The ONLY 4 WAYS to INCREASE CASHFLOW -Creative Finance Live

I'm on the YouTubes and we should be officially live. All right, YouTube and Instagram, welcome back. Today we are covering our topic. It's going to be— what was our topic today? It was, oh, the only 4 ways to increase your cash flow. I should know that because I just put this together today. But as always, we can go through a few questions from the chat. Cody, do you actually have that up? I just realized I'm streaming on my phone and my computer.

I have the chat live, so we are good.

Perfect. Do you have any of the comments from our, our YouTube channel that we can go through? I only memorized one this week, which I can ask.

Can you pull those up? Yeah, I'll pull those up and you can ask the very first one.

Well, The first question that we had this week are, what is more important in your deal? Is it the day one cash flow or is it the upside? The example they gave here is, I have a deal that negative cash flow is $500 a month. However, I think I can pick it up for $150,000 under market price. Now, while we don't usually negotiate on price, what is the most important aspect? If you have a little bit of downside and a huge potential upside.

Cash flow matters like that. That is the, the blood of any business. Upside is like that. That's how you get rich. But cash flow is how you stay wealthy. So if you're going out and you got great deals, if you can stomach $500 a month, let's say it made no money. If you're comfortable and you can make the payments, go for the upside. But understand that Upside is irrelevant if you can't keep it forever. On a small deal, Christian's talked about this in the past. Our first deal we did as a partnership was the first deal he could not afford if it went wrong. All his little stuff had great upside and he could afford the negative if it didn't cash flow. So on a deal like that, if you go pick up $150 grand and you're confident in it, cool, if you can hold it and it didn't make a dime. That is where my confidence level would have to be if I'm going to go pick up something that doesn't cash flow. We're looking at a deal right now, not super cash flow rich, however, a lot of upside and it's just a great asset. So you have to make sure you can hold it. Otherwise the upside is irrelevant. This happened with one of our past mentors. He, he's not doing too well right now because he bought all for upside and had no cash flow to sustain. So we had to keep borrowing to borrow, to borrow. Not a good place to be.

No, not a good place to be at all. And it follows the same rules. How do you buy it? How do you never lose it? If you can buy it and you can hold it forever, it's like, okay, uh, maybe we need to get the cash flow up a little bit. We have a huge upside. So we're in a great equity position in this deal. Like, okay, I can see where the money's being made. How are we going to hold the $500? And more importantly, what is our path to get that $500? Positive. Being positively cash flow, you can buy infinite deals. You can only hold so much negative cash flow. So I love the question. I— while we always buy cash flowing assets for equity growth, if you have a huge upside and a very solid plan, you are allowed to bend the rule a little bit, but on the condition that you actually do get into a cash flow positive state.

All right. And then we've got our next question from, from Jordan Alexander yesterday. So with a paid-off primary residence, would you recommend taking out a HELOC kind of like how Christian did to purchase real estate? We have a principle on this. Christian, if you want to chat about that principle, because I know you were able to use a HELOC and not violate our principle. Mm-hmm.

You cannot invest with something that you're not willing to lose. And that's actually why we're paying off the real estate now, because I'm not willing to lose all the investments we made.

And not just invest, but leverage.

Mm-hmm.

You don't leverage it if you're not willing to lose it.

Yep. I would not tap an asset that I cannot— that I can't stand losing. I am actually okay with losing my house towards getting towards my goals because my house isn't my end goal. I don't have kids. I do have a dog and a couple of cats, but my house is in excess of what I need. And I know how to buy houses. They're not hard to buy. So I can go back and I can build this again. And I know how to build it. I've bought multiple houses. I've lived multiple places. For me, I'm willing to play with the pieces that I have to reach the goal that I had, which was I want to retire from the 9 to 5 and I want my wife to retire from the 9 to 5 as well. I got there. Now I'm protecting that. However, using my house to get to that goal totally made sense for me.

Yeah. Someone also asked— Dividend Dave, actually. Maybe Dividend Dave will join our chat today. Does this relationship growth coffee meeting strategy work with corporate-owned properties also?

Ooh, I love that. I'm a CoStar employee and I'll let you answer this too, Cody, but I was a CoStar employee for a long time. Well, long for me, 4 years. All I did was build relationships with corporate people. Like, there are some mom-and-pop in there, but 85%, you're talking like major investment firms, banks, property managers. And your goal is to meet with the owner of those companies. Companies are run by, you guessed it, people. It is about forming relationships with people.

Is that how that works?

Yeah, the main thing is that you're meeting with the person who's at the head of the ship who can make decisions. Um, in sales they call it meeting with the decision maker, but that's it.

Sweet. All right. From Better Business JB, seller finance allows the contract to be written up any way or form based on mutual agreement. Correct? That was the question.

Correct.

Correct.

The answer.

Yeah, it's super simple. If you have an idea, everybody's on board, you follow all the local laws and you have an attorney who can get it on a legal document that is valid, you're set. All right. Let's see if we have any other questions. We got a ton of comments, but a lot of them were affirmations or statements. We didn't get a ton of questions.

And by the way, those who are watching on Instagram, if you want to see Cody's face, because Cody's phone is basically dead, in the future we'll go live together on the phones. Since we're not doing that, hop over to YouTube. It's Cody and Christian Multifamily Strategy. You can see Cody's face and ask your questions there.

Okay. This is a long-winded question, so I'm going to try my best to get through it. I have another question, and feel free to throw this in the pile for next week. But I'm wondering, when you're analyzing a deal and you're looking at the cash flow, we always factor in things like vacancy maintenance, CapEx, management fees into our monthly expenses. Well, the management fees are a constant monthly cost. Everything else is variable, meaning we set aside money each month for these things, but it doesn't necessarily mean this money is leaving the account each month. My question is, if a property only positive cash flows on paper because you exclude these variable monthly costs, then this technically doesn't pass the test of needing to cash flow day one, right? Okay, that is correct. If it doesn't cash flow, it doesn't cash flow. It's either positive or negative after. Now, granted, if you go in and you just do the CapEx upfront, you say, I'm just going to fix it. Well, now it does cash flow because you don't have to budget for a new roof if it has a new roof. It is just a fact. You don't need to worry about 20 years down the road because 20 years down the road is twice my age. Like, you just— you should worry about the 1-year, 6-month, 1-year, 5-year stuff. But if you're just setting money aside to budget so you never have to worry about writing a check, you're probably going to be better off just cash flowing that and then buying more real estate to pay for the roofs later. Mm-hmm. And that's where we differ from some of the stuff on BP, because there have been some books where people talk about, oh, you should just set it aside so you never have to worry about it. We invest it so we never have to worry about it, because if we grow quick enough in the 20 years before it's due, 10 years before it's due, it won't hurt our bank account regardless. So if it doesn't cash flow, it doesn't cash flow. But if you're just worrying about stuff that's like 20 years down the road, 15 years down the road, well, there's a lot of ways to tank a deal. Don't add steps on that.

And let's get into today's question, Cody. Our question for the day, and it's really more of our topic of the day, is there's only 4 ways to increase cash flow in real estate, and that's what we're talking about today.

