Cody Davis on Selfie Videos, Same-Day Offers, and Bad Partners

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0:00 Hello and welcome to another episode of the Owner Meeting podcast hosted by Multif Family Strategy. I'm Christian,
0:06 your channel host today, joined by Multif Family Strategy co-founder Cody
0:11 Davis. He actually started the company with me. He's been on several times doing some brand new adventures today.
0:16 We're going to talk about creative finance development and much more. Cody, welcome back to the channel.
0:22 Good to see you. Been a little bit. It has been a little bit. It has been. Also, your background looks cooler than
0:27 it did in the past. It looks like you are in your coffee bar. I am. And I have a mixer.
0:33 I like it. Where are you? Where are you living now? Since we've started the channel, you've gone from Tacoma to living at our resort to Tennessee to
0:41 back to central Washington. Where are you at now? Still in Moses Lake for probably another
0:46 year and then Gig Harbor, which will have an even cooler background. That's going to be super fun. Why Gig
0:52 Harbor? It is beautiful and is close to family. That is a good reason to be there. That's the one thing I miss most about
0:57 Washington is I am far away from family. So, but you don't have crazy taxes except for on your properties.
1:03 Man, have you seen that uh that millionaire's tax in Washington state? That is uh I think goes into effect 2028
1:10 if they don't rule it unconstitutional, which who knows, Seattle's pretty crazy. Um but boy, that uh there's a lot of
1:16 people in real estate that make pretty good money. Another 10% tax on that. Do you have any friends who are leaving the
1:22 state since that's been announced? No, not close friends that are leaving. There's people that have already left,
1:28 but it's fine. And it looks like you can use depreciation to get your income back down below the million-doll mark. So,
1:34 that's what I'm I'm seeing anyway. So, it shouldn't affect too many real estate players. Oh, that will be interesting. So, what
1:40 we're going to expect is probably a whole lot of acquisitions and cost sags from anyone making significant money.
1:46 That's my understanding, but it's also above my pay grade. So, we shall see. That is fair. I worry about long-term
1:54 job providers there when you see like again it's it's your top top top people
1:59 but when you lose your Bezos and your Schultz and all of these other people left because of taxes or business
2:05 unfriendly do you start to see that affect the tenant mix in buildings and availability as jobs go with them?
2:12 Yeah, it definitely will. However, there's not a whole lot of those companies where I invest. So hopefully
2:19 it doesn't kill my market. If it does, then we'll have to adjust and pivot. But that would be a tragic day.
2:25 It's something that I'm looking at very closely is like, wow, how heavily do you want to invest in core markets because
2:31 you're in a either it's a large tertiary market or a very small secondary market.
2:36 Kind of hard to say with with Grant County. There's a lot of job diversity, decent population. What have you seen
2:42 over the past couple years as far as leasing, rents, cuz there was a ton of
2:48 growth happening in Central. What are you seeing now just in today's market with leasing, renting, the appreciation
2:54 in buildings in these secondary markets in Washington state? I'm still getting really strong
3:00 appraisals. I'm continuing to lease my stuff up. Me like me doing it, not
3:05 management. So, I've had to take a a good look at management options because
3:11 it seems like I can fill a unit much more efficiently than the local companies because I actually respond to
3:17 people. So it there's an actual demand and for a while I didn't think there was a demand for units based on what I was
3:23 being told. So I think rentals are doing fine. Values while they're down are still
3:30 strong and we had that uplift from all the money printing that got rained down
3:35 on Americans. So that was it certainly did not help uh or it certainly did not hurt rent when
3:41 everyone had magically more money in the economy. Yeah. And housing authority groups seem
3:46 to have more money now to catch up back due. So I'm getting a check for six
3:52 months of rent for someone who it's paying their back due and paying a few months forward. That's nice. Like those
3:59 programs went away for a while. I know we definitely utilized that on some of
4:04 our first acquisitions. So it was very helpful that it went away. Now it's back and things overall are going pretty
4:10 well. This is something Cody and I call each other on this relatively often with uh with managers and I I can confidently
4:16 say every building that I have purchased had like deep management issues. Even
4:23 the ones that were managed by big companies with a lot of track record. Cody and I have used through the years
4:28 we've used boutique, we've started our own, we've done self-management. It sounds like you're falling back on
4:33 self-management without uh you know without overly throwing someone under under the bus.
4:39 What's your experience been between the different flavors of management? Great self-managing,
4:45 uh, owning a PM company, third party management, and now it sounds like you're kind of shifting back into that
4:50 self-management role. Talk to us a little bit about the journey and what the different flavors looked like in
4:56 your experience if someone's starting doing the same thing. Yeah, I've been self-managing some of my portfolio for a
5:02 while now and I'm going back and forth between that and or just creating a a
5:07 company, getting my DB designated broker license and then starting another PM.
5:13 Been there, done that. Would have to systematize it, but that would allow me to open up to third party and I know
5:18 there's a need for that. So, it's a consideration. What's the difference between being a landlord who goes into
5:26 property management or a property manager who wants to focus on building a property management company in your experience?
