Our Partnership has ended!!! Multifamily Live!

All right, that should be working. We should be in, and I believe we are officially live. Well, hello everyone, welcome. It's just Christian today because today's video is about Cody and my partnership finally ending. I'm going to fill you guys all in on this. I'll answer some of your questions, but I am officially taking over. Cody is out. And, uh, yeah, we're gonna share the adventure from, from right there. As I get logged in, I see a couple questions already coming in through the chat. But yeah, I just wanted to share with you all, it's just me now. Cody's gone. He's never coming back. The channel is mine.

Aha.

Just a second. You still have the Zoom link?

Ta-da!

Well, this is—

you're not getting that easily.

No, in all seriousness, yeah, we have some changes I wanted to get you guys all up to date on, but I wanted to share a little bit because we have a punchy title. Cody and I are no longer partnered on everything. We're still partnered on a whole bunch. We're gonna let you guys know what happened, uh, right now as people join the chat. I'm sure we're gonna get the same question a million times, but let's just open with exactly what happened. So the first rule of partnership that Cody and I set together is we're 50/50. We never question it. We're doing everything together until we hit our goals. Well, guess what, guys? We hit our goals. I retired my wife. We have all the pieces that Cody needs to retire his mother. It's going to take some more time because he's going to buy her a house. She has to do the shopping part first. But we've done what we set out to do in that there are some things that we are good at and not good at. And so we're now dividing our company into a couple of silos in that I have bought Cody out of our property management company, because that is an operations-heavy company and it's a people-heavy company. I have the experience running people and operations. Cody's the best single buyer of real estate I've ever seen in my life, so I traded him a piece of real estate, and Cody's gonna now focus on acquiring for us. Our channel is going to be the same, however, the content's going to start going in two different silos as well. I'm doing more biz ops and more people So as we want to offer more value, I'm gonna be able to answer more questions as I'm spending more time focusing on the business, the operations, and the big piece for me, how do you never lose it? Cody is gonna hop on the front end and do the, how the heck do you buy these? How do you master the acquisition? How do you raise private capital? So we're basically dividing as I'm gonna be the real estate business guy and Cody's gonna be the real estate acquisition guy. And between the two of us, we're gonna buy, provide more value to you than ever. But that's a huge change for us. So stay tuned for that journey. Cody, thank you for letting me own the company that retired my wife. That is a big deal for me, and I appreciate having the security of offering her a job.

That is pretty fun. And thanks for the sixplex. I got a free sixplex. It only cost me a lot of money, but it was free from Christian.

Tell a little bit of the story of the sixplex. There's a reason that we chose that asset as the trade for multifamily. What's the story behind that? And why did— why is that the property that you wanted in exchange for that company?

Yeah, so a long time ago, long, long ago, in a galaxy not that far away, I, uh, I had my 30 apartments and I owned them outright. And I had a bad business partner who ended up taking a lot of money from a lot of people, which wasn't cool. So I had to sell out of my assets. I had to sell out of a multi-seven-figure position in real estate. And in that process, I had to sell out of a sixplex Now, I got started on, on a 12-plex. A lot of people know this journey, but I had a bad business venture and so I got rid of that person. But the 6-plex that we're talking about right now is the very first asset I bought with absolutely no help from a business partner, a joint venture. It was just me and getting out of this really bad partnership with a business mentor at the time. Really grateful for what they taught me, but they put me through a lot of BS to get there. I had to sell out of this asset, which I really didn't want to do, but I sold 10% out to Christian. So what we ended up doing is Christian traded me his 10% ownership in the 6-plex, which is the very first one I did with no joint venture, no partnership, no nothing. And I got that back just recently in exchange for ownership in PM. Hence dividing the partnership in the title.

It feels weird. I remember, so the, the actual conversation, the idea occurred to me on our drive actually last week. Cody and I tend to move quick on decisions, but we're talking about the valuation of our companies, and I was talking about would we ever sell PM to free you up to go buy stuff and to free me up to do other ventures? And Cody's like, well, no. Because we have too much influence over reps and that would just be irresponsible offloading that. And the idea occurred to me, what if I bought you out? What would, what would our universe look like? And we discussed that over our drive over the mountains of what would Cody do with his time? What would I do with my time? And ultimately, does that decision move our partnership to the next level? Saying that we like to say all the time on this channel is, you know, what you did to get where you're at is not the same steps that are going to take you to the next level. And for us to reach that level, going into silos in our business was a big deal for us. It's— if I operate the properties, or take— I mean, Cody's still heavily involved, especially through the transition, but if I focus on the operations and the personnel and all those chaotic things that go into running a business, if that's my only focus, is our business going to be better? And are we going to buy more real estate if buying real estate is Cody's only focus, or if we both work on it together? We still work on a ton of things together, and Cody's still helping me with some of our excellent bookkeeping tasks because a lot of that was Cody. However, as we transition these things, I'm going to be the operations guy. He's going to be the acquisitions guy, and that's going to let us buy way more real estate, have way more content, and run a stronger business. So I am just Super excited. But that's how that came about. We just had that conversation. You could own the first asset you ever bought by yourself and have a clear path to do so. And I can run a company that has the people, which is really what I've always wanted to do. I, I actually enjoy that piece of the business. And quite frankly, Cody doesn't love that part as much, which is fine.

Now, yeah, now let's talk about principles because we put all our principles on here. We like to call our shot and we like to tell you how it is. We don't renegotiate until we hit the target. I'd like to really hone in on that point. We did not change a thing until we got to 100 units. We celebrated with the resort. We got the PM company up and running. We retired his wife, got me in a position where this year I'm going to be able to knock out all the projects at my mom's house, turn it into a rental, and then get her into a waterfront condo. And we got all the pieces. And then we took a good look just objectively at the businesses, at the organizations, and saw This is a way to improve it. This is the optimization phase. If you know our 4 phases, you got build phase. And this is not just for real estate, but you build, you stabilize, you optimize, and then you pay everything off. And so we're in optimization phase. We just optimized our companies to get to the higher level. And now I have a lot of time that I'm figuring out what to do with. But we're closing here in a minute on a 5-unit. We're working on an 8-unit. That's absolutely beautiful. Working on a 15, a whole bunch of duplexes and a development site. So we are going to explode this year because of this decision to divide and conquer. And yeah, I mean, calling a shot, what do you think? 250 units in December?

I think we can hit that. 250 units in December. And I think in 3 years we're going to, we're going to cross 1,000 without syndicating.

I'd like to put that out there. We don't need that BS. All right, do we want to jump into comments? It is a Whiteboard Wednesday.

You know what? It is a Whiteboard Wednesday, and I think that's exactly what we should do. So as always, we answer questions until the questions die. By the way, I'm at the Robin Hood today. I'm, I'm here most Wednesdays, but it is finally sunny and amazing. So if anyone wants to come out and visit from now till like the end of October is prime time. Kayaks are on the water. And we are ready to party, just not too hard because I don't want you to mess up my resort. My resort, not dessert. That's not a word. But your questions, as they start coming through the chat, we will answer them in real time and excited to kick off today. If anyone has any questions on partnership in particular, that is our core topic, though feel free to go into as much of the weeds as you want. And as they start to roll in, I'm going to keep them live on my phone because the sun's kind of in my eyes. Cody, do we have any questions already in the chat? Are we answering a couple from the YouTube through the week, because I can always get started on some of our, uh, our questions there too.

I've got, I've got one question from the chat. You can pull up some YouTube questions, but from Pasha: so you're saying it's a big deal with this movement? Do you guys feel relieved at all? I mean, absolutely. I have a lot less stress on my shoulders. I mean, I still manage the money. I like the Doug Dimmadome reference— Christian wears a lot of hats, now he has a couple more. But, uh, my hats are to manage the money and to not go bankrupt. Like, that's— those are the— that and finding out how to buy more real estate. That is— those are my roles.

And they're big hats.

Yeah, not going bankrupt is a good thing to make sure happens. And, um, having money to help flow the businesses is pretty important, and buying more real estate helps flow all the other things. So, um, Yeah, it, it's great because we've identified the very few roles that are critical and then the many roles that are also critical, but just different levels of tasks. And it flows a lot better this way.

And amazingly, because I, I'm taking on a lot more tasks, my stress level has gone down. And I, I feel like a lot of it is just because like the task I'm doing are now the tasks that I own as opposed to like I'm doing tasks for ops while Cody's doing acquisition, and that can sometimes just— it feels like, hey, I'm, you know, I'm doing a lot of the like holding shit together. And it's a joint company now. It's like the task that Cody's best at, acquisition, Cody's getting the recognition and the alignment of like, hey, he's making stuff happen, and he gets a freer schedule for this. So like the compensation makes sense. Like go out and do what you're passionate about. Acquire real estate move us forward? For me, it makes it really simple. I don't have to do as many— I think the big things of like buy real estate and make sure that you keep the right debt-to-income and refinance and all that stuff, that's on Cody, which those are really important, really fun, but really time-consuming. They don't distract me from the things of, are our taxes perfect? Is our bookkeeping perfect? Are our employees happy? Is the resort not falling apart? I get to run around and do those things, which is actually super rewarding. So while I have less day by a lot—

by a lot—

I'm, I'm the happiest I've been. I get to do what I love doing. I'm running around optimizing and managing people, and I actually love doing that. So this is fun all the way around.

