Live from NYC - creative finance

All right, and welcome to another episode of Multifamily Strategy Live. For the few who are already watching, welcome. Everyone else will come in here as we go. Now I'm going live from New York from my phone. This might be a little shorter live than usual, but fun topic for today. We're going to talk a little bit about takeaways from the events, and, uh, I'm really going to focus on when is it actually time to pay off the real estate, why we do that. I've had some controversy on why we have the last phase of our strategy the way it is, and I really would appreciate your guys' feedback. So I'll be looking for, uh, for thoughts in the comments. Uh, we'll, we'll take time to answer a few questions, and then we'll call it a little shorter live. As it is pouring rain in New York. I'm freezing cold and I'm trying to get dry and, uh, under warm here. All right, so today's topic: why we pay off the real estate. We do this creative finance thing. You can start with no money, you can start a ton of money, it doesn't really matter. You're finding opportunities and you're finding a way to get the money to close them. Could be seller financed, we do a ton of that. It could be bank financed with a partner. It could be hard money. There's a a ton of different ways to knock it out. But what you're going to do in Phase 1, you build up the portfolio, buy the real estate, you get the cash flow. And really, the question that you're asking yourself is, what is the real estate for? There are people, and to some extent I'm one of them, I am a board game player. I love playing the game. I love playing the real estate game. So I play this all the time. I absolutely love the actual scaling of the businesses. That's not everyone. In fact, that's not most people. Majority of people have a very simple and specific goal. And I had a very simple and specific goal. This is how I started. I started trying to retire my wife from teaching, wanting to buy, buy or build a house in Texas. I am currently in the process of building the house in Texas as we speak, which is super exciting. Super exciting. The best thing to do is when you've hit your original goal, pay off the real estate that got you there. Right now, today's economy, we print money too fast. Inflation— very, very, very few people earn enough money to save through inflation. They print money faster. You're always trying to catch up. You get to the end of a career, and trust me, I house a lot of people who are elderly who live on Social Security who found, wait, I worked my entire life and I still don't have enough money. Even people who lived under their means, Social Security checks come in, it's not enough money for them to live on. They are stuck. And guess what? We keep printing money and the value of their fixed income goes down and down and down. So what do we do? We play the same game the banks are playing. We use leverage. We lever up, we buy the real estate. Again, you can structure it a million ways. We talk about all the time on this channel, but you lever up You buy the real estate that buys you enough income to both live the life that you want to live and to start paying down the debt. And what you're going to do is you are going to use that cash flow that you generate by buying assets larger than the liabilities to pay off all the underlying liabilities. And the great thing about real estate— this is why we like real estate— real estate will adjust to inflation. Rents go up over time as cost of goods go up over time. Everything goes up in real estate. Give it enough time. So you're gonna get financial freedom, you're going to pay off the debt, and now that income that you are free off of will actually support what your original goal was for all time. Government prints more money, your values go up, the rents go up, they adjust. That's financial freedom. That is why we focus on real estate, because it is such a reliable— especially multifamily— such a reliable, specific income-producing asset. So why would we pay it off other than, oh yeah, let's get some security? You don't want to build it twice. You can still go lever up again and get to the next goal and get to the next goal and get to the next goal. But do not leverage the things that you're not willing to lose. That's really important. When I got started, I took a HELOC against my house. My wife and I also talked about it and we were okay if it came to it with losing the house. Now, of course, we didn't lose the house and that's not what the goal was. But we said, hey, we're going to put more leverage on this, knowing what more leverage means. More leverage is not always the answer. I was at dinner last night with Cody and Henry Washington and a whole bunch of other investors. Matt Faircloth. We were sitting there talking about why would you pay off debt? I was like, well, wait, if you could just take the whole portfolio and rip out $3, $4, $5 million, wouldn't it be better just to have the $3, $4, $5 million right now instead of waiting for it to cash flow? And the answer for us is no. I would rather take the time to pay off the debt. Levering and levering and levering. I know a lot of people, I know billionaires who, one, holding a bunch of cash is not making them any happier because there's no point. They don't have a goal that's that big. They're just scaling to scale. But two, what is the real estate actually for? Like, why did you get into the game? For me, I don't want to start over. Have to provide for my family and maintain a now going to be larger, more expensive house in Texas. I got to my dream. I really don't want to restart, reset, and have to do it twice. So I say lock in those things, lever up again, non-recourse debt, and continue to scale up and buy other assets. Set new goals, absolutely. But you don't need to lever everything that you did in your build and stabilize phase to make it to the next level. Ripping out a bunch of money right now you can stay a little bit more frugal, keep that debt lower, keep your risk down, and maintain the portfolio. That's my, that's my overall advice. On a tax standpoint, of course staying levered is the best thing you can possibly do, but practical advice, it's hard to lose things that you've paid off. Like, don't pay your taxes or utility bills, you'll still lose it. But generally speaking, very, very, very hard to own an asset if it's not levered. All right, let's jump through a couple of these questions here from the chat. Dylan, what's up, man? Good to see you here. What do you think is a good medium time spent on real estate versus time spent on enjoyment? Uh, for me, uh, they're one in the same. Real estate plays just like a board game. I love real estate. I do real estate pretty much 24/7. If you've noticed, I have Instagram videos, YouTube videos. I'm live right now. We're talking real estate. I'm in New York