81 Rental Units at 21 by Doing What 99% of Investors Won’t

this is the bigger pockets podcast show 5 54. the big thing that i see that people do is they will justify buying something that's off brand for them because it made sense for someone else's story and so if your goal is to have 10 single family houses it doesn't matter what cody does buying apartment buildings you don't replicate that you go buy your 10 houses stick to your goal stick to who you are because your story is worth more than any asset you're ever gonna buy it allows you to start over if you need to what's going on everyone this is david green your host of the bigger pockets podcast and you are here because life isn't meant to be lived inside of a cubicle at least that's what we believe here at bigger pockets that real estate investing is the most efficient path to generational wealth even if you're not starting with a ton of money and we prove this by bringing on guests who show that it's not only possible but inevitable that if you get educated and take daily action you too can be as successful as you'd like to be i'm here today with my co-host henry washington h wash the arkansas wonder henry what is going on what's up bud it's so good to be here man this is so much fun what an amazing opportunity thanks for having me oh it's a blast um if you're listening to this on youtube check out henry's shirt and hat they're branded with his name i love this right he's got an h and a w also in the shape of a house which is super cool if you look closely the h is in black the w is in white and it's a house which is the same way that my david green team logo was created it's a d and a g also made in this sense or also made in the shape of a house and i don't know that that was like a trend that other people were doing i kind of thought i was special and then i thought henry did it and i thought well i'm not special but then i realized well henry did it so if we did the same thing then i am special and now i'm feeling good yeah i mean now we're basically brothers pretty much twins so we'd get that a lot i actually i asked people ask me all the time if you and i are related yeah they're like is david your brother i'm like yeah totally totally well we've got a great show for you today with frankly a wonderkind and maybe wonderkid because he's so young today's guest cody davis bought his first property right after turning 19 was already a real estate broker and ended up buying several multi-family properties by the time he hit 21 so he's got 81 units i believe now over eight deals that he's done in about three years and what's better is they're actually good solid deals that are going very well this isn't someone who just raised a bunch of money and threw it at a bunch of properties everything he's bought he's bought directly from sellers without using bank financing and he's buying them off of the mls so basically cody is that annoying person that every time we say it can't be done there's not deals out there you can't find seller financing there's no way to make this deal work cody then goes and does it and he's half of your of our age so it makes it even worse but you don't want to miss today's show so cody talks about one aspect of buying real estate that he will only do it if it would support he and his mom once it was paid off if it doesn't fit that buy box he won't buy that deal he also talks about a very important concept that we call relationship marketing i think henry might have been the one who actually labeled it that but it's a unique way of getting in front of sellers that doesn't have them hang up on the phone because you're not doing what every other wholesale does um henry what was your favorite part of our show today oh man my favorite part of the show was honestly just his approach to life and his business he just is a genuine individual and he's out finding deals by being genuine right and he doesn't take he doesn't take no for an answer or his obstacles he figures out ways around those and i just i love that about our conversation man the kid is doing big things yeah and he's giving very practical steps of how you can get over it he's not it's annoying when i hear people say well don't take no for an answer just keep going okay i've been told that before it's like saying yeah just go to the gym i know i'm supposed to eat vegetables and go to the gym that's not the problem is what about how do i actually do it and i think he gives some really really good insight into how he did it and how he's continuing to do it so this show is fantastic all right before we get into our interview with cody we're going to take a brief moment for our [Music] tip today's quick tip is very easy and very practical just like today's show if you're trying to figure out what you can expect for rent on a property that you are analyzing bigger pockets has your back go to the bigger pockets website hover over tools and then click on rent estimator now you may be confused as why it's named the rent estimator but it's actually because it will estimate rent for you all you have to do is type in the address of the property that you're curious about and it will look up all the comparable properties around there and tell you what you can expect for rent and how certain it is whether it's somewhat certain or it's very clearly certain on what you can expect makes the job of real estate investing so much easier so go check that out and check out that tool section to see what else bigger pockets is offering you i just want to say man what a great example of somebody who is investing in an expensive market right because i tell you you can't do that he's buying multi-family to start out he didn't start with single family they tell you you can't do that he's using owner financing to get his deals done they tell you you can't do that and then he's borrowing the down payments and they tell you that's hard to do and so he's blowing these myths out of the water and oh also he's investing at 20 21 years old they tell you you shouldn't do that either right and so if you're wanting to get started and you're feeling like maybe this is a little too difficult man listen to this show this guy's gonna give you the motivation you need to get it done i love that great job henry all right let's bring in cody cody davis welcome to the bigger pockets podcast how are you today i'm doing good how are you doing thanks for having me i'm doing pretty good thanks for asking that i don't get asked that as often by our guest so tell us where is your real estate business at currently and then we're going to backtrack a little and see how you got there yeah so today i've got 81 rental apartment units comprised of solely commercial residential real estate and i'm going on year three of my investment journey and how old are you today 21. all right so you got started at 18 buying property it was right after i turned 19 so i was 19 years old and i'm turning 22 this week actually oh so you're a salty dog then i don't know what i'm just thinking i'm happy birthday there we go thank you okay so tell us how you bought your first property at uh 19. yeah so i was 19 years old and i didn't have any income i didn't have a job i've actually never had a real w-2 and so i bought my first rental property it was an owner contract so the seller ended up financing that purchase and that was a 12-plex apartment complex in my home state of washington all right and what made you think like i want to get started buying an apartment complex well at the time i wasn't really in the mindset of buying anything i was a new real estate agent and i wasn't really a very good one i wasn't selling a whole lot of stuff and i wasn't making a lot of money that said there was this deal that popped up on the other side of the state now i'm based just south of seattle so this was a three hour drive over the mountains was this eastern washington eastern washington yeah and so it was a three-hour drive and the way it came up is there was another broker in the office who had this transaction for someone else they were doing 22 units it was seller financed buyer backed out and the head of the brokerage i was working at at the time just said hey why don't you go buy this we'll just go raise the money you can buy it till cash flow and you'll have your first rental that was 20 units i tried