How to Invest in Real Estate At Any Age - Creative Finance Live

Here we go, look around the camera.

You need to get slightly, slightly—

ah, well, I think we're live.

And look at that, we are live. Hello and welcome back to Whiteboard Wednesday Live. This is episode 6.

I'm Christian wearing my Cody Things shirt, and this is Cody not wearing a Cody Things shirt.

We will fix that for next week, hold us to that. However, if you want a copy of these shirts, they're just sold on Amazon. We get asked that all the time, so I'll drop a link below. Speaking of links, we just shot a video on the first question that we're going to cover, which is how did you get started at such a young age? We just did a video with our friend Dion about how to get started at any age. He's a couple of years older than I am, but Cody, I'll open up that to you. You started extremely young.

Yeah. So the main thing comes down to if you want to go invest in real estate, invest in stocks, you get to go pick what you want to do. You better go out and meet with the people who have done what you want to go accomplish. So if you want to meet with someone who made $1 million in real estate, you should probably— if you want to go do that, you should probably go meet with people who've done that. It's just that simple. And so regardless of age, think of youth as time in the business over time on the planet. So whether, you know, you're starting out and you're in your early 20s or teens, 30s, or you're in the back half of life after 50, regardless of your age, youth is time in the business. So if you're just getting started, go meet with people who have done what you want to accomplish, and it'll help you catapult into your investment career. Perfect.

By the way, we're going to ask a few questions as we always do, or answer a few questions from the, uh, chat that we've had throughout the week. Anyone who's commented on YouTube videos, then we'll get into your live questions. I see A hi has come in from Theodore, so hello to you. Feel free to ask anything throughout this and we will answer. I don't have another narrator, so if we look down, my screen's below. First questions: could you please share a few introductory lines that you would typically use when cold calling owners? I'll take this one first really quick. So when we first call, the first thing we don't want to do is be transactional. Um, another thing that a lot of people do that you don't need to is they give their first and last name. You're going to start with who you are and why you're calling, which is You'd be amazed how many people skip. Hello, my name is Christian Osgood. I was calling about your property on 123 Main Street. I've given them a subject and who I am. Now, if I own a duplex on the street next to them, I'm probably going to call someone who owns a 6-plex or 12-plex.

And then say, we're property neighbors. Hello.

If you're not a property neighbor yet, hey, I'm an aspiring investor in your area. Tell them one thing about what you've done. I bought a house in another market. I have a rental in another market. I'm trying to get into the game. I want to retire my wife through real estate. I want to retire my mom through real estate. Just share something about you. We talk about a circle drill often, but what you want to communicate through the call, start with relatability. At some point you're going to communicate your goal and why that's significant. So the first question I'd probably ask them, you know, hi, it's Christian. We're property neighbors. I have a property right down the street. Started with duplexes and realized it's going to take me way too long to reach my goal of retiring my wife. I saw your 12-plex and I was curious how you did that. Now, most people, when you call and ask about the property, they're going to say, I'm not selling, because they get beat up by a lot of people to buy. We're not being transactional. Awesome. Don't know how I'd buy a 12-plex. I've only figured out how to buy duplexes. I actually spent most of my available cash on a duplex. I'm more interested in just how you got to 12-plexes. Did you start there with a conventional purchase or How did you get to that building? Because that's what I'm trying to do and I haven't figured it out yet. Like, that's how I would handle that conversation.

Yeah, and relatable points are going to get you to the table, and you should have an objective going in and a takeaway coming out of that call. So when you're making the phone call, you share your relatable point. If you're property neighbors— if you're not, then you can't use that one— but you, you find a reason to relate to them. Hey, I'm trying to get into the game. I saw you owned a sixplex, never bought anything that big before. How do you get started? And our goal, at least my goal, was to, okay, I want to go book a meeting with them in person. So you need to figure out how to navigate from point A to point B, which is, okay, they don't know who I am to they're willing to take a coffee meeting with me.

Next question is from Roger. Uh, we actually got a bunch of questions from Roger, so we'll probably answer a couple of these as we go. But, uh, the first one that I have here, why mess with multiplexes and not single-family units?

Oh boy.

Well, we are called Multifamily Strategy. There is— that is not accidental.

There might be a little bit of bias on this one. However, if you want to go buy houses, that's great. It's a little easier to add 20 at a time than it is to add 1 at a time if you want to build cash flow. Because if you have 20 families paying you, even if 5 of them aren't living there, if there's 15 units paying you you're going to make more money as a standard than you would with a house. Even if you bought 10 houses, yes, the rent's going to be a little lower typically on apartments than it will be on houses, but you can buy so many more under one roof. So that, that is the reason that we do it, because the scalability— it's one closing, one title and escrow, one down payment, one loan. The simplicity is just It's there. And that is what we want to brand off of is simplicity matters.

And something that really resonated with me that I heard in a meeting was you can't have enough bottom line income. That's your actual cash flow without a big enough top line. I just saw someone post today about a house they just bird. The numbers were fantastic with percentages. They got in for less than no money down. They made a profit, pulled out more money than they put in. Awesome. However, they're like, and now I'm cash flowing $500 a month. Well, that's fantastic. $500 a month does not solve any of my problems. It doesn't let me live the life I want to live. I'm going to do a lot of transactions to do that. Our 38-plex, there's enough top-line revenue on that to retire us one transaction by itself.

