Seller Financing to 200+ Multifamily Units! (Live Speech)

Christian Osgood. And as I heard yesterday, it's going to be the Osgood way. All right. Hello, everyone. Hopefully you guys all enjoyed lunch. Good to be here. Weird being the host here. Last year I was just a guest. This is really fun. I actually had a whole thing set up for this, and then I just deleted all but 2 of my slides and I want to talk about something else. And you get to do that when you're co-host. So I'm very grateful that we get to be here today. So thank you everyone for making it. I've listened to a lot of speakers so far, and I know all the other speakers who are coming up. I've looked through the things that are being brought up today, and what I'm so excited about is all the different methods that work to buy real estate. Originally, what I was going to talk about was very specifically creative financing, which we'll definitely get a touch on, but I think it's less about the method and more about what you actually need to do to succeed. I just want to talk about what does it actually take to go from zero to I hit my goal in real estate. And I think that starts with defining your goals. So I'm going to tell you a little bit about my story just so you know who it is talking to you and what my backstory is, where I'm at today and where I'm trying to go. And that is going to relate directly into the things that work, things that don't, what is a distraction and what you actually need to know if your goal is to build a real estate portfolio. So those who don't know me, I'm Christian Osgood. I run a property management company called Kencho Property Management in Central Washington. I have 205 rental units. I haven't counted in forever. I counted earlier today to make sure. Just over 200 rental properties. 17 of those transactions were seller financed, though that is by no means the only way or the right way to buy real estate. It is a way to buy real estate that worked for me. I started with absolutely no money. I worked for the CoStar Group for 4 years on the back end of an 8-year sales career. That allowed me to buy 2 duplexes and the house that I live in. Those 2 duplexes cash flowed enough to cover my mortgage, and after 8 years, that's as far as I got. For me, that was really disappointing. There was a second where I'm like, I can buy real estate, I can buy real estate, this is awesome. And I looked at it and I'm like, do I want to spend another 8 years working for someone else to buy another couple duplexes. Maybe we go a little faster because there's a little bit more cash flow, but do I really want to have this small portfolio? What I did is what I think a lot of people do, which I went— I want to have passive income, rental properties. I watched BiggerPockets, I went to real estate meetups, I read books, and I bought a few rentals. I never actually started on like, where are we headed? It was just, I want more. More money would be great. Yeah, having a rental, like, let's, let's move forward. And what I did is I kind of stumbled forward and I bought a few rentals, which was exactly what I was trying to do. What we ended up doing in 2020 is the, uh, everything shut down. I'm an outside sales rep and now having to sell from my living room. My wife is a kindergarten teacher at the time. Uh, imagine if you didn't have kids at this time, uh, you are a teacher teaching kindergartners over Zoom. She works in a very low-income part of Seattle where a lot of these families have 6 or 7 kids in a small condo, all learning over Zoom. Parents are usually out working because they have to make a living, they're lower income. So you usually have maybe an older sibling trying to teach a kindergartner how to use Zoom. How you communicate, like, hey, can you let me use your bike? I don't know how she did this. Insane. But I was looking at our life, I'm like, this is not what I want to do, I'm not where I want to be. And I had the time to actually think and map and go, what do I actually want? So for Danny and I— and if you're married, this is good to do these goals together— and I'll just go over it. We go, okay, what do we actually want life to look like? The first thing was, she's like, I do not want to teach in this environment anymore. So like, okay, retire wife. At the same time My job, my commissions were basically killed because I'm selling real estate data. Real estate has stopped for a short period of time. I had a bunch of gym clients. I had WeWork in my booking business. You guys have followed WeWork? They haven't done so hot. I'm getting all these reversals. I'm having trouble getting commissions back up. I'm used to a higher income. Like, okay, I'm gonna leave my job. We don't really have any money left over. I have a couple rental properties. She's leaving teaching at the end of the year. I have to figure this out now. All my 20-year loose goals became a right now. I need to get some form of financial control, not even freedom, just I need to build a brand new income stream to do what I want to do. I set a goal after looking at my first business partner, Cody Davis. He was the little 21-year-old in the office who bought 30 rentals and never made any income or any commissions. I'm like, okay, so I don't know how he did it, but there's a way to buy real estate if you don't have money. So I'm going to figure that out. We're going to get up to 30 rentals this year and I'm going to build a 100-unit portfolio in 2 years. That should be enough cash flow. All we want to do is give her the option to do whatever it is she wants to do next and have the financial freedom to choose what that adventure is. And I don't want to have to sell for anyone else again. I only ever want to sell for me or build my own companies. The last goal, which we have here, I want to move to Texas. It's really hard to do business in Washington because Washington hates business owners and landlords. I'll probably share some really horrible stories of trying to get through evictions or crazy tenants or some of the laws they put on us. Now, I bought a bunch of rentals in Texas. I love rentals in Texas. I own most of my portfolio in Grant County, Washington, Central Washington, where I manage over 300 units. It's really hard. Texas. Really easy, but also lower cost of living, uh, nice people, great food, warm weather, all the things that I've always wanted. With clear goals, I went, okay, house in Texas, create our dream home, retire wife. Those are attainable goals. That's not the crap you see online with the guy who