to do that and the seller said no because he had been strung along for a long period of time and so he said i'm not going to give you the one week extension we need that kind of crushed me and by kinda i mean it crushed me and so i looked on the mls and i put in seller financing because i was an agent i had access to the mls and popped up this 12 plex that had been on the market for like 560 days and it never went off the market once so what did i do i call them up i said how do you want this written i wrote it up and then i bought it okay so it sounds like you were an agent so you're kind of exposed to real estate that's one thing we should talk about here and a deal came up in the office that didn't work out but it sort of wet your appetite and you're like oh i wanted that and instead of just giving up and saying i guess it wasn't in the cards because life didn't make it easy for me you went out and did a little bit of research and you just realized well i can't get a loan right now because i'm not making a ton of money and i'm not a very good agent and you found a deal where they put seller finance in the mls and that led to you getting that thing under contract is that more or less how it worked out that's exactly how it happened couple things we can take out of that because everyone's like listening to this wondering how did you do this at 19. hey are you putting yourself around real estate right i hear this all the time people say hey should i be an appraiser should i be an inspector should i be a handyman i really want to own real estate but is that a bad mistake i say no you need to get in the world you need to get comfortable with what it's like to be in that space you don't have to know exactly where you're going to go so cody is a perfect representation of someone who just got in that field because you were interested in it and then the next thing would be when the deal didn't work out you didn't just say i guess it wasn't in the cards that one drives me nuts i hear so many clients say well i guess god doesn't want me to have this property when something comes back that they weren't expecting as opposed to maybe god wants me to work through this problem right maybe i maybe this is an opportunity for me to get stronger or to grow they look at it not working out as a sign they should quit which is ridiculous because no one ever lifts a weight and says i guess god doesn't want me to work out because his weight feels heavy right i guess the fate didn't mean for me to go to work today because my car didn't start or i got a flat tire you know but for some reason with real estate we do it so i just love that we're starting off with the right attitude that led to where you eventually ended up 100 attitude matters i mean a lot people get stuck on the nitty gritty the information is less important than the application 100 of the time yeah man you know as you're telling your story it reminded me of a very similar situation um so david talked about uh putting yourself around people who are involved in the thing you want to be involved in that's huge right but the other thing you did was you were also around other agents who understood investments and investment properties which led to you finding an opportunity although you didn't close on that opportunity you got to analyze it make the offer right you you got your foot in the door and that's what what your appetite to go and look for more i got my i have an eight unit apartment building i found it because my agent who is also an investor similar to you he was in the office the other agent that was selling it was talking about it was going to fall out of contract and well what are we going to do and then he immediately ran the numbers called me up and said hey this is about to fall out of contract like literally today if you come in at this number i think we can lock it up right and that's how i got my eight unit deal and so i always tell my students you need to be in and around other investors as much as possible right and if there's investors in your market having a conversation and you're new you need to be in those rooms virtually in person because that's where you're going to meet some of the connections you want to meet contractors lenders you're going to find deals that way you know professional athletes do it who do professional basketball players hang out with other professional basketball players because they get competitive advantages that way and it's the same thing with real estate well that's the same way that you come up with like turnovers in sports if you're around the person with the ball when the ball comes out you're more likely to jump on that fumble all right it's easy to say oh well somebody else will get it but and majority of the time somebody else will get it but if you're there consistently when the opportunity comes you jump on it it already sounds like cody just right out the gate i can tell that's a trait you've got you're willing to put yourself in the game you probably don't have a huge ego you are humble and you want to learn and all of a sudden what looks like luck is actually just being in the in the right place at the right time so why don't you tell me what was it about that deal that made you think i want to buy that property well i looked at every single deal that i owned today and i backtrack then because all my principles today are the same as they were then for the most part if i paid that off and by me i mean my tenants then it would retire me and it allowed me to retire my mom they made enough money 12 units was enough in washington state the rents were high enough to where i could take care of my mom and i could take care of myself and so i look at properties like that and when i had no money i had three thousand dollars to my name just from saving up i used to coach gymnastics part-time uh i had to find something that would cash flow and i couldn't figure it out with duplex triplex fourplex i couldn't figure it out with sixes i couldn't figure it out with eights and i found a ten ah another ten at twelve and it cash flowed day one with the zero dollars out of pocket a thousand dollars and change a month i was like this this makes sense to me it makes enough income to warrant the long-term risk of owning that asset so my next question is so you find this deal right because most new investors have trouble finding deals but even sometimes they find themselves okay in front of a deal the next hurdle they say is well how can i get the money for it right and so talk a little bit about like how you funded that and uh you know how you came up with the money you needed to buy that deal well yeah i mean there's debt and equity so the the first question i always ask after i pick out a deal is where am i going to get my debt from and being 19 even being 21 today almost 22 i still don't qualify for a lot of traditional products i can't go by fha i can't do the house hack right now i just i don't qualify and so i had to figure out okay where's my debt going to come from and i went to the seller finance rate so i got the seller to finance 90 of the purchase if i round numbers a little bit it's it's a million one purchase there's a million 125 but my down payment total is 112 500 and so what i had to figure out in my mind is how do i come up with a buck 25 that i can slap in a second lean against the property behind the seller finance note so that i have a little bit of equity in reserves granted it's nowhere close to as much as i should have had for that but i made it and i was able to get the deal which is senior to everything else at that point in time for 19 year old cody how did how did you come up with that 125 i was going around and asking everybody for help in the office it's like who has a client that is liquid 125 000 i don't need to be the one man show so i i'm asking for help i got a lot of help not just with connecting with people a lot of people i connected with i've watched the meeting on again from the meeting and asked him what i was backing it with how the numbers worked you know 19 year old boops messed up and not so much the age but just the experience level i hadn't been through it before so i've watched a few meetings and i had my mentor at the time in the room and he's like okay how much do you want because i completely forgot how much i was asking for but