Yeah, and that's with that. So it's just something to think about. Yes, $500 a month in net cash flow, if it's actual net cash flow, it's amazing. And I have deals that do that and It's just easier having done both to look at deals that can cash flow $10,000 to $20,000 a month than it is to buy deals that cash flow $500 a month. And it just comes down to what you're looking at, who you're calling. The think is a little bit bigger, but the actual process and the work to buy that asset is about the same.

And a lot of people do start— adding one more thing to this— they start with houses because it feels like a natural step. The way that we're trained to think is we go from first grade to second grade, second grade to third, all the way through, you know, all of your 12th grade. Some people go to college, some people don't, but you do things one step at a time. Same with a career. You start as an associate, then you get an executive, and then you're in management. You don't have to do that as an investor. You start where you want to start. You do the business that you want to do. If you want to own houses and that is what you want to do, You can do that, and there's a way to play that game. We want to own bigger, we want to own multifamily. Set your goal first and then pick the assets that match that goal.

Um, do we have more questions?

We have a few questions out of this, and then we'll jump into the live, and I do see them, uh, filing in. Um, do you have a favorite spreadsheet you like to share? This is also from Roger. Uh, we have a very, very simple spreadsheet that we use to analyze properties. Ultimately, what we care about is cash flow. I don't care a whole lot about the day one cap rate. By a whole lot, I mean, I don't care at all. I care about where the property is today, if it cash flows, and where it's going to be in the future, because it answers our two questions.

How do you buy it? How do you never lose it? Now, some people are like, well, I would never ever do a deal that's below a 5% cap rate, meaning if you paid cash, made 5%. Well, okay. But just to put numbers out there, Real estate's about a spread. And the reason they wouldn't do that is they're thinking very conventionally of what they can borrow. If you can negotiate a seller finance deal at a 4% cap rate and you can borrow at 1% interest for 50 years, your odds of making money are pretty good because you got a 3-point spread there. So it all comes down to, okay, what's the opportunity and can you borrow cheaper than you can earn on long-term fixed-rate debt that cash flows? And that's it.

Last question I had preloaded here from our comments, a very quick answer to it, I believe. Is getting home insurance as an LLC more difficult? Also, what type of insurance do you guys carry as landlords?

Okay, well, we have a lot for the different companies. We use American Family for a vast majority of them.

I have a couple with State Farm, just like you would any— like if you're financing— or not financing, insuring a house.

Yes, you get an insurance broker and they'll they'll help you find a solid program. And so if you get an insurance policy, and I've done this multiple times, I swapped around. I used to be with Trask Insurance in Central Washington and I ended up going with Mutual Enumclaw, and then I moved it to American Family. You can get insurance in place. Just make sure that your replacement value is based on today's pricing. Prices have gone up a lot to build, and you wanna make sure that if it burns down, if something goes wrong, that you have enough money to rebuild a similar asset, because some people underinsure and then they can't build what they had, and it's a huge loss. You don't want that.

Yeah, and it's, it's very simple. Usually when we go about getting insurance, uh, unless they don't have enough images available or we have to do an extra step, it's about a 10-minute process for us between calling and getting the confirmation that, hey, uh, we have the product, we're ready to go, we're in process. They do most of the work for you. It's very, very simple.

Do you have any other questions there before we move on to the live?

I think that is what I had for us to cover, so let's dive right into the live.

Theodore Davis. Hey, we share a last name. Theodore, how many people or how long were you calling before you got an in-person meeting?

Oh, I'll, I'll start. So I actually, my first transaction, uh, off-market floated to me through the office that I was working in. They just happened to know someone who was considering selling. Um, so for that first transaction, the first conversation I had No calls, no meetings. After that, bought a duplex. It was on market, didn't require a meeting. Um, once we started actually doing meetings, my first call, could I can tell you, was terrible, uh, because I don't script these and I don't— I learn by doing.

And just to set the scene, I, I had done some owner meetings well prior to Christian. I'll talk about mine after this, but we were sitting in Ellensburg. It was a little— there was a little coffee shop, Starbucks, and We'd just gotten our Americano as we were walking out, and I said, Christian, call this person. Yep.

And Cody's like, there's two ways you can take this call. You can ask them if they're willing to sell, or you can ask them how they got started. I ended up doing both. I had no agenda. I am one who, I see a number, I call it, for better or for worse. I had a terrible first call. I learned a lot. My next call was better. For me, my third call, I booked a meeting with a guy named— he goes by Smiley. He's in the market that we're in. Great guy. We got lunch, actually brought one of our, uh, one of our mentees out with him, and, um, we had a great time. Took me 3 times to meet an owner. Um, few calls after that, um, actually had an owner meeting with a relationship Cody has already been working on for a while.

Quincy. Yep.

Um, and got to see some of their portfolio and how they got started. So it actually doesn't take a lot. Just know that I was cold calling for a long time as a career before that. It might take you a little bit longer. Be okay with your first few calls are probably going to suck, and that's totally fine.