Yeah, absolutely. Nick Fazio said, this can't be true, the title.

It's true, we split one of the 22 companies, a big one of the 22 companies. It is a huge deal. I remember the, uh, the first thing that we asked is this, what's this going to do to our partnership? Because this is the first time we're not 50/50. Like, this leaves room for other changes. And, um, I like what we've come out come out with thus far. We haven't really changed anything else other than I'm gonna take on more work and Cody is going to just focus on the biggest things. And I, it's the least stressed I think I've been in a lot of months. So we'll see. It leaves room for more changes, which I don't know that I love, but I love the fact right now that the clear designation of tasks, it's one company and one property that are spun off from each other. And I think it feels really comfortable. Um, question from the chat— or sorry, not from the chat, but from the, uh, the comments section of YouTube, uh, one of our recent videos, $13 million in debt, how we did it. Um, someone asked, what's your cash flow on the $13 million of debt? Let's answer that from our numbers guy Cody, uh, both right now this second and where it's going to be in about 3 months, because we're finishing up about another 12 renovations and lease-up is about 7 days behind finished reno. So we, we rent them, or we renovate them, we lease them. So where are we at today? Where are we going to be in 3 months?

Yeah, I mean, right now I want to say we're at probably like $8,000 to $10,000. It's not amazing on that much debt. No, no, that, that, that sucks. However, we're filling over 20 rentals right now at about an average rate of $1,000. So we're going to triple the cash flow in a minute, and we're buying more assets. And we have, uh, we just bought a 6-plex, or no, 12-plex, sorry. And that 12-plex has 6 vacancies. And as soon as we rent that out at market rent, we get it fully stabilized, that'll cash flow like $6,000 almost. It's like $5,700 a month. And that's not that far out. I mean, that's probably in 6 to 8 months, and I'm not even including that cash flow in numbers right now. So I mean, realistically, by the end of the year, if we didn't buy anything, even though I know we're buying stuff, the real estate will be net-net over $40,000 a month. And that's outside of the other companies. And for two guys that started with next to no money, 2 years ago. I'm happy with that.

I am too. It's, uh, sort of adventure. That's not to mention that, uh, in addition to all these things as part of optimizing, stabilizing, somewhere in the in-between of those 2 sections, we're paying off a lot of our most expensive debt. And so we're, we're writing pretty consistent checks out of that cash flow to pay down some of our more expensive notes. So that's also going to help cash flow a lot. That's, that's a throughout the year process, but there's a few where we're just going to knock out in their entirety, which is going to up global cash flow notably.

Absolutely. And if you pay off debts— I mean, that's from Gary. I'm meeting with Gary tomorrow. But, uh, if you want more cash flow, borrow less money. So we're gonna borrow less money. It's just gonna come from using cash flows to pay it off. And when it's all paid off, there's a lot more money coming in because our mortgages are well over $50,000 a month now.

Oh, we got a good one in the chat. I'm surprised we haven't gotten asked this question before with contract for deed. Who has the benefit of depreciation? Because you guys both show up on title. There's equitable and legal title on that one. I know the answer, but Cody, want to share the contract for deed, how that works and how equitable title works?

Yeah, I mean, we're getting So we did a cost seg, we did the Pheasant Street Apartments and we did a cost seg on that. We're entitled to 100% of those benefits because their legal title is the way that they're backing it. I'm not talking as a CPA, you can— you should go question them, but it's like a car. And so your lender is going to hold the title of the car, but it's your car. Similar to if you were to go buy groceries, you put it on a credit card. Who holds the debt? But you get the asset. So while you're in possession of the asset, you also have the, the tax benefits in this case. And so we're getting the write-offs on all of our contract for deed real estate. It's just the way that they're backed with that attorney structure. That's a good question. I haven't seen that before in the chat.

Yeah, that is an excellent question. I've had that come up a couple of times on calls, but I just realized I don't think we've ever touched that on a YouTube. The one question in the chat, and then I'll keep scrolling through some of our questions here throughout the week, but from Nick Wood, Christian, will this delay your Texas stream? Hmm, hadn't given that thought yet.

It might, but that wasn't one of the original goals.

Yeah, that, that was my second goal. We, we hit the first one. Texas has been a big one for me for a long time. I think realistically, maybe by 6 months. Might make it faster, who knows. Um, huh, that's just a good question. I should have asked myself that earlier. With tech, you stumped me. Well done. I don't get asked new questions very often. That was a new one. Um, so if I'm successful in what I want to do for the company, I'm eliminating some expenses that we had that allowed Cody and I to both operate, and I'm taking those on myself. If I can offload those to a full-time employee instead of Cody, one, they, they cost less than a Cody. And two, if I can add these systems in within a reasonable time, 'cause I, I was realistically looking at one year to Texas, I may be able to put in the automation for the business since that's what I focus on, where I actually have more freedom to move than I otherwise would've. It will either accelerate my, my move to Texas or it will add an extra year because things are harder than you think they are on paper every time. But I'm going to say it's going to do something. It'll plus or minus that by 6 months to a year, and I'm not sure how it will affect it. We'll find out. I'm not sure if it'll delay it, though. I might actually add enough systems where I have more freedom than I otherwise would have had as far as geography.

Yeah. And PM could get huge. I mean, that's a, that's a big opportunity. Well, Christian's scaling that. I'm going to pay off my sixplex. That's going to be my freedom. It's going to be fun. Only assets in cash. Going to be the next Dave Ramsey. I just did it backwards.

I took on so much debt that I don't have any.

Is that how that works?

Yeah. Provided that you use the cash flow to pay it off. Yes.

Let's see. Do you guys have completely separate business accounts for each of your assets, for each of the organizations? Yes. And we've got 22 now, 23 bank accounts. So there's a, there's a handful of orgs in our world. So separating the one, while it's a rather important one, is still a very small portion of our universe. We like to keep things independent, make sure everything is in its own sector. And there's a couple LLCs that have a couple assets in it, so we don't have different bank accounts for each of those assets because it's one company. But, um, yeah, that's, uh, that's how we operate. We like to keep things independent because every company needs to be able to survive on its own. They don't have to grow up on their own. We had a company that would do a bunch of distributions to us, and then we'd have to do contributions to float one of them because we had a little baby company that wanted to die, and we didn't want it to die. And now it's doing fine. But yeah, the goal is to get everything to eventually survive on its own.

Yeah, 115% accurate. That's— that is all I want. And that is my main focus is getting the things—

115%.

Well, I was at 100, but now I have more bandwidth because this is all I do.

There's only 3 types of math people, those who are good and those who aren't.

That is, that is also accurate. Um, so I had, uh, this one's a comment from YouTube, but it actually, it gives me a thought I think it's worth sharing, and then we'll just hop into the chat because you guys are asking some good questions now and we'll keep up with those. Uh, but someone just said, uh, don't buy a resort in your 20s, horrible idea. This is a good conversation piece because I would say there are some pieces of owning the resort that's actually a good conversation of was this a distraction from what we're doing, what were our lessons from doing this, and Would we do it again? Are, are all things that are worth asking on the back end. And so, um, I have my own thoughts, but Cody, I'm going to pose a question to you first. Someone said it's a terrible idea to buy a resort in your 20s. Was it a terrible idea to buy a resort in your 20s?

From a branding perspective, it was great. I get to say that I did something that not many people will ever do. So that's kind of cool. But I've had this conversation multiple times with Christian where we've said, huh, if we hadn't bought the resort, we'd have no financial stress. We would just be good. So that's kind of a bummer. The resort added a lot of variables to our existence that we didn't need to add, but it was the next step in the adventure. It was the right decision. However, if we were just doing this for money, you'd be absolutely right. Buying a resort in your 20s is not the move. But the adventure is what we were after and want to build a legacy, want to show people that, hey, you can absolutely do whatever the heck you want. You can do it without any money. You can do it without a bank. This is all the stuff we did to buy this resort. We bought it without any cash of our own. And, uh, You can do it. But we, we're here online saying you can do it. And had we not done that, not taken that step, that part of the adventure, now we wouldn't be able to share it with folks when we do our little real estate summits. We wouldn't be able to really live up to what we tell everybody. So I think it's absolutely the right thing to do if you're trying to build a brand and really show what's possible. But if that's not you, I mean, it was a dumb financial decision. Long term, it's a really great idea. Short term, it was stupid. Like, we shot ourselves in both feet, both knees, and, and then finished off in the heart. Like, it was dumb, but it's absolutely going to pay off. It just added a whole nother level of chaos that was unnecessary for one year into partnership. Yeah, yeah.