through enough repetition practice and cycles got that funded with a lot of help from my original mentor and uh yeah he closed that deal out i that said i had a lot of help i still had to do the steps i still had to put in the reps i still had to botch the meetings and make the presentation make the pitch now how did you convince the seller to give a million dollar note to a 19 year old with no experience investing in real estate i just i called him up i called the broker up and i didn't really like working with this broker but i called him up said hey saw you have this deal it's listed i had a 22 unit complex just fall out of contract which wasn't untrue i wasn't the one on the contract but it did fall out of contract and i just said hey i had this deal fall apart it was also seller financed i want to write this up and they said okay this is what we want we want 20 down i said no can do i'll do 15 we got through negotiations after we were under contract and had a sticking point said okay i'll give you guys your price if you do 10 down and i get a 30-year note no balloons and they went for it so i have no balloon on that seller finance note this is really cool news so oh henry why don't you go ahead no i was just gonna say that that's amazing because a lot of this uh a lot of these tactics are things that experienced investors deploy and you did it you know just starting out on essentially your first deal and i i love the attitude of you know this is going to work it's going to work i'm going to get this done and as you ran into roadblocks you didn't see them as opportunities to quit you saw them as opportunities to to adjust your approach and either learn from that situation like i love what you said about botching the meetings because that is something we all have done because it's one thing to think about what you're going to say when you get in front of somebody who you're asking a bunch of money from and it's and it's another thing when you're actually in that meeting and a lot of people do they do it with cold calls they do it with uh finance meetings as they get in there the conversation actually starts happening you start sweating you figure you don't know what to say and then you get embarrassed and you don't want to do it anymore but you use that as an opportunity to grow and and i love that man that's that's the that's the mindset that really leads to success appreciate yeah seeing that yeah it's it's a lot of work but it you know you stick with it long enough it'll it'll happen for folks i truly believe that if you look at this from the seller's perspective and what i want to basically get at is what pain was a seller in because there had to be a pain point for them to do this they're giving up a cash flowing property and they're not like i would do that if i wanted to get into the equity of it so i could buy something else but that would mean seller financing wouldn't be an option if i wanted to get the cash so they were willing to hold a note for 30 years and trust a younger person with this deal what was it about that property that they were trying to escape that caused you to be the answer for their problems so what i found is that that is a typical motive of operation what people think when they're buying and selling properties on contracts i've flipped that model every single property i've ever purchased all 81 units are on seller finance notes and i found the textbook answers people do it for tax benefits but that's not why people are giving me the owner contracts i found a a method that's worked very well for myself and then a couple of my buddies that i've shared it with and uh instead of trying to sell an idea i want people to buy into who i am and so what i've come to grips with and how i operate my business today is that everything that i do i got to get to the table first and i do that by being relatable i have to have a relatable story to people i got to be somewhat relatable to get in the room and get people talking to me then those same people whether it's a seller whether it's a buyer if i'm the broker whether it's just an investor they will work with me if i have targets but i don't want to just sell everybody on my idea i don't want to sell people on seller financing i don't like that and people don't like being sold instead i need to loop all that together with the significance of why it's all important and people will just buy into what i'm doing so instead of me trying to sell hey let's do this why would they do it for them they're doing it to pass the torch that's the only reason some of these guys are doing it they want to buy into building up the brand and building up the story of someone that's getting into the game because there's a point in their life where they got more money than they have life left and not all of them are old some of them are in their 30s that have sold the people that sold to that 30-year contractor in their 30s but they're doing it to to build me up they're already set so um that that's how i'm doing what i'm doing with that it's not the textbook answer no i love that i found that a lot with with people who sell uh who have sold deals to me now i haven't i haven't done a a deal as large as that one but the owner finance deals that i have were the exact same situation they were bought into who i was and who my business partner was on on some of those deals and we were younger than them and they wanted to be a part of our journey almost and yeah i totally get that absolutely i think that just goes to show that like we keep saying real estate is a relationship business and the people who try to treat it just transaction based don't last very long in this world because oftentimes decisions get made for things that have nothing to do with numbers and when we're buying a property we tend to focus a lot on the numbers that's what how we're thinking so it's easy to project that on to the seller but cody that was a great answer they wanted to feel like they did a good thing they wanted to feel like they were a good person that was helping somebody else out and they didn't need the numbers to work out and that only works if you can relate to that person who your character is actually what is building your wealth right now in that sense and that's exactly it and you know you can be relatable and get to the table but you have to have targets and significance behind those targets for them to actually buy in is what i've found it's the why the people that i do business with know me they know what i'm doing why i'm doing it like i have to share all of that with them and that all comes from the first contact i don't call anybody anymore just to buy their property that was the first property ever did never did it again i call the book a meeting to learn how they did what they did and nobody's doing that today all the wholesalers are calling hey i'd like to give you x on your property that's i found that such a big turn off today that it didn't it didn't necessarily used to be but today more so than ever it's people just hate it and so i just booked a meeting with them and i i learned that people that own real estate know other people that own real estate and it was this magical circle that they just connected me with everybody and so it's this natural lift up yeah i like that because so i i learned a similar strategy from uh a storage unit investor who's a good friend of mine but he kind of put me on to that relationship marketing and so instead of marketing to uh facilities as a means to say hey i want to buy your facility he markets to them to say hey i'd like to meet you and sit down and have lunch with you i'm also a storage unit investor in the area and so he markets to the storage owners but based on building a relationship and so then he meets these people he has lunch with them they talk shop they top real estate and they may or may not be willing to sell at the time but when they are he's who they think about or when and usually some of these owners especially these mom and pop owners they know who's buying and who's selling so they know old jim down the street is looking to sell his 12 unit apartment building and so he's bought tons of assets by marketing for relationships i think that's brilliant man cody you're smiling what do you have to say about that no i just like listening to henry's story yeah