Why we don't always do $0 down - Creative Finance Live

Hello and welcome back. I am here solo today for our live, and today we will be going over the, uh, actual dates for our next Robinhood Village Resort, um, date. I'll obviously give some people some time to get into the channel here, but we'll announce that just a few minutes in. And wanted to go over some, uh, some quick question Q&A, go through some of our beginning YouTube questions, and make a few announcements. So opening up again, it is just me today. Cody is on a much-deserved vacation for Thanksgiving. He's going to be in California for the next 3 days, and, um, we are not bugging him with anything. However, as of Monday, Cody and I officially have our first bank loan. We have taken the 38-plex from seller finance debt to bank debt, which is our first major exit from existing debt structures. So we'll talk a little bit about that. If you guys have any questions, that is something we can definitely go over. And yeah, I'm going to go break into the text. Give me a little bit of grace today as I go through all the things. I will be reading the chat and I will also be reading the questions here. So I'm going to be looking back and forth between everything. So happy to have you all here. And yeah, start posting your questions below. I'm going to go into our comment section and see what we have not yet responded to. There should be a few. The first— okay, I like this one. The buy box. We had mentioned on a YouTube Short that we don't like the buy box. I think we also had a video where we covered this briefly. A very common industry term is, what is your buy box? That is the box in which you want to buy things, right? Self-explanatory. The buy box is essentially— I'm going to use an example. Say I live in California, I want to invest in California, and I want to buy 2 through 10 unit buildings. I want to buy things under $2 million, which in California, good luck. But I want to buy things under $2 million, and I am only looking for things that will qualify for conventional financing, which means I have to be able to get them to appraise and not have an amazing amount of deferred maintenance. That is what an example of a buy box would be. People use this term all the time. I've heard people recommend that you put them in your email signature. Let everyone know your buy box. What are you looking for? While I understand the concept of branding yourself, I don't like the idea of putting all your things into a box. Cody and I's box is how do I buy it, how do we never lose it, and will it be fun? By expanding on that, we always go after new things that we've never done before. When I had a duplex, the next thing we did was a 38-plex. Lot of learning. Now that enabled us to go back down and buy a bunch of 6, 8, 7, 12-unit buildings. We built a really great portfolio doing exactly that, but we learned how to do new things with the resort that we just purchased, which we're going to talk a little bit more about in a minute. That seller-financed resort we did, and now we've learned a whole lot about acquisitions of new teams, managing your current employees, and integrating existing employees. So an actual merging of businesses. We're running a wedding venue. We're doing events now. Events is a brand new space for us. But because we don't have a buy box, we have a general policy. Let's go on new adventures and make sure that we never violate— how do we buy it? How do we never lose it? Will it be fun? We get to have a heck of a lot of fun and expand very, very quickly. So that's why we said we don't like the buy box, because the buy box is limiting yourself to a box. We hate boxes. I have here from Sina Fanist, how much cash-on-cash return are you getting with the seller finance deals with 10% down in equity? So if we're doing 10% down on a deal, our deals have ranged. I'm just trying to think some, some of them multi-thousands of a percent because sometimes we come in less than 10% down and the equity multiple has been absolutely insane. But if we're 10% down, I would say a lot of our deals are probably yielding about 50% cash on cash. Day 1, I will not go below 8%, so it needs to cash flow day 1. We don't buy cash negative deals. We've had 2 exceptions to that. We've covered a bunch of times on this channel. We only did those because we had enough global cash flow to cover that negative. We didn't buy any other negative during that time. Until it was brought up to positive cash flow. So has cash flow at least 8% if we're doing 10% or less down, often it will be more stabilized, a minimum of 50%. A lot of times though, those have doubled in value in a year. So our cash-on-cash return was in fact 2x. Looking through the messages here, Grab one more and then we'll jump into the questions from the chat. Thus far, though, I only really see one question, which is, how's it going, Christian? To be more honest, it's going very well. Cody and I just pulled out a $2 million bank loan, which now makes us more bankable. While I'm not a huge fan of bank debt, I actually like a lot of seller finance debt. You do have to be able to show that you can execute on exits. The main reason we did this bank refi— granted, we did pull out some money, so it was a cash-out refi— but the main reason that we did that maneuver is so that we have bank debt. The reason that a lot of banks did not want to lend to us is because we didn't have any bank debt. It's kind of like getting your first job. Uh, you want a starter position and they want 3 years of experience. It's kind of how it felt with this bank thing. Banks did not like the fact that we didn't have other bank loans. We had so much made-up debt. They're like, "Well, your deals work in theory and they seem to be doing very, very well, but we don't have any other banks that have ever lent to you and that makes us uncomfortable." Well, now with a $2 million bank loan, banks are much more excited to work with us. I'm getting called like crazy for people trying to refinance some of our other buildings. So Something to consider. I'm going to go for one more question in here and we will get deep into the chat, though. Some of these questions are to some of our comedic shorts, so it's a little bit harder to go through them. Oh, here's a question. I'm going to— I'm going to autocorrect it for the typos, but essentially We were talking about how to buy money zero down. It's one of our videos with Caleb and Chuck. And the question was, so it's a hard money lender, right? Well, that's not necessarily the case with no money down. We've covered this a few times, but there's a few things that you can do to do no money of your own down. One, yeah, absolutely, hard money lender. You can go 100% LTV. I bought my second duplex on 101% financed from a hard money lender. I then had to do a bunch of renovation, but about $30,000 into renovation, and I pulled more than that out at the refi. But the actual acquisition for that was zero down. Another way