How To Write Offers That ACTUALLY Get Accepted

All right, hello and welcome to Multifamily Strategy Live at the smartboard. I'm actually going to show you guys exactly how I'm finding deals in a different way than we have before. I finally got this thing set up and hypothetically working, so super excited to get rocking and rolling. By the way, I have a computer right over here so I can still read all the questions, but if you see me looking off screen, uh, that is exactly what I'm doing and why I am doing it. So I'll see you guys there shortly. So let's go ahead and dive in. By the way, there's a chance that this loads kind of weird for Instagram. So Instagram, if I'm on and off screen, just hop over to YouTube at multifamilystrategy.com and we'll go through exactly how we do this. But I'm going to start here on one of my favorite websites, CREXi. So finding deals, I chose a random market called Lubbock, Texas. This is a market that my PM company is actually looking at opening here this year and managing properties in. We're currently in Stephenville, Waco, Abilene, and we're moving farther west. So if I was looking for deals here where I currently have not looked and I'm brand new to, I'm looking for pictures. I'm actually looking for the buildings that look like what I want to buy. So this right here is a building that looks very much like something I would like to buy. It's $2 million. It's 36 units. It looks like it's in decent condition. It's nothing crazy, but I want to build relationships with the brokers who are listing this type of property because even if this isn't the deal that I want to buy, if I can establish myself as a ready, able, and willing buyer for this property, this broker now knows that I will buy other properties. In fact, I offered on a property today. I'm offering on office, and I came with an offer where the deal definitely worked for me. Didn't look anything like what the seller had listed it for. But it works there for me. And the response from the broker was, oh my gosh, that actually might work. We haven't received any offers. Write that up. And if it doesn't work, I have some other ideas for you. All you're trying to do is position yourself. Now, in this video, I'm going to talk about how you're actually going to do the negotiation. So we're actually going to go into whiteboard mode. I'm going to draw this out in a way that I haven't shared before, even in the Multifamily Strategy Mentorship. This is— I'm trying it here first. So if this is your first time ever watching Multifamily Strategy and you're joining us here for the first time, Welcome, you're choosing a good time to join. Happy New Year. So if your goal is to buy a deal this year, first thing we're gonna do, again, we're looking at the actual image. What is it that we are going to be buying? Well, potentially this building. I'm gonna look through the details and I'm going to actually look through their offering memorandum quickly. Now the goal here, I'm gonna kind of fast forward through this because we've covered this on YouTube before. The goal here is I'm actually going to get some details on the deal. We're gonna negotiate the deal. And before we get into the financing, we're going to follow the order of deal, debt, equity. We're going to map out our pieces and then we're going to figure out how to do the deal. By the end of this video, my goal is that you can transition from a binary view of deals, black and white, of is it a good deal or bad deal? Why are only bad deals listed online? There's no such thing as a good deal or bad deal listed. It's just a potential deal. It's up to you to make it a good deal. Or a bad deal. And what is a good deal for you? We're going to define it graphically on today's video. So enjoy. So we've gone online, we found a building, we have questions about it. What is an actual deal for us? Let's switch to whiteboard mode. Hey, multifamily strategies get an upgrade. Let me learn how to actually clear this because I am brand new to Smartboard land, but I think I got it pretty intuitive. All right. So first we're gonna write this deal, debt, equity, DDE. I should like to check the comments, make sure our audio is working fine. Everyone watching, if you guys are hearing this fine, you guys are able to see everything fine, let me know since this is a new format. Perfect. That is looking very promising. Excellent. So deal, debt, equity. All you are trying to do, and you will get this deal accepted every single time. We're not trying to shotgun offers. We're not trying to write as many letters of intent as humanly possible. That is not the goal. We are following this model: deal first, which is what we're working on. Deal, then we'll line up the debt, then we'll line up the equity. So DDE, deal part first. We found a potential deal. First, we need to map what a deal looks like for us. They call this the buy box. What do I need for every single deal? You cannot miss the buy box. You have to identify what you need, otherwise Everything else is a moot point. If you negotiate something that has nothing to do with what you need, what's the point of anything that you're doing? So let's define our criteria first. I feel like I wanted to do that in black. So it's easier to see. There we go. Okay. So