 3 years. So you're not going to have that confidence day one, but your ability to be perceived as confident determines how far and how fast you can go in relationship to your goals. And that comes down to effective communication. We're buying the resort right now and we're set to make it happen. It's a million dollars down. It's the most money we've ever had to put down, but the owner didn't ask for proof of funds. They just know that we're going to close it. And it comes down to that confidence piece. Never done a million dollars down on a deal. We were working on a million down on an 87-unit, and then the seller renegotiated and we walked away from that. But we've never actually had to do it because we've gotten a lot of lower down situations, 5%, 10% down. And so even if you haven't done something before, if you can instill confidence in people and mainly in yourself, you can transfer that emotion to others. And as long as you know you can do it and you're not lying to people, you have good business ethics, then you just have to convince yourself that you can do it. That's it. You can start with 12, you can start with 2. I started with 12 because it was the opportunity in front of me, but I didn't have any experience when I started.

And I just want to highlight the fact Cody was 19, had no money, and had no real estate experience. Didn't have a real job.

Like, I didn't have income.

Yeah, I was going to say, besides failing as a broker for 6 months, he's like, oh wait, I can just be the buyer.

Yep.

And Cody's actually brokered some great deals, but he got to where he was at as a broker by buying properties, and then he can actually consult people on something he's actually done, and all of a sudden your business took off there.

Yep.

But your experience required to do this is zero, which is the cool part about real estate. You're an entrepreneur, you make it whatever it is.

And know that if they ask for proof of funds or they ask for, you know, experience level, they just don't believe you can close. That's it. And nobody asks us for proof of funds and no one asks for our experience anymore because of the way we present ourselves. If you can just skip all the extra steps and just present yourself as the professional, as the expert, People don't ask for proof of funds because the only reason they want to see that is because they don't believe you're real. They don't believe you can do it. And if you can put the deal together and you know that in your heart and you can present that, then you can just skip the whole confidence piece and start with—

Well, yeah, one more note on being relational in these. With that resort, we spent a half day with the owners getting to know them and the property, and then we lived onsite with them for 3 days before we actually got to even discussing what terms might look like for purchasing the property.

And I'm moving tomorrow, a month before we close. That is how confident we are we're going to do it.

And that's how confident the sellers are that we can do it.

And we've never bought a resort before. So same thing with the 12. You never bought a 12, never bought a duplex. Well, do the deal you want to do. We've never bought a resort. We don't want to buy an Airbnb, we want to buy a resort. So do the bigger deal if you can.

Hey, another one from Caitlin Kuzma. When you close a seller finance deal with an attorney, is the deed recorded and transferred to your name just like a conventional or commercial closing?

Yeah. So if you're in a— I don't know how it works exactly in title theory states, because I live in a lien theory state. I master the area I'm in. However, in a lien theory state, the way that it works is you're going to get the deed recorded with a title company. You go through Title NASCAR, or you get it issued through an attorney depending on which state you're in, and it's going to get recorded and you're on title. Now, on a seller finance deal, there's a promissory note typically and a deed of trust, and those get recorded. So if you call the title company, you can get a copy of the deed of trust and the promissory note, which outlined the terms, and the deed of trust is the collateral. And they put a lien against title. So they're not on title with you. You're on title by yourself typically, and they're going to be recorded as a lien so that if you go to sell it or you get sued, if insurance comes into play, whatever happens, they get paid out.

And we've actually had banks that didn't understand how seller finance notes work. So you're not alone if you're like, how does this get recorded and how does this work? We've had a bank come to us and say—

the day of closing.

Yeah, the day of closing after we passed underwriting and everyone was good to go, they went, Well, we're afraid that your seller finance notes are just going to get called.

It's like, well, that doesn't work.

The notes are structured the same way and recorded the same way. It is a note and a deed of trust that is all public record.

Yeah, but they didn't do the work. No. In your case, yeah, it's typically going to just be the same way. You contract for deed, then typically you're going to be buddies on title where you've got the buyer with equitable title and the seller with legal title. And when you fulfill your contract, because the contract typically isn't recorded as lien, it's the reason that you can do stuff like subject to, because there's no second lien, which would cause the first one to be in default. Lien just means loan. You can buy stuff and then you're both on title and eventually you can boot them out when you fulfill your contract, or you get booted off when you don't fulfill the contract. But plain seller financing in lien-free states, Very simple.

