How we are paying off $10 Million in Debt - LIVE

No one's in the video the first 3 seconds when we launch. We'll pre-schedule these in the future. However, welcome to Whiteboard Wednesday. Cody and I just decided the background color for this week is going to be orange. Uh, we're really, really excited to talk about a few questions that have been asked on our channel this week. We actually have a very diverse, uh, array of questions that we're really excited to get out there for you. Um, but if you have not had a chance to post your question yet, if you watch this series please respond in the comments right now below. I know you've already liked and subscribed. If you haven't, do that now, but post your comments below, ask your questions. We're going to get to all of them next week. As we build out this live platform, we're going to start actually pre-scheduling these. We'll have a longer lead-up to launch. You can actually pre-ask your questions in the chat. However, for today, we're live and we are rolling. Cody, what's our first question?

Question number 1: Do you have a way to get tax lien information? "For context, I just watched the ad that was before your video and it talked about skip tracing lists. Of course, they're also selling a formula class ebook. I'm just starting out and I'm looking to do a small complex deal. I watched your BiggerPockets interview and I'm very impressed. Love your values. You guys are awesome." So how do we get tax lien info?

I love this. So if you're watching that ad before a video, There are a lot of different strategies on how you find owners, how you find deals. If your goal is to find a small complex, this is one of the few times I'm going to answer your question by not directly answering your question. So I'm going to acknowledge that here. I know I'm not going to answer the question directly. I apologize because it is not something that we actually go after. The methodology that we follow is we always go for relationships with owners, period. There is no other strategy that we follow. If you own property, whether it's in tax foreclosure, there's a tax lien, there's deferred maintenance, they're an out-of-state owner, whatever list you could be targeting, it doesn't matter. Everyone in that market has done something, if you're buying your first property, that you've not done, bought in that market. They're going to be uniquely qualified to teach you how to buy in that market. Learn from them. Don't go after deals. This is something we say a lot on this channel now. If you meet one owner, just one person every single week— hey, Erica, you're welcome.

I was just about to say, thanks, Erica.

If you ask one person every week to meet for coffee, you meet one person, that's 52 owners a year. If you're talking about your goals and who you are and what you're trying to accomplish and learning about them, you will find the deals. I promise you, this is the best way we have found to do this. After banging our head against the wall a lot of different ways.

Baller. Boom shakalaka.

I will ask question number 2 here for you. How do you pay back investors?

With money.

I was gonna say that. With money. We're gonna go into how you do that. But the question is, how do you pay back investors? Is there a time frame? Is there a standard amount? Or are they letting you borrow money at a certain interest rate?

Yeah, they let me borrow money at 0% for life. No, that's not actually how it is. Every deal is individual to the deal. I've had opportunities where I end up paying people back with a note, where I end up making payments to them over time and they're cashed out. Think of it like a home loan, you amortize it over time, you pay a little bit of the debt down every single month. Sometimes I just make interest payments while they loan me the money, but if I want to pay them off, I have to typically write a check. So I did a deal where I had to sell some real estate and then I paid people off. Or right now we're doing a refi and Eventually pull out some money, pay people off. There's a lot of ways to do it, but at the end of the day, it comes down to how do you build your real estate portfolio quick enough to where you have enough cash flow on long-term debt to where you can use all the cash flow to pay people off. And the way that we love to structure it is where the real estate buys the real estate, because I can figure out how to buy it, how to never lose it, and I can make the real estate pay off the investors. It's a free piece of real estate, it's free opportunity. Takes creativity on the front end and it takes time on the back end, but we can accumulate a whole bunch of different properties that pay money every month. And we use all that money, we become a great manager, and we write a check to pay off the investors.

Now, to illustrate this just a little bit further, different deals— every deal has a totally different structure on how and when we're going to pay people back. We have a few, very few, short-term notes. We have a lot of notes that are a lot longer, 5, 10 years. If a deal is really low on cash flow, you're probably gonna have to pay a lot more later in a buyout. You're gonna have to promise them, hey, there's not cash flow today, but we have a plan for this property and this is how you're going to get paid. If you're really high on cash flow, we usually have monthly payments. So depends on what you're looking to do. Um, we have a real-time question here.

