We closed! 3 closes from Mexico!!!! Multifamily Live

on Leap Day. So that's going to be a memorable closing. That will be a memorable closing. But should be a lot of fun because that was actually one of the first properties that you and I set out to buy when we started in Moses Lake. We drove by it, said we want to own that. So yeah, that's super exciting stuff. But happy that we are getting those all wrapped up and then onwards and upwards. We are well past the 200-unit mark now. Which is a lot of fun. We got that scale there and we did it without syndicating, which is a big win. And, um, we should be able to make the strong push to 300 this year, sell down and pay off the rest. How's Mexico?

It's a lot of, uh, yeah, a lot of transactions. Mexico's been fun. So we got here, uh, yeah, like Cody mentioned, in Mexico right now. It was fun learning how to close some of the notaries. We actually did a virtual notary. So someone actually had to come in, hop on essentially a Zoom, and they asked a bunch of like super specific questions that you have to get right or it delays your signing half an hour. The funny thing is Cody and I own so much real estate, one of the questions was, do you own property in these, in this county? There were 3 different counties on the list that we own property in. There's like, oh no, there's only one right answer. Turns out if you have 200 units, um, you may own in multiple counties. We had to figure that out. We guessed the right one of 3, and, uh, that allowed us to sign and close. So yeah, we got some new transactions on the board. I'm taking a little vacation though, obviously doing some work, which will be one of our topics— how do you work from everywhere? I just got a question, uh, recently via email. Someone said they wanted to check out our mentorship program but weren't sure if it's going to work if they they're out of country or out of state for an extended period of time. We just closed on like $3 million of stuff from out of country and Cody's out of state. Cody's like 7 hours from where we closed the properties right now.

Yeah, 2,000 miles.

And I'm a lot more than that.

Yes, you are, but it's still doable and the world is not ending and things are still moving forward. The nice thing about closing the $3 million worth of real estate, it's $3 million worth of purchase price, but the real estate's actually worth closer to $6 million. And we are winning on the buy. That is not something we always do. When you're getting started in business, we recommend you focus on getting solid terms. Price is one thing, terms are everything. But now that we're getting more established, we're focusing on those equity plays, that cash flow along the way.. And we absolutely crushed it on price. So we're going to pick up a few million dollars equity, which is going to take us closer to our debt-free journey. Once we hold these for a while, flip them and pay off the debt.

And debt-free is a good place to be, especially when you have a whole bunch of real estate. What does this put us at total, Cody? Are we about $30 million total of real estate?

Is that where you're— Yeah, yeah. We are just a tad bit north of $30 million without syndicating, and we did that in less than 3 years. Used to be less than 2 years, but then we got another year on the end of it, so we can't say that anymore. But, uh, $10 million a year. Yeah, $10 million a year in real estate with basically no money. And we're sharing that just to share with you that this thing's possible and nobody needs $30 million of real estate to be fine. You get a fraction of that and use these techniques, you can absolutely move yourself forward, your family forward financially. So with that said, Christian, do we have any questions in the chat? I see we have an aloha from Hawaii. We've got a howdy, but not a howdy from Dion. That's okay.

Dion will probably make his way over here and give his own howdy. We'll give some time for questions, but let's talk about the individual transactions here. And to show everyone knows the format, as people start logging in, I see the viewers are, are starting to stack up now. Uh, every week we hop on, we're going to talk about one topic. So we're going to talk about what's going on, things that we're learning, uh, a specific topic that will be the subject. In this case, the deals that we just purchased. We're gonna talk about how we structured them, what the project is, and then we're going to open up for questions. Start posting your questions in the chat. We go till the questions end, or, uh, since I'm on vacation, until I get too hungry to continue. It'll be one of the two, and it will be up to you which one. So let's talk first about our Moses Lake property. We buy a lot in Moses Lake. This is one of the last mid-sized acquisitions really available in that town. We've pretty much cleaned up Moses Lake as of, uh, as of day with closing numbers in. We own another 33-plex. Cody, talk a little bit about what that deal actually is.

So that 33-plex, it's one of the last eyesores downtown Broadway for Moses Lake. And, uh, the owners owned it for a while. They bought it for next to nothing. They've rented it out. They ended up— they get older, that happens over time— and their nephew started running the property. Everybody got tired of ownership, management, and paying bills, so they ended up selling. We picked that up for $1.6 million. Our goal— we are actually going to spend some money on it. Talk about the deal, then the debt, then the equity. We got it for $1.6 million. We got a private money loan for $1.8 million to buy it. So we actually got cash out at closing. First lien, no second lien, not seller financed. But a middle money type of product that's going to give us the reno budget to push the value up, get a higher quality of tenant than that property's ever had before, and a higher rent than it's ever had before. We'll stabilize it just slightly below market rent so we can keep occupancy high and turnover low. And at that point in time, we will refinance it into a long-term fixed-rate debt product that'll reduce our mortgage costs by about $8,500 a month. We do have a high interest rate on this loan, but that will basically be our cash flow. So we'll have $100,000 a year in cash flow, a, uh, like $1.4 million in equity when we're all said and done. And we just have to manage it better than anybody's managed it before. And I trust in Christian's ability to do that. And the nice thing is, once we are stabilized and cash flowing, we can hold it. We have no partners on it, no capital partners whatsoever. We decided to do 100% debt and then some. And as a result, we each, when it's stabilized, we get about $50,000 a year in cash flow. And should we choose to sell it, we'll make enough money on that deal after long-term cap gains tax in a year to actually pay off our investor on the Robinhood. Or pay off Pheasant Street or pay off a 12-plex we own or a 10-plex we own. There's enough money on this deal to where we can really start to do the debt hammer should we choose to sell it if an opportunity like that presents itself. So that is super fun and we get to clean up one of the worst properties, really the worst property outside of a little 8-plex on Broadway. We get to fix this one up. Oh no, I don't hear Christian.

Yeah, there we go.

Ah, it's also—

it's just a fun property. Like, it's a great location. It's very similar to our 38-unit for what the actual deal is, except that we're buying it for like $400,000 less, and it's all under that one roof, which makes the maintenance way easier. What I love about this deal is this is essentially a project that we've done before and made $2 million. Granted, a few less units, but they're a little bit bigger. They're on the main drag. This is a project that we're very excited for. Let's talk about our first. It's essentially a mobile home park. It's an RV park, but it's run as they're all on-site long-term tenants. It's essentially a mobile home park that we purchased, 25 units on the Hood Canal. This is about 25-minute drive from the Robin Hood Village Resort where we already own. Uh, we got— we picked this up for the most ridiculously low price.

Stable. So it started— well, tell them about how it's— tell them how it started. Like, tell everybody what we were going to buy it for, the problems that came up, and what we negotiated to. And, and by we, we mean our, our broker, because they did an amazing job.

We started at half a million, right?

Yep, $500K.

Yep, $500K is where we started the negotiation. This thing probably stabilized— it's worth somewhere between $1. $1.2, $1.5 million. It's on the water, uh, large RV park. It's actually surrounded by two very, very nice RV parks. So we followed the trend of, hey, buy the worst property on the block. They had some problems. There's some issues with the septic field, which we're aware of and fixing, and their well is super wonky the way it needs to be treated, like weekly. So we're looking into that. But we had a few things. The big issue for the sellers are they they could not find a buyer. They did not have a lot of liquidity. And this property is something they inherited that has been a nonstop problem for them. They have no value personally in the property, even though it's worth a lot. You can't move it unless you pick— you fix the whole thing. And they don't have the money to fix the whole thing. So we're coming in and solving a legitimate problem for them. Uh, as we started doing the investigation, the septic stuff came up, tenant issue came up, non-pays came up. There's a lot of issues, even though we already had a ridiculous price. Uh, we came in at— I believe we closed at $375,000, right? $373,000. Insane. And Cody, when we financed this, um, because of the value of the park, not what we're buying it for, not loan to cost but loan to value, uh, we got more money than we're buying it for. How much was our loan on this property?

