Christian Osgood bought two apartment buildings with 224 units total for $50,000 per door, generating $70,000 monthly guaranteed rent through Section 8 tenants. He financed them with 70% debt and raised 28% from investors, hitting year-3 cash flow projections in year one.
Chapters
There is a Section 8 strategy so powerful that this building and the building right down the street are bringing in $70,000 a month in only 2 transactions. In fact, I'll show you those numbers right here. Check it out. These are the actual rents that we're receiving right over here. Here we got pool, clubhouse, computer lab, gym. Your portfolio will be worth, you guessed it, junk. In fact, we make up 1/6 of the county's housing vouchers. We bought this thing at just over $50,000 per door. 2 direct deposits, $70,000. Boom, start of every single month. Our occupancy is at 99.4-ish percent. Guaranteed government income. On today's video, I'm going to talk about how Section 8 is supposed to be used and how in just a few transactions you can use this program not to buy crappy houses in the middle of nowhere. In fact, you can buy buildings that look like this behind me, low to no money down. Follow me. So guys, this is Anson Park. Right down the street, there's Anson Senior. We got pool, clubhouse, computer lab, gym, everything is included on this property. And check that I mean, this is actually like a really cool place to live. When a lot of people think Section 8, you think beat-up properties in the middle of nowhere. I see a lot of ads from people online for houses that are like $20,000. They're like, if you can only get the Section 8 rent. If you buy junk, your portfolio will be worth, you guessed it, junk. This is stuff that doesn't appreciate. It's usually stuff that barely cash flows, and you have to do hundreds of transactions to make any money. Here is a 144-unit campus. Down the street is an 80-unit campus. Between the two, we bring in about $70,000 a month solely from Section 8. In fact, we make up 1/6 of the county's housing vouchers. So how do we do this? Well, this particular property is affordable. The one down the street is also affordable living. This one is actually LIHTC, so we have rental caps on this. You buy them where they cash flow. This deal came in off market. It's actually in a category that is my favorite. It's called pre-market. A broker had it. They were shopping it to their internal list before they post online. All you have to do to find deals like this is you just have to be an insider in the market. Now, to do that is a lot easier than you might think. If you go online to CREXi, LoopNet.com, and you start calling the brokers there, if you just call them randomly, you're going to get nowhere. They're going to put you on a list. If you know what you're doing and you have a conversation with them and actually submit legitimate offers on the deals they have listed, you'll slowly move to a category of people who actually buy things. When you're there in a broker's mind, you've made yourself a ready, able, willing buyer, they start showing you deals like this. Caleb called on this one. This deal came up, a broker said, hey, I have the deal for you. It wasn't the one that we offered on. It was this deal. 144 units. We bought this thing at just over $50,000 per door. Look at the quality of the assets as we go through. This campus is 22 acres. We're gonna have a basketball court right back here past the gazebo. This is the type of asset that you can buy. Now today we're making some bonus money because there are some things that we still need to clean up. If you look over at the dumpster, there's a couple of mattresses just hanging out back here. All of those are fines. We're going to snag some gloves, we're going to throw these in the dumpster, and for cleaning up the trash of this property, we're going to save a couple thousand dollars. If you can save a few thousand dollars with about 30 minutes of work, you've done a pretty good job for the day. Now, what do the tenants actually look like for Section 8? In apartments, this is very, very, very normal. Now, Section 8, you need to be in the lower, usually the lower 30-40% of income to qualify. The government will pay for, in some cases, all of, in some cases, A fixed amount of your rent every single month. Many of the tenants here pay little to no money. When rent increases are enacted, it doesn't even affect the tenant. Now you might think that they wouldn't treat the units very nice. A lot of people actually do appreciate being on the program, and you do have to stay on the program. You can't get evicted, you can't go through— there's a lot of things you can do in lease violations and good leasing to make sure that you get good people. So what we do is we do the same screening as any other place. We just throw out the income requirement. If the government's gonna pay for it, awesome. One check, all that money comes in. 2 properties, so it's 2 checks, but you get the point. 2 direct deposits, $70,000, boom, start of every single month. For the tenants, we just do the same screening. They have to have a reasonable credit score. They have to have no criminal background, or at least no significant recent criminal background. We're renting to quality people in a quality area. Is it perfect when it's low-income housing? No, but you have problems at every level— Class C, Class B, Class A. What you're seeing here, this is a true Class B property. Where a ton of money is actually coming in Section 8. Now when buying properties like this, this deal right here was just under $2 million down. And when you're like, oh, wait a second, I don't have $2 million, maybe I go back to the idea of just buying crappy houses in the middle of nowhere. The deal makes a ton of money. We have a deal that is almost 100% occupied. We are bringing in a ton of money. If you have a property that's very nice like this building here, and you are bringing in a lot of money, finding the money for this deal is not that hard. Now we bought this right after buying more deals in Stephenville, Texas. I personally did not have the liquidity to buy a single-family house, let alone 144 of these bad boys. So how do we actually structure this? Well, you start with the deal first. I always say this: deal, then debt, then equity. We have a beautiful property that makes a lot of money. Yes, we do have to clean up the dumpsters a little bit, but you have a beautiful property that makes a lot of money as a very stable asset. If you put together the opportunity, we then go to the bank, we get the best debt product we can. Fannie Mae gave us a direct loan. We're a little over 70% loan-to-value here. So we got about $2 million down payment, a little less. Fannie Mae picks up the rest. Now we're just looking for investors to pick up the last— it was roughly 28% of the actual, of the actual money for this deal. If you keep it in order and you have an opportunity, you can get the bank excited. If the bank's excited, most of your money's there. Now you're inviting investors into a project where it's like, hey, this is an awesome project in a great location. It makes money day one. The bank is in, most of our money is in. We are looking for a few other people who want to make money on this deal as well. Now we're sitting here a little less than 1 year into this project. Right now at the end of year 1, we're almost exactly where we projected we'd be at the end of year 3. Rents went up more than we projected in this market, and our occupancy is at 99.4-ish percent. We're almost fully occupied. There's 1 unit that's down that we need to renovate. The entire campus is either leased or pre-leased for the few units that you saw that aren't rented yet. This is what Section 8 is designed to do. The program is to house people who need housing. If you can do it in mass, you find one deal, and on one contract, you can bring in tens of thousands of dollars a month. Guaranteed government income. We love working with the housing authorities. This is how Section 8 is supposed to be ran.