Uh, this is from Rebecca Marin. Uh, do you guys get leads from a certain system, or how do you find your leads?

Google Maps.

I love this. We get this question really often.

Yeah, we do it on Google Maps. Every building you want to buy, every owner you want to meet owns a building on Google Maps. Doesn't matter what country you're looking at.

They have a lot of satellites and a lot of trucks that map all these for you.

Yeah. Any country you can do this. You find the big buildings, you find the big roofs. The odds of it being a multi-family are greater if it's bigger roof than a single family. It's crazy how that works. You got to figure out who owns it, call them up, learn their story. And we actually have a video link on that.

Yes, I will drop that in the description below. I should probably just keep that as one of the recurring links for every one of these because that does come up a lot. Um, but I think it's one of our most watched videos of all time.

Yeah. And then from Bo Waldrop, he said, me and a buddy have got our first residential deal owner financed, but it needs renovation. We have a 1-year balloon, so should it just be a flip?

Well, not quite enough inputs to say exactly what you should do.

Um, what do you want to do?

Yeah, is really what it comes down to. If you want to hold it, I'd come up with the way that you're going to hold it, and that may look like refinancing. It may look like bringing on capital partners. Again, not enough inputs to tell you exactly how you should do it, but always start with the end in mind. So what do you want to do? What is the outcome that you are aiming on? If your goal is to be an owner of real estate, and right now you own a piece of real estate, we only ask two questions: how do we own it and how do we never lose it? So if you flip it, you're losing it. Now, some people— Cody's flipped one property before, he's done a house. Yeah.

Made 6 figures.

I had a duplex I planned on holding forever. Um, and cash flowed beautifully, and I ended up offloading that to buy into a 12-plex with Cody, and he made even more 6 figures. Yeah, I doubled the money that I had on the flip, and then Cody 3x'd it through really, really, really good renovations. Thank you for that. But that is something that you just have to look at. What do I want to do with this money? If you want to flip it and roll it into something else, that is something you can do. If you want to hold the property, I'd figure out how to readjust your debt stack, because the goal, if you want to figure about how you never lose it is a cash-flowing property with long-term fixed-rate debt. Uh, 1 year isn't long-term, so you just have to figure out how you're going to readjust if you do want to hold that, to get long-term debt and make sure it's not a variable rate.

You're good to go.

Great.

Uh, I'm Luigi says, what do you say as an introduction when talking to an owner to get them to stay in conversation?

Hi, my name is Cody. No, but seriously though, we have some videos on this online, uh, but it's just, hey, this, this is me. I say, um, let's say it's a 12-plex on Marina Drive because that was my script when I bought my first 12-plex in Moses Lake on Marina Drive. So I own a 12-plex. Uh, curious about your story, how you actually got to where you're at and ended up learning through that, that you started with a 6-plex and Started buying more and more. Eventually bought this 12 when he bought the majority seller financed. And I started learning seller financing from him. And then when I called this property neighbor, it's like, "Hey, I just bought a 12-plex. Saw you had a 15, never done anything that big before." I learned about their story. They're even bigger fish and they bought a lot more seller financed and they wanted to sell everything seller financed. And when I met up with him, he took me around in the truck and showed me around town and showed me his deals. And then I introduced Christian and then we met up. And we made the pitch, we want to buy everything from you seller finance.

And he said, that's exactly what I want to do, in his epic deep voice.

Yeah, we quote it all the time. I can't replicate it.

Yeah, I can get slightly closer than Cody, but still not even in the ballpark. 3 things not to do. I hate answering the question what to do with what not to do, but there are 3 things that almost everyone does that I just want to help you guys with. One, they don't care about your last name. They're not going to remember your last name. Don't start with, hey, This is Christian Osgood. That just tells me psychologically, hi, you don't know who I am and I don't know what I'm doing. So, hi, I'm Christian. Hi, I'm Cody.

Start with that. And don't ask if it's, you know, hey, is this Christian?

That's so stupid. That was number 2.