Fact.

What are our 4 ways that we're going to increase cash flow in any given property, any given market? There's only 4 ways to do it. What are our first 2? Let's talk about those first.

Okay. Well, the really simple ones, you can increase your income or you can decrease your expenses. Like that. That's so— it's super simple, but you can either increase the income. That could be from raising rents. Could be from adding units or square footage, new amenities that you charge for, storage. I mean, there's so many ways to increase your income. You can also decrease your expenses, meaning if you upgrade the asset and now your utilities cost less because you got high efficiency appliances or features for whatever you own, there's a lot of ways to do that. You can fight the government on your property taxes. I got my property taxes lowered on my 12-plex from $9,000 and change a year all the way down to, I think it was $5,200. That's not a ton of money. However, if I save $4,000 just on an income approach, that does add up. So you can fight the government, pay less taxes. But no, seriously, if you can do those two things, your cash flow goes up.

What if the latter two— is that's not day one, right?

No, that's not day one because I want day one cash flow. There's only really two ways to increase your cash flow day one. What are those, Christian?

Well, the first thing you can do is you can put more money down. Turns out that if you borrow less, you pay less interest. That is a way to eliminate a legitimate expense. But you can basically pay your way there if you put more money down. Then you're just stuck. Like, you're just stuck with less, less money that you owe. You pay it all the way off, you don't have any debt service, which in most cases debt service is going to be your highest expense. So third way to do it is you just put more money down. However, that's not exactly what we like to do because we make a lot of our money on the spread between borrowing at lower interest than we do, uh, and we never have any money. Yeah, and we never have any money.

I mean, in relationship to the portfolio we have, we don't keep a lot of cash, so that's not really an option. So the real one, which is what we like to control, control the controllables, is borrow cheaper money, lower the cost of debt. If you can lower the cost of debt, you net more every month.

And the reason we say those last two, by the way, the last two are in place because you can control those before the deal closes. It's not something you're adjusting along the way. How much you put down is a decision that you make upfront. What your interest rate is in creative finance, you choose the interest rate, not the bank. So if you want to borrow cheaper cost of capital, you got to negotiate it. And it's that simple.

All righty. So now should we, should we move into the questions from the chat?

I think we should move into the questions for the chat. And we already have a few in here, which is great. And by the way, again, Instagram, if you want to join us on YouTube, it's Cody and Christian. Multifamily Strategy. You can see Cody's face, and we're better at answering questions there because they're like 5 times easier to read.

Are most of your deals, Christian, remote or in-person negotiations?

Most of my deals— gosh, it's really close to 50/50 because about half of our deals have been on market, which means they're typically remote negotiations. We're going to call a broker and hash them out. For the owners, they're 100% in person. Anything off market, except for one deal that a broker brought to us off market, uh, they've all been relationships that we've worked for an extended period of time. Almost never on the first meeting, but it's an extended, hey, we've got to know them, we got to know their goals, we've worked with them, especially getting started. It's the same 2 or 3 people who really— a lot of the transactions came through. Um, always negotiate in person when possible. How about you, Cody? About the same thing for you?

I know we have basically all the same deals, but I've done a lot of my upfront negotiations in person, and then usually the last little bit's over text. I mean, even on our deals right now, like, uh, in person, chat about it, and then hash out the last little bit over text. But we have the gist of what everybody wants. All right. From Justin, mentorship calls. Good to see you, Justin. Can you guys explain more about paying off your borrowed money for down payment when you have little money? All right. So the only way to pay off debt is with money. I mean, you can settle, but that's not good business practice. So you pay off debt that you borrow with money that you earn or you collateralize, meaning you get it from somebody else and borrow it again. You do not— just as a general practice— want to borrow from Peter to pay Paul. I think that's the saying. That is—

Cody's not saying, but you nailed that.

I got one. Not good at many things, but seller financing is one of the few things you don't want to borrow from one person to pay another in perpetuity forever. Can you make a ton of money doing that? Absolutely. That said, you should find a way to earn it. When you borrow money, you give yourself time. As long as it cash flows, you give yourself time until the balloon when it's due to figure out how the heck am I going to go earn this money. So the $125,000 for my down payment that I borrowed on the first deal took 2 years to figure out how to knock that out this year. We'll have paid off close to $1 million of debt. At some point, you do have to figure out where the money's coming from, whether it's from a job, whether it's from investments. Maybe you go buy a couple other assets and you sell one. We're not a fan of selling, but if you have to do it, you have to do it. You have to figure out where the cash is coming from. So if you get an asset to go way up in value, then you can borrow against the asset. To pay off the other debts. And if you— the stuff you're borrowing on your new deal is long-term, then it's going to be safe as long as the cash flow is safer than your down payment that you're borrowing. But you have to scale to do that. My model wouldn't have worked for me if I stuck at 12 units. Couldn't have done it. So I had to scale. But you got to figure out how do I get my income up, whether it's passive income or active income. You do have to get more money into your environment.

Got a question here from Instagram that I really like. It's from @karam41. Christian, can you tell me how I get a rental for zero down or even 3% as an 18-year-old? This would be a good call to have Caleb and Chuck on, but we actually had a couple of 18-year-olds who bought out of state. They live in San Diego, bought in Texas, but we got to help them through some of their journey there. And they, um, they seller financed it and they negotiated, uh, mostly low down, almost exclusively low down deals. We're talking 5-10%, so it's not, not, uh, 0 to 3. But where did the delta come from for the 10%? Cody, where— once they figured out the seller financing, which was 90% of their deal, they figured out the debt, what did they do for the equity?

Well, they, they brought in a JV, a joint venture partner. If then this is where you can choose. Like I did debt in the beginning, they did a partner. So if you want to bring in a partner for your deal, the order of operations is deal, debt, equity. They found a deal, then they found the debt, and then they found the money down. They had to figure out how they structure that money down. They didn't do it as a loan. They did it as a partner. That's typically easier to pitch on a first deal. That said, it's not impossible to do it the other way where you borrow it. But if you want to do zero down, if you're a veteran, thank you for your service, you can do VA. But if you want to play the creative game, zero down, you have to figure out how do I get all the debt? If I can get 100% debt and it cash flows, let's go. If I can't do that, how much money do I have to put down? If I don't have the money, who has it? And then how do I structure it where they're happy, I'm happy, and we can move forward?

Right on topic. Edmund asks, he would like to hear more about how you structure partnerships with equity partners. That plays directly into what we're talking about.

Yeah, go for it.

Oh yeah, I was going to say it's always custom. It is custom to the deal. That's why we put the deal first and the deal debt equity deal always comes first. So if it's something that we can knock out 100% debt, great day one cash flow. My vote is do that. Yeah, like just do where it, you know, do 100% debt like you did your first few deals, Cody. Stellar place to be because you just pay it off with the cash flow from the property and you're golden. That's it. Done. When you need to structure an equity partner, you got to figure out what they want. Just like any deal, they're going to have objectives. Make sure that you meet them. If their goal is monthly cash flow, either doing debt or a preferred return as a JV, could be a very good way to go. Coming up with a way to meet their objectives. I also work with a lot of people whose goal is I want to multiply money. Well, I love doing those because it's very simple to do as a joint venture. They're going to own the property with you and at a fixed period of time and at a fixed price, you're going to offer them the multiple on their money that they're trying to reach. You just have to make sure what makes sense for the deal and can the property make that happen either through refinance or through cash flow. If the real estate buys the real estate and the real estate buys out your partners, you get to own the real estate with or without them, and they can ride that deal directly with you as a JV.

