Live deal walkthrough

All right, hello and welcome to Texas. I'm in a lovely town called Weatherford, not that far of a drive from Stephenville here with my good friend Caleb Hommel and my wife Dani, who's running away over there, but doing a walkthrough with a good friend Jake. He's looking at a deal out here, and so we're actually gonna be walking it with him as he arrives. Before he gets here, I thought we'd actually do a little walkthrough of what we do, how we do it, and things we're actually looking for at a property. So welcome to Texas. This is a special edition of the live. As always, we'll answer some questions as they come in, but we're gonna just dive right in. Kayla, what are we doing in Texas, by the way?

We are looking at your new house and we are walking a brand new deal.

Now, we earlier in the week walked a 120— how many was it? 122? 112. 112, that's why. 112-unit in Waco, Texas. Turns out, not gonna buy that one. Not, uh, well, we'll see. We'll see. It has no books. And it's been a long time.

So yeah, it just comes down to the fact when you're asking for books and deposits, trying to go over everything, and they just keep saying no, no, no, there might be something fishy going on there.

So waiting to investigate, but on the assumption that it's not going to come together, uh, we are looking at some other stuff, including a 44-unit, which is probably gonna be the coolest thing I've ever bought, in Stephenville, Texas. So gonna walk around the property, show you guys how to, uh, how to actually do this. What's up? Away we go. So we're here. It's a 16-unit building. I won't give the exact address because, you know, someone else is actually looking at this deal. They're gonna be joining us here shortly, Mr. Jake. But, uh, first thing I noticed, trim is beat up. It's not bad, but I'll show you what I'm talking about. You can see that there. Down in here. It's chewed up, and that's pretty much consistent all the way around the property. It's not horrible by any means, but it's consistently— you can see the weathering pretty much everywhere. I hope you guys are picking it up as well as I see it. So that's one of the first things I look at, just condition of the wood, and it does need some love, which means, okay, we maybe do have some value-add. It's not in pristine condition. Overall, these look quite nice though. Two-story walk-up, bricks in good condition, landscaping is done. Trees could be— actually, no, they're trimmed pretty well. Uh, so landscaping's pretty good. That— I'd pull that one off the building a little bit. So not too bad. Let's take a look behind. This is just an exterior walkthrough today, seeing the same thing, weathered everywhere. That's why they call it down. I'm just gonna make that joke. Yeah, we're in Weatherford. This is a weathered property in Weatherford. Um, okay, back here, ACs look to be older. A lot of decent shape. Yeah, half decent shape. There's some dirt in them. I don't know how recently they've been serviced, but it's clean back here. Oh, here's a red flag. I, I don't like to see this property. We actually had this at one of our properties this week. Shopping carts. When you're looking at general unit mix, class of tenant, who you are renting to, I try to make sure we're not seeing dog poop, cigarettes, and shopping carts. Shopping carts are one of the first things you notice at a property where you have tenants who are going to be messy. Usually in the very low-income areas. I don't know why that is, but they seem to like to walk the shopping carts to the properties and just leave them. We had this in Stephenville at a property that we have that has actually a good deal of Section 8, and we just had to clear all of them. I think we had 3 of them. So that's what we're looking at there. Nothing too, nothing too crazy. Walking the rest of the building though, everyone looks pretty nice, friendly. I won't disturb anyone too much here, so it'll be fine. But exterior walkthrough. People hugging, nice community. And overall, the gardening is really good. We're seeing consistently through here. Yeah, a bunch of care. People have good upkeep, which is all stuff that I want to see. Same siding issues. These ACs are a little bit more beat up. I'd definitely clear some of the debris around them. Overall, Ooh, lots of stuff up there. Overall, not bad. Initial walkthrough, I would, I would call this a B. There is definitely work to be done, especially on this area side. Look at this gapping here. So definitely work to be done, definitely work to be done here. However, not bad. Now, from Vicks Life, thoughts on Section 8? I have quite a bit of Section 8. One of my buildings in Stephenville with Caleb back here, about 25 units. We have 9 people on Section 8.

Oh, actually, we're— yeah, we're down to 9.