here's us. I want— this is going to be super confusing. Let me erase that really quick. There we go. Long-term debt, it needs to be fixed rate. I do not want variables. By the way, good luck reading my handwriting. Important you watch this video so I can actually translate the scribbles on the board here. I want long-term fixed rate, and most important, cash flowing debt. I want to buy this at a leverage point where it cash flows every single month. I get paid every single month for buying this deal. If you follow this model where you only buy deals that cash flow day one, your income will only go up when you close. If you deviate from this, you get into development, you have all these other ideas, you buy a total fixer-upper that's completely vacant and cash flow negative day one, but Oh my gosh, it's amazing in the future. If you do that, your income is going to go like this. If you keep it simple and you buy on this basic fundamental like I do, it has to fit into this box: long-term debt, fixed rate, cash flowing. So this all needs to be true on the seller side on this hypothetical deal. We need to figure out what they actually need. I'm going to show you an example of how this actually plays out and how this has actually made me a ton of money in Texas. By a ton of money, I mean millions of dollars. And we repeat this every single year. So you can do the same thing, just copy the strategy. So seller side, they probably want a certain price. If they're getting creative with the finance, they may or may not, but they probably have specific terms. They probably have a specific goal, price, terms, goal. I need this. They need this. All we need to do our deal is to fill in this portion. Oops. On ratio mode. There we go. All we need to do is fill in this section. Both things have to be true at the same time. If you have identified everything that you need and everything that they want, you will always get accepted every single time. The question is, how do we do this? I'm going to give you some practical examples, filling out my side of the equation and then filling out the seller's side and figuring out what is true in the middle. This is where you get into creative finance. I say this all the time, but I'm hoping this lands differently visually. When you're in that middle zone, what is the least amount of creativity? We're trying to bridge from one side to the other. If we can build a bridge that connects these two perfectly, we have a deal. So let's go ahead and explore what that looks like on my next page. So there's me, there's the seller, here is the deal zone. I'm going to call this the red zone. We are in the money if we can identify these things. Again, Christian wants long-term cash flow. Fixed rate, my income must go up when I buy the deal. That's it. Income up. Green does not show up amazingly on screen. Very good to know. The money sign here, don't know how well you can see it on YouTube. Money needs to go up though. That is, that is critical. Increase total money. Now, on a deal that actually happened, 25-unit in Stephenville, Texas. This is how I entered the Texas market. I was living in Washington, so this was an out-of-state purchase and my first out-of-state purchase. I'm entering a new market. I have no connections here. I just spent all my money on the Robin Hood Village Resort. So I had no cash. I'm starting where a lot of people started. No connections, new market, out of state, no money. An opportunity comes up. I'm trying to meet owners. I meet this one guy who has a 25-unit. He also owns the law firm. He owns farm and ranch. He owns the title company. He owns a ton of businesses. He is in his 80s and trying to get out of multifamily. His kids want the law firm. His kids want the farmland. They don't want all the other businesses. Now, I don't need to own a title company. There's a bunch of things that I'm not trying to do in this market. I am interested in multifamily, so that's actually part of my buy box. I want to buy apartments. Learning how to write on this thing. That's a win for me. What is he trying to do? His goal is to downsize. 25 units, average price per unit that things are selling at in this market is about $110 per door. He wants $2 million for 25 units. That part works for me. I don't have a problem with it conceptually yet, but I will get into the issue. So he wants to downsize. So he wants to sell. He wants $2 million. Excellent price. We love this price. He tells me there's a problem with it. Income on this property is low. He built this property originally in the '80s. He's held it the entire time. Rents are really low here. He's never had debt on the thing. He hasn't had to increase rents. He just wanted occupancy. He wanted things to be simple. That's totally fine. That's up to him. However, if I'm going to go to a bank and say, we want to buy this for $2 million and it makes half as much as it should, the bank's going to say no, or They're going to say, hey, you need to do 70% down. I told them, look, we can do 15% down on this. I can find the money for 15% down. We need to do some unit updates, but it's pretty much a turnkey property. We need to do a little bit of increases. A lot of them were on Section 8, so the government actually paid a lot of these, but upfront income