We'll answer that because so we don't forget it before— if you had to start over in real time I believe they asked, what would you do? And if you can put that one more time, I— it went away. However, if you had to start over, what would you do? And Christian, what would you do if you had to start over in real time? Let's see. Oh, there it is. If you had to start over— we're just learning this thing— from the beginning, what would you both do differently individually and as partners? Love you guys. Well, we appreciate that.

What would we do if we had to start over individually? The first thing I would do is I would buy bigger. I started with 2 duplexes, then I bought a 38-plex. I would immediately start buying bigger. I had this crazy goal of 30 units by 30. About a quarter of the way through age 29, I had 4 units. Did we figure it out? Yes.

Yes.

Could— it was actually easier to buy the 38-plex than it was either of those.

Much easier. And I started with 12-plexes, so I just added 10 on both of my first purchases. Then I went down to 6, and then we did the 38-unit together. Starting over today, I would pick one market and I'd become the expert in that market. I would know who the players are, who owns what, where are the assets, what are the rents. I did that in Moses Lake and I did it with Quincy. If you pick out a building, I promise you, if it's in Moses Lake, I know who owns it if it's multifamily. And that inspires a lot of confidence brokers. That's how we got our seller financed 10-plex. They called up Christian, passed the phone, and said, hey, we got a Division 10 plex. I was like, I know that owner. I name dropped and they're like, what the heck? How the heck did you know that? And that's how we got that deal. I would become the master of any given market where you wanna invest. Small town America, 'cause that's gonna be where you find the most opportunities. Can we get 25% down from private or hard money lenders?

Ooh, ooh, I'm gonna answer this one really quick. My second deal ever, duplex. I went with a hard money lender. It was a middle money person. I borrowed 101% down on my second duplex. Ridiculous. That is hard to get. That is not normal. The deal was absolutely incredible.

It was on the market, by the way. You could find these on the market. It sat on the market for over a month.

Listed property. We're slightly crooked. This has been bugging me the whole time. We're live.

Would an owner want to sell to me, or why would an owner want to sell to me using seller financing?

I'm 73 years old.

Well, The reality of it is, is if you're getting into this game, youth is not time on the planet, it's time in the business. So if you haven't done this yet, maybe you've bought a whole bunch of property, but you've never done it with seller financing. If you're 73 years old, you're trying to go play this game. Look, you've never done it before. The seller financing route. Most people never do this route. And so if they've done seller financing before and this just comes from learning their story, Same approach. I don't name drop, or I don't drop my age on these phone calls. They don't know that I'm 22 anymore. I used to do that because I thought I had to. Today I don't.

Granted, Cody doesn't sound 73.

Yeah, not yet. Give me 51 years. But in that scenario, I would just acknowledge that they've done something you haven't done. For me, hey, you bought a 12-plex, never done that before. And that, that could be a great way to start. Well, you did a 30— I've never done this before. How the heck did you get in a position to do this? You meet up for coffee, you learn from them. Typically, a lot of big players have done some form of seller financing because that was super popular a long time ago. We've been putting this out online and not a lot of people are really familiar with how we do it. And we brought it to our accountant who's been in the real estate game forever, and he's like, this is how everybody used to do it. What the heck? He didn't understand how we were going as fast, but it just comes down to learning from the people who have played the game regardless of age. They could be younger than you, older than you. But sit down, coffee, lunch, dinner, learn how they got to where they're at, and ask for recommendations how you could do the same thing that they've done to hit your goals.

The easiest way to find seller financing is to have a relationship where they trust you and want to sell the property to you. Then they're going to find a way to make it work, and that's where most of that happens, especially in low-down situations.

So we've got another question. We appreciate everyone dropping questions. This is cool, I've never done this before.

I know it's fun.

From CA, what are your thoughts on using a HELOC from a primary residence? Well, Christian, you've done this.

Yeah.

What are your thoughts on using a HELOC to buy an investment?

Well, I have two thoughts on it. One, I 100% did it. I love the HELOC product. When your real estate can buy your real estate, that's something I'm generally a fan of. I used a HELOC on my primary residence, $100,000 pulled out of the property. To help us stabilize and start up the 38-plex. We raised the down payment, however we did need actual capital because we started renovations immediately and that actually was out of pocket.