Okay, so your take's pretty similar to mine. Setting your foundation for what you want to build is critical. And the foundation for what we wanted to build was we really wanted to be able to push the education piece to other people on what is possible. And so foundationally, fantastic decision. If the goal was simply, hey, we want to hit our original goals, I just want to retire my mom, I just want to retire my wife. We have the portfolio to do that. We could have just focused on what we had and we could have been 100% done. And that is ridiculous. In less than 2 years, we could have got into real estate, bought everything we wanted, stabilized it, and retired. Like, I could just be done and in Texas right now. However, I'm grateful for the adventure. And I do— I'm a little biased because I'm sitting here in the sun right now at the resort and it's actually like, it's fantastic right now. However, if your goal was just to hit your original financial goals, you want to hit $10,000, $20,000 a month, 0%, this is a terrible investment. Laying the foundation for what we want to build in 8 years, this resort will be completely paid off with no other partners. It's just going to be Cody, me, and we have a partner who is actually my director PM, Hannah Caldwell. Um, She's a minority partner on this and she's a fantastic, fantastic asset to the resort. Could not run it without her. What this let us do, we had to run it. We inherited someone else's employees, which we've never done. So it got us through merging companies. So we did a merger with our PM company and the employees at the Robin Hood. The actual acquisition had a bunch of business components, which were a lot of figuring out on how do we break up the transaction What we learned doing this and what we're gonna continue to learn through the next year is going to make us better players in the long run, astronomically better out, uh, better operators. But does it make sense to buy a resort in your 20s? I would generally say, uh, no, don't do it. It's really hard, really hard. And there's easier ways to make money if your goal's to make money. And granted, this makes a lot of money, but you can do this with far less work by scaling up multifamily, which is why our YouTube channel, our core strategy is multifamily strategy. This is not a multifamily strategy. This is a Cody and Christian super fun, really hard projects.

Yeah. Speaking of multifamily strategy, check out multifamilystrategy.com because you can. All right. No more questions. Let's see, we got some more questions here in the chat. So let's see, that smaller cash flow will slowly flip to be incredible. Absolutely. We've done so many renovations. I mean, we've dumped over $1 million in our properties. I just did a $150,000 reno on a little 12-plex, but we're flipping the income switch here. We have great places to live and we're getting those leased right now. Super stoked about that. Haven't been there before. We decided to take on all the hard stuff during winter and it sucked. What questions is from Alex Hawk. What questions do you ask to get owners to offer to sell? So once you've mapped out the circle drills, they understand where you're coming, where you're going, what changes when you get there, and you understand the same 3 concepts and main ideas about them. How do you recommend I go about doing something similar to, to what you've done? That is the goer that has gotten me everything. How do you recommend I go about doing this? Because at that point they know what you're trying to do. They know what changes when you get there. That's what creates the buy-in, and the buy-in is what gets you the opportunity. So you got to ask for the question. You got to ask that question. Ask for the sales, like, how do you recommend I go about doing this? And some of them may just give you some general advice at that point, but what I've found in the majority of my meetings, not all of them, is they say, hey, I've got a 5-plex Or I've got this 12-plex. I would— let's go there, meet me there. Whenever I go and buy from some of the people that are helping me out, that are in my corner, I got to be— some of these people is close family now, but I didn't know them 4 years ago. Whenever they want to sell me something, they'll just say, hey, come check out the swimming pool over here. This is my— this is my duplex. What do you think?

Some of those investors, like, when they, they helped us get started, get started, and they've sold us some properties. But like, Cody's meeting with one of them that helped get us started, where they called me, what, 3 or 4 weeks ago now, saying like, hey, you mentioned that you had a great vacation in San Diego. I'm visiting San Diego for the first time. What was that brewery you mentioned? Like, the things that you're doing where they're going to want to seller finance to you as opposed to conventionally finance or seller finance to anyone else. Is going to be the actual relationship. So I mean, honestly, sometimes it's stuff like, yeah, we talk real estate, but then I don't even drink anymore. And people, they're like, hey, you mentioned a brewery that you just love in San Diego. I'm going down. I'm like, yeah, dude, Ballast Point. Sent them a map, gave them my top 3 recommendations. Grapefruit Sculpin's a great beer if you guys haven't had it and you guys are in Cali. But like, those are the type of questions that are really going to get you deals that no one else have opportunities to. It's, it's The questions that build a relationship where you guys text each other socially and you have lunch at their house, they drive you around in their truck, that level of investment is gonna give you opportunities that no one else has. And we can have honest conversations. There have been times where they want 20% down and we literally only have 10%. We can have that conversation of like, look, I, I am your buyer for this. I literally don't have the money. I'd put 20 down if I could. I can't. Like, okay, well, it's you, so let's do it. And that is where you're going to get opportunities that no one else has.

Yep. And I'm meeting with one of them tomorrow to see if we can swing an 8-plex. It's a beautiful asset. It'd be one of the prettier assets we own in the portfolio.

I would say outside of the Robin Hood. I don't know. Do you think it's prettier than Pelican Point? I think it might be.

Yeah, it's prettier than Pelican Point. 3-bed, 2-bath, 2-car garages for each. Apartment, water view on the top of a hill, centrally located. I mean, it's going to be— that'd be legit.

I think it's the prettiest property that we would have outside of Union, Washington. We have— we have a bunch of buildings here that are— they're fancy.

Yeah. All right. Someone said, let's say a 10-unit property was acquired for $4 million. That's expensive. Cash flow is about $1,000 a month. If you started with no capital, how would you acquire finances to do the renovations? Then would you refinance? Well, if you're buying something for $4 million, you're only cash flowing $1,000 a month. You've got a problem there. It's great if, if you can sign a piece of paper and add cash flow to your existence, global cash flow, that's phenomenal. But the problem is there's these things called ratios, and ratios are where people get out of whack with their personal finance, with their business finance. And this is why I'm super excited to be taking on all the financing stuff for the acquisitions in the portfolio because I, I like numbers. But that ratio is very bad. You have to be able to manage your options and your obligations. And if you're signing a $4 million obligation to make $12,000 a year, that sucks. I think it does. I, I think that is, uh, that's 3% margin.

Sounds right.

Yeah, a year. That's scary because your mortgage on that, if you have a $4 million loan, let's say you're at like 3% interest only, which is probably how that deal would have played out based on the numbers you provided with that pricing, you're going to be probably at 3% interest only. Your mortgage is going to cost you $120,000 a year, meaning you have $132,000 a year NOI. Somewhere in there. That's pretty skinny. So, uh, I, I wouldn't sign up for that deal. I would find a way to get a higher margin. It might just come from having to borrow cheaper money, uh, or just getting a lower price per unit, or a place that has— can get more rents. But, uh, $1,000 is phenomenal. My first deal was $800. But I only signed up for a quarter of those obligations. I had 1,000,001 in obligations to get about the same amount of cash flow. My second deal was $1,250 a month net cash flow, and that was $680,000 of obligations. So you need to look at ratios and say, okay, if I'm going to make $1,000, maybe I make $1,000 in the beginning before it's stabilized for every $800,000 or every million dollars of obligations I take on. And I need a clear path to get that up to like 3,000 to 4,000 a month. For every million because that original million in obligations. Now I'm playing with the asset right now, but that'll get it up to like $5,000 a month net cash flow stabilized.

Now, quick public service announcement. We're 30 minutes into the call. We're at 18 likes, 52 viewers. That means our ratio is a little bit off here. The rest of you guys, give us a favor. Give us a like if you're in the chat on your phone. Hit X, hit like, and then hit join the chat. But I always appreciate seeing those numbers a little closer together so that more people can see this. If you haven't yet, share a link with a friend, have them join in, have them ask a question. And lastly, YouTube tells us they like the Super Chat. You don't need to send us $50. You send us $0.99, YouTube goes, hey, this is quality content, people are paying for it. So any of those things help. But at the very least, if you're watching this, give it a like so that more people know that this is, uh, this is quality stuff. We appreciate your support in any and all ways.

For anybody that does Super Chat, we'll raffle off, uh, to one of the people if we get more than one. Um, if we only get one, I'll go to you. We'll do a I'm Cody Doing Cody Things shirt because we can.

I can commit to that. Whoever wins can choose their color. You can do blue, orange, or, uh, red. I think I have one of each. Send us your size, we'll ship you a shirt. So I don't care if it's 99 cents or $100, uh, all Super Chats will be rewarded.

If it's a million dollars, I'm gonna pay off my 6-plex.

Yes, we'll do the raffle from this one next week so that you guys have to come back. Evil laugh here.

Okay, all right, what's our next question? Can you guys elaborate the risk of overleveraging could carry? I'm not understanding the issue of overleveraging on long-term fixed-rate debt. Yeah. So your bank, your seller-financier doesn't care if all your tenants claim, well, I can't pay this month. So even if you add cash flow, if you buy a 12-plex and you cash flow $1,000, it's really exciting. If the rents are $1,000, though, you have one person not pay, you break even. You have two people not pay, you lose money. Now that's fine. Most people can float $1,000 if something goes wrong for a month. Problem is, what if you own 10 12-plexes and all 12-plexes have 2 tenants leave? Now, is that likely? Absolutely not. Is it possible? Absolutely. Or more likely, what if one person leaves and a couple of people stop paying? Can you afford to lose $1,000 a month or $2,000 a month on 10 12-plexes? Probably not. So that's where you got to be really careful. And as we've built our business, everything has revolved around positive cash flow. When we do a project and we, we nuke is what we call it, we nuke our cash flow on one asset, we take it super negative to fix it up so we don't have any problems in the future. We have to have enough coming from other sources so that we don't lose our butts because we don't want to do that. So over-leverage, I mean, your risk is you could absolutely lose everything. Your inability or your ability to get debt in the future may go away if you don't have a net worth. And so you're going to really have to manage your balance sheet here. Over-leverage in the creative finance game is not LTV because LTV, loan-to-value, only matters when you have to get new debt. The only time you have to get new debt is when you have a balloon or you negative cash flow. So, uh, make sure that you have positive cash flow, much more in excess of your monthly obligations. And it's going to start small, but it's all in ratios. And do long-term fixed-rate mortgages. That's the simplicity. Okay. I understand you guys have used equity for some of your deals. Have you ever used prefec?