Just—

yep, yep, exactly.

All right, here for another like and comment. We appreciate you consider the logic. Most people don't consider the logic. We need to add a logic test to our principles. All right. Do you use an attorney each and every single one of your deals? Yes. The no templates. We don't use templates. So that is super important that you're not just using boilerplate templates. You should have legal counsel on each independent deal because every deal is different, period. Yep.

And I mean, we've even gone back and taken operating agreements that we did with two groups of legal counsel and we've had a third group look at it and rework them because we have new ideas or clauses that we want to add. Legal's everything. Get a great, great lawyer and preferably one who does real estate. Carmen 41 had a question on the Instagram feed here. Do you guys do any webinars or coaching? We don't do as much of the webinar thing like we do this live call, which is close as we get to a webinar. I think we have an online course, about 200 videos. That you can go through. Very, very simple, um, little mini quizzes after them, but that will give you the information. As far as the coaching, we have a mentorship group. You're welcome to check that out. We don't try to plug it here too much, but it's themultifamilystrategy.com. We meet 3 times a week there going over deals, your questions, and some structured topics. I would love to see you join part of that group.

All right, we got another question from Edmund. Are you willing to bring down as much as it can produce for cash on cash? For example, if you're looking at 12% cash on cash at 10%, 10% down, seller wants 20% down, and your cash-on-cash return goes down. Do you pass the deal on or try to negotiate? Well, I'll always try and negotiate. I mean, I'm, I'm a dealmaker. I like buying real estate. I like figuring out how to do stuff with no money out of pocket. And so if I got to figure out how to come up with more money— I mean, we were looking at a deal right now that I tanked. I was just like, nope, not doing it. But originally they want $500,000 down, and then I submitted an offer for $620,000 down. And then they said they wanted $900,000 down and I'm like, not doing it because the purchase price was $1,400,000. It just didn't make sense. That said, I'm all for negotiating and just negotiation overall. I'm not going to take 5% cash on cash if I can get 12 really easily. So if it just takes one little maneuver to get the cash on cash up, I'm all for that. At the same time, cash on cash is only one metric. I care about debt coverage more than I care about cash on cash. My debt costs $100,000 a year and my net income is $200,000. Even if I only make 5%, I'm good. I don't care. Probably means I have more equity in the deal anyways. So you figure out your metrics and you get to make that decision for yourself. All right. We got a question from Bobby. Also, you might be able to put this on gallery mode so it doesn't go back and forth between the two of us.

Oh, I like that idea. I really love it with 3 people, but this would work where we can see everyone. And if you're on IG, the only way to see both of us is to join us on YouTube. Cody Christian Multifamily Strategy.

Bobby here on my way to a real estate company holiday party. Give me some magical chitchat tips. Well, I mean, what's your objective, Bobby? You just want to network, go network, go chat with folks, tell them what you're working on. You got a very cool deal you're working on. You got a turret. So tell them about that. If that's the Bobby I'm thinking of. If not, I'm sorry, you don't have a turret. But yeah, just let them know what you're working on because your deal is cool.

That is right.

Oh man, do you need a down payment required for financing or only capital for closing costs? I mean, if you're borrowing that or raising that from a partner, you don't have to have any money. Yeah, that's simple. Dividend Dave said hello, Christian.

Oh, well, hello to Dividend Dave. On Edmund's question there, do you need a down payment required for financing or refinancing? If you are going through a bank, they want to see skin in the game.

I know refinancing. Oops.

Yep. Well, when you can refinance with the seller, so the answer is still no, you don't need it if you're doing it privately or you're restructuring with the seller, which a seller refinance is a very legitimate play. It's one of my favorite terms. I think we're the ones who originally coined it, but it's a very legitimate— often you go to the seller and say, how did you like getting these payments? Would you like to restructure or continue the same loan? Those don't require a down payment. If you need to have skin in the game, the nice thing with a refinance is you have to have enough equity. For the 38-plex, we bought it with raised capital, so $0 out of pocket, no skin in the game. We increased the value of the property about $1,400,000. When we went to the bank, we actually got to pull cash out at the refinance. So we got paid to refinance, which is the cool thing about refinance. If you do this right and you build enough equity, you actually get to pull money out. One other benefit to that, when you do a cash-out refinance, you're pulling out new debt. Now I can redeploy that money, but it's debt, which means that is not taxable money. I don't get taxed on the $200,000 that we pulled out, which is awesome.

What are ways to lower property taxes on a home? Well, there's a form that I submitted to contest my property tax going up. They went up from $50, I want to say it was like $5,400. I think it was $5,419 a year to just south of $10,000 a year. And I thought that was a little overrated. So they lowered it to like $5,200. So it went lower than it was when I bought it. That was excellent.

That will not be the standard procedure. I know my parents have that happen to them on a Texas property, and I think they lowered the property taxes about $1,000. I've never seen them lower it to lower than you bought it outside of Cody's deal, but it does happen from time to time. But you are allowed to contest that. That is a simple state form from the, from the Instagram chat here. We got a good one. Do you use a broker for agency debt or do you go direct to an agency lender?

Well, I mean, we don't have agency debt. However, that said, when I go to get my when we take it to the next level for that type of loan product, we're going through a mortgage broker. I have heard, and I can't speak out of experience, check back in 6 to 12 months, but I have heard that it is difficult to get an agency loan product if you haven't had one. So I'm going to go through a broker on the first one so that they tell me what to say and what not to say because I don't want to screw it up. I don't know how all that works on a just a personal experience level because I haven't had to do that yet.

And if anyone's wondering, that's actually one of the main reasons that we went ahead and got a bank loan. We did not need to do it. We brought our 4% interest to 6.15. Yeah, 50-plus percent increase in the cost of debt. Why would we do that? Well, it turns out you really can't get agency loans without bank loans and other banks don't want to lend to you. If you don't have a bank loan, cool, we got to pull out a little bit of cash, which actually was helpful. I mean, we— that helped us cycle some other more expensive debt. So there was some utility to it. But the main reason to pull a $2 million bank loan was to have a $2 million bank loan. Within a week of closing that, banks from all over the place started calling us going like, hey, we can refinance that building again for you at an even better loan-to-value. Banks want to see that you have a bank loan. Agencies want to see that you have They also want to see the bank loans. That's kind of how you play the game.

We got offered another half million cash out as soon as we closed our refi, which was ridiculous.

Could have saved me a lot of fees there, Mr. Bank.

All righty. So on average, how many calls are you having with owners before the first meeting? One. Yep. No, I said no. Hi Noah.

Yo Noah.