talking to real estate event. I'm going to come home, drive right to my original duplex that I'm about to put on the market and sell. We're pretty much like I'm home for one day and then we drive out to the duplex. I still running my property management company. I do this all the time. So what a good medium time spent on real estate versus time enjoyment. I don't— I'm probably the wrong person to ask. I go all out pretty much all the time. Uh, that's not sustainable forever though. Like, there's no point in just spending your whole life working. Some people will make that argument that, you know, oh, I just want these goals and whatever. It's not going to be fulfilling. Uh, I am willing to sacrifice a lot right now though to, one, finish the build on the Texas house and actually move in. Then you have to furnish the darn thing. Uh, but to move the pieces around so that I actually get the time back— I spent a lot of time on business building and I'm still having fun. So I'm going to play, play the building game while I'm enjoying it because that is enjoyment. And then I'll, I'll be backing off that the next few years. You'll, I'm guessing you'll probably see less acquisition for me and more fun or adventuresome projects, uh, that are a little bit less capital intensive. But for right now, still enjoying building, and I'll be building a lot in Texas as far as buying a portfolio and stabilizing that. Uh, how many credit cards is good enough to have? Oh, we don't talk about credit cards all the time on this channel, but, uh, I personally have two and my wife has one. Uh, she has an Alaska card because that's the airline that we fly the most, uh, while we've lived in Seattle. I know that Alaska is a little bit, a little bit less popular out of Texas, I believe. But, um, we have an Alaska card for when we do travel. I have a City Card that's cash back, uh, that we pay off everything in full. We don't carry credit card debt personally, um, but that gives cash back on purchases. I like that my life is 2% less expensive. That's kind of cool. So I like and use that card. And then I have an Amazon card because we use Amazon for a ton of stuff and 5% off Amazon. Good stuff. Um, I mean, that's good for credit cards. Uh, my current credit score, last I looked at it, was 815, uh, which you will build a credit score. I started with— I basically had no credit because I didn't use a lot of credit. Um, but you get enough loans and you service those loans and you pay down your loans and you pay off things, and as you play the game, your credit score tends to get ridiculously high as a real estate investor. That's just something that I've done because I use so much debt. I pay it off and I don't carry a balance forward. 1 or 2 cards is usually fine for most people. On my business strategy with credit cards, there are plenty of LLCs when I started with no money where we had projects from like, okay, we have CapEx right now, we're going to refi this year. I'm going to go ahead and take a zero interest card with a 12-month zero interest promotion. It's basically a free loan for whatever amount. A lot of them came out to like $24,000 to start the LLCs. And the real estate has paid those back. Is that a best practice? It only works if it works. That's the problem. I just heard someone in the— we took a class online called credit stacking where we kind of learned how to play the credit cards. So I see people posting there all the time, hey, I took out $200,000 of credit card debt and my businesses didn't work. What do I do now? It's like, well, your businesses didn't work. Now you owe the money back at really high interest. So it is a double-edged sword, but it is a way on a stable deal that is cash flowing. If you can pull in a year of interest-free money, it can give you some liquidity up front. If you have a project that, you know, needs $24,000 to $50,000, you can use credit cards for that. That's about all I have to say on credit cards. Okay, running through a few of these. You need an agent to sell your duplex? Nope, I own a brokerage. All property management companies, I believe, pretty much every state, uh, have to have a licensed designated broker. I actually do have multiple brokers in my office. I rarely talk about it because it's not a huge focus for me, but we actually do decent volume. We do a few transactions, uh, residential, small multifamily, some larger multifamily, um, on a monthly basis. We do a few transactions a month. Little baby firm, but I got some good, uh, good players on that team. Uh, do you, uh, write your notice for evictions, or is that a state thing you just hand out? Oh, definitely don't do that. Um, that's going to be a lawyer is going to handle that for us, especially in Washington State. I've only done a little bit in Texas. I think in Texas you might actually be able to basically take a boilerplate form because it costs basically nothing. But also, that's what lawyers are for. Like, I don't, I don't want to deal with any legal process, so I always, I always just have them go ahead and have a law firm post and draft, and we go ahead and get them out. From Paul: Are you going to 1031 your duplex? I am not. I'm going to take the cash out on that. It's done well enough for me, and I'm going to use that to do the interiors of my house that I'm building in Texas. I want to have a little bit of liquidity, and I want to have actual liquidity. So that particular one, I am not going to 1031, though I could. I am putting a premium right now on liquid cash. Liquid cash is helpful. Because I usually keep very low liquidity. From Dylan: Lumberjack Landlord mentioned a, uh, rent box, uh, said it's like a buy box. Do you know what he means? Yeah, your rent box is like what you want. Uh, well, I believe I know what he means. Uh, your rent box is like, these are the things that I want to rent, these are the tenants that I want to rent to. So you want to know like, hey, am I in student housing from this to this? Or like, a lot of my rent box is I'm going to rent to entry-level tenants, Section 8, we're going to keep costs low, and that means we're going to buy a lot of pieces in bulk. We're going to be using very basic interiors because we want to hit a really wide market. We don't want to do anything polarizing. So very basic, very repeatable renovations. That's my, my rent box is going to be a tenant that fits those. And I have minimum credit scores and all that. But you kind of hit like a buy box is, hey, this is the asset I'm buying, the rent box. The way I've heard it explained is more, this is the tenant mix that's going to live in the place that I'm buying. We have application fees for leases. Absolutely, it costs money to run background checks, and so there is always an application fee. Though, competitive advantage in my market, uh, when you apply with us, you have a period of time where that background