pulls up, this is my $5 million yacht, my $25 million house, my 7 Lamborghinis. No one needs that. A meaningful goal that you actually want to achieve. I screwed that up for 8 years. That's the difference between me and— I think he's out prepping for his speech, but I brought one of my business partners. Caleb's here today. Caleb Hall. He's 21 right now. He has 60— no, he has 79 rental property or rental units. He spent the time of actually setting his goal immediately at a young age. Took me 29. I'm 32 today. But I set where I'm going to go. And finally, when I locked that in, my 2- to 3-year goal, we accomplished it in 11 months. I did a deal, 38 units, seller financed, 85% of it was seller financed. I did my first ever capital raise, never raised money before, had no idea where it was coming from. $300,000 capital raise, 3 investors put in $100,000, took 4 phone calls. It's the easiest thing in the world when you have the right people. That deal was really hard. Had a bad roof, it had a chicken infestation. I'm not kidding. Multiple tenants had chickens in their units. They let them out in the courtyard, they make more chickens. Chickens everywhere. A homeless camp on the back, uh, a partially failed septic system. A super hard deal, but 38 units in Washington State for $2 million. In 11 months, we took that from $5,000 in total collections to $23,000. We got it. 3— I think it was a $3.6 million valuation. We then over the next year pushed it to $29,000 in income, got valued at $4.1 million. That is one deal seller financed after about 2 duplexes. One deal went from $2 million to $4.1 million. We did 17 or 18 other transactions in that window. That one was a fantastic— it's nice when your first self-finance deal makes 7 figures. But we've had other deals that have done the same thing, and all we found is, okay, when you know where you're headed, you make decisions only around there. You don't add steps. You can't skip them, but don't add steps. With that, it's a little bit of my backstory. I'm sure I'm going to share a bunch more through this, but here's the important thing. And actually, I think, uh, Melissa hit on this really well. The gap between rich and poor is expanding. We are printing money way too fast. We see a lot of economic issues. There's a lot out of our control. The old method of, hey, you can just earn your way to wealth. If you make less than probably $400,000 or $500,000 a year, almost impossible to save your way to wealth in a reasonable amount of time. Perhaps when you're 60, you can save enough or bought enough rentals on active income to actually be able to lay off the gas. How do we build this? We use some leverage. We build our income stream, we stabilize it, we optimize it. And for me, I'm not re-leveraging. I'm going to go let that pay itself all the way off. I will go cash-free after I have a few hundred million dollars of real estate paying itself off. If the rich side is getting farther away and the poor side is getting farther away, everyone who is still on this side, not where they want to be, it's not their goal. You start swimming for this side, like right now, swim as hard as you can to get over here. The sooner you do that, the better. I think right now we have one of the best opportunities we've ever had where we have a market where there's high interest rates and there's turmoil. People are scared. Big money is on the sideline. This— well, I think we're entering— I think it's going to get even better. But this year I'm starting to win on pricing. I've always won on negotiating creative terms. People are starting to back off price. We've seen syndications where people crowdsourced a lot of money, a lot of them with no experience. They're starting to go under. Multifamily, especially on the commercial side, 5 units and up, there's going to be more and more opportunity. For myself to hit my original goal, to get here, all I wanted to do was buy just a few rentals. Got a little easier to start a property management company. And as I started playing the game, I just realized a few duplexes or a fourplex here and there is a very slow way to do it. It's a very safe way to do it. Later today, I'm going to talk about a fantastic way. If you love your job and you're okay with pacing yourself, it's a fantastic, safe way to do it with 30-year fixed-rate debt. We built a great strategy for him because he spelled out what is my goal. Work for a company I love, an old-school girl store. Later today. If you know where you're headed, figure out how much do I need to make on a monthly basis to do the thing that I want to do. That's step 1. So for everyone who needs to know, okay, what do I actually need to do to succeed? What's my goal? What does that cost on a monthly basis? And how much real estate do I realistically need to buy to hit that goal? Let's now build a path to what is the most effective way to get there. For me, getting to 100 rental units is arbitrary. Unit count's not the main thing, but since I figured about 100 rental units should get me where I want to be, buying a duplex means I have to do 50 transactions. I hate paperwork. I really hate paperwork. 50 transactions sounds terrible. So one duplex at a time. Immediately I eliminated that as an option. Is that the most effective way to get to where I want to go? No. So step 1, you know you're heading. Step 2, everything that you want to do, someone else has already done. So real estate, 100 units, there are a ton of people who have 100 rental units, a shocking amount of people. If you're, if you're in a duplex right now, uh, you know what gets you a lot closer? Buying a 20-plex. That's a great step forward. If you're not buying 100-unit right off the bat, I certainly didn't. 38 units, that moves you forward a heck of a lot faster. If you have no experience buying a 38-plex, the best thing you can possibly do is figure out who in the market that I want to buy owns the 38-plexes, who owns the 25-unit buildings, and then just meet them. Today we're going to hear a lot of different methods of buying real estate. I have never asked anyone to sell a property to me ever. I had never said, hey, would you consider an offer on this? Or are you— they're not sellers, they are owners. And when that changes in your mind, you go, okay, this is someone who is— they're farther in the game than me, but they are— this is, this is another peer, another person who's building their portfolio, managing their resources, and trying to grow, scale, optimize, adjust to what their goals are. Now