Julie Anderson: I've been borrowing from Peter my whole life. There's another way. There's another way.

You can borrow from Paul to pay Peter.

No. Oh no, wait, I borrow from Paul.

Which is ironic because we actually do have a couple of Pauls in our network. But, um, no, seriously, there is, um, The only way to pay down our debts, and our accountant loves to remind us of this, people can cycle debt forever and it is just a terrible cycle because every time you borrow, you usually have to borrow at a higher premium. The only way to service debts is to earn money and pay them down or keep borrowing and placing money at a higher yield. But even then, you take the yield and you whack the debt. You do actually have to make money when you do this. Otherwise, you can buy everything and then you can lose everything.

Not worth it.

Nope.

Evan asked, did you guys buy a bunch of cash flow positive properties to sustain the 38 you bought? The 38-plex was the very first property we bought together. I had more cash flow than Christian, but not by a ton. I had 30 apartments.

Christian had 4, and I had more earned income than Cody, which helped sustain that. But it was a temporary burn. I do not recommend starting on a cash negative property. That's what that was. However, that building became our full-time job and we made it work. We had to do something big to put ourselves on the map to reach our goals. I do not endorse doing that as your first purchase. That was Cody's fourth purchase. And that, I bought littler stuff, but that was my fourth real estate purchase. So between the two of us, We had 6 deals under our belt before we took that on. And, uh, we came in with a very specific plan.

All right. So we've got, hey, someone, Edmund said gallery mode is way better. That's good.

We'll just launch these on gallery mode every time then. Go, you're mine.

That is the move. Uh, that is the mode and the move. All right. From South Sound Home Pros, coding Christian. I am licensed in Washington too. Well, Christian is not licensed anymore. He dropped it. He's been telling everybody it's not worth it, so now he's proven it. But I am still licensed. Let's see. I would really like to network with you guys on some level. Let's grab coffee. Yeah, that sounds like a plan.

Post in the chat where you're at in Washington. We're migrating Cody back up to Renton. I'm in Renton. So if you want to meet in the greater Seattle area, we are around and coffee is our thing.

All right. Edmund asked, have you ever heard of Gator Lending? If so, what are your thoughts on it? I have no clue what that is.

Gator Lending's Dr. Morbius. Posse Morbay. Gator Lending, to my knowledge, is— I believe Pace owns it or is a co-owner. But that is a lending org. I have not looked into it very deeply. I just know it's part of that whole subject-to community. It's deeply ingrained in their stuff. You'd have to look more into that. I have no further comment other than I, I'm aware of who owns it.

I just— I'm looking it up in real time.

Okay. We'll get back to you on the Gator Lending. In the meantime, what's the farthest property you guys own? Is it worth doing a seller-financed or other type of property out of state? He lives in Virginia. Farthest property we own is— well, it's every property pretty much. Moses Lake is a 3-ish hour drive away, 5 hours if you get blocked in the pass. But they're all about the same distance from where we live. And we invest very heavily in the same town, which I'm a huge fan of doing. Our mentees, Caleb and Chuck, live in San Diego. They invest in Texas, and they have some of their investing friends live in a different part of Texas, and one of them lives in Tennessee. So as far as investing, the main thing is choosing a market and sticking to that area, whether or not it's in your backyard. And this is contrarian. A lot of people recommend against this, I absolutely do not care.

I—

it does not have to be in your backyard. It can be any market anywhere. The main thing is that you choose a market and you stick to your market.

Yep. 3 hours from where I first lived, now 4 hours from where I'm currently at, and soon to be 3 hours again. Yeah. Does a seller have to own the property outright in order to ask for a seller finance deal? No, but they do have to provide clear title unless you're getting creative on that front.

Yeah. Which usually means your down payment has to be greater than their debt. So if you pay off your debt now, the title is free and clear and that can all be handled in sequence during closing.

I looked up Gator Lending.

All right.

Well, quick overview of what it looks like is you find a bunch of people to pull together the money for someone else's deal, and then you put together a JV agreement. So you get a fee. So your fee is typically higher than the interest rate that the lender would actually make. So you come out ahead and if you just become a capital lender, that's one way to do it. Wow. Did Christian drop off me? I don't see you anymore.

Oh, where did I go? Well, I still hear you. I'll figure out the Zoom thing. You just keep doing your thing.

Okay. But basically it looks like you put you bridge the capital. There you are. You bridge the— you bridge the money from people that you know and you get a JV agreement put together and charge for that. The idea is you rustle up some gators and release them on the deal. So that'd be something to look at. But I'd rather just figure out how to buy it than to make money basically being a mortgage broker. All right.

I have one more question in the chat, and I got, I got two primed here on Instagram, but this is as good a place as any to, to make the call for these questions. Go until you guys stop asking questions. We have two in the pipeline. If we run out of questions, the call ends. I like doing these. I, I have another half hour to an hour in me, so if you guys have more questions, post them now because we're going to get to all of them. Uh, Cody, what's the next question?

Is it worth being a realtor to invest in real estate? You're fit to answer that one.

Uh, for me, no. Um, I actually had a— I'll walk that back a step. I enjoyed brokering a few transactions. It was never what I wanted to do long term. I got it for property management reasons and ended up brokering a few deals just to go through the process. I learned a little bit about the paperwork doing it. I learned nothing about the paperwork in the real estate courses. If you want to become a broker as a step to be an investor, you're wrong. Not helpful. Will not do anything. Don't do it. If you want to be a broker to be a broker, you can have a ton of fun being a broker and you'll probably learn something new about the game.

And then one of the last questions here. Oh, that was the last question. All right, okay, you have your questions.

I'll ask this, and then, you know, hopefully some people have some new questions, and away we go. So Manny Man Number 4 asks, hey, so I know you guys probably already covered this, but how exactly did you work out, uh, the seller lending contract with people you know. So I'm interpreting that as when we do seller financing, how did we actually work the contract together? What does it look like? What are some of those details? It's shocking how little paperwork these are.

Yeah, there's not a lot of stuff to sign, but we submit a purchase and sale agreement. So your purchase agreement is what the real estate agent will write up, and that's going to outline terms. There's typically an addenda for, for what the seller terms are going to be. When you're under contract, if you're doing real estate contract or seller, seller note, you pick which one you're doing in your purchase agreement that will get sent off to an attorney while it's at title and escrow. Or if you're an attorney state instead of an escrow state, then it gets sent straight to the attorney. They're going to draft up the prom note and deed of trust or the real estate contract per whatever your agreement is on the PSA, and they handle all that documentation. You're not using boilerplates. You're not writing something on a napkin. That's bad practice.

Now, let's see here. So I'm going through some of the things. I realize one of my comments on Instagram was just a comment and not a question. What are your thoughts on land bank properties? Oh, I like this. I'll open this and, Cody, you can add additional color to this. I love land banking as long as there's cash flows.

They may be talking about waterfront property too. I was curious which way you're going to take that. Oh, if you're on like a land bank.