check just stays on your file. So if you apply to any of our other places, say for some reason you don't get into one but you get into another, You don't have to pay the application fee multiple times. There are a bunch of PM companies, like a bunch bunch, that will just charge that same application fee every single time, which I think is ridiculous and borderline unethical. It's just not necessary to charge more money to people to do something they just paid for. So once you're in the network, you've got some time to go shop apartments, and you can hang out on our PM website, KenshoPM.com, and find the place that you want to live. What are your thoughts on the baby boomer sell-off market in the next 5 to 10 years? Oh, I think I'm going to keep buying a lot of properties in the next 5 to 10 years. I'm not worried about them selling off everything. A lot of them are seller financing to me now. They have estate plans. Uh, right now in general, there is not enough real estate on the market. So if we get a little bit more, I'm fine with the soft market. I have long-term debt and everything I buy goes on long-term debt. So Since there's no near-term ramifications for me in the next 5 to 10 years, I say load up on real estate, long-term fixed rate debt all the way, 10-year minimums on your debt if you can get it. If not, clear path to get it into a longer-term debt product within the first 3 years. What are all hidden fees PMs may charge you? The list is like infinite. There's a million things PMs will try to charge you for. Read the contract. Mine is so clean and simple. For most rental properties, $85 per door per month. Renewal fees for tenants that we placed of $200. Placement fees of $500. Flat fees. I don't care what the rent is. I don't care what occupancy is. Just a flat fee to keep that place running for you. If it is a larger building, I will typically do an 8% fee right now. There's a couple larger buildings I'm willing to do 7% fees on, but they're all flat, they're all fixed. Outside of that, like, I charge if we do a large amount of maintenance coordination— like, our— that's just a construction coordination. Maintenance coordination, it's covered. Construction coordination, if we're like managing contractors for you, that's going to be a fee, and we don't do a lot of that. But if they need someone who has some level of project management case-by-case basis. And only other fee that is coming to mind that could be charged is eviction process. That's a pass-through fee. Uh, we do not pay for your evictions, especially not in this state, because that would be thousands of dollars. And, uh, we will do our best to place tenants, but we cannot control everything. Uh, as far as other hidden fees though, I've seen PMs hide almost everything. Um, quick story, I am actually going to be managing an 8-plex here, and the deal has been held up for months because their property manager— and this is fairly common Uh, they put a clause in there that says if you ever go to sell this property in the next several years, we have the exclusive right to list it, which is ridiculous. If you see that, call your PM and say absolutely not. You are hiring them to manage the property, not to broker a transaction. That is a ridiculous thing to have in a contract that has nothing to do with what you're contracting them for. And I see that slipped into a ton of PM contracts, especially in Texas. I've seen it more common in Washington. Our deposit and late fee amounts, um, you can charge state-specific or county-specific. Um, there are different rules around what you can do. Washington just changed our late fee another day back, I believe, so your rent's not technically allowed to be late until it's 6 days late, which is ridiculous. Uh, but it will be state-specific on what you can and can't do for deposits and late fees. Uh, Jake Martin, good to see you, Jake. Texas, uh, Jake's in, uh, Jake's in, uh, Stephenville, Texas. Fixer price, what's a low, middle, high budget? Danny's in the background. I won't turn on the camera, but, uh, Danny, Texas, what are we seeing for like low unit turns? 12, medium, 5, high, 7.5. So like a light, light turn, it's like $1,200. Uh, most of them, medium, $5,000 is getting most of the units turned. We're talking mid-sized 1-beds and mid-sized 2-bed units. And then like a high turn, how much are you saying that was, Danny? 7.5. To $10,000 if it's— yeah, it's a bad one. There's a hoarder unit I'm going to be working on down there pretty soon that is going to be probably more than $10,000. But generally, generally it's about $2,000 to $3,000 less per turn than it is in Washington, is what I've been seeing. Dylan, you want a high deductible so you don't raise premiums? Okay, so this is with insurance. Yeah, you don't want to do insurance claims for $1,000 things, so get a deductible that's going to match what your actual— it's like self-insuring. It's so expensive and risky to do insurance claims. We do as few as we possibly can. And if you're not going to use them, you want a high deductible because it's going to lower your cost. I do $10,000 or $20,000 deductibles because I'm definitely paying out of pocket for anything that's $10,000 or less. Troy, do you guys look at mechanicals when you're stabilizing property? Do you upgrade water heaters? Uh, with long warranty, good price, or go super efficient, long-term cost saving? Those are all optimizing things. Uh, that's a great question. So you have the 4 phases: buy, stabilize, optimize. Go— someone tried to call me in the middle of my— middle of our broadcast here. Turn this to do not disturb. Kill the broadcast. All right, I'm back, I'm back. Here we go. Sorry, someone attempted to call me right in the middle of our broadcast here. Hopefully everyone can still see me. Oh, nice, and the comments restarted right where I, uh, right where I started, so this is helpful. Um, yeah, so, um, we were talking about stabilized versus optimized phase. Stabilized means everything is rented. We go for 95% occupancy or 90% economic occupancy. Economic occupancy is probably a better metric. That means you're at least 90% of what you would be at fully, like income-wise, fully occupied at market rent. So that means we're at or close to market rent and fully occupied or near full occupancy.. And so that's what we're looking for. So working water heaters, you know, no failed windows, sound roof, good electrical. When we go to optimized, I want like energy efficient windows. I want brand new doors on everything. I want new water heaters with a maintenance plan. That's where you get to start maxing rent, maxing your opportunities or your properties. You usually move to no vacancy when you have something like that or near zero vacancy. Those are in the optimized phase, which you will do before you start paying off the debt. How long do you take, how long do you take to