Well, we got a 45% loan-to-value on our first position financing product, and we got a loan for $525,000. So after fees, we got a check today for $149,000 to buy that piece of real estate. Now, we've always said $0 isn't budget, but getting paid on a low-leverage asset is also in budget. We're not advocates of trying to beat people up on price all the time. That's a harder way to start. Some people do their business model like that. We don't. When an opportunity pops up, you get a good price, it's just going to take a little bit of work. If you're willing to do that work for the price tag, go for it. And on this deal, I think we're going to be able to, to make a million bucks on this realistically within the next 18 months. I agree, and that's a very good target, and that's good money, uh, that after long-term cap gains tax, that'll pay off our investor on the Robinhood, which doesn't suck. And if you see the trend, the trend that we're doing here, you create a problem first And you get paid based on the problems that you can solve. And, and now we're figuring out, okay, we got a million dollar investor, we got to cash out. What's the easiest way to do that? Only do deals that can make you north of a million dollars. And so we're doing a couple of them right now. And that is the solution. Don't add steps, just figure out what would solve your problem and just do deals that can do that. And that's what we're doing. And super stoked. Christian's team at Kensho Property Management, kenshopm.com, or Ken Shop 'Em, they're going to be managing this deal. And super stoked to see how it goes.

Yeah, but if, if negative $149,000 is in budget for you, you can buy real estate and you can play this game the same way we are. This is— some magic deal that we found. This is something that came up from a broker. Uh, he loved the deal so much after we started putting it together, we're actually doing it with our broker. He's partnered with us on the deal. We've done a lot of deals with him. Uh, this isn't just some random guy, but the 3 of us are going to take out this project, and we're very, very excited. So if that's in budget, hit the like button for us. We're going to roll right into the questions. By the way, for those watching on LinkedIn and Facebook and whatever other platform this, this sends out to. The main feed that we're going to be reading off of is going to be the YouTube channel, Cody and Christian Multifamily Strategy. So head on over there and we'll get to all your questions. I'm going to start from the top here. Um, so you guys are guaranteeing your mentees to have seller-financed property if we pay the extra in the course? Well, no, there is nothing extra to pay. Uh, straight up, we will guarantee that we will coach you until you buy your first property. Now, how How you finance it is up to you because it doesn't have to be seller financed. Neither of these two deals for us that were zero down were seller financed. What we do guarantee is that you will buy a deal that cash flows $1,000 per month within the first 9 months. Of course, it's designed for 6 months. Most everyone gets what they need from it before the end of 6 months, but we'll just continue to coach you until you get there because this works in every market everywhere. If you want to buy real estate, we can get you there. There is no extra fee or anything else to pay. You're in. You're in. Guarantee is live.

From Luke. And just— and I'm just going to say on that, just keep showing up. If you're having trouble, if it takes you longer, every number is made up. The reason we put the 9-month number is because that's how long it took me. That's how long it took Caleb. It's how long it takes a lot of people because it takes a few months to understand it, a few months to start applying it. And you don't buy real estate with the click of a button. You gotta do feasibility, you gotta go check it out, you gotta make some investor pitches. But our goal is to simplify it for you. And if it takes you longer than that, you keep showing up to the mentorship calls, that's fine. If you do it faster than that, 'cause we've had people do it in as low as 2 months, congratulations, you can still show up. But we'd love to have you in there if that's something you wanna do.

Let's see here. For amortized loans with 30-year fixed rate, uh, with a 10-year balloon, total price real estate $1 million. Is the balloon only for the interest only, or is it for all of the $1 million? Well, balloon's going to be for whatever is due on the loan. So if you have a million-dollar loan— good, says the price of the real estate is a million, so probably, unless you're us on these last two deals, you're probably not financing $100,000. %. Um, but the balloon will be for whatever is owed on the debt. So for example, you buy a million dollar property, you borrow $900,000 at 6% interest, your 10-year balloon, whatever is left on that, if it's amortized, uh, whatever $800,000-ish is going to be left is going to be paid off, uh, at that balloon. Now your options there, you can write a check for it if you have the liquidity, you sell the property and take the proceeds, pay off the loan. Or, uh, you can refinance, which is what most people opt to do. And you hit the end of your term, you owe a little less than you did, the property's performing better than it did, you go ahead and get a new net product at whatever the market offers you. Uh, but you can earn it, you can borrow it, you can refinance it, you can sell the property. You have a lot of different options to exit, but a balloon is your

balance. Patrick, let's see. Can you go over analyzing a deal? I understand the basics, but I'd love to see how you choose which ones are worth pursuing, trying to make the numbers work, which ones to toss out. At the end of the day, yeah, we can go over a deal. I will have to probably do that on Zoom next week if we're doing a live. But, uh, just a side note, we do that every single Tuesday in the mentorship group. I don't know how to share screen on Riverside. So when it comes down to underwriting a deal, you're going to want to first underwrite the location. Is the population going up or down? What types of employers are there in that location? Is there a diversity of jobs or is it just one or two main companies? Are the streets clean or is there a bunch of junk in the streets, homeless walking around? These are all things you want to look at for the location. When it comes down to the numbers, we're going to gloss over this because we talk about it often on the channel as far as numbers go. But you have a factor rate, which is your true cost of capital expressed as a percentage, and you've got a cap rate, which is your net dividend expressed as a percentage. The net dividend— the cap rate needs to be higher than the loan factor rate. You do those things, you can buy any deal you want as far as the cash-flowing debt part goes. But you make sure you like the deal as long as you want to buy it. You have to underwrite the debt to have a lower factor rate than the cap rate on the purchase. And if you have money down, looks like we have some comments here regarding equity partners, so we'll get to that in a second. You either need to do what I opted to do on my first 3 deals and borrow that down payment and have the total cost of capital less than the net dividends it's bringing in. Or you have to bring on an equity partner and then you have to figure out, do I want to buy them out in the future? Do I want to ride this with them forever? What is the plan for that partnership? Example, Christian and I, we don't have any fixed buyout in any of our deals for each other. There are some deals I'm going to buy Christian out of, and whether it's now or later, because we just want to own bigger stuff together and it doesn't really make sense to own a duplex or a, a sixplex together. It just doesn't make enough money anymore. So while we don't have a fixed buyout, we had a goal in mind in the beginning of let's get to 100 units so we can retire his wife, help retire my mom. And now that we're optimizing that, we're just renegotiating our pieces. And that is a very open type of conversation in, in a solid partnership. Just note that most partnerships don't work like Christian and my

partnership. Most fail. Yes. And, uh, quick tips on the partnership, by the way. Uh, if you set a goal to partner and you know who you're partnering with and you guys have trust, uh, the main thing is just set that goal. Don't renegotiate or trade any of your pieces until you hit that goal. Cody and I do that every single time. Our goal originally was let's get 100 units and, uh, between the two of us, and that should be enough. Obviously, we've bought a lot more since then, but that was the point where we sat down. I traded him one 6-plex, my share in a 6-plex, for the property management company and the work that comes with it. That was a good trade for both of us, I believe. But we put together that deal, we traded a couple of pieces, we went, okay, what's the new goal? And we basically started on a— I would consider that our second partnership together, where we set a new set of goals and started pursuing that. But that is how you have a successful partnership. Partnership the way we did is you have trust, you have a plan, you stick to the plan, and you don't mess with stuff until you hit your goals. All

right. Where are we on now? We are with Emmanuel. Have you guys ever found the owner of a property via the property manager calling leasing office and asking to talk with the owner? Not directly through the property manager. That's typically not what's going to happen. You can do that. I have gotten fortunate before and called the attorney that is their registered agent and smooth-talked my way into getting their contact info. That doesn't work very often, but if you catch them at the right moment, you can get the owner's contact info. But if you want to play that card with a property manager, I would let them know some of your goals. Hey, I'm looking to get to X amount of apartments in this specific location. Could I connect with some of the owners that you work with to see their thoughts on a couple different locations I'm thinking about? That would be the card I would play. So you're not just asking to get their client list to buy the properties, because then the property manager is probably not going to give you the info, because if you buy the property, you may not work with them. But if you connect with people that can help you buy property you may be able to actually work with them. And that, that's going to be a better approach overall to smooth your way into getting those relationships. Next question here. How's the multifamily flip going in Kentucky? Christian, you want to share

that? What happened there? Yeah. So multifamily flip in Kentucky. Sometimes there's something called deal fatigue. Sometimes you're working on a deal and it just goes on and on and on and it just doesn't quite happen. There was enough trading back and forth, parties disagreeing. We hit a point where what we were trying to do, even though the deal's fantastic, it didn't feel like our goals and our timelines were lining up with the sellers anymore. So it just kind of stalled. It took too long to put together. And we have found— sorry for the truck asking me. Uh, but we've found very consistently that when deals take too long— that's annoying noise, I'll mute after this— but when deals take too long, things just fall apart, stall out, and sometimes it just feels like if the deal's not meant to be, it's not meant to be. Like, it just won't come together. And usually when that happens, we end up being glad that we didn't do that deal. So that's where this one ended up. Just the timing didn't seem right for all parties and the deal kind of just naturally petered out. We found, you know, $3 million of other stuff to buy and away we