all I need to do is go, okay, Perfect example. I have 2 duplexes. You have this 20-unit building. I'm trying to build a business you've already built. I haven't figured it out yet. I just spent all of my money on these 2 duplexes. I was curious how you got to where you're at. Like, that's a real phone call, and most people will be like, I'm not selling. Like, awesome, good, good news, because I just spent all my money. So I couldn't buy it if I wanted to. I am trying to learn how to play the game. I happen to be your property neighbor. I own a duplex. As far as I said, again, if you do 10 calls a week, that's, that's about what I do, 10 phone calls to someone who owns real estate in your market. You need one of them to say yes to a coffee meeting. I don't like cold calling, so I don't do— I don't have an auto dialer ripping it out. I don't have an overseas sales team. I don't personally do mailers. If I was marketing, that would be my main way of doing it. I think it's great, less invasive. All I do is I call 10 people who I'd love to meet with. Theoretically, they've done something I haven't done in a building I haven't— I don't own yet. I want to take them out to coffee and I just want to learn, how did you build your business? What struggles did you run into? I want to take the 50-year career they've had and compress it down to as little time as possible by learning from their successes and more importantly, I think, learning from their failures. When you start connecting with these people, If you get one coffee, I like coffee, but it could be anything. It could be someone you play pickleball with. You do that one meeting doing something you enjoy doing with an individual who's playing the game you're trying to play, who knows something you don't. That's 52 owners in a year. You want to— if you want to really go hard, double it. Meet with 100 people who own real estate who are not you. You do not have to ask for a deal. You have a clear goal which you can communicate in conversation without making it all about you. You can talk to them about what they've done. It's pretty easy to just leave it there. It's like, dude, I'm trying to retire my wife right now. If I can do something that you did here, like that 20-plex or the deal you just told me about where you bought the 38-unit, that would move me massively forward. What would you do in my position if you had my thesis after they told you theirs? What would you do in my position to move forward? Sometimes people give you crappy advice, and that's fine. 50 meetings, you're not going to get 50 people who are like going to be super helpful. You're going to end up with 5 or 10 people who have been amazing and they're going to help mentor you or guide you. Some of them will call you and say, hey, this deal's too small for me, but I think it's perfect for you. By the way, you say you don't have any money. I think they're going to be open to carrying a contract. Let me call them for you and I'll let them know that we've met and I like you. Let me get you in the door. Let me set up that next day for you. Those are calls that I get all the time. Is it immediate? Is it up to next week? Almost never. It has been once. Someone just said, let's go, I have a deal for you. Okay, let's do it. But usually, if someone calls a month or two later, it's a relationship that you build over time. And again, this is an owner, it's not a seller. So step 1, set your heading, know your heading, know how to communicate it without just talking about yourself for an hour. Step 2, find the person. Who has done what you want to do in the market you want to do it in, and then just connect with them, one owner to another. If you don't own any real estate, that's a great lead-in. I am trying to play this game. I'm not there yet, but it means the world to me to meet with someone who has done the thing. You're gonna get some nos. You're probably gonna suck at it when you first make some calls. I think it's attainable for everyone to make 10 phone calls to a human being. I do them on Google Maps. I don't even have skip tracing software. I Google property and then I Google the address. Usually I'll have like a parcel map. I'll just click it and like, oh, it's owned by this entity. Google the entity, find the phone number, give them a call. Hey, it's Christian Osgood. I'm sure you guys own this building, probably own other stuff here too, but I'm the smallest owner in town. You're obviously not. How did you get here? It's a really— I think a really simple way to do it, and it works for me. As you're finding your skills and what works for you, some people are like, hey, I'm really good at coordinating people. You can be the person who builds a call center around that. You can build a business around this. What worked for me personally, and I think should be everybody's goal at the end of the day, meet with owners of real estate. Stop thinking of them as sellers. Stop thinking of them finding a deal today. Think of it as I'm going to learn something and make a new connection. And out of my connections, I, I believe that there will be opportunity. And just lean into that and keep doing that. That's worked for me in multiple markets. It's worked for— I've run multifamily strategies, group, of course, mentorship, work for a ton of our students. The people who typically have the most resistance are the people who are like, I've been together in this call list, I'm calling brokers 100 times a week. I'm like, okay, good, every broker in your area hates you now. Um, now you have to meet with others, learn networking. With people who've done the thing. The next thing that I do is, uh, really do not add steps. What does it take to buy a deal? So an opportunity has now come up. You've met with this owner, they've connected you with a friend, there's a deal in front of you. Uh, this happens to me, I just partnered with, uh, with Caleb, who's here somewhere, partners him on a deal in Stephenville, Texas. It's 25 units. The owner wants to meet. Caitlin calls, he's like, dude, I really would like to do this deal with you. It's pretty close to where you want to move. Do you want to just meet this guy? Come down. He happened to be someone who owned his property in cash. He wanted to show us the property. That was really important to him. And she's like, okay, I understand you're buying this without money. I will seller finance this to you. I want about 10% down. You can kind of like $11.5 million. Low down, I'm fine carrying the contract. The only thing that mattered