Financing and partnerships
How I Bought Hundreds of Rentals With No Money: 2 Contracts
The assignment fee and the option contract: the two pieces of paper that paid me while I scaled to hundreds of rentals and let me own 100% of the portfolio.
You're going to want to listen to this one closely. There are no secrets in real estate, but if there were any, these are the two that felt like secrets to me.
If you've been wondering how I did it, whether I have other streams of income, where the money came from, how I structured it: this is the answer. I'm going to share how I fixed my income while I was scaling the portfolio, so I was making hundreds of thousands of dollars in liquidity while buying rental properties without giving myself a job. I was getting paid to be an investor. Then I'm going to share the one piece of paper that lets me own 100% of my portfolio even though I partner with people and start LLCs constantly.
When you see them, I think you're going to say, "Oh my gosh, that's unbelievably simple. That's all I have to do?" The answer is yes.
For context: I've bought hundreds of rentals over the last five years. My net cash flow (and yes, that number is net) is just under $50,000 a month on about $50 million of real estate. Hundreds and hundreds of rentals in Washington state and in Texas. Big markets, small markets, red states, blue states. It doesn't matter. The strategy works everywhere.
Rule Zero: Every Deal Cash Flows Day One
Before either secret, there's the rule they both sit on top of.
Every deal I purchase has to cash flow day one and into eternity. We buy on long-term fixed-rate debt, so when I buy a deal, I'm not paying for it every month: the deal pays me to own it. You buy it once. I don't inject new capital. The deal is the deal.
If you simply say no to deals that negative cash flow, then every time you close, your income goes up. That principle has let me move very quickly. And because it's all long-term fixed-rate debt, when the market changes, my income does not. I have stable income, and every close raises it.
You should follow this model. When you see a deal and think, "this is an amazing property, but it starts out negative": the answer is no. Go find another deal. This principle has carried me farther than most investors in a very short period of time because I don't violate it. Except for the one time I did. I made money on it, and I still regretted it. It was painful and frustrating.
Buy deals that move you forward financially. Period. Don't go negative for a deal, even if there's a bunch of upside. Doesn't matter.
The Problem: Cash Flow Takes Time to Build
Here's the honest part nobody wants to say out loud.
While you're buying deals, you're increasing your income, but you start with $1,000 of cash flow here, $2,000 there. In your first few years you're going to build your first few thousand dollars a month of cash flow. A few thousand a month is not going to carry you all that far.
I did have an 18-year-old mentee buy a deal that cash flowed $7,000 a month to him, and he bought it $0 out of pocket, 100% seller financed. But not every deal gives you that in one shot, and those won't be every deal you do. Along the journey you're going to hit a lot of base hits, and you might hit a few home runs along the way.
Related reading: The Option Contract: Buy Multifamily With $0 Out of Pocket
Myself, I like to buy buildings between 12 and 75 units. That's the sweet spot: I'm closing on a 76 right now, but you get the picture. There isn't a ton of competition at that size and it can still make millions and millions of dollars.
So while the income is slowly and steadily building, how do you actually make money? That's secret number one.
Secret One: Wholesale to Yourself
What we do is called wholesaling for yourself.
You don't become a broker. You don't become a wholesaler. You don't become a property flipper. You become a property manager, and otherwise you don't give yourself a new job besides being an investor.
But think about what you're actually doing on the front end of a deal. You line up the deal. You find the debt product. If you're partnering, you raise the equity. You're assembling a lot of pieces. If you're doing all that work on the front end, you should be paid for the work you're doing.
A traditional wholesaler puts a deal under contract and sells that contract at a premium to a new buyer. I hate that method. You're taking an otherwise great deal that you should be buying and handing it to someone else. And if it's not a deal you should be buying, I don't think you should ethically be selling it to someone else either. You should be putting together excellent deals, and if you have an excellent deal, you should be the one buying it.
So if you need to get liquid, here's what you do instead. I put together the deal. I negotiate the debt product. I build the entire business plan and assemble the team. I have a great deal under contract, and I control that deal. I lay out for my investors what the returns are projected to be. And then I charge an assignment fee (disclosed to them) for all the work I put in. Usually 1 to 2% of the purchase price.
I explain exactly why I'm getting paid: this is my full-time job, I need to get paid to do it, and this is how I'm getting you into a deal that's going to make you a lot of money.
Say it's a $2 million purchase and I charge a 2% fee, because the relationship behind that deal is one I've been working for a year, I found a very, very good debt product, and I've aligned the right team including my management company. On that deal I get paid about $40,000.