5:31 Well, people that just build a company to have a company are quick to spend
5:37 money that's not theirs. And going as an owner into property management, you
5:42 think of it as every dollar to the bottom line is not a cash flow number, it's a value figure. So, if I can save x
5:50 amount of money per year on maintenance rather than blowing this money, this building is worth more, my client can go get a a
5:57 bigger loan, buy more deals, which then would funnel back into the PM company. So, it's it's people that are just
6:04 building a company to have a company can become very shortsighted with the way that they're operating the
6:10 buildings. and people that own buildings and look at it from that approach really have an understanding of how to maximize
6:16 value, how to maximize money in because your big liquidity events from real estate are pushing the value up and then
6:22 borrowing against it and doing it again. Like that's that's how you get your big paydays. So I haven't found a PM company
6:27 that thinks like that in Grant County. uh and and I can say doing this all over
6:33 the country, you know, both myself and then just people within multif family strategy watching all the management models that is consistent in every
6:40 market in the United States is you just have a bunch of PMs. We just entered a um we're on uh PM number three in
6:46 Houston, Texas, little 10 unit down there. So like I don't have enough footprint there to justify opening a
6:53 management company, right? 10 units. It it doesn't make financial sense to have employees in in Houston and it's too far
6:58 for me to drive. We've gone through PM after PM after PM. The last PM that we
7:04 had, they were the biggest one we've worked with. They're like, "Hey, we are so sure that we need to drop your rents
7:10 from 1150 to 785 because that's what the market dictates for this area." And I
7:16 was like, "Well, first of all, no, you can at 9.85 at the absolute lowest."
7:21 They got no leads. They did nothing. And they're like, "Hey, I'm I'm telling you it's the pricing." Caleb spent one
7:28 afternoon, not even a full day, one afternoon being like, "Hey, let me try to work on the leasing." He got three applications between 1,100 and 1350. And
7:36 this is just so consistent in markets all over the country. It is so rare. It is so rare to get a great third party
7:44 PM. Yeah. And at that point, you know, where your portfolio is, it almost just makes sense to sell that building on a wrap
7:49 and move on. That's typically that's typically what you start looking at doing. And it's
7:54 like, hey, I have a smaller building. It doesn't make sense to PM it. I can't do it myself. PMs in the area can't. It's a
8:01 I think it's actually a huge advantage that smaller investors have. This is why I really actually like like you started
8:06 with a 12-unit building. You and I started together on a 38 unit. But when you're a smaller investor, I I think
8:13 self-managing is one of the best things you can do. If if if 10 units made a huge difference in your portfolio and
8:19 you can take over these systems, you started at 19. You were doing a lot of self-management. What did it look like
8:25 realistically for you as a 19 and 20year-old to manage on the other side
8:31 of the Cascade Mountains a roughly you got to about 30 units while you were 100% self-managed?
8:36 Yeah, it wasn't it wasn't that hard. I drove over a lot to do fixes cuz I I didn't have the right people to hire to
8:43 do the fixes that I could trust and I didn't have a whole bunch of extra money to waste. So, I ended up driving more so for that than actual management. I I'd
8:50 go over to collect rent if they didn't pay online and that was it. But most people pay it online. It wasn't that
8:55 hard. I bought buildings where people stayed for a few years, so there wasn't a whole lot to do. And when there was a a lease up, I'd go clean it and put it
9:03 on the market, find a tenant from Facebook or Zillow and move them in. Like it it wasn't a big deal. Especially
9:10 30 units. Anybody can manage 30 units. Yeah. Well, and you would think that.
9:15 However, how many times have you know you as a 19-year-old before you knew
9:20 what you knew today still done a better job leasing your units than a lot of the other property managers that are in these markets?
9:25 Yeah, it's shocking. It is. Speaking of, you did start at 19.
9:31 You started with a lot of creative finance and I was trying to think through the deals here before we hopped on today. You did a 12plex, a second
9:38 12plex, a sixplex all seller financed. You and I partnered at around that time. You did a 38, a 7, sidebyside duplexes,
9:46 two triplexes, a 10plex. How many deals did you do seller finance before you acquired a deal with a bank note? Like
9:53 the first building I ever bought like day one with a bank loan was my afraid
9:58 of building. That was like 8 months ago. So you've done what a dozen or more seller finance transactions to build
10:05 your portfolio. Yeah. there because you got the 212s, the six, the 38, the seven, the three
10:12 duplexes. Then there was a triplex, another triplex, the afraid of two buildings,
10:18 the Gibby duplex. Oh yeah, Gibby. Um, not Peninsula, Aquilla. That's 12 deals right there.
10:24 Division, Robin Hood, White. Yeah, you've done you probably closer to 20 deals seller financed before doing a
10:31 bank loan for acquisition. and the bank loan had a seller second behind it. So
10:37 that was seller financed as well. So with someone starting is creative finance usually the option in your
10:44 experience if you were to if you were to start over again would you go after the deal saying hey I need to focus on
10:51 finding seller finance transactions specifically. I think regardless of whether you do seller financing or you do a a bank loan
10:57 you have to if you don't have money you have to get creative on how you qualify. That's the bottom line. So, if you go
11:04 get a DSCR loan, if you don't have the money down, you have to get a little bit of creativity involved to figure out,
11:10 okay, well, how what would I need to qualify? I need someone with a credit score. I need someone with the money down. You know, how do I structure it to
11:16 where I have control even though I don't have any other pieces? I'm just playing matchmaker. You do seller financing. How
11:21 do I make the seller feel warm and fuzzy about me regardless of my background? It's going to take creativity regardless
11:28 of whether it's actually seller financed or bank loan or commercial. And it's not going to be just if I do X, Y, and Z,
11:35 every deal is going to work. It's going to be what do I have to do to make this deal work? Regardless of your background, how do
11:41 you overcome that when you're 19, 20, you maybe you've done a few deals, but you haven't gone full cycle, right? So,
11:49 how are you landing these deals? And how does that conversation play out where someone would have confidence in you?
