Christian Osgood and Cody argue multifamily real estate beats single-family homes because rents directly drive asset values, while single-family values depend on comparable sales. They grew their net worth nearly tenfold focusing on multifamily and say housing's necessity in growing populations makes it more stable than office, retail, or stocks.
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You can't move housing online, at least not yet. We're not robots.
Multifamily is the number one asset class to be invested in, regardless of whether it's 2023 or 2034. Today we're going to talk about that fact.
My name's Christian. This is Cody. This is Multifamily Strategy. And here we go.
We're going to talk about multifamily. We love multifamily. We're multifamily strategy guys. And the reason we love multifamily so much, we're going to give you a quick example. If Christian and I both own a house, similar condition, if his makes more money than mine, they're still worth the same. If we both have 10-plexes, similar condition, and his makes more money, his asset's worth more. You're incentivized to do better in this business. And we love incentive-based compensation. We don't want everything to be the same. And in multifamily, when we're talking 5+ rental units, You get paid when you do better than everyone around you. And that is one business model that can work for everybody.
Now, if you're someone who's investing in single-family houses, where a lot of people think that they need to start, which, by the way, you don't. But when you're starting with a house, let's say I'm getting 25% more income on my rental house.
Congratulations.
And Cody, yeah, woo-hoo, I'm making more money. That's great. However, on a value standpoint, if we're trying to multiply money, It's going to be worth the exact same as the identical house that Cody owns next door. If we had the same exact house, I have more rent, it should be worth more. It is not. It is based off of what the neighbor's property sold for.
But the way that we multiplied our net worth relatively quickly— when we first partnered, we were both worth about $400,000. We've almost 10x'd that in just a couple years because we were able to optimize the real estate. We have our 4 stages in a business cycle. We've shared that on the channel before, but the optimization phase, you can blow up your net worth if you're in the multifamily asset class. Very difficult to do in single family. Mm-hmm.
And it's not that you can't do it in single family, is that it's hard to predict and control the equity growth. The income, sure, you can do that. You can have a ton of houses and if you do great deals, you actually can get fantastic cash flow. I've seen it done. I think it's harder than multifamily. It certainly takes a lot more loans and a lot more closings. But it is doable. But controlling that equity growth, you want to make sure that you're investing for both long-term cash flow and consistent equity growth. You'll get rich off the multiplication money, but you'll keep it and stabilize it off of the monthly cash flow.
Now let's talk about the other asset classes, because you've got commercial and we've got office and retail. Those are cool and they work until they don't. The problem is when they're not important anymore, as we've seen in just the last couple of years, a lot of people get wiped out. Another issue is even if they're doing well, when a tenant leaves, it can take a long time to refill that space. I don't like negative cash flow. Some people do. Some people like losing all their stuff, it seems, because they keep doing it. However, we don't. We like positive, predictable cash flow, and we can't get that with office or retail.
Now, there's a place to start blending those into a portfolio. We just bought a mixed-use building that has multifamily, and I needed an office building for the property management company. That is an appropriate use to have some office in your portfolio. I need an office. I'm going to buy an office. When you're starting, that's not the stability you want to build on. It is a different business. And if you want consistency and the goal is, hey, I want cash flow every month, I want to grow my net worth and I want to do it predictably, there is no better asset class than multifamily, period.
But what about storage?
Well, storage is great unless you don't need storage. You don't need storage. It's great. It is fairly stable because most people do have a bunch of junk.
Set it, forget it, right? They leave their junk and then forget about it.
Yeah. That being said, it's not a necessity. If there's a major economic pullback, one of the first things I would be doing is selling all my junk and canceling my unnecessary leases, like a storage unit.
I remember when I did that.
I didn't know that you did that.
I had a storage unit and I got rid of all the junk. I never even kept it, just sold it. So you don't need it. People want it. It's a nice luxury because it costs next to nothing for people to have. However, people do need housing. The necessity, the urgency that I have to have a place to live so that I can get ready every day, go to work, make money, pay my bills. I'm not living on the street and I'm not living in a storage unit. I know some people make videos about sneaking into their storage unit and living there. That's not legal. So if we're going to do good business, people need a place to live. People don't need a storage unit. Necessity makes it more valuable, which puts this in the number one asset class.
And you can't have major world conditions that go, hey, people no longer need shelter. For example, retail. A lot of that has migrated online, and we're going to continue to see even more and more of that. You can't move housing online, at least not yet. We're not robots, so we can't move housing online for a long time, if ever. Office— if the entire planet shuts down, office doesn't do too well, is what we've seen the last few years. So not nearly as stable, not nearly as predictable. But I can guarantee you, in any market where population is consistently growing and there are jobs, houses will be required. People have to have a place to live. So if you want stability, it is the best asset class. Now I'm going to touch on these briefly because we are real estate guys. But what about things like gold, silver, stocks, bonds?
Well, I mean, the play for precious metals— you have some precious metals, you got your little silver Lego blocks. Yeah, you can stack them. They're fun. They're pretty to look at. But the main play is you can arbitrage against inflation. It's better than holding cash. Mm-hmm. That's what real estate does. Real estate goes up. As income goes up, which happens when they print more money. So looking at precious metals, why would I arbitrage the value of the dollar going down when I can do that in real estate and get paid to wait and get the tax benefits? I've seen some people say, well, I'm going to buy gold and borrow against it. Those loan products are typically pretty bad.
They are terrible. We looked into that. I'm like, wow, that sounds really cool. So I looked into it. Makes absolutely no sense. You can borrow a portion of the money at a reasonably high interest rate. Just back it by real estate. Get a real estate loan. It doesn't make any sense to do that. I can tell you for a fact that the little brick of silver that I have has never paid me. It's just kind of fun to look at. And I was like, oh, it'd be fun to see, you know, I want this on my bookshelf. Yeah, it's a paperweight.
It's cool. Silver and gold paperweight. You need to get a gold one.
But that would be a little bit cost.
But it's just a store of capital. It's off the grid. You can have your own money that can be converted Now there's other assets. People like to buy land. You can do agricultural land, rent it out to farmers. That can make sense. However, just because it makes sense doesn't mean it makes money. Multifamily will outearn most farms. Another one, ATMs. I have some friends who invest in ATMs. What's the problem with that? After 7 years, they're useless. So you have to buy new ones. You can depreciate it, get your tax benefits, but it will not outproduce the actual apartment buildings. Apartments stay at the top of all investment opportunities.
One thing that can make more money but is higher risk, which is why I don't recommend starting here, is businesses in general. I am not a big fan of stock because you cannot control the stock. If there's something— say the CEO randomly gets sick, stock goes like this. Elon Musk decides that he's going to smoke pot on Joe Rogan. His company's stocks go, ah, you can't control those things. You can make these great investments, you can invest in great businesses, but you cannot control them. Multifamily, as an owner and as an operator, you can steer the ship better than just about any asset class. You can also do this in businesses, but businesses are not going to have the predictability and stability of a multifamily real estate investment.
Big business is absolutely the way to grow your money the fastest, but the most predictable, stable way to build wealth is through investing in apartments, hands down.
That is our final statement, period. Multifamily, buy it. You can build whatever you want on that firm foundation of cash-flowing multifamily real estate.
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