Christian Osgood: How Creative Financing helped him and his wife RETIRE at age 29

Dive into our latest episode where Christian Osgood, who achieved retirement in just 11 months using creative real estate strategies, shares his insights. Learn how he magnified his portfolio from four rental units to an impressive 100+ units through strategic partnerships and seller financing. Delve into the art of creative financing: from seller financing, hard money loans, to equity partnerships, without leaning on traditional bank loans. We also explore the power of relationship-building in real estate, emphasizing the value of face to face meetings and the magic of truly listening, not selling. Christian uncovers the techniques of negotiating seller financing deals by aligning with seller objectives and proposes cash flow plans tailored to them. A highlight is the discussion on the potential of properties that linger on the market, offering rich investment opportunities when approached with savvy negotiation skills. He also discusses some of his more ambitious projects like hotel conversions, and how he plans to capitalize on them for maximum gains.  The dialogues he teaches in this episode are absolute fire... Welcome to the Gould Mine Christian!

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Transcript

•  What's up gold miners if you're sitting at home right now and you're asking yourself. How can I retire from Real Estate. In the next 12 months well you came with the right episode because my friend Christian Osgood did just that he was able to successfully retire himself and his wife in 11 months using the strategies that we're going to be going over in today's episode. Today we go deep into the tactics and the conversations the dialogues that he uses with potential sellers with potential private money partners and that's just the tip of the iceberg for this episode. Christian also goes deep in how he built a successful Business Partnership real estate investing partnership with Cody Davis who I've had on in a previous podcast episode as well as the conversations that he has with sellers leading up to when he asks for seller financing. What does that look like. He has a map literally a map that leads to that conversation and he's going to give that in today's episode so if you don't already have your pen and paper ready take it out because this is a doozy without further Ado everyone Christian o good Christian welcome to the gold mine. Hey thanks for having me yeah man I'm excited to I'm excited to chat with you today I uh I is he your better half or your worse. Half I don't know uh. He's the other half of business oh sure probably get into that but yeah partnership we have uh. We started out very much the same role and have Diversified quite a bit the different roles that's awesome man yeah. Know I I I had a good time interviewing him and and I know that we're going to have a lot of fun together too so um.
•  You know one of the things that really stands out to me when I hear your story and and I've been following you online for some time now is the way you talk about the way in which you retired your wife you know and that really uh that resonated with me. So the claim to fame is you're 29 years old and in 11 months you were able to retire your wife so how how did how does someone do that well out of out of necessity. So I'm in the greater Seattle area. So 2020 uh. She's a kindergarten teacher and uh the government decided that kindergarteners are going to learn best over Zoom um so that was uh that was not going to work especially in my wife's demographic. She was in a demographic in South Seattle where they had a a lot of underprivileged kids. Uh you had you know six different kids in a house all trying to learn on Zoom with one of woman in kindergarten. So that was that was a mess. Then you have all the other political craziness that happens uh from 2020 to 2022 and so I had this goal to retire my wife. In 10 years. She wanted to have a 10 year teaching career so I had like five years left and I'd picked up a couple duplexes well. That goal went from hey I I actually don't. She didn't want to teach the next year and on top of all that as soon as they went back to school. She got a back injury from a kid shoving her so we had lni issues. We had a whole bunch of uh political reasons to be like okay. This job is not going to work. We have to figure out something else right. Um. I already started buying some rentals. I I was at four units and I okay how how does one go from four units to financially not needing a job. And so the answer to that I found in growthcon where I went with Cody Davis and he had this goal of retiring his mom and he's like well. I figured about 50 multif family units is about what it would need if the average cash flow. I'm getting to hit that goal. I'm like okay well. What's easier doing 50 between the two like each of us doing 50 or both of us doing a 100 and we decided to partner up and both go towards the goal of getting 100 units between the two of us and that is exactly what we did we gave ourselves two years to do it uh. But we did it in 11 months. A partnership like that is pretty rare because you know I've seen more. Partnerships fail than succeed. So what was it about I mean so so first of all it sounds. Like there was a shared Mission slightly slightly nuanced but like it was a shared mission right so that yeah that makes perfect sense. But a lot of people have a shared Mission too. A lot of Partnerships have shared missions that don't necessarily succeed so what was it about that first interaction or or those first few months that uh that kind of like laid the foundation for that uh successful partnership I I think there's a few rules for partnership that that that make them work and the first one is that shared Vision you have to have a a clear. Target of this is where we're going and I think where a lot of people get lost. This is where I see a lot of Partnerships fall. Apart is we don't change anything or renegotiate until we hit that goal and so I'll see people because there know such thing as an even partnership and people who can't accept that fail at Partnerships. Um there have been times like at the beginning of of our partnership. Cody had 30 units. He was 21 years old. He had figured out the method of using creative Finance to buy anything he had been with. He had a mentor who helped get him started but he was he brought more value in the beginning because he's done it more often and so that was huge as the partnership develops. I'm a business. Ops guy so the hiring the coordination the remembering to pay bills what are we doing with our businesses. How are we marketing ourselves. Those are all things that followed me so there was a point in the relationship and it's probably the season that we're in right now growing where I really shine if you focused on how much who gets what equity and who's doing more and I'm happy