That's why our question is, how do you buy it, how do you never lose it? We found a way to buy it with no money. We would have lost it if we didn't have any money.

So that's, uh, exactly.

We used his house, which we're in. This house was the First National Bank of Cody and Christian.

Now one thing that I will state, I am willing to lose my house for the vision that I have for financial freedom for life.

I'm willing for him to lose his house too.

Oh, I know you are. Um, but, but really, and I have a wife, I have pets, I have like— I've built a life here. I love this house. I'm gonna do math and deals where I have a clear path to never ever lose the properties. We have non-recourse debt. However, if I stack a new $100,000 against this house, I better know where it's coming from, how I'm paying for it. Is it a risk? Yes. At the end of the day, is your goal big enough to justify HELOC? Because if your goal is, hey, I want to drive a Rolls-Royce, I want to buy a yacht, that is not a goal that is worth getting HELOC for.

No.

If it's, I want to retire my wife, I want to have kids in the place that I want to raise them, those goals will carry you through.

Wouldn't they look at life expectancy before getting into a seller finance contract with a 73-year-old? I think you said you're healthy and 50. Well, if you're 73 years old, yeah, they may look at that. But at the end of the day, if you build the relationship that no one else is willing to build, they'll give you opportunities that they won't give other people. Anybody could die tomorrow. That's why we have to look at life insurance. We haven't figured it out yet, but we got to get it figured out because I could get hit by a bus tomorrow. Someone could have a heart attack tomorrow. You could die any day, and it's a factor for everybody because everybody has that unknown risk of, oh, this could go wrong. But if you have the relationship, your odds of actually making it happen go way up instead of building it as a transaction. If you're 50 today or 73 today, 2 years from now, if you're 73 now, you're going to be 75. The difference is you could have a bunch of real estate at 75, or you could be where you're at at 75. And so my thought is, whether you get the real estate or not, build the relationships with the people that could get you in a position where you own the real estate. Because yeah, some people may say, oh, I don't want to seller finance to you because you're 73. Oh, I don't want to seller finance to you because you're 19, you've never done this before. Well, either way, I'm going to build the relationship because that is worth more to me than the real estate.

And I feel that's just as insane with, hey, I'm 19 years old, I have absolutely no money, I've never owned real estate, neither has my family. That's hard to seller finance to too. It's just about having a true relationship. If they get to know you and you actually have a relationship with that owner, age is just another factor. Next question we had. Oh, this should be a pretty simple one for you, Cody.

I can do this.

What is debt in the NOI minus debt equals cash flow equation?

Okay, so you buy a property. Net operating income, NOI. Thanks, Bill. NOI is your net operating income. It's the money you have after you pay your expenses. Now think of it like growing up, you have to feed your body or you die. It happens. Well, in this case, you have to feed the property or it gets taken by the government. So you have to pay your taxes, you got to pay utilities or those get shut off and then no one lives there. You got to pay your management fees, you got to pay all your bills, there's maintenance, repairs, there's gonna be things that pop up. Well, you take your top-line income, always on an annual basis, you subtract your operating expenses just to keep the property alive, just like you'd have to keep yourself alive, feed the property. And assuming you had it free and clear, that's how much money you'd have at the end of every year, NOI. Well, typically, I mean, I never had any money, so I've had to borrow to buy my real estate. And so the debt in that function, NOI less debt equals cash flow, well, you have your income after you pay all your bills. Now you have your debt payments. If your debt costs you $10,000 per year, $833 a month, I hope your net operating income is higher than $10,000 a year. Otherwise, you're going to be losing money to own real estate, and we don't want to do that. So NOI, your net income from the asset if you owned it outright, less the debt, whatever it costs you to get the loan on an annual basis, You subtract that out and you get cash flow. So example, our 38-unit, we're refinancing right now. The debt's going to cost about $6,500 a month. The net operating income on the asset should be around $15,000 to $17,000 a month. Yeah. And if you subtract out the, you know, $17,000 minus $6,500, and now I'm going to cash flow on that— why am I doing bad math? $10,500 a month. Now that's $126,000 a year in net cash flow on that asset, and there's room to improve it. Now, the $17,000 a month NOI is not top-line revenue. The rent roll, it's fully stabilized upwards of $30,000 a month, but there's operating expenses to keep the property. So the debt is just what it costs for you to borrow to buy the real estate.

