In this conversational video Christian Osgood and Cody walk through a series of real‑estate financing structures they have used to acquire properties with little or no cash outlay. They start by describing a 100 % equity deal where an equity partner receives a 33 % ownership stake for $0 down and a buy‑out clause that lets the original owners repurchase the partner’s share for $180,000 over five years, allowing the property’s cash flow to fund the buy‑out. Next they discuss 100 % debt financing, where the down payment is borrowed from a seller (first lien) and a second lien, at a modest interest rate, enabling the purchase of a cash‑flow‑positive 12‑plex with zero cash out of pocket. They then explore hybrid “dequity” structures that blend debt and equity: a partner contributes half the equity, loans the other half, and the property’s cash flow services the loan while the partner retains equity upside. The “Hommel hack” is presented as a creative payment‑plan solution when the required down payment exceeds available cash; a small annual lump‑sum payment over several years satisfies the seller while preserving cash flow. Throughout, they stress keeping structures simple and repeatable, aligning ownership percentages with capital contributions for tax efficiency, and negotiating seller terms (e.g., lower initial payments) to make deals work. The video emphasizes evaluating the deal first, understanding seller objectives, and tailoring the capital stack to cash‑flow capacity, rather than forcing a deal into a pre‑set box.
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We had a deal where it's like, well, we could do it if we just had lower payments for a few months, and then we made it happen. Yeah, just ask the seller, you want $10,000 a month? Today we're going to be talking about some of our favorite deals and unique capital structures that we have used to close pretty much everything that we've closed. We have some highlight reels for you, and we're just gonna have a conversation about them today.
Welcome back to the channel. My name is Cody, this is Christian, and we are talking about your capital stack. Now, what do we mean by capital stack? We mean your money.
The stack of the capital, stacking the money, because we got all this money.
Just kidding. But there's debt and there's equity, and there's different types of debt and there's different types of equity. How you structure it is going to greatly impact the successful outcome or failure of your business venture. So it's really important to make sure that you are smart when it comes to structuring your capital.
Now, deal number 1 that we're going to talk about is 100% equity. This is a deal where we actually share absolutely no cash flow. So the deal itself, 3 side-by-side duplexes, one of the first deals we ever purchased. I believe it was either number 2 or number 3 that we purchased together.
This was our 3rd building we bought together.
Very excited about this transaction. It does phenomenally, by the way, one of our best properties. But day 1, it barely cash flowed. We bought it right around break-even, which means we didn't have the ability to raise a bunch of expensive debt responsibly. Yes, because we were early in our career And when you're— especially when you're starting, you cannot buy a cash flow negative property because you have nothing else to support it. You just lose money. Losing money is bad. So we don't do that.
Don't do that. Yeah.
So on this deal, if we need to raise money but we can't raise debt, your only options for new capital are going to be debt or equity, right?
And equity means bringing on a partner. Now, most partners like to get their share of cash flow and they want to get their write-offs. However, this partner did not.
Correct.
What happened is they just wanted to get a double on their money. So the way we structured the deal, they don't want any cash flow, they'll get their proportion of write-offs, but they get 33% of the LLC, and we each get 33% for $0 down. Now that's cool and all, but we don't want to have a partner forever, other than ourselves. We are receptive to that, but not with them. So we have a buyout agreement that says in our operating agreement that we can buy them out for $180,000, and they put $90,000 down. So we got to buy real estate for free, but it turns out you do have to pay it back. You do have to pay people off, and so we're gonna have to write a check for $180 grand. Now the beauty of this deal, we got our buyout agreement fixed. The cash flow from the real estate, once we get the rents up over a course of 5 years, which is the buyout period, will more than pay for their buyout agreement. And we wrote it in the operating agreement where we get 100% of the cash flow. The real estate bought the real estate. It's free real estate.
And that's always the goal. That is how you're answering the question, how do you own it and how do you never lose it. All you have to do is make sure that your real estate buys the real estate, and if the down payment comes from someone else and they get the return they wanted, you're good to go. So that's one thing.
You have done 100% debt though.
Yes, we have. Uh, let's share one of the— we've done it a couple times, but when have we done 100% debt?
Well, I did 100% debt before I met Christian. That you did? A couple years before I met Christian, I bought my very first building and I borrowed the down payment. First lien for the seller, second lien for the down payment. This is a very high cash flowing asset, where I was able to borrow the down payment at 12% interest because I borrowed the big portion from the seller really cheap, and it still cash flowed about $800 a month. So for signing a piece of paper, I owe money to one person, I owe money to another person, I pay my taxes, my insurance, my utilities, I was self-managing, I was doing the maintenance, but I was saving $800 a month every single month, day one, and I was making 2 mortgage payments. I borrowed 100% of the deal and I got to buy a 12-plex for zero money out of pocket. Cash flow positive in a great location, fully occupied and stabilized. Now, were the rents a little low? Absolutely. They're a little higher now as people move out. I can go in, fix it up, and raise the rent a little bit. But that takes time. But I was able to go buy a deal, and you can do this too, where you borrow 100% of the deal. You just have to borrow cheap enough money to where it'll still cash flow.
Now, if you're noticing a trend here already, if you're doing a deal where you're bringing in an equity partner with a buyout, usually those buyouts are more expensive than raising as debt. But if a property doesn't have cash flow, you're going to have to bring on a larger equity position or a higher buyout for that partner.
If you want to increase cash flow, borrow less money.