Not down to 9 now. Um, they've been really easy. Have we had any problems with the Section 8 people? We had one pass away, but, um, tenants, no.

With the housing authority itself, yes.

With the checks? Oh, they kept sending the checks the wrong spot, but that was the housing And we did get that resolved. They have a— they have an actual PO box. Yeah, tenants themselves have been absolutely great. I do about— I want to say it's probably 18 to 20% of my rentals in Grant County are Section 8. I love it. It's one check. They itemize it pretty well. Uh, it's different everywhere, so not every housing authority is made the same, but Section 8 has been a great way to stabilize portfolios. I found in the markets that I'm in, they actually offer a little bit over market rent, and over market rent is actually very helpful. So we've been able to get rents up. It does not affect the tenants. It is a government program that is available to anyone. Overall, I'm a big fan. I have had one really rough one, someone who was out of prison.

Did you inherit or—

I inherited. We didn't place, we didn't place. You're still allowed to screen them, by the way. Very clear question. But, but this person was fairly fresh out of prison. They were, they were working on getting their life back together, which we do like to work with people. Yes. However, they fell off the bandwagon, started dealing drugs to other tenants who were Section 8 who fell off the bandwagon with them. So we went from a beautiful, calm little campus with a big courtyard to, uh, pretty massive drug problems pretty quick. So not the recommended way to do this. You want to avoid that at all costs. That we do. What are the numbers on the 16 units?

We actually don't—

I don't know all the numbers. I'm here to investigate conditions. You're helping out a friend. Yeah, so actually someone in the mentorship program, uh, on the way up from Stephenville going back to my house in, uh, the DFW area. We're up here checking it out, giving the exterior walkthrough. I do know that the pricing is going to be close to $100,000 a door, which is very reasonable for Weatherford. In fact, I think the average price is about $115,000 to $120,000 a door if you're doing a per-door basis. That's not bad. A blend of 1s and 2s if memory serves, but, uh, we'll remember as we go. And a lot of— well, hello— a lot of regulation and cost to pass Section 8. Not really. There is a Section 8 guidebook, and I actually share this in one of our videos here on YouTube, but there's a Section 8 guidebook you can actually go through that gives exactly the renovation standards that you need for your building. Oh my gosh, this is a mirrored image. It's really hard for me I keep tilting the wrong way. I'm sorry, I keep just leaving the camera. But yeah, there's a guidebook that we actually set all of our renovation standards to this because it's pretty strict. It has regulations for here's exterior lighting, where do GFCIs go, how is water heater supposed to be secured. However, if you follow that for all your properties, they all qualify for basically every program. So not just Section 8, we have lots of people who are on various rental programs in my portfolio.

We have another one down in Stephenville we're starting right— we have one in Stephenville, a new one we're starting right now with two brand new tenants with a brand new housing authority or brand new government assistance program as well.

So, oh, that's fantastic. I didn't even know that. Where, uh, what do we know about that program?

Uh, it's local to Stephenville. It's more, um, on the elderly side.

Oh, perfect.

So yeah, brand new program there.

And, uh, we do, uh, there's a program called Hope Source. There's another one called— I think it's another Hope thing. This is called the Cotton Valley. Pecan Valley, we have New Life, there's a whole bunch of— then there's a Catholic church program up in Moses Lake too, as well as I believe the Mormon church. They have a Mormon temple up there. All have assistance programs, all available. So boy, I'm really not doing well with this camera. I apologize, folks. But yeah, if you follow those guidelines exactly, you're gonna have a massively, massively easier time. And then if you just set it as your rent of renovation standards— wow, stutters— if you set those as your renovation standards for all your units, you'll qualify for basically every program. Section 8 is something that I really enjoy. This building that we're walking today, I don't believe actually is Section 8.

It's not, no, no Section 8.