is low. And so I was like, okay, it's going to have to be seller financed because I'm not buying this in cash. He's like, absolutely not a problem. So Creative finance, possible. So we— this opens up more opportunities in here. What does he want? He wants 5% interest at a very minimum on his note. In addition, this is actually the only deal ever where the seller asked me for my credit score. So actually had to run a FICO score. That will almost never come up in creative finance. It did on this one. So Decent credit. Decent credit for borrower. Okay, so things that already line up initially, I'm going to do this in blue. He wants to downsize. I want to buy apartments. These check already match. $2 million. I don't have a problem with $2 million. We can go ahead and move this in here. That'll work for our deal. $2 million, check. 5% interest. Here's a problem. 5% interest is below market interest rate. It's actually great interest. Even at 5% interest only, even if you have no principal, the deal still didn't cash flow. Cash flow and 5% interest cannot be true at the same time. Or can we? We're going to figure out in the deal zone. So right now, initially, cash flow with 5% interest, not going to align. Buyer with decent credit score, check for Christian. Long-term debt, he was open to 5 years. That's midterm debt. 7 years or more is long-term. So it's not quite, but we easily can refinance into long-term debt based on the value of the building. So it's, it's not a total yes, it's not a total no. We got midterm debt, fixed rate debt, not a problem. Decent credit score. Fortunately, I had it. If I didn't, I would have built a team of people who had the credit scores he would have wanted to see. I would have taken less equity and we would have built the team. So I have a solution for it. But in this case— sorry, I was going to do that blue check. So here's what we need to solve. We now are just solving for the middle. How could these two things be true? So the deal does not have enough cash flow today. And this is the simple part. So right now, let me summarize. Here's what we got. We got $2 million. We love this. We have 5-year debt. It's not perfect, but we've agreed on it. This is close enough for me, close enough for him. There's the negotiation. I need cash flow. He needs 5% interest. We're the reverse AMM. I would almost never use this. It's almost never the right tool. We're winning on price. The deal should be worth more than $25 million, should be worth about $27 million. We're buying it for $2 million. We basically said, we're going to pay you less money so that we cashflow. We're going to pay you less than 5% interest for the first 2 years. It's actually the mathematical equivalent to 3%. The additional interest we're going to add to the value of the loan. It ended up adding about $50,000, maybe $51,000 to the total loan. So it's the equivalent of buying it for $2,050,000. So we basically just said reverse AMM. Now on a normal AMM schedule, the amortization means you're paying down the loan over time. In this case, the loan actually grows over time. It's odd. It's not usually the tool, but if you win on price, it could be a perfect tool. We're keeping our payments low until we fix the income. Once the income's fixed, ta-da! Now our original proposal, I think, is a little cleaner. It's called an income ladder. So on an income ladder or an interest rate ladder, year 1 would be 3%, year 2 would be 4%, year 3 would be 5%. And now we've given him a yes to everything he wanted. We said yes to price, yes to terms, yes to down payment. We gave him the down payment, the price, everything on the front end, except the full payments would start in the future, giving us time to get through our project, which would've been, I think, a better structure. He was fixed and dead set on minimum 5% interest. He didn't want the extra creativity. So he said, hey, we're going to tack it on to the back end. So reverse AM adds $51,000 to the loan balance. This works. We have now found our deal. If you've identified everything they want and you give them everything they want— so we've turned this into a check, we now have 5% interest, and I have cash flow. So Eraser mode. That's the deal that we offered. That's the deal we wrote. I got everything I wanted. He got everything he wanted. The only compromise we made is 5-year debt instead of 7-year debt. And we have a deal where we're able to get through the entire project in 2 years, which gives me more than twice the amount of time that I need to lock it into a brand new 10-year debt product on this property. As a bonus, when we closed, about half the tenants were on Section 8. He had them almost $300 under fair market rent. The day we closed, actually the day after, I called the housing authority. I said, hey, a lot of these tenants are up for renewal. My understanding, you're just going to pay more money if I renew these leases, correct? And they're like, oh yeah, no, absolutely. We never figured out why the old owner didn't do that. Turns out not hard to be a better manager than the prior manager. We came in instantly, tenants did not pay any more. We got about half the campus $300 more per month, a massive increase. In fact, it would've been enough to pay the 5% interest. We still