Oh, I see. It could go either way because there's land banking and there's— let's answer it both ways because I do have a thing about land banking and then you can talk about like waterfront properties and between the two of us we'll answer the question. Um, so land banking is where you hold land, especially in development areas. So you try to control a lot of the land in the path of growth for either future development or future sale. I love doing that as long as you can cash flow it, which means either the land has to make money, i.e., a parking lot, farmland, railroad, any of that— storage, storage, storage is a great one— or you do what Cody and I do and you buy parcels that come with attached parcels of land. So we'll buy multifamily, like the 38-plex came with a half acre of land. Our 6-plex on Broadway and Moses Lake came with a full acre of perfectly flat land. It's an excellent land banking site for holding the land in great areas. However, our tenants are paying for it, and that is the key there. Cody, talk about waterfront land in case that is the question.

I like waterfront property, own a little bit of it. That said, there's more due diligence you have to do with it to make sure that— like we were looking at the Robin Hood, it came with land on the water and we just opted to do a forever easement rather than actually purchasing the waterfront land for the most part, because there would have been a lot of surveying and just land studies we'd have to do if we were to acquire that for environmental issues. So it can come with issues, but it's really beautiful. Not making more of it except for if you're in— I think it's in Dubai, right?

Oh yeah, where they're just making additional islands.

Yeah, yeah.

But they're not making a lot more of it. I'm going to say that there is less land than money being printed. Okay, let's see what individual documents are required to go through a seller finance deal and what the documents look like with an equity partner. Cody, you want to take that one? I'll take F2.

Promissory note and deed of trust. If you're doing seller financing or a promissory note and some other form of collateral, deed of trust is the typical standard.

And for a partnership, you're going to do an operating agreement. It's going to be drafted by a lawyer. And ours have worked their way up to like 75 to 100 pages for a lot of them. But it goes through who owns what, what do you do in the event of a disagreement, how are capital accounts handled, how are taxes handled, who can loan to the LLC? All those questions need to be answered in an operating agreement. There are like 5-page operating agreements you can download online. Do not use those. Operating agreements are your lifeline. Partnerships— go into all of them assuming that they are going to fall apart at some point. If they don't, great. Most of them will. Assume they'll fail and protect yourself accordingly.

Johnny just did their first seller-financed purchase. Congratulations, Johnny.

That's a big deal.

Do you guys order an appraisal with your multifamily property? No, we don't care. How do you buy? How do you never lose it? Appraisal is not one of those things.

Yeah. Now, if you have an up-and-coming refinance or using a bank, if you're using a bank, you have to do an appraisal unless you put enough money down. Unless you put enough money down. That is true. But generally they're going to want an appraisal. If you know that you're refinancing, say you buy something and it's on a 3-year balloon. I don't advocate for that, but sometimes that's what the deal requires. If you have a deal on a shorter-term balloon, we typically don't. But if you don't know what your valuation is going to be, I would recommend— I'd actually really highly recommend looking at an appraisal so that your guess is not way off.

I think we answered this, but it was probably too short of an answer for them. REI Stoners said, I think you missed my question. Does the seller have to own the property outright? No, they don't. However, as a standard clean deal, to get free and clear title, you have to do— you do have to pay off the obligations. So if you're not getting super creative, if they owe $500,000, you need to put $500,000 plus the closing costs down to get free and clear title. You could assume their mortgage, but all the lienholders have to sign off. To transfer title. What's the general difference between aiming for the bigger multifamily, 100+ than 8 to 10 units? Well, you guys aim for bigger deals in the future. Yeah, having a whole bunch of tax bills for a bunch of little properties is obnoxious and we pay the same amount to our CPA to file our returns for our little stuff as we do our midsize stuff. So I'd rather have 100 units of income rather than 2 units of income.

That's my thought too. The biggest difference is the number of zeros. And if you get big enough, you get a bunch of efficiencies like on-site management, which I just like so much better.

All righty. Let's see. Wife and I picked up on our first flip What are your thoughts on hard money lenders versus banks for financing benefits for each? Banks are going to typically be cheaper. Hard money loans are easier to get, but they're harder to get rid of. So I just pick your problem. One's going to cost you more monthly, especially on interest front. I mean, instead of paying 6 or 7 right now, you'll pay 12 to 14 if you don't have experience. So I'd rather opt for a bank if you can't do the seller finance route because you're going to save a lot more. But if you need to get it done, the bank's not going to be the fastest route.

And it also depends a little bit on what your debt product is going to be like. My first— I've only done one flip, but— and it wasn't supposed to be a flip. I bought it in a way that I could have held it forever easily. However, when we were doing the renovations for the property, the original financing was 101% financed hard money. You're not going to find a bank that gives you 101% of the money to purchase for a deal like that.

No. All righty. Well, that's all for my questions that I have on this chat.

All right. Let me give a quick little scroll through and see if we have anything else.

Nope.

I had one question that I missed in here, so I'll answer that question. And then, yeah, guys, Get your questions posted because we're pretty much out of time. If we don't have a question after this, we're wrapping. So yeah, we're wrapping. So the question is, um, how does the first meeting look when you meet with a seller?

Typically meeting over coffee. I'm sharing little bits of my story, learning about theirs. My goal is to go in there and learn how they got to where they're at. I want them to have enough pieces of my story to where they know how I'm getting to where I'm at, like my, my past, my present, my future, where I'm coming from, where I'm going, why I'm going there. But that's it. Just want to establish that relationship.

Yeah, that's pretty much it. You, you meet, you share, uh, we talk about the circle drill a lot in our, on our channel and in our online course. It's one of the first things we share, but essentially You have relatability, you have a goal, and you have the significance behind that goal. You should have mapped that out pretty much every aspect of your life. So did you have a crappy first job? A lot of people did. How did that motivate you to buy multifamily? Why is it significant that you actually succeed? These are all questions that you can go over. Uh, you can do it for, hey, I dropped out of college, I had a sport, whatever your thing is, map out your story. Your mission in this meeting is to map out the other person's circle drill. So you should have mapped this out well enough so in a few sentences you can just go through and have that conversation with them. This is what I did. This is why I'm doing it. This is where I'm at. Then you just learn how they got to where they're at, and then you go out and apply it for yourself. But that's what the meeting is all about, an alignment of your circle drills. I had a second question here. What should I expect to pay an attorney for an operating agreement? What do you think? Got a couple hundred bucks?

Yeah, $300 to $500.

They're pretty cheap.

That'd be my guess. Yeah, that's about right. All right. We got a couple more questions in the chat. What do you recommend for a hard money lender? We work with Flynn Family Lending in Washington State, but they only fund in Washington as of right now. How do you structure your equity stake in a deal where you have to raise 100% via a partner? All depends. We've done it where we've kept 67% ownership in a deal. It's just, it's dependent on what you're buying, depends on what the other person's comfortable with, what they want. They may want 80%, they may want 10%.

When we do a lower backing though, we typically will put a clause in there that says if we fail to pay you back by the time we buy you out, we forfeit our equity. So even if they come in with a lower equity position, we back it with more equity than we are raising for.

Yeah. What are ways you can vet a hard money lender and know if they're in it to scam you? Well, I'd go meet with them in person first. There's some online company I'm not working with them. I don't care who they are, what they promise.