No.

I mean, we haven't had to do preferred. I mean, we've written deals where it's equity, but it's similar to debt. But that's just because some deals have no further encumbrances. But we don't like to do preferred equity if we don't have to. Okay. What exactly does optimizing and stabilizing mean?

Ooh, my favorite questions.

So talk about stabilizing. Yeah.

So let's talk about stabilizing. So the first thing you do is you buy properties. A lot of these, not all of them. There's some properties that we bought. They're fantastic, stable, don't have to do anything. I'm thinking Pheasant Street duplexes, Pelican Point duplex. So there's a lot of our duplexes are really, really turnkey. You take a property like the 38-plex where you have a bunch of vacancies and a bunch of non-pays, a bunch of deferred maintenance stabilization means the things that have to be fixed by have to be fixed. I mean, like health and safety or major aesthetic problems are fixed. If you have, let's say, 40 units, you want to see at least 37, 38 of those rented. That's a stable asset. The target, depending on your market, stabilized is going to be somewhere between 90 and 95% occupied, depending on what market you're in. It's in that ballpark. So we have— yeah, or 100. But generally speaking, if you have a big enough building, you're just going to have some vacancy at some point. A stable asset is one that is mostly leased or completely leased, no major deferred maintenance. Your water heaters aren't 25 years old, your roof's not, you know, on your 32 on a 30-year roof, like your general maintenance is done, your building's occupied, that's a stable asset. Now when you stabilize a portfolio, all that means is that's true of all of your properties across the portfolio. Now you have no major ticking time bombs and you have predictable, stable income. Things are working around where they should based on what you purchased. Cody, how do you take it to the next level on an optimization play?

Yeah, well, I mean, stabilization is just going for consistency. When we're talking about optimization, we're talking highest and best use. Hence the split of the PM partnership. It's not highest and best use of time to have us both in that organization just get in the way. So we got to consistency. We know what our income is, we know what our expenses are, we know the general operations of the org. How do we take it to the next level? Well, Cody leaves. But no, in practical application, for taking a property from stabilization to optimization, If you are getting started, you can't afford to get wet, so you don't rock the boat, right? You rock the boat, you fall in— not a great place to be. So you run it at status quo, you run it below market where you make money, and because it's below market, the people aren't going to necessarily leave as often. You don't rock the boat. When you go to optimization, you make that push you push the rents closer and closer to market, you get the higher income, you get the lower expenses, and as a byproduct, you make a lot more money. But you're pushing beyond just getting consistent income. You're pushing for, I will maximize the opportunity at the highest level because I have done enough to warrant the risk of making the push, which is why our cycles build and stabilize. So we get consistency. Then we push it to the maximum output. We give it as much input as it needs to get the maximum potential output from an asset, and then we deadhammer. We used to just go build, stabilize, pay off, but takes too long if you don't do this step and really optimize for the maximum potential net operating income.

Now, love this next question because I know, I know how you started and I know people that you branded with early on in your career. So this makes— this is a great question. What would 18-year-old Cody say to an owner investor that says you should syndicate? What would 23-year-old Cody say? So when you started syndication, what were your thoughts? What are they today?

I'd heard about syndication and I had learned about it from owners back at 19 years old. People were telling me all about it, but it's just— it's not my thing. That said, there's absolutely a play where syndication can save your butt. And so I would want to know how they've applied it. Like, tell me about how you got started in this space. If someone's telling me about it, even today, I met with Ken McElroy, I met with Robert Kiyosaki, I've met with the Cardones, and they're all syndicators. They love that stuff. They love buying real estate with other people's money. It can work really well. However, when it comes down to actually going out and building the portfolio, I don't want to be like everybody else. So I would want to learn how they applied it. It's one of the reasons I went on and interviewed with Ken. I wanted to learn from his business model on and off camera. I was asking him questions, asked him a lot of detailed questions off camera, and I just wanted to learn how he replicated what he did and how I could replicate it. I wouldn't necessarily use syndication to build a portfolio, but if I got in trouble, I own a lot of my stuff with Christian and I own some stuff without Christian. Below 60% loan-to-value. I could sell my real estate to a syndication fund that I also happen to own at a discount, get the investors a great return if I ran out of time and I wasn't able to refinance because acquisition debt's better than refi debt. So I could sell it to myself at a discount and syndicate out the equity and get a cash out of that. But I would just want to learn and ask about a practical application. How do you replicate this? At what point did you see this as a way to take your business to the next level? And how do you recommend I go about doing the same? It's going to be the same general questions, but if I don't get a takeaway just because I don't like their business model or the bulk of their business model, that's on me. That would be my fault. And, um, that's not a good place to be. Always be open to learn regardless of whether you agree with the business model or not, because you get one takeaway and it makes thing worth it.

And that's it. And by the way, we have 5 people from the Super Chats. We have at least 5 people who are in the running for a t-shirt next week. Some of them actually jumped into the chat after we announced that. So congratulations, Aaron and Matt the Lumberjack Landlord. You guys could win a t-shirt for your contribution. So thank you very much. By the way, if you guys haven't checked out Matt the Lumberjack Landlord's course, I should drop a link below this, which I will. I just went through it myself. I finished it last week. If you're self-managing or you're starting a PM company, which was relevant to me, fantastic course, best 8 hours I've spent on my business. I can say that as a 100%. I don't endorse anyone else's courses but that one. That is fantastic. So Matt, thank you for your contribution there. If you guys haven't checked it out yet, I will put a link in this immediately after we are out.

When cold calling in the beginning, did you experience a lot of people not picking up? Yes. Also, if the owner is out of state, would you be more transactional over the phone? I mean, you can be, but there's an owner I met with and he and his family have got 900 units in California, out of all places. He lives in Colorado. That's a little ways away from Washington State. So what did I do? I tried to build a relationship, hopped on a Zoom call, and then a year later flew out to meet him, and I was in town for 12 hours. It was worth it. You can absolutely do the relationship thing. It might cost you a little bit more money, but, um, I got some valid takeaways, like some really strong takeaways from him, and I recorded the owner meeting and put it on YouTube, so you should check it out. That owner meeting is on our YouTube channel, and it's a good episode.

I, I think that was, uh, up there in watches for us. I've, I've actually watched that a couple times because I was not on that trip, and, um, really cool you got to do that.

How exactly did you— oh, go for it.

Okay, I'll take the turn this time. How exactly did you guys come to the conclusion of creating a partnership between each other? Um, well, it actually started— we were working at the same firm And I had one set of goals. I'd bought a little bit of real estate by myself. Cody's bought a little bit of real estate, significantly more by himself. I was unaware of what you could do with creative finance, so I knew how to operate some businesses. I've hired a lot of employees at that point. I'm not a lot. I've done 10 to 20 employees. I was spinning up the business ops part of my career, and when we connected, We actually went to Grant Cardone's GrowthCon. The owner of the company ditched last second, asked us if we wanna split a room on two separate queen beds. I don't know why that question always comes up. It was two beds, but we spent the day together. First day talked about our goals. Second day got all amped up from GrowthCon. Third day actually didn't even attend the event. We went to the beach and just talked about how we would actually apply what we learned the last two days. That's the most important piece of partnership. You're headed the same direction. And for Cody and I, we set a goal. I want to go here, retire my wife. Cody's like, I want to retire my mom. That costs about the same. What is it going to take? It's going to take 100 units. Then we celebrated with a resort. Notice we haven't launched this video of ending any of our partnership stuff until we hit that goal. Once we did, we went, how do we restructure to optimize what we have? And not step all over each other. Perfect timing, exactly what we needed to do. But that's how we got to that conclusion of partnership, is am I going to get here by myself? Cody wasn't an ops guy. Cody was self-managing, for the most part, 30 units, taking on a 38-plex together, which was our first deal, self-managing 68 units, and one of those being a super rough building. That would have been a lot. I personally think Cody would have pulled it off, But I think he would have had absolutely no hair left. I think he would have stressed himself to death and there would be— there'd be no Cody left. Uh, partnering together, and then eventually, eventually I learned that my hair was gluten. It was not even stress at the end of it. However, it wasn't a gamble we were willing to take. We want to protect the hair that Cody has, and so we partnered up for that adventure because we wanted to do that together and didn't want to take that big of a financial decision on our own. I could say for 100% fact that was the best personal and financial decision that I made at that time, taking on a partner with a different set of skills and different set of knowledge. It also helped me just take the courage part of like, this is a huge undertaking. I'm glad I don't have to make the decisions alone.

Yeah, it's like, no, it's not. Join the cool kids club. Let's go.