And our last question, I'm not actually even as interested in as some of the questions that have come through the chat. We pre— pre-grabbed a couple of them to get the conversation going, but I'm going to answer a couple from here. I think I can pull these here. What the last one in order was, would you go through realtors or direct to sellers if the deals are for sale by realtors? This is a really important question. You don't want to mess this one up.

Cody, if it's for sale by a broker, a real estate agent, a realtor, go through the agent. Don't go around them. It's not worth it. They're doing their job. They signed a contract with the seller. The seller doesn't want you to go around the broker. That's why they hired a broker opposed to selling it off market. So don't be shady. Don't go around people. Do business with people that the seller has signed up to do business with and keep it that simple. Now, if there's no brokers involved, go straight to the owner. But if there's brokers involved, Work through them. Don't try and cut price just because you can save the seller 3%. That's not why they hired a broker. They're not focused on 3% and neither should you. We got more questions though. So this is fun.

Yes, it is. We'll get a better version of this. We actually see them on the screen. I have to scroll through.

I have a variable rate HELOC. That sounds like Christian Osgood. On my personal home used to buy a commercial property. That also sounds like Christian Osgood. With interest rates steadily going up. Should I be paying off this HELOC? So I actually love this question. I'm a numbers guy. If you want to jump into it, you can. I know you're going to start paying yours down, but I'm paying it down because I don't like having the HELOC.

If we have the opportunity, I just tap the HELOC again. The beautiful thing about the HELOC is it's revolving. It's revolving. It's a 10-year HELOC. So I'm paying it down when I get cash in. If I don't have somewhere to place cash, I am ready to tap that again for the next opportunity. Right now, my interest on my HELOC is 5.5%. It is variable, so that will go up. If the HELOC gets really expensive, I have to just make sure that the money is placed in an asset that is yielding a lot more than I'm paying.

Yes.

The nice thing is it's interest only, which makes the math one step easier.

And we just got a question from Bill. Bill said he wants to make $5,000 a month in net cash flow, $60,000 a year. How much real estate do you have to own?

Well, that's convenient math. I know how to do this.

So let's say you make 6% on your money. Whatever you have invested, you make 6% on. Well, what is $60,000, 6% of? A million bucks. You need a million dollars of equity paying you 6%. Now, don't fret. Don't worry about it. I had $3,000. I was able to multiply it into over a million dollars. It doesn't have to be cash that you've earned. It has to be cash that you multiplied in real estate equity. You need to get a million dollars of equity in real estate paying you 6%. And that's $60,000 a year, $5,000 a month. And then boom, you get to live the life you want to live with $5,000 a month in passive cash flow. You have to figure out how you buy it and then how you never lose it on long-term debt. That is the only question. And the quickest and easiest way to become a millionaire is to borrow $1 million and let someone else pay it off for you in the form of rental income. This is cool that we're getting more questions.

I know, I like this a lot.

This is a lot easier than trying to find them on YouTube. How did you build these relationships with owners without going past realtors on on-market deals? Well, a lot of these were off-market. I mean, if you want to talk about the Lischkas. Yeah.

So there is a group out in Quincy, Washington. If you look at their holdings on a map, it lights up the entire city. It's incredible what they built and how we found that is they have a single-family house right next door to Cody's 12-plex. I looked them up, plugged their name in, lit up the whole city, all of the self-storage, 100% of it. Houses everywhere, multifamily everywhere. What they've acquired is incredible. Well, that's a good enough reason right there for me to call. So I call. Hey, my best friend owns 12 units. I'm actually looking to buy into them. I didn't end up buying into that building, but I was analyzing it at the time. I'm looking to get my own foothold in Quincy. I'm already established in Moses Lake. You tell them just a little bit. Of your story. It's not a, a long story where you do a ton of talking. It's a very quick, hey, this is what I'm looking to do. I saw you on this house. When I searched it, the entire map lit up with your name. I've never seen that happen before. I wanted to learn how you got there. They kind of chuckled. She's like, oh, you need to speak to my husband. His father built this whole portfolio. That opened up a relationship where they have an openness to buying the entire city. You can seller finance cities from the right person. Turns out their goal is to slowly roll down that portfolio to the next people.