i like listening when other people connect see henry he's doing it to you you're being relationship marketed right now right it's working look how much henry's smiling i've got a deal to sell you [Laughter] all right so that's how you got your first deal what did you do did you have to stabilize that property was it already pretty much running well the property is beautiful that it's right next to microsoft there's there's a lot of data centers over in central washington so this this place is next to microsoft it's next to a school it's got a little yard i mean it's beautiful property that was running great so that's just been on autopilot for the last two years and for the next property though i bought another 12 plex i wanted to double down that first 22 unit portfolio that i mentioned there was a 12 plex a 6 plex and a 4 plex and since going back to that i brokered the fourplex and bought the other two buildings so my second deal that i ever bought was that 12 plex it was in that portfolio that originally got me interested in buying and i just called them up i'd been calling them up even while i was trying to buy my first place just trying to build that relationship i would drive three hours to go meet with him for 30 40 minutes and then i'd drive three hours back and that paid off very very well but nine months after my first purchase i ended up it was end of june 2020 i bought my second 12 plex also in central washington and i bought that that was much worse off property that was more of a flip property i i still own it today i'm under contract to sell it i don't think it'll sell so i'll probably keep it but i bought it for 680 which was great he also didn't need top dollar it was probably worth closer to eight at the time but it he was just happy to help me out he wanted 120 grand down so i did the same exact thing that i did on the first deal raised 125 as debt collateralized it and bought the building for the signature and what tell us more about what kind of building that was that was a 12 plex it was two side by side six plexes single level 50s filled it was concrete block stucco exterior so you know older rambler style apartments but a cash flow really well and today it makes about 75 7 600 a month my mortgage payment's 3 300 bucks so it did really well for a zero down investment and it's it's close to the water so it's over in a little area called moses lake if you're pretty familiar with that area and i know very little about that area but i know it's beautiful most people think of it as an old tourist town which it used to be they're accurate but today there's a lot more than the ci for folks to drive through so talking about those two deals so both of those deals owner financed the majority and then had to bring 10 to 15 for a down payment and then you raise that you said by talking to other people who have the capital and then you turn that into a second mortgage like a second note against the property can you talk a little bit about like how you structured those seconds like what the what the interest rate was and how you're paying that back yeah so i paid 12 interest only on those which some people would say absurd in the right so it's a lot of interest and there was a point where i was at half a million dollars and 12 money which was very expensive and i don't recommend it however it got out of that so basically twelve percent interest i pay one percent of whatever i borrow a month and so my first two deals i borrowed a quarter million dollars i was paying twenty five hundred dollars a month in interest and most people would say that's ridiculous that cost so much money i'd argue that it costs a lot more money not to get started and both assets cash flowed a thousand dollars a month or more day one net of everything and of all the mortgages net of all debt or not debts um operating expenses and so it's a lot of interest but i saw it as an opportunity to get in originally there are one-year notes one-year balloons not very smart i don't recommend that either but i don't do that anymore but it's a learning lesson and there's a time where i had to extend and you know it gets expensive but it's always cheaper to do that than it is to not get started yeah assuming that we're not talking about a one year balloon payment we're talking about like a significant period of time 20 30 40 year loan people get very hung up on interest rates so there's people exactly like you said cody that will say 12 percent too expensive not gonna do it better not to do the deal at all they're not even asking the question of well is it still going to make money is there a value add here what if you broke even at twelve percent but you were able to add four hundred thousand dollars of equity over two year period of time is that still expensive and the second comment i'd make about that because now that i have a mortgage company this type of stuff comes up all the time debt is really like it works in a sense where whatever you get in at if it's for a fixed rate term that's the worst it could ever be it can only stay the same or get better you can refinance into a lower amount as the property gains equity options start to open up like you could have found somebody with a bunch of money in the bank that would have said i'll give you a loan for seven percent for a million dollars and you could have paid it off at 12 and now you've cut it almost in half and then you could have when you got older and you got the chance you could get a loan you could have went got three and a half percent like it doesn't have to stay at 12 for the whole time and i think that's something that even experienced investors i see get really hung up on the rate and they're ready to blow up a whole deal because they can't get the rate that they expected you want to comment on what your experience like that with that was uh like the cost of not doing is more important than the cost of doing 12 some people say that's ridiculous my parents said that's really expensive it was like you're right it's really expensive but my tenants are really nice people and they're going to pay for it because i'm going to provide them a great place to live yeah i i don't have to pay for it right you looked at the net cash flow so you said yeah but even paying 12 i'm putting a thousand dollars in my pocket every month so my tenants are paying my interest i just got to think about the deal and think about what you're looking to do and like david said there's always options for getting into better financing down the road you don't have to pay 12 for 30 years like you you can you can get into a more favorable situation down the road but don't miss out on quality opportunities because you're hung up on a number that really isn't that big of a deal when you break down your goals and your goals are what am i going to put in my pocket every month it's also really important to qualify who you're getting advice from when i first started out i was i was 18 right before i became a broker and there was a guy leading a flip conference and come to find out just earlier this year he did his first flip like go that's probably not a qualified person to get advice from so i notice a lot of people that talk about rates being the most important cap rates being the most important thing debt structures being the most important they don't own a lot of real estate just go do applications more important i don't you know on the cap right thing i don't even care about cap rates and i want them to go down but if we're in a stable environment like it's okay and if they go up it's okay too you know i don't have to sell so that people focus on the wrong things is what i found to be true or they get too hung up on little things yeah you have to you have to think about what is my investment strategy right what is it that's important to me in my financial situation that i'm currently in and what's important to my goals and that strategy may be great for you but somebody like me or david might look at that and be like that's just that's not how i would do that deal because i am set up differently and that's the beauty of real estate is that it's so flexible that you can you can take different different numbers can be more important to you than they will be to somebody else you said you don't like to look at cap rates there are people all across the world