with wouldn't. It would not be a successful partnership. At all. What we did is we kept at 50/50. We both pushed as hard as we both could we both give 100% effort towards the goal till we hit 100 units and at that point my wife left teaching. She wanted to help be part of the companies and started working in Property Management. That's where we started renegotiating things because now you have two people from the Osan Clan working full-time in pm and you have one guy who does more. Acquisitions also owning half of our property management company we reworked it where I'm like okay. We hit our original goal. How could we changeed pieces and the simple change was. I bought Cody out of the property management company by trading him one of our buildings. Cody's happy. I'm happy everyone manages stuff but if you want a successful partnership clear goal and Target where you're going you don't renegotiate anything until you hit that goal and then once you hit that goal you just do an evaluation what are our current pieces. What would you like to do what I like to do and what Cody and I ended up. Doing is I'll take the management side um and I'll manage the humans all the all the people who work for us. Cody will do more Acquisitions and that's going to be our universe and we're going to hit that uh we're going to do that until we hit 300 units which should be in another six or so months and at 300 units we'll reevaluate again. It is fun. It moves it moves quickly because your transaction size goes up as you as you uh progress typically so we're uh we close on 22 unit on Friday. We'll close on another 15 in I think end of October and then we're still under contract for another 60. So it's like we' we'll pick up a lot of stuff but then once we hit it. We'll look at the pieces again. I know Cody wants to move to Tennessee. I want to move to Texas so um. We'll figure out our pieces. Once we're there but yeah that's that's the key to partnership. Set a goal hit it and don't change anything till you hit it. And that is a it works every time. That's awesome man well what I heard and and for the audience listening at home too it doesn't sound like the two of you. When you came into the partnership. You had a shared Mission. You had an agreed upon. Target. We're not going to renegotiate. We're not going to do. We're not going to do until we hit that Target but it sounds to me like at the beginning you guys were still trying to figure out the dynamic. Like there wasn't there weren't clearly defined roles from the beginning so maybe I'm wrong but what it sounds like is there weren't clearly defined. There weren't clearly defined sorry notu gos. There weren't clearly defined roles at the beginning of the of the partnership and so how long did it take you to figure out okay like and and was that just like trial and error was that just like okay well you do. This you do that like because I could see a lot of these Partnerships where there's two people who have very you know typa personalities and and it and I'm sure that that's how the two of you are too because you're very ambitious people so how do two type. A personalities who are very talented and very driven find a way to make that happen. I see I think a lot of it just comes down to who you are as a person. But when you set that goal you just you like hey. We have the same goals. We we both have some skills. I I think the Partnerships that fail are the ones who try to over script it because there's a certain amount of you have to have you just have to develop as a partnership when you're starting and you don't have a lot of real estate nothing matters outside of buying the real estate like building the business. There's there's nothing to delegate because it's we're acquiring properties um.
•  So initially Cody comes in and goes hey there's 38 blacks. I want to buy because I had this goal getting to 30 units by 30. That was one of my my little sub goals there. He's like well you're 29. So um. I can't help you there because you have four units and I want to buy 38 Plex and so that's G to put you. A 42 I'm like okay perfect uh on a deal like that the whole Focus now is how do we how do we take it out. So now Cody and I both get on to Capital raising. We both bring in money the actual deal structure I had the idea uh because it was not going to cash flow day. One. I had the idea of hey with collections as low as they are what if we did lower payments for the first six months and then they bump up in price to where the seller wants and the seller said that was perfectly acceptable um so like we worked on the negotiations we worked on the capital raising. Once we got it done it's the two of us on site doing management I brought in the second deal uh that was a deal in Seattle that was from a family friend who saw us on YouTube who thought that we were interesting and had a building to sell so that one uh picked up seven then shortly after a Mutual contact reached out to us and had us buy six more units and so that was in the first three months. But that's all we focused on is. It's like let's go acquire stuff so everyone's all hand on Deck let's AC chire stuff. Then we realized we're out doing a great job of managing these things. Let's really focus in on managing and I I took the lead on that and Cody did a lot of the bookkeeping there because he's a math wizard but you evolve into the roles. I think if you over script it the part Partnerships I see that look massively unbalanced is where you get one guy who's like hey. I'm really good like I have friends in a marketing company. I'm good at bringing up business. The other one's good like I'm good at doing all of the grind of like putting together all the pieces and what you end up with is sales guy who brings on business and they're really good. But they don't do nearly as much work and you have someone who works five times as hard for the same amount of equity and I've seen that happen in in a sales company. I've seen it happen in marketing companies. I've seen it happen in real estate groups uh when everyone overcommits to just doing one thing you get huge imbalances if everyone's just hey I'm all hands on deck and we're going to figure this out. But this is what we're building. I've seen those develop better makes sense so up until recently. My understanding is that the two of you have never used a bank to finance property. Yep. We yeah so I've done one my my first ever deal was bank finance um there's a duplex and that is the only time I've ever used a bank loan to pick up a a piece of a piece of property and our partnership. C I've never acquired on a bank loan that's correct gotcha. So you you've never acquired period on a bank loan nope. It's all been seller finan. We have one that was acquired it with hard money that we're refinancing um. But no everything is uh. We've never gone through a bank to buy a property and what are the so if that's the case what are the various financing