11 Units to 55: How Two Partners Bought a 44-Unit With $0 Down

Original automatic captions. Names, numbers, and punctuation may contain transcription errors.

0:00 Hello and welcome back to the owner [music] meeting podcast by multif family strategy. I'm Christian your channel host today joined with Ethan and Eddie.
0:06 What these guys have [music] done independent of multif family strategy or anyone else has been ridiculous to
0:12 watch. It's been so fun to watch [music] you guys take off. I brought this up on the podcast before but I still when I think of hard work I think of you guys
0:19 hand digging that trench outside your one building. I don't know if people realize how athletically difficult that
0:26 is but they built how deep was that trench? 3T 4T. Yeah, four feet was huge. How long did that take to dig
0:33 by hand? That took a long time. Like a day and a half. These guys do what it takes to make the deals happen.
0:39 I want to talk about what you guys have done with business. Most importantly, I think what everyone wants out of this podcast. So, what I can guarantee you
0:46 will get if you are listening to this episode is these two young guys. What it actually takes to build a
0:53 significant portfolio from scratch. Ethan, you started with you had a single
0:59 family rental when we met, right? That's right. Eddie, you had have you even started your business yet at that point? Your
1:05 your airport business or is that birthed in COVID? I can't remember. It was birthed in COVID. Yeah. So, a a
1:12 little bit before when we started investing in real estate um 2020. Okay. What was what was your starting
1:17 point when you and Ethan first partnered up? Where were you at? We I was flipping couches. Um, and then
1:25 we were both flipping couches. Bought I mean sold over 200 couches along with
1:32 that the money from the sanitizing cleaning business in the airport.
1:38 Um, kind of joined those two along with and then Yeah. And then the multif family mentorship kind of like taught us
1:46 what we need to know as far as like multif family goes to kind of combine the two so that we could, you know, join
1:51 forces and get going. So, what makes more money, flipping a house or flipping
1:57 a couch? Well, it depends. You know, we we hit some couches and we also I mean, we
2:03 almost broke even on the on the first house. We made like nine grand, but yeah, typically houses. Okay, good.
2:08 It it depend I mean like it yes, houses make more money. That being said, like
2:15 couches you don't have a lot of money tied up, right? So, you can put money in, take money out quickly. Um, and
2:21 that's how you like build, right? to get into stuff where you can put money in more chunks of it in and they get a
2:28 greater return. That's how we've seen it. Christian, maybe you can speak. It sounds like you have the same experience. But yeah.
2:34 Yeah. Never never flipped a couch, but I've done about every job that one can do. I I I I've gone from screen printing
2:39 from 1150 an hour to selling the t-shirts that we used to print on. Uh I have done just about every job that you
2:47 can do. I haven't sold money yet, though. I I've never been a I've never been a lender. It's the only thing I haven't uh I haven't sold money yet,
2:53 but pretty much anything else, data, tech, apparel, uh sold it all. Sold it all. So, I've
3:00 I've I've done some done some projects. I'm actually curious about this. So, you guys now know the answer to this because
3:06 I saw Cardone ask you this question, so I'll ask it to you now that you're prepared. What is the difference between
3:11 a couch and a sofa? It's the same thing. I still agree with you guys. I still
3:17 agree. I was like, "No, a sofa's fancier. It's more expensive market. You know what? You know what? I think
3:23 they got that backwards to be completely honest. I think a sofa sounds outdated in all
3:29 house. I think sofa. I think I don't know why, but I think gold floral in your
3:34 grandma's house love. You know what the proper the proper marketing the proper word is?
3:40 You said it on the sectional. That's right. There we go. It's sectional. Sectional sell the best, too. But yeah,
3:46 I mean like that was that was a trick question. We answered it correctly. We stand firm by that.
3:51 It's like they say, sectional cells. Right. Right. Right. That is So, so you guys ran that that
3:58 business. You did like 200 couches. How long were you guys doing the couch flipping?
4:03 Two years. Two years. Okay. So, two years. You're entering into real estate.
4:09 You did some crazy fun deals and you've done some hard deals. You've done some deals that have gone pretty well. Let's
4:15 actually You know what? We're we're going to we're going to tease the multif family deal. We're about to get there. I want to talk about these single family
4:21 flips. I got to drive out and see one of your single family flips once. So, I've actually seen that house and that one
4:27 went pretty well, right? The one that I saw. That was a that was a very successful flip. I remember.
4:32 Talk about the flipping business. So, you go from couch flipping to flipping houses. More risk, more reward.
4:38 How did the first deal go? Do you want me Do you want it? is well just going back a little bit
4:44 it it was like we were working our 9 to5 fives right and we would always call each other every single afternoon like
4:50 hey like you know this is not for us not being in a cubicle not you know working
4:55 from an office it just like it was driving us crazy so um like we were like we got to get out of it but we were
5:02 working our jobs then after work we would do couch flipping and after that we would clean floors in the airport so
5:08 we were doing that for two years two years of, you know, working non-stop to
5:13 try to make that active income. Once we made that active income, then we
5:18 could like get, I guess, get our foot in the door into like bigger deals such as flipping houses. So, the first deal we
5:26 did, we got it from wholesaler. Not, you know, it it was New Western. It wasn't a
5:32 or no, no, no, that wasn't the first deal. That was the first deal we were looking at. And there was a whole thing
5:37 with we were going to close the next day and then the seller went to jail. So we couldn't we couldn't actually close on
5:43 that house. You can still sign from jail, can't you? Right. Right. I mean, but I guess New
5:49 West wasn't going to go through that. Totally fine. Um and so we found a deal on market. Um and I mean it was like a
5:57 super light cosmetic thing and we didn't even actually do the work. We hired a contractor from someone that we knew
6:04 that had been had done like hundreds of houses and honestly he overcharged us
6:09 and he he was somewhat timely, right? But we weren't learning the game of
6:15 flipping of of real estate. And so that's what and really we only made
6:21 5,000 bucks 7,000 bucks on that deal. Like once we start to finish it was like six months. So it was a long time and
6:28 the market dipped. Could have made in could have flipped a lot of couches in that time.