go. Oh no, I lost your audio. There we go. Oh, you're muted. Okay. So our next question from Luke. Since Cody was young, starting out with little and no credit, How would you bring in an equity partner to get a refinance? How does this work when you do not personally qualify to refinance? I would build a business model if I were you. This is what I did to where when you make things work out, not everything works out in business, but you should ask yourself the question, if everything worked out, did I build the business I wanted to build? And we ask ourselves that all the time whenever we're looking at a deal. If this works, is it a big enough payday to make sense? When you're getting started, you don't have credit, you don't have as much money as you will after you do some deals. And after you wait— real estate's a waiting game, unfortunately. You got to sit on your hands sometimes and let deals do their thing. But, uh, as you progress, you get the asset value up, you get the cash flows up, you manage it better than the previous manager, previous owner, you create equity, you create cash flow, you get your net worth up. You become more bankable. And so what we would say is instead of just bringing on a partner just so that you qualify for some future date in time that you don't really know where you're going to be at, I would just do it on my own, which is what I opted to do on my deals. I didn't plan on having a partner for a refinance. I just made sure the balloon was so far in the future that it didn't matter. Because if I just waited 10 years, statistically in the market that I bought in, every 15 to 17 years all property values double. And I don't need the property value to double, uh, to be able to refinance. I need to go up maybe 40%, 50%. So if I just hold it for a long period of time— my shortest balloon on my first 3 deals out of those 30 units was 10 years. I had a 30-year fully amortized note. Negotiate a deal where you don't need to refinance in the foreseeable future. Make sure that you cash flow positive with a long-term fixed rate debt cash flow margin. You will be set. Things will come up, but don't take on a partner just for a refinance event that you don't know if you're going to do or not. You could be in a position where you could just pay off the property if you bought a bunch of rentals like Christian and I did. Some of the first rentals we bought. We bought a little place on Marina, bought a little place on Grape. Realistically, I mean, if we wanted to tomorrow between the two of us, we could pay off both of those triplexes. But, uh, we didn't think we'd be able to in the beginning. So we just kept on buying, kept on scaling, and we planned for let's grow our net worth so that in case we can't pay it off, we can refinance the assets. But we gave ourselves a long enough window to where we were comfortable being able to do that. All right, let's see. Next question from Manuel. When you bring on an equity partner into a deal, what are some of the benefits that you guys implement in addition to the buyout? Typically there's going to be some cash flow that's shared, and Christian does a lot more of the business ops and then a lot more of the tax stuff. So do you want to chat about some of those

benefits? Yeah, so one of the big benefits of an equity partner— we're bringing equity to the deal— there's a couple. One, a buyout is typically structured as a buyout option, which means you don't have the same obligation on the balloon. You have a set timeline that you are allowed to buy someone out in. While super beneficial, it is nice to manage your options and your obligations. So that's a big piece. Now, on the tax end of things, is when you have an equity partner, you ideally still want to have some cash in the deal if you're planning on taking any tax benefits. You can't claim more on your taxes than money that you have in the deal. However, debt is still considered your money. So a structure that we do a lot is we'll bring on an equity partner who brings 100% of the money, but they lend us half the money. So if we go in 50/50 with someone, half of their money goes towards their equity, half of their money is loan to us for our equity. When we refinance the property or do something out of cash flow or have a liquidity event elsewhere, we pay off that loan. Everyone's— what's called your internal, uh, equity is going to be balanced. Everyone has the same amount of money in that's equal to their equity. On the IRS level, they love this for taxes, and you'll be able to absolutely maximize your benefit. That is a really good way where you can blend debt and equity be with the same investor, but you want to keep those things in balance. Sometimes an equity partner— sometimes it's not all about the tax benefit. Sometimes it makes sense to be, hey, we need an equity partner, we're doing something very specific, we can't afford monthly payments because we're raising rent a lot on this property, the cash flow is not there day one for that. You may just structure it all as equity with a buyout in the future. It's going to depend on your property. It always is deal, debt, equity. What equity gives you is more flexibility of ability to structure basically whatever you want. And the last piece is that it doesn't further encumber the property. So a lot of loans will have a clause that's having no further encumbrance, which essentially means, uh, you can't put additional debt behind the seller financing. That's a place where you bring on an equity partner, because while they bring in money, it's not debt against the property. They are on the owning LLC. So it— there's a few advantages to equity. Those are the first ones that come to my

mind. All right, Christian, what are strategies— because you directly did this, you built the call center off of this before I met you— what are strategies for marketing to low unit count properties given that the vacancy is usually low but any that come up are high impact? What's your best way to handle the

marketing? How do we market them? So are we talking about in this question, do we think this is like how do we market for tenants when there is vacancy, or is this how do we market to like acquire

them? I guess I can answer it both

ways. Yeah, let's do both. Okay, if we're marketing to acquire them, this is what I build a call center for. Uh, it's good. There's a lot of— because of how popular house hacking is, which is not my favorite strategy, is it? It's a good strategy, but people fall in love with it and make it their only investment strategy, and that's where it becomes a huge problem. It's way too slow, um, and you have to share walls and tenants. There's a few problems with it, but, um, because the popularity of house hacking, duplex to fourplex are really, really, really aggressively, uh, sought after, which means you're competing with a lot of brokers. You're gonna have to make more phone calls and more effort if you're focused on that asset

class.

Class. What we ended up doing is I had a whole research center that was calling them, gathering information, and they would just casually mention at the end of every call, hey, I'm going to be talking to another 100 owners, is there anything else that you're looking to buy right now? And that was a cool thing because people would either tell us, yeah, I'm looking to buy this, this, this, and this, or if they are selling, we didn't blow them up like everyone else and say, hey, would you sell this? We just said, are you looking to expand? No, I am looking to sell this. You're talking to another 100

people?

Yeah. And then they would give us the listing. It was kind of a— I think it was a really good strategy. That was how I marketed the small stuff, and Cody and I slayed. Yeah, back when we were brokers, just running through those leads and selling those, you know, talk to one person one day, another person buying the same asset, you line them up, get paid. It was a good way to do it. As far as marketing for vacancy, one of the best things people can do for free is Facebook Marketplace, but we, uh, we push out to pretty pretty much every site. My property management company, uh, I don't do the paid advertising on it, but we show up on apartments.com, we show up on rent.com. But you basically show up on all the different things. Um, it's not too hard to find tenants. The best one I have found though is if you can get a good listing on Facebook Marketplace in most areas, that is the one that just moves. Uh, really good way to

market. Really, really good way to market. Also, one thing on those, something that I haven't talked a bunch with Christian yet, but something that I'm going to be doing for all my rentals as they get renovated is getting professional photos taken. So many property managers, especially for mom-and-pop small stuff, take the worst photos. Their angle is terrible. So if you can get professional photos, they're going to cost maybe $200 to get a few units shot and edited. It's absolutely worth it. You have it forever.. And, uh, as long as you maintain the, the quality of that asset, you have the photos forever that represents what you've got. And, um, on those, it makes it easier to market them if everything looks the same. If all your units have the same hardware, the same flooring, the same cabinets, countertops, it gets very easy, um, to get things live because you've got photos of what what those units will look like. You can get them up, you can get them live, uh, before you get it completely finished, before you get it completely cleaned, and then you can get people moved in. All right, what makes your company worth more money than the properties

themselves? What do you think that refers to, Christian? I don't know, I'm trying to think about that. What makes your company worth more than the property themselves. If they're talking about the LLC level, the LLC is worth what it, uh, what it owns. If they're talking about why are we buying properties at a certain price and why are they worth more than the price we just bought them for, um, you know, there's a bunch of factors that go into that. There's a minimum price per unit that things actually trade for. So if you pick it up underneath that, it's like it's— you're just getting a discount. There is a bottom line price of like, hey, a unit like a studio is worth at the lowest this amount regardless because of what it's going to rent for. But value is based on how much income an asset will bring in, uh, divided by a cap rate. And there's some weighting on if it's way under market rent, you do some allocation for, hey, it's probably worth a little bit more because rents of course could be higher based on market data. That's the only thing I can think of is like, why are we buying for $1.6 million and we're saying, hey, this thing's worth $3