11:54 You're like, "Hey, I've I've done this once, right? I bought a 12plex." You're still really young. You still don't really have any experience. You haven't
12:00 taken it full cycle as a seller. How do you overcome that when when you are pitching to a seller? Like, how do you
12:07 go, "Yes, this is the guy I want to sell the building." The way I've done it is selfie videos.
12:12 And so, the there's a there's a building in Quincy that I own, and then there's another one that's basically adjacent to
12:17 it that's 12 units. And I'm working on going mutual on that right now as well. and I've been sending him selfies at my
12:24 property, selfie videos around his property, telling him about who I am, the Ellensburg deal that I'm working on
12:30 right now. The way I got the seller on board, cuz I don't think I was the highest offer. I was just the most
12:36 certain to close. I drove over, same day, took a selfie in front of the campus and sent it. And then the day
12:43 following, Ashley and I, my wife, we drove over, took a selfie together at a
12:49 different angle at the campus and said, "Hey, it was so exciting. I had to bring my wife." And she loves it more than I
12:54 do. Like building confidence like that. Regardless of track record, I've never bought a 41 unit. I've owned stuff
13:01 similar size. But also, the income on that is over half a million a year. So
13:06 even though it's only two more units, it brings in a lot more money, over 100 grand more than my 39 unit, which is
13:12 only two units less. So it's just a different class of asset. Showing up, showing them that I'm there and highly
13:17 interested builds a level of credibility cuz most people take too long to make a decision. That is very true. And I I've seen that
13:23 be the difference maker in more deals than I think anything else. And this is like any other sales job. It's speed to
13:28 lead. What is the difference between like really what is the right timeline? I should ask. You're interested in a
13:35 deal. you've decided, hey, I think I want to buy this. There's probably still a little bit more due diligence to go. Like you never go into a deal knowing
13:41 everything about everything. How do you get a offer that you are confident in a
13:47 timeline that builds confidence that you are going to close? Well, I'm going to give the broker
13:52 notice same day. So, if he sends me the material, if I got to spend 20 minutes or if it takes an hour because I don't
13:58 know the market, I'm like, "Okay, let me let me Google map street view, drive through this. Is this ghetto? Is it not?
14:04 Oh, it's by the school." like I I'm going to start digging into that stuff. I'll spend as much time as I need and then as soon as I have an answer, I'm
14:10 just going to call them back. So, as much time as you need though, that is you're you're talking like 15 minutes to maybe a matter of one or two
14:17 hours. Yeah. So, they sent me that that deal and the interesting thing is it was
14:22 listed for 5.2 million and I called him back on a different deal. There was a
14:27 property in Walaw Wala 64. I won't go too deep into that. And I called him. I was like, "Hey, you know, I'd have to
14:33 chat with the manager. I'm not so sure. The Ellensburg deal is nice. It's just too much. He's like, "Yeah, well, they'd
14:38 probably accept a discount. They really want to sell." And we listed this pie in
14:43 the sky price because they wanted it. Then he went into some reasons that they were willing to go for a little less.
14:49 And so I submitted an LOI same day. I was like, "Well, if that's true, let's submit let's submit LOI like today
14:56 at that price you mentioned." And then we met in the middle, which was, I believe, a reasonable price for the
15:03 seller. and I'm going to make a good win out of it. And I think all negotiation should be about that simple. If you think of any
15:09 sales process, the time kills the deal. It's not even just some other competition getting in there. I lose
15:15 confidence if you and I talk about a deal and 4 days later we're still talking about a deal and next week you
15:22 have more questions about the deal. I in that timeline, I don't believe you're going to just come in and aggressively
15:28 close the contract anymore. Regardless of how old you are, how much experience you have, that same day, realistically,
15:36 if you were if you were newer, so let's let's go back to like earlier days. So, let's call it year one or two of being a
15:42 landlord, how long did it realistically take from when someone's like, "Hey, I would this price, this building, how
15:50 long would it realistically take to get back to them with an offer that you felt strong about?" I found the 12plex that was listed on
15:56 the market in Quincy for 551 days. it was probably on the market for 550 days
16:01 and I submitted my offer, got it accepted on the so that was back then. I found underwriting that made sense. I
16:07 said, "Let's do it." I sent the offer and it it was under contract and then it closed like 60 days later. Earnest money
16:14 was due like one day before closing. It was beautiful. So, see that that's the way to do it. And I think a lot of people, especially when
16:20 you have low to no money transactions, how did you get that accepted? Earnest money not due till the last second. Well, I had a super long feasibility for
16:28 that deal. I think it was 30 or 40 days and then I had earnest money due 15 days after that and then we were right at
16:34 closing. So, it just happened to work out that that was the timeline. And and do you often get push back on
16:39 that or is that something where you just you just put it in your offer and sometimes it gets accepted, sometimes it doesn't? They give push back, but I just use my
16:46 personal experience. I tell them about Walaw Wala. I think I do the same thing.
16:51 I said I I put up 130 grand with my buddy. We each had 65,000.