kept the low payments. We stacked the cash flow. We spent the excess on more renovations. We did nicer units. Today, a building that was renting at $550 is now leasing at $1,350, and tenants are super happy to move in, and we're below market rent, and we're completely new renovated— new floors, new bathrooms, vanities, kitchens. The buildings are awesome and beautiful. It's one of my favorite acquisitions, and every deal is done like this. What do I need? What do they need? If we match them up correctly, it's always a yes. If you write this proposal And the seller says, no, you missed something on this side. Your job now is to work with the broker or the owner to come in and revisit. Now, again, if you're watching this on Instagram, I apologize. This is— the screen may not be the right width. So join us on YouTube. Whiteboard Wednesday is back. We used to call this Whiteboard Wednesday back in the days when it was Cody and I. I'm bringing it back. We have the full whiteboard. We can save the whiteboards. This is much, much easier than having a whiteboard with a glare on it that looks absolutely terrible. So hopefully you guys are enjoying this. I'm gonna go answer a couple of the questions from the chat now and we'll dive in. But that's today's lesson. This is how you negotiate any deal and get every single deal accepted. I have no idea how to get out of the whiteboard once I'm in the whiteboard. I just realized that. Also learning how to use our software. Save our changes there. Theoretically, look at that, we're back. We're back to our deal. I like that as a background better. Okay, let me get to the questions here. You're loving the new board. Thank you. They're not as inexpensive as I would have hoped, to be completely honest with you. When you find and bring a deal, typically what equity percent do you get if you bring none of your own money, aka $0 to the deal? I'll use the deal that I used as an example here, the 25-unit. I got 50% of the equity. I brought none of the money. I lined up the deal. I lined up the debt product, which again was 75% of the money. I also agreed that my company would manage it at a little bit of a discount. So they got inexpensive management, they got onsite management. I took a majority of the operations at the time. I found the deal, I funded the deal, I built our team, and we came in with originally one investor. They eventually wanted to be bought out, and so we brought on two investors to replace them. So we have this little team of four. I own 50, technically 51%. It's better to have a majority. I have 51% ownership, they have 49%. We did this deal in a structure with the equity partners where their money is the first money out. So when we get cash flow distributions, the cash flow goes to them. When we reset the LLC and new investors bought in, we went to a pro rata. I had an LLC that was much farther along and much more mature. Investors were buying into significant day one cash flow. So original structure, They fund the deal, their money comes back at refinance, and then we just distribute money, 51% to me, 49% to them. As we actually go through this in practice, other investors bought out their position. Now we're already doing the cash flow distributions to each of us per our equity. So that's one way to do it. The 26-unit that I bought down the street, I got 40%, they got 60%. I wanted 51%. I had one person who was like, I'll fund it right now if I get 60. I love the deal. 60% is my number. I was like, you know what? Pretty easy. I really like the guy. We have a buyout option where you can buy them out at a fixed price in a fixed period of time for me to own all of it at refi. 60% works for me. We're going to finish the project, refi them. We're almost done with that building. We're in final lease-up right now. Just finished renovations. The answer is as much as you can. When you map these out, This is actually a good one for the, the whiteboard. Love that we have a captive audience here too. Let me see here. Whiteboard. If I hit save, are we, are we golden? This is so cool. I love this thing. Okay. So they have a brand new clean whiteboard. You have two, two sets of math you're gonna do. Every deal, this is for the investor side. So we've already talked about negotiating deals. This is negotiating for your equity. So we're out of the deal, we're out of the debt. We've negotiated both of those. We've agreed with the seller. We're on the equity. I have my day 1 math, day 1, and I have my end math. Now, it doesn't mean I'm selling the property. This means the end of my current structure. In this case, at year 5, when the note becomes due, we're changing the debt. So where are we going to be at year 5? If I was going to buy someone out at year 3, it'd be the same thing there. So day 1, we have X amount of cash flow and we have X amount of equity. If I bought a deal for $2 million, it's worth $2.5 million, I put $200,000 down, I have $700,000 of equity in the deal. So we have a certain amount of money that the deal is worth and a certain amount that it makes day 1. At the end, by the time we're done with our deal, we have a new cash flow. These numbers are completely arbitrary, by the way. Z is just new cash flow Z, and future equity equals smiley face. Those are variables. This