And we did. Yeah, Donald missed why the partnership ended. Um, for those who are newer to the chat, because we've cycled through some people, let's do the 100,000-foot view. I'm an ops guy, Cody is not. We just explained why we partnered and why we started going to silos, but we hit our goal. I bought Cody out of the property management company. You're going to see us partner on a lot of real estate moving forward, but I'm going to guess the ops-heavy stuff is probably typically going to be me because I love pain, apparently. And Cody is gonna do a lot of acquisition, but I freed some stuff off Cody's calendar. So I'm gonna guess that Cody has some new things that he announces here in the next little bit, uh, that I am not even aware of. Uh, but as Cody figures out exactly what he does with a little bit of extra time outside of acquisition, um, we freed him up to take on the most important parts of the business, which is buying the real estate and making sure that we still have money. Um, Hugely important. Yeah, yeah. Both, uh, both help. I don't want Cody thinking about anything else than those. So we took the other things off him. And, um, the nice thing with my universe is that I have a wife who's also in the business. So 2 people can run the ops without having to involve Cody, which is great.

Yeah.

And I hired my dad. That's a new, new thing too. My dad's working exactly 30 minutes a day for me. So yeah, new, new things.

Nice. You say build a foundation by cash flow. When you raise money, you say double your investors' money. How does that work when you buy that amount with debt charged by crazy interest? All right. Some people go to Gary, Indiana, and they buy for cash flow. Some people buy in Seattle for appreciation. We like to do it a little smarter than that. And we buy based on cash flow for equity growth. We do not compromise, and we buy for both. Doubling money is difficult if you don't know what you're doing, and you have to find opportunities other people don't see. It's not always with price, sometimes it's with terms. A lot of the times with us, it's with terms. But in order to do that and to borrow a ton of money and to pay out high-interest debt, you have to have great opportunities. And I— all the opportunities that I've done that with, I bought off the MLS and they've been on the market. So how do you make one of those deals work? Well, you figure out how to optimize that real estate above and beyond what other people can do. There's two types of groups in real estate. We've got insiders and you got outsiders. Now, you might think about this like insider trading in stock market, which is not legal, but a lot of people make a lot of money doing that. Well, in real estate, it's the opposite. The outsiders control the real estate market. The insiders are people that have been in any given market at any given time. They usually own for a while and they have all the stigmas with all the properties and they don't think it can go to a certain place. While someone with outside money— we saw this all over the states prices just shot up when people left California. Well, outsiders came in, they're like, that's a steal, I'm going to come buy that up. Well, same thing happens with apartments. That's what's called cap rate compression. A whole bunch of foreign money comes in from a different area, not just sent from out of the States, but money comes in, inflates prices, and boom, you have lower cap rate markets. So what we did is we went in and became an insider. We bought a whole bunch of real estate from people that have been in the market for a long period of time. You got debt markets and equity markets. Central Washington is primarily an equity market. I was looking at CoStar, over 40% of all residences are owned in cash over there, which is pretty incredible. That includes some of the multifamilies. And so a lot of people own their stuff outright. So we can go in, start buying stuff, and we get into that equity market, we throw some debt at it, and that just means we're borrowing money, and then we get it online and we get a whole bunch of people with more money than us to buy up in that market. As a real estate agent, I go get my clients to start buying up the market and that brings outsider money into an insider market and boom, all the assets go up, all the rents go up. It's not beyond affordability. People usually say, well, if you make $1,000 or you make $3,000, you can afford $1,000. But we've got a lot of people making like $6,000 or $7,000 paying $1,000 in rent. So it's still very affordable, but we were able to really push up equity in that market and pay the high-interest debt. Now, if you didn't track with that, you can watch that again. But that's exactly how we did what we did. We just went in, got a whole bunch of deals, put it online, got a whole bunch of friends and clients to start buying up the market because we showed them it was a great opportunity, got cap rates to compress and multiply the money so we could get new debt and pay everybody out. It's free real estate.

My favorite price.

If you can learn that crash course of what I just said, you know, you can do this any market. It's easier in tertiary markets and secondary markets, but if you repeat that, my job is to find that next market that we do that with. But you improve a whole community if you renovate every building. An area is just nice. And so that's what we're doing. And, um, you repeat that, you start making everywhere nice. You can pull all the money out and pay off the high interest rate debt with low interest rate debt.

Now, let's see here. Hopping back into the chat here, I had— oh, from Franklin here. What's a good purchase price to cash flow ratio? So I don't worry too much about the purchase price. I mean, now the actual cash flow I worry about, but that's going to depend very much on what market you're in. There's some high appreciation areas and some non-appreciation areas. So you can go anywhere in there, but it very much depends on where you are buying. For example, if you're out in the Midwest, you're probably going to look at places that cash flow. I've seen a lot of deals that cash flow 20%, 30%, 40% cash-on-cash return. So the money you have invested versus the income, net operating income— or sorry, just net income to the property, not just operating, that includes your debt. But your income minus expenses divided by your purchase price. That is going to be a huge ratio if you're buying a good deal out in the Midwest where you don't see much appreciation. For us in the greater Seattle area, we own a little bit, we have some in Central Washington, we're in higher appreciation areas. So for us, on a deal where I'm seeing 8 to 20% cash flow in a high appreciation area where I am 100% sure I can hold that in long-term fixed-rate debt, I'm starting to like those more in high appreciation areas. So it depends on your market, on what return you're expecting to get. But that's the main thing. The most important thing that I worry about beyond that is, are you borrowing cheaper than the property yields? So if you have a property that yields 6%, if you owned it in cash, are your— is your true cost of capital less than 6%? I want to see those sort of numbers. We cover that in depth in our course on multifamilystrategy.com if you want to see some visuals on that. But I think that's the most important thing. If you can borrow cheaper than property yields, you're probably making money. Just make sure you do that on long-term debt.

James asked how to learn about what we do. That is multifamilystrategy.com. Check that out. Oh, I have a cat in the way. There we go. Okay. What do you mean the partnership has ended? We divorced. The big D.

No, spun off a company and traded them a bit of my property.

Yeah, we separated two assets, PM and a sixplex. What? Okay, let's see. You read that one. You said you thought you already knew everything about real estate investing when you bought the 12. What are some things you learned since then? Well, yeah, in the beginning I thought I knew everything. I thought I was a pro. I didn't know jack about anything. So, I mean, everything I've learned, I've learned since I bought that 12-plex. That is where the learning really began. It's one thing to— in theory, you can know how things should play out, but until you borrow millions of dollars, cash flow plan hundreds of thousands of dollars a month, like, until you get to that point, you're not really going to know how it feels, what goes wrong, what goes on. I mean, Christian and I are going to make an announcement. We're buying a 5-plex with our own money. We're not— oh yeah, we're not borrowing the down payment. It's going to be crazy that we're just going to buy it. We wouldn't be able to really fathom that until we do it. So we're doing it. But you're— I've learned all this stuff, practical application. Everything has happened ever since then. In theory, I knew how to buy real estate. In theory, I knew about seller financing. In theory, I knew about property management. In theory, I knew about raising money, but until I did it and did it over and over and over and over— this is called, you know, actually executing upon the, uh, the mission here— like, until I did that multiple times, I didn't really have a great grasp on it. And so I wasn't the professional, I wasn't the expert, and I quickly realized I was getting started, but I didn't know anything like I thought I did when I was getting started. But that's an adventure everybody goes on. Till you do it, you haven't done it. You won't know how to execute on it. You'll think you will, but, um, then you get there and you're like, huh, that didn't work like I thought it was gonna. Lumberjack, thank you for the Super Chat, we appreciate you. All right, from Dylan, what software, website, app do you use to to find seller contact details on properties you're interested in? Well, I use Google Maps, and then when I find Google Maps, I figure out who the owner is. And you can use that on a county assessor. And then once you find the property owner and the city that they live in, you just plug those in on Google and you can put in phone number and it'll pop up for 9 out of 10 people. And then the other 1 of 10, you can usually find within like a 10-minute search. But I don't have any apps that I use. You can use apps. I mean, there's some that I've heard of, but like CoStar, or what's the other one? PropStream. I think people use that.

Yeah, I think PropStream is a big one a lot of people use. I haven't, I haven't used most of the paid stuff since I used to work at CoStar. I kind of just know that system and that's my comfort zone.

Thanks, Aaron. Good to see you from South Dakota. It's good to see you in person at the Robin Hood. Thanks for posting those photos. I didn't even know some of those existed till yesterday. All right. If you're doing a lease option on exiting debt, wouldn't go— I'm going to try and reread this question. If you're doing a lease option Wouldn't it be the same as subject-to without ownership? Subject-to is just a clause in a real estate contract. So they're not— they're not the same. I mean, you could equate things to be the same, but it's also like saying I just got a mortgage without getting a mortgage. I mean, you're signing a lease. Talk about options versus obligations. You have an option to buy something, but you don't own it. It's just rental arbitrage. In some states it's legal, some it's not. They're pushing away from lease option because it can be highly predatory. So, uh, I, I wouldn't do it. We looked at doing it. I'm glad we didn't because that— the person who's going to do it with us was highly predatory.

Go figure.

Yeah, so I just— I wouldn't do it at all.

Agreed.

What's up, fellas? Maryland checking in. If you don't know it, these two guys are no BS, real deal. Oh, thanks.

I appreciate that a lot. Speaking of the real deal, I did just edit the description of this video, so if anyone wants to check out Matt's course, that is now in the description. Just so you know, Matt, that's, that's what your $10 gets you. Welcome to the— yeah, there's your endorsement. I'm not— it's not paid.

