Millionaire Mindset in Multifamily investing - Christian Osgood Live

On a technical level, it was probably the wrong decision. This is something that we would do after we hit our multifamily goals, we have more stability, and then you go do a variable project like this. I think— would you agree with that, Cody? This was dumb. So today I'm going to be talking about mindset. I know a lot of people, not everyone, but a lot of people in the room are in a 9-to-5 trying to scale their portfolio, have a smaller portfolio that they're not isn't where they want it to be yet, which is why we're here learning creative finance. I'm probably, of our small little group, I'm probably the most qualified to talk about getting stuck there because Cody skipped that step completely. At 19, he went ahead and bought a 12-plex and then started scaling. So for those who feel stuck, don't have their plan, or things just aren't clicking together yet, first of all, that's okay. The actual mindset difference that I found, and I'll lay it out in a few things, but the first big thing is when you have an opportunity, you take it. And the opportunity is not always what you expect to see. So I'm gonna share a little bit of my story. I'm gonna dive right into that. So when I got out of college, I did the whole, hey, you need to go to college to get a job, to get a second job, to get a third job, and at some point you're gonna have enough money where you can start investing in real estate. And I did that for almost 8 years, and I went from selling t-shirts at a company called SanMar in Issaquah. I went from selling t-shirts to selling ad space on Facebook, of all places, for a small little ad company. Got picked up by Lands.com, which is basically Zillow for land. Moved from that one into the CoStar Group, who bought us, and that's Apartments.com, LoopNet, CoStar, and that's where I spent the majority of my career. So I was in real estate, and I was feeling pretty good about myself because I'm like, hey, I'm around all these big players, I'm networking, I'm getting paid, I'm building my brand. And after 4 years of that, I looked back and I said, oh, you know how much real estate I own? Exactly this much real estate. I have a decent paycheck, and the second I stop selling, that paycheck disappears. That didn't feel great. It took 2020, when we decided to shut down the whole country, for me to realize, sitting at home as an outside sales rep, not going out, going What on earth am I doing? I'm still sitting on the wrong side of the table from all these investors. They all own, I sell them information, and I still don't have much. At that point, I took the money that I've saved up and I bought one duplex. It was conventional purchase, it was owner-occupied. I forgot to move into it, but owner-occupied duplex, $30,000 down. I actually did it officially. I wrote a whole letter of why my situation has changed and the bank gave me the sign-off. So I didn't just straight cheat. I, I wrote them the letter and made sure they're not going to come back and call my note due. Um, middle of COVID my job just shifted, and that was all true. Uh, that being said, I was always going to do that. Uh, $30,000 down, bought a duplex, cash flow about $750 a month. I was absolutely stoked. This is around the time that I had joined the firm that Cody Davis was working at in Tacoma. That's how we first connected. He was the kid in the office who was somehow magically picking up some rentals, and I was the one who was building the call center out. Cody came into my office one day, and I was talking about trying to find my next deal, and he was like, there's a duplex on the other side of the street for me. I think you should buy it. Now, we miscommunicated. Cody didn't realize I was a broker. I was trying to scale things. I was like, wow, how nice. He was actually trying to sell me the duplex as a broker. So that's, uh, you stole my commission. I'm sorry. And I actually did need that commission to get through my project. I had not quite enough money to do the rent But what that started was an awesome relationship where I had a duplex on the other side of the street from Cody, who had just closed on a 6-plex. And so we were driving over together fairly frequently, we were looking at real estate together, Cody was showing me the town, and while he was working on renovation projects, I was working on renovation projects. It was a really cool place to be because I got to the point where my career got me 2 duplexes, and the cash flow from those 2 duplexes basically exactly covered my mortgage. So my real estate was paying for my real estate on your house, on my house. It's a great place to be. I have enough cash flow. And then I looked at my money and I went, oh no, I'm out of money, I can't scale this. My goals were I want to retire my wife from teaching because especially 2020, school districts here got insane. They went insane everywhere, but they got really weird here. Then we had, I I wanted to one day move to Texas so I can get out of the rain. Now, of course, today we decided to get some sun, which is fantastic because last night was a little bit soggy. But setting my goals, I'm like, okay, I want to buy a house in a warmer climate, and I want to retire my wife from teaching. Breaking even with your real estate where your two properties pay for your house is not financial freedom. We do in fact still have to work. We want to eat, have insurance, drive cars, live in general. So this is where Cody came back to my office, and I set out this new goal of— I'm like, okay, to get where I want to go at 29, arbitrary goal, but I'm like, I'm gonna get to 30 units by age 30. I don't know how to do it, but I'm seeing some people do this creative finance thing. Cody's figured out how to buy a few properties. They needed a lot of capital expenditures, but like, Cody's actually picking up the unit count. And Cody came into my office and said, well, hey, I can't help you. On that goal. I was like, bummer, I was hoping you had some secret sauce for me. He's like, well, I can't