who are going to cringe when you say the cap rate doesn't isn't important to you right but but that doesn't mean that that's that's that doesn't work for you oh absolutely and it goes a little deeper with apartments i don't know that we want to jump into that right now well let's just briefly describe what we're talking about with capri cody why don't you go ahead and explain what a cap rate is and why it matters when they're valuing multi-family yeah so multi-family when you're talking five plus units is valued on a capitalization rate so if you paid cash for something what's your cash on cash return it's the simplest way that i found it and it's it's more so of an apples-to-apples comparison among asset classes to establish what a return on your equity is going to be now the reason i don't really mind whether they're high or whether they're low is if you equate it to a piece of pie if you control the pie and you think about a percentage going out if you sell on a low rate you give up less to the next person you keep more and so whether they're what whether the low cap rates i make more money for every dollar it generates and if it's a high return then i get more cash flow and less equity that's a sliding scale now like you said a cap rate is is basically if i paid cash for this what would my return be on it but none of us are paying cash for this so right off the bat that uses of cap rate is largely useless it doesn't matter because we're not doing it that way the other time that cap rate really comes into play is when you're trying to decide what is the property worth so that's when you're going to take your net operating income you're divided by the cap rate or maybe it's vice versa but the lower the cap rate is the lower number you're dividing your net operating income by so the bigger number that you get when the property is valued but again that's also only applicable if you're looking to exit now the reason that you hear so many people hammering capra is because of the syndications that are happening where properties have to be exited to pay back investors so they're playing this game of musical chairs and they know the music will stop at some point and they're very concerned about where that cap rate is when the music stops because there's more risk they got to pay people back right it's syndications do own real estate but they're not in control of that asset like if one of us buys real estate and we have you know it's ours and we can choose when we get in when we get out when we refinance syndications are different and that's why cap rate becomes very very critical and talked about so much if you're listening to this and you're hearing it and you heard cody say i don't care understand that what he's saying is i'm not playing by those rules the music doesn't stop for me i choose when i'm gonna sit down and i choose if i keep circling these chairs because you own at least my understanding is cody you own the properties is that right oh yeah they're mine i don't syndicate i haven't syndicated a deal yet may get there someday so to henry's point about like why real estate is awesome because you find the same principle that like in like i mentioned with interest rates they can't go up if it's a fixed rate but they could go down you could get more favorable financing but if you don't find it at minimum you get to stay with what you were okay with a lot of other things in real estate worked that way too rents just rarely ever go down like it's very hard for me to imagine a time where they would go down unless we're in like a deflationary environment or something like that but even then if the rents go down in that environment the money that you're getting paid even though it's less is worth more so i still you might not be losing in that right but rents do frequently go up so if it cash flows on day one the odds of it getting worse for you are very small the odds of it betting better for you are very big that makes it a safer play when it comes to like well what if the property values go down like cody said i don't care i'll just keep it and collect rent i'm not forced to exit when the values go down well what if the values go up well then i get to look at if i want to sell it and go buy something else there's so many ways in real estate where your floor is covered but your ceiling is limitless you just can't often explode in one move it's not like buying a cryptocurrency that thousand x's over a week or something right like it happens in increments but it is still like so geared towards benefiting the people who are owning it if you have the long time frame and it's scary to think about how someone like you cody who got started at 19. how much time you have ahead of you for this to work in your favor i mean do you just lay at night thinking about that sometimes i sleep pretty dang quick because i'm running all day long maybe one day i'll have that luxury we'll do it all right so what i want to ask you is we often talk about getting the property how we find the deal and that is very important you make your money when you buy that's the most important part i think but right behind it is actually operating and managing that thing and i found like i don't have kids but i know that there's a lot of people i know that were like i gotta have kids having kids consumed their thoughts and then they finally had kids and they're like oh my god what did i do these things are just running me to the ground right you don't think about the work of being a parent when you just want to have a kid just like you don't think about the work of being a landlord when you want to buy a property what can you share about what your experience has been like how you've navigated those waters how you've kept it from making you hate real estate well that comes down the your last point about not hating the real estate i had to buy something that was big enough to support my missions to support the y i could retire my mom and retire myself if it was paid off i kept that in my mind that i go back to that every single time i look at buying something but for the management piece i started out managing it myself i had systems in place which were helpful i have appfolio which you know have your software to keep track of rent collection and 24 7 maintenance reports you know keep track we'll have books coming in we have quickbooks and so i had systems in place that were helping me out but when it came to making phone calls to tenants they'd put in their maintenance request at whatever time i'd give them a call up and say hey this is cody i'm gonna be working on this right now and in the beginning i was doing everything myself so on the non-urgent stuff i would drive over there and i'd get it fixed which was not a very good use of time i recommend people just pay your time's worth more than you think and then i just started hiring everything out and so now i have a system where rents come in online through their online portal tenants can put an online maintenance request something comes up i've got a full-time employee which goes through all the tasks i had to do but in the beginning i was there taking care of every little item if circuits blew i facetimed a family friend who had done electrical before like do i put this wire here it was it was that and i've been shocked before you know it got electrocuted i wasn't being smart um should have i was trying to take shortcuts don't do that either turn off the breaker but i had to learn the hard way that there's a lot of work that goes into it and your property is essentially your baby and you can let it die and then you become what's called a slumblord and i didn't really want that to happen to me so as i started accumulating cash reserves i would just expense it to make everything better than when i bought it and so now i don't have to worry about a lot of those maintenance items okay so a question on that so are you now do you now have a property manager that you've hired yeah so i started my own pm company i start i started my own camp company and that's rather new i'm i'm not a designated broker so i'm hanging that license with pnw property advisors out of lakewood just south of seattle but i i met with uh another local investor who runs the show there and in the investment space you know meeting of the mines and i don't have to go do everything