Finding deals
How the 76-Unit Deal Put Me at 170 Units in Stephenville, Texas
Inside my largest acquisition yet: a 76-unit LIHTC property on 13.5 acres, why stacking units in one market wins, and where new investors should actually start.
I'm standing in front of the 76-unit. We're under contract and getting close to closing on this bad boy, and it is the largest deal I've ever done. It's also the most exciting one. Three- and four-bedroom units, paved parking, a relatively new build, a clubhouse and a pool right behind me. When people call me a slumlord online, this is what I'm actually buying: genuinely lovely places to live. And yes, the rents are subsidized.
The seller asked me not to disclose the price until we close, which is fine. I can tell you every other thing about this deal, and there's a lot here whether you're a brand-new investor trying to get your first building or a seasoned operator who wants to buy larger, nicer properties. Here's the deal, the game plan, and exactly where I'd tell you to start if you want to eventually take out buildings like this one.
Related reading: Inside My 44-Unit Section 42 Building: $1.8M, $0 Out of Pocket
Why This Deal Is Better for Me Than for Anyone Else
The price is off the table, but the rest of the financial picture isn't. This property cash flows day one, and it cash flows well: even on the seller's numbers, before I touch a thing.
The reason I can push those day-one profits past what their books show comes down to one thing: I already have 95 other units in this town. I have a maintenance crew that needs more work. I already have leasing staff on the ground. The sellers, meanwhile, are out-of-state owners carrying a lot of on-site payroll to run a building I can run with people I'm already paying.
This deal is better for me than it would be for anyone else in any other town, because I already operate there. Payroll drops dramatically for us to run the building exactly the way the prior owners were running it. That gap is a huge piece of the opportunity.
It's also why I keep telling people to invest in their own backyard when they can, and when you do, stack as many units in the same market as possible. You get efficiencies between units. Every additional building in a market you already run makes the next building cheaper to operate than it was for the person selling it to you.
What Section 42 / LIHTC Housing Actually Is
The second piece of this deal is the subsidy: though "subsidized" isn't quite the right word. It's rent-restricted housing, under the program people call Section 42, or LIHTC.
When a developer builds a property, they can receive huge tax credits to build it. In exchange, they sign what amounts to a 30-year agreement to keep the property rent restricted. That 30 years breaks into two halves: a 15-year compliance period and a 15-year extension period.
This property was built in the early 2000s, which puts us in the extension period. Practically, that means there are a few different ways we could exit the rent restrictions before the end of the LIHTC contract. I won't take you into the weeds on the mechanics, but it's a major part of the upside.
That said (and this matters more than the upside) every deal has to hold its own without any bonus scenarios. Day one, we need cash flow. We have it, and the way we're going to operate it, that cash flow gets pushed massively right out of the blocks. In the future, if and when we do exit the program, this building is worth astronomically more. By astronomically, I mean millions and millions and millions more than we're purchasing it for.
But I didn't underwrite it on that. I underwrote it on day one.
How a 25-Unit Turned Into a 76-Unit
None of this happened because we're special or because we found some secret. It happened in a sequence, and the sequence is repeatable.
- We bought a 25-unit building for $2 million. That opened the door to a 26-unit right down the street for $1.6 million: $400,000 less. Both projects do very, very well.
- Then we bought a LIHTC property, 44 units, an absolutely beautiful building right down the street from those.
- LIHTC deals are harder to close. There are a lot of government qualifications and a long application process. The moment we closed on the 44, a broker reached out and said there was another LIHTC property in town whose owners wanted to sell, and they wanted to work with someone who had already been through the process.
That's it. That's how the 76 came up. We went from one to the other because we had already proven we could get one of these across the finish line.
This will put me at about 170 units in Stephenville, Texas. Not because we're amazing or running some strategy nobody else knows about. We're meeting the players in the market, closing the deals we can close, and expanding in that area while creating efficiencies in the business.
I think this will likely be the best deal I've done dollar for dollar of all time. It's certainly the nicest building: 13½ acres. We're buying one whole neighborhood.
Where You Should Actually Start (Hint: Not at 76 Units)
I don't recommend starting with 76 units. If it's in your market and it's a fantastic deal and you love it, absolutely go for it, but understand that it's a $2 million raise up front to close this property. That's a big chunk of cash to go get if you've never done it before.
Here's where I'd start instead.
Pick the market first. Find the market you want to invest in, like I did in Stephenville. Make sure population growth is trending up over time. Your product is housing for humans: you want to provide excellent housing for excellent people. If more people are moving in, they'll need more and more housing. In Stephenville there aren't a lot of new building starts right now and the town is expanding pretty rapidly. That's basic economics: demand is going up, supply is relatively static. If we can take out a lot of the housing there and manage it well, we're in a very good place.