million. That's how we're coming up with those numbers. All right. And then our next question here, if you find a deal, then the debt, do you use money from the hard money loan to open the LLC? Do you recommend we put our property in LLC or in our own name? We get a lawyer to close each deal. Well, opening an LLC is $180, $200, and then you're going to have to have an attorney that'll file your actual operating agreement if you got a partner. And so I probably wouldn't use a hard money loan to fund that. I mean, if you truly don't have the money, you're starting from ground zero, maybe put that on a credit card or just save, save the money. Work a, you know, an extra 20 hours, 10 hours at your job, whatever your pay rate is, just figure out how to save that money, um, because that is something everybody can save, um, if they just work X amount more hours than they're doing to maintain. So, um, yeah, if that's what you plan to do, do that. We use an attorney to draft our documents because We're not lawyers and we don't know how to be a lawyer. I didn't go to school and Christian didn't go to school for that. So we would not be the right people to do that. But with all that said, on your— on the last part of your question, do you recommend we put each property in LLC or our own name? If you have partners, absolutely use an LLC. And you need to have a good operating agreement. You can have an attorney draft that up. If you're buying it in your own personal name, then you're going to want to chat with an insurance broker. And, and I'm not talking about for life insurance, but I'm talking about an umbrella policy, something that can protect you for when things pop up. Proper insurance is really important to make sure you keep your stuff forever. But, uh, Christian owns some stuff in his personal name. I'm going to own some stuff in my personal name. I'm looking at buying Christian and my buddy out of a 12-plex later this year, depending on where our money goes. If we got to contribute a bunch more money to the Robinhood, then I may do it next year. But it's a property I really want to own by myself someday. And at that point, I'll put it in my personal name. But since I have two partners on it right now, And if it stays like that forever, then we keep it in the LLC because you don't want to be your personal name, someone random's personal name, someone else. That is going to be a nightmare. It's very hard to enforce stuff if you don't have a written operating agreement, and you should have that in a

company. All right. I love this next question. Um, yes, we did answer this a little bit earlier, but that is okay. You've just joined the chat, this is a good one. So, apologize for jumping the gun if this has already been answered, but what kind of terms are you guys buying these deals under? How much down payment? Down payment was about negative $300,000, what, about negative $330,000, give or take. These were both financed over 100% on both deals, hard money. They are higher interest loans, and they're shorter-term loans. One is a renovation project that will operate at a very slight negative until we finish renovating a few units and leasing it up. The mobile home park is just going to make money, and then when we're done the project, it makes a lot of money. We just got an excellent price on it, so on it, so we bought that for $375,000. Uh, we got paid about $149,000 at closing. So yes, if negative 6 figures is in the budget for you, then these are deals that you can

do. And also, I realized my computer scrolled way off the chart here. So I missed some questions. Do you verify that— I don't think I got this one. Do you verify if you're able to get a cash-out refinance for property before investing? Cash-out refinance money is used to pay off the hard money loan. You should be able to get the math to get the value way up above your cost basis. Your cost basis is your purchase, your closing costs, your renovations. If you can't get significantly above your cost basis, if we can't do that, we're not buying it unless it is something that we could afford to pay off in cash before the end of the note. And it is not so big that's going to tank our business. 'Cause once you have your business built, it's not worth giving up. Protect it. So, like we're buying a $1.5 million right now. If rates came down, all the hypotheticals and everything went well, it'd be worth $2 million. But realistically, we're paying $1.4 million, it's worth $1.4 million, and we could get it to be worth $1.6 million someday. But 10% cost to sell for all the costs of selling, We, we'd only make $40 grand on that before renovations. And we got well over that in rent out we got to do on that property. Just electric, electrical alone is gonna be $40 grand. So that one, we're not gonna make a ton of money, but it is a solid location and it's an asset that needs to be cleaned

up. Needs

to— it— we— you know what I'm talking about. It's the 15-unit we're buying next month, Christian. It's just they haven't put any money into it in ever. And they've owned it for longer than Christian's been alive. And that's a bit longer than I've been alive. So they, they've just kind of been holding it for a while. But we're gonna go in and clean it up, we're not going to make a ton of money. The only reason we're buying that is it's a land assemblage play with other assets that we own. It's cleaning up the area, which will push up the value of all of our other assets in that neighborhood. And so we're not making money on that specific deal, but we're making money on all the other stuff that we own. You should have a plan to get the asset significantly worth more than your cost basis so that if you can't refinance— back to one of the questions we talked about earlier— if you're not in a position to by the end of that note, you could sell it, get a profit, and have your learning lesson. Because if you just don't lose money In real estate, you move forward. All right, let's see from REI

Stoners. Oh, go ahead. Oh, sorry, I had one by Matthew. I know you're picking up something that somebody skipped over. Jump on to REI Stoners

there. What's his question? REI Stoners said, let's see, we definitely want to scale up now that we have a first property. That was a huge goal in itself for us. Yeah, congratulations on your first deal. Absolutely, that is

fantastic. So they didn't have a question, but, uh, good job. From Matthew Freonko: when refinancing debt to buy out partners, do you refi through the bank or owner? And how do you anticipate changing interest rates when planning buyouts? That's an excellent question. Answer to, uh, bank or owner, the answer is yes. Owner refinance is a valid thing. Cody and I have done that before. We've pitched that before. Sometimes you just meet back to the owner and you say, hey, do you like how this has been going? They go, yes. It's like, okay, would you like to extend? And then you renegotiate the interest rate. So it's all negotiable. We love seller financing because the pieces are negotiable. So seller refinance is awesome because you're just going to hit another negotiation from a stronger point because you've done a better job managing the asset, um, with the bank. That is why we are so conservative with our numbers. You don't know what interest rates are going to be. What you do know is where you can get the property to be, or at least with a reasonable amount of certainty. You can look at a deal and go, okay, I think the property rents at this right now. I know we can double the income, for example. Will the property be worth more if it's bringing in twice as much? Yes. Do I think I can get a bank loan on this? Let's use something conservative like 70% LTV in 3 years. Is 70% of the new value that I'm projecting going to be something that the bank is willing to lend on, and will it cash flow even if interest rates go up? The answer is yes. That is how we buy it and never lose it. Bank is a little bit harder because you can't negotiate with them as much. Uh, seller refinance is an awesome tool because you can get together with them and say, hey, this is where the deal's at, this is where the market at, you like how it's been, what do you want to do? And that usually works very well. We've done that a couple times. How much of your portfolio is heavy value-add? This is from

Fabian. Cody, how much is heavy value-add? 38-plex was heavy value-add. The 33-plex is going to be heavy value-add. The 24-plex was heavy. The 12 was heavy before you bought in. Yeah, it's been moderate. Yeah, but not super crazy. We had to do the roof. But mainly our larger apartment projects, and our large stuff is small for some people, but the 33, the 38, the 24, those have been the big ones. So as a proportionate amount of our unit count, you got, what is that, 71 plus 24, 95 units across 3 buildings. So that's less than half of our portfolio has been heavy value-add. 107 units, which is still less than half our portfolio if you include that 12-plex. But we try and, and buy some stable stuff because if you have stable assets in the portfolio, it helps you cash flow plan. And now that those heavy value-adds are starting to cash flow The 38 isn't negative anymore. Gotta knock on wood because Danny will cringe. Christian's wife will cringe that I just said that and she didn't even hear it. She's not going to know why she cringed. Because we've been bleeding on that for a while. We fixed it, but we got through bank refinanced a couple times. So it's fine. But there was a while where that one really hurt. And that one's not hurting anymore. The 24, just, we had 19 of the 24 units flood out. So Big value add on that one. But we bought a lot of stable stuff. We got a 10-plex that cash flows a few thousand bucks a month. Got a 12-plex that cash flows a few thousand. Another 12 that cash flows a few thousand. We got a 12-plex in Efreda that we're getting stabilized. That one will cash flow like $4,500 when it's fully stabilized. And so you start stacking all the cash flow. And if you can keep more than half your portfolio stabilized, and not doing those heavy value adds, it does get easier to scale and build predictably. You don't have to be predictable, but we choose to

be. All right. So we got one here. Buy new or rehab? That kind of ties right into that. We love new stuff. One of the big things with the rehab, heavy or not, you buy the older stuff. We've learned this, some of of our partners have learned this the hard way. When you buy older stuff, um, it's just expensive. Like, stuff goes wrong while you're doing your project. So you're gonna have a pipe burst somewhere, you're gonna have an electrical problem, a roof might leak, you're gonna find that there's some rot problem in one of your walls that you weren't aware of. There's a lot of just general stuff that happens. We love buying new stabilized things. However, especially when you're starting, you usually have to create a lot of equity, create that upside, you're going to end up doing some value-add. Almost everyone has to do it. And just know the projects take longer than you think, the projects cost more than you think, but when you finish them on a great deal, you can make millions of dollars. And we've done that a few times. I think on the deals that we bought that are the subject of this call are 33 and 25. Both of those have million dollar potential upside, which is fantastic. That is where it's worth the pain. But just know that if you're doing them, they cost more and take