16:56 We were right. They didn't sign. And then we lost like 60,000 between giving
17:02 up earnest money, which we didn't have to do just to settle a lawsuit and legal fees. So, I don't want to have earnest money
17:08 due before feasibility because if I want to walk, I don't want to fight. We were right and still lost money.
17:13 That was a that was a scarring moment for me as well. And that is uh pretty much every offer I did after that. I'm
17:19 like, "Yeah, we'll put I usually do $500 to $1,000 hard up front." And in Texas,
17:25 you actually have to have non-refundable consideration to have an open contract. So, you you have to have something,
17:30 but we'll put a little bit up and then the rest of it's due after feasibility. It's like, look at you can't take the money until after feasibility anyway. I
17:36 get you want to see where invested, but like look at I've been burned on it. So, refundable. If I have to fight you on
17:43 it, it's not free to be refunded. I found the same thing that one time we did that. Tell us a little bit about
17:48 that deal. That was a dramatic that was a huge learning experience. We've had you on the podcast multiple times, right? So, we talked we've talked about
17:54 multiple stupid taxes. This one sucked. Tell us about the deal. And then how did
17:59 it go wrong? So, for examples, right, I'll use objects. So, this was portfolio A and portfolio B.
18:05 Yes. And we were going to buy portfolio A, which was the big portion conventional, and put a down payment.
18:12 And they were going to sell or finance portfolio B with zero money down because all the money was coming from portfolio
18:17 A. Yes. And if if we put 20% down on portfolio A, the bank puts up the other 80%.
18:23 They're getting 100% of the money on that. So, they're getting a massive down payment and giving us good terms on the other. Well, we did not have a clause
18:29 cuz we didn't know this. We did not have a clause that allows us to back out in
18:34 the event that rates go up and rates went up which killed portfolio A's conventional purchase.
18:40 Yep. And seller doesn't want to move forward so they don't sign. They also thought that the offers were were contingent on
18:46 each other which they were not. So there was a misunderstanding the way that the broker involved presented it. Broker's
18:52 partially at fault. We're at fault because we don't know that we need to have a clause in case rates go up
18:57 on a deal like that. And to be fair, this was when rates were at about 3%.
19:04 And through the course of this transaction, this was the these were the months rates were skyrocketing. So we
19:11 started in around three. By the time we got to close, we were already looking like closer to 5%, weren't we, at that
19:17 time? It was in the sixes. But either way, it killed the deal. So we couldn't move forward and we didn't have a clause to
19:24 prevent against that rate hike. So that was a learning lesson. and hence Walaw
19:29 Wala fell apart which it for me it was a huge learning lesson too because this was a great example of the deal didn't work because
19:35 we got too creative. The concept was a great concept right you have some conventionally financable stuff you have
19:41 some stuff that's not we really want the whole portfolio so let's seller finance some and let's bank finance the other
19:46 like on on face value it wasn't that crazy. They introduced some other pieces though like well my son has this one
19:52 house and if you guys can overpay for this one house and underpay for some other ones by the time the contract from
19:58 where we started right we want to buy a bunch of duplexes and a 30 unit I believe it was apartment building and
20:04 there was a seven there it was just this convoluted portfolio that we were going to clean up but they added in a piece
20:10 where we had to overpay with hard money on one deal and personally back it and we're moving equity it got complicated
20:17 and and like almost every deal where you involve creative finance or creative real estate structures and it gets
20:23 complicated. Pieces were missed and it fell apart. To be fair, if this was done correctly, they should have made the
20:29 contracts contingent on each other. Like that was just something that they should have done, but they didn't. So, we were right. We didn't have to close on both,
20:36 but they should have done that. That that would have been a prudent thing to do for the design of the deal. And we
20:43 should have had a clause that said, "Hey, if there's a problem with the bank piece, the entire deal is canceled. We
20:49 didn't do that. Both parties had missing pieces." And I think it just came down to the deal was too creative. It was not
20:55 a repeatable deal structure. Yeah. And the 30 grand you lost and the 30 grand I lost has made up for itself
21:00 like many times over cuz now we know more pieces that can put us at fault.
21:06 Like we just didn't know everything that we needed to know to do that type of deal. Well, that's what real estate is too,
21:11 right? You can't It's hard to lose if you don't stop learning and playing, right? Like, you only lose if if if we just did that deal and said, "Wow, real
21:18 estate sucks. We're out." We would have just lost a bunch of money and hated real estate. But if you go in and actually applied the lessons like you're
21:24 doing here, you're like, "Hey, your last deal. Earnest money wasn't due till like the day before close." Like, you're
21:29 structuring deals in a way where you're completely avoiding the problem. And it's a problem that a lot of people get hung up on. You said this earlier and I
21:34 wanted to I wanted to highlight this mapping out the pieces. So, I asked you about seller financing and one, does
21:40 seller financing today, does it still look like it did in 2022 when we were
21:45 building the bulk of the portfolio? Yep. I'm still doing it the same way we were doing it back then.