Now, why would they do that? I mean, other than tax benefits, right? I mean, everyone says the tax benefits are the reason they would sell or finance. That's not true. Why would they do it?

Well, in this case, they have a little bit of deferred maintenance. It would be— it would take a little bit more time. By a little bit, I mean a lot more to try to get all these into one bankable loan, right? Um, so there's a convenience factor, but above that, their father, who we've— I've met with them and talked about tons of times He built this as a passion project. He built this huge portfolio. They don't want to see it broken down and taken into a whole bunch of different places. I love their priorities here. First, they want to go to all their tenants in the small multifamily and the houses, and they want to offer them the privilege of buying the place they own, which is awesome. And they get first shot before us. That is an awesome thing that they are doing for their tenants, and that is their priority. I will never get in the way of that. For everything else, every other property, that their tenants don't want to buy themselves. They want to see their father's mission carried on to the next generation.

Passing the torch.

Yes. Now that one might be a little bit harder if you're 73. However, your story is going to be different and land with different people.

Yeah, you're going to be able to connect with others based on your ability to present your story. Now we had a few more questions, actually more coming in live. This is fun. All right, so we had a couple up But nope, I skipped them. My bad. So someone asked if we could cover a live deal. Yes, we can do that. Someone else asked— that was a quick question— how do you keep building a relationship with an owner after you meet? Well, quick phone call, ask for coffee meeting. I ask about how they keep building their portfolio. I have someone that I'm buying from, going to continue buying from them. I think of them like a father. They're in Central Washington. What they've built is actually ridiculous. I mean, it is, it is so cool what they've built. I met them for the very first time a little over 2 years ago, and I bought my first deal from them about 2 years ago. And yeah, bought my 12-plex in Moses Lake. What they've done is phenomenal. I look and see what they're doing right now. They're building. I'm trying to figure out what their next step is because through that I can learn what they're working on. I can maybe contribute to it. I can add commentary. I can show them what I'm doing. I've bought a lot of stuff that wasn't from them and I can show, hey, these are my projects. This is what I'm working on. And that builds a relationship. I listen to what they're sharing. So they said, you should put a pitched roof on this project, the one that they sold me. And it was $130,000 roof, very expensive. I borrowed money. It was essentially a 12% interest HELOC, a RELOC, rental equity line of credit, very expensive. But I did the roof and I got a lot of buy-in because I did what he told me to do. And when you do things that people share with you, it builds a lot of trust. Mm-hmm.

It's rarely going to be a one meeting thing if they have an opportunity for you to buy. Uh, we didn't even bring up transactions or what their plans were for their portfolio. That first group we used as an example, that was maybe meeting 4, um, cruise through. So get touch points once a month with people and you're building a relationship. Just like you would any other friendship. You just need additional points.

From Larry Chong, what do you suggest people do to find multifamily that is not on the MLS? Well, there's a beautiful map called Google Maps. Boom. Google Maps has every single property that you could want to buy, and you just have to find the big roofs on Google Maps, figure out who owns it. Tax assessor. There's typically a map on a tax assessor website. You can figure out who owns it, Google them. We have a video that Christian and I put together. Oh, boom, someone said thanks, setting a notification for live now. Sweet. But yeah, you could just set, not a notification, but you can set a search online, see who owns it. We have a video on how to find their phone number. You can do this with anybody. Give them a call, and that's exactly how we do what we do.

It's actually one of our most watched videos. I forget what we titled it, but it's essentially how to find every multifamily owner.

Yeah, ever. Next question: What does the coffee meeting typically entail? Do you both have an outline of questions you like to ask? Yes.