longer. Uh, all right, next

question. Do you see it? Uh, yeah, I see one here. How much capital do I need to get a realistic seller finance deal done, assuming I want to maintain ownership of the deal and not give away equity, assuming 20 to 40

units? Actual capital to get seller finance deal done? Well, if you use the average, let's say you're doing seller finance, and we can get a lot of 10% down deals done. But let's say you're doing 15% like our first deal. We just bought our first deal together, which was the 38-plex. Which is in that unit count. That was 15% down. We bought it for $2 million, which was $300,000 down. We had to come up with that money. We didn't have any money, so we brought in equity partners. We did it the wrong way, and it cost us a lot of money in the long run, but we learned our lesson. Should have borrowed the down payment. Uh, we did a deal, it was 24 units, we bought for $1 million, but it was $300,000 down as well, which was 30% down. Uh, we brought in one equity partner. And we are planning on figuring out how to exit that partnership right now, whether they buy us out or we buy them out. We're figuring that piece out in real time. But for between 20 and 40 units, you can usually get those deals done between $200,000 to $400,000. And for perspective on those types of deals, there's— if you're buying them right, and you're doing solid math and using good fundamentals of investing, long-term approach, you should be able to pick up $1 to $2 million on that size of deal. And so the, the risk-reward, figuring out the $200,000 to $400,000 to pick up $1 to $2 million, the risk-reward is there. Risk-adjusted, it makes sense. And there's typically enough cash flow on those deals to support any money that you have to borrow or bring in a partner for. On the down payment. All right, what stops investors from buying the opportunity themselves? I know you have a relationship-based approach, but if they're already investors and you pitch them a great deal, couldn't they just buy

it? What are your thoughts on that, Christian Osgood? Uh, we pitch the deal. It goes deal, then debt, then equity. You pitch that capital when you're under contract. They can't just come in and say, hey, I'm actually going to buy this out from underneath you. Funny enough, um, our good friend Caleb is under contract for a deal right now in Texas, 26 units. His investors just gave him a call and said, hey, um, would you consider wholesaling this to us? Which is an option. So Caleb now has an option. He has a deal that probably has about $750,000 of upside. He may have the option to say, hey, do you want to not do the project and get paid $200,000 now, or do you want your half of $750,000 later if the project goes your way? That's an actual consideration. Like, I'm not a big fan of wholesaling, and if you're expanding, you're expanding. But if you're young in your career and you can get paid a couple hundred thousand dollars to not do any work, that's something you have to sit down and say, you know, what are my objectives right now, and would I rather pay down debt here, or am I more focused on expansion? Um, so that's what they have to do though, because it's under contract, Caleb Hommel, and/or assigns. He can do an assignment fee, but he has the contract. Sellers can't just sell to one of the investors. Uh, good question though. Always protect against

that. Don't tell everyone about your deal until you have it locked up and in your name. And I didn't know that he had that deal, but if I were him personally, knowing what I know, I would take— I'm not a fan of wholesaling, but I would take $200 grand if that's the option. Because I know for a fact. Yeah, yeah, he could pay off his investors if he was smart. He would take that. Well, he is smart. If he thinks about it logically, if he thinks about it logically, he will take that deal because that would buy out all of his partners on a couple other properties he

owns. And that would be highly intelligent of him. Now, if he was just starting, And this is an interesting thought because he already has over 50 units and he's young, he's 21 years old. If he was just starting, I think it'd be a harder decision. I'd probably encourage him like, you know what, the money could be life-changing. And I think the discipline of you want to buy real estate, go buy that darn deal. And that's what I would tell him to do, even though the $200 grand would make a huge difference, even though you can buy your own real estate with it. I think I would tell him, stick it out, do this project. And you already have 50 units. And you're able to do more deals, I'm, I'm with you, Cody. Take the money and run. You get paid to not work, and that's a significant paycheck. That's more than a lot of people make in a year. He can get in one second from, uh, from saying yes. So we'll see how that pans out. We'll keep you updated as we hear on that deal. But, uh, that is what it looks like when you follow the order deal debt equity. You control the deal before you bring in investors. So Thank you for asking that question. Um, that was a timely time to ask that because we have a fantastic example of what this could look

like. From Luke, last question: Is it right saying that the attorney writes all the contracts and the lawyer makes sure everything is legally

okay? Well, your attorney is your lawyer. Yeah, real estate writes contracts, lawyer signs off and usually drafts some of your more complicated stuff like your seller finance agreements, if you have any special clauses or operating agreements, that sort of

stuff. What factors make it a good deal for everyone, the seller, the investor, and you? Well, there's a few things, but the main one is cash flow. People invest for cash flow and capital gains. And to make it a win for the owner, the person who's actually selling you the asset, typically They're hoping for some sort of capital gain above and beyond what they bought it for. They want to actually make money above and beyond what they paid. So we're paying $1.4 million for a 15-unit. They bought it basically double my age ago, way back when, and they paid $140,000. They're getting a 10x. That was actually something that was cool for them. They just got to add a zero to what they paid for it. Now, will we get to add a zero to what we pay for it? Probably not. We'll probably pay it off and sell it before we get to that point. But for them, that's super cool. They got a capital gain. In addition to that, when they bought that asset, I believe it made $1,400 or $1,500 a month in rent. It probably was closer to $1,500. It was $100 a unit, which our mortgage payment to them before it steps up is $6,300. So their monthly net payment that they're receiving is 4 times and then some the gross income they used to have when they bought it. So they're getting cash flow, they're getting capital gains, the down payment of $140,000, which we're bringing in an equity partner. Eventually we'll 1031 out of it, uh, to something bigger, but, uh, The down payment's $140 grand, which is what they paid for the asset. So not only have they gotten paid for decades and decades, but they're getting what they paid for it back at close. There's no realtor fees, and then they're just going to get a good payment. So that makes it good for them. Now, what makes it good for the buyer or investor? Same thing. A path to cash flow and a path to get capital gains. Bump the equity, bump the income. And if you can just keep adding income and net worth to your balance sheet, it's very hard to go broke as long as you have long-term debt. Variables aren't in play, nothing's

changing. That's how you win in real estate. So from, uh, from Emmanuel, what's the ratio of how much you guys pay yourselves from the portfolio versus the cash flow that it makes. Yeah, um, we don't pay ourselves from the portfolio almost ever, very

rarely. Out of all of our businesses— and Christian's got a property management company, uh, we've got multifamily strategy, we've got all the real estate— our total income that we take After taxes, it's like $4,200 a month each. And then Christian pays himself like $3,000 out of property

management. Yep,

yep. I pay myself a $3,000 a month salary. So Christian's bringing in like $7,000 a month out of all the businesses. And he owns property management, which is something I don't own. So he gets to do what he wants. But total for everything that's going on, is like $1,100 and change a month between the both of us. That is a very, very small percentage of income. And everybody on this YouTube thread or video, you can get to that same level of income if you just stack cash-flowing assets. You may not do it in 2.5 years, Uh, and I've been doing it for close to— you might, you might beat us, but, uh, I mean, I've been doing this for almost 5 years now, and as has Christian. We've just been doing it together for about 2 and a half. Uh, whether you do it 2 and a half years, you do it in 10 years or 20 years, it doesn't really matter. If you have a goal, just keep stacking assets that pay you and get you closer to that goal. Move forward a little bit day by day, and, uh, you can get there too. Let's see

here. Oh, it looks like we missed True's question. True, we apologize. Asking, what would you do if a seller has an existing mortgage on a property and willing to owner finance but wants to avoid the mortgage being called

due? Well, yeah, then you got to clear title. So if it's, uh, we bought a property like this, but let's say they got a $200,000 mortgage, you're buying it for $2 million, you should probably— best practice would be clear title. Clear title means you don't have any liens against it. Get free unencumbered title. Any liens are liens that you're bringing to the table in the form of your loans. So if they got a $200K mortgage, maybe you put, you know, to cover that closing cost, maybe you put $250,000 down. Or maybe you borrow $250,000 as a down payment, or you bring in an equity partner, or you just write a check. That's what the standard answer from us would be. Or you get a conventional lender to finance in first position and have them allow you— you got to ask, not everybody will do it, most won't— but get them to get the seller in second position. And you can also buy stuff zero down like