6:33 Right. Right. It's so true. And we were still flipping couches like here and there. But like if we had focused on
6:40 like learning the game, I think the experience would have been more valuable than actually just like flipping couches
6:45 at that point. But then we got into our second flip in a more desirable part of
6:51 Nashville. Um and which you saw. Which you saw. That's right. That was your second flip. That's the one that
6:58 editing team if if you know where I stored that clip. Insert is here. Hey, shout out to Danny for the interior
7:04 design tips. Yes. Yeah, that's right. My wife came through and walked the property. She like, "You need to put this here and this here." I
7:10 still don't know where any of this stuff goes. And she was right. And she was right about all of it.
7:15 There we go. There we go. Testimonial from Eddie for for my wife. You're right. Eddie Ozgood. Functional
7:21 flipping. Eddie Ozgood. She's awesome. Anyway, um so uh did that. It was like
7:28 full gut, right? And we uh you know, we hired a better contractor. Were on site
7:33 every day kind of getting the experience, taking videos, just learning the game.
7:39 And we, you know, made a little bit more money on that one. Uh probably, well,
7:46 not probably $120,000 on that. That is that is more than seven. I'm not super good at math, but that it seems a
7:53 lot better. Yeah. So, that that took about like four months. Um, and like I said, like we
7:59 were So, you got faster and better. Faster and better, but it wasn't really moving the needle like we wanted it to,
8:06 right? And so like it was it was good like as far as like cash goes and it was important for like cash goes
8:14 but like the long-term vision was the multif family stuff which Ethan was in
8:19 the your I mean y'all's mentorship and your mentorship and so while we were we
8:24 were kind of like had two things at once, right? One which was the like money-making side and flipping and
8:30 contracting side. The other side was learning the multif family game. And so I'll let
8:35 this is what too many people skip and this is why I wanted to start here. You did the couch flipping. You did the the
8:41 airport cleaning business. You guys were sanitizing. And we didn't really go into that a ton on this, but for those who
8:46 don't know that Eddie started a company and these two both started working together on cleaning airport sanitizing
8:52 during co which by the way sharp business idea. Hey you know what has demand right now?
8:58 Exactly this. Uh, what people skip, especially young, especially male, like they young
9:05 hustlers in real estate think, I'm going to get in and I'm just going to buy deals and I'll instantly have cash flow
9:11 and I can retire. And I've seen so many people get wiped out with this. It's a neverending run of you get cash flow,
9:19 you spend it on fixing your building. When do you pay yourself? I don't know. Because all of the money goes back into
9:25 growing the business. You can be a multi-millionaire in real estate and
9:30 have absolutely no money and never get caught up if you don't go out and earn the darn money. It doesn't mean you have
9:37 to be a wholesaler. It doesn't mean that you have, but you have to do something to earn money because if you're using
9:42 debt, too many people forget you do in fact have to pay for that later. And if you
9:47 only do it out of refies, you owe more money and it's never ending cycle. Well, the
9:54 property is worth more, so I'll just refinance it. It is such a stupid model and you guys figured it out early. It's
10:00 like it doesn't matter what you do, you got to freaking work and you guys did that on multiple businesses, multiple
10:07 projects and you okay let's go figure out the active income. Let's get into the multif family.
10:13 So right now reason I really wanted to host this podcast today. You guys are about to do one of my favorite magic
10:20 tricks of all time. You're going to turn 11 units into 55 units. You guys are buying a 44, but you're not selling the
10:26 11. Talk to me about the 11 unit deal, the acquisition, and then we're going to
10:32 talk about how you guys are going to turn this in 55 units with no money. It's going to be amazing.
10:38 No, you gone. You gone. I just talked. Well, the 11 units just over a year ago. It was like 13
10:45 months ago when we bought it. Yep. Which back up before that was nine months of Eddie Cole called the seller.
10:52 It was like right at nine months before that. January, we were both cold calling and someone someone would have gotten a hold of the
10:58 seller between one of us two, you know, we cold called between us 8,000 people.
11:04 8,000 call 8,000 calls. Probably 4,000 people. No, no, no. Repeatedly.
11:11 You got that sounds like the hard way to do it, but it's the same way Caleb started, too. It's like, hey, let's just
11:17 go grind it out the oldfashioned way. Okay, so Eddie gets the gets the seller
11:23 on the line. You guys are finally you guys finally got it at least got the conversation started. How does the deal
11:28 come together? Then it was just followup after followup after followup. It wasn't the right time. He wasn't looking to sell, but we
11:35 say this all the time. It's about bringing the seller into the market, the owner into the market when they're not
11:41 actively talking to brokers and pushing that thing out for the top dollar. It's like, well, maybe you have this
11:46 conversation and he says, maybe it would make sense for me to sell. had some family stuff. So, we waited some time
11:51 and followed up and kept having the conversation. Went and met him, got lunch, and just spent a lot of time building that relationship, which it was
11:59 a long time, but it paid off with the rapport that the rapport that we built to be able to structure the deal how we
12:05 did, right? And there was a lot of it was a roller coaster. I'll just roller coaster
12:10 say that we can save everybody the time on that. basically got to the closing table on the 11 unit with what 2,600
12:18 bucks out of our pocket. So, we found a local bank who took first position. They
12:23 financed uh 45% of it. The seller carried the second 55%. And
12:30 that's really good. So, you guys got to push the leverage all the way to 90%. No, 100,
12:36 right? Because because math math still applies. Uh 45 plus 55 is in fact not 90. I just flew in from the Bahamas and
12:42 we got in early in the morning. So, don't be in your education mode.
12:49 How's How are Christian's numbers always so good? Well, if you just change a couple of digits, No, I'm kidding.
12:54 Right. Right. Oh, that's funny. That's That's embarrassing. I promise I could do math for a living. Um that's that's a thing that I do. You guys got a 100% financing
13:02 and the bank allowed this. Yeah, that is crazy.
13:07 assumption that we were going to bring all the renovation costs. Yeah. Okay. I So, the only time I've ever got
13:13 a bank to say yes to this was my second deal. It was a duplex, so much smaller than this, but same thing. I had to do
13:19 renovation cost. I got 101% financing. Just the way the math came out, they we
13:24 got a little seller credit at the end. And so, it came out to 101% financed. Yeah. So, you got 100% financing, but you have
13:31 to do the Rena. Now, did this Renault have to go into a reserve account held by the bank?
13:36 Okay, so you guys better strong word over here, Christian. We're only as good as our word. We're honest, man.