Can you guys take a mentee? Yes, actually I have. Um, we try to stay at right around 40 people, or 40 to 45 on the live calls. I think we're right at 40, so we could, we can fit another 5 people if we wanted to. Uh, so absolutely. You are invited. Check it out, multifamilystrategy.com. Uh, but yeah, checking out the building for those who are just joining now, that tree is large and looms over the building. I would trim that thing up. Uh, everything else really well kept. So we have great plants. I'm looking at the parking and while it's beat up, it fits in with the rest of the properties here. And this is the other thing that you want to look at. So I'll take you guys on a quick walk down the street here. I believe there's some other multifamily this way. So we're gonna go down just a property or so down the road here. Continue to ask questions in the comments, by the way. If you guys are new to the channel, welcome. I'm Christian Osgood. I bought hundreds of rental properties using none of my own money because zero of the dollars were in my bank account when we got started. Um, we're talking today about property walkthroughs. A lot of the questions have been around Section 8, though this property doesn't have it. Um, I do like to take a look at these properties. They do look like they'd be a good fit for lower income, where they're nice, well-maintained, but they're not like fancy with amazing finishes. Looking at the parking lot on this one, I'm seeing the same thing. A little beat up, the fence is a little beat up. So the stuff where I'm saying like the property is a B, there is stuff to improve, it's consistent with everything else on the street. It does look like if we go a little bit further down We may have one more building to look at that is much nicer, and we'll take a look at this one. That's a bigger building. That's fancy. Okay, so on my quick search of the neighborhood, and that's what I always want to do, it gets nicer and nicer the farther down you go on this road. When I'm looking at multifamily, I like to see that there is still achievable upside. It is by no means the nicest property. It's also not the worst property on the street. Area seems pretty highly trafficked. There's a lot of people going through here, but it also feels really safe, quiet. I've seen a lot of neighbors out and about talking, hugging, doing the— just being neighborly and kind. I like the area overall. It's actually this kind of industrial area, which I don't know that I love, but for what it is, There we go. That should, uh, that should get the audio going there. My apologies. Okay, so we're talking, um, right here when calling owners, best time to call if there is one. Okay, so we're going to be calling owners, uh, some answer during the workday, some answer a little after the workday. You're not going to call too early in the morning, you're not going to call too late at night. Those are the two main things. Other than that Day of the week doesn't matter. Every time you call, you're going to leave a voicemail. You're just going to say, hello, this is insert name here. This is the reason that I'm calling, and we'll go from there. It's pretty quick. You don't want to give them too much. So it'd be essentially, hey, Christian had a quick question for you. If you can give me a call back, here's my number here, insert number, get off the phone. I make 2 calls a day, by the way. The way that I prospect for owners, I do something like this. I'll drive to an area with multifamily. There's 3 buildings there. I'll look up the owners, give those 3 people a call. Whether they answer or not, done my job for the day. You do that every day, call 2 or 3 buildings, quick voicemail if they don't pick up. You will in fact meet a lot of owners. In fact, on average, I do 1 to 2 coffee meetings a weekend, which means every year 50 to 100 owners of real estate have met with me. I don't pay for leads. I don't pay for phone numbers. I don't do mailers. I don't do door knocking. I don't consider it cold calling. I mean, it is, but it's 3 a day. It's not like I'm dialing 100 people. That's how I find real estate without really having a marketing or sales job. Ever been to Australia? Have you thought about going to or investing in Australia? No, Australia has a really hard time with their pricing. Australia has a habit of being a little overpriced for what you get. On the income. Since I buy for cash flow, Australia is very pinched there. Doesn't mean it's impossible. In fact, they call it vendor financing down there, but seller financing, still an option. In fact, it's usually the way things trade because you don't have the same bank options we do here in America. Do you put any value into the NOI numbers provided by brokers? No, uh, it's almost always pro forma. I will use it for like initial, initial numbers But if that's what we're going off of, uh, the 112, the 112-unit Waco deal that we're actually walking from— well, might be if we don't get numbers— that would be our reason. We cannot prove the income. I have stated income, and then I asked them to at least show a deposit slip, and they just sent me an Excel sheet that just has a few numbers on it that says these were the deposits. That is not financials that we can bank off of. And it looks like that's about what we have here for questions on today's episode. I'm trying to keep this pretty quick because we are here just doing this. I have one that just popped in, and then I'll do a quick run-through for those who haven't seen this yet. I've acquired a property with