that. And on these deals on smaller multifamily, it's roughly 1 out of 5 of these notes get called, especially right now as interest rates spiked because banks have 3% debt, they can replace it closer to 7%. Um, they're obligated to try to track these down. They're doing that a lot, a lot more. They just run basic title searches, things that don't match, they do a quick audit and they, they, they do call these. If you're doing commercial multifamily, I'll tell you right now, these are going to be called. They do audits more frequently if there is a bank loan involved. A lot of our commercial bank loans, we have annual reviews where they look through, you know, what's going on with the ownership, how did the property perform. There's certain metrics you have to hit. Like on commercial multifamily, your subject-to loan is going to trigger the due-on-sale clause. It might not take— you know, it might take 6 months might take 2 months, but within the first year, that note's almost definitely going to get

called. So pay off, whatever. Absolutely. Or assume it. Those are your options. From Zach: So in hindsight, would you guys have added more and more stable projects instead of jumping straight into the Robinhood? We can both say without a doubt, yes. The Robinhood was an impulsive buy, and I'm grateful that we had the ability and really the skill set to impulse buy a resort and then impulse buy a million-dollar house next to the resort. But just because you can doesn't mean you should. We should not have bought that level of hospitality. I would have much rather we bought a $10 million hotel than having bought a $4.5 million hotel. Because there's more income on that level of hospitality and it's less involved at that level. We bought too small. Some people want to buy an Airbnb, uh, and they're like, well, the resort's huge. Well, the Airbnb is way easier to manage than a resort, uh, and a big chain hotel is way easier to manage than our resort because the resort's just too small, too few, uh, employees and incomes and all that. So we should have bought more stable assets, and if we did that, we'd probably be at 300 units today. Um, but even if we were just at the same 200 and whatever the heck we have, we would be— I would say we'd be wealthy and rich. And right now I feel like we're just wealthy, we're not rich, because all of our money goes into that eternal pit of, uh, burning capital, which is called the Robinhood. But it is a lot of fun. Every time we go there, we're happy we bought it, and then when we leave, we're like, oh, we shouldn't have done

that. Yeah, so it builds a crazy amount of equity. The problem is how we structured it. It drains cash flow, and it's a big, big piggy bank of forced savings and appreciation. Wrong phase of our business to do that. If we were older and farther in our career, that would be fine. It's just wrong, wrong project for the phase that we're

in. Absolutely. And I'd say, you know, even if we got— this is the problem. If we had gotten to 200, 300, 400 units of stable assets, cash flowing, you figure your average cash flow is $200 a door when you're stable and optimized. With 200, 300 units, you got a good amount of cash flow coming in. I don't know that we would have bought the Robinhood. I don't know. Why we would have, because we would have enough income to do what we want. Now we just add a complicated

piece. I don't know if you have any different thoughts on that, but that's what I

feel. Yeah, no, I

agree. I think one of the best things we did with the, with the Robinhood is, is one, we use that as a community thing for, for our events. We've had a great time having people come in and meet us there. That's been phenomenal. Am I in the White House? Nextdoor was actually the right move. That thing does very well. If you bought a resource that's too small, making it bigger is not a horrible maneuver. So I'm actually really happy with that one. Um, Truett followed up on his question here, uh, by the way, on paying off existing debt. Uh, try to think about paying off the existing mortgage but the owner's not able to. You would need to be able to pay off their mortgage. So whatever the down payment is would need to clear the rest of that. That additional debt. That can be, you know, a bank could come in and take it out. You can get conventional financing. There's a lot of different options there. We were lucky with the White House to be in the position where the owners actually did have the liquidity and they just paid off their mortgage and seller financed to us. That doesn't happen on every deal, and we recognize that sometimes seller financing is not the answer. We do a lot of it, but not all of our deals are seller financed, and that is not always the way that you're going to buy no-to-low money

down. Christian, how do you bring up seller financing to a broker without sounding like you're

broke? Uh, talk about the deal like you're not broke. I mean, that's how basic it is. You always follow the same flow of conversation. So I want to know, uh, like, start out with just an opening small talk thing. Won't be a weirdo and just call and be like, okay, tell me about the deal. Like, hey, nice to meet you, I'm Christian. This is what I'm trying to put together. I saw this deal here. It looks pretty cool. Tell me something about the area. I invest in Moses Lake. I haven't invested in this neighborhood yet. Something along those lines. Generic. I like to narrow down, talk about something, you know, maybe something they don't like about the property. Why isn't this, like, in your opinion, why isn't this sold yet? Like, is there anything that you don't love about the property? It's a question I usually end up asking twice to get a real answer from them. But if you can learn that, you're narrowing in on like an actual interested, like in their head you're like, okay, so this person's actually interested, they're digging a little deeper. I like to ask, what is the big thing about the property? Because that asks the rest of your questions. Is it— if it has a damaged roof, the maintenance is bad, they're going to ask for more down. Uh, if there's bad books, they're going to ask for more down. But if you're asking about bank financing, you're getting your pieces and you're not telling anything, no one's thinking like, oh, this person's broke. Uh, then we just ask a final question. On that if you're doing the transaction and not just looking for more deals. The question is, is the owner open to carrying a contract? You're just asking what the pieces are. That's where you start that conversation. It's the same with an owner or a broker. With an owner, are you open to carrying a contract? With a broker, you get through your normal conversation that you would whether you had money or not, and you just end with, all right, do this. Are they open to carrying a contract, or do we have to take it out with the bank? Leave it there. If you want to be like sales perfect, you always end on the result you want. So you'd say, are we taking out with the bank or are they open to carrying a contract? Is the technically best way to word that. Uh, but that's how the question's asked, and it's after you've already qualified yourself as a ready, able

buyer. All right, from Emmanuel, what does it look like when you are trying to get to an owner through an attorney? Well, you got to qualify yourself again, just like Christian was talking about. If you're talking with broker or an attorney or a banker, you have to qualify who you are. And so what I did in my market is I said, hey, I saw you represent— you got to figure out the client's name if you can't find their phone number. Um, I saw you represent Ben, he owns a 20-unit next to my 10-unit on Division. I saw you were the registered agent trying to reach him. Can you relay a message? That's typically as far as you're going to get. And I say, well, I'm a little bit busy right now. I'll just give you his number. That's happened to me before. They're not supposed to do that. They're really not supposed to do that, but some attorneys do. Uh, but they will just about always relay a message. And, um, through that they'll either reach out or they won't. And then you can follow up if you don't get any progress, but that's

it. That's about

it. Okay. All right. Noisy

questions. So all are noisy trucks. So I'll, I'll ask you and then you talk while I go on mute, but how do you split up the equity with your your equity partners, do you ever bring the entire down payment or do you bring half and they bring half, keeping it

50%? Well, the ideal, if you're doing 50/50, if you want to go 50/50, but the problem is Christian and I have never had any money. So typically they bring 100% of the money and we get north of half of the ownership. Now, how do you do that? Well, if they're not comfortable doing that, the way that we structure it is some of the money that they bring in, is just cash. It's their proportionate amount of equity that they own. If they bring 100% of the money, but you want to own 70% of the deal, have them lend you 70% of the money, and then they just bring you, you know, the extra 30% as the form of cash. You still owe the 70% of the capital they brought in as debt. But now you own the majority of the deal with no money in. All the money came from that person, just some of it is equity, some of it is a loan to you. So that's how we've done it before, but we prefer to own over half because if we want to buy them out, there's excise tax as everything stands right now if you trade over 50% of an LLC. How do you guys navigate all different contractual obligations you have going on concurrently? Was there someone who simplified the process in the beginning, i.e., a lawyer? Well, The, the people that simplified everything for us are the people that taught us the game. All the owner meetings we went to, Christian and I would drive, and before I met Christian, I would drive. But eventually we started partnering up. We would drive 3 hours for a 20-minute meeting that ended up getting rescheduled, and then we just figure out what to do in Moses Lake and then drive back, and then we'd reschedule and take the meeting. And those people taught us how to play the game. They taught us what they did, and we just copied it. Christian talked about this in a video. We're not going to talk about the video, but you can watch it on our channel. Christian said, I don't even know if I could talk about this, but oh yeah, we just learned from a whole bunch of people that we'd never met before, that we had not a whole lot in common with, but they had done something cool that we wanted to