21:51 I love that. I get a lot of people, well, it doesn't work now because people are we're only seller financing because
21:57 of the terms or the price or the market. Why do people at their core, why would
22:02 someone accept seller finance terms? Well, that's how a lot of people built their business. And so it's just repeating history, right? And they want
22:09 to be able to pass the torch. We've talked about that before. People are still seller financing to me because
22:14 they want to see me win. And I built that relationship with them and so I can go farther with their help than I could
22:21 on my own. I think that's consistent with everybody. It's very helpful to get a helping hand up. You can get seller financing terms if you are very
22:28 knowledgeable about how to put pieces together. So that deal I bought an Afreda that I showed you that I think
22:34 that was done pretty masterfully because I bought it with no money down. I got paid a commission to buy it
22:40 and the property value doubled within a year. I bought it eight months ago and the property value is
22:46 legitimately double that works. And it was on the market for 223 days. Like it was there forever. But I showed
22:54 the seller who was saying there's no seller financing available a path to finance some of their equity and
23:00 significantly increased the return to my capital partner because 10% down to get the same upside is much better than 25
23:06 to 30% down. You mentioned mapping the pieces and so you you had talked you alluded briefly to you know down payment money
23:14 qualifications or the whole thing. How do you actually gather the pieces? I find a lot of owners and I hear this a
23:19 lot within the mentorship groups. is something that we coach through a lot. But from your perspective, you're reaching out to a seller. How do you
23:25 truly identify what it is that they're after? Because a lot of people have a barrier between the broker and the
23:31 owner. And so when you're mapping the pieces and putting together your masterful plan, how do you identify
23:37 accurately what pieces you need to address? Sharing your goal and then labeling the situation goes a long ways.
23:43 And so when I talk to owners and I share what I'm trying to do, I'm trying to build X and and this is Y. Then I
23:50 labeled the situation. So like I I'm working on some new construction and the guy building it, I labeled the situation
23:57 as it it seems like you're trying to phase out of ownership and and more just
24:02 into building for people you like, know, and trust. And he said, "Yeah, but I still like
24:07 owning these bigger assets." And and so now I know he's willing to hold his big
24:12 stuff and and sell his small stuff. And so it labeling that situation after
24:17 sharing some of what I'm trying to do, it opens up some of their ideas that they're not telling me otherwise because
24:23 they'll correct you if you're wrong typically. So another person is looking at building out some of their lots. And
24:30 I said, you know, you'll make a little bit more money, but it seems like rather than making more money cuz you already
24:35 make a lot, you'd rather not be living in Moses Lake. And he and his wife started nodding because they know that's
24:40 true. And so you can start to see people's motives if you label the situation remotely close to accurately.
24:47 I really like that. And that so essentially what you're doing is one of my favorite quotes from you that I I still use this all the time on the
24:54 Bradley podcast. He gave you a whole bunch of what ifs. What if this happens or this happens or this happens or else
24:59 we'll just we play the game where the goalposts are and if the field moves, we'll play our game over there. This
25:04 sounds like a version of that. You're essentially you're just reiterating where you believe the goals are. you're
25:10 mapping out here's the field here here's the targets this is what I'm looking to do and then you try to name as
25:16 accurately as you can this is what you're trying to do and either they'll say yes or they'll help you get closer
25:21 to what is a goal for them and then you just have to match the pieces correct yeah and for a lot of these
25:26 people that own these properties more money is not the answer it's more time a lot of them have built this business where you've seen it you make a lot more
25:34 money than you used to but you have a lot less time than you did as well we're not playing enter the dungeon in rent anymore
25:39 No, we are not. But that was a great season of life. It was working out every day and then
25:45 playing Enter the Dungeon didn't have you don't have time for that anymore. It doesn't work. So, you know, there's
25:50 going to be a stepping off point for you as well when someone correctly labels it, gives you a solution to step out or
25:56 you create the solution, you and your wife like that. Labeling that situation for the right people at the right time
26:01 enables you to move forward. Yeah. Well, and like to date I I've seller financed a couple of properties
26:08 to other people for the same same reasons. In a lot of time, I'm like, hey, liquidity actually solves a lot of my problems. So, you would think that's
26:14 not the right solution, but I've had multiple properties where I'm like, this property takes time and as long as the
26:20 balloon I basically, if I'm seller financing, I'm just lining up the balloon with, well, where are my other
26:25 obligations? And so if I can come up with a path to have more cash flow, get
26:30 time back, but this money comes in prior to me owing money elsewhere. I've solved
26:37 for a whole bunch of my problems. And so as a seller, every single transaction is unique. I'm not someone who'd want to
26:42 create a finance for 90. There's not a whole lot of benefit for me right now. If you identify the problem that I have
26:49 and you line up a solution, I've said yes to that multiple times as an owner. Yeah. Someone offered to buy my whole
26:54 portfolio on a raft, which was all the old stuff anyway. Very enticing. And they basically write me a check for my
27:00 equity. Again, like we were talking about earlier, deal fatigue. They're three months into consideration.
27:06 And I'm like, guys, you got to make a decision. And that's the most frustrating thing. People say they want to do something and
27:12 then they take three months. As an owner, I'm like, you're not real. You're not. So, I don't believe it's actually
27:17 going to happen because they can't make a decision. And I told the broker involved, I was like, "If you can't get
27:22 your client to make a decision, then don't bring it to me." Oh, yeah. Because it's so frustrating, too. Like, if you're trying to build
27:29 relationships and you early in your career establish yourself as a tire kicker, every time you reach out to any
27:36 of the owners, everyone knows that you're someone who doesn't transact. I'm such a huge fan of if you underwrite a
27:41 deal, throw out the price. Just temporarily just say like, "Okay, asking price, great benchmark. I know what they
27:48 said they wanted." That's like value is like a 0.5 out of 10. It's a thing that has very very very little consideration.