13:41 That is amazing. So, most banks, if you don't know, most banks will say, "Yes,
13:47 you can fund the Renault. We'll fund the the acquisition or allow you to go to
13:52 100% loan to value blended LTV. That's the your first and your second combined. But you're going to give us all the
13:59 money up front and as you get invoices, we'll distribute it out so that we know you're not going to take all the money,
14:05 not repair the building, and now we're stuck with a Now, maybe it's because you guys only levered 45% with the bank. The
14:11 risk was low enough where they're like, "Who cares? We would love for you guys to fail and get this thing back at 45%
14:18 LTV." That may be the dream, right? If we lend to these two kids and they screw it up, we make a ton of money. Let's go.
14:26 But uh that's a great debt product. That's that is a fantastic debt product. So you got 100% leverage. Uh out of
14:32 curiosity, interest rate on the seller finance portion, five and a quarter interest only. Better than market debt product.
14:38 Significantly better than market debt product. Well, yeah, our debt on the on the bank portion was 8 and a half%.
14:43 Interest only. It was at the peak of the of worse than market debt product. You
14:49 combine the two for a nice blended debt product that works for your deal, right? How did the rest of the money come So,
14:55 what was the rental cost and how did that money come in? Because you mentioned that you guys were out of pocket like 2 and a half grand.
15:01 Uh yeah, so um uh renovation we planned for like
15:08 probably like 220 ended up being $290,000 that we put like our own cash into the
15:14 deal which we did not have at the beginning. We didn't Yeah, good preface. Yes, we
15:20 did not have that at the beginning and it was only funded by uh Ethan cleaning
15:27 the airports at night, right? So like like we would both be living at the
15:33 apartments, but like we lived on site, right, in a cockroachinfested apartment with no floors and like yeah,
15:40 we showered at the YMCA um bathroom. So, and then the YMCA sometimes didn't have
15:46 hot water. So, we would shower in threederee weather in cold water. Slept on air mattresses.
15:52 Slept on air. Yeah. Slept on air, you know, the whole nine yards. You know, it was No, I did that with a 38 plex. I didn't
15:58 live there full-time, but we would like a week at a time air mattresses in one of the renovated units while we were
16:03 remediating cockroaches. I mean, literally the same thing. It's like, okay, we wake up, we go outside,
16:10 hopefully no one kills us. like that that was rough times, right? I love
16:16 it was just it was just like while while like we were doing that and you know like we would be you know doing the
16:24 construction and and we had a team behind us uh then at night uh would go
16:31 to the airport and clean floors and Eddie was grinding in the construction field of course. Yeah. So like we it was like
16:39 kind of the yin and the yang, right? because we needed to make our debt service and we needed to finish these renovations. Um, but we didn't have the
16:45 money to to do that. And so, the the business that we had, the floor cleaning business, gave us that cash flow to be
16:53 able to service that debt and also those construction costs at the end. Now, we
16:58 didn't service all of that from Music City Sanitizing our cleaning business.
17:04 That being said, did we did service like a good amount like for for debt and and for
17:10 construction. So the wholesale too and yeah, we had a wholes some wholesales as well.
17:15 So you guys had to come in and earn it. Did you guys have any partners on any of it or did you guys just earn your way through the whole thing?
17:21 We us only us. That is amazing. And so many people can't say that like the
17:26 Yeah. the the shortcut, which I've taken many times, is okay, let's get people in
17:32 and let's put out a buyout option so when I refinance, we'll buy you out the property. Had you done that play instead
17:38 of earning through, you would not have the money for the next play that you guys are doing right now. So, this is
17:44 happening right now. This is active. It has not closed, but you guys are right at threshold of finishing this uh this
17:51 project. So, you go through the project, you're updating the 11 unit, you're you finish
17:57 out the project. What did you guys hope to get for an appraisal? Hoped at the beginning of the project,
18:05 what would you say? Like probably like 1.4 1.5 is what? Like, is that what you
18:10 had as well? Okay. And what did you guys buy it for again? Purchase price $690. 660 and plus a $30,000 renovation
18:18 note for the for the roof. So 690 altogether is the debt that we had on it. Okay. So buying at 690 100% financed
18:27 hoping to get a million and a half valuation. So hoping to do a little bit better than a double. That's fantastic.
18:33 Your appraisal's in. What did appraisal come in at at the end of your project? 1.7. It's what I'm talking about.
18:41 Again, not super good at math, but that sounds like a little more than a million than you originally purchased the
18:46 property for. Yes. Yes. It was a heavy heavy value. But but yeah, like it
18:53 through the entire project, how much did you end up investing into the deal? Full project from beginning to end, how much
18:59 additional money did you put in for renovation? 290. That is everything.
19:04 The whole thing. That is everything. Um, now aside from debt service,
19:09 Mhm. That service uh was probably I don't know like all in
19:17 like probably another like 50 or so but all in probably right at a million. Just under a million.
19:23 Yeah. Just just under a million dollars in. So overall in equity you really only
19:28 made a measily $700,000. That's right. In one shot. I the amount. So So first
19:36 of all I want I want people to hear what is what you guys actually did. So, you guys slept basically on the floor in
19:42 cockroach land, showering at the YMCA, working your butt off in construction and cleaning and flipping
19:50 to make it through this to not have any partners. The payoff being $700,000
19:57 does not suck. And then you also were doing these jumps. You guys are earning money. You guys made a lot of money on
20:03 this. Now you have the appraisal in. What's the game plan from here? Do you
20:09 sell the building or I already said you're not selling it? Refi, what are they likely going to have you take out
20:16 of the building as a cash out refinance? We are our new loans going to be 1.28
20:22 and Right. Yes. 1.28. Yeah. That first of all, phenomenal. So,
20:29 you're about to get a boatload of cash. You have no partners. There's no one to buy out. So, this money transfers from
20:35 that to your bank account for about two weeks. Yeah, we'll have we'll get a check on
20:41 Monday. We're closing. We actually literally just scheduled that like 30 minutes ago. Uh for $590,000.
20:48 By the way, you're borrowing the money cuz it's a refinance. So, on a refinance, your tax on that is exactly
20:55 I'm calculating since I messed up the math earlier. It's 0%.
21:02 Not bad. I got that one right. You guys thought I was going to say 10 based on my last uh my last mental math, right?
