Out of State Creative finance and the Hommel Hack - Multifamily Live!

Says we're going live at 3:10, which is in the past, but that is okay. Here we go. There we go. Like that, we are live. Caleb, welcome to Whiteboard Wednesday Live or Creative Finance Live. We've changed the name enough, which one we call it, it'll be one of the two.

Thanks for having me.

Yeah, I'm going to shift the view here to get us both on the screen. But yeah, we made it. Good to see everyone. And yeah, excited to— excited to be on the, on the stream with you. I'm going to update the Instagram right now since we did actually just do a change and people aren't able to make it in via the link I shared. So I'm going to go ahead and change that, let everyone know we're here. But Caleb, for those who haven't seen you on the channel yet, give us a quick introduction. Today we're going to be talking about out-of-state investing, creative finance, and the HOMEL hack. But yeah, talk to us a little bit about who you are and what you're up to.

Sounds good. Yeah. I'm 20 years old now, born and raised San Diego. Buy all my real estate in Texas, 28 units over there, all seller finance, zero money out of pocket.

See, that is not half bad. Where were you at when you started? How did you get there? Where are you going next?

Gosh, yeah. What, 18? I was 18-year-old college dropout, not really sure what I was doing. Stumbled into your and Cody's program as you guys were first starting off. Like I said, really absolutely zero idea where I was going, what I was doing, kind of just bought into what you guys were talking about, figured it out. Now I'm at 28 units, going to 100 next.

100 units. Okay. How are you getting from 28 units to 100 units?

Just sticking with the seller finance and buying some bigger buildings.

Okay, so you've done 3 deals, 28 units. What is that made up of? What type of units? Let's get a little bit of context here so people know what it means when it's a bigger building. What is— what do you have right now?

Yeah, that would clarify a lot. So I've got 2 10-plexes and 1 8-plex, looking to pick up something over 15 units next.

Okay, that's not half bad. So over 15 units, where specifically? Are you looking to invest?

Yeah, really like the border towns in Texas. Those are two of the main spots. And then also in Houston, so always looking there as well.

Dude, that is incredible. Well done. I know you're working really hard to find stuff. So South Texas, anyone has a deal, let us know in the chat. There we go. I've corrected some of our stuff there. I'm going to go into view and then we're going to get into the meat of this thing.

Oh, you left me. Am I just in here alone? I, I, I don't have a YouTube chat. Let's see. It looks like you came back.

There we go. Did it keep the stream going with you in there?

I have no idea.

Okay, it says we're being streamed live. Sorry for the technical difficulties. My computer decided to kick me out of my own Zoom room. Hilarious. All right, well, let's talk. Let's talk creative finance. Caleb, structure of your first deal. Go.

Great question. $900,000 purchase price, 10% down. We'll go the boring option first. 4% interest, 5-year balloon, and the Hubble hack thrown in there for 6 months of no payments.

So that's not half bad. What is the Hummel hack? We've talked about the Hummel chat hack once on the channel. What's that move? What's that move? I'm excited to share this one with everyone.

Yeah, basically instead of—

well, how would—

that's the best way to refer it. Um, when you need reserves against our— and you're a broke 18-year-old and you have absolutely no money, and reserves are nice, you just decide not to pay the seller at all. So negotiate out in their first one with 6 months of absolutely no payments to the seller. Not deferred, just no payments at all for 6 months.

Okay, no payments. Now that sounds to a lot of people to be completely illegal. How do you not pay a seller for 6 months?

Well, you just don't send them the mortgage. Pretty much it's that easy. It's not illegal. I mean, seller financing is whatever you can negotiate, so that's the beauty of it.

Adding to that, it's whatever you can negotiate and both parties agree on.

Um, that is true.

As long as you negotiate it and you agree on it and everyone's lawyers agree on it. I've actually seen people agree on stuff that's totally illegal. So get good legal counsel, but that is a great maneuver. So essentially the Hummel hack, we've talked a lot on this channel about how we do lower payments. They might step up over time as we raise rent. That's an easy way to keep an owner, one, involved with the property. You're saying, hey, I actually do have to perform because I have to hit these benchmarks. So we'll come in and say the mortgage payments are $5,000 let's say 6 months, they bumped to $7,000, all the way up to $10,000, which was the original goal of the seller. That's something that we do all the time. Caleb took it to the next level and went, hey, I don't have reserves. I have rental projects to do to get the real estate to buy the real estate. What if I just don't start paying for 6 months? It's legal. It is a great move and is an easy way to land a pitch if someone's stuck on price, but it doesn't cash flow day one on long-term fixed rate debt. I'm gonna guess all those deals cash flowed positive when you had no payments to make. Is that right?

Gosh, I sure hope so. Yes, they did, dude.

That's super fun. So, okay, that's deal 1. Deal 2, how'd you put that one together?

Yep, similar thing. $700,000, 10% down, 4% interest again, and only 2 months of no payments. So not, not as fun and creative, but still got that in there.

There we go. Okay. And then deal 3, how did that one look?

Yep, that one's $725,000, 10% down, 5% interest or 5.25% interest. So a little bit more, not as creative, but still seller financed.

Perfect. And we're getting a few people into the chat now, so we'll keep an eye on the questions, but we will get to all those. We're going to start diving right into today's topic. We've already started talking about the HOMEL hack, but let's talk a little bit more about that and let's dive right into the questions. So creative finance and out of state. Why out of state?

Well, I live in California, specifically San Diego. Prices here are not very favorable, to say the least, and California hates landlords. So kind of at the beginning, I'm like, oh, you're wrong, but buying here isn't the easiest thing to do. So I decided to look elsewhere.

And why creative finance?

I'm broke, 18 years old, no credit history, no job history, no rental history, no nothing. So had to find a way to get around that.

And the fun thing is, as you start playing creative— Cody and I are very explicit about this— we're multifamily strategy, we're not creative finance strategy. As you get more chips on the board, you're going to become bankable, you'll get the net worth up, and you'll start to be able to play with bank debt and creative finance. If you're getting started and you don't have any of the pieces, No credit, no money. That's fine. You can play the game like Caleb did, and that's how Cody and I scaled. But it's not the only way to play the game. It's just how we got started on these deals. The good news, and Caleb proved this, is that anyone at any age with any amount of money can buy. So we're going to talk a lot about how to do that today. In seller financing, we went very heavily on the direct-to-owner route. We drove to the market, we sat there, we got coffee. We've talked about this a ton. We have a circle drill on how you map Your story become relatable to be exactly how you do this out of state. If you're not there, you can't get coffee. You have to figure out— this actually might tie into the first question I see here from My Apple ID. Caleb, walk us through the conversations between you and the realtor. How did you convince them to put this offer together when others are paying cash or going through the bank, 20+% down?