techniques that the two of you have used to acquire seller financing and a hard money loan one time gotcha. Just because the price of the deal merited it is a fantastic opportunity great yeah. Were there were there Equity Partners on any of these deals as well. Like were you bringing in or were these all 100% seller finance deals. Most of them did have an equity partner and the way that we rated the changed for every single partnership and that's one of the fun things about creative finances where the money comes from is just about aligning people's goals. This actually ties right into the partnership thing because you're partners with your Capital Partners um it's aligning it's an order of deal than debt than equity and a lot of people over focus on the capital because they don't have money and so the first thing they goes like oh where do. I find the money because I I don't know how I'm going to buy it. If I find a deal and that's the opposite way of thinking about it. If you start with the deal. What is the opportunity. Then what is the debt product which for us is almost always seller financing. So let's say the seller. Uh for this example is financing 90% of the property. We have to find 10% down that's a pretty common thing. For us. We we do a lot of deals 10% down where does that 10% come from well. We just meet with owners of properties and they're owners not sellers. People who own real estate in our Market we meet with them all day every day. That is what we do and we just build relationships with people who are playing the same game if you've been playing real estate for a while and you're doing it. Successfully. You typically have some money we know what everyone's goal is because we have actual relationships with people. So when I fight a deal the partner I bring on is the person that that individual deal hits their objective example. Say they're like hey. I'm trying to build a base of cash flow of $10,000 a month for my family. I uh I'm. I'm partnered with one of my original homelanders. Actually he trying to build that passive income and I'm like why don't we build an LLC where we're 50/50 and that LLC needs to bring in $220,000 a month and that hits your goal. He's a million dollar a year income earner so he doesn't care too much about the day one cash flow. He cares about buying the portfolio that's going to yield that once it's built stabilized and optimized for him any deal that has some upside. That is we're going to get at a great price but will take some time to increase RS that's the right investor for that deal and that's how I raise Capital. It's find a deal that I so we have a 12px and a fiveplex together right. Now both of them required some capex so they're low cash flow day one but they're massive. Cash flow deals in years you know after year one that's someone who can afford to wait because he's trying to build this over a fiveyear period super easy they bring in capital. We do the renovations we refy and pull their money back out. Everyone owns the property without a single dollar invested in it and they're that much closer to their cash flow goal. That's a perfect one. Another quick example um I had someone whose goal is to double their money every five years in real estate. It's another one who's a higher income earner so cash flow upfront is not as important to them. They're all about the equity growth. We just did a deal um where they bring in the capital. The operating Partners get all the cash flow which means Cody and I have zero dollars in the deal but we're getting paid every single month month. At the end of year five we have an obligation to buy him out or he gets our equity in the LLC for exactly double his money which means he'll double his money every five years and if we fail he triples his money based on the value of the property total win for the investor super simple structure that was a deal where cash flow was okay day one but is going to be F fantastic. In the future. I didn't want to take on additional debt to buy that property because I would been cash flow negative putting a partner on there. Like that was the perfect solution. I see so that's that's a very creative way of doing it so you're bringing equ. So there was some seller financing involved in that one too I'm assuming yes. There was that was 90%. Seller financed right so there're seller financing and so you're bringing in an equity partner. They're bringing in the down you're structuring it to where you're realizing 100% of the cash flow as the GP. We'll call it right the the the person who's putting the deal together yeah managing partner managing partner because we'll do everything. We've done is JV. We don't Syndicate so there's not necessarily GPS and LPS but effectively managing partners and general Partners. Perfect so the managing partner then realizes 100% of the cash flow until year five at which point you're going to refy full return of capital split. The cash flow 50/50 or they get the or they get. The property is am I misinterpreting that so so at the end of it. It's a buyout so the goal is to if you have an equity partner. The goal is not to partner with everyone forever because you hit the nail r on the head. Most Partnerships fail over time so we don't want to partner with everyone forever because the goals don't align forever with everyone. Uh so we have a fixed buyout at a fixed period of time for all Partners. So on that one year five it is a obligation to buy them out so I will buy them out for two to one. Then we'll Own 100% the LLC gotta. If we fail to do so. Then we surrender our equity in the LLC and they get the property um now the easy way to do that like you said is to refy which we'd be able to do. However we have a fantastic interest rate and a seller who's willing to extend another. Five years. I would like to keep that note in place so what we'll likely do is. We we save the cash flow on the property. It will cash flow enough to buy him out. The real estate will buy the real estate whether we refinance or not so we'll write like just cut him a check. It was a $90,000 down payment. It'll be $180,000 in five years. Almost anyone with a reasonable job can save up $180,000 in five years. U it's a reasonable buyout you're buying yourself time yeah that makes a lot of sense so what I'm hearing you say then is. We're going to start with the deal what are the benefits of the deal and then at that point. Let's find the investor whose goals are in alignment with the features and the benefits of this particular deal yep know what people's goals are know what your goals are because you're going to go into a partnership and yeah line up. The deal figure out the debt product and then that will tell you who the right partner is going to be to close that deal as simple as that every single time and we close a deal. Seller financed on average about every 75 days and I five calls a week we're not grinding the phones I have no software.