Exactly. That is the, that is the dumbest script. Whoever's promoting that, that is garbage. If you do that, it's just you're tanking yourself. Again, ask. Yeah, that's just dumb. If you're going to be wrong, be wrong. I learned that from my diving coach. If you're going to kick out for the dive and you're going to back flop, you're going to back flop with confidence. If you're going to flop this phone call, you're going to do it with confidence, but don't ask if it's them, assume it's them and your success will go up. Yeah.

A huge part of navigating these is just thinking, if I say this, what is the other party going to think? Just play out both sides of the conversation as you practice this. It gets easier. But if you ask me, is this Christian? What is that actually telling me? I don't know this person, they don't know me, they probably are either trying to sell me something or they want something from me.

And I'll just hang up on you.

Yeah, I'm like, is it Christian? Yes, it's Christian. Goodbye. I'm like, do I owe you money? Is this a— like, what's— did my property burn down? Um, yeah, so, so cut that out of your scripts. And then I had a third thing that was important, which was don't overshare. A lot of people— because we tell you, hey, be relatable, find a point, communicate your goal and the significance behind that goal, share enough to get there in person. Well, yeah, what we're not advocating is dump your life story onto them in the beginning of the call. They don't need to know, hey, I'm Christian, I'm 30 years old, I want to retire my wife, I want to have kids, I want to move to Texas. It should be 3, 4 sentences really quick. Hey, I'm Christian, I own the duplex down the street from you. I Trying to retire my wife, just came to the realization one duplex at a time is not doing that. I saw your 12-plex here and I was actually curious how you got started.

One rental at a time works, just a little slow. Yep.

That's as long as I would make that intro. I've communicated enough to get started and I've been sincere giving a little piece of me and then just talk to them like a normal human. Don't data dump on them and go, this is everything I've done, this is where I want to go. It gets overwhelming. Calm down, be a human. First name, assume that you got their name right. Hi, this is Christian Osgood. John, I had a question for you. If it's not John, let him tell you it's not John. Don't ask if it's John or not, and you'll be just good to go.

Cool. Investor for Christ said, what are your plans for the resort? Will you keep it as a resort?

Yes, apartments. It's going to stay as a resort.

Those would be weird apartments, and they are an awesome resort.

Yeah, it's a cool resort. I'm going to be living there because I I'm over my current apartment.

Yes, Cody's apartment is not a whole lot bigger than the tiny room that we're in right now.

It is small, it costs just about $1,800 a month with utilities included, and it's not a great location.

Cody will be moving to a Class A, super cool building that we will share all up and down our channel.

And if you want to come visit and discuss how we structured that deal, we're doing not only seller financing, we're also doing 2 simultaneous lease options of which we can execute with seller financing. You'll learn how we did that. Come visit the resort.

I'll be there. I'll be there about half the time.

Okay.

From Caden, what are the clauses in your contract or cases in which a seller acting as the bank could try to foreclose on you to take the property back? Are the rules the same or similar to a conventional financier?

I'd say it's more in our favor than it would be with a traditional loan. I mean, if we're going out and getting a conventional bank loan, some of the commercial clauses, if you have a net worth drop significantly all at once, something crashed, they can call your notes due. We don't have that on seller financing.

That happened in 2008 to a lot of people.

Yeah. You go into technical default because the net worth you had to have to back the loan is no longer your net worth. And all of a sudden you lose everything because they call your note like, hey, you have 60 days to pay this off, refinance it. And if your net worth is super far down, how are you going to go get a loan? Because you typically have to back those. And so we don't have that in seller financing. It's very cut and dry, and we typically don't give any clauses where it can be called due. We like long-term fixed-rate debt, and we don't want stuff that can get called early. So we make sure we don't have any clauses that allow for that.

Yeah, typically they're a lot simpler, especially when you go after that relationship, you have trust Now, one thing you never do is you never trust without drafting paperwork. We've done that on small things and it's burned us 2 out of 2 times.

Yeah. Rule number 36, which we'll have a video many weeks from now, because I think we just did 18 or 19.

Yeah, we just concluded 18.

So we're halfway there. Do business with people you can trust but have contracts in place so you don't have to trust them.

That's best for all parties.