It shows up on the final settlement statement as "assignment fee to Christian Osgood." If I'm buying it with partners in, say, 123 LLC (three people joined together by that property) I'm getting paid $40,000 to change the contract from Christian Osgood and/or assigns to the final entity. It's disclosed. Everyone sees it on the record, in the credits and debits of the closing statement. You have been paid. Congratulations.
I do three or four deals a year at roughly $40,000 a pop, so that's $120,000 to $160,000 a year in fees for the hard work I do. For most people, that's a pretty good job you can live on.
And the difference from real wholesaling is this: I'm not just getting paid once. Every time I do it, I'm also building equity in real estate and raising my personal monthly cash flow: forever, into eternity, because we're buying on long-term cash flow.
Secret Two: The Option Contract
Variable rate debt is a no-no for me. I don't want variables in my portfolio.
Well, people tend to be a huge variable. They have different objectives. They have different emotions. Their financial situation can change partway through the deal for reasons that have nothing to do with you.
So if you build all these partnerships and collect all these assignment fees and all these properties the way I did, you end up with hundreds and hundreds of units and 25 to 30 partnerships. That's a lot of people, and at some point that's a lot of problems. Different needs and wants, reporting obligations, and a lot of your time.
I have the ability to own 100% of my portfolio by myself, because of one clause.
Every time I go into a partnership, we negotiate a fixed price and a fixed period of time in which I am allowed to buy that partner out at that price.
For example: someone puts $100,000 into one of my deals. We split cash flow somewhat through the life of the deal, so they're getting a modest return along the way. And I reserve the right to buy them out at 1.75x their money. They put in $100,000; I have the right, within (let's call it three years) to buy them out for $175,000.
When we buy real estate, we calculate what the property is worth today and, very conservatively, what the future value will be. The goal is for the real estate to buy the real estate. If I can increase the value of that property through performance (increasing income, improving the building, whatever it takes) I can do a cash-out refinance somewhere in the life of the loan, and the real estate buys the real estate.
I buy out the partners. Yes, I'm giving up some equity to do it. But I built an income stream for myself and I've been paid to own it, and very often I'm in the deal zero dollars out of pocket personally. The partner gets a fantastic return on the upside of the property. I keep the cash-flowing asset and all of the future upside, and I no longer have the partnership: the property moves into my personal portfolio.
They hit their goal. I hit mine.
It's a simple clause, but if you put an option contract in every single partnership you have, you get to control the partnerships. If there's a problem in one, you have a fixed price and a fixed window in which you can buy them out: refinance, borrow the money, bring another partner in, whatever you have to do. You have a fixed way out.
Yes, still have great operating agreements and great dispute resolution language. But there is nothing like the safety and security of having a clear path for the real estate to buy itself for you. As you play this game, you get more and more equity and fewer and fewer partners.
Key Takeaways
- Never buy a deal that starts negative. Long-term fixed-rate debt plus day-one cash flow means every close raises your income and market swings don't move it.
- Building cash flow takes years. The assignment fee is how you eat in the meantime without taking on a second job.
- Wholesale to yourself: 1 to 2% of the purchase price, fully disclosed on the settlement statement, for the work of sourcing, structuring the debt, writing the business plan, and assembling the team.
- Three or four deals a year at roughly $40,000 each is $120,000 to $160,000 in annual income: plus equity and permanent cash flow on every one.
- Put an option contract in every partnership: a fixed buyout price and a fixed window. Mine is often 1.75x the partner's money.
- Refinance and let the real estate buy the real estate. The partner gets a great return, you keep the asset and all future upside, and the partnership goes away.
Pair the assignment contract (wholesaling into your own LLC, one you're a member of) with the option contract to buy your partners out at a price everybody agreed on up front, and this is what happens: you get paid at the beginning of the deal, the deal buys the real estate, and the deal buys the partners out. No money into the deal. Everyone is happy. Everyone has exited except you. You kept the real estate, you paid no money, you were paid a lot of money, and your income went up. You've won capitalism.
Watch the full video for how I walk through the $2 million example and the 1.75x buyout math on screen. If you want the tactical version of this, there's a free multifamily training course linked in the description, the Facebook group is open, and you can look at the mentorship if you want help running these structures on your own deals. Drop a question in the comments: I answer every single one.