I'm in the same boat. It's, uh, it all comes down to the relationship. There are a lot of scammers out there. Uh, the only other thing you can do to protect yourself from that is get referrals. Just there, there are— this is why we meet with owners. This is why it's so critical to meet the other players in your market. I can call the other people in Moses Lake, Washington and ask them who they're working with and what their experience is because we're on the same team and I have those existing relationships. A lot of them have probably already gotten burned by someone So they can steer you to who not to do.

Yep. Do you go in day one with zero equity? I don't buy deals with zero equity. That's a poor idea. Did you say you have a real estate meetup you host? Yep. We've got a— our next meetup is going to be January 20th, 21st, 22nd. That is a Friday through a Sunday. We have a real estate event. We have speakers coming in. That'll be at the Robin Hood Village Resort. And you can message us if you actually want to book that. The number to reach out to— let's see, I can pull it up.

I'll type it in the chat as you go.

All right. The number to message if you want to shoot a text over to book the event, just book the cabin cost, 360-490-8168. 360-490-8168. Just shoot that. Number of texts, that'll be Hannah. She's awesome. She's part of our team and she can hook you up. Okay. Someone said attorneys only charge $300 to $500. What if there's an attorney that charges $2,500? Well, are they that good? I mean, is there going to be something that's that worth that much more? Because if they're doing the prom note, the deed of trust, that could be worth it. But I would just find someone solid. I pay the pros more than I'll pay anybody else. If they're the best, cool. But I don't spend $2,500 on an operating agreement. Never had to do that.

They're usually— until you get like really complicated, they're usually pretty boilerplate. And as you work with an attorney more and more, they usually work off your prior operating agreement. So the more you do, the longer and better they get, but they usually don't cost any more because you're just adding to an agreement you've done 100 times.

Johnny asked, so you're building relationships before buying or building as you negotiate? Yes, you build the relationship first. Is Flynn Family a local group I can meet with? Yep. If you're in Washington, they're based out of Renton, Exit 7. Go check them out.

You can message us on this channel, or if you want to connect with me, I can make the connection because they live and work right next to my house. You can hit me up on Instagram @ChristianOsgood. Happy to help you there.

All right. Edmund asks, how much is the overall cost to work with an attorney to close? Some attorneys charge $250 an hour. Well, yeah, some do. Some charge more. I think our charge is more, but it depends how complicated your deal is. If it's really simple, you may spend a few thousand bucks. The Robinhood costs like $10,000 or $12,000 or something in attorney's fees. All right. Let's see. Is having an LLC a good idea from Eli?

Not if you're buying it individually. If you're just buying it yourself, this is my opinion. You add steps. If you're buying a duplex through fourplex and you're doing it by yourself, I can't think of any reason why it would ever make sense because your LLC will be ineligible for Fannie Freddie debt, which is the best debt products you can get are all backed by Fannie Freddie. All your 30-year fixed rate debt, which is the only reason you would really want to pick up a lot of small multifamily if you're getting started. If you're doing partnerships, you have to do an LLC because you have different partners on the LLC. And that is just how the— I mean, that's what the operating agreement is for. You have different tax returns, you have different tax burdens. You file an LLC end of your tax thing that follows your operating agreement instructions., and that is how you allocate all the income depreciation expenses.

So it can be if you have partners, you structure an LLC with the attorney before you go under contract. No, no, that's during feasibility. All right. Ryan Mitchell, I'm sure that every deal is different, but typically how long are your equity partner agreements before the buyout? Usually 5 years.

Yep. That's the typical— a couple of them are 3, but it's 3 to 5 years almost exclusively.

Johnny asked if there is a referral for a reasonable attorney. If you want a good attorney in Washington, you can text us or message us on Instagram. I'm not going to blast them because then they'll get too busy for us. Yes.

And before anyone asks, our accountant is retiring. I don't have a referral for an accountant because we are going to be his sole clients when he retires. I got a question here from Alex. I have a deal according to the owner no one else knows about. Okay, this is an off-market deal. I worry about asking for help and getting bumped out of the deal. In your experience, should I be open about the deal or not?

Hmm.

Well, if it's off-market, you're working direct with the owner, I would ask for as much help as you can. It's about building a relationship. I would start by communicating my goals, being up and upfront about what my experience is, but I would definitely, um, push through as much confidence as you possibly can on, look it, I'm going to figure this out and I'm your buyer for this if you want to buy the deal. Instill confidence, but absolutely ask for help. That just gets buy-in. That's my, that's my thought.

Cody? Yep, I, I ask for help all the time. That is the way to do it. Yep. Alrighty, someone asked On average, what does each door cash flow in your portfolio net? It is— I'm not going to give you the exact number, but it is more than $200 and it's less than $1,000. It is a few hundred bucks a month. All righty. Is feasibility different than due diligence?

Nope.

Those are the same thing. When we're talking about that, those terms are synonymous.

And as a side note, I don't like making earnest money due before we get through that feasibility/due diligence. There's no reason to put down money because people lie too often. It can just be a pain to get it back. So I usually put in a term that says, hey, we're going to do our due diligence, and as soon as we check off that box, we're going to give you the earnest money.

Yep, that's it, I think. Oh, someone— Johnny asked your thoughts on buying subject-to and selling on a wraparound mortgage.

Adds a lot of steps.

Yeah, we heard someone talking about that on stage at BP. It's like, that's a lot of steps to not make a lot of money. You're going to be doing that on very little deals. You will not do that on huge assets, period. Like, that's not going to happen. So if you want to play in the small game, you can do that. It's difficult to make a lot of money doing that and depends what you quantify as a lot of money. But when I'm talking about that, I mean like 7 figures, you got to do a lot of deals, you can add a lot of steps and subject to clause. That's part of a strategy. If that's your only strategy, if you're a hammer, everything's a nail. You just sit in your spot in the toolbox and that's it. It's good to build a strategy that allows you to use all components so that you're not just looking for that, but if it pops up, you can execute on it. If that's the only thing you're looking for, you're going to miss a ton of opportunities.

Mm-hmm. I really, really agree with what you said, though, about the— like, we heard this person on stage and it's not the guy you think of when you think sub-2, by the way, but it's another guy talking about the sub-to deal that he did with a wrap to sell someone else. So basically the sub-to is you get someone else's debt that you're servicing, so they continue paying the debt, you pay them to keep their mortgage in place, you take title of the property, and then you package that whole debt package to someone else. So you'll write a contract, they'll have payments to you, payments to the other person. Like, wow, it's really, really complicated.

—40 grand.