And my first owner call, I booked the meeting and ended up buying 20 apartments from him. So it is very possible to call someone you've never met, book a meeting, end up learning how they did exactly what they did over time, buying their property, I ended up first starting with a 12-plex. I didn't buy it right away. I learned the story first, but ended up buying a 12 and then a 6 and then a duplex. So you can definitely do this thing one-call close, but it's going to depend how comfortable you are on the phone. I wasn't comfortable. Uh, I was very nervous. I think they knew that when I was calling, which is probably why they agreed to meet up. So don't be worried no matter how your skill level is on the phone. But if you make the phone calls, people typically do want to help you.

Next question is awesome. Uh, just, it just scrolled up past what I can see. I will pull that down just a bit. Hey guys, how, uh, when you connect with owners, how do you get past the introduction? What do you say? So assuming this is off the front of the call where he said, hey, how did you get started? Um, it goes back to the circle drill. Once you share relatability You're going to transition to your goals and you want to start learning a little bit, not a ton, because you want to book that owner meeting and have the conversation there, but you want to learn a little bit about what their actual goals were. I would ask questions around that.

Yeah. Once you figure that out, if you just want to book a meeting, ask, right? I mean, it can be as simple as, I'm curious to learn more. Could I, could we grab coffee? It's on me. Well, I don't live there. Like, okay, well, where are you at? Well, I'm actually over here in Ellensburg. Great. I'll drive. And I've done that before. I've driven 6 hours to meet with someone. I flew 8 hours to meet with someone. So if you're committed, if you stay true to your purpose for the call, you don't try and buy, you try and learn. People are typically going to say yes.

And at the end of the day, you're having a conversation with someone. Uh, when you're first doing this, it's going to feel a little bit awkward. It just will. As you do this a few times, you're just having a conversation with another person. I recently cold-called an owner of a cleaning business we were considering adding to our PM company. We ended up deciding not to, but they were willing to work with us. In booking that meeting, we talked a whole lot about how she got started, her employees. She told me a lot about her experiences. Hey, as a woman in business, this is what I experienced. While it's not directly relatable to me, It was fantastic to hear, and she had a lot of thoughts of how it's going to be different if I was the one buying the business from what her experience was. Not how I expected that to go. It's important not to over-script these because I definitely didn't call the owner to learn about how it is to start a business as a woman in the Seattle area. But we had a great conversation, we built rapport, we got to connect our stories and shared a lot about some of my team. And ultimately You just want to make sure you book that meeting when the conversation's at a high. The one mistake I see a lot of people do is you over-talk it, conversation kind of fizzles down. It's, well, let's meet. They're like, well, I think we talked about everything we need to talk about.

Yeah. Don't overdo the phone call.

Very simple. Share your goal, talk to them a little bit. When you get some energy going, you feel some good synergy. Hey, I really want to continue this conversation. I am available next Wednesday for coffee. Close it down, book an in-person meeting, get off the phone. That is your entire goal, is meeting someone in person.

Next up from CK: Hi guys, I've been calling around Texas looking for 10 to 40 unit properties open to seller financing. Do you guys have a mentor program, someone who can guide me through the process? So we do, uh, themultifamilystrategy.com. You can check that out, or you can just text us. Our phone number is linked in a video we put, how to find Every property owner ever. That's on YouTube and that's for free. So if you just want to give us a call, go through that. I showed how to find any owner ever, and I use myself as an example. So my phone number actually is in that video. So if you want to reach out, or you can just Google Christian Osgood phone number in, uh, Renton. Yes, it'll pop up. Don't call his mom. That one tends to pop up.

The two, two paths you can go. We For everyone who's getting started, if you're after the information, exactly how I went to— from where we started to where we're at today, we put it all in our course, themultifamilystrategy.com. We do have a mentorship group. I 1,000% recommend get the information first. And if you're like, I want more one-on-one and group training, we have a small group that gets together 3 times a week. We can talk about that separately because Whiteboard Wednesday is not an ad for all of our services. But if you're looking for information, 100% start with the course. Less expensive, and it will have everything we did to get where we're at.

From Boomflix: When you are calling a seller's agent, how do you propose or negotiate seller financing? Starts with a question. Are they looking to be cashed out, or would they be open to holding the contract? It's just that simple. And it starts with a few calculated questions. Starting out, you always call— when you're calling an agent, you always want to gauge availability because typically agents are lazy and they don't reset the data online. And so it could be pending but it doesn't show as pending, or vice versa. You want to call them up, say, hey, what's availability looking like? And then we typically dive into some open-ended questions, let the broker sell on the location. From then, I want to transition into, okay, what do they not like about the property? Because everyone loves to tell you what they love about the property, but we want to shift into, okay, what do you not like? After that, you'll probably recognize this because I got a lot of this studying under Grant Cardone way back when. After that, we want to ask how the bank's going to look at it. And this is the key piece when you're looking at the seller finance game, because if the property is not performing well, well, it's probably not going to finance. And so you can start peeling away the layers of the onion here and say, okay, well, the bank's probably going to want 50%, 60% down. And I've heard that on deals. It's like, well, why is that? Well, it's not performing very well. Okay. And you got to think about this is people typically only get price or terms. They don't get both. And so if the seller wants their price, that's your opportunity to come in and get terms. And you know that they're probably not highly leveraged if it's not performing well, because they wouldn't be able to support the negative cash flow and they wouldn't be able to get the loan in the first place. So that just presents in my mind an opportunity. Oh, they probably don't have a lot of debt because they can't service a lot of debt. Lender's not going to give them a loan. Lender won't give me a loan. So they're probably going to have to finance this. And that's just a little workaround going through those questions. All right. Next up from Andy, how do you get past the fear of making the wrong step and putting yourself in a hole with your first deal?