to him, because we met with him on a personal level— I've met with his whole family. One of his family, you know, my favorite lawyer in Texas. When we met with him, we talked about him and the building. And sure, I asked questions about the deal when he brought it up, but I brought that up later. We got lunch first. Talked about this, people. His only condition was, when you buy this, like, I assume you're probably bringing in a capital partner. I want you guys to own at least 51% of the deal because I want to be selling this to you, and I want you to be in the driver's seat of this deal. As long as you are the one buying the property, I will finance this. I've had that conversation in real estate with many people. They come in, they're like, I've offered this 25%, down self-finance. But because it's you, because you've asked me how I ran my business, because I'm now invested in your success, I'm willing to carry a contract 5% down, 10% down, lower down deals, because they understand someone with more money could run this, but they're not building what you're building. A lot of these guys get really excited, and gals get really excited when you put together this Here's what I'm trying to build. And you look at their pieces and you learn, oh yeah, they bought 300 units, they've gotten into development, they've done all this stuff. When you come in and you're that one investor who instead of, can I buy your deal, is going, how did you, how did you build your business? You're excited about how they did it. They now want you to carry on whatever it is they built and make it bigger. I wish he was here today. Sister's graduation today. My first ever business partner, Cody Davis, he's so good at this. In Moses Lake, he has two sellers who have come to him and said, I will sell you my entire portfolio zero down as soon as I'm done playing, whatever I build, because I love the way you play the game. I love your passion for it. You're the only one in your generation who took the time to drive over the mountains and hang out with us. When I go to Moses Lake, I just jump in a people's offices. I'm like, hey, you told me to do this one thing on this one building where we added a roof. Thank you for doing that. And then I leave, and they're like, you're the guy who doesn't come in and ask me for stuff. You just ask good questions and you're interested in my business. I think it's the best possible way to move forward. So in summary here, because I threw out all of my notes: step 1, set your goal. Step 2, find new people. Step 3, actually invest in relationships with the people who are interested in building a business in the way that you want to build it. Continue to thank them, continue to engage with them. They're going to keep moving you forward. I also attend a whole bunch of meetups. I'm around people. Is every single meetup I go to a good use of my time? Absolutely not. Who here has been to a meetup where you're like, this was really boring and I got nothing? We should see more hands. This one happens to be the best meetup they would go to. This entire year and possibly ever. But in general, they're not all worth it. But you just— same thing with meetings. You just go out and you get around with people, build the relationships, spend the time. The next thing, and this is super important, you can't skip this stuff. You need to be able to do addition, subtraction, multiplication, division, and understand when you are looking at a deal if it is a deal or not. Now you have all these relationships. Someone stops you with a deal, Great thing with creative finance, you can buy anything. You can literally— I think I bought, I bought a resort for $4.5 million, and then I learned I hate hospitality. Uh, keep your mistakes to less than $4.5 million. But as you're building your portfolio, you can buy absolutely anything regardless of financial position. I bought to date about $32 million in real estate, and I started with no money, and I started buying most of my portfolio 4 years ago. You can do Anything. The problem is you can do anything. So you can negotiate a horrible deal, and if your lawyer signs off on it, their lawyer signs off on it, congratulations, you're screwed. There's no underwriter or bank backing this. So the next thing that cannot be skipped— can you look at a deal, understand the deal, and know, hey, there is an opportunity in front of me that is worth closing? I believe it takes about What, 4 hours of sitting down and learning the math to actually fundamentally wrap your head around it. This is— we're talking basic, basic algebra. Does it cash flow? Do I have margin on this? How do I feel the banks will evaluate the value of this? If we don't get any magical appreciation, am I still okay at the end of whatever balloon I have? If I have a 10-year balloon, I set some rules to this that are really hard to screw up. Buy deals with cash flow, period. An asset pays you every month. Buy assets, don't buy liabilities. You're taking on a liability debt. Your asset needs to be larger than the liability on your balance sheet. Do that again and again and again, you're going to get richer and richer and richer. So must have cash flow. I hate variables. Fixed rate debt. This is where a lot of people are going to get wiped out. This is where a lot of us in this room are going to have a ton of opportunity because there's a bunch of these buildings They're going right back to the public now. People bought them thinking, oh yeah, variable rates at 3% right now, as long as they don't skyrocket past 5, we're fine. Congratulations, we're 7.5% debt. These are starting to get called in a higher rate. I think the next, in my opinion, next 1 to 2 years, 12 to 24 month window, there's going to be continual pain. And then I think it's going to get a lot better, a lot faster. I think we're going to see a lot of rent growth after that. But right now, I think we're in for a lot more pain for larger operators who didn't fix their variables. Long-term cash-flowing fixed-rate debt, every deal, no exceptions. If I can underwrite a deal and assume there's going to be no appreciation, there's going to be no rent growth whatsoever, but I'm going to buy it today, I'm going to raise enough money to get to whatever projects I need to do, and I'll never have to write another check into this property. That is a deal that I want to do. If you do those again and again and again, every deal, your income goes up, you build wealth. The people who violate that principle, in my opinion, you could get