fix small, smaller maintenance? Yeah, we get most of it done 24 hours. We get a notice, we get it done almost exclusively. Very rare something will go over 24 hours. It's usually because someone needs to get a part or there's a specialist who is needed somewhere. That takes more than a day. But generally speaking, if there's a problem, within 24 hours will be fixed. Washington or Texas. From Dylan, how to keep renewal rate high? So you're going to want to keep your rents a little bit below market. Not a lot, but keep rents a little bit below market. We go for $50 to $100 under market. Rent for most of our stuff, and it is cheaper than having turnover. Uh, the other thing you do is you respond quickly to all maintenance requests. That last question is like, that's probably the single biggest thing that we do is we're really good. Like, when something is wrong, you reach out and we reach right back out to you with a phone call and we say, hey, we got your request and this is how it's going to be dealt with. And we post a notice if we need to enter, we get the notice posted, we notify the tenants. Within 24 hours, stuff's just fixed. People hate it when you have something broken and it's just taking weeks to fix. You have a bad oven, there's a water problem, there's an electric problem, and they have to wait around. Like, those are the horror stories you hear from tenants all the time. That's why people hate landlords. If you keep the maintenance up well and you have a nice looking space and it costs less than other spaces that look similar, you will have very high renewal rates and very little turnover. I got a question in here. Uh, someone just scrolled up to our live. Tell me about your channel. Well, uh, this is Multifamily Strategy. We talk about multifamily, creative finance, how to build a portfolio, find financial freedom, and the best principles to essentially buy and never lose your properties. I think it's the simplest explanation I could do for Multifamily Strategy. It is not one magical strategy. It is what is the strategy that's going to work for you. Real estate is a simple game. We just teach the rules as they stand. Cost of an eviction, Texas, uh, $250 to $500. It takes like 2 weeks. One of the easiest states in the country to do evictions in, though Florida is passing some laws where they, uh, you can now get squatters out, uh, immediately. Like, call the police, they'll be there in 30 minutes. No squatters' rights in Florida. So we're not the best state, but Texas is very, very, very inexpensive, very quick. Turns out if you own the property, you do not have to rent it out for free. We have a— there we go. I can get these posted here. I'm going from my phone so you guys can actually read the questions. I try to answer as many of the good ones as I can. Occasionally we get spam. Example from Mr. Doubtful: What do you look for in a man? I basically just look for them to not hit on me or interrupt my channel. It's my favorite thing that any man can do. If it's a man I want to partner with, like a Caleb Hommel, I look for someone who is a Titan, highly motivated and self-motivated. I do not want to have to run the men or women around me. I want people to do the things they need to do while we move forward. I know that was not the intention of that junk question, but you know what? What the heck? It's Multifamily Strategy Live. We're going to answer it. Uh, Dylan, do you ask for reviews from tenants? No. Probably could. Might not be a bad idea. Um, I don't currently solicit for reviews though. The one thing I want my tenants to do though, like, I would— my favorite thing that they do, pay online. Open your portal. Don't mail in a check. Don't make me do a bank run and reconcile checks. Just pay the thing and log it online. We've had a bunch of property managers in Texas say, yeah, your tenants won't do that, like zero of them will do that. We just crossed over 51% of our tenants are paying online now for my Texas portfolio. Like, it's, uh, people like paying online, people like autopay, landlords like autopay. That's what tenants can do for me. Are you going to be selling your holdings in Washington? Any concerns with legislations coming through in Washington? There's always concerns with legislation in Washington. Um, I've sold a lot— not a lot, lot, but a chunk of my portfolio to Cody in Washington while I'm expanding in Texas. Um, I am less interested in Washington now that I moved to Texas. The advantage that I had in Washington starting out is that I'm local. So is it a more difficult market? Yes, but my proximity gives me a unique advantage. I like unique advantages in business, so that's made a sense for us. As I move to Texas, I have a property management company in Washington, which gives me some autonomy, but I lose that edge. And so I won't be doing nearly as much expansion in Washington, um, little to no expansion after I move. I have some active projects there. There are opportunities that come up. I'm established in Grant County, but you're going to see a lot less, uh, play with me up there. And there's a possibility if Cody Cody's talking about actually moving to Central Washington. I don't know if he will, but we'll see. Um, if he moves closer to the portfolio, there may be a point— because Cody and I, my ultimate goal is to own the real estate ourselves— where we may do some trading properties. He might pay me, buy me out of a couple properties. I'm trading him for a 6-plex right now, 6-plex for a 6-plex. Uh, less partners is always better. Cody and I work together extremely well. We spoke in New York together Yesterday, but both of us have the same thought on partners, even with each other. People are liabilities. Less people in your org, the easier it is. Who do you use for background checks? I actually— we run them through AppFolio. My director of property management, Corey, who is fantastic, can actually speak to that more than I can. Um, but I've heard good things about RentReady, which I see you're using as well. There's a lot of different things that you can use. Um, I've, I've used Appfolio and Buildium. One thing that I will say, and I've got this feedback consistently, is Appfolio's background check software that's integrated with it is a lot better than Buildium's. I think it's one of the very few weaknesses Buildium has. Um, but that's just been my experience. It's been pretty limited. We, we have liked a lot of what we've done through Appfolio. Thoughts on a gated entry? Would your lower tenants rent to snitch? Um, I don't have any gated entry properties. I— it seems like another thing that can break for me. The types and the types of communities that I have don't make sense to be gated. If you had a more upscale— if you're talking like Class A, or you're in a, you know, a town that has an issue that needs gates, That would be one thing, but they don't really— like