Ah, so, um, gosh, speaking of the course, we talk about a, uh, a square drill that actually really helps with this.

But we can paint it out in a picture, right?

Yes, we can. So the first step when you're learning how to play the game is you identify the things that you know that you don't know. And as you study them, those go into a box called the things that you don't know you know. You know a lot about them, but you haven't actually done it yet.

Now, in theory, you're an expert because in theory you've studied a bunch. You know the little intricacies of, you know, theoretically this makes sense.

We have a parallel parking model for this. First time you've ever parallel parked, say you're in your family's old Honda Civic and you go ahead and you nail it on your first try and you're like, oh wow, awesome, I'm a pro now. Now you take the Ferrari, the dream car, actually don't care for Ferraris as much, but you take the Aston Martin, you have some really cool car you want. Second time ever parallel parking, it's a big deal. It's gonna be a lot scarier.

You don't—

you need practice to be a master. So when you're doing your first deal, no matter what, you're just not a master because you haven't experienced it yet. So how do we address this? You need to surround yourself with the right people. You want to have someone in your corner who has gone through the process before, who can help make sure you don't make the same mistakes. This could be a mentor, this could be a partner, though I'd be very careful with that because Cody and I both know what it feels like to be burned with that. Um, but make sure that you have someone who can guide you through the process. It could even be a really good broker that you're working with who will guide you through, help you with the underwriting and make sure that you're getting into the right deal. That's the best step I can tell you to do is commit to the deal, know that you love the deal, and then find someone with the experience to help make sure that you don't add extra roadblocks.

Yeah. You can't do a good deal with a bad partner and a bad partner could just be incompetent and not know it. We've, had those before. And that's like the baby, that's like the baby snake that doesn't know when to stop inserting venom. It's just like, it keeps on going. And it's awful. We've been through that. So don't need to do a deal with a partner on your first one. But as far as a whole goes, I mean, this is what Christian did on his first few deals. If his first duplex went wrong, his job could support the payment. His second deal went wrong. His job could support the payment. When we did our third deal, his third deal, my fourth deal, it was 38 units. We could not outwork the payments on the 38-unit. Wouldn't have worked. And today our whole portfolio, we cannot outearn that if everybody stopped paying. I mean, it's just not feasible. Well, you know, once you get past 100 units, if you have debt, even if you don't have debt, utilities alone are massive bills. So in the beginning, you don't have to completely burn the ships. Christian didn't. I did because I had no money and I wanted to play the game. But you don't have to do that. If you have a job and you're making money right now, even if you're making, you know, $3,000 a month, if you get a deal where you're— you, let's say you do a house hack and your payment is $2,000 a month, well, be very uncomfortable. Maybe get a roommate, but you could flow it. Right. And so that's the mindset you could have going into that. But if you underwrite based on cash flow, income less expenses equals cash flow, make sure that number is positive and your odds of success and having fun go up.

The next one is directed directly to you, Cody. Okay, Cody, can you talk more about your first deal?

No. Yeah.

How you borrowed the terms, how to cash flow the whole—

so the numbers, the very first deal, 12 units, Quincy, Washington, Beverly Apartments. Going and trying to renovate some of those units right now. But I bought it, it was pretty turnkey, it was fully occupied, it was listed on the market 561 days, or 551. And so I ended up writing that deal up, and it was with seller financing. I didn't know about seller financing prior to this deal. There was a 22-unit that was off-market for someone else in the office, and that's when it first sparked the idea of seller financing. And then I read Deals on Wheels by Lonnie Scruggs, but I looked at this deal. I was like, "Hey, it's seller financeable and it makes about $10,000 a month." And I called them up. They wanted 6% interest. They wanted 20% down. Problem was I didn't have 20% down. I didn't even have 1% down. Problems. But I got them down to— they accepted an offer, 15% down payment, 6% interest, 30-year amortization, no balloon. Now, if you're not familiar with commercial real estate, commercial residential, which is 5+ units, 30-year amortizations with no balloon are what we call unicorns. Doesn't happen. You're not going to get that from a loan. Maybe you could get a 35-year HUD loan, but you're not going to get this typically on a deal this size. And so great terms. Well, we started going through it, and this was before I met Christian by probably a year and a half, 2 years. I was going through due diligence and they were sticking on some terms. They wanted some wicked prepays, meaning if I pay them off early, it would be X amount more. And so we had to negotiate on that. I gave them that term, but instead I was like, "Okay, we'll do this, but I want 10% down." So I saved another 5%. Now granted, 5% on $1,125,000, it's a lot of money, and especially on your first deal, multiple 5 figures. So it was 10% down, They're financing 90% of the purchase. The mortgage was $6,078 per month. That was with all the fees. And it made just shy of $10,000 a month. It was like $9,740 in rental income and about $250 a month in laundry. So it was $10,000. And so it cash flowed. Now, yes, there are utilities, taxes, and insurance. There's all those payments. And I had my hard money loan. I borrowed $125,000 in second lien position. We talk about Lean Theory and other videos. But that payment at 12% interest was $1,250 a month. And so added everything up and I cashflowed about $800 per month, bought it with a signature. Now there's a lot of people out there that are getting started and they're like, well, $1,000 a month or less on a 12-plex is terrible. Like, well, yeah, but you pick your problem. Today that deal cashflows over $3,000 a month fully occupied and we're getting rents up as I'm going in and renovating it. That's my only deal I don't own with Christian. I kept that to myself, but, um, I have one duplex without Cody. Yeah.