From Esther Cho, how to agree on the rate for owner financing?

Whatever you want. It's all made up.

We did one where the owner wanted 6% and I was like, it only works at 3%. I don't think we're going to do the deal. And he's like, oh, I'm fine with 3%. And so we got that 3% with a reduced principal payment instead of being on a full traditional AM schedule. It's just an extra $1,000 a month of principal pay down. For the life of the loan. So you can get that creative. We haven't done them, but I've seen people do 0% interest. They're like, "Well, you can have your price, but the only way this cash flows is with no interest. So I'll just pay your price and we'll do a 3-year term or 5-year term and away you go." I've seen all sorts of stuff, but the beautiful thing with creative financing is figure out what matters to them. Some people are stuck on price, so don't negotiate price. Some people are really stuck on interest rate. I've seen this happen more recently with interest rates spiking. People are like, I have to get 7% interest. It's like, well, we might need to work on the price or the length of this to make that interest rate work. Just figure out what they want to do and then draft it around that. The interest rate, just again, how do you buy it? How do you never hold it? Cash flowing long— oh yeah, how do you never lose it?

Yeah, how do you never hold it?

That's, um, how do you always hold it? How do you hold it forever? But, uh, yeah. What you want to do is make sure that you can hold it, which is cash flowing, long-term fixed rate debt. That's how you determine what that interest rate needs to be.

From Carlos, if you're just starting and want to get into multifamily in the long run, should I get my license?

Do you want to get your license? That's the only question you should be asking yourself right now. If you want to do this as a career, then get your license. But if you want to do it as an investment path, you don't need it.

It will do very, very, very little to help you be an investor. Now, being an investor can make you a great real estate agent. So if you want to be a real estate agent, 100% become an investor. But it is just not helpful. You learn nothing in the class and you really learn very little by helping other people get there if you haven't been there yourself. So easiest way to become an investor is to be an investor.

Good. Uh, Ruth asks, can you guys share some things that you've tried that didn't work out but that you learned from?

Oh my gosh, there's so many.

Yeah. I mean, with past business partners, we've done what we promised we would do before getting all this stuff signed around, and then they decide they get a better deal if they don't do their obligation, and then they get annoyed when we ask them to do what they said they would do. So we would get stuff signed before we actually perform.

Yeah, if you're going to honor a handshake, make sure the other party honors it at the exact same time in writing. If you shake our hand on something and we agree on a deal, we will always do it, period.

And if you renegotiate after we shake without, you know, these ridiculous circumstances changing, then, um, we'll never work with you again.

Yeah, like if you're in feasibility and something comes up, you're like, we need to change terms, that's normal. If you give us a price you want us to buy your property at, we write you an offer for that price, and then you renegotiate against yourself, you're on the blacklist, you're dead to us, we're never doing business with you. So—

[Speaker:ROBERT_LEONARD] Cadence asks, "Do you guys make your own contract for seller financing, or do you use your state's standard purchase contract and just add addendums for the financing?" We had our attorney draft it up specifically for the deal.

Does it cost more money than using a boilerplate? Yes. Is it more suited to the deal? Yes. So make sure you just get deal-specific docs. Yeah.

And a lot of it does have the state-specific paperwork on it, but any additions that have anything outside of the norm, your goal is not to practice law. Let people who practice law practice law. So if you have anything in any way creative, just have a lawyer draft it. Okay.

Uh, San Shan says, I've been trying the approach you both have advocated for, but folks are saying they're busy or don't have time to talk. How do you recommend countering that? They're usually open to calls but not to in-person meetings.

Well, the only reason they wouldn't meet with you is they don't have a reason to, a valid reason to. They would make time if they really knew what you were trying to do. Right. And so self-reflect, figure out, okay, why would someone not meet with me? And it could just be that the communication wasn't very solid and they don't think there's any reason to meet. You may not have asked at all, like, hey, can we grab coffee? It's on me. Like, some people just forget to do the ask. It's— and then they think they did. And if you record it, listen to your call and then get your takeaways that you can, because A lot of people, when they're making their first calls, get so nervous they forget, and they just end the call and they forget to ask what they think they did. Happens to a lot more people than you think.