21:07 So, [laughter] you guys are borrowing. There's no there's no tax. Your property's doing it. Uh what does the
21:13 cash flow look like after refinance on the original 11? You mean Andy? Like two grand.
21:18 Okay. So, you bought a property. It's cash flowing. It's cash flowing in excess of what you would need to pull out all of
21:26 this money on this property. You're then using that money to buy a 44 unit property. Tell us about the 44. How did
21:32 you guys find this deal? More cold calls. Just thousands and thousands more cold calls. Just
21:39 while while we were wrapping up Cookville in between the downtime after we had finished just banging out the
21:45 calls and talked to this guy like a year and a half ago, wasn't the right time. Followed up with
21:50 him, stayed in touch, just built that relationship. And finally one day he was like, "You know what? I think that I
21:56 think now's the time." And we were the only people who were talking to him. What was the purchase price or is
22:03 we are under contract to purchase that for 2.4 for 44 units.
22:08 Okay. Awesome price per unit. Like awesome awesome price per unit. What do
22:13 you think it's actually worth day one? Around 3 million. Okay. When you're done with your project
22:19 on it, what do you think it's worth? We've projected around five. That's going to feel better than this cash out refi. I can tell you that right
22:26 now. But you get to keep the 11 and you get to keep the 44.
22:31 That's right. Income stays up for the rest of your natural life unless you decide to 1031
22:37 these. And you're going to be doing probably the same play what, two years from now.
22:43 That's the plan. Now, the thing on the 44 is that the amount that we're pulling out of out of the 11 unit is the exact
22:50 amount for the down payment, which we're borrowing purchase and renovation funds on that. also some a seller second to
22:57 help with the leverage but uh is exactly enough for the down payment but with the renovations with us having to front
23:03 money and have some liquidity have some working capital and reserve we are bringing on a partner for that so that's
23:09 not 100% us gotcha okay so on the uh 44 what is the
23:14 partner bringing in he's bringing in 300 we're still we don't have the structure
23:20 solidified but it'll be he'll get 5 to 10% of the Well, that's not bad.
23:27 No, it's great. You're going to the lion share of a much much much bigger property and you keep the 11. Now, is the 11 being rolled into
23:33 this or do you guys keep the 11 by yourselves? No. No, that's just by yourselves. This is like a master class on correct
23:40 deal structure. You earned as much as you could through the process to retain
23:47 the maximum amount of equity and you're bringing on a partner for a little bit of equity to close out a deal. Now, long
23:53 term, is this a partnership that you guys intend to keep forever or at Refi you guys intend to buy them out?
23:58 He's a mentor to us. Like, I mean, don't we don't know what the partnership like structure will look like in the in
24:04 future deals, but that being said, like he's been a mentor to us. He's been fantastic and
24:11 and we really value his advice. Yeah, super close relationship. So, it's awesome. We haven't we haven't finished
24:17 structuring what that deal is going to look like at the end of this deal and all of that, but I mean he'll be with us
24:22 for our our whole careers probably. Oh, that's awesome. How did you find this mentor,
24:28 man? It was just it was a family friend. It was like as soon as we quit our jobs,
24:33 we both went to our parents and we were like, "Hey, who do you know who's in real estate?" And they were like, "Well, nobody, but we do know this." And so we
24:40 just started you call him called him up and we're like hey my parents said you were a little bit in real estate like
24:46 you want to get coffee he's like yes swing by the office and so he just met with him and just clicked immediately
24:52 and he's just been he's got the experience been through a lot more than we have and so he's been very very
24:59 crucial in our success. I love to hear that's that's the real model here is you find people who've
25:04 done the thing you want to do and you learn from them. That's the whole point of this podcast. It's called the owner meeting podcast. Meet with people who've
25:11 done really unique, awesome stuff in their business. Try to skip as many of the mistakes as they made along the way
25:17 and take all of the best and roll it in. There's a man named Gary Man in Moses Lake and he was that for us when we
25:23 started. He's like, "Here's where we screwed up. We built this huge portfolio, hundreds of units over 50
25:29 years." I'm like, "Awesome. With this knowledge, I shall do it in two."
25:34 Being able to take that and accelerate and make less mistakes is one of the most valuable things ever. I highly
25:41 recommend figuring out your deal structure [laughter] moving forward getting plan on that. Um, as someone who has been screwed on more
25:47 partnerships than I would uh like to uh make sure you nail the crap out of that structure, but it this sounds like the
25:52 type of person that you want to be with for a long period of time. Like the person there's obviously a very high
25:58 level of trust here. uh you back that with a fantastic legal structure and you
26:03 have I mean you potentially have this amazing unbreakable partnership where you're like we like each other, we trust
26:09 each other and we have paperwork so that we don't have to do any of that if we don't want to.
26:14 Great place to be. Great place to be. Um man. Okay, so you guys are going to make
26:19 a ton of money on that likely. I mean that that sounds like a ton of money. What other projects have you guys been
26:25 working on in the meantime? So, you have the 11. Side note, side note, just wanted to say
26:31 like we're we are putting $1.55 million into that 44 unit. Uh, so it's going to
26:38 be ex an extensive construction cost and we I mean like we're we passed our GC
26:45 commercial residential l like license exam and we're working on uh the paperwork to get it. Uh, so we'll have
26:53 it when we close on this property by November 20. November 20th, we're closing on it. We'll have it around
27:00 then, our GC license. So, we're really vertically integrating as far as like a
27:06 prop. We do property management, we do the construction, and then the investing is kind of like on top.
27:11 And we'll be moving to Huntsville as well. We'll be living in one of the units, overseeing the construction, doing the leasing, doing all that and
27:17 get that project off the ground and running smoothly. I there's not enough people who do the business the hard way,
27:23 which is the which is the right way to do it, which is just get out there and build the freaking business while you're
27:29 young. Put it in now. We think so. We think so. I I
27:35 the way that I built my business was non-stop work for
27:40 too many years. I did it the slow way for 17 years. Uh but most of my success came in the last five. And in those five
27:47 years, all I did was work. I just got back from that vacation I mentioned. That was really cool being able to take my one-year-old, be able to spend as
27:53 much money as I possibly want to in the Bahamas and just be able to take I took
27:58 three full days off. I just turned off my phone and I was like, you know what? Unless a building burns down. You know
28:04 what? Actually, don't call me if a building burns down. I will find out when I get back, it will be equally crispy in three days. I came in, I
28:12 watched baseball games, which I've never seen a baseball game in my life. Uh, I came in, I watched the Dodgers get, uh,
28:19 slapped around by the Blue Jays several times. I ate whatever I wanted. Uh, and then now I'm back to grinding and we're
28:25 going to keep stacking and building. But when you come in and you do all this stuff early, the setup, it's just crazy.