rich, but you're playing the real estate casino. You're going to be subject to the market. You're going to be— if you're doing this for financial freedom, you're basically saying like, well, we're going to roll the dice on my freedom. There's some clauses that you can do Subjectives are really touchy ones. I think it should be a tool in your tool belt. That's where you can actually— essentially, you keep the debt in someone else's name, you take a property, often zero or very, very low down. Is that a viable way to do real estate? Yes. Is it a legal way to do real estate? Do I want to build my entire financial freedom on a potentially callable note where that's not in my own name? Absolutely not. It could be a tool in your tool belt, but I don't want to have hollow notes people might find you're afraid to build on. Build your freedom on things that will not collapse. Once we know we have the relationships, we know our heading, and we know the math, then we can worry about the money. And only then. Almost everyone— this is by far the most common question I get, I'm sure this is true of most of the other speakers— well, I don't have the money yet, or how do I find capital partners? Everyone worries about the money, which is supernatural. When you don't have any money, that is the most normal thing to think about. It's like, boy, do all this work, I don't have equity to buy it. All of you probably heard this, I'm going to say it again: deal, then debt, then equity. DDE. Always in that order. Deal first. It is so easy to raise capital if you have a good deal, and if you build the pieces that you need to do, you have the relationships in place where you're going to find the lawyer that you need to use, you're gonna find the property manager you need to use, you're gonna find the lender you need to use. Because you've already met all the other owners playing the game who've been successful, you go to them and you go, who did you use for this? Do you have a recommendation for a lawyer? Who's the best property manager? Who should I avoid? You have all your pieces. There is so much more money because guess what? We just keep printing. There's way more money in circulation than there are great opportunities. And those who can find great opportunities properties and have the ability to operate them consistently with the game. You're trying to come over here on the poor side and sprint to the rich side. The easiest way to do it is to take positive leverage where your tenants with margin pay off your debt, get to this side, and if you can just stay here, you will appreciate with time. Appreciation will make you ludicrously rich if hold a lot of real estate for a long period of time. We never buy for appreciation, though. We buy for cash flow. Income keeps us alive. If you can just live over here on this side long enough, you will rise with the rest of the people who have assets. It's the only way over here if you do not have massive inherited wealth, which there's nothing wrong with. Just me and most other people who are not in that camp— if you didn't inherit a ton of money or you don't have any lucrative get a ridiculously high-paying job. The way from one side to the other is use leverage, cover up, stabilize, optimize the real estate, maximize your cash flow. In my opinion, the final step to this is actually pay off your debt. I've built my entire business on interviewing owners. I launched this as a podcast recently, or on episode 10, so maybe podcast, Multifamily Strategy. All I do is interview the largest owners I can find, the most public owners I can find. I'm interviewing people on what business they built and what their strategy was. What I keep finding is the best owners in every market don't have a whole lot of debt. They paid off their stuff. They didn't re-lever again and again and again. You guys read Rich Dad Poor Dad or Kiyosaki? The best way to borrow, borrow, borrow, borrow is tax-free. Is that a great tax strategy? Absolutely. You don't get to sleep at night. You don't win the game. When you have all this debt, you owe people stuff, and they're like, oh, I bought more stuff, I need more write-offs, I'm gonna go buy more stuff. It's a never-ending cycle. If your goal is to hit a certain point and to win the game, lock in your wins. I've seen people build $100,000 a month cash flow in real estate, passive. Like, they're like, I got management on it, they're not doing— they built their business. Then we all— you know what we need to do? Maybe you've got one more project, you've got one more chance. They do a development project they have no business doing, they default, and then they get in there like, oh boy, I'm going to start over, but now I'm 60. You can start at 60, but you've lost all that momentum. Paid off is really hard to lose. Paid off real estate, granted, I've seen it done. You can in fact not pay your taxes, the government will take it. But when you're playing this game if you buy all this real estate, you get to that cash flow goal. Say it was $25,000 a month. That was my best sales commission ever, was $25,000 a month. I'm like, okay, if I had my best month every month, I think I can live pretty awesome. I would love that. That's phenomenal. When I hit $25,000 a month, I'm not going to re-lever any of this stuff. Now, I love real estate, so I'll keep doing adventures. I'm not re-levering that. I'm going to keep stabilizing it. Focus very hard on optimizing it. Do I need to make units a little nicer? Do they need new windows? Are there things I can do to save on utilities, lower electrical bills, build back the tenants? Like, make an optimized portfolio so you maximize the cash flow and then just let it pay itself off. Don't re-lever that. You can do new adventures, but take that block of financial freedom you built and just own it. That has been the strategy that I've seen First guy I ever met, first meeting I ever did, Gary Mann. Most like, don't try to buy stuff from him, he already said he's selling everything to me. Um, this guy owns a ton of real estate. Um, last time I looked at his portfolio, I valued it somewhere $125-ish million in real estate that he owns. He has $2 million in debt left. He just happened to buy a strip mall. He's like, we could have bought it in cash, but I use leverage. He was sell our finance, whatnot, 5% interest. This guy taught us how to do a lot of the seller finance contracts that we do. I go to Gary and I'm like, okay, uh, I'm young and dumb, I'm not really that smart, I've been playing real estate for 