you can do it is with capital partners, which means there's no loan with a capital partner. That is how we originally took out the 38-plex. We brought on 3 partners for $300,000 down on a $2 million deal. They brought all the capital, we brought the technical experience. We then coordinated all the maintenance projects out of cash flow and sold a little bit of land to the city to gain additional cash to go flip more units. So that's another structure for zero down. There's actually quite a few ways to do it. So in short, answer to that question is no, it's not always a hard money lender. It can be like a middle money lender. You can do a bridge loan, which you can do with a conventional lender. Different private capital falls outside of what I would call hard money. But then you can also use capital partners, a blend of debt and equity, or the unicorn deal, 100% seller financed. I've seen them done. We've gotten close. We've gotten down to 4.5% down. But sometimes your lender, if they trust you, we're about— we're looking at doing one. I won't say we're about to do it in case it doesn't come together. But in the next couple of years, we should be doing a true zero-down deal where we use equity in one building, the place, a second on it as our down payment, and then the 100% seller finance the remainder of the building. So one of our prior buildings will actually buy the other building, which means your lender is me and the other seller with the asset that I own. So there's a ton of ways to do it. It's not always just hard money. All right. Digging into the chat. Oh, see, have you ever used a DSCR loan? What are your thoughts on that? We have not used the DSCR loan. One of my good friends and one of the only people I'll ever long-term partner with, Adam, actually did a lot of DSCR loans on a portfolio of multifamily properties in downtown Seattle in the Ballard area. He used DSCR and he brought his whole portfolio, which is already cash flowing and extremely high in appreciation. He brought that entire portfolio to interest only, which increased his monthly cash flow enough where he was able to completely leave his Wall Street job, buy a new house, and he has not worked for years. He does projects he wants. He does jiu-jitsu, marathons. But he bought his time by converting a portfolio of small multifamily into a DSCR interest-only product. It upped the global cash flow enough where he is out of the rat race. So when used correctly, I love them because they give you an interest-only option. While amortization is cool because it pays down your properties, I would rather choose where that goes. If you just have extra cash, you can still pay down the property if you want, or it can help fund your other projects, pay off other debts. Interest only is a great product, and a lot of DSCR will be interest only. Dory, hope you have a wonderful Thanksgiving. Absolutely, Dory. I hope you have a fantastic one as well. I will jump into our announcement as promised for our Whiteboard Wednesday, uh, live. We have an incoming event. The event will be on January 20th, and what we'll be doing is running another real estate meetup. This event will actually fly in a few guest speakers. We're going to be catering dinner at the next-door resort, the Alderbrook, But it will be an event hosted at the Robin Hood primarily. If that is something that you want to do, because we have teased for a while that we're going to be announcing this first here. So this is the first announcement of that date, January 20th, 21st, and 22nd, 3-night event. You can absolutely come down, stay with us on site. We're going to have a couple speeches and speakers in on the actual campus in the Bar Suite. And then we're going to hop across the street to the Alderbrook, and we'll probably have a couple of presentations over there in addition to breakfast and dinner. So if there was a time for you to come down, January will be the big event before we, uh, start figuring out what summer events look like. It's the next upcoming event unless you happen to be available next weekend. You can come down. Cody and I are just running a quick little meetup dinner or sorry, meetup breakfast. If you want to stay the night next weekend, if you can make Friday night, we're going to be having— I'm sorry, I'm pulling my calendar here. Yeah, not this weekend, but next. Or maybe it's the 1st of December. I'm looking through on my calendar, December 3rd. So right before that event. So you have a couple of weeks. I'm all over the place. I apologize. December 3rd, there'll be a breakfast that morning at 9 o'clock at the Alderbrook, paid for by us if you book a cabin at the Robin Hood. So if anyone happens to be available at that time, absolutely feel free to swing down. This is before the event, um, because I know we have another event that weekend, but this will just be a real estate meetup breakfast. If you're local or you want to come meet us, swing down then. But if you want to make it to the big event, that's January 20th. 21st and 22nd, I'm going to give you a number to call because we have blocked out the entire weekend on the website. The number that you will want to call, I should have it memorized by now, but let's go. Oh, that's funny. It changed to my phone, so now I'm gonna have to go find it. Drum roll, please. There it is. All right, number you're gonna want to call is 360-490-81— 6, 8, and I will put it in the chat here. Perfect. So anyone who wants to come, last time I'll announce it, then we're going to get back into the questions and the normal, uh, cadence of Whiteboard Wednesday. But, um, Robin Hood Village Resort, January event, January 21st, 22nd, 23rd, bringing some guest speakers down, catered dinners. Nights in the hot tub cabins. It will probably be cold out there, so the hot tubs are going to be super awesome. Uh, but very much looking forward to see you down there. Everyone who is watching this gets the first chance at doing that. Call that number, 360-490-8168. And if you want to come down and see us, uh, the soonest you can do that is December 3rd, Real Estate Breakfast. Kevin G, I see you here. Uh, we got to meet him at our last breakfast, and it was awesome. So Kevin, really good seeing you there and thanks for being on the live today. All right, from Michael, question, have you two considered building in 2023, small or big? Just wondering. Yes, I do not want to be a developer. Developers are great at making money until they don't. It is not my business model. Cody and I are very, very good at buying real estate that cash flows. I do not wanna deviate far from that model. However, What we did do is we picked up a lot of land when we bought the real estate. I have a lot of land that cash flows on the real estate, so the real estate holds the land for me, but I just have unused land. And so what we want to go do in 2023 and 2024 is we go back to those projects and unused parcels of land we control and we figure out what is the actual highest