Another thing people will do is they, they don't know when to wrap up the conversation. You want to do it when the momentum's high. So you build rapport, there's a little bit of back and forth, and right when you guys are enjoying the conversation, you can feel the energy— your goal was never to form a relationship over the phone, it was to get a meeting where you form a relationship. So when you get that energy going, the instinct is let's keep talking until the conversation dies down.

Yeah, you don't want to do that.

End it right there. You've communicated your goals, you've got a little bit of their backstory. I want to hear more about this. I'm going to be in your area next week. Are you available on Tuesday? No? How about Wednesday? Like, just book the meeting and get off the phone because now they're like, oh, I want to engage in this. There's energy in this conversation. I've seen a lot of people just communicate their whole story and they go, 'Can we meet?' And they're like, 'I think we talked about everything that we need to talk about.' Don't let them tell you everything you want to know on the phone call, because you want most of that conversation in the meeting. So those are just some ideas. I'm trying to diagnose the, uh, the vehicle, um, based on the noise. I haven't actually seen your phone call to come in there and specifically diagnose what the problem is, but those are some general ones that, that might help.

Do we have a bunch more questions?

Not that many actually.

Sweet.

Good.

We're going to have to head out in just a minute.

Oh, okay.

Let's see here.

So actually this is the last one from Caden. He says, when you guys want to refinance the property with another party or bank down the road, does the old seller acting as the bank have to agree to it?

No, no. They're just a lien, at least in a lien theory state. They're just a lien on title. In most circumstances. So you can just refinance them. Now, could you have a prepayment penalty? Oh yeah, if you've got penalties for paying people off, it may be advantageous to get that waived.

Cody's first deal, what was the prepay?

$150,000 for 10 years, flat fee.

You're probably not going to refinance that.

Yeah, it's 15% of the loan amount, so it's actually like $147,000 today, but It's a lot. And after another 4 years, it goes down to, I want to say, 10%. And then after 3 more years, it'll be zero. But you may have to get that approved for payoff. And by may, I mean you will have to, but they can't just flat out say you're not allowed to sell, you're not allowed to refi.

Yeah. And those aren't in every note. Most seller contracts, we haven't had prepays in. In fact, a lot of them would love to be paid earlier. And it's the same way with banks. Some have a prepay, some don't. It just depends on what you negotiated in the initial agreement. Yeah.

But that's—

Do we have anything else come through?

We have one more.

Okay. We'll take one last one, then we'll wrap.

Yeah, we gotta go. We're in Moses Lake, so we got some stuff to do.

So this one's from Carrot Z. He says, what do you generally look for in additional partners when you engage in seller finance scenarios?

Additional partners, typically money. People ask how we pay bills. Well, with money. So what we like to do when we partner with someone is we'll bring them in as a partner. They'll get their share of the cash flow and/or the tax benefits. It depends what people want. You can allocate stuff however you want. You just have to work with the right team and eventually we'll cash them out. We're arbitraging their money and their time being alive. I mean, there's only so much time I've had to make money. I don't have a ton of it, but I can use money other people have earned and multiply that through getting efficiencies up on assets, getting the incomes up, getting the expenses down, building up the cash flow and the equity to where eventually I can re-leverage, cash them out, and they make whatever they wanted to make. We just typically ask what people want to make and then we set it up to where that's the buyout. And then we keep the real estate. We're arbitraging their money for time.

And number one thing I look for, by the way, in there is people that we trust. We work with very few partners because partnerships are very, very, very hard to do.

I—

from people I hear, way over 50% of the stories I hear about partnerships end in a negative story. So you want to have very few partnerships. The first thing we look for is trust. And then the rest of it is, is this the right person where everyone's objectives are being met? Yeah, but you know the circle drill we talk about all the time.

You got to make sure the goals align, but we talk about in a lot of other videos.

So yep, that's what we have time for today. Uh, we'll have a little bit longer session next time, but thank you guys for joining us out of Moses Lake, and we will see you soon. Like, subscribe, follow, share.

If you haven't gotten your Cody shirt, you should get Cody shirt. We appreciate Vukomir coming in all the way from Maui. And if you want to come check out Moses Lake with us, check out the portfolio Shoot us a message. Now we have to hit end.

Okay, peace out.