is telling me how much money I have. The day one cash flow I have is how much I can distribute at maximum to investors. If I want to get paid cash flow, we have to come up with a way to conserve this. If cash flow is high or becomes high in this deal, we're going to incentivize with a higher cash flow return. They're going to get higher distributions or preferred return. If we don't have that, we're going to have to give more equity. If we have a deal with a ton of upside, but there's not a lot of cash flow, no one's going to park their money for a low continued return. But if you have enough cash flow, you give more equity. So you give cash flow if the cash flow is high or going to be high. If your equity is high or going to be high, you give more of your deal. But you just need to structure these two pieces and the total money, how much you cash flow between year 1 and the end, in this case year 5, And the total equity available in the deal between my starting point and my conservative ending point, that is the total amount of dollars that I have to pay myself and pay my investors. So your deal will tell you what debt products are available, and the combination of deal and debt is going to give you your cash flow, your equity, and your projections will tell you your future cash flow and future equity. This will tell you how much money is available. This is why we always do things in this order. We're going to build the product, and then we're going to look at it and say, how much money is there to give people? And is it enough for a return? If so, we're going to structure the return to our partners and the equity that our partners have correlated with our opportunity. Hope that helps. Going to grab a sip of water, and then I'm going to answer the next question. All right. Okay. I had two investors tell me that I point to the deal, not bring the deal. They downplayed the value that I bring finding the deal. I know they're wrong. To me, that's telling me that they didn't package enough of the deal. Now, if you've packaged the deal correctly, I'm coming in saying, hey, this is under contract. Here's the terms. I am on the path to closing this. So it's going to get funded with or without you. It's just going to be part of our process. Here's what we are doing. And this is, you know, you can join me or not. Here are the projected returns based on what your deal does. So in your actual presentation, you should be painting the picture of the value that you brought. Because of the opportunity that I have, we're going to bring a deal from here to here because it's making this much money. We're allowing investors in this deal this return. So here's our structure. If that investor, potential investor, goes like, well, I don't think you're bringing enough value to the deal, it's like, awesome, then we will do the deal with someone else who wants the return that we're offering here. You need to just put together an attractive enough package. They'll always say yes. It's the same thing as that original Venn diagram. You do a second one for, okay, now I have this deal and need to match it to an investor. An investor who wants a high monthly cash flow and doesn't care a lot about multiplying money right now, they're just trying to get the income up, you're going to be looking for higher cash flow deals. And you can do this likely in secondary, tertiary markets. You can do this in higher cash flow markets like the Midwest where you have less appreciation, but your deals are going to kind of trend towards cash flow. If you have deals with a lot of upside, maybe you're increasing rents, you're increasing the net operating income of the building, You're doing some capital improvements, you're making repairs. If you go through that process, then you're likely looking for someone who's trying to multiply money. They're likely going to start with lower cash flow. You can't start with zero, otherwise you're putting yourself in a dangerous situation, but there'll be less cash flow to share. So you're going to have to have a higher upside, but that's pretty much all that you're doing here. You're mapping out the pieces. And if you've created that again, If you have everything that you need, which in this case, everything the deal has, and you have everything that your investor wants, who cares what you bring to the deal? You have the opportunity. It's yours to lose. They're either in or they're out. Investor wants 51% equity for using— if I bring a deal, I underwrote it, negotiated, another investor brings the down payment. Solution is find other investors. Isn't that unfair if he wants 51%? No, not at all. If he's bringing in all the money, he's taking in the majority of the risk. 50%, uh, 51% is fine. Uh, my previous example, 60%, no problem giving that up. What you're going to do is if your deal can do a cash-out refinance in the future, just buy them out. Then just give yourself a path to own 100% of it. You're in it for no money. He owns 51%. That's totally fine. You run through the deal, then you eventually let the deal buy his 51% for you. It's free real estate. You still get all the real estate. You're just putting a pin in the map. You have to match the pieces up with where they're at. If I'm taking all the risk, 51% is not too