Live from the field!!!

Live from the field, and we are now officially live from the field.

We were doing owner meetings, sorry not sorry that we're late.

Yep, we are late to our own party. However, we are back in Moses. If you noticed, our last 3 lives have been live from the field. We've even been— yeah, wow. Oh, sorry, it's cold outside, my tongue is frozen.

That was atrocious, so I'll talk for you. We are in the optimization phase of our business and thus very hands-on. We have bought some real estate, we've done a lot of the stabilization, and now it's time to optimize. So going in. We're playing Cody the Builder and Christian the Builder, and we're gonna be doing our first development. We talked about that on our last live as I was in the field getting attacked by little dogs. But we are in Moses Lake, and today has been a very busy day.

Yes, so if you've seen any of our prior posts, we visited a 12-plex over in a city called Ephrata that's a little north of here. Super excited about that transaction.

We are buying that.

We are going to do that one. We talked about a 14-plex previously That was a turd. We are not doing that one. We are doing that one. Uh, very fun deal. Cruise back down here, met with our builder that we are very, very excited to be working with.

He's actually the, the sole person who helped me get started in Moses Lake. Phenomenal guy. And he, uh, he said build your little multifamily portfolio and then go play developer and you can do bigger, nicer deals. And so here we are, we built our multifamily portfolio and now he's helping us out building our bigger, nicer deals.

Yep, we pretty much followed that model exactly. He got to what, 40 units before he started building?

Yep, he did his 40 apartments and then he started— and some of those were single family, some of those were multi-family— and then he started doing his ground-up development. And that's where he built a lot of wealth and he owns a lot of cool real estate today. Yep.

And we're 2 people who own 100 units together, so about 50 per person if you bring out the proportions.

Very similar math.

Yep. Account for inflation and 50 units individually is what it takes to get to build phase. So we're pretty much copying that, uh, verbatim, and he is going to be our builder, which means we get to learn from a lot of what he has already learned, which is pretty much the model. Learn from the people who've done what you want to do and then work with them to learn how to do it.

And all that to be said, we just wrapped up our meeting with him. We're talking about site plans, looking at the development, and we're a little bit late to this live, and that is okay because done's better than perfect.

That it is.

However, today's Whiteboard Wednesday, so if you have questions, make sure to drop them in the chat.

And we'll get to them in real time.

We will get them in real time while driving.

However, uh, topic for today is I want to talk more about that optimization phase. We've talked about it before. I want to do it one more time. What are we doing in stabilization right now, Cody, to make it to optimization? What are real-time things from this week?

So stabilization is all about getting income up. You're not getting it to the max. However, what we are doing is we're getting our vacancies leased, and we are prioritizing getting delinquent tenants, the people that are in our apartments to get caught up, whether that is through housing authorities' help or whether that is just getting them out. There's a point in business where sometimes you just have to evict people that are unwilling to pay, and that is a very real thing for us right now. We've tried to get them on housing authority, they skip the meetings, and so part of stabilizing the portfolio is making sure that people do in fact pay for services and for housing because things cost money. So we post notices, we got to visit with some of the tenants that were behind and Some of them are mailing checks today.

Now one of the cool things about stabilization is once you finish stabilization, your building does in fact make more money. So when you have more money coming in, and yes, we will bounce, the roads are a little bumpy and we are on the move, but once your buildings are making more money, they're worth more. So when we get to optimization, that's why you have to stabilize first, when the building's worth more, we can go ahead and refinance these into bank debt regardless how they were acquired, whether it's seller financed, private capital, bank debt, we can pull out more money, which allows us to build on them and optimize. It can even be as simple as just doing more renovations or cleaning up the units. But on our 38-unit building, our next project is we're going to be building, looks like probably 10-plexes on the back. And one building at a time, we're going to improve them, refinance them, lease them up, and keep going around the entire campus. Very, very excited for that. After that building, On to the rest of the portfolio. That is the optimization phase.

We actually just drove by our 6-plex, but it's back right back there. We just missed it behind Bill's Self Storage, but we're gonna look at building 20 to 40 apartments back there, but we're not there yet, so we're not worried about it.

What is the hardest seller financing objection to overcome? That's a question that just came through.

Seller financing objection. Well, some people just need money, and that's where you got to figure out, okay, what type— I have the chat here. Oh, perfect.

That is so much easier.