and best use for this piece of land. Working with the city currently to get through zoning for turning one into RV storage. The city has other ideas. They're kind of difficult to work with. However, I have a set plan and we have a sign-off from everyone but one sub-department of the city planning committee. So that's one thing we're going to do is going to do some outdoor storage, and then we'll probably build— I have two parcels of land. We're looking at building an 8-plex on one and a 4-plex on the other. I don't know which one we're going to do first. I'm 100% sure we will announce it and share the whole journey on this channel because that's what we do. But, um, long answer to a short question. Yes, we will definitely start building. It will never be my core business model, but we will gain the skill of building on the things that we already have. Absolutely. Do you have pre-written contracts in your coaching program? Uh, Daniel, no, we don't. And there's a reason that we don't. Uh, it's not because I don't want to share them. Every state, region, sometimes even on the county level, will use different legal. I do not want someone trying to write their contract using our format and have it not work. That sounds like a recipe for disaster or a lawsuit, or in the worst-case scenario, just something going wrong for you. What we really want to do is we just want to create great legal. And the real advice is if you want to create a legal doc, have a lawyer do it. Do not practice law. Don't write a note exactly the way we did. It's not a fill-in-the-blank. In our mentorship, I'm happy to go through some of our notes. And that's something that we do is we'll actually pull up docs and we'll talk about how we structure them and why we structure them. What I don't want to do is provide them as an actual template because what is right for your deal may not be the same as what we did on our deal. That is between you and a lawyer. And on any piece of real estate, your legal fees should be a very small portion of the cost. A few thousand dollars to buy a million-dollar deal is more or less a rounding error. Just have a lawyer draft it right. Kevin, you mentioned we can come to Ohio. I am not Opposed to that, I will have someone joining our channel for an extended series starting in January. Her name's Soli on Instagram. She's Lattes and Leases. She actually invests in Cincinnati, Ohio. She is a very, very talented investor. So excited to have her on the channel. I guess this is the official announcement of that too, but I actually might be in Ohio for some media with her at some point. Uh, let's see here. Is there anything specific needed to be brought? Very interested in attending. Well, the main thing that you need to bring to the event is yourself and a notepad and some good rest, especially if you're swinging over from the, uh, the East Coast. I know the time change can be kind of weird, but, um, it's better going this way than it is going the other way, to be completely honest. But yeah, if you make either the breakfast event on December 3rd or the January, um, big event, the 3-day event, um, nothing much is needed. We're providing some meals, not all of them, though we'll have an exhaustive list of everywhere to eat in town. The fun thing is it's a small town and everyone in town is aware we're running the event already, uh, so all the restaurants will be pre-ready for you. Excited, ready to go. I think we're gonna get a little discount at the Alderbrook for you, uh, to be determined. I have one more person to give you the okay on that. But yeah, you don't need to bring much. I'd bring a jacket, it gets a little chilly over here in Washington that time of year. But yeah, excited to see you down. If you want to go, call that number I posted in the chat. You'll get Hannah who runs the booking phone, and she will go over the pricing and availability. Let's see here from Daniel. Thank you. Appreciate the answer. Absolutely. And now the rule for this is that we will go until the responses stop. That being said, I am manning the station myself, which means I am reading the text, making the announcements, checking the phone numbers and doing everything. So I realize this will not be our most watched live of all time. I also posted the time for this. About 6 minutes before we went live. So I shot myself in the foot there, but, um, per the rules, ask all your questions or on this. I'm sure it's going to be a little shorter live, and then, um, yeah, we'll answer everything we can, and we'll be back again next week to talk again. Uh, from Orlando, could you briefly explain what is included in both the course and the mentorship? Yes. Um, sorry guys, I feel like this live is an ad for all the stuff that we do. Um, That is not the intent, so I won't go too deep. The course is designed for the information. If you want the information, it's all there. You can buy that monthly. And what it's going to be is a roadmap A to Z from how Cody and I got to where we started to where we're at today. We update that every month. I just threw some new things in the partnership section, I think last week or the week before, and we put in a little bit of the live content. We added a video or two to the course. Course. So it's a living course. It grows as we grow, but it's very explicitly, here's how you set your goals, here's how you talk to owners, talk to brokers, negotiate your contracts, choose a property manager, analyze a deal. We have spreadsheets built out in there. That is what that is for, is the information. What we found is that people who take the course love the course, give it great reviews, and then go take another course instead of buying real estate. So we paired that with the mentorship, which will help you with the application. That meets 3 times a week. Monday is kind of like this Whiteboard Wednesday. It's an open forum except we have 25 people-ish on the call, and it's going to be actually interactive. So it's all of us on video talking back and forth, working on whatever it is you're working on. Tuesdays are deal deep dives, the most important day of the entire week, because we actually go over the deals that people in the group are working on look at the math, look at the numbers, look at the analytics, and put the deal together. We have had deals found, negotiated, and fully funded through that call. So we've actually had people partner during that call on deals that closed seller finance, low down. So I love Tuesday. The last thing we do Thursdays is a structured lesson with Cody and I with 15 minutes on the back end to chat. That was really wordy. Basically, the course information, A to Z, way more streamlined than the YouTube channel because it is just the how-to guide to do what we did. The mentorship is going to put you in a group of people who are all applying the same skills together. Postal controls, contract grammar because the postal code is— I really appreciate that. Yep. From all night, either they are