myself so i was like okay he's already got his db what if i just merge and now i have another level of support from someone who's been in the business for a while and then we got our first time full-time employee who's also a co-owner in the pm company and so she's on payroll and so i'm building out a team now but in the beginning i was out the property doing everything and i i'd recommend people do that for their first 10 units and then outsource it learn what you need to learn so that you can better manage your managers but other than that you're not buying real estate to have a job instead most people aren't if you are then do it but that that wasn't my thing henry what's your experience been like with that i i agree wholeheartedly so i have a mix so i have 81 units but i self-manage uh about a third of them and then i have 50 50 manage another third and then i have the third third is managed professionally um and there's pros and cons to each right um and i say me my wife is handling property management for us and so it's similar to you which is kind of what i was going to touch on is there's a difference between self-manage and property management you need a different skill set to make sure that things are going in in a way that's going to be financially beneficial to you but i i love the option of really what you're doing is you're in-housing it right you're hiring you've become your own property management company so you've in-house your property management um because what i find is what makes property man hiring property management difficult is because we as investors have our own way of doing things we have our own kind of uh you know ways of operating you know a lot of us are want to be you know super integrity focused right or maybe you're more people focused right your way of operating isn't always the same way a company's going to operate and sometimes that can be difficult when you're managing your manager because they might not handle a situation the same way as you because whereas a situation they're going to try to they're going to try to fix something in the most cost effective way and that might be how i want to handle that situation right and so when you in-house management i like that because you kind of get that mix of professional management but you get it done based on the way you would operate business and it's a great mix best practices i i don't really want to focus on the money over the person that's very similar to how i've done things with my businesses as they're all well i'm referring my friends out to other agents and those agents aren't doing a good job i'll get my license and then i can't help all these people i gotta hire other people and train them so i'll start a real estate team and then i'm tired of the lender not answering the questions or me coming up with a solution and giving it to the lender so i'm just going to start a loan company and then the property management and construction will be the next two things that are on my plate if you're listening i'm looking to start a business in california right because i get tired of having like the whole who's the contractor gonna be can i get a detailed scope of work can they answer their phone is so frustrating that eventually you just go start your own thing so i love that you're doing that cody because the world needs the people that actually run the asset to train the person how to do it so that when when someone else buys an apartment in that area they know they're getting a good property manager that's been trained in the way you want it done instead of a person that bought a franchise and doesn't know how this whole thing works and kind of does the bare minimum and gives real estate everywhere a bad name you know it slumlords is the word but it's often poor property managers not doing a good job for either party they don't do a good job for the owner because they just want you they just want to spend all your money because that's the fastest way to get the thing solved is they're like yeah you spend three grand on this thing and then i look into it we can do it for 400 now i don't trust them so i don't use them and then on the same side they just blow the tenants off who have legit concerns because they don't want to talk to us so that is such a crucial component in the relationship of real estate between the tenants and the landlords 100 agree are you looking to manage other people's properties through your property management company are you just keeping it to yours we'll go third party we launched for third party for one it was a mid-sized multi-family it was above 10 units and the the way that that was put together i didn't see any of the due diligence we came on after they closed and they totally botched it i mean the it's no fault to the buyer it was their their representation did not do due diligence and so we're not actively taking on new third party until we fix this situation for the buyer because they're in a they're in a mess we were we were told when we first onboarded and we're talking with them that hey we've got great units they're rentable first time we walk in there's standing water on the floor oh that's uh less than ideal not really habitable so we need to build up our systems first a little bit more before we really scale that out because we're finding that we can depend on dependable information it's just hard to get that sometimes so i got one last question before we move to the deal deep dive what do you see cody in your future where are you headed towards yeah so i've got one business partner his name is christian and we started buying together he was he's a buddy of mine we've known each other for about a year and he and i loved in the seller finance stuff we connected last year and since then he went from zero to 55 units and now we're just trying to scale together but long term what we really want to do is we want to get to 100 units paid off so we have a foundation together and then scale up independently and the reason behind that is i my family has a lot of health issues that they've had to overcome and i know there's a lot of other families in the world that have to go through the same thing where a sister gets type 1 diabetes at a very young age and that becomes financially a burden for the family and i know there's other families that have financial struggles like that you make good money but it all goes out because something pops up for better for worse but you got to do it because it's family and so i want to build a portfolio that allows me to not only take care of my family but show other people how to take care of theirs and give other people the opportunities where if i have a free and clear portfolio i can do an owner contract for someone give them an opportunity when they have no money because it won't matter for me i'll have more money than i have like i mentioned earlier life so that is where this goes for me and that's why i'm able to push so hard i love that answer all right we will move this along to the next segment of the show the deal deep dive all right cody this is the segment of the show where we are going to dive deep into a specific deal that you have done first question what kind of property is it this was a 38 unit apartment complex awesome next question how did you find it it was on the market like loop net no it was just on the mls okay on the mls awesome and did you find it yourself or did you have an agent that looked it up for you you found it okay uh how much was it listed for and how much did you buy it for two million dollars and two million dollars i don't fight on price so how'd you fund that deal that was also seller financed and so the seller ended up funding a million seven for me on a contract four percent interest and the uh the 300 000 came from equity i actually bought that with three capital partners on which i have buyout agreements for but they they fronted the 300 i'm fronting the renovation cost with my buddy christian we went and bought that together and upon stabilization we're going to refi cash out the other investors and we'll have an asset to ourselves all right how did you negotiate the price it sounds like you didn't negotiate the price how did you negotiate the terms yeah when it came to the terms i just needed to figure out what they wanted the the couple who was selling i