No, it is a better operator of real estate than both of us combined.

Matt's the smartest investor of all time. We're going to stop just worshiping Matt on this call. But seriously, if you guys have technical questions or like really want to learn how to own your real estate, Matt is The boss. He's the best investor I've ever met.

Chris asks, how do you figure out market value for a multifamily in your area you're not familiar with, in an area you're not familiar with? So if it's commercial, it's going to be based on the income. You're going to look at the net operating income, which is your operating income plus your operating expenses. That does not include debt. Debt is an option. We can all identify as rich and then we're rich. So debt is just an option. So you have your OpEx, uh, that is subtracted out of your operating income, and it goes income less expenses equals net operating income. And that's the money you have to pay your mortgage and pay yourself. And so all you got to do is take that net operating income divided by the market cap rate, which is the cash-on-cash return if you paid cash, because then we can do apples to apples between asset classes. And so if you buy a million-dollar asset and you took the total rental income and you subtracted out the total expenses like taxes, insurance, utilities, maintenance, management, repairs, all those. Then let's say you had $80,000. If you bought it for $1 million, take the $80,000 divided by 0.08 and boom, you're at a million-dollar valuation. You're at 8% cap rate. It's just inverse of each other. So you can go either way, but you figure out what's the average going rate of return people would expect if they paid cash. And now the trick is, if that's your dividends, you need to borrow cheaper debt. You need to have your cost of capital less than that number and you make money on your leverage. But as far as valuation goes, for 5+ units or storage, something like that, mobile home park, it's going to be based off that cap rate. For 4 or less, it's going to be based off of rental comps that are local to you. So if there's a fourplex that trades for $1 million, There's a good chance that your fourplex, if it's right next door, could be worth $1 million. When's the flipping channel coming out, Cody? Well, I mean, that could come out whenever. We'll do some more videos. Parkour.

Yeah. You guys watch our most recent short. We don't do a lot of flips. There's a reason for that.

Yeah. Christian will die.

Yeah. I also can't do one.

But no, that, that was a one take. I didn't even warm up through it. I was prepping to not land it and just say this is why flips suck, but I landed it, so I had to come up with something on the fly. But now we'll do some more videos. Those are fun. Have you ever considered seller financing an island?

No, but we have considered seller financing a mountain.

Yeah, we did look at financing a mountain that had a ski resort attached to it. Someone asked earlier if we buy more hospitality. Yes, but it would have to be 10 times bigger than Robinhood.

And that's one where Robinhood— you see, that's, that's one of those few things where that's a project I might look at that Cody wouldn't look at. I could do another one of these, but I would give my team more equity. So I had to do a little less because I have people who can really operate these things well, but I need to give them more, more incentive. I'm not one to give equity, but I would do one of these again if I gave someone enough to take a bulk of it off of me for the management, because they are intensive.

And building a relationship with an owner, would it be wise to ask them if they know other owners in the area, in the market, to try and get in contact with the biggest players? I mean, I wouldn't. I'm there to meet with them. If you know how to meet with them, just do the same thing with all the other bigger owners in, in town.

And if they're really bought into who you are and you showed interest in them, they'll introduce you to the other players. That's happened very consistently with us. Hey, have you talked to this person yet? Or, hey, there's this property that's not right for us, like the Robinhood. It's not right for me, but this could be right for you. Like, those conversations happen if you just focus on your relationship with them, communicate who you are, learn about them, be a normal human. I think that's too transactional. Who else should I be introduced to? That sounds like you're only meeting me to move yourself forward. I'm meeting with other people. Yeah, sure. To advance my position. But I really just want to get to know them and provide whatever value is appropriate. It's just like, hey, let's meet as people. I'm trying to play this game. There's another player in the game. Don't complicate it past that. Otherwise it's going to get weird and transactional and no one will like you.

From Aaron, I've got memories in the background behind where Christian's sitting. Heck yeah. Robinhood Real Estate Summit. Be there or be square. It's good to see you there, and we appreciate you making the commute all the way from Dakotas.

Our next one will be an outdoor event. I believe it's going to be August, so more details coming. But, um, I think because this one we, we stacked to this room, this room was full. We're in the— we're in our bar right now. I'm thinking we probably do 100 to 150 people. For the next event. So if you guys want to do the next one, it's gonna be a big one and, um, really gonna be hard to compete with better speakers because that was about, um, man, we had a good lineup last time. But we're gonna bring in as big as we can get. We will, we will deck out this event. So save, uh, save the calendar for late August.

From Nick Wood: Multifamily Strategies, awesome. Joined last week and I've learned more than I ever thought I could in a short time. Nick, that's awesome. We appreciate you and, um, grateful that you're part of— what are we calling ourselves? The Squad.

Someone screenshot that and put it on our website. Um, thank you, Nick. I appreciate that a lot. Uh, we love teaching. If anyone else wants to learn any of these things, I know we've talked a little bit of math today especially. Um, we put it all in the video course. You can check it out there and then join us 3 times a week on the mentorship group. I love doing that. But we're limiting that to 10 more spots because it's getting really full and we don't want to take anything away from anyone who's in the course. So we'll— 10 more, 10 more filled and we'll, we'll cut down the sales on that substantially.

All right. Question for you, Alex said, can you get in trouble for using someone else's CoStar account?

Nope. But they can, they will get banned and fined and oh man. Uh, CoStar is extremely litigious. They will go. After you. I've had clients who've shared it. First thing they do is they're going to put you on facial recognition. And what people don't realize with facial recognition with CoStar is it is actually your computer or phone is going to be taking a picture of your face. So I've had clients who take hold of a picture of their face to get someone else in, and CoStar gets a picture of them holding up a photo of themselves, and that, that is audited. Cracked me up. But yeah, they will, they will do everything in their power to prevent or to protect their intellectual property. And CoStar makes a lot of money. So yeah, you can get fined, you can get shut down. And yeah, it gets, it gets nasty and they will collect on the rest of their contract even after they shut you down. They'll send you to the nastiest collection people. Yeah, don't do that.

It turns out when you have 10 figures in the bank, not in assets, but in the bank, you can kind of do that stuff.

Yeah, they hold— they call it the war chest and they usually hold $1 to $3 billion in there to acquire smaller companies. So yeah, they do not mess with CoStar. If you want access to their stuff, buy their stuff. It's not an account you can't share with your friends for $6.

Yeah. Go, Andy. He's accumulated a little bit of the wealth. Oh, all right. What do you tell the inspector to pay special attention to when inspecting multifamily that's a little older? Well, I don't give them any. Yeah, like, let me know how the building is. I'm not the inspector. They are. So tell me what's wrong.

Yeah, one thing that I wonder— this is a helpful tip though, um, almost related, but, um, I learned this from our inspector. When you walk through the units with them to tenants, the first thing he always asks everyone is, hey, we're doing an inspection, is there anything else you want us to communicate to the owner that needs to be fixed? He asked that in every single unit, and we learn so much about what's wrong with the property from the tenants. They'll let you know, oh yeah, there's a problem with floor. I think they're a foundation issue. Or it could be as small as like, I have a sink leak that they just keep not fixing. But you get to document all those things as you do your walkthrough. Uh, that's a golden question. I hear Cody ask it every time. I ask it every time. Uh, we just come in, hey, anything you need us to report to management? Excellent question. Uh, and that, that is a bonus thing to your inspector's walkthroughs that you guys add in, and you will document so much of what's wrong with your property. REI Stoners. Hey guys, what is the benefit to a seller regarding capital gains tax? Don't they still pay capital gains on the mortgage each month? So they're going to pay cap gains at the end of the year and their tax situation to them. So I'm going to caveat this. I'm not a CPA. They need to talk to their CPA. But generally speaking, they're going to only pay cap gains on what you pay them in principle, because what happens at the IRS level, for example, if you default 2 years in, they didn't actually ever receive all the capital gains for the property. So they're going to be taxed on what they receive. Again, consult a CPA, but that's the general rule of thumb. It could be a huge advantage to them to receive less cap gains year over year, to put it on a note and spread out the cost. I know that's happened for a lot of people we've worked with. However, if you make the decision, the wrong decision, to try to sell seller financing based on their tax situation, you're unlikely to get it because their tax situation is theirs. And if you start talking to them about their individual tax situation, they typically get uncomfortable or know that you're a novice and they're not going to sell or finance to you. Keep it relational. But good to know in the back of your head, they're going to get taxed generally on what they've been paid out of the principal. And then, you know, whatever interest taxes, that's a separate 1099 thing.

Turns out you get taxed when you make money. Okay. What are some key takeaways that you both have learned from your first deal that you wouldn't implement towards your future deals? Oh boy. So my first deal, I let someone else— I did the PM, but my business mentor at the time, he handled the rent collection. Like, I would make sure it gets sent to the right place, but he would cash the checks. And eventually I stopped getting those checks. So I control the money. Granted, now that I'm out of PM, I don't control the money anymore. So Christian and I will have a stern talking with if something gets funky, but I also own almost all the stuff with him, so that would be hard to find a fight.