27:54 Underwrite the deal where it works for you and where you would want to buy it and then come to the table with hey this is where I'm at. If you only did that
28:01 and I just said no, that doesn't work for me. You're still in the category like you moved from I don't know you to
28:06 hey I talked to him and he wrote me a legitimate offer that had some amount of thought behind it. totally different camp than the person who's like I might
28:13 buy all of your stuff and make you a ton of money and 3 months later you still have all of your stuff and ostensibly
28:18 not the ton of money which is which is the part that you would have wanted like it does your personal brand in a market
28:27 I think what you've done especially in Grant County everyone in that county everyone in that city knows who you are
28:33 and how you transact within reason when I talk to other PMs I talk to other owners often times they still reference
28:39 oh yeah there's property like Cody Davis is. I'm like, "Yeah, actually Cody and I used to own that building together." Like, I have that conversation all the
28:44 time. Everyone knows who you are in your market. And in my experience, it's not because you're just aggressively calling
28:50 everyone. You don't hammer the phones. You just offer on deals. You get coffee
28:56 occasionally. Has anything changed at all in your general approach to real
29:02 estate over the last 5 years? No. Buy on long-term fixed rate debt, cash flow, and margin. And I mean,
29:07 everything we shared was and is accurate. I've put out offers. There's a
29:12 deal that's on the market right now. It's pending. I do not believe it's going to close. And if it does close, I'm calling the buyer to sell everything
29:18 because it's a sub 5% cap rate on 50's product in a rent controlled market that
29:24 needs unit turns. So, it's like that's uh I I I kind of hope it transacts, but
29:29 I put out like five or six offers on that building, different structures that worked for me. I just kept following up
29:34 and they didn't want to hear from me but I kept following up and it was with a broker. I was like just share it with your client. Let me know and it didn't
29:41 come together. So they're under contract with someone who offered probably too much with a long feasibility and part
29:48 12% chance of actually closing. Then whenever I see long feasibility and too much price, it usually means oh they
29:53 they'll come back to me when this doesn't go through. Well, that's the thought. So, half of me hopes that it falls apart so I can buy and half of me hopes it closes so that I
30:00 have an identified buyer who will overpay for stuff. That that is a win-win. Well, if that is the case, I have some I also have some
30:07 older stuff that I would be open to uh open to negotiate. I have a listed property in in Moses Lake currently.
30:12 Yeah. Or you sell it to a partner. Yeah. Which is also completely possible. That's one of the great things I found with having partners. Partners are, as
30:19 we've talked, and this is I'd love to go into this deeper now that you've done more of this. Partners are your biggest variable outside because if you fix your
30:25 your debt like we do, like costs are relatively fixed. People are always going to be your biggest variable, but
30:31 variables can be good or bad. You have a bunch of great people in your network. You have more pieces to work with. People have different capital, different
30:37 needs. And I've traded around equity on a lot of properties. putting together people from where you started because
30:44 you and I have had some I mean almost comic book level crazy bad partners or
30:50 people who've entered our universe like we have some stories that it's like how does that happen to anyone and then we've had some amazing partnerships.
30:57 What does a good partnership look like to you today after 5 years of being in
31:02 and out of excellent mediocre and tragic partnerships? A good partner for me lets
31:09 me do what I know how to do and can bring up valid points and questions but
31:15 doesn't make me doubt my skill set. Like one of our biggest partners, well it
31:20 could have been was on a portfolio that I sold out of at a loss because they were mean to me on a Zoom
31:26 call and I don't like that. So I fired myself and sold out and you know exactly
31:31 who I'm talking about. Bill, but they did not let us be in our lane.
31:36 Oh, that fizzled out. 38 unit that we bought. One of the partners wanted to
31:42 run the show. They didn't know how to run the show and so they fired themselves and so we bought them out
31:47 months after we bought it and that enabled us to figure out how to own it 50/50 back then, which was pretty cool for no money. But that was a bad partner
31:55 for that deal because they wanted to run the show they didn't know how to run. Same with It doesn't mean they're bad people. Great great guy. I love love that
32:01 individual that we're talking about. fantastic human being. Yeah, I still hang out with him. Years later, even though, you know, that could
32:08 have really hurt us, what he was trying to do, but a good partner lets the person driving the boat drive the boat
32:14 and they put themselves in a position where if they say, "Hey, my money's tied up for 5 years." They don't try and get it in six months. Like,
32:21 yes, let that in the operating agreement. How do you
32:26 legally establish yourself now that we've done this multiple multiple times? How do you put in there? Basically, when
32:33 I explain to people, I always tell people, the only thing that's important to me is that there's no point where you
32:38 or anyone else gets in the way of me making us money. I always want the most experienced person to have the final
32:44 say, and I'm always transparent. How do you communicate that in paperwork when you bring on new partnerships? What I've
32:50 been doing lately, like when I have to get something put together by an attorney, is I will throw out all of our
32:56 past situations where we've lost into chat GPT and then I'll say put together
33:02 potential causes I could share with my attorney so that they can put it on paper and it's going to summarize based
33:08 off of all of our losing experiences. So like Wala Wala, Ephraa, the 38, oh what
33:16 are the other ones? I'm not going to name the LLC division, that that type of stuff. So, I
33:22 can bring up the pitfalls of the partnerships and then have it draft clause ideas so that it's cheaper to
33:29 have it go through the attorney. I'm sincerely worried about law school with the with the the entry of AI. Like,
33:36 you need a lawyer to represent you in court, right? Like if you're arbitration, mediation, but like even in Texas, like we just we don't need it for