help you because I want to buy a 38-unit. I need an active partner to take on something that big. And I'll put you at 42 units, that's not 30. Which is true. So what we did is I looked at that opportunity and I thought about it for about 7 minutes. I think that's what I want to do. And so I called my wife and I said, hey, there's an opportunity. There's a 38-unit. There's only a few problems with it. The roof's bad, the septic's bad, the tenants aren't paying, there's a homeless camp on the property, and, um, I feel like I'm missing a couple of other things. We also had a chicken problem. There was like a chicken infestation. Chickens in the courtyard, chickens living in the units. Not one, but two tenants kept chickens in their unit. And I looked at the opportunity and I went, this is what I want to do, because if we solve this problem, this problem is big enough to move us forward. And this problem gets me out of, hey, I'm going to do one duplex and another duplex and another duplex. So while we're talking about mindset, there's two big shifts here. Shift one: duplexes are too slow. We pick up duplexes all the time. Cody and I have 9 of them, I believe, maybe more. We have 9 duplexes in the portfolio. We still pick them up. We like to pick them up next to larger buildings that we own. Hit base hits all the time. But building a strategy of, hey, I'm gonna build it, buy a small building, I'm gonna buy another small building, single-family, small multifamily, as the core of your strategy takes a very long time. That doesn't mean it's wrong. If you have a job that you love and it's making money and you're buying one rental at a time, you can do that. For me to hit my goal, I had to buy bigger buildings faster. Now that 38-plex, fast forward 2 years down the line, we bought it for $2 million. Yeah, last appraisal we saw was at $4.1, and we've done a lot of projects since they got appraised at 4.1. That deal made Cody and I each $1 million. That is— I just don't have a duplex that can do that. I don't have any duplexes that are worth $1 million. I have one that might be worth half of that, and it's definitely not paid off. If you're trying to scale and your goal has a certain cost, step 1 is identify that darn goal. And step 2 is when the opportunity presents itself. When I was figuring out how to get into real estate, there was absolutely no point where I thought You know what I'm going to do? I'm going to find a Central Washington, Moses Lake, that weird city I passed back when I drove out to WSU in college. I'm like, this little tiny city, I'm going to buy a beat-up 38-plex and that's going to be where I make my money. But that was the opportunity that aligned with my goals, and it was a big enough problem where I went, hey, when we fix this, we're going to be the ones to do that. Now, when you get to capital raising, by the way, that's how you pitch that. It's like, what's wrong with the building? Absolutely everything. No one's wanted to fix it for 13 years, and we're gonna be the two to do it. Here's why. People love that. Like, that's a fun story. It's like, this is the problem. It's everything. We are ready for it. This is a challenge. We're gonna make it happen. So, you set your goals. You have the opportunity that comes up, and it's gonna be different for everyone. Like, you're probably not gonna find a 38-plex in Moses Lake. And how do I know? Because we own the only one. There's some bigger buildings. There's a 45-unit if anyone figures out how to beat us to it. That's available. Um, but I don't think you're gonna make as much money on it because the people who own it are, uh, are hard to negotiate with. When you're finding your opportunity, it will usually find you. The big thing is when that comes up, you jump and take that opportunity, and you go where that adventure goes. Cody and I, throughout our entire career together, every time we have had an opportunity, you do due diligence, you vet out the project, but we always choose to do the adventure until we hit our goals. Which brings me to the next piece. What happens when you actually hit a goal? I got this question a few times last night, and I just added this right into what I wanted to talk about today. When you go on a project, especially if you're using partners, it is so fun to do this with people. If you want to scale, it has to be with other people. You're going to be limited if you're doing this by yourself. Now, we have people— most of our events, Dion McNeely's spoken at. He owns, I think it's 16, maybe he might have bought a few more. I think he has 18 to 20 rental properties. He cash flows about $16,000 a month. He did it over a long career. By himself with small properties. It's a slower way to get the same place. If you want to accelerate or your goals are more urgent, like me, retire my wife from teaching like right this minute— if you're trying to hit a huge goal, it's going to take more people. People are variables. We generally don't like variables. Variables are difficult. When you're doing that, you need to have set goals that align with those people. So what we found— Cody wanted to retire his mother. He wanted to buy his mother a house. I wanted to retire my wife. I wanted to buy my wife a house. The goals are monetarily the exact same thing. What is it going to take to do that? Well, if we knock out about 100 units together, that should be enough cash flow to hit the goal that we have, and we're going to get there. So we set a 2-year goal. Within 2 years, we're going to hit this. When we focused up and both of us were pulling at 100% towards that goal, figuring everything out, getting through the property management— we started the property management company together What ended up happening is we hit it in 11 months. 