Central Washington, no one really has gated apartments, almost no one. So they're just not normal out there. Case-by-case basis, as you get into more downtown stuff or closer to a downtown suburb, gated multifamily can make more sense. But I have a lot of rural stuff in Texas that also just wouldn't make sense. Do you enforce tenants to have tenant insurance? Yes, it's part of your lease. And if it— if you do not maintain your tenant insurance, so say you move into a building and then you discontinue your insurance, you will automatically be billed for insurance through my company. We have a third-party provider. It will add— it'll automatically add it to your rent and you'll start paying it automatically. Um, I got spammed by some car ad, which is odd. No, do you do screen recording or do you record— oh, do I record screenings? Dyslexia. Uh, do you record, uh, screenings? Um, they stay on record for, I believe it is, 60 days.. And so I can see any one background check and screening in my system for 60 days, and then it disappears. And if you want to apply, that will get run again. Do you provide any appliances besides the kitchen stuff? Not if we can avoid it. Some of our apartments came with AC units. We try not to provide any appliances because as soon as you, you like supply them, you're responsible for them. So if they break, you have to replace them. And in Washington, there are actual laws of how fast you need to replace things based off of like the weather. Danny actually knows more about this. Danny, what are the, what are the things with, uh, why don't, why don't we want AC units? Ah, so on days where it's 90 degrees or higher, if you own the AC unit, you have to replace it. Thank you, Danny. I didn't know that specifically. Thing. So if it gets above 90 degrees, we have a 24-hour window where we have to replace it, which makes sense, right? Because you're providing the service and it's now created a dangerous environment. It's a good safety thing, but I don't want the liability. Less liability is good. There's other buildings where I like putting in our own mini splits. Like when you're doing optimized, mini splits are great, energy efficient, and they tend to break a lot less than like a window AC unit. So it kind of depends on what you're doing, but Depends on the project, how optimized it is, and where the building's at. Kind of a weak answer. It's kind of like, it depends on the building, but that is the most honest answer I have. Do you replace AC filters or fire alarm batteries and stuff? That tends— yes, uh, we do. Every time there's a unit turn, we do annual walkthroughs, but we consistently, um, do, especially, especially with like the fire alarm and CO2 batteries. We have to make sure those are operational. Those are just even like for Section 8, we have those checks and we have to maintain them. From Edmund, do your capital partners want to see your direct underwriting sheet? Almost never. You would think they would, that would be a logical thing, and of course we have that available, uh, but usually they just want to see a quick summary of how the deal is going to do and what we're going to do. Um, I typically present the same way on every deal. Here's the property, here's where it's located, here's every problem I foresee happening and how we're going to deal with it. This is the amount of cash I need to close it, and this is what I expect it to yield. Usually that conversation brings in money. One out of maybe every 3 investors want to actually see my underwriting, which is a 2-page document that we have on multifamilystrategy.com course and mentorship. It's available for download, but I have an inputs page and I have a basic calculations page. I go, here are the numbers, this is what we're underwriting to, and This is how we're going to proceed. I've sent that same document to banks and it's sufficient for them. Usually sufficient for our investors. From Emmanuel. Hey Christian, do you know if it's common for people to 1031 exchange multifamily? Yes, almost, almost all the time when it sells. I'd say multifamily is probably the most popular asset to do 1031s with. How do I do my first deal? JV, credit, without using a bank? What do you suggest? Um, I would definitely not focus on the how until you find the deal, because if you have— for a couple of examples, because there's 100 ways to take out a deal without a bank. But, uh, if you have a very high cash flow deal, the one of the best things you can do is get 100% debt with a hard money lender. If you have a deal that cash flows, say, 30% cash on cash, and you bring on the cash, um, from, from a lender, you can borrow at 12%, 14%, you're still making 16% to 18% on the money. Uh, that's phenomenal. And you have no partners, you have the minimum amount of variables. Plus, when you stabilize that property, you've owned it for a couple years, you should be able to take that to a bank, get bank debt, and now drop that rate from like like 14% to 6 or 7%. That is like a great deal structure that you could do if the deal does that, if the cash flow is pretty good. Or say it doesn't cash flow at all, uh, but you can get seller financing on it. Seller financing is a fantastic way to do it. You get 100% seller finance, do that. If you get 90% financed, now you might need to get a second position loan or do a joint venture, get an equity partner, You could, uh, have a bank product that really likes the deal, but you need an equity partner for the down payment or to qualify for the loan. Uh, those are just like a rapid fire of scenarios that could happen. You can have a blend of bank and seller financing, a million ways to knock it out. How you do your first deal is you find your first deal, you learn how to underwrite, which is basic to do. It's super easy. Um, the basis: income minus expenses equals cash flow. Your deal must cash flow. Your debt must be long-term, which you're going to negotiate in the debt side. So if you have a deal where you have a clear path to make a property cash flow on acquisition, now we get to tailor what makes sense for the deal instead of how would you start, because you have no idea. Every deal has a different debt product that would be perfect for it, and that is what we really focus on. I think the main thing we focus on with multifamily strategy the YouTube channel, the lives, the mentorship, the whole thing is find the deal and then let's analyze the pieces that are appropriate for the deal. Instead of trying to line up money to an opportunity, find the opportunity and then line it up with the money. That's the way to think about it. And as you flex that creative finance muscle, it gets very easy to do very quickly. How do you go about finding a private lender slash equity partner? Partner? Do you lock in a SF deal first, seller finance deal first? Um, so how do you go about finding a private money