Then find a five- to 50-unit building. If you're starting out and you find a five- to 25-unit building in your market, that's an excellent place to start. One of my first deals was a 38-plex. It was hard. It pushed me. It was also absolutely doable. My recommendation is to stay at 50 units or below, but above five units if you can find it.
I'm not saying that if there's an amazing duplex in your market you shouldn't buy it: if it moves you forward, do it. But the way commercial real estate is valued, and the control you have as a good operator to improve those values, is what you're after.
Then get the order right. You don't need money in your bank account to do this. The order is always deal, debt, equity. Find the property. Line up the appropriate debt product, and there are many. Then find the remaining capital, after you've done those first two steps.
From there, your next step is one of two things: meet someone who is already doing deals like that, network with them, and maybe do a deal with them. Or do what I did: find your own deal in the five- to 50-unit range, meet the people who own those buildings in your market, and when an opportunity comes up, select the debt product that fits it. If the deal cash flows day one when you close, that's a deal that makes money out of the blocks, and it is not going to be hard to raise money for.
Buy the deal so the real estate can buy the real estate, regardless of how much money you have. I got caught up on that money thing forever. I don't want that to happen to you.
Throw Out the One-Strategy Mindset
Once people get the hang of this and learn how to get creative, most of the investors I watch start playing this game get into a rhythm where they're closing about an apartment complex a quarter. On 25-unit buildings, that's roughly 100 units a year. It's not that hard to do.
Which brings me to my final point. If you're an investor focused on just the BRRRR method, or just the house hack, or "I want to get into single family," or "I want to wholesale": throw those strategies out now. Look for opportunities instead. If you run into a duplex and it's a great deal, buy it. But look at all of the opportunities and figure out how to put them together.
The question isn't "what's the one strategy I saw online" or "how do I start small and scale up." The question is: what opportunities are available in front of me, and am I equipped (or willing to learn how) to solve the problems that need solving to make that project work?
This 76-unit is a new adventure for me. I'm comfortable doing these deals because I took the leap and closed on a 38-plex. Two weeks later I closed on three side-by-side duplexes. Two weeks after that, a seven-unit building. This works. It is consistent. It's not that hard. Choose a market where the population is going up, meet the players, find and coordinate the deals, get them under contract, find the money, and close indefinitely.
Key takeaways
- Stacking units in one market is a real financial advantage: my existing crew and leasing staff in Stephenville make this building worth more to me than to an out-of-state buyer carrying full on-site payroll.
- LIHTC (Section 42) runs on a 30-year restriction: 15 years of compliance, then a 15-year extension period. We're in the extension period here, which is where the long-term upside lives.
- Every deal must stand on its own without bonus scenarios. Day one cash flow first.
- Closing one hard deal creates the next one. Getting through the LIHTC process on the 44-unit is the only reason the broker brought us the 76.
- Start in the five- to 50-unit range, in a market with rising population and limited new supply.
- The order is always deal, then debt, then equity. Find the opportunity and the money works itself out.
It took me about three years to reach complete financial freedom through my portfolio alone. You can absolutely do the same.
Watch the full video above for the walkthrough of the property and the Stephenville population data I pull up on screen. You can learn about my mentorship at mentorship overview, or download our free course on getting started in multifamily investing. We also run a Skool community where investors work through these deals together. And if you have questions, DM me on Instagram at @christianosgood: I answer every message personally.
Read the episode transcript
0:00 Hello friends. I'm at the 76 unit. We 0:02 are under contract and getting close to 0:04 close on this bad boy. This is the 0:06 largest deal I've done. It's also the 0:07 most exciting deal. These are three, 0:08 four beds, paved parking, relatively new 0:11 build. There's a clubhouse and pool 0:14 right behind me. But when people call me 0:16 a slum lord online, uh this is what I'm 0:18 actually buying. These are super nice uh 0:21 lovely places to live. And yes, they are 0:23 subsidized rents. We're under contract 0:25 right now. I can't disclose the price 0:27 unfortunately, but there's a heck of a 0:29 lot I can tell you about this deal. I 0:31 want to share what we're looking at, 0:32 what our game plan is, and how we're 0:34 taking this out on today's video. Stay 0:37 tuned. I'll see you back at the office. 