Yeah, that's a great question. So It was, um, the conversation with the broker is different to build credibility, but I think they're kind of going towards why would they accept the seller finance offer versus a conventional offer. That's kind of what I assumed that question to be. And the biggest answer for me was price. It's an owner, but if he's getting lowballed on price, getting constantly beat up on price, they get tired of it. I'm sure you've seen the same thing, Christian. I know you guys do some on-market stuff, but if you're just getting constantly beat up on price over and over and over again, you get tired of it. And so for that guy, the most important thing wasn't getting a cash or conventional offer to get him out at less, let's say, $30,000, $50,000 off the purchase price. He just wanted his number. And when I was just like, oh, what if we just do this and get creative and I get you your number, give you some payments for a few years and call it a deal? For him, that was way more acceptable than just taking a lowball offer.

And that's the important piece for everything. And it's a little bit harder with a broker because direct to owner, you can figure out exactly what it is they need. Oh yeah, you can negotiate right to it. And with a broker, there's a middleman. So how do you, how do you communicate that through a broker? Because not everyone's sticking point is price. Now, a lot of the deals that have been on market for, say, 100, 200, 300 days, price is more often than not where people got stuck. Conventionally, you can only negotiate on price with bank debt because the terms and balloons are already locked. You're buying an existing product. But how do you work with a broker to figure out what the seller actually wants, especially when you got— you don't know them already? How do you build that credit?

Yeah, that's a great point. Yeah, so most brokers suck, so it's— that's just a given. So, and especially being 18 years old, if I was telling a broker I'm 18 years old, I have no money, I have no job, I try to earn money on the side, and I'm trying to buy real estate for my first deal seller finance, almost every broker is going to laugh at you and hang up. And even if you just bring up seller financing out of the gate, most brokers are going to call you crazy. That's just kind of how it goes. So it's building credibility through how you talk to them and what you say, and not really giving away that for your underwriting. They're sending you the deal, you're like, hey, this is why it doesn't work conventionally here. Are they open to getting creative here? That's always a question you can ask. The worst they could say is no.

And it's a great way to put it. It's a really simple way to put it. Are you able or willing to get creative on this? This is why it doesn't work. And a lot of the times, the ones that have stuck around on market for a long time, there's a reason they don't work conventionally. Otherwise, people would have them. Yeah, because 9 times out of 10 it's overpriced. There's too much deferred maintenance. You guys have some special concession the banks aren't going to work with. That happens to us all the time. But if you can figure out what that thing is, it's a little harder through a broker. But if you can figure out what the thing is that they need and problem, you will get a yes every single time. Creative finance is a great tool to have in your arsenal, which is why you're able to take out so many properties at such a young age. Cody and I are right now under contract for 108 different units that are all creatively financed. And that is the key. There was something unique or special about the deal where we were the right person to take it out and they're creatively financed. One of them is a blend of bank and creative financing, but they both had special clauses that were needed to close the deal. That's all you needed.

Yeah.

Question from Cutest Pets. How did you find this deal, Caleb? Did you put your money down as a down payment? Or did you use someone else's money? Well, since you didn't have any of your own money, I have an idea where this, where this might be headed.

Yeah, I had to use other people's money as a down payment. When you only have a few hundred dollars in the bank, the $90,000 down payment needed doesn't exactly come from there. So, and how did I find the deal? It was actually just sitting on the market, just sitting there for over 150 days. Give the broker a call, and that's kind of how the process started.

Okay, and how did it work for the other deals? Same thing.

Well, um, the second one was on market, that third one was off market.

Okay, so on and off market, when you're going through brokers, I think there's an assumption that is usually listed things. How does an off-market deal with a broker work? How does it come up? What level of relationship do you need to have? Break that down for me a little bit.

Yeah, you definitely need to have a relationship with the broker. I mean, if you don't know the broker, you're not going to get their off-market deals. It's that simple. And with that particular broker, I called on one of his other listings, built the relationships, like, hey, this one doesn't work, conventionally? Are they open to getting creative? The answer was a no. And just kind of let them know I'm looking for creative finance deals and that deal's good enough, I could figure it out bankable. Could I? I don't know if I could have, but would just let them know that. So from that point, he just kept an eye out for me and he had one of his sellers who was open to seller financing. They were just looking for a certain number. And so he's like, hey, send it over. I'm going to give you a first look at this. Got first look at it. And then that's kind of how the ball started rolling there.

Dude, that is absolutely perfect. And that's how you play the game. It's that simple. Build the relationships, whether it's a broker or an owner. Whoever has the most relationships and the most contacts in a market is going to be the biggest player in the market. It's as simple as that.

Yep.

Um, what led you to choose Texas as your virtual market? Which I would just— virtual means out-of-state market.

Yeah, that's a great question. Originally I started looking at Nevada particularly not Vegas, more up in the Reno, Sparks, Fernley area, Northern Nevada. Love it up there still. It was just not enough deals on market in the town I wanted to be in that had the metrics I was looking for. And so I was looking for somewhere, had to make a pivot, needed more inventory. That was the biggest thing. If I'm going the broker route, you need inventory so you can shotgun through the deals on market and just call a bunch of people. So it was inventory, price, legislation were the 3 huge things for me. Texas obviously loves landlord. Prices aren't crazy like California is. I mean, San Diego, if you're looking at over $300,000 or almost always, it feels like. So that was a big one for me.

And huge announcement for us, I recently bought into one of those properties.

You did?

Properties, actually, a little tiny, tiny equity piece. But, um, if you're comfortable, Caleb, are we allowed to share that? I mean, I guess I already kind of— yeah, I already did, but okay. So these deals were good enough and in a new enough market where Caleb decided to make a shift. He was the main person finding deals and had a vision for where he wanted to take the company and his partner, nothing against them at all, was not on the same page. They made the decision, hey, we'd like to split. I have never, and I'm not a huge advocate of partnering with anyone to when you have a mentor-mentee relationship, which is how we started out. Caleb has become quite a good friend prior to this. Caleb's actually the guy who flies up from California to watch my pets when I travel. Caleb and I are very close. Again, small, small position, but came in to restructure this. I love these deals. I love the market. The assets are absolutely beautiful. I love what you put together. So now, as an out-of-state investor alongside you in 2 of your 3 deals, I love having some properties, surprisingly, in a blue state where it's hard to operate because there is no one in Texas who's like, you know what I want to do? I want the challenge of owning in Washington. I have way less competition up here. And I talk about this a lot. I love it. It's harder. And because it's harder, less people want to do it. I dominate the markets I'm in. What I love about Texas is that I am going to have an easier time operating. So when you're talking to participate in a difficult state, that sounds like a losing proposition. Going virtual, you want to choose those states that are landlord-friendly because you have less direct control over your market.

Yep. And then another note there, I mean, there are some people who live on the border of, let's say, like, like Illinois and Indiana. Like, we've met somebody at the last event where I was talking about that. He's an out-of-state investor, but he is an hour and a half drive from his property. So it's— thing in the world, it's still out of market, out of state conveniently, but you can still be near your properties in a different state. It just all depends where you are as well.

Absolutely. Um, so look where you have competitive advantage. If location is going to make it harder to manage, then choose a market that's going to be easier to manage. It's really about that simple.

Can't agree more.