equity partner? Um, well, you go ahead and you, you get the deal figured out. So it actually, it's the same answer as the last question. Um, you find the lender or the equity partner first by you find the deal and the opportunity, and then you go, okay, what do I want to see to make this deal work? What can I afford debt-wise? Does it need an equity partner? What are the pieces that one would need to close the deal with the pieces? Picture it as a, picture it as a soccer field. I think it's a good analogy. There's things that are not going to work for your deal, and those are the sidelines. Like there's things that go, okay, where are the out-of-bounds for this deal where it's not going to work? And then what is the actual goal and how do I hit the goal? So as long as you've mapped out on your deal What are the, you know, what is our playing field and where are the goalposts? We can pretty much go in now and start playing the game for, okay, we can borrow up to this interest rate. I believe I can do this with an equity partner, or I have the cash to put down. If I can get the 90% seller financing, I have 10% for the deal. It depends on the pieces you have and the pieces of the deal. So you lock up the deal first, always. As long as the deal has the pieces to get into long-term cash flowing fixed rate debt. Why do you think that all the companies are moving to Texas? Because Texas likes business, and also Texas is warm and sunny and friendly, and the food is amazing. But the main thing is they have laws that are pro-business. And so if you are a business in New York, New Jersey, California, Oregon, Washington. Really, it's a lot of these border towns that aren't Florida, like either the coasts. Um, people are fleeing the crazy liberal cities because they've gone too crazy. They all have massive homeless problems. They are absolutely taxing the daylights out of business. It is almost impossible to be a landlord in some of these states. And so they're going to places like Florida and Texas and North Carolina, South Carolina, places that like to have rental properties, like to have business, are tax-friendly to business. That is what people want, and that makes sense. There's a large reason I moved to Texas. I own multiple companies as well as multiple real estate properties, and so the laws and the rules for being able to employ and provide a profitable business in which to pay my employees out of is greater in Texas. I can possibly affect more people and have a business that makes more money. Everyone wins when your business is making money. I'm going to tell a story on that in a little bit. I'll answer a few more questions, but I have a good story on that. Can you refuse your tenants the option to pay with a check? I mean, you can. I don't think it would be wise. Some people just don't know how to pay online, but you can accept payment however you want. I've never seen a law that says you must accept a certain type of payment. Um, in Washington? Yes. Oh, look at that, see, my wife knows all the rules. Washington State, so the law that I just referenced never having seen, um, I still haven't seen it, but I've been informed I have to accept check, I can decline cash. Um, it is state by state, it is specific. I know that that would be an RCW for Washington State. However, state-specific, but in Washington, as I've just been informed by my lovely wife, Dani, that she is 95% positive that's true, you have to accept cash or you have to accept check. Look it up with your local state laws, but there's usually a list of what is and is not required to be allowed as far as payments. I hate people sending checks though. Checks get lost in the mail, and if you sent a check, especially if people send a money order, which happens very often— money order is like sending cash. It comes in and gets lost in the mail. You still paid for the money order, it's just gone. We've almost never had that happen, but I've had 2 times where a tenant who's always paid— I mean, always paid for years— has reached out and said like I paid rent. And I'm like, we have never received it. I have checked all the mail, I've checked all the letters. We photograph every single check as it gets deposited, and we can see pictures of all the checks on the deposit reports. And I'm like, we did not receive it. I've had that only happen 2 times, and I manage hundreds of units. But it is terrible. So really encourage your tenants to pay online. My last acquisitions, uh, last acquisition, everyone got a Starbucks for signing up. And surprisingly, much of the old people are like, I can't figure this out. They magically figured it out for $25 of Starbucks coffee. So to the extent you get them online, the better. What is the step-by-step process for a rent bump? Just, hey, rent's coming up when the lease ends. Washington State, it's going to be a 60-day notice. You're going to let them know 60 days before the lease expires that they're going to have an incoming rent bump. Texas, you can do it 30 days. Uh, you can actually do it less than 30 days in Texas. You can basically do it whenever you want. Um, but if you're working with housing authority, they have a 30-day minimum. And to be fair, that's just being a decent human. Just springing on a tenant the day that their lease comes up, hey, this is your new price— that's just terrible landlording. So the requirement most places is 30 to 60 days. Um, but that's also just polite and being a good landlord to your tenants. And that's usually done with a rent increase notice. That is, there's usually— every state or locality will have a, a document that you can— that one's pretty much a boilerplate document you can use because it's just saying, you know, your rent was this, it is now going to be this starting this effective date. Emmanuel, do you plan on starting property management company in Texas or finding solid ones in your target markets already. I am thinking— I talk about how much I don't like running property management. I might start a property management company in Texas. TBD, TBD. Um, I would need to have a little bit more holdings than I do now, but I have enough relationships down there and there's enough need where the markets that I'm buying in may not have the manager that I need. So Stay tuned on that one. It is— it has been discussed multiple times with multiple partners. Carlos, how do you approach owners in building a relationship before buying their assets? Um, one thing, you never ask them to buy their assets. Uh, find someone who's done what you want to do and ask them how they did it. That is what I do. I see a building that I don't own and I call the owner and I'm like, hey, I'm trying to buy assets like this. Here's my current pieces, why I haven't been able to buy this yet. Oh, can we meet for coffee? I'd love to learn how you built your business. And I meet with fellow owners all