•  This is Google Maps figured out who owns the large roofs in my market. Uh calling five people book at a coffee meeting with at least one assuming three of them don't answer. Generally you call Five People. You get three no answers. Two people will pick up and one of the two is going to be available for coffee. You book a coffee meeting you meet with 50 owners. A year assuming you take two weeks off. If you meet 50 owners in your Market. You talk to them about real estate communic at your goals in a minute or less and learn how they build their portfolio. You're going to learn everything about how to operate in your Market. You're going to have every connection you need if you need a reference for a an accountant. A contractor. What have you you're gonna have every reference you could ever need and you'll have more deal flow than you can handle. It's a very simple pipeline strategy yeah. It's not rocket science huh but some people like want to over complicate it yeah. Like one call a business day. I mean it's like it cannot be easier than that it takes no time maybe 30 minutes a day if you get in a good conversation with someone but like the goal of the call is to book the meeting so shouldn't even be a long phone call. You generate some interest you learn something unique awesome about him tell them when you're in town and go hey can I get you coffee like it's. So easy it takes an hour maybe a week right because you get three no answers that takes no time you left three voicemails. You talk to one person. They're not available or not interested in meeting yet right them later and then you get someone who you meet with and it's like you talk for 15 minutes. You book a coffee meeting. Then you get coffee and coffee usually goes like an hour and a half like. If you have a great conversation. It usually goes over the hour. You schedule you're talking to two hours of work a week to find the deals. It's it's lit. It's nothing uh people get stuck on that this works in every market and it's not that hard to do if you focus on you're meeting with an owner. Not a seller you're not going to ask them to sell their real estate. You're not going to ask ask them for a deal. You're tell them what you're trying to build and learn how they build their portfolio whole model. That's all Cody and I do both of us. So you go out. You interview these sellers interview them right because what you're really doing is you're trying to extract information but at the same time plant the seed ever so slightly that hey we you know. We're always open to look you know we're always looking for for deals kind of thing I I wouldn't even go that far. It's so so. Here's a a good example because this this is what it looked like when I got started uh hey I'm trying to my wife. Uh government just shut everything down so my my 10-year plan came came a one year and I have two duplexes so I'm trying to figure out how to scale. They usually go like okay so why you calling me. I'm like well you have the 12px down the street. We property neighbors. I just wanted to learn how you got into 12 plexes the natural response since everyone asked them to sell is well. I'm not selling like oh perfect. I don't have any money. I just spent it on the duplex. However I I I I realize I do need to go bigger. Do you have any piece of advice or do you know like in my position. You're farther than me. What would you do if you're in my position to advance and sometimes the conversations are like super friendly and awesome and sometimes they're just super cold because you're cold calling someone asking for advice like it's not like a normal call yeah um either way. Most people will hear that and go okay well. This is this is what I did and and this is they'll give you a piece of advice and so you learn a little bit of their story. Once you get some traction and some energy on it. It's like okay perfect time to end the phone meeting because I'm not building a relationship over the phone I'm going to build in person. It's like that is amazing how often are you out of your property because I'm in town next week can can we snag coffee. I just want to learn a little bit about how you built your business and it's good to know the players in our Market. Most people will say yes to that in my experience way more than half. The time people will say yes to that they're family didn't excuse me usually the people in real estate they love real estate. Their family never really cared. Their friends don't care that they're real estate but they love the game and when you're the person who's like I want to talk to real estate. Most people are like heck yeah free coffee and talk about my business like people enjoy doing that I never ask them. I don't tell them I'm open to buying stuff because I don't know if they're going to sell me anything. It's not relevant um most of the deals that we buy out of these meetings. They call three months later and they're like hey I have have a friend who is selling a property. It's not what I'm looking for. I think this is a good deal for you. You should look into doing this. That's what it is more often than not. But it's never ever ever ask for a sale. If there's a sale and they know you and they're interested in your mission. Whatever you communicated your goal was they will reach out to you when there's an opportunity. I've never told someone I'm open to something I've never proposed an offer on a property except for once um. I always let the deals come to me and it's just by communicating your goals learn their goals and be the one guy who's not asking them to sell their stuff. And that's the number one way to buy things. I mean you have like this massive smile on your face too because I I could I could tell that you enjoy this man like like you love this.