It's usually by zip code. Now, there are a lot of legal, especially some if you're really generic in your contract, where I'm sure our note would work like some of the notes and deed of trust and things that we've had drafted will work pretty much anywhere in the state of Washington. Some of them can be pretty cut and paste. However, we do a lot of creative clauses, and if we have something creative in there or you have something creative that is different, the last thing you want is someone else's contract verbiage finding its way into your contract. Easiest thing to do is get drafted by a lawyer. Now, if you want to look over it with us on a group call, that's a good thing to join the mentorship for. We can look over your legal, we'll counsel on it. We'll absolutely go through it with you. We just don't provide the boilerplates. Let's see here. All my income is from my own business I started this year. How will banks look at that income? Typically speaking, I haven't had much luck. Oh my goodness, Mitchell, that is, uh, that hits me right in the feels. Um, I, that was really hard for us to do. Banks hated that we didn't have any bank loans. They absolutely hated that. Um, I used this analogy earlier in the call, but it's kind of like getting that first job. They're like, hey, starter position, 3 years experience required. It's like, oh my goodness, how do you get the first bank loan? It is hard. We, Cody and I, have been in business for about 13, 14 months now. We have— I'm thinking back, it's like 21 bank accounts. Some of them have multiple, though. I think I have 16 or 17 LLCs. The underwriting to give Cody and I our first loan, just the— just to underwrite us was 60 to 90 days. The first bank backed out because after we passed underwriting, the day of signing, the vice president called— of the bank called and said, hey, you only have seller finance notes. I'm uncomfortable with this because all your terms are made up. I don't— we just don't know how your other deals really look because your debt's all custom and we're uncomfortable. That doesn't even make any sense, but that's what happened. So it actually took Cody and I 8 or 9 months to get through the whole lending process. It should be a lot faster for you, but it is a struggle. Once you get that first bank loan done with your current financials, you're probably going to want to use that lender again. That same lender we used 45 days to refinance a whole bunch of other stuff in our portfolio now that they've already given us money and we're all set up. It is hard though. Yeah. To Michael's comment below, 2 years of filed taxes usually for conventional lenders. That's going to be true on the smaller stuff if you're doing a conventional loan. But if you're doing a commercial loan, it's going to be a lot more asset-based, but they're going to blend it between asset experience and then they still want to see your taxes. I was a W-2 employee for years. 7 years, I believe. And then I simultaneously, like, I just left the 9-to-5 and started a bunch of companies. So underwriting me was very, very, very difficult. Cody's 22, has no work history ever, and got his first credit card when he was 20. Underwriting Cody to a bank, also ridiculous. So the good news is it can be done. If a bank will lend to us, a bank will lend to you. As long as you have enough net worth to back that up. Oh, and Daniel knows a thing or two about financing. As long as he has the down payment. I do a lot more refinancing than bank financing as well. I should mention that I've never used the bank for acquisition outside of primary residences. So that's a good thing to talk about. If if you're going to need a down payment, that needs to be considered. I didn't need them because I'm doing refinances. So the deal's done and we're restructuring. But yeah, Daniel actually probably can speak more to some of the conventional stuff because I don't touch that. And Michael, to your point, use private lenders. You'll never want to use conventional lenders again. I agree, conventional lending sucks. You should see the amount of fees that we had to pay. Sorry, Daniel, you just said you're a lender. We just talked about that. Banks suck and they do charge a lot of fees. I used to sell financing where closing cost is almost nothing. There's no fees other than like your basic— like there's usually a title fee and I pay my lawyer for anything they draft that's custom. Seller financing, there's no lender taking points. Traditionally, you file it, you work through it with the other party, and you're done. The stack of papers to sign is about this thick as opposed to this thick. And yeah, when I went through that final closing statement, I was just like, oh my goodness, the list of fees, even the little nickel and dime stuff, $300 here, $2,000 over here. $21,000 to, to the mortgage broker. It gets very expensive when you start playing with bank debt. I love seller finance debt. However, at some point, if you have 5, 10, 15-year balloons, there's going to be a point where you do hit a balloon and your options are you need to renegotiate so you can extend, change it around. You can pay it off with a check if you're liquid for it. That's my favorite method. Or you're going to need to refinance. And if you're not taking it private, you're going to a bank. Daniel goes private route or smaller local banks, 4 units. So yeah, it's so fee heavy. It's, it's just kind of a terrible system. I really didn't enjoy it. Where it makes the most sense for me is we have a lot of equity in the portfolio, and Cody and I made a point of re-rolling all of the capital for a year. So we did not pay ourselves anything for one year. There was one day where Cody and I paid ourselves $200, and then we went out and bought groceries. And so, uh, if you look through my Instagram, at some point there's a video where we go, hey, we got groceries. Um, that was a big deal to us. We rerolled every single dollar in acquisition, which means all of the net worth is rolled up in the portfolio. At some point you're going to need liquidity. And as we're going into a bit of a market pullback, we are doing some cash-out refis. If you can get paid to refi and it more than covers your fees, granted it still sucks, but it is not a terrible idea to pull some cash out and hold some cash on hand. So I'll pay the fees to pull some money out and borrow at 6% as opposed to taking it private at like 10%. From the Divergent Minds podcast, what are your thoughts on seller carry down payment and using private money for the majority LTV? Well, my first thought is it's probably going to be a lot more expensive. Seller financing is private money. They are a lender. That's just what it is. That being said, you typically get lower interest rates with the seller-financed transaction because they're also getting their price, their terms, they're backed by their piece of real estate. And traditionally for us, it's usually in first position. So for seller financing, the