And also Cody's still a broker through the PM company and is an employee, so when he consults on any of the stuff, he gets paid. I've kept access to the books, so he can't modify the books, but he can see every single dollar in and out of every single account and every single piece of software. So he's, uh, he basically has owner privileges on everything. His past partner hid everything and siphoned the money off. They just embezzled the whole thing.

That happens, I guess.

We have safeguards against that now.

Yeah.

Um, so I wouldn't do that. The other thing I wouldn't do on our first deal together, um, we promised some really high payouts to investors because the property could afford it, not because it made any sense whatsoever. I am all for giving huge returns to your investors and align the incentives with the opportunity, but we promised way too much on our first deal and we promised everything on a 5-year buyout and then had to buy out everyone in year 6 to refinance the property, or sorry, month 6 to refinance the property. We didn't have any contingencies for that, so we just had extremely expensive buyouts at month 6. Where I'm like, oh great, so we just gave people like a 200% return in 2 months. That was idiotic. We still made $1 million, but we could have— we could have multiple six figures of liquidity would have been a huge difference had we structured that correctly. So capital structures for me was the most expensive lesson.

Live and learn. It happens. From Lumberjack Landlord: older buildings, the sewer lines, the joists pulling away from building. Water infiltration, chimney lining is an easy shortlist. Awesome.

Now we just bought one that has joists pulling away. We need to be aware of it. We have a— we have a joist on that 12-plex that needs a little love.

Oh yeah, it happens.

Yeah. Left side building underneath the third unit. But if you're going to buy it, know what you're buying. And that's the point of the inspections, like Matt's point here. Know what the problems are, and they need to be problems that you're capable of fixing.

All right. We have one last— oh, we got two questions. Still trying to find OPM to use. It's kind of hard. Well, deal debt equity. The OPM, the equity piece comes later. That if you don't have a great deal and you don't have the debt lined up, it's going to be hard to find. What are you guys' top couple of reasons to refinance?

Top couple of reasons to refinance. One, to lower your interest rate. Now, in this market, that's not happening for a lot of people because interest rates spiked. However, great reason to do it. Two, to pull capital in your stabilization or optimization phases to stabilize or optimize your building. And that's what we did a lot of. We just closed a $2.3 million refi where we have another $320,000 to go out and renovate the 38-plex. So that's a legitimate reason. What we do, though, and this is where I'd call it a bad reason to refi, if you're not lowering your expenses or pulling cash to improve your property, some people just refi to pull out capital to spend capital. That's the wrong thing to do. Once our buildings are stabilized and optimized, we're paying off the debt in lieu of refinancing. We're just going to pay it all the way down to zero. We're not pulling new money against the asset. That's done. So those are the reasons I can think of. Only other thing that we've done, we've done a refi where we pulled the capital and bought another cash flowing property with it. So if you're using the money for acquisition, stabilization, or optimization, valid point. If you're lowering your interest rate, could be really valid. Outside of that, I can't think of any good reasons to pull a refi. Cody, can you think of any?

Uh, to extend your loan term. I mean, that's, that's always my go-to. No, we just— we had a, we had a 5-year deal we took to a 10-year. You can't buy time. I mean, you can, just cost you money, uh, with, with debt products. But it's hard to get time in real estate because you can't just click a button and fix your problems overnight. That's one of the— my favorite parts and my least favorite parts. The, the tough times suck and the great times seem to last a while. So, um, there's a lot less stress on that because you can't fix it overnight. But if you can get time, you can refinance one of your 5-year deals to a 10-year or a 20-year. Whenever you can buy more time and you can get it done and locked and in the bank, Absolutely do it.

Now we have the last few questions here, so I'm going to do the final call for get your questions in now because I think we have 2 or 3 left and then, then we're a wrap. We have 5 people who've donated anything to the Super Chat, which means 1 of 5 people is getting a Cody Thinks t-shirt. Really, it just helps us with the algorithm. So whether it's $0.99 or $20,000, it doesn't make a difference to the algorithm, I don't believe. So, um, if you want to jump in and win the raffle and help us boost our channel, last call to do so. I'm going to take pictures of them, and then next, uh, next week's, we'll actually probably roll dice and, uh, see who won. That being said, let's get down to 5 people we've got. Perfect. And we'll, we'll hopefully have a few more than 5 so that I can roll 2 dice, because I like rolling dice. They're fun. All right, uh, what's our next question here? Do you guys— I'm looking at day loans. If I missed one, Cody, fact-check me here. But did you guys go through a DSCR refi?

Well, all, all commercial debt products are going to have a debt coverage ratio you're going to have to hit. But it wasn't just specifically a DSCR loan. No, just a commercial product. They have requirements we got to hit, which is 1.25 to 1.4 depending on the loan. All right, let's see. Oh, I accidentally turned off my phone.

That's okay. I got, I got that. I did, I did miss, uh, did miss one though. Yep.

How come he was in control of rent collection when you were the one owning the property? I'm confused on how that works. Well, my business mentor, he owned a PM company. I did all the PM work. I did all the tenant communications and I got 3PM software, AppFolio usage. That's also where all the money goes through. So that is why now I have a rule that I have to be able to handle money because that money stopped going to my bank account, which was tough.

From Alex, what are a few ways you like to structure debt and ownership with money you raise? Well, it depends on the deal. 10,000-foot view on this. If you have a ton of cash flow, generally speaking, that's going to cost you less than equity. Buyouts, typically, if you're given less cash flow upfront, less monthly payments, there's a bigger incentive on the back end for the investor. So if it can support that, we're typically doing debt, and I love doing that. Um, any of the investor debt, we usually try to pay off as soon as humanly possible. I don't like owing individuals money. But sometimes individuals have money that you need. So that is how I structure those. Um, but basically how fast can I pay it off? What do I need to do to get the deal done? And where does it make sense for everyone? And most importantly, do everyone's objectives align? So in our course, again, Multifamily Strategy, the mentorship, we spin the Rubik's cube on deals every single Tuesday. We look at everyone else's deals and we come up with how would this work? It's going to be extremely deal dependent, but that's my basic rule of thumb. If we can do it as debt and the property can support that debt day one, let's do it as debt. If it is a value-add project that doesn't have the cash flow day one to support additional debt, we'll do it as an equity partner with a buyout on the back end.

Sweet. How do you see how many or which properties are paid off off in your market. So what I do, and you can typically see it, but not every state is a disclosure state. There are some non-disclosure states. I think Texas is one of them. But, uh, you can see when it sells and if there was a recorded mortgage. If there's a recorded— and this is just like statistics— if there's a mortgage record last year, highly likely they have debt. If there was a mortgage recorded 17 years ago, they probably don't have any debt on it. It's just you don't know for a fact. But regardless, I'm calling people to learn how they got to where they're at. I'm not calling them to buy. So that aside, I'm just calling people that own real estate. They usually tell me what they do. Well, I got to 30 apartments and I paid it all off, and I wish I didn't pay it off until I got to 80. That's a real story. So, uh, yeah, I'm not asking and I'm not looking up front. They're just going to tell me over the course of that relationship how they did it. And it really doesn't matter. I don't think— I don't try and just call people just because they own 100 units outright. I call people that have— we called some people that only had 21 units. They happen to own everything in cash because they only pay cash. They don't believe in debt.

And if they don't believe in debt, they're unlikely to sell or finance to you. So that's good to know. But that's why you don't go after these transactionally. I learned a little bit from him. He's referenced to our way. Nice guy. You just go through those meetings and you build more relationships. There's one more person in that city who knows who we are. Awesome. Are you stoners? Found an off-market deal through a coworker who is— who is setting up a meeting. Besides not talking about their tax situation, what else should I avoid? Over-talking or over-explaining your situation. And the easiest way I found to avoid that for myself is not to over-practice. Know what you want to say, script it out. But if you plan that too much, people end up just vomiting the whole thing. And I've done that. I've done it in front of Cody. And we've seen almost everyone in our mentorship do that on their first calls when they're learning the script. When it's new, habit is to overtalk. So don't overtalk. Be able to sum up, this is who I am. And I've actually met with REI Stoners and it was a fantastic meeting and he's a great presenter. Um, but just like we did when we met, talk about who you are, tell your backstory. You have a fantastic backstory. And then just open the floor to questions about them. And if you just do that, that's the biggest thing to avoid is just don't overtalk. It's my biggest weakness. Keep it that simple. Cody, anything else you would avoid on that first meeting?

No, just don't be transactional. There's a point where you can get transactional with every relationship, but it's not on the first meeting. How fast— from Alex— how fast can you get a deal from an owner you just met? I mean, it could happen. They could offer it on the first time you meet them, but it could be first day, could be 2 years down the road. I've had both. First day ones are nice, but, um, don't expect that. From All Nighter Hider— wow, you guys are still live! I'm here, we can start now. All right everybody, you heard it, we can start now. Boom shakalaka. As someone who wants to get into— what's up?

Oh, I was just saying, and, uh, thank you Ari Stoner and, uh, Charm City for the, the Super Chats. I'm screenshotting those now so that everyone is, is in and documented. It looks like I do get to roll 2 dice.

I think we just put a little piece of paper up on your whiteboard and we do 1 through like however many people. And then we just roll a die and have the camera on it, whichever one it rolls. I guess we can't have one and we probably shouldn't do two because the odds are low. So we'll start at like 3 to 3 plus.