believe is in their 90s early 90s late 80s they said they need 10 000 a month but they only wanted four percent interest and so i saw four percent interest loans eighty one hundred dollars a month so i worked the terms to where the majority of my monthly payments go to principal which starts whacking down that loan amount so i get them what they want it's a little bit more cash flow intensive on the front end where it's going to eat up a little bit of the cash flow however i'm getting a massive equity bump over the course of five years and so i just focused on okay what do they really need they're old they just need monthly consistent income then i'm gonna get them that but the problem was the problem was that half the tenants weren't paying when i bought it and so i can't afford ten thousand dollars a month negative and so what i did is i negotiate down to a seven thousand dollar a month mortgage for the first half year is for six months and then it goes up to the ten thousand dollars a month and all the extra is principal pay down in addition to what's already being paid down so what did you do with the property flip rent bur i'm gonna keep that forever so i'm gonna get this place stabilized the the rents on there have never been raised since 1991. we got people that are paying 380 450 500 700 and then there's some people paying 900 so i'm like okay i could probably get rents to 900 but let's say i can't let's say that was a fluke because it was only two of them and so i get rents to seven hundred dollars well 700 bucks the property is worth 3.2 million dollars and i bought it for two everyone told me i was overpaying for it because it needs a lot of work it's like i have a million to an upside here and it's going to cash flow and so i'm going to get it up to where i need to be i'm in the middle of the process right now i am renovating to granite countertops new everything i'm getting all the units and i want this to be the nicest complex in that area and it's it's definitely got one of the best street corners i buy for the location more so than just what it looks like and so i'm renovating that i think stabilized it's worth four and a half million dollars but if i get it just to 3.2 i can go get 75 percent loan on that i can go start cashing people out and have a little bit of equity left over to to keep the asset forever absolutely that's awesome you focus on all the right things and you avoided worrying about all the wrong things it's such a good story last question what lessons did you learn from this deal lessons i learned is that the the cost to rehab those units was a lot more than i thought it was going to be i thought it was going to be 10 000 and i'm dropping 25 a door well that part of that could be at the time you were looking at it that was closer to what it might have been but things change over time and so that's a very real problem a lot of people are having right now yeah well learning lessons me me that guy this guy's having that problem right now [Laughter] all right that was the deal deep let's head over to the fire round all right cody this is the segment of the show where henry and i will fire questions at you that come directly out of the bigger pockets forums henry why don't you start all right question number one are there any risks to using non-bank financing if so what are they well there's risk to using financing in general the the problem is if you don't have there's lots of ways to structure it if like you could do a land contract that could get a little bit messier than if you just do a standard promissory note indeed to trust um if you don't structure it the right way you can find problems if people pass or there's lots of little minute details but as long as you have an attorney draft up your your notes and your deeds like everything is controllable you just have to make sure that all the right parties sign off on everything you need signed off on wonderful next question what are some of your steps for identifying an investor or a mentor i need to see what they've done and i need to see who they are i don't really care if if they're super flashy i don't care if they're behind the books i want to know what they do when times are great i want to know what they do when times are tough some people say that you really find out who someone is when times are tough and i'll flip that and say you find out who people are when times are good because they're going to be amplified by the money they have so i want to look at them in both down times and up times because people change when they get money for better for worse they do and i want to know who that person is i know i'm going to make it and if i'm associating it with them i have to know that they're going to be the same person when we have 200 million dollars each than when we have 200 000 such a good point or 2 000. i heard a quote one time that said something like one out of every 10 people can make it through adversity but out of those out of that one only one out of every 10 people that could handle that can make it through prosperity it is much more difficult to carry the weight of prosperity than it is adversity and i would say what i found in life that's absolutely true it's one of the reasons why you just have to date when you're getting to know somebody as a business partner you can't just jump in and say hey you want to buy a deal i want to buy a deal let's just get do it because the person they were at the time that you did the deal is not the person they're gonna be if the deal goes well or if the deal goes sour and so it's just it's a very difficult way cody you're very wise especially for your age to be looking at that that's one of the reasons i don't partner a ton i've got a lot of people that i'm kind of considering as partners but i know like you said if you get with me you're going to be successful right otherwise that means i failed us and i'm not going to let that happen so when that happens am i going to like you or am i going to hate you am i going to be dealing with someone coming back to renegotiate and say i want a bigger piece than what we agreed of because now they got a taste of money and they want more or are they going to have the same character at that point that they did in the beginning absolutely awesome man number three so the question is how are you picking the markets that you invest in currently if you're just investing where you are then maybe talk about how are you picking the locations within your market you're investing in yeah so i'm in two markets i'm over in central washington and then i'm in in aquila and tuwell is just south of seattle i've got a small apartment complex there that was also the owner contract but the way i picked my markets is i i just want to know if people are happy there and i want to know if people are moving it's one thing to see that people are moving there but if they're actually happy like i go to seattle i don't see any happy people i just don't i see tents everywhere and you can't move the tents so people are like i know investors there that are just they're you know not to say the least because of what's going on in that environment so i don't want to buy somewhere that that's like that i'm going to go to a city or go to a town i'm going to drive the streets i want to know if the streets are taken care of i want to see if people are smiling if they're going to wave at you i want to look at job growth i want to look at who's actually there employing the people that are going to live like who's going to be my typical tenant and more so than just that when i go to like a neighborhood perspective if i wouldn't live there why would my tenants so i want to make sure that i'm buying in specific neighborhoods where i would feel comfortable or a significant other would be comfortable at night just walking up to the door put down the groceries and unlocking the door and walking in by herself or himself i i don't want my tenants to be uncomfortable at a location so i'm not going to buy in a location like that dude i love that man those that is great advice and i've never heard anybody say that buy not just where um where people live but where people are happy i like that perspective because you're right there are cities across the country where they may be populated right and there may be jobs but are people moving are