more seller financing you can get, typically the lower interest rate you're going to get. That being said, I— it's very common for me that I use a blend of, uh, most of it is seller and 5 or 10% of it is private. If you flip-flop those, it just has to work at a little higher interest rate, but you could have a much easier time if a seller wants more cash out. That's where you really can come in and ask, hey, can you carry 20, 30%, and you can partner with either a bank or private money. If you do private, you can probably take it to 100% purchase price. If you go with a bank, you will need to have some skin in the game. My good friend Matt the Lumberjack Landlord, which by the way, check him out on YouTube if you haven't, it's Matt the Lumberjack Landlord. His name's Matt Hawkins. He has 40 or 50 bank loans. It's crazy how he structured all of his loans. He actually created a bank product with a bank that once you get your 10 Fannie Freddie loans, you can get additional loans from a bank on your residential, like houses, duplexes, fourplexes. Really, really cool. But he just did a blended where they needed him to bring 10% down, seller financed 40%, bank financed 50%. And banks love that because they have to have the first position, And they're only financing half the property. They're in an excellent spot. They just will need to see some skin in the game if you go that route. I'm wondering if you'll try to fill your vacancies before buying another property with more debt. Well, funny you should mention vacancies. Cody and I have more vacancies than usual. Right now is financially one of the tighter times in the portfolio. We had coming out of COVID a lot of government support with if there's a non-pay, essentially the government will just write them a check and get them caught up. So the non-pays were basically a non-issue. They're still doing those programs, but we made the decision as a company, we benefited from that enough. I want other people to get into that program. It's time for the non-pays to start paying or leave. So we actually did remove a lot of the people who are just intentionally not paying. And taking advantage of the system, we did remove them. Winter is very hard to lease in Moses Lake, very, very hard. And so what we will be doing is I'll be bringing on one more member of our team. His name's Gavin. He is fantastic. He is going to be our boots on the ground in Moses Lake, and he's going to really kickstart the, um, leasing when we hit spring. So We're in a higher vacancy time. I will still buy deals that cash flow all day long. It just has to cash flow day one. I'll absolutely buy more. We submitted an offer for something that I know will be accepted today. Details to come after it's accepted. But yeah, we're still buying, but the buying does slow down until we're stabilized. That's a great question. Don't go overboard on other projects while you have vacancies because that's just thousands of dollars a month in potential rent that you're losing and vacancy loss is one of your highest expenses. Let's see here. Michael, I could see financing the 4 and 8 unit using the land as collateral. How do you see structuring the construction? Just wondering how you like to do it. Well, it is much easier if you own the land free and clear. So the first thing we'll do on the land portions, a lot of them are their own parcel. So we will essentially move the debt from the whole parcel onto the building. So we have to get a deed release to make sure that we own that land free and clear. That is much easier to go get collateral, start building on that land. That's usually done in phases with draws. I'm a little bit more familiar with some of this because I've coordinated some big construction projects when I was working for CoStar. I worked very closely with the analytics teams and helped people structure these and get that debt. So it is part of my background, so I'm a little bit more comfortable with it. But I'll tell you, I hate taking out debt to build anything. It's not a huge part of our model. So when we do it, that portion will definitely be after we're all leased up in the portfolio and we're not taking on any other major projects because Construction is expensive and you need to move fast on it. Daniel, the DSCR loans are awesome. We talked about this slightly earlier in the call. I love DSCR loans and Cody and I have a portfolio DSCR of about 2.2% last I looked. So what— another thing that I'm looking at is the potential of just pulling a portfolio line of credit so that I don't have to pay on it when I'm not using it, but I have the ability to use a line backed by our actual portfolio. I'm looking into that as well. But any sort of interest-only product, I'm a huge fan of. And DSCR is really popular right now because a lot of things that used to pencil aren't penciling the same on traditional products. DSCR is just a function of how well can you service the debt. And so they are— most of the products going out right now are going to be DSCR. Divergent Minds, you explained the equity is the easiest out of the deal debt equity. Yes. Would you ever see investors co-signing on mortgages? I've heard a Facebook group. I heard on Facebook group of this method. What are your thoughts? I do not like cosigners. I actually have some very dear friends who cosigned on a deal for one of their employees, and that note is coming due in a couple of months. And I think they're about $200,000 underwater. I have no idea how they're going to keep their house. I talked to them recently and apparently there's a game plan in place, but I don't know what it is. Incredibly stressful, miserable situation to be in. I don't like signing for debt with other people. I will typically, even with investors, I typically limit any one investor to 19.99% of my deal. And the reason I do that is because anyone under 20% does not have to sign as a guarantor on the loan. If I am managing the deal, I want to be responsible for the deal. Period. There's other ways to structure partnerships around that, but that is my main thing is I don't like the idea of cosigners, especially in the creative space. The cool thing is you don't need a cosigner because I don't need another person backing my debt. If you are converting to bank, it is possible that you have another partner who is bankable. It's not something that I do. Cody and I made the decision to get our— literally the decision was we need to get our net worth high enough so that we can back bigger loans. And that is why we bought as much little stuff as we did, is we were prepping to be able to back the loan for the 38-plex. So we made our— we forced ourselves to be bankable. That is a good challenge I encourage you to do if you're not bankable. Get a seller-financed deal that doesn't require it and make yourself bankable by the time it is time to refinance. The idea of going live on Instagram while being live on YouTube— this is probably the day I should have done that. It's