Here, you can just— yeah, we'll put that here, but Yeah, as far as objections, I mean, it depends how you build your business model. Our business model is not just, hey, we want to buy seller finances. Deal debt equity, you find your deal, then you figure out the debt, then you figure out the money down if you don't have it. And so if you want to buy seller finance, you need to pick who you're talking to. You could build a business model off of talking to distressed owners where their property's a little run down and they made some bad decisions and got to where they're at. We built our business model off of affluent people. It wasn't on purpose, it's just the people we met with ended up being affluent individuals that have done very well. And I learned they were doing well by asking them how they got to where they're at and learning about their story. And they told me the pieces that they played with, and most of them started with absolutely nothing and they built up to something that's quite phenomenal. But when I talk with them, a lot of the really well-off people built their portfolio with seller financing. They did it, it was normal, that was how everybody used to play the game. And so as a byproduct of that, it's, it's never really been an issue issue getting it. There's never really been an objection. Some people build their business model though off of people that are owners of distressed properties, and if you do that, then they may need the money. A lot of people I'm buying from don't need the money. They just want to hold the note and get payments forever and ever and ever because they have more cash than they could ever spend. And that's, that's a very real thing for people when they play real estate for 30, 40, 50 years.

Now the next question here is define stabilization versus optimization. The easiest way that I can is stabilization is the needs. What does the building need to be? One, fully leased. Two, within spitting distance of market rent. It's fine to be a little bit underneath, but you should be getting close to the market rent. They should be nice places to live. If there's big problems like, say, your electrical or plumbing is way out of date, you have a bad roof, paint needs to be fixed, your basic maintenance and quality of life things, you need to have a stable asset, which means no deferred maintenance, full units, low vacancy, close to market rent. That That's a stable asset. That's the type of asset that a bank wants to lend on. When you get to optimization, now you get to talk about wants. How do you do things that really make your property better? That could be adding a park. That could be building brand new buildings like we're doing right now. That could be taking lame countertops to stone.

And really just quantify it as simply as possible. One is to build consistency and one is for perfection. Done is better than perfect. That's one of our principles. And as far as stabilization goes, we're getting it done. We're getting consistent income, consistent expenses, and we know what things are doing. We don't have any ambiguity in the portfolio. Optimization is more of that perfection. Done is better than perfect, however perfect is better than just being done. If you can get both, I'd get both. When you optimize, you're getting the max rent. You have the highest and best land use of the portfolio. So for us, we got a 38-plex. The highest and best use of that land is to have 104 apartments on it. We're not there yet. So we're gonna have to redevelop that site because it's got 228 feet of highway frontage and there's brand new developments all around it. So we're taking it from stable income, consistent income, to the highest and best potential use for the site.

That is the best way. Actually, I love what you just said there. Yeah, stabilization you can just define as what is the best we can do with what we have and is it working the way that it should? Then optimization is what is the highest and best use of all the pieces we have and how do we get there.

All right, should you always use a loan servicing company? Well, I like to use a loan servicing company, especially today. We both have a lot going on, everybody does, but we have a lot of stuff going on since, I mean, hence we're late to this and this is scheduled, but we just got out of an owner meeting after a property inspection and it's just been a busy day. So I don't have to think about paying all the mortgages. I used to do all my mortgages manually. Now the bulk of them are on autopay. And some people don't like autopay because they don't have money, and that's where it is in the beginning. If you don't have any reserves, you don't want things to autopay before you put money in the account. However, I prefer it to be on autopay now, and I just have to make sure I watch my accounts. Some people like to do it manually so they can send it out on the 10th or the 11th or 12th after they collected rents. However, after you get your little base, it's much easier for me to not have to think about paying the mortgage and then at the end of the year just getting a tax summary because I don't want to have to think about mortgage payments. I mean, I already— we already have to worry about utility payments, tax payments, insurance payments.

There's a lot, and we've been almost perfect on that, but there's been one time where we double paid for a mortgage, and we're still having to figure that out right now. It's not a big deal. We have the money in the account, and we know the seller really well, so I'm not worried about it. But you don't want to make mistakes. The nice thing with a mortgage loan servicing company is if they're servicing the mortgage for you and they make a mistake, it's on them. It's not on you. And they'll make mistakes too, don't make any mistake about that.

Oh yeah, we had a note servicing company that, they misrecorded the date that it should have started per when we actually closed on a piece of real estate. And so we started accruing $150 a day late fee. It was per day, $150 on 2 properties. So months and months go by of $300 a day that was accruing when we weren't late. That was a mess to figure out, to say the least.

But guess who had to figure it out in the end? Granted, I had to do a little sleuthing for them, but it was on them to figure it out. They told us the steps that needed to happen. They executed. Problem solved. And as the guy who files our taxes, I love getting an end-of-year statement from the same company saying, here is all you need, please submit. It's really simple. If you're going to do it, might as well do it right. If you're planning on buying more than, I don't know, 2, 3 buildings, I think it's just a good idea to start out with note servicing. It's easy, it's cheap, you won't regret it.

Brian Mitchell said yo. Yo.

Also yo.

Also, uh, we don't have any other questions.

Questions.

So if we're going to do a short in-the-field live today, then that's how it's going to be. Or if you have questions, make sure to drop them down below and, uh, we'll address those as quickly as possible. Perfect.

Good seeing you guys. We will try to find one Wednesday when we're not on the road or out of property and we'll do a longer live. But appreciate all of you. Like, subscribe, and we'll see you soon.