bad. I'd like that investor. I think that's likely a fair offer. We'd have to look at the math, but if 51% secures him with enough equity in the deal to back the amount of money you put in, I think that's fair. Hopping over to Instagram here. Oh, cool. I'm getting some, some questions here on Instagram. I can't put them on the screen the same cool way. So you guys should join us over here on Multifamily Strategies YouTube. But a question, what website am I using to find the deals? The one, my favorite one that I was using was CREXi. They give you a lot of information. You can download the actual, you can actually come in and download the offering memorandum. You can upload it into an AI, or if you're part of Multifamily Strategy, into our custom AI, and it will actually read it, help you negotiate, give you the next steps. But you can actually download a lot of information directly out of Craigslist, which I found immensely helpful. All right. And do give me some feedback. If you guys found this helpful and you like this format, we can do more whiteboard sessions. We do this all the time in Multifamily Strategy, the mentorship. But if I need to move the camera to my landing and you guys can look at whatever cool album we're playing, which apparently Benson Boone's getting some free ad space on my YouTube channel. Good for him. But if you guys Have more questions. I'll answer the last few on the chat here. By the way, if you are yet to buy your first deal and you're trying to learn how to do this, put this together, create a finance, we're about to run a webinar here. It's going to be starting in about 35 minutes. I'm going to be in my studio right there. So I move my camera, head over there. That's the first webinar I've run for this year. It's also revamped and I'm super excited about what we've added to this.. But if you haven't bought a deal, you don't know how to use creative finance, you don't know how to negotiate these. Maybe you're looking at leaving your job and you don't know how to actually replace the income while you're building a portfolio. I'll show you how to get paid while you're increasing your income. Ultimately though, I'm going to share with you a model that has worked for me so that every deal I buy, just like our examples here, they cash flow day one. So when I close, my income goes up, and when I close again, my income goes up again. I only need to succeed 2, 3, 4 times a year and I move forward massively with apartments. A few deals gets me brand new income for life. It scales over time and adjusts for inflation. It's leverage, so it grows and multiplies money while it adds money. But if you're continuing to add income with every single deal and you know how to structure deals like this, I'm going to share some different tools and methods to find, negotiate, close, and the different tools in your arsenal to close this as debt and equity. It's a much larger expansion of what we talked about here today, and you guys can check it out at multifamilystrategy.com/workshop. Before I started this, there are 20 spots left. We have almost all the spaces registered. We had 9,080 registrants. There's 9,900. There's almost 1,000 people. Registered, which is the maximum that my Zoom can actually hold. So if you're interested, register there. That starts at the top of the hour, completely free. Usually I wouldn't say spots are limited, but they actually are this time. We have a crazy, crazy high attendance for this, which I'm really excited for. So I'm gonna bring it. Hopefully I'll see you there. Let me answer the last few questions here and we will call it a day. Love the whiteboard, super helpful. Hope to see it more. You absolutely will, and we will do a good job of trying to get our topics out there earlier. I'm gonna actually set up our lives on Mondays moving forward, uh, so that it's actually broadcast earlier. You can know the topic going in, save it on your calendar. Uh, very much looking forward to adding that Just as an extra thing to make it this much easier for everyone to show up. And getting some, some more positive feedback on the new toy. I'm really happy. I'm going to be using this all the time in the mentorship. I'm gonna be using it all the time on the live. But our only goal here is that more people buy apartments. I want an education. The information is always free. I have nothing to sell you other than a mentorship, which actually costs me all of my time. I love that group., and I'm happy to invest the time in there. If you need direct mentorship, that's something that I love working with people on and moving forward in community with other people on an intentional guided path from A to B is fantastic for almost everyone. But my goal is to make it so you never have to buy an online course ever again. You don't have to watch that next podcast. All of it is here on Multifamily Strategy. So if you haven't yet, like, subscribe, we're going to be sharing content like this and going through every single topic. That I can possibly think of in real estate, creative finance, creative equity, to make sure that 2026 is your year. So happy New Year, everyone. We'll see you guys next Wednesday, same time like always. Like, subscribe, and I'll see you guys on the webinar here in about 25 minutes.