hard when Cody and I are in different places because when we go live on IG and YouTube at the same time, it's usually a mess because the audio comes through both ends. And I, I've had multiple attempts at that and it sucked. However, when I'm in one room and it's just me that, yeah, this would've been the day to do that. IG gets a lot more views than YouTube. However, I'm really dedicated to our YouTube channel as is Cody. This is my favorite platform and where I want to teach out of. So we keep it on YouTube. That's, today was a no-brainer. I wish that if you mentioned that at the beginning of the call, I would've just tossed it up there. That's, Thank you for being smarter than me. Giovanni, ever had a low appraisal come in on a refinance out of short-term debt? Yes. My second deal, duplex. The— my neighbor's property at the same time with no renovations appraised for $400,000. My property appraised for $3— 65. I was going to do a BRRRR, the buy, rehab, rent, refinance, repeat. I was not able to pull all the money out of that duplex. I put in 50, I was able to pull out 30. So it's close to a full BRRRR, but I got absolutely gypped on appraisal. I had the highest market rent per square foot in the entire city. It's used as a rent comp still everywhere. Brand new everything, countertops, floors, drywall, light fixtures, faucets. I mean, you name it, I renovated it. New garage doors, new roof. And we did everything but new landscaping, which I should have done, but, uh, I was a little bit over budget already. We decked this place out, and I came about $40,000 to $50,000 under what the appraisal should have been. And so while I was able to refinance it and the refinance went quickly, the appraisal was really low. I've seen it happen to a lot of other people, especially right now. Flippers are just losing everything because appraisals— appraisers are being instructed to be extra conservative because the market's pulling back and it's causing a lot of problems. I have someone who just appraised a property easily, easily worth $800,000 today. Just appraised at about $550,000 because they comped it with properties. He just spent $400,000 in renovation on this property. They comped it with properties that were dilapidated or condemned. It was ridiculous. So yeah, I run into that a lot. Appraisals are dumb. That's why I hate— that's one of the other reasons I really hate banks. Teller Finance, it's based on the deal and your relationship. If you can execute on it and you're a good operator, you're going to get the deal. What would LLC structure look like with equity partners? Completely made up. Whatever you want to do and everyone signs off on and every lawyer signs off on, you can do. But essentially you're going to lay out— you have to have an operating agreement to have an LLC. This is why we do LLCs. People ask all the time, do we need an LLC? If you don't have partners, no, you just flat out, you don't. I think they're dumb. LLCs are designed to be able to partner with people and bring other people in. Operating agreement will lay out who has what equity, what your roles are, what happens when there's conflict, who can and can't loan to the company, who can sign for what. My operating agreements are about 200 pages. I have refined that over a lot of operating agreements with multiple teams of lawyers. When you start, I'm going to guess your first operating agreement is probably about 60 pages of stuff. You add to it as your legal library grows, but it is unique to every partnership. All special clauses live in that. That is the, the Bible for this is how we will operate our business, spend the money, to get a great lawyer to draft every single one of those because they're totally custom, completely negotiable on almost every single word in there. Um, Divergent Minds comments on, uh, commented on Giovanni's refinancing on a short-term debt. If you are buying, if you know you're buying over asking price, you need to have a long balloon, just, just period. Because you— there's only so much cash flow you can possibly get in a year. If you can cash flow the entire debt payoff in a year, then like, sure, do it. But you need long balloons so you have time to adjust. And if Appraisals don't come in. There's one other option. You can earn the darn money and pay down the loan. Cody and I have a, a 6-plex. It's one of our only cash negative deals we ever bought because it came with a ton of land and it's way under market rent. So the thought is let's find the right use for the land and bring the market rent up and refinance. The city has been blocking every idea I have on the land. I have another year of the debt, but it's expensive debt. It's a 2-year balloon. I have a little over a year on it. What I'm probably going to do is we will find the right use of the land. It is a stellar deal at a stellar price, but there's no way with its current income that we can possibly refinance it. So all of us will be writing a $20,000 check to pay it down and then it will finance, which is— it is what it is. But a lot of your problems get solved with money. Give yourself a long enough balloon to fix it. I could fix it in a year. I just don't want to be paying 12% debt for a year. I wanted to be in and out of that debt. It didn't happen. That's why you always have a backup plan and a backup plan and a backup plan. But yeah, if you're buying over market rate and over market price and it's a 1-year note, I would not do that. That, that can be really brutal. You're gonna need to either execute perfectly or start paying money to get that refinanced. Giovanni, appraiser was having a bad day, I guess. Yeah. How did you pull through on that one? Was— we just executed the refinance. I left some money in the deal and that was fine. And actually, that's the only building I've ever sold that I've, that I purchased. And I am, I'm happy I did. I rolled that into a 12-plex and in one year we 6x'd the money. I doubled it. I doubled my initial investment in that duplex. Sold it and then tripled the money in a 12-plex renovation with Cody. Yeah. Risky to flip in the current market. It's risky to flip all the time. I know that's not a question, but that is definitely worth talking about. It is always risky to flip and wholesale and do all sorts of stuff that people go, oh, it's risk-free, it's easy money. There are a million people who have been posting all over social media for the last 12 years when the market was easy. Look at all the money I made when any idiot can make money trying to flip a property. In fact, the longer your flip takes, the more the darn thing appreciates. There's some deals that look better because they just took so long that the market just lifted up the property. Um, I am so excited for what we're running into. When the market pulls back, bad operators get burned. The people who banked on just appreciation bailing them out every time, they're going to disappear. They're going to stop being on social media because they're