28:32 I'm I'm sitting here at 33 and I'm like, "Okay, for the most part, I can do what I want when I want and I choose to work and continue scaling." But you, it is
28:39 worth the time. The way that you guys are building this, you're not going to have a crippling debt load. You're not going to get into your, you know, late
28:45 30s and just be spending all of your time hustling to pay down the debt.
28:50 You're managing the debt and you're paying it down and you're working the businesses so you have a foundation
28:56 where you can scale off of. So, vertical integration, you nailed it. This is just it's a master class on how people should
29:01 do business. I I really think that that is the way to do it. Yeah. And let me interject right there.
29:07 Something that Eddie and I say we talk about almost every single day is like
29:12 knowing the difference for us between our active and our not passive, but the active income from the business versus
29:18 the income that you're going to get from the real estate. And I say this cuz our biggest thing is is speed moving through
29:24 these projects. And the 11 unit, I mean, we did it in 13 months, which if we did it now, it would be a lot quicker, but for where we were
29:30 at, that was a great pace. This 44 unit is all about how quickly can we get
29:36 through that and recycle that cash because we're putting every penny we have in. So, we need that back out to keep growing the business, right? And
29:43 that comes down the speed of moving through these projects comes down to how much of a risk we can take in terms of
29:50 are we going to do one unit at a time or two units at a time on these unit turns
29:55 and it's going to take us four or five years to reposition this property. What we're going to do is is be able to go in
30:01 and empty out entire buildings, take bigger risk, and move at a quicker timeline because we have this active
30:08 income from the business to service our debt and allows us to take bigger risk and move quicker through these projects.
30:15 Like yes, let me cut you. Well, I just want to add to that real quick that like
30:20 we are like we understand we are taking massive risk as far as like we are trying to get debt product with as much
30:27 leverage as we can. Um and and that is where we receive our paydays are from
30:32 refinances. So like in order to steady that like boat that's rocking like this
30:38 with the investment with the high leverage we have to have something that's actively servicing that debt
30:45 because there will be one time or maybe multiple times in which like it's going
30:51 to be like we wouldn't be able to service that debt and it happened in Cookville with just like the reserve
30:57 funds that we have. So, we have to have that active income coming in every month to service and derisk us.
31:04 How do you, especially at a young age, how do you bet on yourself? How do you go, "Hey, this is this is a question
31:10 that I got. I actually got this from a uh from like a a 13-year-old girl at an event, and I was like, this is this is
31:15 the best question I've I've been asked in a long time. When you get started, how do you know it's going to work?"
31:21 Well, that's the beautiful thing. You don't, right? And I mean what I would
31:27 say, everybody needs an Eddie on their team. Everyone needs an Ethan as well. If you don't have an Eddie on [laughter] your team, you got to be an Eddie. You
31:33 know, everyone needs an Ethan as well. It's a yin and a yang type of relationship that we have. And well, where I'm going with that is
31:39 like Horoszi always says like the way to conquer doubt and fear is with action. And this guy right here is the most
31:48 executing action-based person that I know. And like if there is anything to do, he's
31:56 doing it right then and there. And so when it comes to projects, it's decision, decision, decision. And you're constantly moving and driving the
32:02 project forward. Hey, but I'll add to that. There are plenty of times that me personally, I am
32:08 wrong, right? And so this guy puts me back in check, which is like, hey, have you thought about it this way? Right? So
32:16 it's kind of like like we'll make quick decisions, right? And then like but if
32:22 if we don't agree on something and Ethan's very good at being like more
32:27 what's the word like pro uh like giving different ideas on the situation right
32:33 cuz I'll be like okay let's go go go like we got to go we got to get this done and he kind of like reels me back
32:39 which is like okay like have you thought about it this way have you thought about it that way and so like it's kind of like a yinyang honestly like it's a
32:46 perfect match like it is a perfect match because he like kind of reels me back and it's like, "Okay, like this is this
32:53 is maybe a better option." Thanks, sweetie. It's so fun to see highly effective
32:59 partnerships. I've had multiple partnerships fall apart. I've also had partnerships that are absolutely epic where I I feel like Caleb and I have a
33:06 partnership that's very similar to you guys where Caleb is just like on the gas like he's 22 and he's like, "We got to
33:12 go go go go go go." And I'm like, that's how many buildings can we buy before we
33:18 just like implode PM? Like, we have I we literally you will destroy our company
33:24 if we buy another great deal because how the heck are we going to our
33:29 our staff can't handle it? There's no possible way. Don't have that. It's that yin and le yang where it's like, hey,
33:35 this is like it is a fantastic partnership when you have two different personalities, especially when you have someone with perspective and vision and
33:42 you have someone who is like, hey, we got to move forward. I love those personality types. I think it's oversimplified when people talk about
33:49 like, oh, you have a visionary and an integrator because usually when I see that comparison, you usually have an
33:55 and someone who's doing all the work. Is like what I see 80 80% of the time people like, oh yes, I want to be
34:00 the visionary. I'm going to tell you what I want done and then you need to make it happen which is a horrible
34:06 partnership. Uh what you guys have is is the real deal. Both of you guys are pulling 100%. You guys
34:12 you hit on the mark Christian you know I couldn't have said that better myself. visionary integrator. It's not always
34:19 it's not like one or the you're not one or the other. Like you have different like attributes as a visionary,
34:25 different attributes as an integrator, right? Like you can be maybe more of an integrator, more of a visionary, but you
34:32 are not just a visionarian. Like yes, we know plenty of partnerships where like
34:37 the integrator, right, is really doing all the work, right? and and it makes
34:42 them feel really terrible to have the visionary just sit back and just like say, "Hey, like this is like this is
34:48 what we want." And not see the actual work, right? And so you hit it right on
34:54 the like nail on the head. I I've learned it too much. I feel like people people take too much book knowledge
35:00 sometimes and they try to like simplify business to a point where it's they're like, "Oh, this is just how it is.
