Christian Osgood bought his first duplex off-market in 2020 with 5% down, generating $750/month in cash flow. He argues 1-4 unit properties don't reward improvements the way 5-unit buildings do, where income-based valuation lets you scale faster. His partner Cody made more money on a 12-unit deal than smaller rentals.
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When you're going out buying your first duplex, I recommend you go bigger. You want to buy your first duplex? Here's exactly how you do it. Hello, welcome back to the channel. I'm Christian Osgood. I'm not joined by Cody today because I started with duplexes, he started with 12-plexes. I am the one who buys the most duplexes. Now today we both buy larger properties. I'm going to get into why we do that. However, if you're looking to buy your first duplex, triplex, or fourplex, I'm going to talk to you today about how to do it. So back end of 2020, the whole country was shut down. I had been wanting to be an investor for a very long time. What I finally did was buy my first duplex. I saved up for years and I lacked the courage to go and just buy a piece of real estate. And I say this all the time, need to say it again, the only way to be a real estate investor is to buy an investment property. I wanted to be in multifamily. I finally pulled the trigger. Here's some of the stuff I learned. So the deal, how did it come up? It was brought to me. I off market. I got a phone call from a property manager who said, hey, I have a client who would like to sell a building. They would sell for this price. Do you know anyone who might be interested? At the time, I was working for a data company that called a bunch of owners. So their hope was I might have talked to someone recently who might want to buy that property. When it came up, I ran the numbers so I could prepare to present it to someone and realized this is about perfect for me. Cash flow, I could buy it $30,000 down, the goal of moving into it, doing some light renovations, and eventually renting it out. So I could buy it super low down with a conventional product, 5% down. If you want to go lower, FHA might be an option for you, as low as 3.5%. If you serve in the military, you can get in for as little as 0% on your VA loan. So there are options for these low-cost products if you are buying as a primary residence. Now fast forward to the future, I actually got an exemption where I never had to move in. I moved jobs and location. They actually gave me a letter that said they are just fine with that. I know not everyone does that, but that's what I did on this. So I got in $30,000 down, the deal cash flowed $750 a month, day one. The price was just under $400,000. Today, I entertained an offer a couple weeks ago for $520,000. So in a few years, you get a good deal of appreciation. I've got paid every single month on this. It's been one of the most hands-off properties ever. What I learned from this process, if you are looking for a deal and you're receptive to it, they start appearing. It didn't take long after that to buy my second duplex, Central Washington fixer-upper. The first deal, I learned the confidence to close. I learned some negotiation. I learned not to renegotiate, uh, mid-deal. Ask for the terms that you want up front. I got a lot of that out of my system in the learning phase. Now we're on to duplex number 2, Central Washington. I'm confident now to go do a renovation project. So we go in, we basically demo the whole unit, take out all the cabinets, all the plumbing. We redid the roof, like totally flipped this thing and did a fantastic job on it. How do you get started though? You need to be listening, you need to be receptive, and you just need to be around people doing real estate. Deal number 2 came from being around people in my office. I actually used to work at the same company as Cody. He came by my office and said, hey, my friend just bought this duplex. Do you have anyone to buy the one next door? Look at that. I'm not hunting for deals. I'm just around people doing transactions. And that deal came about. Now, if you're looking to buy your first duplex, triplex, or fourplex, there are a few things to remember because you actually shouldn't start with small multifamily. That's something I've learned through doing this. 5 units and up is easier. 5 units and up, you have more control because of the valuation. Here's what I'm talking about. Duplexes, triplexes, fourplexes, and single-family houses are all valued based on what your neighbors sold their property for recently. This came into play on that second duplex. I spent way more money than the next door neighbor renovating. I made the thing absolutely beautiful. However, when I went to refinance the property, they used the beat up property next door that sold at the same time as one of the comps at the lower price. After I got my refinance, that same owner came in and refinanced his, and they used my new financing as the new valuation for the comp. And he actually got a higher valuation than my identical property, but his was completely unrenovated. See, they don't care about the operations of the property, the income, and your ability to operate the property on the residential stuff, 1 through 4 units, does not affect the valuation. They're all valued just like a house. Sales comps in the market for similar properties. If you're really looking to get started and you want to scale multifamily, I recommend looking at 5-plex all the way up to a 50-unit building depending on how aggressive you want to be. Now, I learned a lot on the duplexes and I needed that to build the confidence to move forward because I didn't have anyone telling me how to play this game. If I could go back in time, I would have started where Cody started. Cody's first deal was a 12-unit building. His second was a 12-unit building. His third was a 6-unit building. My third transaction, Cody's fourth, we did it together, was a 38-unit building. That building, I promise you, makes a lot more than any duplex you're going to find, and it's easier to actually do the transaction. You see, the sellers of commercial multifamily are typically a little bit more sophisticated. They understand more, so you can negotiate more reasonably. There's not an emotional price to most of these. It's a, this is where it makes economic sense for me. How do we structure this? We do a lot of creative finance. Cody and I have bought a lot of small multifamily, even duplexes. We bought on seller-financed contracts. When you get the bigger properties, you can explain, here's the price, these are the numbers behind why I'm offering what I'm offering. And this is how we're going to structure a deal where you get what you want and you're never going to have to take back the property because we are going to make this cash flow on long-term cash flowing fixed rate debt. When you're going out and buying your first duplex, I recommend you go bigger. If you're not going to take that advice, follow those rules. The deal and the debt and equity. So find the actual property. This happens every single time. Look at the actual property, the actual financials. What is the opportunity in front of me? That'll determine the type of debt and the ownership that you have. The next piece, long-term cash-flowing fixed-rate debt, and that is the single best thing for small multifamily. Unlike commercial, this is the one thing they have on it. You have awesome 30-year fixed-rate products. If you can buy these small multifamilies on long-term debt, fixed rate, where the property will pay itself off all the way in 30 years, fantastic product. Good to add to your portfolio. You're starting, telling you, you're not going to regret going bigger. Hope this was helpful. You want more, you can always hit me up on Instagram. It's a great place to message me, @ChristianOsgood. If you haven't yet, hit that subscribe button, and we'll see you guys on the next episode. Now, if there's one YouTube channel that you watch to learn creative finance, multifamily investing, I'm going to recommend Cody and Christian Osgood's Multifamily Strategy.