Yeah, they're like, and we made 40 grand. I was like, oh my goodness, our first deal ever made a million dollars and it was seller financed. And it was like, hello, we would like to buy this. And then we bought it. I mean, it was super easy. I wouldn't add all of the steps. I got a quick question here on the Instagram stream. By the way, Instagram people, go over to the YouTube channel. It's even, it's better and you can see both of our faces, Cody and Christian, Multifamily Strategy. This question is, okay, this is the biggest newbie question. I doubt it. You'd be amazed how many newbie questions we see. How or when do you check if a wholesaler actually is able to sell a property to you, or is that all handled by the title company? I love this question because there are a lot of scammers. The wholesaling thing, people will try to get a fee, and if they're trying to get fees upfront to do a deal with you, Absolutely no. No one does that. That's not a thing. Wholesalers are paid at close. You are exactly right. It is handled by the title company. Do not skip that step. You need to make sure that there's a real contract with a real property at the end. There are people who buy sight unseen and find out that they closed on a property that doesn't even exist. Crazy. But yes, title will let you know that. I also wouldn't buy property sight unseen from a wholesaler. That's just me. I would see them.

I probably wouldn't buy it from a wholesaler because the amount of wholesalers that have actually good opportunities are slim to none today.

That being said, I wouldn't, I wouldn't completely take it off the list. Like, there's some— I've seen some people get a deal under contract they really truly want to do, find out that it's not the right deal for them, but it could be the perfect deal for me. I would pay a wholesale fee to an operator who owns real estate. But if their job is wholesaling, I've never seen them keep a good deal.

So Jean said, using a HELOC of $100,000 to buy a million-dollar 12-plex, how do you suggest I scale from there if I don't want to refinance my building for 5 to 10 years? Well, you got to figure out how to go get more loans. Or earn more money if you don't want to partner. Like, those are your options. Either go get new debt— people don't understand this, but your ability to scale is capped by your ability to get new loans. If you can get new loans and they cash flow, you can go buy as much real estate as you want. So you have to figure out who's going to give you that loan. If the bank's not going to give it to you, credit union's not going to give it to you, you know, just people aren't going to give it to you, then you need to look at yourself, figure out, okay, how do I make myself bankable? Or how do I talk with owners to where they might give me the loan? Because if you can't get the loan, you're not getting the deal if you're not earning the money.

A question here from Chuckie Sotelo. You guys probably know him from our YouTube channel. I have a feeling he knows the answer to this question because Chuckie is one of the smarter investors I've met. But is that—

does subject-to add risk? Any time you add people or debt, you add risk, period. So yes, subject-to, the clause itself is one way to maneuver a debt product, which number one adds risk and you're keeping extra people in the situation, which adds more risk. So yeah, but debt in general is going to add risk. So if you don't want as much risk, don't borrow as much money. If you don't want as much risk, don't partner, don't bring people into the space. That's—

and more people are more variables. Variables add risk because they vary. So whatever you— funny how that works. But when you have a variable, it means that you do not have a constant, which means you do not know for a fact exactly what is going to be in the future. The more variables you add, the more things can fluctuate. That's a great way to lose real estate. That's why we buy long-term fixed rate debt on properties that cash flow day one. That is the target. If we deviate from that ever, it's because we have a very specific plan to bring it into line extremely quickly and we do not affect our global cash flow. So yeah, sub-2 is going to add quite a few steps and quite a bit of risk.

Johnny asked, what numbers do you use to evaluate whether it's a good deal or not? I, I look at number one, how do I buy? How do I never lose it? So the key components of that, it needs to have good debt coverage, meaning that I have excess cash flows as a ratio, not looking at the ratio of cash flow to what I invested, but a ratio of the cash flow to the debt that I took on. I want to know if my debt costs $10,000 a year, how much do I actually net on top of that? Because that's more valuable than cash-on-cash return. If you put no money in, you have an infinite return. But if the cash on the debt coverage ratio is 1, then, you know, or 1.1, you know, it's really low. You could be at risk of losing the asset. It's one thing to buy it. It's one thing to never lose it.

We've got a great question here from Edmund. What are ways to verify the numbers during the feasibility period? Also, how many days on average after that period needed to close? Is feasibility— is the— is it feasibility period, inspection period, then close? Inspection will be part of feasibility. To answer the second part, feasibility is kind of your catch-all. However, Cody, you do a lot of the audits for these.

What do we do for verifying our statements? I look at bank statements and I want to make sure that they line up. The, the perfect number in accounting is zero. If it all zeros out, balances out, great. So they give me a report. If it's off from their bank statements, I'm going to call them out on it. Be like, this isn't accurate. And they'll be like, well, I didn't run everything to bank. Like, okay, well, I don't— we're going to have to do something about that because I have to— I want to look at utility bills, tax bills. I want to make sure that they're all paid up on their taxes, even though that'll get paid out of closing at escrow. I want to get a quote for insurance, so I'm just going to look through all their expenses and line by line, make sure that it lines up with bank statements, because if it doesn't, they're lying. I don't want to work with people that lie. I've done enough of that. And a lot of— I asked— Eli's asked if anybody's tried suing.

Cody, you're more qualified to answer that than I am.

I mean, I've, I've sued. Someone because they stole a bunch of money from me. And I got tagged with a small lawsuit from a family friend who placed a small dollar figure with an old mentor. There's a reason we don't name drop my old mentor because that didn't go very well. But there were things that were done on his end that shouldn't have been done. And I got tagged with someone else's mess. And that was a whole adventure. So yeah, that happens. And that's, that's the reason we don't work with that individual anymore, that individual being the, the mentor. But, uh, good business is good business and vice versa. And even if you get tagged, I got released from it because I had nothing to do with it. If you're doing good business and you keep good records, it'll happen. It's a matter of not if, but when. If you play this game, it's just how are you operating your business will determine your outcome on that one.

Mm-hmm. Most, but not everyone who I've seen who's been tagged with lawsuits and have kept good books have been fine. It's the people who actually had something to hide or did something really sloppy that got wiped out by lawsuits. Lawsuits will happen. It's part of the game. This is owning real estate. There's real money involved. Very significant money involved, which means there's going to be very significant legal. Do everything you can to protect yourself because lawsuits are unfortunately part of the game.

They're very expensive too. All right. So those— Johnny has a deal. Let's look at that. I have a seller finance opportunity. Seller price, $3.6 million. Net income of $226,000. Oh, no, my phone turned. All right. So I'm just going to get my calculator out because I don't feel like doing math today. So we have a purchase price of 3.6. You've got 226 NOI. If we divide those out, you have a 6.3% cap rate. And yes, I am rounding. So how do I evaluate if this is a good deal? Well, I have no idea where that is. Numbers are irrelevant. Without context, that's in Detroit. That is a terrible deal. So I would figure out what the going cap rate is for the area, figure out if there's upside. I mean, there's— is it stabilized? There's a lot of pieces you haven't shared with me. That said, the factor rate on your debt— and we still owe a video to the online space. We've actually done some math videos on this on YouTube. But your factor rate, your actual true cost of capital, has to be less than your net income as a ratio, which is just the cap rate. So if you have a 6.3 cap, your cost of debt has to be below 6.3%. Otherwise you will lose money on every dollar you borrow. And that's just about as simple as it gets. I'm not saying the interest rate, but the actual fact rate, the cost of capital. So that is something that you should look up. We have some math videos on here. I don't know anything about your deal. Oh, it's in Seattle. Well, no, I'm not going to buy anything in Seattle. Seattle sucks. Yeah, I just wouldn't buy in Seattle. You can do that if you want, but I wouldn't touch a 6-cap in Seattle. I would maybe buy a 10-cap in Seattle and then sell it on a 6, but I would never try and hold something in King County for long term. That's—