35:06 You're this or this." It's like, "No, no." In my partnership with Cody, I was the integrator and which really meant I
35:12 I was doing a lot of the the business and the work. He had a lot of great vision. Like a lot of his stuff was
35:17 built like our company was built off of ideas that he had fantastic freaking ideas. I'm I'm like nine years older
35:24 than him and he was what 26 units ahead of me, right? And he'd never had a job. I was like I'm
35:30 like, "Okay, well obviously what you're doing is working better." So a lot of the vision came there. Caleb and I like I've become more of the
35:38 directional person. Like everyone has a balance of both things. And I I I just I
35:43 love the personality types that you two bring to your partnerships. And you got you two are just generally fun to hang out with, which is a good sign for a
35:50 partnership. You guys know how to have fun at the same time, which is which is appreciate it. Well, it goes right back
35:56 at you. I appreciate that a lot. I'm I'm a massive massive massive fan of these two guys, so it's there reason they're
36:02 recurring theme on this on this podcast. I feel like it's like once or twice a year. It's like Ethan, Ethan, you did something cool.
36:08 Hop in the pod, what you guys do is it's just the right way to do business and you guys are going to have fun doing it. And I look
36:15 back very fondly at the uh the air mattress sleeping sleeping with the roaches days. I'm like, we could not be
36:21 here without those. And it makes you so much more resilient. Which leads to my last question or my at
36:27 least my next question. Maybe we'll have another one. Thus far, most expensive mistake you guys have made. Could be timeline, could be money, could be
36:34 relationship, doesn't matter. But most expensive that you guys have made. I don't know what you're thinking, but like if I'm being honest, like our first
36:41 deal that we did, we bought an apartment complex in Huntsville and it does well.
36:47 We executed on the game plan, right? It could have been done better. And the reason is we should have improved it a
36:54 lot more because right now we're having to deal with the headaches that we wouldn't have had to deal been dealing
37:00 with if we had done it the right way. over improved improve the property
37:06 drastically more even overimproved I would argue would have been better for
37:11 us because in order to build a foundation of a business right and not
37:18 having to go back and have those headaches constantly over your head you have to do it right the first time and
37:23 do it well. So, what's an example of one of the things that you've had to come back and do that
37:29 cost money because you didn't improve it enough the first time around?
37:34 Like for example, like cast iron pipes, right? Like if we had done it right, like we we probably would have switched
37:40 to PVC. Mhm. or if we had let's say not put
37:46 lipstick on I'm not saying it's we have our 24 units of paint but if we had you
37:52 know redone the plumbing redone the electrical um and you know put
37:58 just overall better yeah cosmetic job as well we wouldn't yeah we we underspent and put some
38:05 band-aids on that we shouldn't have we didn't know we didn't know so it is what it is at this point but and we've fixed it since then like we've gone back and
38:11 done a better job, but we still suffered the consequences of that two and a half
38:18 years later. Whereas Cookville, we did it right. We went to the studs. We did everything everything right.
38:24 Overimproved. We have fantastic tenants. We drove the value of that property
38:30 beyond what we thought was poss tolerate. It Yes.
38:35 And now we get like a phone call or two a month on that. And it's just like the
38:41 difference. Our time is worth so much more. It's better spent on this next deal, on the construction, the leasing
38:47 of this, and looking for the next one after that, not trying to fix what we messed up on in the past. Yes. Absolutely. And it and it's like to
38:55 build a strong foundation for a business, you don't want to have to go back cuz like our time is going to be
39:01 become even more valuable in a year and more valuable in two years, five years. So always having to go back and write
39:08 our mistakes, right, is going to turn more and more turn to be more and more
39:13 costly of the stupid taxes to pay early. That's a great one.
39:18 Yeah, that that is a fantastic one because you overcame it. You moved on. You've improved and too many people don't learn
39:26 that thing. And so they're seven buildings in and they still have cast iron pipes. They have what what
39:34 year built was that building? 60s. Was it 60s? Which one? Cut the Huntsman one.
39:39 Yeah. 64. Yeah. I'm going to tell you right now, any any metal pipes you have in that building are beyond dead. Do you ever
39:47 cut into those? The king of buying uh buildings with cast iron pipes is Cody Davis.
39:55 You've seen the number of post he has monthly. Where did this leak come from?
40:04 I've never seen someone get more leagues. Like, have you upgraded a pack? So, not yet. It's It is one of the most
40:11 frustrating things. And you know, one of the most damaging things to your building is water. Yeah.
40:16 Those You buy an old building, get the old pipes out of it. Your PVC will outlive
40:24 you and your children. Like, switched PEX, plumbing, just like just just get it out of there. You will not regret it.
40:30 You will you will not regret it. your resale value, your insurance value, everything will be just better. Electrics are the other big one. Like,
40:36 if you have some old electric in a building, it can be an absolute bear of a project to get done. But if you have the new panels, the new outlets or the
40:43 new uh the new breakers, it's cheap to fix things that you almost
40:48 never have to fix because it's all new. It It is such a better way to do real estate. What I love about your project,
40:55 because you guys nailed this, and this is the most important thing for the timeline of your project,
41:01 you start with the rena budget, you start with your reserve. It's people raising, hey, we did just enough cash to
41:06 close and we brought in no other money and we're going to try to do this out of cash flow. No, you're going to have a lot of shitty
41:11 pipes. You're going to have a lot of stuff. We're going to get to this in a few months after it breaks. It's like
41:17 horrible. You guys are doing your projects correctly. You're like, "Hey, you guys could have closed this 44 unit,
41:23 right?" And then just tried to bleed it along andearn your way through. Instead, you're bringing in a little bit
41:28 of outside capital, not a lot. You're bringing in a little bit of outside capital and you're getting the money started. You're getting your project
41:34 rolling. The time you're going to save doing that is going to allow you to do five or six
41:39 more deals and you're going to do those deals right. And all of a sudden your velocity has gone from like, hey, we we
41:45 get stuck for a year on a project and then have to go back to it to like, oh yeah, we could knock out one of these every, you know, it becomes a six-month
41:52 thing, then four month thing. We're doing a renovation right now on a 10plex. This would have taken me when I
41:58 started probably a year. We're finishing it in two weeks. That's great. I'm like, how was I ever
42:04 that bad? I was like, what do we do? You hire two construction teams. Someone works on the inside, someone works on
42:10 the outside. You get big teams and you pay them to do it right. It's like we took a year to do this. A year when we
42:18 started, but that's the education. Like that's what you guys had to go through. That's what we had to go through to fully
42:24 understand and be able to execute how we do now. So, if you're listening to this and you haven't done your first multif family
42:31 deal yet, be the one freaking person who actually hears this and goes, "Wait a
42:37 second. Your reno cost is higher than you think. you need to start with it. No, starting by trying to top deck every
42:44 dollar out of cash flow is not the way to buy a deal. Start with a fully funded deal. Start with the money you need for
42:50 your project. It will save you so much time that you can just do 10 more deals and make a ton more money. The time
42:57 piece of real estate is the most valuable. It's what we're all trying to buy back with financial freedom anyway,
43:02 right? And so, if you're building your business, anything that slows you down is costing you a boatload of money. just
43:09 start the project. And if you're looking at your deal being like, "Wait a second. It doesn't work if we raise the reno cost." Then you don't have a deal yet.