Yep. But yeah, that's why we choose Texas. Texas is cost effective. It's also where I want to live and I will be there in probably about— I'm going to say 14 months. I want to have one more summer here in Washington because summers here are actually fantastic. Rest of the year is horrible. I'm stabilizing my companies and doing the final big push. Cody and I are going to have astronomically different business than we do right now in a year. I'm going to share a lot more about the business structure here, but Cody and I are moving to stage 2 of our 4-step business plan, and I'm excited to share it all with you guys. Let's see here. Brokers of Barrier, do you only choose properties that have been sitting on the market? Oh, that's a good question. I'm going to broaden it up.

That's a really good question. Yeah. Yeah. The first thing is when I was getting started, no idea what I was doing. The first thing I would do is I saw a deal in a market. I would just type in, let's say, McAllen, Texas population. And you look, I would look at populationgrowth.com and look at the graph. That was the first thing. The place had to be growing. I'm not buying somewhere where people don't want to live. That just doesn't add up. So that was the second thing. When I'm looking for properties, usually properties that have been sitting on the market for a lot longer. People are going to generally open up to creative financing more as their property sits around more. A property that's been on market for— this can probably tell you to get lost, that they're not going to create a finance, not going to get creative. So yeah, definitely something that's been on market for a little longer, usually 60 days is kind of the mark, and then in a growing area and a state or an area where you have a competitive advantage.

Yeah, that pretty much sums it up. Um, there's not one thing. I think what a lot of people will do is they overfocus on I need to find the exact right thing. We call it the buy box and people box themselves way in.

I hate that term. I can't stand that term.

I'm naming that now because there are two sides. How do I buy it? How do I never lose it? I'm very open outside of that. And then there's a, we'll put a lid on it way up here of will it be fun? Um, which you'll get to as you start expanding. It's like, is this gonna be a really enjoyable adventure for us? But if you can hit all those things, you're pretty much good to go. Uh, the worldpopulationreview.com is the one that you just mentioned, Caleb. When you see the graph that goes up like this over time, just populations moving in, that's the number one thing. Uh, the number two thing— more job stability. Yeah, I love, love military towns. In fact, I rent, um, my first ever property is a duplex in Bremerton, uh, right next to the base. Love them. If that is the only— and bases do move around, there's a few that don't, but for the most part, we open and close bases all the time. Not a great cultural background. And you want diverse tenants with diverse incomes because you don't want one economic event to wipe you out. Take a city like Detroit, heavily dependent on the auto industry. Auto industry goes down, devastating to home prices. So you just want that stability. But other than that, it's like choose your market, get a win there, like get a, get a property on the board and then just expand like crazy around it.

Yep. Hit it on the head right there.

Let's see here from Chandler. Oh, this is a great question for you too, Caleb. Any tips for scripts on calling brokers other than purchasing our course on multifamilystrategy.com where we actually go through our 5 points? Uh, Gail, like, really, what do you add to the conversation with a broker that you need to have in the conversation every single time?

That's a great question. Well, the first thing you have to ask, first question you're asking, is the property still available? You don't want to go through this great conversation with a broker and then you're like, oh, just want to make sure it's still available, or they kind of spring out, oh, well, it's under contract. That kind of just takes away all of your momentum. And another thing I would add in there, other than the 5 points, is always asking what else they have, or is there anything else you should know about that property, and then what else they have besides this one, either coming down the line or just anything like that. Because that's how I found some of my properties. It's— that was actually how I found my second property, was, hey, what else do you have coming? Oh, got this other little deal. And then go ahead, take a look at the other deal. It's— that's just how it goes.

That makes sense to me. Yeah, the main things when you're communicating to a broker, you need to communicate, no matter who you are, what your position is, that you are a ready, able, and willing buyer of the property, that you are the one who is going to close, the goal of becoming the most logical buyer, because the most logical buyer will in fact get the deal. Now, it is definitely easier as you have more pieces on the board. As you get more and more real estate, you become a more and more logical buyer for the real estate. When I buy a property built by the same builder, same size, right down the street, I am a more logical buyer for the next time. That being said, it's going to mostly depend on the individual. How well can you communicate your game plan and your ability to buy the property? How confidently can you ask those questions? If you can get right through it, get to the point, learn about the deal and ask the right questions, you're going to get more opportunities with brokers. They're business people. Be direct, be sincere, put a smile on, have fun, get through your questions and get off the phone. Brokers are not there to hang out all day and be your friend.

Yep. Completely agree with you there.

Did you roleplay a brief conversation with a broker? Man, we're getting great questions. Yes, we are.

Absolutely. I call being Mr. Broker.

You're Mr. Oh, come on. I almost want to throw you out there and make you the other side just for that. All right. So I'm calling you. I'm looking at a 12-plex down the, down the road here. Let's say, for example, it's right next to my first duplex I ever bought in the market. Just so this can be relatable to more people. So I got a little duplex in the market. We're looking at a 12-unit that just, let's say, got listed a month ago. So it's been on market, but not that long. And you're the broker. That's all I know about it. So I'll call you right here. Ring, ring. Hello? Hey, this is Christian. This is Caleb.

Yes, it is. How are you?

I do. I'm doing fantastic. I actually recently bought this duplex down the street from that 12-plex you just listed. Is that still available? It is the one on 123 Main Street.

Yep, that's the one.

Oh, awesome, awesome, dude. I've seen your name pop up all over town, by the way. I know you list a lot of multifamily. I'm sorry I haven't reached out and introduced myself yet. I'm new to the— new to the city, but I just became an owner here.

Great meeting you.

Great meeting you. On this 12-plex, quick question.

I—

like I said, I'm new to the town. What are your thoughts on this area? Like, I don't know the neighborhood. I know the city really well.

Yeah, like you said, the city is great. Neighborhood's a little rough, more up and coming, but yep, still growing like crazy.

Okay, you did a great job on listing photos. It looks like what I'm trying to do. I, I bought this property. They're both 1 bed, 1 bath. This has some 2/1s. That's, that's kind of the unit mix I'm looking for. I want some more bedrooms. Um, so I really like the listing. Tell me about, uh, is there anything you don't like about the property? Because it looks great on paper. What am I not saying?

Yeah, yeah, I would say the only thing I don't like about it is the roof's a little old, gonna need replacing here pretty soon. But other than that, that's pretty much it. Like everything else about it.

Okay, if the roof's old, how do you think the bank's gonna look at this? Is this gonna be a— are they gonna need 30, 40% down? Has this been something that's come up yet on this deal?

Yeah, that's probably what we're looking about, just around there.

Okay. I mean, I like the deal. 12 units is about what I'm looking for. I'm trying to scale out of this small multifamily personally. I set this crazy goal to retire my wife, and I'm realizing one duplex at a time might be a little slow for that. With this deal, is this— is this the— is this the property I need to look at? Is there anything else I need to know about? Before I make a decision?

Um, great question. I would say the only other thing is the owner is open to a possible seller carry. Just depends on the other terms you present as well.

Okay, stepping out of character, Caleb's— Caleb's giving me a gimme here, but this actually does happen. Um, I, I've had this happen on 3 or 4 deals where the broker actually does bring up the creative financing.