just losing money on every deal. I've already met a bunch of people who are absolutely hemorrhaging on a whole bunch of flips that they cannot sell for what they need to sell, and they're just selling for losses to stop the bleeding. Very painful. I feel bad for them, but at the same time, it's been an artificially propped up market. We are now entering a time where we get to see the best operators play the game. If you bought on long-term fixed rate debt, the new variables in the market don't matter because you bought for cash flow and your debt is fixed. We're just going to ride this out. If you bought right, you just get paid to wait for the market to go up again. If you played the short-term everything game, I think 2023 is going to be a really hard year for you. It's really hard here. Flips are scary. All Night Hider, I appreciate your, your comments there. Always glad to, uh, always glad to give as much content as we can. Again, I did a terrible job of marketing, uh, today's Whiteboard Wednesday. I took my first day off in a year yesterday, and, um, I didn't set this up. I should have done that. That's on me. Do we have any last questions for the chat today before we hop off? Again, anyone who's, uh, Anyone who is new to this call, I said we're announcing the Robinhood events. December 3rd, we have a breakfast. If you want to book that Friday night, which I think is the 2nd, come on down. Cody and I will be there. We will pay for your breakfast. It's going to be at the Alderbrook. They have one of the better breakfast menus I've ever had. Come down and join us. Kevin G actually flew in from Ohio. So thank you, Kevin, for joining us there. But fantastic, um, time just to go ahead and network. The big event will be January 20th, 21st, and 22nd. Uh, you're gonna need to call the number earlier in the chat for that, but I'll pull it up again. It is 360-490-8168. Talk to Hannah, she will let you know what the pricing and cabin availability is. But if you book a cabin Dinners are catered. We're bringing up guest speakers. We may have Michael Zuber and Dion there. There's a couple other people in the lineup. So very, very excited to have you guys there if you can make that. We had a couple more questions come in and then we will call it a day. What's the end goal? Commercial buildings, apartment buildings, development, etc.? My end goal— the fun thing is there is no, there is no actual end goal. There's a goal, but then you hit your goals and then you change them. I have a lot of big goals, but I've hit every goal that I had initially. When I was growing up, I wanted to own my own house, I wanted to have an amazing wife, and I've always wanted to have a dog. I have a Frenchie, so that counts as half a dog. Um, but I do have an amazing wife. I own the house that I live in. It's a small, cute little house in Renton, Washington. I love it. I hit all my initial goals. Um, then the school district got really weird during COVID and started forcing people to get vaccinated and bullying people who question anything ever. So that got a little weird. So my new goal was I want to retire my wife. And so I retired her and myself, and now we work on all of our companies. We have a little bit more control of our time and our projects. So that was cool. The next goal— I can't communicate what the next goal is. We want to all— we love the resort space. I actually really love running the resorts, events. That's the route that we want to start pursuing. So what you'll see from us over the next year is we're going to be doing a lot more media, a lot more events. We're probably going to buy another resort, but we'll always keep buying enough multifamily because multifamily is stable. In a down market, resorts definitely get hit. So I want to buy enough multifamily so we always stay in a place where there's enough cash from the multifamily. So if all the resorts were completely vacant, 100% vacant, we can still service all of our debts, all of our obligations, and we don't sink the boat by doing fun projects. So you'll see a lot of hospitality plays from us. I really want to buy a castle. So if anyone has a castle, let's talk. If you know someone who has a castle, make the introduction. But we want to buy some fun real estate backed by our stable multifamily. From Andre, are property taxes valued normally, uh, under seller financing? Yes, as soon as anything trades, it's recorded at the county level, and that is the trigger for the city to go, hey, we should probably reevaluate this. If you buy a property, without failure, taxes will go up. I have had one property where the taxes didn't go up in the first year when we bought it. It's usually about the same ratio in every given state. It's usually about the same ratio for how much taxes go up in proportion to the purchase price. In Washington, your property taxes are usually about 1%. It's like 0.9% of the purchase price is typically where it comes out. And Texas is twice that. It's almost exactly 1.8% every single time. So if you bought something for 3 or say something last traded at $300,000 and that's how they valued it at the tax assessor level, and then you bought it for $1 million, well, it turns out your taxes are going to be close to I mean, wow, that's actually going to be kind of expensive. There'll be a couple thousand bucks a month. It's like a permanent mortgage. Where do you and Cody look for insurance, like health and life, without working a typical job? Um, I'm actually open to suggestions on this because I just— I, I did a program through my wife's school after she left, we just hopped on COBRA where we basically pay to continue the healthcare we have. I haven't really done a deep dive on the best way to run this, so if anyone has an idea, I'm open to it. But I pay about $1,300 a month for healthcare, and that is expensive. That's a, that's a real line item. I live very frugally, so my healthcare is not much less than my mortgage for my house. They're almost They're very similar numbers. So it's expensive. You need enough cash flow to be able to afford it. I don't, I don't really care that it's expensive because I live ridiculously under my means. But yeah, there's a way to bring that under $1,000. I am all ears. If I had to start over $0, what would I do? If I had to start over with $0, I would I wouldn't change much. I would buy the biggest— because I have $0, I'm going to say start over. So I don't have any real estate, I don't have any money. I would take on the biggest project that I can because I know for a fact today I can handle a 38-unit building without any trouble. And so if I was starting over, I would find a 50 to 100-unit building. I would go, this is my project. I would take it out with private capital, seller financing, whatever I needed. I would take that building out without any of my own money, and that would be the seed for buying a bunch more smaller real estate that I would use to expand. Buy a big property with a lot of cash flow, buy some smaller stuff, add pieces to that, and I would scale up as quickly and aggressively as I could for exactly one year. 100%, no weekends, just grind, grind, grind for 1 year, and I can get right back to where I'm at or better. 