43:16 And that's okay. Don't close it. There's other deals out there. I I know I might not be willing to make six to 8,000
43:23 calls to find the deal. So you got you guys have a different strategy than I have on that front,
43:29 but it's worked. And you guys know that if you don't do this deal, you'll find
43:35 another deal, right? Like we like for us like honestly
43:40 like we have to find the best deals like this is our full like this is our full-time thing like ac and and
43:46 acquisitions like yields a much higher return on our time than something like
43:53 uh like doing the construction ourselves or or what have you. It's good to get that experience though. I'll say that.
44:00 It's very very important to get that experience. And just Oh, go ahead. Finish. I was gonna go into like cash flow versus
44:06 appreciation, but go on like go on. I was just gonna go back to what we said just in case anybody is thinking about
44:13 like the renovation budgets and all that just for a reference point and it's different in every building in every market. We spent about 7 to nine grand
44:20 per unit on our first project on the Cookville on our 11 unit. The most recent one we spent about 27 a door on
44:27 that. Uh and we'll do the same thing in Huntsville again. So just reference points. It's expensive. like it can get really
44:33 expensive, right? So, make sure that but like going back to um like cash flow
44:38 versus appreciation like possibly like getting the cash flow to fix the like
44:45 your units or or anyone's units like an investor's units, right? Like for us and it's different for
44:51 everyone, right? Like we are appreciation investors, right? We have the cash flow from a business and we get
44:58 cash from the cleaning company. Um, real estate, we do not look for cash flow. It
45:06 has to cash flow day one, right? But we get our major checks in the refinance,
45:12 right? And so like like and I would argue that you can make more cash flow
45:18 from a business rather than real estate. This is this is something that people
45:23 need to hear. I had Brian Luben on the podcast talking about this early in the year.
45:28 I don't want to speak for everyone, right? This is just our experience which is that like if we're going to invest if
45:35 we're going to invest for cash flow we are going to invest in a business. If we are going to invest for appreciation, we
45:42 are going to invest in our in real estate which is like yeah that's the main driver for our property and in the
45:49 long run the future cash especially the future cash flow the cash flow that you build in real estate will buy you back
45:56 time right the only problem with a business is the only businesses that build you actual time freedom are large businesses small
46:04 business will cost you time for money period midsize business you get some
46:09 efficiencies but still lots of time for money. You really have to have a very large business to get time freedom. The
46:16 one massive advantage of real estate is if you continue to stack real estate, especially early in the career, the cash
46:24 flow later will be the most passive cash flow you can possibly get. The the path to time freedom through cash flow is
46:31 still rentals, but you're going to build a ton of equity and a ton of net worth in real estate. There is nothing that
46:38 builds more cash flow than a business. And you know why? Because it takes more input. Yes. Yes.
46:45 Your job makes you more more liquidity. That is a normal thing. If you think you're joining and you're
46:51 not going to work, unfortunately, I'll tell you right now, multif family strategy is not the group for you.
46:56 Working with Ethan and Eddie is not the group for you either. We outwork everyone. Honestly, we're more Dave
47:02 Ramsey people than we are. If you really boil it down, even though we use debt,
47:07 nothing replaces earning money and paying down your debts. Like we use
47:12 debts, we use leverage. Absolutely. But at the end of the day, you work, you
47:17 make money, you invest the money, you put it back into your business. Nothing beats good old-fashioned hard work. the
47:24 I think everyone's pretty much on to this, but if you if you're listening and you don't know this, just passively investing in real estate or like doing
47:31 drill down deals, all of the people who were advertising that of like, oh, you can just do nothing. Like three of them
47:37 still have any real estate. They're all gone. If you're like, "Oh, I remember this influencer. Where did they go?"
47:43 They're gone. Even Even I I won't name drop him. I won't be a dick, but the
47:49 couch flipping guy. Yeah. real estate anymore.
47:54 All of his content is, oh yeah, no, cash flowing real estate, that's not a thing. It's a myth. Like, it's not a myth.
48:02 There's cash flow in real estate. But it does not compete with the earned income that you can make. I have a property
48:08 management company that is stable. I do third-party on top of managing our own stuff that has fantastic cash flow. That
48:16 is a business that we have built over years and years and years. And it supports the rentals. It makes the
48:22 rentals make more. Today, I could retire on my rentals. I would be just fine. It
48:28 was five years of absolute grind after 17 years of going to college and getting
48:33 a first, second, third, fourth, fifth job. I'm deeper in my career than I want to
48:38 be at 33 years old. But I'm finally like I'm just now hitting the point. I'm just
48:44 now hitting the point where it's an option to retire off the rentals. You
48:49 could do it in a business in a couple years. You wouldn't retire, but you can get the cash flow from your business
48:55 like that. And you guys have figured that out. The key to cash flow is is business. The key to long-term time
49:02 freedom and wealth is real estate. And you guys are doing a great job of doing both. What's the next what's the next
49:08 move for you guys? So, you guys are doing the 44. We know that's like the next next move. What is the next move in
49:13 your business that you are using alongside real estate? What are the next moves for you guys? cleaning company
49:18 specifically or what or like just the overall you guys are you guys are doing some of your own PM you guys are doing some of
49:24 your own construction licenses you guys have a cleaning company I'll let you interpret that question what what are
49:30 you guys doing to scale the business side of your business I mean like as far
49:36 like so vertically integrating that's a big thing we're not planning on doing
49:42 third party PM stuff just because it does require a lot more of our time and
49:47 the cleaning business requires a little bit less time and there's a little bit higher profit margin on it. On top of it
49:54 being only at nights versus in the day. So in the days we're real estate investors. In the nights we can clean.