I got that today is why. That's why it's kind of exactly what I went through today.

And it's crazy. So this is a realistic call. Like, that is really how it goes. What did we cover here? Is it available? We had an open-ended question where we just let them talk. Tell me about the area. I don't know the neighborhood. I didn't even listen to what he said. I was thinking about my next question. Like, I don't really care too much about that one. I want to get them comfortable and talking. Question number 2, what don't you like about it? I'm testing to see how honest they are. And I also want to know, like, Are they going to give me a ton of stuff? Are they going to give me a little? This tells me who I'm working with. The bank question asks everything. Is it financeable? Is it priced correct? If it's way overpriced, you're going to have to put more down to get this done. Is there deferred maintenance? Because if there's deferred maintenance, you're probably going to have to put more down to get this done. Is there— are there bad books? Like if they go, ah, bank might not love this deal. Okay, why not? Well, the bookkeeping was terrible. So you're asking all these questions without wasting their time. I weaved in a little bit of story. I retired my wife, bought some duplexes. I like the unit mix on this property, but I'm getting to the point. Yeah, what's the deal? Here's what I like about it. Here's my thoughts. You're asking about the banking. You're talking about financing. Psychologically, you're walking the broker through. I'm interested. Is it available? Tell me a little bit. Okay. They're interested. I'm asking a financing question. Okay. Money's not the problem for them. And is this the deal for me?

Yeah.

Anything else you need to know? Financing. Awesome. So picking up where we left off, I just wanted to highlight that so people know what we're doing.

It doesn't always happen, full transparency, but like, I just got that today with the broker. So yeah, I mean, it totally happens.

Um, but when it doesn't, that's fine too. But so carrying on from this point, I just wanted to highlight that because It does sometimes happen, sometimes it doesn't. The way you ask is, are they open to carrying a contract? Super casual. You don't want to make it sound like it's contingent on it because it's not. Just, are they open to carrying a contract? Okay, good to know. We can revisit that later. So on this, so they're open to carrying contract. Awesome. Did they have any discussion with you of what terms they would like to see?

Um, not too much. Looking for around 20% down. That's about it.

20% is reasonable. That sounds like a little bit less than you were thinking the bank would need down. I'm guessing that's— do we think that's because of the roof, or is there anything else in there?

Um, roof, mom-and-pop owner, so books aren't the best, but yeah, that's, that's about it.

Okay. I mean, I like the deal. Um, the real reason for my question on the, you know, is there anything else I need to know? I appreciate the financing. Are there any other deals that I should be looking at? My goal is to get a few more beds, and I'm looking at units honestly around the size— perfect, like 6 to 25.

Um, I've got some other mid-sized small multifamily, another 10-unit coming down the line here pretty soon. I can keep you posted about as well.

Okay, what do we like about that one?

Um, Same thing, long-term owner, mom-and-pop, uh, room to increase rents, a little bit of deferred maintenance, rougher units could use some updating, some cleaning up. But yeah, overall just solid deal and they don't seem too overpriced as of now.

Okay, are you writing up this 12-plex or is that the deal? Or am I your buyer for both? I, I like both. If they work, they work. I'll do them.

Let's see about both.

Okay, let's talk about both. That's, that's how it works. Just be confident, smile, ask your questions. Just by having the conversation, now I know of another off-market deal. And that happens all the time.

Way more than you think. Way more than you think.

It's like half the time you talk to brokers, you ask them about other deals. Well, there is this one other thing, and that's how you find an off-market deal from a broker. You call sincerely about an on-market deal. I usually end up buying the other deal. I rarely call the listed one or buy the listed one.

That's actually how it's gone, um, more lately. It's looking at on-market deals, you call them just because they have— not— it's got to be something you want to own, but it's also due to the fact that they, they're a broker, they have listings out there, and you see that they're putting out listings, that means they have other stuff coming down the line usually. So it's calling, building that relationship to also prepare for what they have coming down the line.

100%. Okay. I just got the low battery warning. I'm going to plug in my laptop, but I'm going to leave you with a question here, Caleb, and then I'll be right back. My Apple ID says Caleb keeps saying the deal doesn't work with conventional financing. When you say that, what do you mean by that?

What that usually means is when you're looking at a deal and they want bank debt on it, you're probably looking at 35% down. Market interest rate today is at least 6%. For you, if you're, if you're looking for certain numbers, let's say you're looking for 10% cash on cash, that either means you're just not making any money every month after the mortgage, or you're not making enough to where you want to be. If you're looking at that certain return, maybe you're making 2 or 3%, or maybe you're not making anything at all. So that just means with the debt product that the bank has, it's not hitting the metrics you're looking for. And the way to get around that— that question is usually building into you want to seller finance, which you're obviously going for less down, less interest and not playing bully ball on price.

And a deal that works means long-term cash-flowing fixed-rate debt, period.

Yep.

Or an extremely clear path to get there with a deal like the Hummel hack. If you can't get it there, what does get you there? Well, not paying for 6 months would give me enough time to get there.

Perfect.

Do that.

Yeah. And then also something to add on to that, Christian.

Yeah.

Is once— that's just at the beginning when you, when you're getting started, like you just can't afford to go negative. That's just that simple. But as you get further in your career, you could just be going for some crazy equity plays, but that's way down the line. That's just another thing I would add right there.

There, that's something that we don't always share on the channel. And if we get a question specific to it, of course we always answer it. But the more pieces you get on the board, the more ability that you have to do deals. Like there are times where there is a deal with a ton of upside that is a massive project. It is just cash flow negative. You can't do that as your first deal. It's just not feasible. If you have 10 other properties that can outcash flow that 2 times over, you can do a negative deal to make millions of dollars. Cody, I make a lot of money buying deals that are rough, but they're smaller deals that are huge deals next door that cash flow through them. When you have more access to capital, your risk tolerance changes. But when you look at the portfolio, globally at any point, it is all structured with long-term cash flow positive fixed rate debt.

Bingo.

Yeah, you get more plays open. But when you're starting or you're even in just like the first few innings of this, just say no to those deals with crazy upside. Yes, you can make a lot of money. You can also lose a lot of other people's money. Just keep the cash flow coming. It is hard to lose your real estate if it makes more money than it costs.

Hit on the head.

Let's see here. Are you essentially just asking everyone, this doesn't work, can you make it work for me, but in different ways? This from Vasily. Not quite. First of all, actually a lot of deals people propose where the answer is that works. Just, it's that simple. Yes, we can do that. Um, so that's not really what we're asking. I am never asking, can you make it work for me?