•  It's so fun and it's so easy like it. I mean oh well let let me take it back. It's not easy. It's ton of work. It's so simple. It's very very simple which makes it very repeatable and it's fun because it I talked to so. Many people about this and everyone has some iteration of the same thing where there's a mindset and I used to be a broker. So it took me a while to to learn the mindset too. It's not about the sale and my old boss would slap me because I used to work for the coastar group. Selling you get the sale by not asking for the sale and that was like the main thing when they train you how to do sales is you have to ask for the sale I never ever ever do that and we buy more real estate than most people in our Market. There's two or three people who are bigger than me currently in Grand County Washington. Technically Cody is because he has 12x I don't have um. But there's there's there's very few people who buy more real estate than we do and no one who is buying in our Market at the volume that we're buying and we don't ask anyone to sell anything ever I just get coffee meetings. So I have a lot of I'm I'm highly C caffeinated through the day uh. But outside of that like I get coffee I sit down and talk to people and when someone has an idea on hey this is a deal. That's stuck or. This is something that I wanted to work on or you guys should take a look at this you should get spin the rubbish Cube and then it's just like a game you're figuring out okay well. Why hasn't it sold yet what does the other party want and how do we get a proposal in front of them that allows us to cash flow and long-term fixed rate debt. If I can do that every deal we buy I cash flow and it's longterm. My income. Just goes up for closing the deal and that's that's all we do just figure out okay. That's all I have to hit now let's figure out their goals and make sure we H all the targets so you gave one you gave the in like the the first part of that conversation with the seller yeah or owners. We'll call them owners right because that those that's the conversation with the owner. At some point those conversations might evolve or they might introduce you to someone that wants to sell their property given that all of your. Properties or most of them have been seller finance let like talk me through how you introduce the subject like what what are the what's the what's the dial there that you're using to kind of bring that up and and uh and get them to agree to do that that's perfect okay so they've reached out to you. Now you you have a relationship. They reached out to you and they have a property that they want to talk about selling perfect just like you would any so so if you just jump into like hey would you be open to seller financing. You you sound like someone who has no money and has no idea what they're doing uh. So you don't do that. That's what most people will do is. They're like he are you open to seller financing. I'm only interested in seller finance deals. You don't know that you're only interested in seller finance deals. You don't know what the deal is yet just like you would any other deal on Market or any conventional deal. You're going to ask your basic questions about what's the actual opportunity so tell me about the property tell me about the area. What's your experience been with this property. One don't you like about the property I love knowing that like okay every there's no such thing as a perect property. So like what what's wrong with the property. Uh what can be improved easy way to trans I into seller financing or any financing is a simple question how is the bank going to look at this property. It's one of my favorite questions because it asks almost everything but really succinctly how's the bank going to look at it. Asks is there any major deferred maintenance do I need to put more money down because there's a problem. It's asking how are collections in rent roll because if you're not bringing in enough money the bank's not going to look at that favorably at that price or again you're going to need to bring more down. But if you're asking questions on finance and status of the building and you're opening up the conversation to okay. I've learned about the property. Now. I'm asking about how I'm buying it like if you're talking about the psychology of a sale. You've now flown from your your general open-ended questions to a specific like okay. Let's talk about the money that's telling the other party I'm interested and we're starting to talk about like we're talking about closing the deal. You're building a story of I am interested willing and able to close on the property. The way that you ask about seller financing is casually as a simple question after they tell you how bank's going to look at it. Awesome. How would you like us to take this out are you open to carrying a contract or are we sticking with the bank or I actually think less wordy than that just call it to say are you open to carry a contract and just pass it to them. A lot of times we just get a yes and people don't ask that question a question that we get all the time on our YouTube channels by the way Cody and Christian multif family strategy on YouTube but a question we get all the time is how do you convince someone to give you seller financing and the answer is you. Don't you you build confidence that you're the buyer and if that's how you have to do it. You'll get there later in the conversation but talk about the deal and then just ask them are you open to carrying a contract. If you try to justify because there's a bunch of reasons they would do it. But if you try to sell them on well. There's all these potential tax benefits. You don't realize all the capital gains up front. Uh you can receive interest on your payments uh any of the reasons that people sell our finance. If you give them the reason you're almost definitely not going to get seller financing because you don't know what their reasons are you don't know their tax benefits. You don't know what they want to do with their errors for their money just ask them if they're open a car contract and they'll give you a yes or no and you get a yes a lot more often than people. Expect yeah makes sense so don't start with that you know. It's like no okay yeah. That's that's something that you kind of bring up casually after you've learned more about the property. That's a really great question by the way so for those of you listening. How's the bank going to look at this property that that's a golden that's a golden question. It's a transition to close sort of question. That is that that belongs in every conversation tells you about the bankability. The the the maintenance. The money and again I I mentioned this earlier but the the psychology of the sale like you're the first one to bring up money and you're talking about how are we going to put together the capital. For this that is a collaborative. It's the best question you could ask I think in anyone's General script to an owner or a broker that is your first question as you transition to the cloth beautiful. You so that this is great all Christian but there's someone sitting there at home right now and they're thinking like okay but like but like how right like how are they doing this at scale now because maybe one or two. But there's so many what are you like what are you finding and by the way the other. The other thing too with this is that I'm assuming well. I'm not assuming I know I've seen some of your videos on YouTube.