11 months, we passed, we passed 100 units together. I had enough cash flow to retire my wife. She was allowed to do anything in the world she wanted to do. And for some insane reason, she's like, I want to work on the companies with you. So now she works in PM with me, but she loves what she does. She gets to do the design, she runs our contractors, which again helps Cody and I scale to our next level. We don't change anything with partnerships for any reason until you hit the goal, which is why that goal is so important. If you know where you're headed, you go, hey, as a group, This is our, this is our company's mission, and it has to be super specific. The two of us are going to build a property management company because all the PMs here suck. We're going to be better managers than everyone else in this market. We're going to buy 100 units. We are both going to push as hard as we can until we get there, and nothing else is going to change. We're not negotiating equity. We're not worrying about who's doing what. Everyone does everything and does what needs to be done until you get there. And that is a big difference in mindset. Is when you have a team of people who have a very, very, very fixed goal. 100 units, 2 years. Don't go cash flow negative. Like, cash flowing real estate, buy the properties. When everyone pulls towards that, you get to a certain point, your 2-year goals can get hit in 11 months. And we had no idea what we were doing. I mean, I had 2 duplexes. I'm like, whoa, 100 units, we can do this. We did not have the money, we did not have the experience, we did not have the credit scores, the history, the net worth to do any of this conventionally. We just said we're going to do it and we hit it. Once we hit it, you look at your pieces and that's where you can change things. That's where my wife had entered the company. We have 2 people in the Osgood clan working full-time in PM. We own 50%, Cody owns 50%, and Cody goes, you know what I want to do next? I really want to expand acquisition. And Cody started talking about wanting to get into development. I'm a systems guy. I also manage a lot of our employees. That is the point where you're allowed to look at your people and your variables and go, let's trade stuff. You want a little bit more real estate, I want a little bit more control, and I want to own my wife's income stream as well. I traded PM for one of the buildings. Simple little fix. I hear so many people have the partnerships just fall apart because they're like, oh, we went different directions, this was horrible. Cody and I do projects together all the time. It took a 10% stake in one building from Christian that I had a little piece of And it took Cody's stake in PM, and Cody got to trade his whole job. He's like, I don't like doing this work. I'm like, awesome, no one likes doing this work, it's property management. That being said, these systems make sense in my universe. A simple little tweak and we set a whole new set of goals. And then we set a goal of, well, now we're teaching a lot of people, and we've actually like, we just, we really hit the lottery with BiggerPockets, which was fun. Talk about opportunities. We had one episode that was their most watched episode of all time where Cody came on beginning of 2022, right? Beginning of 2022, he gets this amazing episode. We go, people are really resonating with this. That same message where Cody's like, hey, I'm, uh, I'm young, I have no money, and I can buy anything. That's starting to resonate with people. Uh, we've met with Caleb Hall. He's gonna be our keynote speaker here. Uh, Caleb had $300. I won't tell all your story because I know you're gonna share this, but he had $300. He was DoorDashing, and he saw that, uh, you— I believe you actually— did you see that one, or were you referenced by, um with Julianne. Julianne. Julianne. So someone who had saw that video told Caleb, you need to reach out to these two. And he reached out, and here he is about a year and a half later. Kid has 53 rentals. They built out of $300. I was like, this is really cool. What if we built a company where we spend our time teaching people how to do this and save them on all the mistakes that we made? Because when you make mistakes on a few million dollars in real estate, it costs a few hundred thousand dollars. We've had several of those. When you over-renovate a unit that you could have done for $10,000 and you spent $30,000, I'm like, wow, if we put this all into a format and a community where we can just talk about this, share what worked and what didn't, and help move people forward, you can make a huge difference. And so that was our second focus. And now we're hitting a point there where it's like, wow, we're actually hitting a lot of our goals. Now Cody and I are going to keep expanding units. We're looking at doing some larger renovation projects now. But keeping those goals specifically aligned with specific timelines, building your team, hitting those goals. And when we hit the next set of goals, I think we're probably looking 250 units and a large rental project, we probably sit down again and we just do a calm, fun meeting of let's look at our whole universe. What is your goal here now? What is my goal here now? The next time we do this, I'll actually have bought that house in Texas. I'm under contract on it now. Talk about hitting goals. That's the last major life goal that I set out. We're getting that built. Uh, I just flew back early, early yesterday morning from finishing out the design of that. We hit the goal. Now at some point I'll be in Texas, my wife will be retired, we're running the property management company, Cody's gonna be working on his projects, we'll be working on a bunch of projects together. We're gonna sit down and look at the pieces and say, what does everyone want to do? What projects get us there? What do we do together? Do we look at doing anything separately? But when you set these things, the biggest thing is just find the goal, set the— set your goalposts, build your team, and then go score till the game's over. And once the game's over, find that next opportunity. When you have an opportunity that you believe in, but it's big and it's scary and it's beyond you, my vote is do it, because that has worked for us every single time. The last major example that I really want to give here is the