4 years, like I'm really playing the game, I don't have a ton of experience. Gary's been playing the game with his partner for 50 years. I'm gonna— I think I have some genius idea, I call someone like Gary or one of the other 50 people I've and go, hey, here's my thought. You've been through this. What do you think? Gary told us really early, you're gonna, you're gonna start buying stuff because you now know the creative game. Like, you can buy all sorts of stuff and you're gonna make some really expensive mistake. You're gonna get like right up to here in debt, and then you're either gonna figure it out or you won't. He's like, if everyone will do it, and you guys are young enough and dumb enough to do it, we did it and we survived. And we bought the resort, and I was like, oh wait, we have no idea how to operate this, and, uh, this is not going the way I wanted to, and it's really expensive. And we got exactly there. And that's what I did. I called a bunch of the other owners I've already talked to. I'm like, have you ever been here? All of them, absolutely. Here's how you're going to manage it. Uh, he told me the simplest thing. He's like, well, you have great terms on this, but you overpaid for it. You don't want to run a resort? Too bad. If you overpay and you win on terms, you can't just sell it because you paid too much. There's no outs. There's like the only way to fix an is to outperform. So your mission now is to throw out all your other ideas. You now must execute on this. You must outperform what you purchased. And if you get the value up above what you purchased it for, you now have your app. That's how you play this. That is such a better way to play the game than, hey, I found someone, I asked for a deal, they sold it to me, and I'm stuck with the problem. I went after relationships, and now I can talk to those relationships. I can solve all of my problems. In my opinion, this is the way to play the game. Set your target, look at all the other distracting things out there. Don't just decide, I'm going to buy seller finance, I'm going to do the BRRRR method. Don't worry about what you're going to do. There's a million ways to buy real estate. Be around people, and when an opportunity comes to you, you're like, I think this is the one. Know if it's a deal. If it's a deal, put it under contract. Do your due diligence on it. Ask other owners, are you seeing what I'm seeing? Finding money, which I promise you is the least interesting, easiest part. If you have a bunch of private money lenders here, it can be debt, it can be equity, it can be partners. There are 100 ways to fund a deal. The money part is the easiest. And then hold it and be responsible with what you hold. Be a good manager. It is so easy in this industry to be a better manager than the last person you bought from. So easy. If you do these steps, that is really all it takes to be successful in real estate. And you repeat and you repeat and you repeat. Then you get the option, the end game. I have a whole bunch of paid-off real estate here. Do I love this game enough where I want to keep playing, or do I want to go do something else? If your passion in life is something totally different, When you've handled money and everything's on lockdown, okay, I'm safe, I'm secure, set your new goal. Is it, I love this, I want to go buy real estate? I found that's me. I think this is like a board game. It's kind of fun to move pieces around and adjust. I would work, played a lot of Magic: The Gathering growing up, which is probably why I've done okay with the creative finance stuff. Get more pieces, drive in the car, we'll figure this out. Do you love the game? You want to keep scaling, or do you want— do you want to focus on a golf career, a music career, spend time with your kids, grandkids? The fun thing is, if you play this game the right way and you eliminate all the extra steps, you can cut out a lot of time and you can control your time and finances. Don't grow and grow. Know where you're headed, and when you hit it, ask yourself the question: what's the next step? Where do I go from here. Now what I really wanted to do for this is open up to questions, because again, I threw out my entire script for this. What do you need to do to succeed? Do these things. Meet owners, win game. Any questions on creative finance, deal structure, crazy things that happen? I've had everything that can happen. I've had partners sue me over, over, uh, vacancies because I managed it. They're like, I think you owe me rents for every month as make it. So I mean, I've had ridiculous situations. We've had buildings flood, we bought on option contracts, we've had everything that can happen feasibly, even down to like, you know, chicken infestations. We've had it all. Love to have some questions. How about partners? Talk about partners. Yes, he said, what advice do you have for that? One more time. Oh, just ask for partners. You said you had some partners. What would you recommend in terms of partners, in terms of agreements, legal, that kind of area? Partnerships. Who remembers a few minutes ago when I said you build security by eliminating variables? We don't like variable rate debt, we don't like— yeah, partners, humans, the biggest variable in your, in your whole entire portfolio. It is the hardest piece. I have a few things on partnerships. One, just like the steps to buying real estate, you need to set a very clear goal for the partnership. Marriage, you can do that one till you die. That one, that's allowed to be a lifetime partnership. Every other business, every other partnership has a clear ending. Now when you hit that ending, you get to choose, hey, would we like to restructure and move on to another mission? But set a very specific mission for the partnership that you have. I was on a phone call earlier today with a partner who wants to do do other ventures. He's like, would you just be able to cash me out of this at principal? Like, absolutely, we can figure that out. The reason that we're even having those conversations though is that as a partner who didn't have a clear mission, if you were just like, I want to buy a deal, we bought a deal, and he's like, okay, now I want to do other stuff. When Cody and I started our partnership, the two of us want to get to 100 units together within 2 years. That's 50 for you, 50 for me, and it's enough where we can divide it up if we decide we hate each other.