Yeah, that's just something I've—

yeah, you are going to do the work of putting a proposal in front of them that makes sense. If I'm asking them to do the work, and quite honestly, if you ask, like, if someone came to me and said like, hey, I have this deal here, um, it doesn't quite cash flow, what can we work on? I would be like, uh, I don't know, dude, you called me. Yeah, I'd have that conversation all the time. I deal with salespeople all the time. They'll ask me, they'll ask me some questions like, I don't know, man, you called me, you tell me. Your job is to figure out what they want and you're not directly asking them what they want. Most of the time you don't go, hey man, I wonder what you want to put this together. It's okay, let's talk about the deal. Let's make myself positioned as the right buyer for it. Why am I interested? Why does it make sense to sell to me? I'm telling a story. Then we'll ask, okay, what— let's say it's a direct-to-seller. This thing's been listed for 100 days. Why are you selling it? Like, what is your goal? Because people aren't hitting your goal. And they'll probably reach out with either, oh, we haven't actually got a lot of offers on this, or I don't know what's making it fall apart. This is all I'm trying to do. But you build rapport first. And then you just figure out, okay, what is the real problem here? You have a great property. I don't see the issue. I like the terms. We might need to work on the interest rate a little bit. Outside of that, what's made this not sell yet? Like, where are you stuck? And they'll usually volunteer. I'm not getting my price or like a deal we're doing right now. Well, I own it with my sister. We're trying to get more money to my son and the way that we're wanting to structure it. She's not wanting to give him what I think he should get. Okay, what is your idea? And he had a creative structure where I'm like, we can absolutely do that. It's one where it's partially bank financed, partially seller financed. We came up with a special clause, a really simple one where everyone walks away with the money they want and his son gets paid for the fact that he helped run that portfolio for 50 years of his life. Like, Simple, simple fix. Identify the fix, move forward. The proposal— we write the proposal, it matches everything that we want and it gets what they want. That's it. They say, hey, hey, back at you, Daylon. I hear you're looking at a pretty cool deal. Caleb told me about it. I wish you the best of luck. How did you first— or how did your first deal open the door to more deals? Caleb, you start. I'm gonna— I have, I have a lot on this, but you, you go first.

Yeah, I'll touch on a little bit before I pass it off to you, but the first one, it's— there got to a point when you're getting started, or there gets to a point when you're getting started where you just know pretty much as much as you can know before you buy that first deal. And so also the learning experience of having the deal, running it, all that stuff is just going to open up, make you a better manager down the line. But it also gives you the confidence. Like, when I was getting started talking to brokers feeling a little fraudulent sometimes where I'm like, going through the questions, all this stuff sounds good, but inside I'm like, I just don't feel like I'm really there. But once you go out and do it—

They call that imposter syndrome.

Yeah. Yep. You get, yeah, I got that. And then once I got the first deal, it's like imposter syndrome is gone. And then after the second one, the imposter syndrome was just nowhere to be found. And that's just a big thing. It just gives you the more confidence to keep rolling. Just a little change. Mm-hmm.

There's so much learning. Like when I bought my first duplex, even though I bought houses before, it's a very similar process. First duplex, going through the due diligence of a rental property and wrapping my head around, okay, what is the lease going to look like in management? There's so much stuff going on in your head that has nothing to do with the deal. Just the emotion of like, yeah, what if I miss something? What if this doesn't turn out the way I think it is? You have a lot of what-ifs when you go through the first deal and that opens the door to a lot. The biggest thing for me, though, is when I did my second deal, but it was my first deal in Moses Lake. I used that as a springboard to talk to every other owner. It is different. Talk about the ready, able, and willing to buy. It is different talking to an 18-year-old who's like, I'm— I have a dream of buying a property and talking to a 19-year-old who has bought a property, you've already proven you can do this in my market. You're an owner. We're talking owner to owner. It is an actually different relationship.

Completely different. Completely changes everything.

Yeah, that's the way to look at it. That's the way I look at it. Let's see here. Christian, what are the 4 stages of your business plan? I am not even revealing all of them yet, but I will. It goes alongside with our our business principles, which are build, stabilize, optimize, and debt hammer. Stage 1 we've completed, so I can share that. Stage 1: buy 100 units and tell the world the story. We— and you go back on our YouTube channel, like, literally after this, go down to the first video. This used to be Caleb's YouTube channel. It had 27 subscribers when I joined, and before he owned any real estate, he started a channel and said, I'm going to go buy real estate. Before we bought our 38, I hopped on that channel in a really, really cheap suit with a bad haircut and said, hey, I'm going to buy this 38 with Cody. And then we did what we said we would do. Phase 1 was build a foundation where we actually go buy real estate together and execute a business plan and most importantly, call our shot and document the, document the adventure. We did that. Stage 2 is help other people get there, and we've been doing a lot of that. Caleb's, uh, Caleb's one of the first people on that journey, but we're getting, we're getting into the— we, we're adding some pieces to Stage 2 that you guys will, we'll reveal soon on, um, how we plan to grow and link all of our pieces together. I hate being cryptic, but I have, um I have a plan. I have a plan. And I'm— we love calling our shot and hitting it. Give me time, because when I call my shot, we're going to— we're going to knock it out of the park. Just give me time to— give me time to plan it and land it out. But we do have 4 fun stages and we will share them as we— as we enter each phase. From Kevin, what numbers do you look at when analyzing a property on Prestige.

First thing you got to do is give the broker a call. And it's like any deal, it's just you got to have your own metrics you look for, whether it's 10% cash on cash, certain debt coverage ratios, all that stuff. But you got to come up with your own metrics and criteria you look at when buying deals.

I think you said the perfect thing there. You have to call the broker. Everything on a listing is usually BS. Usually.

Pro forma means BS. That's just all it means.

What do I look at? I look at the pictures and the location and the number of units, and then I hit dial.

That's it. Yeah, it's that simple. That's all.

You have a multifamily building. I want this building. I don't care what the listed price is. It's not relevant yet because I haven't looked at their actual books, which are not listed on CREXi. Half the time I don't read the description. Because I'm going to be asking them questions. Tell me about the area. What don't you like about the property? I noticed this. How's the bank going to look at it? The questions we just went through, I'm going to be going through that talk track. Nothing about their listing tells me anything that I need to know.

Completely agree. Yeah, almost all the time. Sometimes there's little things in there, like a lot of people say it like very rarely, I'd be like owner finance. Possibly available, that's kind of it you might look for. Really? That's good to know.

But even with me, like my talk track, I'm still going to ask if they're open to carry contract. I don't think it changed.

Oh no, 100%. No, no, it doesn't change the talk track, but that's just the only thing you might even look for in a description.

Yeah, no, and that's completely fair. For me, the problem with CREXi and analyzing a deal on CREXi is that they put the broker's phone number there and I'm always going to call a number if it's in front of me. And that is a practice I recommend for everyone. I have a number. This guy knows the things. I want this building. Dial.

Yep.

And I'm not a phone warrior. You're talking to a guy who makes like 2 or 3 calls to owners a day. Like, maybe, maybe I get through 10 calls in a week, but I meet with a lot of owners because when we have those conversations, they say yes. And when I talk to a broker, we're writing up that deal a lot of the time. So take it for what it is, but that's what CREXi is for. It's for finding brokers who do deals and talking about deals. And you'll rarely buy the deal that you found on CREXi. That almost, almost never happens. You're going to buy something else from that guy. You're going to build a relationship with a broker who lists things on CREXi. You love that deal. That deal ends up not working for you, totally fine. He knows you. He knows you're capable. He's going to give you another shot.