So he'll always have 10 more units because I partner with him on everything. It's fun to do things by yourself, but, um, I like doing deals with Cody more.

But once I get the rent up, it'll cash flow about $3,500, $4,000 a month. And the day that I refinance, when my prepayment penalty goes away, it'll be closer to $5,000 to $6,000 a month cash flow. But that takes time. I've owned that deal for almost 3 years now. And, you know, I've been— I'm grateful for the fact that the government has been blowing money and printing a ton of it. That helps. But at the end of the day, it cash flowed day one. The other thing is I had to go earn money to pay off the down payment, hard money. There's not a free lunch. You can delay the bill, put it on your tab, but eventually you leave you leave the table and you do have to pay. So I ended up paying off that hard money loan 2 years after I bought it.

That's something we get a lot when we'll have some 18, 17-year-olds reach out, go, how did you do all this without money? Um, we delayed. And then they go, how do you pay all these balloons? Well, the answer is with money. And sometimes you have to go out and actually earn money. Just because Cody hasn't had a job doesn't mean Cody hasn't had to work. Oh my goodness, we've had to actually make profit and start businesses and, um, It— you said it perfectly— is not, uh, it's not free, but that's how Cody got started. Uh, the next question's from Andy. Uh, so I'm planning on doing the course in October and reaching out about mentoring after. I was wondering, uh, what kind of mentoring you do? What's your style? Excited for the future. Well, Andy, we are excited to see you soon in the future, um, both in the course and in the mentorship group. Um, as far as our course style, it's going to be— some videos are 30 seconds. What we're supposed to do is 4 to 8 minutes. Yeah, exactly like this.

I recorded a 26-second video and Christian I was like, that's not long enough. I said, watch the video.

And turns out, if you say everything you need to say in 26 seconds, it's long enough for us. So, uh, did we follow all the rules for the perfect course? Absolutely not. We, uh, we've always played by our own rules. However, there's about 150, 160 videos, 20 sections.

Some are up to an hour long.

Most of them are going to be in that 2 to 6 minute range, very short little videos, little mini quizzes going through each of the concepts, how we laid out our goals and learning style, analyzing a deal, how we actually script for broker-owner calls, etc. That's on the course. As far as mentorship, we kept it very, very simple. We meet 3 times a week. Mondays is open forum. We sit down kind of like this, but it's in a small group. It's a lot more intimate. We have a back and forth conversation.

You can actually talk. We haven't figured out how to get everybody to be able to talk on these lives.

Tuesday's deal analysis, which is my personal favorite because that's what most people need the most help on. We take the deals you're working on, the deals that we're working on, On the rare occasion the conversation dies a little early, we'll take a deal that we've done before, but we break down and analyze deals and we get creative as a group on if the deal didn't work, how would you make it work? And we've had some really cool ideas come out of that. Uh, last is on Thursdays we meet, and that is a structured 45-minute course with Cody and I where we go through usually more of the complicated subjects that don't make sense on YouTube. I mean, no one would watch them because it's kind of like out there stuff, but we'll get into more of the technical coaching. We do that on Thursdays, but that's our style. It's going to be interactive mentoring, and the video series is going to be just document everything we did step by step and how you can do it too.

From Tyler Sierra, how do you suppose your business model would change if CoStar hypothetically gave you free-ish unlimited access? Well, that is funny because we actually just bought, uh, CoStar access within the last 5 days. Yeah, so that's ironic. However, uh, we didn't have that in the beginning.

Compared to their old pricing that I used to sell on, they gave us free-ish access. Um, it cost very little of our cash flow and has a lot of the data that we would have used. Um, it saves us some steps, it saves us time.

And I was looking at the CoStar data, and I, I've spent countless hours so much time mapping out all the data for Grant County, and in minutes I was able to find all the data I spent years building. So it would have saved a lot of time, but I learned more doing it the way I did it than I would have had I had to go start.

If anyone wants a job in real estate— I'm not one who wants a job— a good place to learn. And, uh, turns out if you want to, uh, sell awesome data and have a monopoly on it. It's really easy to sell data when you're the only ones who have the data. Um, okay, let's see here from Ford Green. Came on your BiggerPockets episode— oh, came upon your BiggerPockets episode today. Cody, congratulations, uh, for your success. Thank you both for sharing your knowledge and education. Oh, there's a statement, but thank you very much for the statement, and thank you for watching the BiggerPockets episode. If you missed it, Cody has the most BiggerPockets episode, uh, most watched BiggerPockets episode.

Now you're missing words of all times.

Well, that is okay. Um, from O. Johan, how do you follow up with your contacts, uh, to keep the relationship and have them keep interest in you?

Okay, great question. So I have something in my pocket that I'm about to show you guys. It's a phone. This is how I follow up with my contacts. That's it. I mean, we don't, we don't script it out. We're not using some CRM That's not relationship-based. We're just giving them phone calls when we think about them. That's it.