•  You're getting some sellers to finance at better rates than you'd get from a bank. Like I just saw you posted a video on YouTube about a month ago where you got seller financing for for 5% or less than 5% yeah. We a lot even our Robin Hood Village Resort. That's a three and a half million doar loan. At 4.25% yeah. We do a lot of lower interest and are these interest only loans or are. They amortised over 30 years something. Like that. It depends on the loans yeah I I prefer interest only uh solely because on an adverti note your actual principal is just going to pay down on that note if you have a bunch of real estate. I like to choose where my principal gets paid down I am all for paying down your debts by the way I'm a huge like our model is build. It stabilize it optimize it and then pay off all the debt. You have a debt-free mega portfolio. Like that is that is the model however interest only is massively Superior because you control the cash instead of giving it to the lender. You want to keep as much of the risk as possible on the lender because if I pay down a loan and I lose that property the money's all gone if not that you lose a property but I'm saying if it the risk of something going wrong. If you have more money invested in the property you carry more risk. If you come come in with less money. In the deal you carry less risk so you want to keep it on the lender until you have enough money to pay your loans. All the way off so IO is how we do most of the deals to your question though before I go down a rabbit hole. Onely majority are interest sely um longer terms so you're looking for five 10 15 years. Five is a midterm you need to have a plan to get that into new debt. We still do some five years but you need. To have a plan to get it into long-term debt uh but 10 years. Plus is considered long-term debt and that is what we're targeting every single time. What would MO motivate someone to take that deal under 5% interest because I mean you can go to a bank right now and get that so what would what would what would the what's the motivation. There I I'm trying to understand that too yeah. So I think right now is actually a really easy time market-wise to explain this and to get those type of terms. So the reason being uh a year and a half ago properties are an all-time high. Interest. Rates are an all-time low well. Now interest rates have absolutely Gone Crazy Fast spiking so we went from like three to seven and a half percent. Like that. There are sellers who still want the price that they could have got a year and a half ago. However the debt markets no longer support that so you have to come in and C with cash to get the same return which is unlikely when the cost of capital goes up like that pricing is affected. The fun thing with creative Finance is you can modify whatever you want. You have price you have terms you have special. Clauses you can negotiate your own balloon payment. Whatever you can put in paper you can do and so on a lot of these deals right. Now people have a specific price that they're after but the debt markets do not allow that. So if you can come in and say here's what I need I need to have this at 5% and let's take a midterm product. Let's say let's say we actually do want to bring into a a permanent financing in the future fiveyear debt product at 4%. It's going to cash flow from me. There one it gives me time to get the income up so that I could get this into bank financing so let's me do my job as an operator. They can understand that two it gives time for rates to adjust if rates come back down. We can refy immediately it'll get it done but it is a like one of the easiest ways to do. It is it is a realistic way to give give someone their price on a piece of property and pay interest it just it's just saying hey the market is no support. This right now give me time to either improve the operations or for the market to correct either way. I can do this in a five-year period uh even better though a lot of people just understand I'm going to sell this where it cash flows like I can maximize my price. I have this great note. I'm getting what I want and it works for me as the seller at 5% that it's just not a problem. It. It has to work for all parties but more often than not you're doing these where you're giving them their price and they're giving you your terms. We've gotten price and terms before. Sometimes people just do deals that are fantastic but more often than not interest. Rate is the thing that we reduce because no one else can do that if you're going through a bank you're interest rates are fixed best part of this strategy. By the way. So this is. This is for those at home. I talked a lot about how we meet owners how you connect with individuals and find deals without asking for the sale. The other thing you get to do with this is you can hop online anywhere in the country to like crack your. Loop net and look at deals that have been on market for 100 plus days and instead of doing what most other people are doing which is trying to send in a low M offer and get it moved you just call them and say why hasn't this moved well. We haven't found anybody who serious about buying it or whatever reason is you okay um. I don't have a problem with your price if you're the first one who's called them who's fine with their price has been on Market forever and you're not you're not trying to lowball that gets the conversation going and that often is okay well. Here's what it needs to look like there's one other reason that you'll get low interest and that is you have a property that is in that is underperforming. So you have some maintenance things capex yeah bad septics system whatever it is. You have a property that's not doing well and you're coming in and you're giving them a reasonable price but you need to buy time and that is the whole pitch they know their property is not performing in the state. The property is at right. Now we need to inject a bunch of capital in order to get you the price that you want I need to have these payments to sustain the property and get through the project and we will refinance out at whatever time that you negotiate. But that is another great way to get terms people f so hard on the price right and you don't have to negotiate on that if you can say hey I'm so confident in my project I can give you the price that is going like I'll give you a reasonable price for one. I'd buy it for fixed up. However I'm gonna be giving you that check in five years right. Now you're GNA lend me at 3% interest only because your collections are terrible and we are going to do all the pain of renovating we're going to put in new roof on the building. We're going to swap out some of the non-paying tenants.