Or her.

Rick Ramirez is in Military City, USA. Military City will, will probably remain Military City. But the next question is, why military towns? Isn't it a singular industry? Yes, that's what I was saying. I have a property that is next to a military base. There's other industry around there. It's also the largest naval base on this coast. So that one, that's where they deconstruct all the nuclear subs. Very unlikely they move that. But for my example, it was I would not invest in a military town if that is the only source of employer. Yeah, let's take Moses Lake, for example, because that is going to be my main market. We also invest in the surrounding cities, Ephrata, Quincy, Data centers are everywhere. So Microsoft, Google, Amazon, you got data centers all over. Cheapest cost of power in the US. Huge draw. Boeing has a huge manufacturing and R&D department out there. There's a big Boeing airfield. Diverse. There's actually a lot of different R&D things out there. Again, because of the cheap cost of power, you can do a lot of stuff in, in engineering and aerospace. A lot of that is based in Moses Lake. They just flew the first hydrogen-powered plane out there. You have agriculture base that's been there forever, where there's miles and miles and miles and miles and miles of agriculture in every direction. So you have a great base there that is going absolutely nowhere. That's super stable. And then you have a bunch of smaller jobs within there, but you have some big diverse sources of income. Things coming down the pike. They're expanding and building a brand new medical district that's going to be huge, that will service the entire county as the main medical district for the county of Grant County. And they're building the world's largest— and I believe simultaneously another company building the fourth largest battery manufacturer on the planet for electric vehicles. Diverse, really diverse. Employers, that is a market that I love, that I will keep investing in because they bring in business, they bring in big business, and they bring in different types of business. Most of it's based on the cheap power, but also the fantastic agriculture. None of those are going away. Chandler is a 16-plex. Too big to start? No, nope. Seems like seeing all the metrics, great city growing, super safe. $1.1 million price point is scary. Looks like conservative cash flow is $4K at minimum. That sounds like a great deal. If the cash flow is positively $4,000 for $1.1 million, as long as you're not putting 50% down, that seems like a stellar deal.

I'm inclined to say that sounds like a good deal.

Yeah, 16 is not too big at all. I bought a 12, a 12, and then a 38. 38 was $2 million. That seemed scary then. $27 million in real estate under contract for $10 million of new real estate, a little bit north of that, like $14. There's only one point that's scary in all of real estate that I could find. If you're buying duplexes and everyone moves out, most people can earn their way through that. There's a point like with the 38 plex for me If everyone stopped paying, I can't afford to cash flow. I can't earn my way through that mortgage. At least I couldn't back then.

I can now.

But say, you know, say I have 100 people in my portfolio stop paying. I certainly can't outearn that. That's a— that's a lot to outearn. That is the scary point for almost everyone. $1.1 million, that's a fairly small deal. 15 is a— or sorry, 16 units is fairly small. Uh, Caleb, you went from— how long did it take you to go from 10 units to 28 units?

A few months, barely. Like, just maybe 3 months.

Okay, so in 3 months you bought a 10, you bought an 8, you bought a 10. Um, how— that was really fast. Good job, man. Um, how much harder was it to manage 28 units than it was to manage 10.

Few more phone calls a week. Same thing if you're buying on the good principles, long-term fixed-rate cash-flowing debt.

If this thing positively cash flows $4K a month on a $1.1 million price, that's ridiculous. That is a ridiculous deal. That sounds— I'd love to see the numbers on that.

Very interested.

Um, there's a little— oh, he has a little bit more context below this too. Accounting for regular property maintenance, been on market for 40 days. They won't separate the fourplexes. I'm assuming the price is why it hasn't sold. So 16 units, $1.1 million. They're all— so it's a side-by-side fourplex. I'm curious if they're all on one parcel. I like it better if it's all on one parcel, 2 hours away from them. But I love it. That's, that's a ton of cash flow. Each fourplex cash flows positively $1,000. That sounds very good. That just sounds really, really, really good. Next question. Oh, well, let's start. Chandler added one more thing. It's all one parcel. Well, that's why they can't separate it out. That's that's difficult to do. I like it much better on one parcel. It's commercial product, has commercial loan. The better you manage it, the more it's worth. That is, that is what you want to see. So if it's a real 16-plex and it's on one parcel and it cash flows that much, I would buy that in a heartbeat.

If you're—

if your numbers are correct. From Mitchell, what are realistic expectations for using cash flow from multifamily to replace a 9-to-5 job and become your only source of income? For example, number of doors to generate $2,000 a month of income. Number of doors is the wrong—

Yeah, I was going to say the same thing. That's just not the right metric to use.

A lot of people do that though, so you're not alone.

Everybody does that. Yeah.

I love BiggerPockets. I blame them though. They talk so much about cash per door as a metric. Cash on cash return and debt service coverage ratio are the two things that matter in real estate. What is the money in the deal yield in proportion to like what we actually put in and how far above your debt payments is the actual net operating income of the property? How much money do you have to pay your debts? Those are the only two things that really matter. So if you're looking at $2,000 a month, month of income, I mean, that's not too hard to do. $2,000.

Doable.

Yeah. What is that? Earning 6% on $400,000?

I'm—

Cody's our math genius. Let me— I can do the math here. So if you have $400,000 in equity in real estate and we multiply that by 0.06 for a 6% return and divide that by 12, hey, I did the thing.

There we go.

You need to get your equity position through either having $400,000 or building your equity in real estate and doing a good job managing the properties. $400,000 earning an average return of 6%, which is extremely conservative.

100% doable. Yeah.

If your equity— so that's buying six cap deals at with $400,000 in equity, you make $2,000 a month and you are done. That is the, that is the cash-on-cash return for build the equity, get the cash flow. That's pretty simple way to do it. And hard to— my first duplex cash flowed $750 a month. My second duplex cash flowed $1,400 a month. So in my portfolio, the way I built it, $2,000 a month of income, like net income, was 4 units. I was, I was just past it. So that's, that's doable.

That just goes to illustrate though why the unit count question is the wrong question to ask.

Yeah. And if you bought units out in Indiana instead of Washington, Probably take a lot more. It would take a lot more units, but your cash to buy them would have been a lot less.

Yep.

Yeah. And that's one I did. I did that with $100,000, built a $2,000-plus-a-month income. So lots of different ways to do it. Mason wants to know what's the average cash flow of all of your units? My deals are so different and I have to eliminate the resort. Obviously, because that would skew the numbers astronomically higher.

Very different asset class.

Yeah, that's a lot of dividing. My portfolio right now, and I'm doing a lot of— I'm still leasing a bunch of stuff up. I cash flow about $22,000 a month on 150 units, but we're finishing some reno and that number is about to go up. That is what my portfolio looks like. You guys can do that. It's just hard because it's changed so much over the last few months. Yeah, we did. We had to do some evictions. We had criminal stuff in a few units that we inherited that we were fixing. I'm not a huge fan of kicking people out, but sometimes criminal nonpayers or other issues need to be resolved. So we brought our cash flow down a little bit and now we're renovating all those units and bringing it back up. So I need to take a closer look at my books, but it's somewhere around there. We'll say $22,000 to $25,000 a month total cash flow on 150 units. What does cash flow look like in your portfolio? I know you have one deal that really carries over the other ones, but—

Yeah, that's a great question. Gosh, I was so zoned out while you were talking. It'll be After everything stabilized and my rentals are done, you grand a month, nothing near the $22,000, but I'll be getting at least around $3,000.