There's nothing more important to us. There's just nothing more important than the relationships. We get together and we meet owners. We learn how they did what they did. There's people who I haven't followed up with because I just don't think there's anything there. And there's people who we follow up with all the time because we're really close with them. I look at it very much like your friendships or your family. If you have a family member where you guys just don't get along, you typically don't call them as much. If you're really, really close with a sibling or a best friend, you typically call a lot more. Um, if I'm not thinking about you, we're probably just not in relationship, right? Um, other than that, I mean, basic things. If you're trying to get this started, it's a good idea as you're growing a relationship to call at least once a month. If you can't remember that Phone calendar is a great way to, hey, I'm going to spend 1 hour today touching base with my investors and owners. But keep it really simple. You don't want to overthink that.

All right. So we have Nick and Boomflix asking the same question. How did I pay off my hard money lender?

With money.

Well, it was with money, but we'll go into depth on that because my story is a little less conventional and you guys can hold me to this. I've been saying I'm going to do this for a week to Christian. I just haven't done it. I'm gonna do a stream of consciousness video where I just probably talk for an hour and a half, 2 hours, everything that happened. Now, I'll omit names and companies because I had rather raw end of the stick on my first partnership. Went very south, about as far as it can go before breaking. You know, the bendy rulers will bend, eventually they break. That went really far south, but I had expanded rather quickly with this person. And then I started buying on my own eventually with Christian. I bought the 6-plex on my own, and then we bought 38 together, and we kept buying and buying and buying and buying. And over the course of 10 months, went from 30 units to 105. The reason— and I got in a really bad position with my partner. It went Very, it was just the worst thing that ever happened. And so I had to split from that and it ended up costing me over half a million dollars. It was way worse than just the $125,000 hard money. And so what ended up happening is I had to sell out of a multimillion dollar position in my real estate portfolio. Meaning if I was 100% owner on my first 12-plex, my second 12-plex, and my 6-plex. You wonder why I'm partnered with Christian on a lot of my stuff. He bought into a lot of it because he had the money in his house and HELOC, and he had a little bit of money saved from his 8 years at Coast— or, you know, just working. Most of it was at CoStar. Yeah, he has more life. I had to sell out of a bunch of real estate to pay off obligations that I took over from my old partner. And originally on my first 12 and my second 12, I ended up partnering with this guy, uh, He said, "You can do it on your own and I'll still help you figure out how to pitch the investor and we'll do the deal, or you can do it with me and I'll help you avoid some pitfalls." Wouldn't be here without him. However, he put me in a very uncomfortable and very detrimental position. And so I took on some of his obligations that he racked up. In exchange, I got 100% ownership of all the assets. And in the process, I had to simultaneously sell out a lot of that equity And so I went from 100%, I had to sell out 67% of my second 12-plex. But in doing that, I paid off all my hard money for both 12s and my 6-plex. So I wiped out all my hard money. I essentially was able to get the value up, sell out the equity. Yeah, excise tax is a thing.

Ouch.

However, I got free deals out of that. So learned a lot, spent a lot. It was very expensive, which is why we don't always recommend partnerships. But I got the real estate out of it and I have a controlling interest in the majority of the portfolio. So that is how I paid it off. That's not how I recommend you pay it off. The standard answer is work hard, save money, pay off your debt.

The, uh, next thing we got from, uh, Dion with Dion Talk Financial Freedom. If you haven't checked out his channel, we have him on all the time. I'm actually linking our last video with him because it relates directly to our first question here. Um, but he says every time you hit the like button, an angel gets its wings. I have not tested that. If you are willing to test that for us, we do appreciate it. The question after that: hey guys, is there a difference between seller financing and a customer Master lease, one of the pros and cons. There absolutely is one. You are buying the property. The other one, you typically are going to have a lease option, which is giving you the option.

Typically we mean always. That's why it's called a lease. Do you want to be an owner or do you want to arbitrage? Yeah, that's it. Like, what do you want to do? What's your business model? There's a lot of people that are big on rental arbitrage. I'll lease it for X and then I'll make a profit over here and I wanted the liability. I'm like, well, cool. You also want to have the upside, right? So I mean, if you want to build an arbitrage business and you want to lease and then lease it out for more, cool. I know a lot of people that are doing the Airbnb thing or doing that on apartments and they're making good money, but it turns out the people that own the real estate, and when you can't make more of it, tend to do better in the long term.

Now, using a lease option or a master lease on a property is something that you can do if you're trying to say you don't have the pieces to put together the deal, but you want to put a pin in it for future acquisition. It's not that it's not a piece of creative finance and a part of buying real estate. That is something you can do. As a business model, I recommend against it. Majority of people who try to do the arbitrage end up like WeWork and overleveraging, getting a bunch of leases. There's an economic shift. You open yourself up to a lot of risk, and then your options are either be a terrible person and default on all of your leases.

We know people like that.

I know a lot of people who've done that. That is not a Best practice, buy real estate. And if you're at your end of buying real estate, then look at other ways to control real estate. I'm not saying never do it, but our goal is always to acquire the property. I always ask myself, how do we do it? And that's our first part of how we buy it, how we never lose it.