that is my thought. We got 3 questions from Edmund. I'm going to answer them in rapid fire. Also, where a lender doesn't charge upfront fees, correct? Yep. Lenders usually get paid on close, so expect that to be a percentage of your deal. I've never seen lenders charge upfront, so that's correct. Is the only party that charges upfront fees an attorney? Yes. Attorneys bill hourly. There's a few other people who will charge upfront if you do an inspection, which you should. Your inspector is going to charge on site, and that's true of any inspection for sewer scopes or what have you. But anyone who's a contractor, it's going to get paid up front. Anyone as far as closing the deal, title companies get paid at close, brokers get paid at close, lenders get paid at close. And do you guys have videos in regards to goal planning? Uh, best video series we have, because that is a more specific topic, we actually did put that in our course, themultifamilystrategy.com. That is the opening is how you set your targets, because if you actually go through the whole thing and you don't have a target set, I would say— and Cody, feel free to agree or disagree— the course is widely pointless if you don't actually know what your target is because you don't know when to stop buying, you don't know when to roll down your debt. The strategy doesn't really work without a goal.

Yeah, if you're just aimlessly wandering, you're not going to go very far, period. It doesn't matter what you're doing. Go to college without a plan, you just drink your way through college. You're probably not going to get a whole lot out of it other than a beer gut. It's good to know. I mean, it's real. So most people operate their life, they go through it without a target. Not a good place to be. Okay. What's an average closing cost? Depends on what you're buying. That said, I budget for around $5,000 to $15,000. Okay. Someone asked us why Seattle sucks. I think the list would be shorter if we said why it's okay. Seattle— everything about owning real estate in Seattle is awful.

Values are tanking there at a higher rate than almost any other city in the US, with the exception of New York, I believe.

Now, that is a byproduct. Like, that's the, that's the out or the outcome of terrible management as a city. The landlord-tenant laws are terrible. They're not as bad as Oregon, but they're catching up. Yeah, but you want to be an owner. If you want to know why Seattle sucks, try buying a couple of rentals in Seattle and then come back in a year or two when you have to pay your tenants to leave after they didn't pay you for a while. It's just garbage.

Yeah. No, no bueno. And there's all sorts of bonus stuff like we The only thing we own in King County outside of my house, we own a 7-plex in the greater Seattle area, and we had a mandatory inspection by the city and they decided— and we did, after a long process, get this reversed. But they decided they did not like the flooring of 2 of our units. There was no actual problem with it. They just thought it was ugly. And so they issued a fine. And gave us a 30-day timeline to completely replace the flooring in 2 units, as well as all of our working fridges, because our fridges were older than they wanted them to be. Though they did not actually check the dates, they just decided that looks old, therefore it is old. 2 of them were actually almost brand new.

Seattle. Okay. Edmund asked, is it favorable to invest in states like Texas and Florida? We just invest in Washington. You can invest wherever you want and there will be people that succeed in any market. There will be people that fail miserably in every market. You have to pick one market that you're comfortable with and stick to it if you want to scale quickly. People that diversify too quickly don't grow as fast. So pick a place. But we buy just in Washington right now.

The higher appreciation markets are typically the harder ones to operate in because they're less friendly to building and they tend to be places that attract high-tech jobs and other high-paying jobs. You typically have high population growth but terrible building standards, which means your supply of humans goes up, the demand goes up, but the housing supply stays roughly the same, or at least doesn't grow at the same rate as demand. Therefore, with just basic economics, your reward for playing in a difficult-to-rent market is typically high appreciation. If you go to markets that tend to be a little bit easier to operate in, that are more landlord-friendly, they also tend to be more cash flow friendly, which is fantastic. They do multiply your money a little slower because one, more appreciation— or sorry, more— let me try that again. They tend to appreciate a little bit slower. They're longer to— the cash flow markets are a longer trajectory to multiply your money because with more cash flow, you have more competition, which means harder to get your appreciation because it's competitive all the time. A little harder to land your deal. And with high cash flow, you typically have properties that stay around the same value. They just pay you more to hold them. So different strategies, different markets. However, someone has to own everywhere.

Would you think Aberdeen would be good? No, I've been to Aberdeen. I don't like it. I would not live there. I would not invest there. I would live in Moses Lake if I had to. I would live in Union. I live in Union. I bought here. I'm moving back to King County. I own in King County. I don't really want to own in King County because the rules, but like, I don't buy places I wouldn't live. So I would not live in Aberdeen.

Got a question from the Instagram here. Christian, do you go after distressed sellers? No. One, I don't go after anyone. I want to talk to anyone who owns multifamily in a market that I want to own in, period. If you own multifamily, I don't care if you're distressed, rich, loaded with debt, have no debt. It doesn't matter. In-state, out-of-state owners. There's no super list other than people who are playing the game. There's something to learn from everyone. There's opportunity with everyone, and we just get in front of them and meet for coffee. I have found in general, a distressed seller is typically not a master of the real estate game. Doesn't mean the best players never lose. Like sometimes people get pinched and they rebuild. There's been some great players in the real estate space. Dave Ramsey's one. He owns a ton of real estate. He went bankrupt. He lost everything because he played it wrong. That being said, distressed sellers are hard to do multiple transactions with because they're usually in the process of losing everything. If you play with someone who is an advanced player who is, we'll call it, winning the game, your opportunity there is much, much larger. Yeah. Cool. There was one from Hayden in there. If we answered it, I missed it. I answered Hayden.

Oh, we did. Oh, that's a different one from Hayden.

Have you guys considered applying the strategy to an asset class that requires less maintenance, like self-storage?

Yeah, I looked at a $6.5 million self-storage deal seller. That property owner— this was off market. They ended up wanting to hold on to it for a while, but I looked at putting $1.2 million down on a storage deal. That was also over in Central Washington. You can do it on any asset class.

Well, I've answered Instagram, we've answered YouTube, so I'm going to do one thing for our sign-off. I'm going to repeat this. We're doing events. The last one I want to just talk about a little bit. I'm going to put in the YouTube chat right now the phone number one more time if you guys do want to join us. But our last event, we got to spend 3 days. We had about 30, 35 people. You book a cabin, you get your hot tub, you get to hang out. It's a vacation, like it is a resort on the water. You come out there, join us. We did 5 sessions, an hour each, with some guest speakers. We had amazing food. They just opened the, uh, the wine bar across the street from us. So you get to hang out with other investors, you get to network. You get to learn and you get to do it for roughly the price of a cabin. If you guys want to join us on the next event, everyone from this channel, I really appreciate— I see a lot of the same names every week. I would like to meet more of you in person if you're available January 20th, 21st, or 22nd. Please join us there and you can call that number. It's 360-490-8168. I would love to meet some of you guys in person.

Alrighty, well, that is a wrap. Alrighty, see you guys next week. See you later.