•  We're going to fix all the problems and there's two reasons. They would do this one. They're gonna get. They're gonna make a lot of money without having to do the work so that's awesome two. If I fail what happens. They take back that's better than they left it because they've done a bad job managing it and so that's where track record does help like it gets easier as you get more properties because now on these you know comes in. They're like well what if what if you don't treat the property well and it's like well here look at the last 20 deals. We did right we fun now that Google Maps has the uh thing where you can actually go through time. You can literally pull up the properties and go back year by year and watch the property get crappier and crappier as you go back through time. It's like look at where it's at today look at where I bought it look at it where it's the year before. Like this is what we do track record helps there but no matter who you are no matter matter. How many deals you've done that is a achievable task absolutely. I really think that anyone who's trying to get into the game right now should take that little nugget right there that Christian just shared and they should go do that go to go to kxy go to loopnet find something that's been on there for a long time and give them their price because they haven't gotten it. That's why it's still on there. But then you give them your terms and the interesting thing about that and and I I we don't have to spend all day here. But the the observation is this is that your F your focus is solely on. How can we how can we make this property fit our buy box right like what what are the terms that we can manipulate to have this still be a deal for us. It might not be a deal for everyone. But if you can if you can do it to one of the things that you shared the um I don't know where where this which podcast this was or which where which video one of the things you guys. Said was like Hey if we bought a 10 million or we bought a million doll property for $2 million but we got it at 50 years. 2% interest only right I mean that's that's a farfetched example. But I was last yeah bigger pocket that was a good one that was a multi family. Mentor. I think was their Series yeah that was a great example yeah yeah. It's like well of course you're going to do that deal because someone would I I I mean I'm not going to do the math. Here. It's going to take me forever but like you actually do the math on it and it's traditional building. You'd be buying it at a discount because your the the payments are lower than that of a traditional you know loan on the million dooll property. So I thought it was just a really interesting take um and and something that probably not a lot of people are conditioned to um to think about hey uh by the way we're we're we're running running up on time here and selfishly I had uh. I had two more questions that I wanted to ask you yeah. Let's let's go so and and we spent a little bit of time here with the private money you already explained to us how you built your network of owners which is awesome. How did you build your network of privat money Equity Partners to come in and give the down excellent question okay. So first of all. Most of them are owners that I met with uh because people playing the game longer than you typically also have money. So a lot of them are people with money who are like and like we just closed a 22 unit hotel that we're converting into multif family uh the owners of that we've been trying to meet with we we've gone under contract for deals with them a few times um. But they've always fallen apart. Over the last three years. We've been trying to figure out how we work. Together. They happen to own 14 hotels. I did not I literally just closed on a property so so I had no money. Cuz. I just spent what I had on acquisition. So the phone call to him was I have a building 22 units that conservatively when we have at least multif family is going to be worth 2.3 million. We have an under contract for $1 million right now. Seller financed $300,000 S I need someone to finance this for us. And we want to do this deal 50/50 and they're like it's a great deal. We'll do the capital the way we it. They lent me 50% of the money I Cody and I I should say but they L us. 50% of the money and the other half of the money was their down payment. We then used the lent money to buy it so we've both put in the same Capital contribution. I just owe him my half when we refinance it which he does on his projects. It usually takes him three to five months. On these Hotel conversions he's going to refinance. It pull out all the money plus some and he just gets first dibs on the like. We pay him back out of the refi. We'll all own the building zero money in and it's going to cash flow like a monster. That is a fantastic deal. But it's with another owner who I've met with learning how they built what they built and I met him at one of his hotels in my hometown. Actually I was like 140 unit.