Well, we'll get it all figured out, but I'm excited. I have, I have like a container of 36 dice so we can, we can roll quite a few of these.

As someone who wants to get in real estate with a very demanding W-2, assuming your strategy would be hard to find deals and manage large units due to time strain, What advice would you have? Well, you don't have to do it the hard way. You can do it the smart way and have third party manage your bigger assets. That's what Caleb and Chuck did, and I think they're better off for it. They spend a lot less. Well, granted, I don't spend any time on it now, but they spend— like, I'm doing their model now. I have third party management, a.k.a. Christian Osgood. You don't have to manage all your assets. It's really not that hard to manage small stuff. You got 10, 20 units, you can manage it. Even with a pretty demanding job. But if you don't want to, interview all the local PM companies, get references, and see who the best one is.

That's fantastic advice. Um, have you guys, uh, declined a seller deal that looked amazing, uh, through trailing financials, but something completely threw off the deal? Uh, same question to Lumberjack. So Lumberjack, if you haven't already, You can answer that in the chat for us. Yeah, we had a 13-unit that financials looked fantastic, price per unit was ridiculous, and then we walked through and the whole thing is garbage. And if we were just starting, I probably would have taken on the challenge, but we already have like 20 renovations going simultaneously. It's really expensive. The last thing my team needs is a brand new city brand new building that has every type of problem that I don't want to deal with. It would be expensive and it would take too much time. So on that one, financials, 10 out of 10 as far as what we were presented with. The other problem with it is they had no bankruptcy to verify their financials, so I couldn't even tell that the financials were real, which they probably were.

Yeah. That was bad. Thank you, Pasha. You are in the drawing for the Doing Cody Things shirt. We're gonna one day at a time create a crew. I just envisioned going to a real estate event and seeing random people that I haven't met in person yet wearing that shirt.

And we can't do one for me that's Christian Doing Christian Things because it'll sound like a church event. So now that I have the PM company, I'm going to have to make some t-shirts so I can hand those out. And that will be— that'll be Christian's brand.

How would you structure an owner finance deal where the owner has a mortgage? You can assume the mortgage or you can pay it off. Now, that money doesn't have to be with your money. You can borrow it. But those are the ways we do it. You either pay off the debt or you assume the debt.

And if anyone here posts that you could do subject-to, Technically, yes. But if you're following our rules, no, you can't. Not an option.

Yeah, that's a stupid clause. Save it for Santa. All right. How many owners would you estimate you've met with exclusively in Moses Lake? All of them? No, not actually, but I met with a lot of other owners in Moses. There's There's not many mid-sized multifamily people that I haven't met with yet in Moses Lake.

There's one who always blocks our calls. I only see him with his camera off when I'm in court. Curse you, Miguel, meet with us.

Always evicting people.

I know every time I've been in eviction court, he's been there, but he always blocks us. He doesn't want to meet. So it's not everyone, but it is a lot. That's, that is what we do is we meet the people and The fun thing is, and Matt can definitely back this up, the more you play the game and the more you're around, like there are stuff like the best way I can meet Miguel who never meets with us is probably because he sees my name all the time in evictions court and he's going to at some point go like, this guy's a player going through the same stuff. I'll bet you that is how I end up building that relationship. Probably message him, hey, see you on court on Friday, and he might actually respond. I'll have to do that from a different number since he blocked me. But you guys get the deal. Like, that's when you play the game and you're around people, more and more people will just get to know in your market this is who you are. Now, when our broker calls someone— this happened this week— they reached out, beautiful building, 8-plex that we're buying. Like, hey, my buyers can close on this. They also own a property management company. Like, they're, they're ready to go. Is it Cody and Christian? Yes, it is. Like, you guys will get there if you keep doing this in your market. Everyone will know you. And the people who don't, it's even cooler when the other owners in the market just tell them about you. I don't even have to introduce myself anymore because someone else already has.

We got a comment from Pasha: I'm Christian not doing Cody things anymore.

I don't know that we're gonna get many sales of that shirt, but I'm up to make it.

We'll make it. If you make it, they will come, right?

Yeah, I'm Cody Not Doing Christian Things Anymore, though everyone will think that you just left the church, so we can't— yeah, my name's difficult to brand. Jesus beat me to it.

Yes. How quickly can you get to a billion net worth with your strategy? I'm wondering if it's possible. It's absolutely possible. When I got started, I wanted to become a millionaire. And it took 2 and a half years to do that, start to finish, from nothing, just to get to a million. And then the next year and a half, more than tripled it. But the quickest way— and this is what my mentor told me at the time— the quickest, simplest way to become a millionaire is to borrow a million dollars and let someone else pay it off. So your question is, how do I borrow a billion dollars on an asset or on a bunch of assets that can pay itself off. You don't have to get rich yet, but one day, if you do a 30-year note, you'll have a billion dollars worth of assets that'll adjust for inflation, that'll be spitting out cash flow. And if you're a 6% rate of return market, or 5%, $50, $60 million a year cash flow, $4 or $5 million a month, that works. You just have to figure out, how do I buy it? How do I never lose it? How do you buy it? You find the deal, then you find the debt. You got to figure out, how do I get a million or a billion dollars of debt? It's B, I don't usually think like that, but how do you get to $1 billion worth of debt with the deal? And then where's the down come from if you need to down? And then how do you never lose it? Long-term fixed rate debt and cash flow. If you have that with margin, you're set. But it doesn't matter how many zeros are on the end of your deal. You're just either going to have to figure out how to do bigger deals or buy a lot of little deals.

I got a question in the, in the chat here. When will you property manage in Spokane? So technically we do. And here was the promise. I'll tell you a little bit of the story without mentioning names, but they said, hey, this is the most passive building that we've ever bought. Super easy. We just need a PM who's going to collect rent and has good leases. I'm like, we have good leases and we can collect rent occasionally. We might have to post the notice.. But outside of that, it's going to be just fine. That building has taken more time. 8 units has taken more time to manage than the whole rest of our portfolio combined. It is a pain in the butt. However, I'm out there, so I am open to managing in Spokane. However, we have to have a long conversation before I take it on. I have boots on the ground. I have contractors out there. We can do it, but I'm not managing like a duplex out there. If you have a 25-unit building or you have a portfolio, I am open to the discussion. We're not going after it super hard, but I am fully capable of doing a great job out there. Um, so Josh, if you want to DM me on Instagram @ChristianOsgood, if that's a conversation you want to have, I can have that conversation with you.

All right. Gotta make a shirt with the cow picture from Cody's PC background. That is actually just a picture of Christian with long hair. We will do the comparison side by side when we do the raffle.

That is factually— if my hair is down, it will look like the cow.

It looks exactly like the cow. It's ridiculous.

Moo. That's a short. Chase, if you're watching, write that down.

Write that down. All right, how long do your meetings typically last on average with new investors that you're looking to book meeting with? Well, if you're meeting with a new property owner, I mean, it could last an hour, 30 to 40 minutes. I met with an owner today and it was 2 hours, and that owner I had known for— I've known for 4 and a half years. I was thinking about that today. 4 and a half years I've known this person. I've known them, uh, since I got my license. I guess the very first month I got licensed, which was 4 and a half years ago. That's crazy.

That same owner also helped, helped me write the basic, basic structure for spinning off PM from Cody. He had a partner who took over PM from him in the past. And so we had that conversation of what people specialize in and the same guy Cody's meeting, just fantastic advice. And that owner meeting was like 35 seconds while Cody went to the bathroom. Yeah, I was like, hey, we're looking at doing this, what would you do? He's like, I did that, here's how I would do it. Make sure you put this clause and this clause in your contract. I was like, oh, okay, awesome.

Cody Rep said, ah, y'all helped me get into debt, best decision ever. For those who don't know Cody Rep, Cody bought a $600,000 deal. He did 3.5% down., I believe. And, uh, now it's worth $1 million a year later. That doesn't suck. I'd love to turn 20 G's into $400,000.

Yeah, Cody came into my office, was like, I have a buyer for that. I, to this day, I have no idea why Cody and I didn't just buy that, but I'm really happy that that worked the way it did because Cody's awesome. Cody Reb. Is fantastic. He's another Cody who is also doing Cody things. And, um, yeah, I'm, I'm really happy you guys got that deal. And if you guys haven't checked out his social media, you guys should see the reno he did to that basement. That had 3 decent units and 1 really dirty basement. That was a, that was a gut job. Well done on that project, Cody.

All right, uh, from Alex: How many meetings does it take to get a deal? Well, it depends. It can be 1. We mentioned that earlier. It could be 1. It could be 5, 10, you may never get the deal, but the relationship's worth more than the real estate. And that wraps up our questions. So we did it. I think we are done.

All right. Well, thank you, everyone, for joining the chat. If you guys haven't yet, the link to Matt Hawkins' course I just added to the description. Again, I've never endorsed anyone else's course ever. It's really good. It's really, really good. So if you guys want to go through the management, follow that rubric, and that is how you do it. Other than that, you can buy your own Cody shirt. I think the link's in there too. We're going to be doing a raffle next week, so join for that. And everyone, we just appreciate your, your contribution to the chat here, and we'll talk to you guys all next week on 3 o'clock Pacific Standard Time.

See ya.