over the country. This is the entire basis of my model, is interview as many people who are farther than you than you possibly can and never ask them for anything ever other than information on how they built their business. And so all I know is how everyone I've met has operated and succeeded, and I've stored all that knowledge and I apply it here. And those same people who know what my goals are because they're helping me reach my goals, if there's a deal that they find or they want to sell something, they'll tell me. I don't have to ask them. If they already know you're trying to buy real estate, it's not a mystery that of course if they wanted to sell their building, you would buy it. You don't need to tell them that. That's, uh, it's backwards from the way that we're trained as salespeople, um, because that's just not how sales works. In sales, like ask for the sale. In this, you lose when you ask for the sale. Ask for help or ask for information and be really good at presenting who you are and what it is you're trying to accomplish and why you're asking the information. And the deals will flow, and you'll get the relationships with other owners, with other lawyers, property managers, accountants, vendors. Um, think of it like a board game. Let's use a poker analogy for this. You can only play with the chips that you have unless you have another poker player at the table with more chips will let you play with their pieces. If you're starting with nothing, you're going to need someone to deal you in. So meet those people and learn how they play the game. That is how you do real estate. For instance, do you ever buy properties from owners you've built relationships with, or do you wait until they offer to say, oh, I pretty much finished that, Yeah, I just let them reach out and they do all the time. And not everyone I meet with sells me a property. And that's not the goal. The goal is to learn. And as you learn, opportunities present themselves. And then all you have to have the ability to do is how do you close a deal with or without money when an opportunity comes up? That's how you play the game. You're just sitting, waiting for the card to be drawn. That is a deal. And the rest of it, learn, learn, learn, learn, learn. Be around owners, go to events, meet people for coffee. It's not that hard. It's just, it's really not that much work compared to what other people do. Uh, you know, make 10 phone calls a week to people who own real estate and meet with one of them. 50 to 52 owners a year. Say you take a couple weekends off, uh, you're talking getting coffee every Saturday for a year, meet 50 people. I promise you, if you meet with 50 owners in your market and communicate in 45 seconds or less what you're trying to do, someone is going to deal you in. It will happen. Need a sheet with useful apps, websites, services. I just don't use a lot of apps or websites or services. I use Appfolio to do property management, but that's because I own the property management company, own more than 50 or manage more than 50 units. Um, websites, I use OpenCorporates sometimes to find, uh, corporate ownership. And I use Google. That's basically my, my whole list of apps, websites, sheets. They're all, you know, AppFolio's paid. And yeah, that's pretty much it. Everything else is free. Vincent, will you ever give the full story on— oh, on the cult story? I gave some on YouTube channel. I actually have a YouTube video out on that. Um, but yeah, crazy experience. Didn't talk for like 99 days. Um, that— yeah, wild thing. Um, yeah, I share that one sometimes in like events or one-on-one. I can always share more on it, but, um, doesn't usually come up in, in real estate too much. It is a huge part of my motivation though. When we talk— when we talk like mindset entrepreneur, like being an entrepreneur, if I'm on a business podcast, it comes up. And if it's on real estate, usually doesn't come up that often, but always like to, always like to share. So more than happy to do that. Uh, and then, uh, Dylan wants to know if this is Vincent from Houston. So if so, you two can connect here. Carson, thoughts on small-scale RV parks, 8 to 14, in order to cash flow and mitigate risk? I love them. I love them. I actually have a I participated in a course with John Wanot. He runs Washington State Real Estate Investing. It's the largest Facebook group in Washington for real estate investors. He has a ton of mobile home parks. I actually came in and taught the creative finance part of his course. There is a link to that on my Instagram too. It's MHParkAcademy.com. But I love mobile home parks and RV parks. I own a 25-unit one. They cash flow. And we're in the process right now of— we bought them all park-owned, so we own the RVs. We're selling a bunch of them back to the, uh, right now back to the tenants, which is really interesting. So we bought it for $375,000, we financed them for $500,000, so we got paid six figures to buy it. And then after we bought it, we get even more cash by selling the RVs to the individual tenants. You can do that seller-financed or and, or just direct cash out. Uh, just fun with RV parks and mobile homes, how you have some unique plays, even more so than multifamily. Um, but yeah, RV parks, fantastic investment. They fall right in line with multifamily strategy because it's a different type of multifamily. How do you replace things like fire alarm batteries or check them annually or anytime there's a unit turn? What mini-split system have you used? Do you use a major brand or carrier, Mitsubishi, or off-brand? Uh, we use on-brand. I do not know what they— what it is though. I have an HVAC guy who I go to for everything, so when I install HVACs, he tells me exactly what I need and I do that thing. That is Johnny. He's been on the channel a couple times. He actually did a live with me a few weeks back. I think it's one of our most informative lives we've ever done. It's probably too much information on maintenance, but that's a good one to watch. I think it's about an hour long, and we do talk specifically about HVACs and water heaters and electric and windows and government rebates. That's a good live to go back to. That's live with Johnny Nyland. I want to say it was about 2 months ago. How do I find commercial multifamily refinance requirements? Um, it depends on the banks and the different lenders. So what I always look at for commercial, uh, requirements is I find a good mortgage broker and I talk to them. I say, hey, this is the building, or this is my portfolio, um, what sort of requirements or loan products are we looking at? And going through a few of the questions, I'm going to cherry-pick a few because I'm gonna have to head off here fairly soon. My apologies, I am in New York and I am jet-lagged like crazy. Uh, but I will pick a few more of these. Uh, when you assess a potential seller finance