From Mighty Savage, what's needed for the mentorship? Just go to themultifamilystrategy.com, check it out. Uh, from Sean, simple question, When people say they own X amount of real estate, are they referring to the purchase price or equity? They're typically referring to asset value. So if they bought it for $1 million, it's worth $2 million today. If that's all they own, they'd probably say, oh, I got $2 million real estate. Now, if they owe $1.9 million on that, they don't have a lot of equity and they won't have much to any cash flow. However, they would own $2 million real estate. Some people have the unit count goal. Some people have a real estate number goal. Those are all irrelevant without cash flow. If you don't have cash flow, all the other metrics are just— they're irrelevant. They don't matter. Okay. Uh, oh, Johan, message retracted.

There was a question there, but now it's not. By the way, on the, um, on the mentorship, we broke this down earlier. The course online, if you guys want to meet and be part of the, the live group that meets regularly, just message me on Instagram. That's the easiest way to reach us, just at Christian Osgood.

He'll see it quicker than I do. I'm bad at answering my messages.

I do a lot of admin, so if you're emailing us, it's almost always me as well.

Hi guys, after working through a deal after 3 to 4 years, how do you begin to exit via a wrap deal? Can you break that down? Well, we typically don't. We don't look at an exit. Do you have a specific deal you're referring to? Because we figure out how do we buy and how do we never lose it, which implies we hold it forever. If you're looking at wrapping new debt into it, there are ways to do that. Wraps are kind of cool, but that's not super simple, which is kind of out of brand. That's more of the stuff we talk about offline. But on that specific deal, we just want to hold it forever because if we can get paid forever, it turns out that's a lot of money because forever is kind of a long time in relationship to your life.

Next question from Alonzo. What resources would you recommend for learning more about seller finance contract? Structure outside of our course, which we've talked about enough for this call.

Deals on Wheels by Lonnie Scruggs is a great test to check it out. It's like a $500 book, unfortunately. So if you can find a cheaper one, make it happen.

If you want a one-on-one book, Brandon Turner does a small little book that just goes over a brief overview of all creative finance. I believe it's called Investing Rental Properties: No to Low Money Down. It's a good book, very short book, but helps me get my head around the basic framework. So for a 101 level, that's a good little booklet to pick up.

Yeah. And, um, but those are good places to start. There's not a lot of content on this stuff. Yep.

That's why we have the channel that we have.

Does anybody else have any other questions? This is on a 20-second delay, so by the time you hear this, we'll be 20 seconds in the future. But, um, If you have any questions, drop them down below. If not, we will wrap up this 40-minute livestream for Whiteboard Wednesday and go from there.

All right. Well, I will talk for 10 more seconds to give us 10 more seconds of time for questions to roll in. And it's looking like, okay, the one more that we were waiting for. Thank you.

Boom, boom. When first starting out and searching for property, how do you guys keep yourself from quitting? And also, how do you guys push yourselves to continue to grow? Okay, so I have answers for both of these, unless you want to take it.

Um, go for it. I, I have thoughts too, but I'll hit them if you miss them.

So I almost did quit. Um, I was like a week away because when I was a real estate agent— this was before I bought real estate, I wasn't selling anything— I don't have any family or friends in this business. It was so hard to get started, and I'm you know, introverted. Less so today than I was 3 years ago, but a very introverted person. And so I was sitting down at a little place called Shenanigans, which got shut down during the vid.

It was a bummer.

It is a bummer. They're a great place, the waterfront. Well, he invited me out for lunch. I was like, okay, let's go do lunch. And, um, sat me down. This was my mentor at the time. He said, hey, Cody, if you don't sell anything, you're fired. I was like, oh, I guess I don't really have the option of whether I quit or not. So, uh, you know, I just kept doing what I was doing. I was going through Cardone University, learning how to sell, getting confidence up. I didn't really have an option, but I didn't get the sale. I had someone call me up at 10 PM. They're like, hey, can you sell me a house? I was like, sure, but what if you bought a duplex? Because people in the office were doing that. And they're like, okay. And so sold them a duplex in Bremerton. They bought it for $300,000, which was right before the boom of Bremerton happened. And so they made a ton of money. And I got my first deal and I stayed at the brokerage, and 3 months later I bought my deal. Stuff just happens. I mean, it just does. You can't script this thing out. I couldn't have scripted what we did together, and I couldn't have scripted my start. It just happens. But you have to be present if you want that stuff to happen.

And for myself, I have a habit of overstaying. I'm not one who's, oh man, this is hard, I'm going to quit. I've stayed too long at jobs where they've out-served their purpose, or the income I was owed, or the utility that they have. The other huge thing is having the right network around you. I am surrounded by people who are playing the real estate game, who are doing really cool things, and we meet owners all the time. So when I see what someone else is doing, I'm inspired by how they got there, and we're constantly mapping this thing out. In addition, before we started our partnership, before we did anything, we have defined the why behind what we're doing. So I know what my goals are, I know where we're trying to get, and that benchmark being in front of us Really, really helps if you haven't set those things in stone and you haven't written them down, discussed them with your loved ones, friends, family. It's going to be a lot harder when things get difficult because I promise you they will. Cody and I have had plenty of roadblocks. You want to make sure you have that defined. Have your network, have your goal.