0:39 Now, unfortunately, on this deal, I'm 0:40 not allowed to disclose price. However, 0:42 I can tell you every other thing about 0:43 this deal. I think there's going to be a 0:44 ton of takeaways. If you're a new 0:46 investor trying to build your portfolio, 0:47 you're in season investor who want to 0:49 buy larger deals or nicer buildings, 0:51 this one checks all the boxes. Now, the 0:54 only thing I'm not allowed to talk about 0:55 on this video is the price. The seller 0:56 asked until we close not to disclose the 0:58 price, which is fine. I can share the 0:59 rest of the financial data in that this 1:01 cash flows day one quite well, even on 1:04 their numbers. Now, we're going to be 1:05 able to really push the day one profits 1:07 from what their books look like because 1:09 I have 95 other units in this town. I 1:11 have a maintenance crew who needs more 1:13 work. I already have leasing staff. They 1:16 have a lot of on-site payroll. This is 1:18 an outofstate owner. This is one of the 1:20 efficiencies and why I encourage people 1:22 to try to invest in their backyard when 1:24 they can. And when you do, stack as many 1:26 units in the same market as possible. 1:27 You get efficiencies between units. This 1:29 deal is better for me than it would be 1:31 for anyone else in any other town 1:33 because I already operate there. Because 1:35 I already have staff there, the payroll 1:37 drops dramatically for us to run the 1:39 building the same way the prior owners 1:40 were, which is a huge piece of the 1:42 opportunity. Portion number two, this is 1:44 subsidized housing. Actually, it's rent 1:46 restricted housing. It's called section 1:47 42 or LITC. When you build a property, 1:50 the builder can get huge tax credits to 1:53 build a property and sign. It's like a 1:55 30-year agreement to keep the property 1:57 rent restricted. There's a 15-year 2:00 compliance period and then a 15-year 2:02 extension period. We're in the extension 2:04 period. This was built in the early 2:05 2000s. All this means is there there are 2:07 a few different ways that we could exit 2:09 these rent restrictions prior to the end 2:11 of the LITC contract. Now, I won't go 2:14 too deep into the weeds on that, but it 2:16 is part of the massive upside we have 2:17 here. That being said, every deal must 2:19 hold its own without having any extra 2:22 bonus things or things that might 2:23 happen. Day one, we need cash flow. We 2:26 have it. The way we're going to operate 2:27 it, that cash flow is going to get 2:28 pushed massively right out of the 2:30 blocks. And then in the future, when we 2:32 do exit the program, this building is 2:34 worth astronomically more. By 2:36 astronomically more, I mean millions and 2:37 millions and millions more than we're 2:39 purchasing it. So, that's what the deal 2:41 is and the opportunity. 76 units. 2:43 They're three and four bed units. When I 2:46 started buying properties, I bought a 2:47 lot of one beds in studios. We did a 2:49 good deal of renovation. When you're 2:51 jumping into a new market, you're going 2:53 to have to work with the deals that are 2:54 available. Make sure they always cash 2:56 flow. But whether it's nice properties 2:57 or properties that need some value ad, 2:59 the important part is getting your foot 3:00 in the door and getting started. Because 3:03 we bought a 19 building for $2 million, 3:06 25 units, it opened up the door for us 3:08 to buy a 26 unit right down the street 3:10 for a million6, $400,000 less. Both 3:13 projects do very very well. We then 3:15 bought a litec property, 44 units, 3:17 absolutely beautiful building right down 3:20 the street and that's how the 76 came 3:21 up. When we closed on the 44, these are 3:23 harder to close on. There's a lot of 3:25 government qualifications that you need. 3:26 There's a lot of application process. 3:28 When we closed on one, a broker reached 3:30 out and said, "Hey, there's another 3:31 litech property here." And they would 3:32 like to sell. They want to work with 3:34 someone who's already been through this 3:35 process. We got to go from one to the 3:37 other. This is how you get to hundreds 3:39 of units in any market. This will put me 3:40 at about 170 units in Stevenville, 3:43 Texas. It's not because we're amazing or 3:45 we're doing anything super secret, 3:46 right? We're just meeting with the 3:47 players in the market. We're closing the 3:49 deals that we can close and we're 3:51 expanding in that area, creating 3:52 efficiencies in our business. I'm super 3:54 excited about this property. I think 3:55 this will likely be the best deal that 3:57 I've done dollar for dollar of all time. 4:00 It's certainly the nicest building. Not 4:02 that the 44 isn't very nice, but this 4:04 building is insane. 13 1/2 acres. We're 4:07 buying one whole neighborhood. Now, if 4:09 you want to take out buildings like 4:10 this, what is a good starting point? I 4:12 think this is really important for a lot 4:13 of people who are trying to scale. I 4:15 don't recommend starting with 76 units. 4:17 If it's in your market and it's a 4:18 fantastic deal and you love the deal, 4:20 absolutely go for it. But it's a $2 4:22 million raise up front to close this 4:25 property. That's a big chunk of cash. If 4:27 you haven't done this before, here's 4:28 where I'd recommend starting. Find the 4:30 market that you want to invest in, like 4:32 I did in Stevenville, Texas. Make sure 4:33 population growth is going up over time. 4:36 Check out the graph here for 4:38 Stevenville, Texas's population. You see 4:40 a market like this, your product is 4:42 housing for humans. You want to provide 4:44 excellent housing for excellent people. 