•  Hotel met him in the lobby his staff came over uh it was later in the day but they made us new coffee so they came in. It just fun like you sit down. He's like oh oh my staff will get us some coffee. You guys get the go uh super excited to finally be doing something with you guys and we had this long meeting going over everyone's goals everyone's objectives. That's that's how we do it on almost everything everything else. You just run into people if you're good at telling your story like Cody and I do Market a lot but we show up at events and I just meet to people and I talk to people and my goal is just not to talk about myself. You guys do that for me in podcast by the way thank you. For this. I get D about myself here. But it's the opposite my job is your job. Job interview other people and you have it. You have a doubt by having a podcast I need to do that at some point. But what you're doing right. Here is exactly what you do with other people. You ask them questions and learn about their business and just sincerely learn from them. You're not trying to buy anything from them. You're not trying to get anything other than have an interesting conversation with an interesting person and yeah. Sometimes I a lot of investors I met at a Meetup um a lot of investors are people. I meet on like I I met an investor on an airplane ride to New York and they sat next to me on the plane and we talk about their goals. They're like oh no way you're partnered with that guy from Bigger Pockets. I'm like yes I also have an episode on Bigger Pockets. You can also watch. Cody has the most watched episode ever uh but like you meet people all over the place um. There's a lot of money out there especially because uh our government is just dead set on printing it. There's no lack of capital. There's no lack of people with money. Uh the piece is just showing a real interest in what is it that they're trying to achieve I track it on a Excel sheet. When someone tells me hey I have this specific goal and I'm trying to place this much money. I just keep that later so when I find a deal you do the deal debt than the equity partner. When I need the right Equity partner I only have a few sells on that sheet. It has four columns and this is all you need to know about people if you want to line up. Capital. You have a conversation with someone. They say hey I'm trying to put money into real estate. I have like $100,000. I put here's this person's name. We'll call him. Mike so this is Mike. Here's his contact information so I can reach him. Here's the amount of capital that he's trying to place because I don't want to call someone for a dealer raising a million dollars who has $50,000 right that would be kind of weird um and then I just put down their goal like what is it that they're trying to do and so I have a little goals sheet. So I have you know trying to reach 10 ,000. A month to retire family member um wants to multiply money wants to double their their net worth in real estate in five years whatever it is. They communicated I just have a little note here and that way I know when I find the deal and I line up a debt product. I know whose goal I'm going to help achieve and I know who has the right amount of capital to do the deal. It's super simple. But I just keep it on a little a little I just call the money list. But it's a little Capital list on Google Sheets where I can just dive in and when there's a deal I'm like. It's not just oh. Where's the money coming from. It's whose targets can I hit the best by aligning this deal to them and you get a yes every time for Capital. If you can pitch someone it looks like this hey I'd L meeting with coffee with you last month. I finally found the right opportunity. This is the deal that I want to do with you. This is why you mentioned that you wanted to do X and Y and this particular deal is going to hit that because while the cash flow is a little bit low day one we're getting a ridiculous price. Our terms are insane and my management team is going to come in and we have a one-year plan to get this thing to cash flowing like they it's going to knock out. Let's say. Their goal is 10,000 a month. It's going to C for $2,000 a month. This is going to get you one fif of the way to your ultimate goal within a year of partnership. That is how this deal is going to work who's not. Gonna say yes to that like if you did good maths and you can show them like quick like that here's the math I did but you don't even really need to show them anything you just explain to them like this is the deal that I want to do with you and you were my first called because it hits your goal. This is how it hits your goal and that's it. I I have had a no for Capital like twice ever um because you are pitching people what they asked you to you're literally pitching them what they told you yeah exactly like I want to do this awesome. I have a way for you to do that like you g say no to that that is so clutch man and and honestly you have given so many great pieces of dialogue. If you're listening to this podcast right. Now you're watching this. I hope you're taking notes because some of this dialogue is. It's like. It's foolproof and I couldn't agree more if you if you match and you've said this multiple times now like in different ways. But you said it multiple times find the need fill. The need right so there's like hey what's your need. What do you like what's your objective with the money that you have and let me go find a deal that fits that and then I'm gonna call you right yeah and and that's uh that's awesome man well listen. We are overtime so I want to be respectful of that in traditional Gold Mine fashion. Though leave us with one final gold nugget one final gold nugget okay. There are a ton of people and this is my most common um Instagram DM. When people ask me questions. It's how do I get started or have you done this strategy or this strategy or this strategy like wholesaling flipping syndication figure out what you want to do and do that you don't need to be a broker if you don't want to be a broker if you want to be a broker then guess your broker license. Uh people add steps and so what I'm going to leave you with which I wish. Someone told me eight years earlier because Cody's eight years younger than me and figured this out figure out what it is that you want to do and then just map out how it is that you want to do that. If you want to buy multif family don't start with single family. Go buy a 12px go buy a 38 unit building buy a duplex do the thing that you want to do without adding steps. This isn't a job you don't need to build a resume uh. If you're gonna be an entrepreneur keep. It super simple don't add steps oh my god dude yes stop waiting for permission just fing do it. Yes absolutely love it Christian.