Not bad. Not bad at all.

No money in. Yeah.

Yep. Let's see here. Charm City says, what's up, Christian? I have a property that's been on the MLS for 544 days. That sounds like something I would buy. Seller doesn't want a contract or assumption. What's my next approach? Move on.

Um, move on. Yeah, unless he, unless he's gonna take a lower price, but if it's been on the market that long, he's probably not going to.

I'm inclined to say the thing is, I know, I know one thing the seller doesn't want. He doesn't want a contract or a loan assumption. I don't know anything else about what they want. So before I move on, I'd probably— I mean, no harm in asking the question. Like, it's been on market for 544 days. I don't know if you're working direct with the owner, but if you're working with the broker or the owner, either way, the question is, it's been on market for 544 days. I am very interested. If their price is fine, then tell them you're fine with the price.

Oh, I thought he said the owner wasn't open to carrying a contract. I thought that's either—

they're not open to carrying a contract.

Okay.

But if they're— if their price is fine, there's nothing to do. If their price has a problem, they might need to figure it out because there are ways. Like, if you don't have money, you can still buy deals conventionally. You're going to need an equity partner who'd qualify for the debt. But if you have a great deal, you can find one of those. So in terms of that was an 8-plex. Yeah, sometimes they just smoke. Sometimes there you could find that they are more open to carrying a contract when they realize that there's no other way they can sell it. So I mean, my last thing would be like, what are they trying to do? Because they're like, oh, I just want to get this price. It's like, okay, well, you're not able or willing to carry a contract, you're not going to get that price. And then you do move on. But you just got to figure out what the, what the actual objective is. And if you can't, then also move on because there's a on of 8-plexes that you can buy, um, with different finance.

100%.

From Mitchell: How much were you guys able to pay yourselves from your first 10+ unit properties? Caleb, you go first.

Um, I don't take anything out of it, but I just don't need to, so that's kind of my biggest thing.

Same. Build phase. Phase 1, build the business, trying to build, reinvest everything. I've paid myself in the properties one time, two times.

If there's no need for it, it's just why would you do it? Let the real estate keep funding the real estate. It's the whole thing.

Yeah. A few thousand dollars. Cody and I were waiting for it to turn some money and Cody ran out of money for rent. And I'm not throwing Cody under the bus. Cody shares this all the time. This is, this is fair game. Cody doesn't hold cash. Cash is stupid. We own properties. People go like, how do you not have a job and also not pay yourself from the real estate? We pay ourselves when we run out of money and that's it. I don't just carry huge liquid reserves. There are times, transparently, there's 7 figures in our bank account. They very quickly turn into real estate. The money doesn't stay there. It turns into real estate and the real estate pays us. And when we need money, We can do that. The other time I pulled money out of the real estate was we did a large refi and I was like, hey, we should have a little bit of liquidity right now. So we pulled several hundred thousand dollars out of the portfolio after we've already stabilized and optimized the assets. Now they cash flow on long-term fixed rate debt and we got paid to hold them. That was just a— I don't know, I feel like most people, even though it's only one paycheck, most people can live on a couple hundred thousand dollars even if you only pay yourself every 2 years. Like, you don't need a whole lot of paychecks. You need one $100,000 paycheck and you can— most people can last the whole year pretty darn well.

I would agree.

Now you get to a point where you're stabilized, optimized, and paid off all your debt, and all of a sudden you can pay yourself a few hundred thousand dollars a month and it doesn't matter. I'm not there yet. And I know Caleb's not there yet, but we will be. But yeah, for my first 10+ unit properties, they still don't pay me. They pay down other debts or they put me in a position to buy more real estate. I am now at a point where we're just a few properties and I don't like selling. There are a few properties that are kind of out of the way of where we invested. Like I have a property in Seattle I am selling a few things and I will just pay down debt instead of paying myself. But paying off your debts is sexy. You should do it. Mason, is there a correct way to ask to see a listing's books in order to see if the deal makes sense before making an offer?

Yeah, just in the talk track for the broker at the end. I usually do it. I just ask if that's their cell phone and if it is, I If it isn't, I get their cell phone. If it's not, or if it is, I just send them over my email and then get the numbers that way and they shoot them over. Yeah.

I let them know, hey, I want to make an offer on this. What do we have in the way of books? It's not a deal breaker if they're like, we don't have any books yet. I'm like, okay, well then offer's going to reflect that. Like, I'll write it where I know it works. I can write a better offer if I know what I'm working with, but That's about it. Like, what do you have for me to look at? Oh, they haven't got me over all their stuff yet.

Okay.

Is it coming in the next 2 days or can I just— like, I want to put this under contract. What do we need to do to get this moving? Well, write it up first, then we'll, we'll get everything to you. Okay, that's fine. And then I write it up. I don't let that be an obstacle because that's something where that's going to come up in feasibility. We require that we get to see the books. So you may or may not have them upfront every time. You usually do. And you just go through the questions on the property and the broker and the financing, go through the script that we did at the beginning of this first. And if you have that talk track and you have that success there, you are good to go and you can ask those specific questions because now you're a serious buyer and you can go, okay, well, what do you have in the way of books? I'll give it to you. If you just call someone and say, hey, I'm interested in this property, can you send me books? No, I'm not going to waste my time because you're not in my mind.

Agreed.

Chandler said he's going to call them and make the deal happen. Chandler, do it. Yeah, the price is not a concern for me. The price to cash flow on that deal that you presented, if you are right, Sounds amazing. In different places like where I'm at in Washington, $1,000,001 for a 16-plex. It must be in rough shape because that is cheap. That is really inexpensive, especially listed. Yeah, we were looking— Cody and I were looking at buying a 15-unit that was in rough shape. For $1.4 million. Rents were way under market rent price for what it is in a, you know, two-sentence description on a YouTube chat. Sounds very interesting. I like it. Obviously, there's a lot more to the deal than what you can learn from 2 seconds in a YouTube chat, but Could be good. Kevin, if I have credit and some money, should I look to a bank loan for a down payment? Is that even possible? Well, yeah, a bank can give you a down payment if you qualify for the down payment or the loan.

That's—

they can just do that. Answer is depends on your deal. I don't know.

I wouldn't be worried about it.