people living there and wanting to stay there i think that's a great perspective appreciate that all right last question of the fire round what should i look for in a property manager that isn't common knowledge when you're looking at a property manager i want to see someone where everybody in the company owns real estate i don't know if that's common knowledge or not i i haven't researched this a whole bunch but i want every single person in the company to own real estate because they're going to know better than anybody else how to take care of somebody it's not just a 400 expense that can be handled on thursday it's this this person's home and we need to take care of it today and no one's going to relate to that better than someone that actually owns real estate whether it's a home they might relate to it even better than someone who just owns a duplex but i want everybody in that company to own real estate and so that is something that i've set for my pm company every single person in the company owns real estate some people have done ground up development for huge factories some people just don't a home and then christian i have the apartment complexes but everybody in the company owns real estate for that reason because i want people that i'm working with to know that i will treat their families the same way that they would treat their families really good all right that leads us to the last section of our show the famous four all right cody these are the same four questions that we ask every single guest every week with one bonus question at the end question number one what is your favorite real estate book does rich dad poor dad count as a real estate book yeah seeing inside about 80 of people shoot with that one we'll let you shoot with that one too okay that got me started if not i can put in that how to create wealth investing in real estate by grant cardone awesome that's a bonus question number two what is your favorite business book it's an actual grant cardone fan got it by grant cardone yeah i know question number three what are your hobbies so i've been doing parkour for 11 years now going on 12 here shortly i like jumping off of buildings doing flips i was a gymnast for a handful of years so i'm into acrobatics that's pretty cool i don't think we've had a parkour yeah what do you call people that do it do you have video and david can you stitch some to the front of this video i have a ton of videos and i have a lot of scarves to that correlate with the videos we'll see if our production team can get that from you and throw it into the youtube so if you're listening to this right now make sure on the podcast make sure you check it out on youtube we'll see if we can get some hardcore parkour from cody here cody did you ever watch the office or are you too young to know that was a tv show yeah let's jump into the box that is a hilarious intro where they just go running through screaming like screaming parkour every time that they jump from an office chair to the desk or something like that's what it means to do it is just to yell parkour i thought that was hilarious great of ways a to b yep and i also wonder like when they filmed that how many scenes did they have to do before they actually got like stuff that would be good like what ridiculous i'd love to see the outtakes of what they were trying to do when they were making that that intro all right my last question then henry's got one more for you what sets apart successful investors from those who give up fail or never get started they just don't buy their first deal you know the yeah you just have to buy your first property that aligns with your long-term goal and the big thing that i see that people do is they will justify buying something that's off brand for them because it made sense for someone else's story and so if your goal is to have 10 single family houses it doesn't matter what cody does buying apartment buildings you don't replicate that you go buy your 10 houses stick to your goal stick to who you are because your story is worth more than any asset you're ever going to buy it allows you to start over if you need to what a what a great quote your story is more more than any asset you buy i love that last question tell us where people can find out more about you i'm i'm on instagram if people use that it's cody d2020 and christian and i are on youtube together that's a very small platform but maybe one day it'll grow that's cody and christian multi-family strategy so that that's that's about it for where we are we're on linkedin but not tick tock huh i'm on tick tock because someone told me i had to be on tick tock that said i don't know if i'm happy that i'm honest hey man i'm on tick-tock are you happy that you're on it are you happy with that decision watch we get we get it popping on tech talk man okay i've been warned by brandon stay far away from it that it is addictive it's a gateway drug into other things so i myself am not on there but we are going to be making one for the david green team and i'm going to have one of the younger people on the team actually run the tick tock account what you won't see from me is that ridiculous dance where they like point at the bubbles and they do this thing like can that thing die fast enough you noticed a lot of the tick tock people that are super like huge in the real estate space don't actually do a lot of real estate stuff so it's just i i haven't found my way into that unfortunately in our world if you're huge at all you probably don't do much of what we're actually talking about here you don't get huge by being really good at real estate investing you get huge by being very attractive or very inspiring or very controversial or very anything other than practical so like cody's the person that people should be listening to but you're not going to get nearly as many youtube video watches as somebody who just has a really good production and they have a very fun personality that everyone goes to it's one of the worst parts of our space but also one of the best because it allows a podcast like this that actually brings true value to stand out amongst the others that just don't go deep cody i want to thank you for actually giving details about what you're doing how you bought it you gave a very clear blueprint that anybody can follow don't hit people up and say i'll give you this much for your house which is what they're used to getting or your property say i'd love to hear your story tell me about why you bought it when you bought it what it was like owning it what you learned from it what was the best what was the worst get them talking and then build a bond through that story and then see if they're interested in selling it to you if they're interested in connecting you to somebody else that might like that i don't think you can fail with a strategy like that so thank you very much for sharing that um henry i'm going to leave you with the last word as in youtube cody yeah man thank you so much cody i love your perspective on life i love your perspective on business and i love how you don't see obstacles as a means to stop but as a means to grow and as a means to to find a way around them so that you can hit your goals man and i love that you're looking to to keep your why in perspective so that you can take care of your family man we need more people like you out there investing man thank you well i appreciate you guys thanks so much for having me on thank you cody um yeah guys go follow cody on social media this is a up-and-coming superstar in the real estate world as well as maybe a parkour olympian at some point who knows but you heard him on bigger pockets first this is david green for henry washington signing off [Music] you

Channel: BiggerPockets

Views: 892,947

Keywords: biggerpockets, real estate, real estate investing, investing, rentals, rental property, investing in real estate, income property, bigger pockets, passive income, rental units, multifamily investing, investing in multifamily, multifamily investor, how to invest in multifamily, apartment investing, how to get started in real estate, real estate financing, real estate loans, loans for real estate, seller financing, creative financing, how to find real estate deals, cash flow

Id: P2L3NklcU1k

Length: 65min 40sec (3940 seconds)

Published: Thu Jan 06 2022