49:59 Sometimes it does like coingle a little bit. We try to keep it like real estate during the day. Uh and then at that
50:06 active income at night. So right now we clean 26 floors in the airport
50:11 regularly. Um, and the airport is actually doubling in size that they announced two days ago. So, um, yeah,
50:19 but I mean, we're we're making like decent active income from that business and steady active income, which is
50:26 really nice. So, yeah, just continue to sell like grease clean. We do hood cleaning, we do floor cleaning for that
50:32 business, and so selling that in the airport and that's where like a good amount of money is being invested in the
50:39 Nashville airport. And so just go where the money is. Yeah. I love how that business just came
50:45 up. You're like, "Hey, this is a good idea. We launched it. You got the you got the contract, right? Have you do you have any idea what that
50:51 business is worth today?" Like depends on like IBIDA does, right? Like a X3X
50:56 probably like I don't know 300, 250, 300. So not like a ton, but something.
51:02 It's a absolutely awesome supplemental business. Absolutely. Yeah, it's good. It's decent. Uh it just helps with like
51:10 good it's good cash flow. Uh like revenue that we bring in is 10 grand a month like consistently right now with
51:17 eight more stores being added. So it'll like 12 or something that consistently
51:22 brings in. It's awesome. It's great business. Great business. Super cool.
51:28 All right, guys. This was one of my favorite episodes. I love I love the partnership. I love what you guys have done. You guys are such a good example
51:34 of what a successful partnership looks like. I've had a lot of people on the podcast who are like, "My first, second,
51:40 and third partner all burned me." And I'm like, "You guys probably just didn't get along." If everyone burns you at some point, maybe you're not the good
51:46 partner, right? You guys have started. You guys did you guys like grew up together, right? It
51:51 wasn't built like our like uh partnership wasn't built on business. It
51:57 was built on friendship, which is a little bit different. Yeah. But we've known each other for 23 years.
52:04 That's crazy. Oh, I argue 24. He says 23. So, I mean, whoever.
52:10 But either way, yeah, you guys have known each other for a long time. You've maintained and grown a friendship
52:16 through business, which I have actually found is less common than common. I feel like more friendships have fallen apart
52:21 over business than got closer. So, what you guys have done is is I think it's relatively unique. It's really fun and
52:28 encouraging to see. Uh, massive massive fan of how you guys run business, of everything you guys do. love the work
52:34 ethic and I it's exciting to me that you guys are hitting the point in the business where you're learning you guys
52:39 are really really really absorbing this is the value of time and why we need to create efficiencies in the business now
52:45 you know how to put in the grind you've put in a lot of the hours now you're looking at how do we add systems and
52:52 people to scale the business without the same without staying in the coach
52:58 unit without hand digging a hundred foot or yard, whatever, whatever baseball
53:04 field you guys dug up to put your building in. Right. Right. When you get past those things and you
53:09 get the time to really scale the business, it's fun watching you guys go from 11 to 55 on that one project and
53:16 it'll be equally fun next year, the year after when you guys are back on the pod being like, we refinanced to 55, we're
53:22 buying a 280 unit building. I'm just so excited to watch it scale. It's really
53:28 fun. Okay, final final question. What is the end goal for real estate for you two? You guys have a you guys have a
53:34 partnership together. What are you guys trying to accomplish? Be the best.
53:39 That's it. We don't have like hard numbers that Target can move any day. We
53:46 just want to put in the work, be the best that there is, and we buy as much as we can. Like if there were like a
53:52 business model that like not business model but like uh like a business that
53:58 we would look up to. It's like a Mil Creek Residential. I don't know if you've heard of them. They own a bunch they own up they're second largest in
54:05 the nation right now. They're raising like outside capital, but they have like stuff like downtown. They have stuff uh
54:13 here that like like our condo. They have like a ton of units and they're
54:18 vertically integrated. They have a construction group. They have a PM group. they have like their investing side. So like something like that like
54:25 that that is like that's the goal honestly to be the best. We don't want to be second. We want to be first
54:32 and we want to own everything like a like a Logan Rankin. He's a beast. Somebody tag him. Yeah. And and tell him to give us a
54:38 call. There we go. [laughter] No, that's uh Okay. We'll It'll be very interesting to watch the journey. It'll
54:44 be very interesting to watch the journey. One piece of advice that I have gotten from a bunch of people on the podcast, especially people who are
54:50 farther much much much farther ahead in their business than I am, the more specific the goal is, the
54:55 faster you hit it. And most of the guys who actually became the best actually didn't have a goal to become the best.
55:02 They they always had a next goal. They're like, "Hey, we are going to get here. And when we are here, we're going
55:07 to evaluate what we're going to do and we're going to get here." And what you end up with is you end up becoming the
55:12 best. So, one of the best pieces of advice I've got on the podcast, so maybe it works for you guys, maybe you guys
55:18 just go like, "Hey, we're going to become the best." And you do, but to the extent that you define the best will
55:23 likely serve you well in getting there, right? We all have a habit of getting I I remember there was a point in my career
55:29 like I want to be the best at creative finance. And I'm like, what does the best even mean? Like I I best
55:35 to me is a little ambiguous. Is it the largest? Is it the most units? Is it we make the most money? Is it we employ the
55:40 most people gainfully? There's there's a lot of different angles to being the best,
55:46 but to the extent that you can define that, I'm excited to watch you guys hit that. You guys are making all the right moves there. You're following all the
55:51 right people. I love the Hermosi quote. That that guy is just chalk full of great business advice. [music] So, I
55:58 think you guys are making great decisions. Fun to watch the adventure. Let us know when you close. Where do people follow the story for you two?
56:04 Brio GRP. [music] Here we go. Brio Group. That's us. B R I
56:10 O G RP. Brio GRP. There we go. Check them out. There'll be a link below in
56:15 the show notes as well. We'll see you guys all in the next episode. Thanks for having us, Christian. Absolutely.
56:20 Always.