Now, if you have a high amount of cash flow, you can service debt. And that's a very simple way to bring someone on without giving up any of the equity in your deal, which is usually the preferred method to pick up something. Now, the one advantage that I see in equity partners is that the buyouts are usually structured as an option, whereas with debt, you have an obligation and a specific time to pay it off. Now, there are ways around that too. You can have review periods and other extension clauses to a note, but generally speaking, you're going to be more expensive to buy out equity, but it's going to be more optional on how you structure it. With debt, it's going to be more structured, harder balloons, but much less expensive to do in the long run, and you get to own 100% of your asset on the front end.
And more equity is more better.
So let's talk about debt equity.
Debt and equity. This is a fun one that we've done before.
Yep.
We had someone who had 100% of the money, but they wanted us to contribute half of the cash. Problem is we didn't have half the cash. So what we asked them to do is said, how about you bring in half the money and you'll own half the LLC and you loan us the other half? Because the real estate would cash flow enough to pay half of the deal as debt, and then they'd get their half of the money as a cash flow in the form of being an equity partner. They were happy with that. That gives us time to go earn a bunch of money through our other investments and through the cash flows of all of our companies, and then we could pay them off over time instead of having to write a check right now. We turn a cash problem into a cash flow problem.
Now, depending on the deal, if you have no cash flow, you're not gonna be able to raise a lot of debt, and vice versa. You have a ton of cash flow, you're not going to need to give up a lot of equity. But on a standard deal where you come in and there's a good blend of day one cash flow and a ton of upside in the deal, that is a great structure that you can come on with where they bring half the money for themselves as equity. And if you don't have the money, they lend it to you. One, typically it's a shorter balloon, so before the end of whatever your primary financing is, you're going to have a strategy to pay them back for the money they lent you.
If you're being responsible.
Yes, which we strongly encourage. That's what you should do is set up way of, here is exactly how and when we're going to pay you back.
Don't lose real estate, that's a bad model. Yes, it is. Too many people are doing that.
Yes, it is, and not a recommended model. The other thing it's gonna do though that's really, really simple is on a tax level, your CPA will love you because for the LLC, everyone's capital contribution is equal, matches their ownership, which is perfect. All of the rents are gonna be distributed exactly equally. All the tax benefits are going to be distributed equally. Now you can play with all those things on a creative contract, but this is one of the simplest ways to write it where it's zero money down because everyone brought their own money to the table, even though yours is loaned and is usually backed by your equity in the property. So if you don't pay them, they get your shares.
If you are borrowing the down payment, doesn't matter whether— I mean, we talk about don't partner with family, but if it comes from family, if it comes from friends, if it comes from a hard money lender, in the eyes of the IRS, you are making a contribution. The fact that you have to make payments to someone else is irrelevant in the fact of that business.
Now I'm going to talk about one last capital structure. We've talked about debt, we've talked about equity, we've talked about what I like to call dequity, where you blend the two. Special clauses. We use these very sparingly. In fact, we've used a couple complicated ones and I'll never use them again because we violate a principle. If it's not simple, it's hard to repeat. If it's hard to repeat, you're not going to do a lot of deals. So we try to keep these very, very simple. We recently shared on the channel the Hommel hack, which is one of my favorites of all time. One that we use that's kind of similar is if you don't have the down payment or you need a smaller down payment day one, so you don't have access to a lot of capital or capital partners, they want— hypothetical, but say they want $250,000 down. Actually, it doesn't have to be. I have a deal where we did this. 7-plex. They wanted a quarter million dollars down. We had, between all the partners, $50,000.
That's not $250,000.
It is not $250,000. What we did is we put together a payment plan so at the end of every calendar year we give them a lump sum of cash, and I think it was only $20,000, but we give them $20,000 at the end of every year for the next 5 years. Now granted, that still doesn't equal $250,000, but we give them a lot more in principal paid out through the life of the loan. What it also allowed us to do is cash flow all the way through the year, save that cash flow, and let the property pay the extra chunks of principal pay down.
If you don't have the extra money, you don't need it if someone else pays for it for you.
Now you need to present a clear plan to them on how you're going to operate the property to get them their money, because that was the conversation. I don't have the down payment. I do have a plan for this property, and when we execute it, this is exactly how we're going to pay you back. And if we don't, we lose the property back to you. Minus all the interest that we've already paid you on the note. Great structure. We've used that 2 times. We have a few people in our mentorship group who have used that on their deals. It's a good way to get into a property and buy yourself time with less money and allow again the real estate to buy the real estate.
And that's really it for equity and equity and debt and special clauses. Special clauses.
So those are some of our favorite structures. There's a million other ways to do it.
There's a lot of ways to to do it.
But that's the highlight reel. There's some of my favorites where you go 100% one way, you go 100% the other, you try something creative. The important thing is you're asking yourself, instead of, oh, it doesn't fit the box of how I wanted to buy this deal, you look at the deal first. You separate the debt and equity, you look at the opportunity, and you go, what would make this deal work for me? Know the seller's objectives, understand what your needs are. And if you can sit down, you would usually take what, 5, 10 minutes on these or less? When we were starting, probably an hour or so of just asking only that question, what would make this work? We had a deal where it was like, well, we could do it if we just had lower payments for a few months.
And then we made it happen.
Yeah, just ask the seller, you want $10,000 a month, the property would only lose basically all of that, can we have lower payments that we can afford while we collect rent?
And that is how we bought the very first deal that made us both millionaires.
Keep these things really simple, answer that question, what would make this work? Would make this deal work for me and still hit their objectives. You would be amazed how many times you find the answer that no one else found and you buy the deal that everyone else wanted to buy.
Keep it simple, subscribe, hit the like button, and we'll see you on our next video.