If it's a good deal and like we're looking at one right now, it's a multimillion dollar acquisition, but the bank said, hey, we'll do, we'll do this 80% loan to value. I'm like, 20% down is not bad. Bank terms, very reasonable. It has fantastic cash flow. They're offering a 10-year product. Heck yeah, let's do it. Absolutely. Bank loan that one. In that same transaction, there's a bunch of other properties that are picking up that don't make as much sense to do through the bank. They're seller financing those ones. Completely depends on your deal. If you have money, don't be shy on spending it. People get weird about money and it's silly. Don't be worried about money. Just go out and buy deals that make money, multiply the money, and get paid to do so. That's the simple way to do it. If you have money, absolutely put it in a property. That could be a bank loan, that could be you putting down the down payment on seller finance note. And if you run out of money, it's just another thing that you have to solve for. If you have a great deal, align great capital to it. Looking through the stuff, let's see here. Hey, did you guys buy a 48-unit on my backyard in Sunnyside? We are under contract for one. We'll see what happens. We'll see what happens. I like Sunnyside a lot. I was there yesterday. I'm also buying a deal in Walla Walla, Washington, but I am looking at picking up that 48 with a partner or two. It's Cody actually went out and negotiated that debt product for that particular deal. We basically, we weren't sure we wanted to buy it. So Cody's like, I'll just ask for terms that I don't think they're going to say yes to. And they just got back with, yeah, dang it, we could have asked for even more. Yeah, we are, we are looking at buying that deal. It looks like it's going to be a stellar deal. I'm going to add something to that too. If you get a fantastic debt product, say like 3% interest only. Your debt product is only fantastic if it's long term because if you have it for a year, it turns out the awesome part of your deal disappears. That's why the long term is so important. People tend to forget that. So I'm just reminding you, if you negotiate stellar debt, the longer the term is on that stellar debt, that determines how valuable it is. So get a long term. If you can, great debt, push that as far as you can. Let's see here. Chandler, I messaged Christian about the property. Got to go to the gym. Okay, awesome, Chandler. We'll see you later. Feel free to message me anytime. You guys can message me if you have any questions midweek. You message me @ChristianOsgood on Instagram. Caleb, too. Are you just at— are you @CalebHomel? @Caleb.Homel.

Just shoot me a message whenever.

There we go. Caleb.

Yeah.

You guys have any questions? Feel free to ask any time. Matthias, what do you mean by balloons? So on a home loan, you don't use— like you have a 30-year mortgage fully amortized, which means over 30 years you're going to pay it off. Typically there's 15-year and 10-year products and all sorts of stuff. But on a general seller-financed or commercial loan, there's what's called a balloon, which means you could be on a 30-year schedule. So it's priced like it's going to be paid off in 30 years and the payments match that. But there's a balloon in the middle, we'll say year 10, which means you have hit the end of it and you now must pay the rest of it off. Your balloon has now popped and that is the end of the loan. That is when the loan is due. So even though it's on a 30-year amortization, it's on a 10-year balloon. At 10 years, whatever the balance is needs to be refinanced or paid off, which means your options are sell, refinance, renegotiate. If it's seller financed, you can always just go back to the seller and work out something else, or you write a check for it, which is, Cody, my preferred way to do it. We try to do it in a way where the real estate buys the real estate. So when it comes time to refi, we can write a check instead. But those are all the options. A balloon is just a timeline of how long you have on that loan before you have to do one of those moves— sell, refinance, renegotiate, or pay off. Mitchell, when refinancing multifamily acquired using seller financing to pay off private lenders, do you use a traditional lender to refinance the property, pay off private money? You could. We do a lot. That's how we did everything. We didn't qualify for a bank loan. So we bought a ton of seller-financed deals, increased our net worth by several million dollars, and all of a sudden, ta-da, we qualify for commercial bank loans because we can back them. So I've used traditional lenders on two of our deals, soon to be three, to back the deal and to move money around. We've also had deals where we just— we've had ones where we went back to the seller and just refinanced on a new note. So that's a seller refinance. That's an option. And we have other times where we've paid off private lenders with new private lenders. We've also used equity partners to buy out private notes. We get to the end of the note, we're like, oh, you know what, I actually want to deploy this capital somewhere else instead of writing a check for it, even though we can. We have an LLC with another partner that would love to expand and take this on. So we actually have had another LLC come in And so you can pay it off with debt, equity, money, traditional creative finance. You can do whatever you want. Just make sure that you have the legal to back it up. You can turn debt into equity. You can turn equity into debt. You can swap them all you want. This is creative finance. Like when you train your brain to think like this, you go, what are my pieces and how do I shuffle them? You virtually don't have any real balloons. Money's coming up. I have equity in properties, I have debt, I have capital partners. You just have to make a decision. What do I want to do and how do I shuffle my pieces? But that is a game for when you have more pieces. Daylon just got done talking with a broker. We're going to have 0% interest on a crazy deal. I'm excited to hear about that, Daylon. 0% interest can be very interesting. It's actually a good way to pick up properties that are overpriced. I'll see people do things where you have more principal. So if you do a higher, like a higher overall principal, you can get away with some crazy stuff where it's like, okay, the deal is overpriced, we're not paying any interest on it. All of our payments go towards paying down the loan. And when we get to the end of whatever that balloon is, however long we have, it's going to be in a financeable place. I've seen those happen. I don't know if that's Dale's deal specifically, if pricing is an issue, but zero interest is a good way where you basically bake the interest into the price. Like, yeah, we'll overpay, but all the money we pay you is going to go to doing it down. It's also a good way to get a lower down payment. I'll overpay you, there'll be zero interest, and we'll pay down that extra principal over time. Fantastic way to structure a deal. And I think that's it for questions. So I'm going to do a last call for questions. If anyone else has anything, go ahead and toss it in the chat here and we'll go from there. Caleb, as we get the last few questions in, Closing thoughts. Seller financing. You've done the Hummel hack, which we talked about in the beginning of this call. For everyone who wasn't, uh, wasn't here for the beginning, tell us about the Hummel hack one more time.

Yeah, basically we'll say deal doesn't work day one, you need reserves, whatever it may be. You just decide— well, you have to negotiate it and get it accepted. You can't just decide not to do it, but you just don't pay the seller for a period of time.

And why would you use that? Why would— even better question— why would someone say yes to that?

It's a great question. With seller financing, it's kind of just the big thing, knowing their pieces. It's, let's say an owner has been constantly beaten up on price for a year and he's like, I don't care, you give me my price. Another reason, the reason it actually happened for me is the guy's like, hey, I'm old school, I don't want to go interest only into AMM. I'd rather just keep it the same. Can we just— is there a way we can keep the interest rate the same for the whole thing? And I was like, yeah, I just don't pay you for 6 months.

So yeah, not paying for 6 months makes sense. I can make sense of that.

Yeah, that's how I work on my deal. But every seller has different motivations and different things they're looking for.

Yeah, just depends on where you're at. Well, I don't see any new questions. That's the Hommel Hack. That's Caleb Hommel. This is, uh, out-of-state investing and creative finance. You guys have any questions?

Whiteboard Wednesday.

Yeah. Or Whiteboard Wednesday. Yeah. Hit us up on Instagram if you want to ask us any questions individually. Again, it's @ChristianOsgood and @Caleb.Hommel. H-O-M-M-E-L. We'll see you guys all in a little bit. I'm sure we'll have Caleb on again. Thanks for making it today, Caleb.

Thank you.