33:43 even evictions. I just I just run our thing. We zoom in in court like JGBT knows 100% of the law and all of the
33:50 case law or you know choose your AI cloud AI is is more popular right now. You get actual better quicker
33:57 inexpensive legal advice for stuff that we used to pay thousands and thousands of dollars for. I remember a time when our attorney was
34:02 like we sure see you guys a lot. That is no longer the case since the last year. It just AI does all of it
34:09 amazingly well and I get better advice more consistently. Yeah. I ask it how to respond to a tenant. and just screenshot the text and
34:16 I'm like, how would you best respond in this situation given these variables in Washington state makes my text so much
34:22 better. It's like, you're too soft or you're too firm. You can't say that. I'm like, okay, I'm glad I asked. And just
34:28 getting the the verbiage and the legal down. I mean, how many times have we got paid for often thousands of thousands of
34:35 dollars legal advice that was suboptimal? I I'm trying to think of examples, but I'm getting too many to
34:41 think of from every lawyer that we've worked with. Yeah. And it'd be too direct. It'd be tied to a deal. But
34:47 yeah, I know. I think is there a way to bring this up? We'll keep that high level. Chat GPT is a smarter lawyer than your
34:54 lawyer 99% of the time. They just don't have the human aspect. That's the only thing. Yeah. It's just it's not human, but it does know case
35:01 law very well. Yeah. That's that's going to be really interesting watching that uh watch that move forward. How are how are you
35:07 because you're you you of the two of us, you have actually even more analog than uh than my very analog business model.
35:14 How has AI affected the way that you attack the real estate industry? Because
35:19 you're you're a relationship model at like 99% of your activities is relationship based. How do you use AI
35:26 outside of, you know, drafting a legal doc? How are you using AI in your business? Well, I mean, I don't use it for a lot
35:31 of legal docs. I mean, maybe to give me pointers on my loan docs or like things I'm because I don't read every single
35:38 word of my loan doc, which I know I should, but I ask it to tell me what I'm, you know, probably not going to read. And I I use it to pick apart my
35:45 strategy, my approach, the way that I structure certain deals. I ask it to put
35:50 holes in my strategy, and I can ask it for market data, but but more so just for my strategy, like, how do I make it
35:57 better? How do I how could I sue my way through my strategy if I was the partner? Like that type of stuff is
36:04 valuable information. Yes. Cuz that that's where you really get hurt is like, hey, what what happens
36:09 when there's conflict here? If you can avoid conflict, that is a fantastic way like, hey, run the scenario, stress test
36:15 this with me. It's going to think a thing. I guarantee you if we plugged our series of contracts for that wala wala
36:21 deal into an AI we uploaded course it didn't exist then but you uploaded into the software and you describe hey this
36:28 is our objective like let's exactly like we talked about on this podcast episode we laid out what is a goal for us what is a goal for them and we put the two
36:34 contracts in it would have immediately told us both you need a financing contingency of some type for either
36:39 rates or just financing in general and these two contracts for this other side they should be contingent on each other
36:45 they weren't but they totally should have that that would have made sense for the way the deal was structured. Yeah. And then we would have gone into
36:50 it operating differently if we knew that they were contingent cuz we knew they weren't. And the broker who probably
36:58 shouldn't have put the offer together, I remember he said, "I'm surprised they signed that." I'm like, "That's never a
37:03 good thing to hear." Which is if your broker ever says that, that is your first red flag. By the way, we probably
37:08 have a structural issue as we're as we're going through this. Great broker, too. Extremely successful broker. uh one
37:14 of my like really really really close friends today. But that was a red flag right there. That was a red flag. And uh as Cody and
37:21 I know, close friends never make mistakes in real estate. Cody and I have uh had a very successful partnership. I
37:26 think we have gotten ourselves or each other into trouble nearly as often as we've had a victory. However, fortunately, the value of the victory is
37:33 massively outshined the exorbitant cost of mistakes. If you had to put a dollar figure on it roughly and it just we'll
37:39 say number of figures of five five, six, seven or eight figures. How much how much do you think that we have cost each
37:46 other by making mistakes along the way to the for context we've made millions
37:51 of dollars together. How much do you think the two of us have cost each other? Well, the opportunity cost of just Robin
37:56 Hood alone was north of 2 million for me from the actual loss of capital.
38:02 Yes. Had that money been placed into multif family that we could have pursued otherwise that we didn't. Yeah. I mean,
38:08 just that deal was a couple million dollars. So, there we go. That puts us into the sevens already. And then we've hadve had
38:14 five figure lawsuits that we didn't need to be in that we were able to settle but still cost, you know, low five figures
38:20 of legal fees, low five figures of settlement fees. We've had six figure earnest money tied up for years. It's
38:26 that would have been so helpful. I remember us sitting down. It's like if we just had that money, we would not have any problems right now. And that
38:33 was funny enough, the the one time that we actually went into a mediation, which Cody and I signed that we can't say too
38:39 much about, so I'll be careful the way that I word this, but we had a mediation that cost money that was really, really
38:44 unfortunate and a super not fun uh little deal. That money, that was like
38:50 the exact same time that our earnest money was tied up. Like, we needed that to fight our basic little legal battle
38:56 and we just didn't have it. Like, we were broke. We bought the Robin Hood. We were throwing money into our resort. We
39:02 were trying to manage all of our obligations, renovate the portfolio, and just every we had no cash again. Like
39:08 we, you and I finally had six figures in our joint account. We plugged it into one deal, and then every expense came up
39:14 while the money was tied up. I can't think of a worse point in our career to not have that money in our bank account.