do. So they made it simple for us. I, I said it on the last live, so I'll, I'll I'll just say it again. Their comment was just straight up. They're like, well, you guys did this because you guys are white. It's like, look, that discredits the people who we bought from. We learned the game primarily from people who are not from this country, did not speak a lot of English. And like, one of them, one of the biggest players that we've actually worked with, partnered with, bought real estate with, he started as a potato peeler for $5 an hour and worked his way all the way up. Anyone can play the game, just, just period. We'll, we'll call it as we see it live. I, I don't want anyone to feel like, well, I look a certain way so I can't do real estate. Money doesn't care what you look like. The properties don't care what you look like. And if you answer what the other party's looking, like, looking for— if the seller is trying to get out of a property, they're looking for a certain price or a certain structure— if you're the one who comes there with a plan and the confidence to execute it, um, I'm gonna say over 95% of the time, that's what's going to get the deal

done. That's just realistically calling it as we see it. Is there a cash reserve target you should aim for? I would want to get on a speculative deal, I'd want 6 months plus in reserves of all expenses. And I'd want my rental budget in reserve. If you're doing a pretty simple deal, 3 months is fine. And if you have 3 months, then you can do distributions. That's our thought process, as long as you don't have an impending balloon. All right, from Lumberjack Landlord, shout out to Matt. Long-term debt, yes, underrated YouTube channel that needs more love and support because Matt Lumberjack is awesome. Long-term debt and cash flow is best part of the model. Absolutely, that's what makes the The wheels on the bus go around in real estate. And Lumberjack would know better than anybody on this YouTube Live because he's the best operator that either of us have ever met. Okay. Why not sell the resort and move

on? Rob, I will await your

offer. $6 million gets it done. Jonathan Moody, how do you evaluate and hedge a purchase in Florida considering insurance rates and hurricanes? Everybody's dealing with the same thing. It's just another line item expense. It's going to come off of your gross income. Yep. It's going to get priced into your NOI. Why did Moses need a lake? I don't know. But there's a lake and it's called Moses Lake, so you should go there. Just be careful what time of year you swim because sometimes there's toxic algae and I hear that's not good for

health. Yeah, Moses, I think it needs a lake. This is my, this is my working theory. Um, there's a lot of job opportunity. There's agriculture, R&D. There's a lot of R&D, like Boeing's out there and there's the battery manufacturing. There's a lot of jobs, but there's not a whole lot to do. Having a lake there is kind of nice. It is a big man-made lake. Um, But I think it's a good attraction to bring a lot of people there to live on the water, to have an actual community. That is my working theory because, um, there's not a whole lot going on out there other than very stable job growth, which is why we invest there. Uh, but that's my best guess. Uh, sell it to Dion. He's retired. Uh, Dion's the one who brought us the project because it was too active for him. Dion was the smart one, so he's already passed. Um, because he's retired and this resort is a job. That I think was the biggest miss for Cody and I. We didn't realize how much work it actually is to run a small resort. Um, Victor had asked, would you subject to a multi-family? No, if it's over 5 units, it's— it has any bank debt on it, they're probably going to call it. Now you could look at potentially if you're doing subject to and the note seller finance and there's no due-on-sale clause, go crazy. If you don't have a due-on-sale clause to compete with, I don't have any issue with subject-to. Uh, the problem with subject-to is people love that strategy and go like, oh, this is how I want to build a whole portfolio. And what you end up with is typically low equity deals on distressed properties, and you hold a callable note that could be called at any time. Having ticking time bombs, don't want it. But there is a time and a place for subject-to. We've actually used it as a small piece of a much larger multimillion-dollar transaction. There's a place for subject-to. I would not use it on a multifamily property, especially if it was a significant piece of the debt

stack. All right, how do you get— speaking of debt, how do you get over the fear of having a mountain of debt? And failing. Christian talks about this a lot. He, you know, being able to outearn your stupidity, as Dave Ramsey would call it. But you, you get a mountain of debt payments. There's a point where you can't outearn it anymore with a job. For some people, that's more of the debt than others. But that's the stepping off point. With Christian, it was a 38-plex because he had some duplexes he could outearn. His stupidity of mortgage payments if none of his tenants paid. 38-plex, he couldn't. Looking back on it, if we had our skills today, we could. But turns out we weren't very good back then. We were just figuring stuff out. And we're still figuring stuff out, always getting better every day. So the stepping off point is just when you're buying deals big enough to where you can't bail yourself out anymore. That's where it will feel the same whether you've got $10 million in debt or $50 million, because it's— you either got the margin because you negotiate good deals or you don't. And if you don't, you go

bankrupt. So do good math. Yep. And every single business has risk. Sometimes things don't go the way you think, and your options are you can fail and stay down and be frustrated, or you can just go do the next thing and go make some money. There are ways to be good at business. Anyone can play the game, but there's a certain amount of like, you have to have the mental fortitude for like, things don't always go the way you think. We had a massive flood in a 24-unit building we just finished getting online, and we have to do the project again. 19 of 24 units have to be redone. That's like catastrophic. Um, we could be really bummed or frustrated or worried, or we can go, here's the pieces we have, what can we build out of it? And you just push on. Um, I understand that is way easier said than done, but the fear of failing for a lot of people is big, especially when you have debt involved. The biggest thing is like, stick with principles like long-term cash-flowing debt and having a plan to buy it and never lose lose it. Like, the basics we talk about all the time on this channel, those are there to protect you from failing. Um, don't violate those principles, because when you do, that's where you start to get burned. And if that happens, I have a lot of friends who have failed, a lot of people have started over, and guess what? Um, every single one of them who've started over are doing pretty well now. I've seen a lot of people, um, fun part about business, you can, you can get wiped out. And as long as you are ethical and, you know, as long as you're not like embezzling money or stealing from people, you can pretty much get back on and, uh, and start again, and you will survive. What if you're buying out of state? I build a network seller so far away. Uh, Cody, you just bought something out of state very

recently. How did you do it? I bought a deal in Indiana for like $7, and it cash flowed— like, the cash-on-cash return is stupid. Small multifamily. It's only a few units, but double-digit cash-on-cash return day one with upside. I don't think much of it. It's in third-party property management now with the property management team. Bought it with a couple buddies that I met in Nashville a while ago, and that LLC will just keep on scaling and doing its thing., then it'll get to a pretty sizable income. And eventually I think that LLC will cash flow like $20,000 a month. But, um, buying outside of state, or it's, it's all basically the same thing. I don't manage my Washington portfolio. I don't manage the Indiana portfolio. And Christian and I are going to buy bigger apartment buildings, 75-unit-plus deals over the next 3 to 4 years in landlord-friendly states. And we'll continue to buy brand new stuff in Washington State and Moses Lake area because we've got some opportunities there and we can get to cash flow. And we both see a lot of appreciation coming to those specific markets. But we will push to own the big stuff in landlord-friendly areas so that we don't have to deal with some of the stuff we deal with in areas like Central Washington or Washington State in

general. All right, let's see. Someone just inspired me in the, uh, in the comments here. Uh, Rob, a little bit lower, I'm skipping ahead, but he said put it out on BP and you'll get volunteers. I'm, uh, I'm texting Rob Alvasola right now. He's a, he's a friend. I bet you he knows someone who likes hospitality, as someone who has a lot of cool hospitality. We'll see what he thinks. That's not a bad

idea. We'll reach out to our friends at BP. And then subject to as a bigger part of another deal is Frankenstein together different strategies confusing for sellers. Just because you can doesn't mean you should. And keep, keep it simple. If it's not simple, it's not repeatable. That is just a fact. If you want to add all the strategies you can, But every strategy you commingle into your business, the less repeatable it is, number one, and the more likely it is that people are going to get upset, things are going to go wrong, and you're going to lose your real estate. It adds risk. Debt itself adds risk. Keeping other people on the note adds even more risk, especially like more so today than ever before with all the new technology that there is to skip trace data and sort through it. It's crazy. So I would not do that. And when we've tried to put together a bunch of strategies, we've always regretted