— which we didn't, fortunately— but is enough. So we got there in 11 months, and on month 11, I retired my wife. Cody had hit his financial goals, and we got to sit down and say, what do we want to do now? We have a clear exit. And what we found is my wife has retired. She had joined the property management company, so now the office is on 50%, but we have two of us working full-time. And Cody's really excited about buying real estate, so we got one Cody working half time. That wasn't the problem because we were not renegotiating anything. We're not changing course until we hit our goals. We hit our goals, and what I ended up doing is I traded a 6-plex for the property management company. Problem solved. We've rebalanced the partnership. There's no more tension. And when Dr. Christian Osgood said, what do you want to do next? Because, you know, let's, let's see if we can buy another 200 units. About half of those It works as long as you have a very clear timeline. The other thing you have to do is you have to be amazing in communication. I have found even when deals are going fantastic, if I forget to tell everyone very regularly it's going fantastic, you're going, I don't know, my money's been sitting here, I have questions about my money, should I be putting this elsewhere? It's like, I've had someone where I tripled their money in 2 years and they called me pissed that I didn't make them more money. It's like, we did not communicate something That is, that's on me. That is not on them for being dumb. That is on Christian for not getting them excited about how well we're doing. We massively outperformed on the project. And then when the takeaway is like, you only tripled my money, I want more of your cuts, I'm like, well, we're 50/50 partners, but I did all the work. Those aren't fun conversations. Had we had a very clear goal in the beginning, set parameters, done a better job of defining our roles throughout, and then actually talked on a monthly basis throughout that, that would have been huge. I think those are the biggest pieces. I think the, uh, regardless of where you fall religiously, the Bible verse, I believe it was in terms of marriage, about being unequally yoked. You're talking about two oxen pulling in the same direction. You need your partner pulling in the same direction with the same force, because if you are tied to someone else and they're trying to go that way and I'm trying to go this way, it doesn't matter if we both have great ideas. Partnerships sucks. Everyone going one direction, pulling the same amount, or at least the amount in proportion to their equity in the deal. That will make a partnership go a lot better.

My question is about seller financing.

Yeah.

And talk about it today. Is that good? Curious on, you know, you get a good agreement for seller finance, it's a property you're probably gonna want to hold for long term. There's like a 5-year—

that's something I'm just still trying to get my head around.

What do you do at that 5-year mark? Okay, um, when you need to pay that property off or there's a big payment that's due. Also, um, what if the seller dies and what are you going to do with that? A couple years in, those are my questions.

Perfect. For balloons, how do we pay our debts? Anyone know the answer? With money. Now, where does money come from? I will explain this. Uh, we have a balloon that comes up. Uh, money comes from earned income. That could be from cash flow, the deal. That could be from other deals that you're doing. It comes from the sale of an asset. It can come from the refinance of an asset. The big important thing is that at that balloon, you must have a plan for the money. I do two pieces of math every time I buy a deal. I do day one, what is it that we're buying? Long-term cash flow, fixed-rate debt, check all the boxes, good. If I have 5-year debt, very conservatively, where is this property going to be? I'm looking at buying a deal with Caleb, uh, 112 units, has 20-something vacancies. The reason it has those vacancies, from the best we can tell so far, a family member is managing it. They jack up the rents, they want a rent that is way above market, and they're just not backing off of it. Our deal works phenomenally if we we back $200 off that rent is a stellar deal. So my answer for, okay, what are we going to do— it is a 5-year balloon on that. In 5 years, what am I going to do? Well, I have 5 years to lease 20 units. I have a property management company. I'm pretty sure I can do this. I'm very good at leasing. The numbers work very well if rent does not increase for the next 5 years at all. We have 5 to 10% vacancy, and we get rents $200 less than current market rent today. I am very confident that we can go to a bank at the end of that and do a refinance. If you don't refinance, you can sell. It's all— it all comes down to the deal structure. As far as the, uh, what happens if the seller dies on seller finance though, uh, typically it's going to be inherited by a family member. It's not really ideal. Yeah, secondary beneficiary, whoever it is their benefit. Yeah, everyone has a different setup for how, you know, where their stuff goes when they die. But it is a note. Your note doesn't dissolve just because you owed it to them and now it disappears. Someone else is going to inherit that note. A lot— not all, but a good chunk of the seller finance debt I have is specifically long-term seller finance debt because real estate investors are like my kids. People do not care about real estate, they cannot operate my massive portfolio. I already have millions and millions of dollars because I did all the steps. I don't need cash right now, and I definitely don't want to give my idiot kids cash. I want them to inherit this note. I have people put clauses to where their kids can't sell the note. Yeah, so that agreement is locked in. They're locked in right into that, that agreement. Exactly. It's very, very similar to a bank account. Bank will sell your note. Notes can pass around, but the note exists, and that is your obligation to the property. Good question. Now that you've been further in the game, what are the owner meetings like at this point? Owner meetings are very much the same. I'm looking at different markets now. I'm a huge believer in hyper-localization. Locality. But I've done most of what I wanted to do in Washington. Now they're moving to Texas. I'm meeting new owners. So a lot of them are doing the same thing. I have 25 units in this town, you own 150, you've done something I haven't done, we should meet up. I have a little bit more to talk about now. I have more track record. I'm basically a little bit more interesting because I've made more mistakes. We have stuff to laugh about. But when we connect, I found this really— it's the same thing. There's so many people have done so many projects that I haven't done. Talk to people who develop. Uh, recently we talked to someone who has 4,500 units. He's my age. I'm like, how long have you been buying? 