Robinhood Village stores, since that's where we're at right now. Realistically, probably shouldn't have bought it. It's not part of the plan. Hospitality? Don't deviate from your goals. That being said, we love the property. I don't regret buying it, but it, on a technical level, was probably the wrong decision. This is something that we would do after we hit our multifamily goals. We have more stability, and then you go do a variable project like this. I think— would you agree with that, Cody? This was dumb. This was dumb, but it was fun. And we have a policy just because it makes money doesn't mean that it makes sense. This is one of those. This resort does very well financially. We actually put our note together in a way where this is mostly paid off at the end of the note. This resort by itself is enough to financially retire Cody and I at the end of its cycle, which is fantastic. That being said, it takes a lot of time and it's a really hard project and it's not for everyone. However, what we did in principle that was correct, is we chose the adventure. We chose to push ourselves. And you look at the pieces you have and you go, okay, well, how do we optimize this? So we took this resort that had all sorts of maintenance problems. No one likes the old owner, unfortunately. So it had a bad reputation, it had a lot of bad maintenance, horrible operations. And we went, okay, let's take the pieces that we have and let's build the best engine that we possibly can. We started running concert series down here. Sugarland played, uh, for the opening of our thing. They were the biggest title that came through. I didn't know they were a band until they came through, but that being said, they were our openers, uh, and they were pretty darn good. Um, we boosted the wedding revenue astronomically. We started actually marketing this thing like you should market a venue. Well, this was until this weekend. This whole area was actually another room. This is where a lot of the people on their wedding night, they typically stay in this room The groomsmen usually use the pub to get dressed. That is the whole hangout area. We convert this into meeting room now. So you guys are in our first ever iteration of a Robin Hood event in this building, a big old A-frame. But you take those opportunities as they come up. It's not always the opportunity you expect, but it's the opportunity that you get. And you say yes to a majority of these. You commit to figuring them out. You build your team. And you do it again and again and again and again and again. So. If you're stuck, the major things that you need to look at is, is the problem just a scaling problem? 'Cause that's where I was stuck. I'm like, I'm thinking like a 9-to-5er. I think I have to get qualified, or I have to have money to do something, instead of just breaking it apart and go, how would we hit this goal? What would it look like if we actually just did the thing that I want to do without adding steps? So you go, what's the minimum steps to get from point A to point B without skipping any necessary steps? And let's go do that. You wanna get to 30 units? I recommend buying 30 units in one shot. If you want to get to 100 units, buy a 100-unit building, or since a lot of institutions really like buying those and you have heavy competition, buy 2 50-unit buildings. That's a pretty efficient way to get to 100 units. I have 2 transactions, they're going to be around 50 units, we're getting them done this year. That is something you can write down, build a team, go out and execute. I think where a lot of people are getting stuck is they're going, "Man, BiggerPockets told me I need to burr, so I'm going to house hack." Which, like, awesome, go house hack. I've done that twice. But then they make their whole strategy that I'm only going to do this. I'm going to buy a duplex, I'm going to rent out one side, I'm going to renovate the other one, and we're going to scale. And then I'm going to buy a fourplex. And then here they are 10 years later, they have a few units, they're happy, but they haven't hit their goals. Or you can go, what is the end goal and what do we need to do to get there? Let's just go out and execute those steps. It's worked for us in Moses Lake, it's working for us over in Union. We bought this whole assemblage Right after, they called the property next door, not seller-financable by the way, they still had debt on it. Cody called and said, "Hey, we're interested in buying your property." It was listed but not seller-financed. "Would you guys be open to holding a contract?" "Well, we can't, we have debt." Then they called him right back. "Actually, yeah, sure. If you're good with the price, we'll just pay off our debt and then we'll finance it to you." One ask. There was no persuading, there was no— You just come up with, how would we make this better? Well, we'd expand the campus, we'd connect the properties, we'd build an assemblage. Alderbrook's over there, Bill Gates is right across the street, and they're a big complex. Like, let's go build our own. You take the pieces, you execute the plan, you scale. Every opportunity that comes, take it. If you do those things and get out of the tiny mind— like, there's the tiny property mindset— or get focused on one strategy, if you let go of like, this is exactly how I'm going to make it, and you go I'm headed here and we're going to go on a little adventure, a targeted adventure, a strategic adventure. But you go, I'm going to be open to what comes at me. I'm going to take those opportunities as they come. You're going to find that there's a lot more ways to play the real estate game. You're going to scale in a way that's much different than Cody and I. Even Caleb, who had the advantage of getting to copy and paste exactly what we did, he's going to talk about a couple of special clauses that he wrote in his deals that we definitely didn't teach him that were fantastic ways to close the deal. The adventure for him looked different for us. That's a perfect example of someone who has opportunity and seizes it.