it. So just keep it really simple. Yeah, and I apologize because I'm the one who skipped around a little bit. I'll hop back up to where we skipped. Unless I missed this. But sitting around— this is from Jonathan— sitting around $300K from two duplexes that aren't really cash flowing. Assuming, uh, a good deal comes up, would you sell or look for, uh, seller finance and, uh, uh, property management? If you're sitting on $300K and they're not really cash flowing, uh, the short answer is yes. Um, I would look at doing a 1031 and getting that into an asset that is going to serve you better. Cash flow is extremely important in your business. You can move forward astronomically a little barometer that I do, um, if I'm even going to consider selling. Because some assets you just want to hold regardless of your equity position. But if you're going to consider selling something, if selling today gets me more money than 6 years of cash flow would pay me, I get to move forward in time if I sell that asset and roll into something else. That is a metric that I made up for myself that I'm comfortable with, but I'm like, okay, um, 6 years of cash flow because you're going to have some fees in selling. So really I'm saying if I can skip 5 years ahead of my cash position right now, what does that allow me to do? And so that's a little barometer that I test. If you're not cash flowing that well and you have $300K, I'm going to guess that you are probably not sitting on $300K of cash flow over the next 5 years. I would look at moving those assets into something else that maybe brings you a little bit more or a lot more and scales up quicker. Doesn't have to be seller financed, but I would look at larger deals. Um, if you have a couple duplexes where I started, I started making real money, um, when I scaled beyond the duplexes. So you're in a, you're in a really good position. $300,000 down was exactly what Cody and I did together, uh, when I had 2 duplexes. That's how we bought the 38-plex, was that $300,000 right there. You can do the exact same deal Cody and I did without any

partners. And that deal made us each $1 million and we pulled out over $1 million on that deal. So that, that would move you forward based on what you shared. Cassie asked, how frequently do we do live streams? Every week, every Wednesday at 3 PM Pacific Standard

Time. From Rob, do you have a plan We're 5 here and Cody's in Tennessee right

now. So we're 5 Central today, but generally podcasting out of Washington, 3 PM Pacific time. Nice thing is 3 Pacific and 5 Central is the same time. Yes, it is. From Rob, do you have a plan for downturn? Yep, we will sit on our hands and collect checks. That's the best part about cash flowing real estate. Long-term fixed-rate debt, cash flow, and margin. Rents can go down, and, uh, turns out we don't pay ourselves much out of the real estate anyway. So if our cash flow goes down, we could pay ourselves more than we're paying ourselves right now, and things would be

okay. When my wife started helping us collect the checks, when they were just coming into the mailbox— this is before you had— we have a majority of our portfolio on online pay, but there's still a lot of physical checks. While we were doing that first transition, there was a day where my wife was there and we were opening the mailbox. She's like, there's so many damn checks, they don't stop coming. I was like, that is the goal. We don't want them to stop coming. That is exactly what we do in a downturn though. That's why you fix your variables. If, uh, if the market turns but you've fixed all of your expenses, you don't

care. Long-term debt will let weather the storm. How do you pull out equity out of the home if it's seller financing? Example, you got a $500,000 home, you bought it a while ago, you owe $250,000 on a seller contract. You go get a new loan with a bank for 80% of value, or let's say 75% of value, go get a $375,000 loan. You'd pay out the $250,000 to the seller, you'd pull another $125,000 less your fees, and you'd be pulling out the equity. You'd be getting a new loan to replace your current one. Are there any areas or trophy properties that you might sacrifice some points of cash flow to get, and how many points? I don't know what we're going to call it, but the Monroe properties— not Monroe, Washington, but it's a specific street in a neighborhood we want to own in. There's a 25-plex there that we want to buy. That'll be a trophy property that we want to work on in the future. And we won't cash flow as much, but it's a really good location. And it's a good assemblage of multifamily that we don't need to cash flow as much on

it. It's really nice. It's brand new. Yeah, the trade there is sometimes you sacrifice some cash flow for passivity. Um, now we did that same thing on the Robinhood. You're like, oh, there's a trophy property and it's incredible. That was the wrong move. But on multifamily in a market that we're well established in, uh, there is something to be said for cash flow with less work put in. You only have so much time and only so much cash you can throw at things when you're mid-project. Sometimes just having a great new build project that looks beautiful and you're really proud to own is what we wanted the portfolio. So absolutely, that was the first property that came to mind for me

too. All right, let's see. Could you guys afford to pay yourself a lot more and still scale at the same rate? We could, but why? I mean, what are we gonna do if we paid ourselves a little bit more? I would go buy a McLaren. That would be fun, but it's not financially smart. Like, if you have more money on a personal level, you just buy more stupid stuff, especially when it's passive income. And so instead of buying the McLaren, or for Christian, the Aston Martin Valhalla, blowing $800,000 on a car before it goes up to be a million-dollar-plus car, which is going to rival the the P1, which will be like $1.4 million, um, instead of paying ourselves money and just doing something stupid like that, we reroll it. We invest into the communities that we buy in. We're being an investor. We're not just being a buy and holder. We're holding our stuff, but we're making it nice. We're putting a lot of money into stuff, and over time, the more money we throw at the properties, the better the payoff is in the future. So while we could— the only We can both survive on the money that we pay ourselves right now. So the only reason we would pay ourselves more is to splurge more, and we don't need to do that. Christian has his reasons for why he will splurge more in the next year, but there's no rush. And next year, I'm going to buy the McLaren anyway, so we'll both splurge on our own

things. There we go. All right, we're going to speedrun these because because we are running a little bit low on time. We usually go until the questions end, but I am on vacation here in Mexico, and at some point I should probably hang out with fam again. Um, from, uh, Dave: I've been contacting owners just as you said and find that many of them do a mentorship for a fee, just like you guys. I am curious on how you recommend approaching this. Nothing wrong at all with paying for mentorship, and I'm not saying you need to take ours or anyone else's. Um, as you get a little farther, you'll probably find a mentor who is free in your market. But a paid mentor, all you're really looking for is what are the systems, like what is the actual process? Like, are they mentoring you or have they hired it out? They've hired it out, that one's off the table. And then have they done what you want to do? I mean, that's the main thing. Some, some people take courses and they're like, well, I mean, this person's like in my field, they know a lot, I want to do something a little different. If you wanted to become a real real estate syndicator, you wanted to take out 200-unit properties, 400-unit properties as a GP and own 5% of us— Cody and I are 5% of the deal. Cody and I are the wrong mentors for you. We haven't done that. We're not syndicators. You want to start a wholesaling business? Can we teach you how to do that? Sure. Are we the right

mentors? Absolutely

not. So I mean, that's the main thing. Make sure that you're doing exactly what you want to do, and then just make sure the structure of their mentorship program makes sense to you. And if you have those two things in place, by all means, like paid mentorship should save you hundreds of thousands of dollars. Like a good mentorship will save you a ton of money investing. And a lot of them cost anywhere from $1,000 to $15,000 is the kind of the typical range. I know that's a bit of a window, but I would spend any amount of that money to save a couple hundred

grand. And then Mediation Music asks, will you show some numbers sometime? We share a lot of those in the mentorship, but there's a video that we did, how I scaled from $3,000 to $9 million. I actually filmed that in the Robin Hood. Check that video out. We'll do an update on how we went from $3,000 to $30 million. That, that has a good ring to it. So we'll, uh, we'll film a video like that. Zach, uh, wait, so you guys are manually managing a Hundreds of payments month to month. We do a lot of online payments. There's just some checks, a lot of checks that come in. What would you suggest? What would you suggest if I live in Canada with strict privacy laws? Get a really good real estate agent. That's what I would do. And network with real estate owners. Do you suggest reaching out through social media and ask them to meet for coffee? Absolutely. Whatever it takes to book a meeting, start a relationship. And that's it for questions. So we are gonna wrap. Christian's gonna go on his vacation and start his actual vacation because he's been working the last few

days. Now, if anyone wants to have any like specific questions or you want to connect with us directly, like please follow us on

Instagram. I'm

@ChristianOsgood. Cody's @DoingCodyThings. But shoot us a DM. We're super

responsive.

Responsive. I'm happy to work with any of you guys. So if someone has a specific deal, wants to know what they need to do with their pieces, let us know there. Again, @ChristianOsgood, @DoingCodyThings. Um, but that is the easiest place to message us directly, and we will do everything in our power to help you out. Um, it looks like everyone wants us to do a stream when you buy that McLaren. Um, I'm not going to show everyone the layout of my house because that sounds like a way to get robbed. But I am, uh, we started building my house in Texas, which has been my dream, and it's not— what's like a good way to say this— it's not

small. Um, I feel like a large

house. Okay, we can, we can do a live stream from in the McLaren when I get it, and we could maybe, maybe you guys road trip to my house in Cody's McLaren. We'll, we'll live stream the pull-up with the cars. We

will— all right, you don't get to do it immediately. All right, we'll see everybody next week. And, uh, in the meantime, if you have more questions, make sure to hit us up on Instagram and check out