4:46 If more people are moving in, they will 4:48 need more and more housing. Now, there's 4:49 not a whole lot of new building starts 4:51 in Stevenville, Texas right now, and it 4:53 is expanding pretty rapidly. This is 4:55 really, really good in basic economics. 4:57 Supply and demand. Demand is going up. 4:59 Supply is relatively static. So, if we 5:02 can take out a lot of the housing here 5:03 and do a really good job managing it, 5:04 we're in a very good place. If you're 5:06 starting and you find a five to 25 unit 5:10 building in your market, excellent place 5:11 to start. One of my first deals was a 5:14 38lex. It was hard. It was challenging. 5:16 It pushed me, but absolutely doable. My 5:18 recommendation, stay at 50 units or 5:21 below, but definitely above 5 units if 5:23 you can find it. Now, I'm not saying if 5:25 there's an amazing duplex in your 5:26 market, don't buy it. If it moves you 5:28 forward, do it. But the way that 5:29 commercial real estate's valued and the 5:31 control you have over being a good 5:32 operator and improving your values, that 5:35 is what you are after. So five to 50 5:38 units, you can absolutely take those out 5:40 and you don't need any money in your 5:42 bank account to do this. Look for the 5:43 opportunity first. We cover this in a 5:45 ton of videos, but the order is always 5:46 dealt equity. So you're going to find 5:47 the property, you're going to line up 5:49 the appropriate debt product, and there 5:50 are many, and you then find the 5:52 remaining capital after you have those 5:54 first two steps done. So, your next step 5:56 if you want to buy deals exactly like 5:57 this is one, meet someone who's already 6:00 doing deals like that, network with 6:01 them, and perhaps do a deal with them. 6:03 That's a great way to get in. Or do what 6:05 I did, find your own deal, 5 to 50 units 6:08 in a market. Meet the people who own 6:10 those buildings, network with them. When 6:12 the opportunity comes up, select what 6:14 debt product is available for it. And if 6:16 the deal is going to cash flow day one 6:18 when you close, that's a deal that makes 6:19 money out of the blocks. It's not going 6:21 to be hard to raise money for. Make sure 6:22 you buy the deal so the real estate can 6:24 buy the real estate regardless of how 6:25 much money you have. I got caught up on 6:27 that money thing forever. I don't want 6:29 that to happen to you. Find the 6:31 opportunity. The money will work itself 6:33 out. If you need help on that, follow 6:35 this channel. Seriously, just give it a 6:37 like. Give it a subscribe. You're now 6:39 part of the club. We talk about a lot of 6:40 different debt structures. And once you 6:42 get the hang of this, once you learn how 6:44 to get creative, most people I see start 6:46 playing this game, get in a rhythm where 6:48 they're closing about an apartment 6:50 complex a quarter, which on 25 or so 6:52 unit buildings about 100 units per year. 6:55 And it's not that hard to do. Which 6:56 brings me to my final point. If you're 6:58 an investor who's focused on just the 7:00 burr method or the house hack or I want 7:02 to get into single family or 7:03 wholesaling, throw out those strategies 7:05 now. Look for the opportunities. If you 7:06 run into a duplex, it's a great deal. 7:08 Buy it. But look at all of the 7:10 opportunities and figure out how to put 7:12 them together. It's not, hey, I want the 7:14 one strategy I saw online or hey, I want 7:16 to start small and scale up. What 7:17 opportunities are available and are you 7:20 equipped or willing to learn how to 7:22 solve the problems that need to be 7:23 solved to make that project work? This 7:25 76 unit will be a new adventure for me. 7:27 It's the largest deal I've ever 7:28 purchased. The largest property I 7:30 purchased today was 44 units, but in a 7:32 town where I have 95. I'm comfortable 7:34 doing these deals because I took the 7:36 leap and closed on a 38lex. And two 7:38 weeks later, I closed on three 7:40 sideby-side duplexes. And two weeks 7:42 after that, a seven-unit building. This 7:44 works. It is consistent. It's not that 7:46 hard. But really, this deal came up 7:47 because we were already doing deals on 7:49 the same method I'm sharing with you 7:50 here. Choose a market where the 7:52 population's going up. Meet the players, 7:54 find and coordinate the deals, get them 7:56 under contract, find the money, close 7:58 indefinitely. It took me about three 8:00 years to reach complete financial 8:02 freedom through my portfolio alone. You 8:04 can absolutely do the same. And if you 8:05 want to fast track it, again, follow 8:07 this channel. If you have any questions, 8:09 DM me on Instagram at Christian Osgood. 8:10 You guys are always invited to follow me 8:12 there. Love interacting with you. I do 8:14 answer every message personally. That's 8:15 the 76 unit. That's how you can do the 8:17 exact same thing we are. I am so excited 8:19 about this deal. and I will see you on 8:21 the next
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