5 years. I got longer. How do they go now? I love meeting with people like that. Where do you find the best large multifamily deals? Are they off market or are they perhaps through CoStar? I've— so Google. Yeah, really it is Google. It's meeting the owners. They're not necessarily all off market. I do have a few. I love having a few brokers who are just fantastic. And when you're starting, I have found most brokers don't really care about you. So when you're starting, I was finding more off-market than I was on market. I do a lot of on-market deals, or just about to be on-market deals. It's about 50% of my deal flow, but it's the same mentality. It's a couple brokers in the area who I have a long-standing relationship with. They know how I operate. That works very, very well for me. The rest of them, it is just getting down there and getting coffee. And I found it's pretty easy. You go into a town, you book 5 meetings, Good to go. But yeah, deal flow is very easy when you're just around people playing the game. I'm so serious, it's just like a board game. I found that if everyone's playing poker night and you come in a little bit late, there's usually someone at the table who's like, here, have a couple chips, let's deal you in, get a seat at the table, you just start playing the game. Be around enough people playing, someone does deal deal you in. And then as you have more pieces, you have more ability to expand. Not CoStar. In fact, I'm going to add one thing to this. I worked for CoStar for a long time. Uh, CoStar and LoopNet are very good at restricting what you see so the broker will pay to get it up there. Uh, CREXi is a very similar site, but they restrict less. So if you're going to do any just free prospecting, whatever's listed, look at CREXi because GoStar wants your money. In your experience, have you had any opportunity to buy anything on assumable on any hotel or large scale? I have, where we were in negotiation for it or part of the contract. On both times where we were getting into the assumable debt, the sellers— it was just a fluke— they both got frustrated. Like, we don't actually have that much debt, we'll just pay it off finance to you. That is not common. That should happen to be how the deal is. I've looked at doing those. Assumable debt is awesome. I have been seeing less of that lately as rates went to 7.5, all the debt you're assuming is a 3. If I'm a bank, I really would run, especially because they're cracking down on banks right now. I'd rather pull that money back and redeploy it. So I'm not seeing a lot of yeses to that unless you have an existing relationship personally with that bank, which which was what we were looking at doing, a bank funny enough out of Texas but lending in Washington. They're called MC Bank. Uh, I do millions of dollars of business with them. They were open to us assuming a loan from someone else because all parties are friends, they know everyone. I'm not seeing as much of it in our current rate environment. However, if we see rates go down— let's see what happens one day— uh, rates went down to 5, Banks are probably going to be all value, assuming 7.5% though. That's an educated guess. You're moving to Texas in a few months. Yes. How is it going to change what you're buying, how you're buying, your general business plan, I guess, over the next 2 to 3 years? Well, in Washington State, I can actually do— I can actually do emissions. I have no idea how to change the slides. I'll figure it out. Or I go home. That's fine. Didn't think. When I moved to Texas, I'm doing the exact same thing I did in Washington, except that I have some laws that are really friendly. In Washington State, evictions cost $3,000 to $5,000. They take 60 days if you knock them out of the park and do everything perfectly. Last time I was in court for evictions, I actually had the lawyer like, what is the the owner that you're representing, is their mortgage backed by Fannie Freddie? Because apparently there's a 30-day notice that you post on anyone who has a Fannie Freddie-backed note and a 14-day notice, pay or vacate, that you start with if they don't have Fannie Freddie debt. Obviously you would assume that this is really important because the owner's debt has a massive impact on the tenant. Anyone can explain that to me? I, I don't get that at all. Um, but it's stuff like that in Washington that's really difficult. In Texas, one thing that I really like is that they are owner-friendly. And so if someone just stops paying, or God forbid, we've had this happen, one of your tenants decides to kill someone on your property, you can actually get rid of them instead of being forced to offer them free rent. That is a little difference between, uh, Washington and Texas. And that is true for pretty much this entire coast. If you're in California, Oregon, Washington, there are some ridiculous where it's like if you commit a heinous crime or something, you're violating your lease. I don't know California, Oregon, and Washington. If I accept rent from you while we're evicting you, even if it's not for nonpay and I accept a rent check, it is assumed that I'm continuing to let you stay there. I am forced to offer you free housing until your eviction is over. Otherwise, you can get a free state-appointed lawyer to fight me and reset the entire process. So in Texas, I'll be doing the same thing that I do with the same number of meetings, but with a whole lot less headache. Yes? Do we have time for one last question, or are we— okay, that'll be it. I am around the whole time, so if you guys have more questions, hang out. I'm all over YouTube, so if you guys want to see more of the details— this is why I swapped what I was going to talk about— if you want to see the details of putting together different deal structures. I talk about all of it on YouTube. That is completely free. We have, of course, a mentorship group where people connect, network. Actually, a lot of people here are part of that group, so thank you all for making it. But you can check that all here, my Instagram, all the links are attached to that QR code. So scan that for more. I'm around, and thank you guys so much.