a, uh, large range between what tenants pay in rent. I have, I have. There's actually a good question. I don't know if we've had this on the channel. If so, how do you go about closing the gap and bringing rents closer to market? All right, ever acquired a property with a large range between what tenants pay in rent? Yes, we picked up one where tenants were paying $400 and for the same identical unit there's tenants that are paying $1,000. The landlord didn't feel that it was fair to do rent increases. What they ended up having is people who lived there for over a decade who had never had rent increases increased. I don't necessarily think that's fair to the tenants, but that's what the situation was. The best you can do in those situations is you standardize rent, and you may lose some of your tenants, and it is a bummer. I have found offer value first. So first thing we do is we come in and we do any repairs that need to be done to the exterior, and we send in requests. If you have any maintenance orders, you have a range that's gone out, Maybe just even a burner on one of your ranges. There's anything that we can do to repair the property so that they see that new ownership does actually care about them. We try to do that first. The next thing we're going to do is we're going to look at rent when there's a huge gap between what people are paying and go, okay, some people are paying, say they're paying $1,000, other people paying $400. Rent's going to have to move up to $1,000. Otherwise it doesn't, at least to me, doesn't feel fair to the people paying $1,000. We do rent increases that we're increasing people to less than they're currently paying for the same spot. That's been our policy. Fixlife, what are some of the major red flags when walking properties? Illegal number of units? I don't run into that too often, actually. I have seen people tell me it's a 32-unit building when it clearly only has 29 doors. Like, well, we, you know, we were counting the laundry room and the electric room and the There's a storage maintenance area. They all could be rooms. I've seen that before. That's why you do a physical walkthrough of your properties, by the way. People will in fact lie to you. Happens all the time. Oscar, can I get a cash-out refi if we have no credit or low credit? What can a real estate investor with 1 to 2 multifamily cash-flowing properties do to qualify for a cash-out refi with no job or credit? So if you're doing a cash-out refi, they are going to look at your credit. The way that you get around this in this case would be an equity partner. If you have an equity partner, you could come in and you could establish, uh, you could establish a score between the partners and a net worth between the partners that could get you a cash-out refi. Now typically on conventional financing They do want to see that the partners' combined net worth is at or above the actual loan amount. So that's going to be really important for you. Uh, we have a bunch of unnecessary chatter in here, but I think the main thing you do if you're looking for a refinance— there's a few different ways to refinance. You can actually do a private refinance, you can do a seller refinance if you happen to have seller financing on them. You can actually have the seller just restructure your loan if you've increased the value of the property significantly. I've actually had that happen before. There are a lot of different options that you have on refinance, but directly to your question, if you're asking like, how would I refinance a property if I don't currently have the credit or the net worth requirement to do so, what I would 100% recommend, 100% recommend, is getting a long enough balloon where you can fix the credit piece. That's, that's about all you can do. You do want to have good credit at some point. You don't need it to get into the game at all, but there's a lot of people online, and I mean like a lot, who will do these ads, oh, with no money, with no credit, you too can be rich in real estate. Yeah, but if you have to refinance, your options are sell or refi. And if you can't refi and you can't get out of your seller finance debt or your creative finance debt, you're more or less stuck. If it's a problem you can fix in a few years, I would do that. Can I get a refi on some bad chronic I bought? Don't know what that means. Don't know what chronic is. David, uh, when seller financing, are you looking at properties, uh, when there is not existing Financing, uh, no, actually really common for us, like super common. Something that I'll do is, um, properties that have a loan that is smaller than the down payment that I would like to place down on the property. So for example, say someone has low debt, they still have an existing loan, uh, that's something that you can actually do, like absolutely. Um, just raise the money, find an equity partner. This is something you can do if you have no credit as well. Find an equity partner does have the credit, have them bring the money, and then go ahead and take that and pay off their debt. And now you have the building free and clear. As long as you can wipe out the debt though, you can do that. I don't do any targeting, I just meet with owners of real estate. Some of them are not going to sell me properties, that's okay. You want to make connections as humanly possible. I'm actually going to try to, uh, try to answer this one because it does actually pertain to seller refinancing. Even though Travis is being a troll, we're going to jump in here and try to answer this.