deal, what is the optimal cash flow per door? I do not look at cash flow per door. It is so subjective, especially because I buy in multiple markets in multiple states, uh, prices are different in different areas. Uh, if I'm investing in like— if you're looking at Ohio, you're going to cash flow twice as much as you are in Washington. You're going to get half the appreciation. That's just kind of how it is. Um, so what I'm looking at is debt service coverage ratio of a 1.5 or better and a loan factor rate that allows for at least a 1% spread between my cost of debt and my cap rate. If you want to learn more about loan factor rate, we have some videos on that on the channel as well, and we talk about it a ton in the course because while very simple to calculate, it only comes up in creative finance, which means you probably have not heard it on any other channel. What is your interest rate predictions for the next 3 years? I think we stay fairly flat here for the short term. Next year is going to be— we have a little bit of turbulence and will be after the election, so depending on who's in office um, you'll either stay flat again or interest rates may go up again. But I think as you start to hit, uh, and I think for the next 48 months, I think after 48 months we will hit the next bump because we've gotten through all of our building. Building slowed down a while ago. Projects are finishing developing. Demand is the same, but there is not enough new inventory coming online, and we're still printing a ton of money. And so somewhere in here, inflation and lack of available inventory are going to hit at the same exact time, and rents are going to skyrocket, which is bad for tenants and great for landlords. And while I am all for affordable housing, the market is the market, and that is likely what's going to happen in the US economy. When we look at interest rates, interest rates are— it's really hard to say. The Fed changes stuff around all the time. For the time being, I think we're going to settle out pretty close to where we're going to be for a while. I don't know if it goes up or down in that third year. What I do know is I don't think we're going to massively swing up again, especially with this year, the upcoming election. And I don't think we're going to drop down to 5 for some time. Do you have experience to work with hard money lenders? No. I bought a duplex conventionally. And then a few months later, I bought 101% financed with a hard money lender, actually middle money lender. But they lent me more than 100% of the purchase price on my second duplex. I had basically no experience. I mean, I'd been a landlord for months on a duplex on the other side of the state. I had none of the relevant experience. So short answer is no. You just have to convince them that you are the person to lend to. Yeah, when you get in a commercial— Edmund, uh, Dylan mentioned this, uh, Dylan, they team a bunch of lenders, they don't care about credit or experience. Credit experience will help, especially as you get into some of the larger assets, but when you're in like mid-sized multifamily, if you have a great deal, lenders will overlook a lot of things. They want to place money. If you can put together a compelling argument for why you're going to run the deal right and the deal looks good, you'll probably get the money. Carlos, are you open to buying overseas? No, I buy in the US. I do coach— creative finance works anywhere. You have to decide what you want to be the best in the world at. I don't want to learn all the different rules and all the different markets. I want to be— I— what I really want to do is I want finish my optimization phase and start paying off some real estate. And then I really want to push to see if I can be one of the biggest landlords in Texas. I love that state. I like managing there. As I move in, I want to start seeing how large of a business that I can build there. So I'm going to focus very, very, very specifically on Texas multifamily real estate from Fort Worth all the way down I-35. Skipping Austin because Austin's real estate market's jacked up. All Nighter has an important reminder for all of us: hit that like button for Christian. Very important. Everyone should do that. The Hire, no disrespect, can you name all 66 books of the Bible without using Google? I absolutely can. I went to Awana as a kid. I can do that in song and just in rapid fire. Heck yes, I can do that. However, if I start in the middle, absolutely not. I have to start from the beginning of either the Old Testament or the New Testament and go straight through. I know them in sequence. If you started me in the middle, I'd have to go back to the beginning and count my way through. Um, but, uh, yes, absolutely. Can go through the, uh, all the books in the Bible. I didn't realize there were 66. I don't know the total. I didn't know the total number of them. I just know that I can go through all of them. I mean, I pitched the deal to a few capital partners this week. Seller said that one of the capital partners actually tried to call them personally, uh, to buy the deal. It's a good thing that I'm under contract. Yes. Uh, I see a lot of people do too much negotiating out of contract. A lot of the things that you're going to verify are due diligence. If you have a deal and you think that it is pretty much good to go, it's usually time to go ahead and write an offer, get it accepted. So good job getting that under contract. Just read through for any last, last ones before my phone battery wants to disappear. From Mathias. Who finds your deals outside of the state when you are starting your career? You. The best way to do it is I found to call brokers. Brokers are fantastic. A bunch of broker calls starts to get the deal flow going. Then you call into owners and if it's out of state, there's a few rules. You need to buy a deal that's big enough to merit the plane ticket to go out there because you're going to see your property occasionally. So you need to find a big enough deal. And with that deal, uh, like you're gonna fly out to that market, you meet with owners, we just meet with a bunch of them at the same time when you fly out there. If you're never going to go to the market that you're going to buy in, then I wouldn't buy out of state. All right, that is what I have— battery and, uh, quite frankly, energy for today on today's live. We still have some good questions, I appreciate them. I am back in Washington on a normal schedule next Wednesday. So this will go live right at 3. We're about half an hour late today. It is pouring rain in New York and it's cold, and this happens every time I go to New York. So I am going to, uh, recover, get some rest, and I will see you guys all on the next episode. I may do a bonus live this Saturday at some point in the evening, so stay tuned for that. Till next time, see y'all soon.