1,000% sure that I can do that. Just guess, but you look for seller-financed multifamily building. Yeah, exactly. And I would go big. That's the big thing that I think a lot of people miss. You go, oh, I'd scale up with duplexes and triplexes. And I would skip that whole phase. I would go for bigger buildings. I would build a portfolio of 100, units like we did last time. Um, because honestly, it was 14, 15 months ago that I had a duplex, and now it's over 100 units in a resort. You can scale extremely quickly. I would do the same thing except I'd do it even faster because I know how to do it. Um, I love the goals, uh, with as far as freeing my wife and not being under the control of an employer. Almost every single day. Um, it's not that I, like, it's not that I can't just plan my food out, but I like to actually just walk to Safeway with my wife. It's right down the street. Uh, it's the grocery store if you're not from this half of the country. Um, but we walk to the grocery store and we just pick out what we want to eat for dinner and lunch. And, you know, every other day walk over there, we have that conversation every single time. We walk over there and my wife goes, I'm so glad I don't have to teach. I just get to go on a walk with you and we get to make lunch together. I'm busy. I work really hard, but my life is so much better without an employer. I love not being told what to do. If anyone's searching for a goal, highly recommend. Question: From what I heard, property taxes can be challenged by the owner to be reassessed after the assessment. Yeah, you absolutely can. I've never heard of a place where you can't challenge it. You rarely win the challenge. I'm thinking through— I've never seen someone win in Washington. My dad actually bought a house in Texas, uh, Conroe, a little north of Houston. He challenged his taxes. They said no. He re-challenged them with a lawyer, and they brought it down a little bit, but he spent more on the lawyer than, um, He saved on taxes. So you can fight them. You can absolutely contest them. They rarely reevaluate them unless they're egregiously off, which does happen. Dividend Dave, how do you find private lenders and how do you get them to trust you? We say all the time on this channel, but the story is more important than the real estate. We get a lot of trust because we have a policy of if we sign something, if you put your name on something, you do it. And so we don't sign, we don't wholesale. I don't, um, I don't renegotiate. When we write a deal, I write a deal I know is going to work unless we found something that just absolutely, like, the deal has to be reworked to be salvaged. We've closed everything we've ever written on, and lenders see that too. And when they see that velocity in your ability to execute they want to place money with you. The other thing that was huge, Flynn Family Lending is a private lender that we use a lot. Not by any means all of our deals, but we have 3 separate loans with them. One is, well, one's actually not a loan. We're partnered with them on a deal. We have a second position loan with them, and we have their only ever third position loan. And they did it because they trust us. That was earned by Cody. His first partner actually, um, he lost the game. He played the equity game, overbought real estate creatively, and then levered up and levered up and levered up and never made any money. So he lost and he was saddled with bad debt. To get unpartnered with him, Cody got a little bit of equity in the buildings and In exchange, took half a million dollars of bad debt and made all of his investors whole, the other person's investors whole. That was a project that Cody and I and a few other people worked on. I bought out some of Cody's equity and bought into some of the buildings. Cody earned it. And that's actually how we started a lot of our businesses. We had 6 months and Cody's like, well, I've never really had a job. How do we earn half a million dollars in 6 months? And having to do that and then actually doing it, we shared that story with a few people and that built a lot of trust. So just being true to your word, doing what you'll say, and doing the right thing in all circumstances, people will see that. I, I'm not a karma person, but I mean, that you do good things, you get good prizes. That's it for the questions today. This was a fun one. Sorry everyone for not marketing this well enough. We could have had more people and more questions. But, um, yeah, if you can join us at any of our Robinhood events, December 3rd or, um, January 20th for the 3-day event. I really appreciate you guys being here and I'm really looking forward to next week. We'll see you guys again. I believe Cody will be here. Oh, there's one more question. I'm gonna answer it really quick 'cause it's a 17-year-old. Hey, good afternoon. I'm 17 years old, soon to be 18. I really don't want to go to college. I do in fact want to get into the real estate via seller financing, but don't have any money. Any advice? Don't do something that you don't want to do. If you don't wanna go to college, you don't need to go to college. I did, I loved it. I would not trade it for the world. I learned a lot about how to communicate with others. It rounded out my knowledge. And while I didn't learn a ton about business in my business degree, I am the business operations person for our company. I oversee a lot of the legal, I oversee a lot of negotiation, but like the accounting, the corporate structure, HR, I do all the hiring and firing. I got a lot from it. So it depends on what you want to do and what you want to be. I wouldn't trade my college experience. There's no way Cody would have got the same benefit going to college. Cody's not as social as I am, and so the, the fun factor of being around others, I think he would have missed out, uh, or he wouldn't have taken full advantage of it the way I did. Um, so if you don't want to go to college, don't let people tell you what to do. I think that's a dumb model. Um, I'm not saying do or don't, I'm just saying do what's right for you. If you want to get into the game Uh, Caleb and Chuck were on our channel all the time, and their, their actual YouTube channel is Caleb and Chuck. They made it pretty easy. Um, check them out. They just turned 19. They didn't go to college. Uh, I think they were in a community college for a few months or something, but like, they didn't really do the college thing, and they're at 28 units, and they're just a year or two ahead of you. So I would, I would check out their channel. And then just keep learning the seller finance game. You can start whatever business you want, real estate or other. All right, for real now, I'll see you guys later. Have a good night.