As far as growing goes, you talk about expanding the business. Something I heard from Cardone when I really used to look up to him a ton, it was someone's gonna get to $50 million, and granted it's all zeros at that point, $50 million, $500 million, $1 billion. Someone's going to get there. The difference is if you have the option to get there, you should, because you have an ability to manage it better than those who will. So if someone's going to get to $50 million, $500 million, $1 billion, it should be you if you have the opportunity to grow to that, because your ability to be a good human, to manage it better than those around you, can actually make an impact. At that level, you can make an impact. And so that is why we're expanding. We have an opportunity. Whether we get there or not, I don't know. We could completely get wiped out. Something could happen if everybody just stopped paying and, you know, or meteor hit Moses Lake.

That'd be bad.

It would be rather unfortunate. Uh, if something like that happened, we would be in trouble. However, we're going to seize the opportunity that we've got in front of us because I truly believe we can manage it better than those who currently have it.

Absolutely agreed. Next question, what return do you guys like to see on a property? Gross cash flow, purchase price, cash in?

Okay.

Oh yeah, I got that.

Take it away.

Okay. So on a cash-on-cash return, which is just your annual income divided by the money that you have in the deal, short answer is 8% is the absolute minimum that we'll look at. That's the floor that I set for myself. That's assuming I'm not raising other debt that's eating into that. That is the actual end-all be-all. That is the net cash flow to me. In addition, I'm not interested in investing, you know, $10 and making $20. That's just— $20 is just not an objective that we set earlier. I'm glad we're on the same page with that. An objective that we set really early is, hey, if we're gonna buy a deal, It needs to cash flow $1,000 a month day one, and it has to have upside on that. If we're going to do a deal, because they're not all super easy to put together, sometimes they really are, sometimes they're not, but you do have to manage them. If we're not going to get paid enough to actually do the whole process, I say don't do it at all. So $1,000 a month in cash flow is the floor, 8% cash-on-cash return is a floor. Outside of that, I'm more worried about the strategic pieces. I'm worried about How does this add to our story? How does this add to our market share location? There's, there's more to it than just what are the numbers.

That was funny. This is on a 20-second delay. I got to watch us start cracking up.

Oh, that's funny. I was like, Cody's losing it again. I don't know what he's laughing about.

I was laughing at ourselves. Uh, okay. Uh, hi guys. Upon finding a deal, multifamily unit property, what are the key pieces of info needed to calculate the numbers?

Expenses and income.

Boom. Okay. You need to know your income, your expenses, and your debt if you have any. Yeah.

And quick breakdown of expenses. You need to know what's going to cost to manage it, what's the factor for vacancy, taxes, insurance, and general maintenance. That's a vast majority of your expenses. Use that and the income to find your net operating income. And then if you want to find cash flow, subtract out your any debt expenses that you have associated.

Oh, Johan, how many properties did you buy and own each year? 2019, I bought a 12-plex.

I bought nothing.

All right. 2020, I bought a 12-plex.

I bought 2 at the very back end of December. I bought a duplex.

Nice.

Yeah.

Last year, '21, I bought a 6-plex, a 38-plex, which this is now—

we've done all these together.

Well, I bought the 6 first, then I bought a 38, then I bought a 7, another 6, 3 duplexes. That might have been it. I had 81 units, so that might math, that might not. We might have— we didn't buy the triplexes that year.

No, but the only thing I did different is I bought a duplex next to his triplex. I ended up selling it to buy into one of those 12-plexes he bought the year before.

That's if you refer back to earlier in the video when I had a tough time with my old partner, had to pay off some of his obligations. That's where some of his money came from.

I actually, I, we tried to never lose it. However, he didn't lose it.

He sold it.

I, yep. I sold it because I wanted to. It helped out Cody and it had gave me an opportunity to scale from a duplex into a 12-plex with a partner that I wanted to have.

Okay. And then this year we bought the, the 10 and some other stuff, some triplexes, more to come on that too, by the way.

Yeah.

From Simon. So you guys have live meetings for people in mentorship? Yes, and that's all we're bringing up on that for today. Tyler, thanks for the CoStar feedback. I'll stay away from your Google Earth model if that's what you meant. Uh, no, that's not what I meant. If you have access to CoStar, you should use it. However, if you don't, Google Maps has every property you want to buy on it, and you can cross-reference that with the tax assessor website to get info.

CoStar's map just happens to be powered by Google Maps and has additional filters you can add. So, uh, CoStar figured out as well that Google Maps has every property that you may want to buy.

Any thoughts or concerns on the Kwok Brothers, uh, and their seller FI acquisition models? Well, I don't know anything about them.

I don't either, never heard of them.

I've heard of them, I just don't follow them. Uh, as you start growing as a business person, you get a lot more advice from a lot fewer people. And you stop just actively seeking new people. You just find a couple people you know could get you to that next level. So we haven't really studied from them, but I can look into it if you want. So just let us know. Thanks, guys. You bet. Well, if that's all we have for today, I'm good to—

I think we're good to call it there. That's, that was, that was some good content. Um, I'll put the links for the associated videos and things that I said that I would shortly after this. Give me a few minutes. Um, we appreciate everyone being here. Like Dion said, give this a like, angel will get its wings, and we're excited to share this with more people.

So if you want to join the squad doing Cody things, check out the link. They're not our shirts, but it would be fun if everybody had one. All right, see everybody. Hey, Cody Rev, all right, congrats on your fourplex.