Um, so the first thing you want to do is you— I'll break this into a few very simple pieces. We actually just recently filmed this for our course, but I'll give you the general rundown. So the first thing you want to do is you get in and you just act like a normal human being. You have small talk. If you don't know how to do small talk This is going to be really, really hard for you because if you jump in on business, it's going to be uncomfortable. It's going to become transactional. Talk about a relatable point. It could be when you played soccer in high school, something you know they have in common. Soccer is the last one that got brought up when I talked. It could be fly fishing, whatever. Small talk. Set a quick verbal agenda of, hey, the reason that I called you to meet was X. It's the reason that you have for meeting them. Your questions— there's only two critical ones in here. You're going to ask how they did what they did. If they bought a 12-plex and you have a duplex, you can tell a quick story of, hey, I'm striving to scale up. I don't have the money to do so. I wanted to learn how you got started in real estate and how you got to owning this 12-plex. Now, if I ask Cody that, he'd be like, well, that's where I started. That's amazing. We have a conversation about that. You're going to end on, well, what do you recommend I do next? Throughout this conversation, you've learned some of their story. You've shared yours. They now have their your pieces, you just take their story and say, well, given what you've done, what do you recommend I do next? If you follow that general guideline— obviously there's more nuance to it than that, but that is the general script— if you can do that start to end, you're going to start finding opportunities. They're either going to suggest an opportunity for you to buy, connect you to the next person you need to meet— owners of real estate, know other owners of real estate— or they're going to give you valuable advice that you can apply elsewhere. A a lot of the deal structures that we do today. They didn't tell us a deal, but they did tell us how to do deals in a different way that opened our mind and let us do deals no one else could do.

Yeah. And then our last question, we got, um, actually it was on the phone and Christian sent it over. It was, uh, from someone who's asked a lot of questions on the channel. We appreciate Mo. Is there any actual support behind the Multifamily Strategy Course, or is it just educational material. The course itself is just educational. There's a point where you need information, and there's a point where you just need to go apply stuff. We are launching something where it's going to be live 3 times a week. We're still figuring that piece out. I mean, that is launching very soon, but the course itself is just for the information. And as you know, application is more important than information, but that is also essential. So if you want to check it out, check it out, uh, but that is not a whole bunch of support behind it. It is just the content. And as always, everyone on this channel has our phone number because we posted it in How to Find Every Property Owner Ever. So if you have questions, you just send us a message.

Now, if you are going through the course, we do value your feedback. And especially as we, we launched this about 2 and a half, 3 months ago, we're still adding new content about every other week. If you are someone going through that course, you're always welcome to reach out to us. For me, Instagram is probably the easiest way.

If you @ChristianOsgood.

If you have questions or want to connect with us on a call and you've completed the course, 100%, we're here to support you. We would love to hop on that call with you.

In your seller finance deals, who holds title and deed? Well, we're in a lien theory state, so in this state, at the very minimum, Washington State lien theory, I'm on title with Christian. It's not actually our name, it's our LLC, and we are on title. And the way that it works in this state is that a lender is a lien, aka a loan. L-I-E-N also stands for loan against title. And once you pay stuff off, you have what's called free and clear title. When you sell something, you typically have to provide free and clear title, meaning that the new buyer is not going to inherit any of your own loans. Well, the seller becomes one of those loans on title. So if you want to sell it, you have to pay them off typically. So that is the way that that would work. But we don't have any other questions. So if we'll give it like 20 seconds, if anybody has any other questions, put them in the comments. But, um, that's Whiteboard Wednesday, and now we know that people are actually going to comment. This is cool.

Yes, I like this much better live. We should have thought of this 18 Whiteboard Wednesdays ago. However, uh, doing it every single week. So post your questions. We'll warm up with any questions. So if you have questions throughout the week and you're like, oh, I'm not sure if I'm gonna be able to make it to the live, post it below to this video now. If you're watching it later, also post it now. Which will be later, and we will read it. We'll answer those questions. And then this is really fun. If you guys can join live and invite other people to this, we will just do this in exactly this format. Just keep answering as they come, your questions live.

It'll go as long as the questions roll in. Where is your course located? TheMultifamilyStrategy.com. Our idea was name a company Multifamily Strategy because we built our own multifamily strategy based on those of others that we called and learned from. But themultifamilystrategy.com where you check that out. And if you have questions, shoot us a text. Thanks guys, you guys are great. Thanks for motivating and giving us knowledge. We are going to try our best every single Wednesday. So that's it for this Whiteboard Wednesday, and we'll see you next time if we can exit this. Boom shakalaka.