Cody and Christian Osgood recount real disasters from managing apartment buildings: a truck crashed through their 38-unit building, a roof replacement was followed by flooding in every unit, a tenant died shortly after they bought a duplex. They argue that scaling to 81 doors gave them enough cash flow to survive these hits.
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Hey YouTube, it's Cody. We got Christian, and today we're talking about some of the failures. And if you call them failures, we've had some difficulties in this real estate thing. Learning lessons, learning lessons and challenges, of which just today I got a photo from my contractor, our contractor named Rick. He sent us a little photo and said, hey, you might want to check this out. Turns out a car drove 25 miles an hour into our building, and now we have a an extra window. They knocked over a wall, and we are having fun figuring that piece out, getting that boarded up, and eventually we're getting a new concrete wall poured. Yeah, that said, not everything is super smooth, and we want to put out a video that shows you not everything is sunshine and rainbows, and there are difficulties.
Yeah, a car through the building is a bit of a bummer. That being said, it is much better to have this happen on a 38-unit than on an individual house. If you had a car inside a house and that is 100% of your income on that property, there is a lot more stress. Right now there's a hole in the wall on a big building. There's enough cash flow from the other units where this isn't a huge stressor. We saw it, we're like, wow, that is a bummer, let's address it. It was about 5, 10 minutes of calls today and it's all being worked out.
Yep. And we're gonna be posting some photos in this. You guys are gonna be seeing this in real time, what we're talking about. We're not just gonna tell you, we want to show you, 'cause that's worth more than any amount of words we can share. Couple other things that's happened. We have had apartments flood. Mm-hmm. I had 2 apartments flood at my very first 12-plex. I'll be pulling some photos to share with you guys. And I got a roof replaced at my other 12-plex in Moses Lake. Just so happens that right after the roof got replaced, where they were pulling it off, the single largest rainstorm, unforecasted, rolls into town and floods the whole building. Every single apartment had water come through the ceiling because an unprojected rainstorm came in. You can't predict that. It was unforecasted, heaviest rain shower in Moses Lake in the first, like, in the past few years, and it floods every single rental apartment. Not everything is as great as you see on YouTube. It's not as great as you see on Instagram. Social media is the highlight reel. You guys are seeing the very best, and so today we want to share some of the worst. Christian, what's happened at your places?
Oh man, my first ever duplex, purchased it 2 months in. I was working for a company that had property management. I was sitting in the office, we were just talking, and they brought up, oh, there's that one tenant in Bremerton just passed away. I was like, oh no. I figured it was one of the— we manage a few buildings over there. I figured it was one of the other tenants. I was like, whose apartment? They're like, Oh, you know what, actually that's yours. I was like, what? I only had 2 tenants in my whole portfolio. 2 months into being an investor, I had a dead tenant in one of my portfolios, or one of my units, excuse me. I was like, I don't know what to do here. Again, that's part of the great thing about great property management and honestly just having a great police force that can help tell you what to do on this. But not all sunshine and rainbows. You lease up a space, Unfortunately, when you have units where people live in, it's a pretty common place for people to die in. It's just a reality of the business, but can be a little bit shocking when you are a brand new baby investor and you get that phone call. That was, that was uncomfortable.
Yeah, this can be a little bit rough when you're getting started. When you have fewer doors and something goes wrong, it can take out your cash flow. And that is the reason that we cannot justify staying small. It's the reason that you see us pushing so hard to scale. With 81 doors, I am not worried about 5 being vacant. I'm not worried about 5 having issues because I have enough cash flow to pay for those issues. When I had 12 units, my first 12-plex, a lot of people said, well, this is amazing, you got a 12-plex. And then I bought another, oh my goodness, you have 24 doors. If I have any problems on those 24 doors, granted everything cash flows 4 figures a month, If I have $2,000 to $3,000, $4,000 a month in cash flow, that can get eaten up by 5 units having problems. This is the reason that we have to scale. It's the reason that if you really want to build this out relatively quickly, you need to scale and have your principles built off of cash flow. Because when problems happen, not if, but when, the more cash flow you have, the less susceptible you are to risks.
Yeah, another story that I always just find amusing, when we first bought the 38-unit, we knew it was gonna be a huge project. So I mean, most of the basements had some level of flooding that needed to be addressed immediately. But the biggest issue that I faced is we had a homeless camp on the property, just over the property line. They had come over to our property, steal power. But they were camping just on the other side of the property line, so the police could not remove them. We just got stuck with a sizable homeless camp. That was a little bit of an adventure, 'cause I had absolutely no idea what our options were to get rid of that.
Yeah, there's a lot that you gotta learn on this. That said, you're not gonna learn it unless you go do it. You should go acquire information for certainty, not just for having information, and the quickest way to do that is to go apply the things you learn. It's one thing to go study a concept, go study seller financing, but until you do it, you're operating in theory. That's a dangerous place to be. You want to apply so that you're acting out of practical application. You're acting out of the knowledge that you've done it before and you know how to execute it. If you're operating in theory just because you've studied it, you will encounter things that you don't know what you're doing. And the homeless camp was one for us. Like, I, guess it makes sense we call the cops and they handle it, but in reality we can't do anything because they're one foot off of our property line. How do you go through things like that? That is what you're going to encounter when you actually go buy properties and learn that this game has issues. You're going to encounter challenges, and that's not a reason not to do it.
And by the way, that story ended with our neighbors started developing the property, which is just perfect timing and super lucky, they called in and had the homeless camp removed for us. So we got lucked out on that one. Touching base on the operating in theory, that is something that while dangerous, you don't want to do it, at some point there is a, I have mastered this, it takes practice. There's going to be things that you have to do operating in theory. Don't let the little stuff get there. One comment that we've gotten quite a bit is, "You didn't do it on your own, you got help." Yes, we want to do something that is bigger than us. This requires a lot of help. When you are operating in theory and building your way to mastery, when you have something you haven't done or don't know, surround yourself with people who do know what they're doing. We have an amazing resource in that market, his name's Doug. Very, very helpful on what to do and not to do on this renovation. We would have under-renovated the units. We would not have maximized market rents. We would not have the same project without the right people in place. So the biggest message I think we learned there is when you have to operate in theory, surround yourself by people who know exactly what they're doing, who have a mastery in what you're trying to do.
Do not play this game alone. Even if you want to be the lone wolf that says, "I made it by myself," the game isn't as fun to play by yourself. It's just not, and it's more difficult. Don't add extra steps. The game is challenging enough on its own. Surround yourself with the right people, play the game with the top people in your space, and go do something remarkable. That said, that's today's video. If you guys want to see more of this, put your comments in the comment section below and we'll make it happen. Perfect.