39:21 Yeah, pretty terrible. But we learned a lesson and not we didn't do it again. Cody still uh Cody's actually one of our
39:27 regional mentors at at Multif Family Strategy. So he's he's back on staff, which is awesome. However, I bought Cody
39:32 out of the company about 2 years ago, a little bit more than two years ago now. In those last two years, and we'll
39:38 exclude anything related to the Robin Hood for this since we've we've we've talked about that on so many episodes, highest stupid tax that you've paid in
39:45 the last two years since we've been partnered on a majority of the real estate. Biggest lesson you can share,
39:52 biggest mistake on the 39 unit. The way that that buyout
39:57 happened was very expensive for me. It was like 100% cost of capital in six
40:02 months, which was exactly the same figure as when we bought out the first partners cuz I bought you out with
40:07 external money and then I bought out that external money later on a note. So, it's like what I should have done was
40:14 found a way to just borrow at your buyout cost and owned it by myself day
40:19 one rather than bring in a potential partner. It got too creative again.
40:25 Mhm. It would have saved me like 300 grand had I just
40:31 borrowed a lot. Even if I borrowed the money at 12%. Because it got marked up if it got
40:37 marked up by double, right? Which is what happened there. The note value was like 7 instead of 350.
40:44 12% would have been the same payment as a 6% payment on the marked up balance. So it Yes.
40:50 wiser. But on top of the payments being different, you also owe twice as much money, which is also less than ideal.
40:57 Yeah. So, that was my most expensive stupid text. But 300 and change is
41:03 better than the Robin Hood, of course, learning lesson. How would you map that differently today
41:09 so that you make a better decision? We know what the decision would be in retrospect, but what would you do on the front end to make a different decision
41:16 or go into the deciding factor? What what things would you do differently? Well, I would have just asked you I mean
41:21 similar on like so right now I have a note that I owe you and I I have a proposal that moves you forward and I
41:28 have the paperwork for that by the way. I have a proposal that moved you forward. My signing hand is ready by the way. I
41:33 warmed it up this morning. Yes, it's ready. And my check writing hand will be ready too. So maybe we can
41:39 do that next week. I just asked you the question because when I when we did some shifting around, you got control of an
41:44 asset that I owned for a while and I got it back and I gave you some money up front. I don't remember if you need my solar finance do because the proposal
41:50 made perfect sense. Yeah, but I should have asked you back then, hey, would you accept half down
41:56 and half on a note? I don't know if that would have been enough, but it that would have been more doable for me to
42:02 figure out and then I could have retained it for a lot less money overall. And that's what I asked you on
42:07 the 12 and it it landed because it worked for you. So, I should have done that on that deal, too. But I didn't
42:13 think about it. You should I should have just asked. That is actually that I think that is my favorite takeaway from this episode. So that is the that is the
42:20 note that we will wrap this up on to quote our our lovehate relationship with Grant Cardone. But uh you don't ask you
42:25 don't get is a absolute fact. That's where all of deals come in. That's where
42:31 you do not buy any real estate if you don't ask. If you don't ask them the question, is this the goal? Does this work for
42:37 you? Here's where if you don't state it, it doesn't exist. You just throw it out there and sometimes yes. I've turned
42:43 down like a ton of proposals from Cody. Cody has a lot of ideas. Some of them are really good. A lot of them, like a
42:50 lot of mine, are also not really good, but none of them have ever happened if we don't bring them up. It's a very simple uh very very simple uh policy
42:57 that I think a lot of people do get stuck on when when we're coaching people. And I know Cody hears this all
43:02 the time. People will propose something. Hey, do you think they accept that? It's like, did you ask? It's a good starting point. I I I hope
43:08 listening to this episode uh think of one thing that you have in your business or or in your personal life. Have you
43:15 asked yet? If you apply that, I think you've done a good job listening to the episode uh with Cody here. So, ladies
43:21 and gentlemen, this has been Cody Davis. Cody, you're doing a whole bunch of other stuff we didn't get to talk about today, and I'm uh I'm looking forward to
43:27 talking about this on a uh YouTube live on Wednesday with you on the multif family strategy channel, but Cody's
43:33 doing uh his first groundup developments. So, and that sounds like it's going phenomenally. So, I'm super excited to hear more about that. But
43:39 you're doing development, you're selling some stuff, you're buying some stuff, you're getting a newer portfolio, you're
43:44 buying out partners. How do people follow the adventure of you as you go
43:50 through all of your Cody doing Cody things? Cody Davis Business Adventures on
43:55 YouTube. Post couple times a week. Now, we'll be going live. So, that's cool.
44:00 But I'm there. Well, that's going to be awesome. Well guys, there's a link below to Cody's YouTube channel and I'll probably collaborate this with that as well. So
44:06 you guys click the link and I will see you all on the next episode. See you.