Read the episode transcript
0:00 You're going to want to listen to this 0:01 one closely. There are no secrets in 0:03 real estate, but if there were any, I'm 0:04 going to share them on this video. I'm 0:06 going to share how I bought hundreds and 0:07 hundreds of rentals starting with no 0:08 money in a different way than I ever 0:10 have. There are no secrets in real 0:11 estate, but these are the things that 0:13 felt like secrets for me. If you're 0:15 wondering, how did this guy do there? 0:16 Does he have other streams of income? 0:18 How where did the money come from? How 0:19 did he structure it? I'm going to share 0:22 how to structure your portfolio in a 0:24 similar way to what I did so you can buy 0:25 infinite real estate. If you've been 0:26 trying to figure out like what is the 0:27 what's the catch? What's the secret? 0:29 what's holding me back. I'm going to 0:30 share a couple things that have made an 0:32 astronomical difference. One, how I 0:34 fixed my income while I was scaling the 0:36 portfolio. So, I was making hundreds of 0:37 thousands of dollars in liquidity while 0:40 buying all the rental properties without 0:42 giving myself a job. I was getting paid 0:44 to be an investor. Number two, I'm going 0:46 to talk about the contract I put in 0:47 place that allows me to own 100% of my 0:50 portfolio. So, while I am partnering 0:52 with people and I'm starting these 0:53 LLC's, if this is all looking 0:55 complicated, confusing, I'm going to 0:56 share one piece of paper that makes the 0:59 whole thing simple that gives me 1:00 complete control of every piece of real 1:02 estate I own and eventually 100% of the 1:05 equity in the entire multiund portfolio. 1:08 When I share this, I believe you're 1:10 going to look at this and go like, "Oh 1:11 my gosh, that's unbelievably simple. 1:13 That's all I have to do." The answer is 1:14 yes. This is the secrets to real estate. 1:17 Buckle in. Uh, by the way, if you guys 1:18 are new to the channel, I've bought 1:19 hundreds of rentals over the last five 1:21 years. My net cash flow, and yes, the 1:23 number is net cash flow is just under 1:27 $50,000 a month. $50,000 a month coming 1:31 in on about $50 million of real estate. 1:33 Hundreds and hundreds of rentals in 1:35 Washington state and in Texas. Big 1:36 markets, small markets, red states, blue 1:38 states, doesn't matter. The strategy 1:40 works everywhere. It has worked for me 1:42 fantastically. So, welcome to the 1:44 channel. I'm sharing exactly how to do 1:45 this. So, if you're joining for the 1:46 first time, you picked a freaking good 1:48 video. If you've been here for a while, 1:49 I hope I blow your minds. First of all, 1:51 let's talk about the liquidity. So, yes, 1:54 every deal that I purchase needs to cash 1:55 flow day one and into eternity. We buy 1:58 on long-term fixed rate debt so that 2:00 when I buy a deal, I'm not paying for it 2:02 every single month. The deal is paying 2:04 me to own it. You buy it once. I don't 2:06 inject new capital. The deal is the 2:08 deal. Every deal is structured this way. 2:10 If you just say no to the deals that 2:12 negative cash flow, every time you 2:14 close, your income goes up. This 2:15 principle has allowed me to move very 2:17 quickly. And because it's all long-term 2:19 fixed rate debt, when the market 2:20 changes, my income does not. I have 2:22 stable income and every time I close, it 2:24 goes up. You should follow this model. 2:26 If you see deals, you're like, "Oh, man. 2:27 I think this is an amazing property, but 2:28 it starts out negative." The answer is 2:30 no. Just go find another deal. This 2:32 principle has carried me farther than 2:34 most investors in a very short period of 2:36 time because I don't violate the 2:37 principle. Except for the one time I 2:39 did. And while I did make money, I 2:40 regretted it and it was painful and it 2:42 was frustrating. Just buy deals that 2:44 move you forward financially. Period. 2:46 Don't go negative to buy a deal. Even if 2:48 there's a bunch of upside doesn't 2:50 matter. Don't go negative. So, while 2:52 we're buying deals, we're increasing our 2:53 income. You start with $1,000 cash flow 2:55 here, 2,000 there. In your first few 2:56 years, you're going to build your first 2:58 few thousand of cash flow. Now, while I 2:59 had an 18-year-old mentee buy a deal 3:01 that cash flowed $7,000 a month to him, 3:04 not every single deal is going to give 3:05 you that much income in one shot. By the 3:08 way, he bought that $0 out of pocket. 3:11 100% seller financed. Those also will 3:14 not be every single deal you do. Along 3:16 the journey, you're going to do a lot of 3:18 base hits and you might hit a few home 3:20 runs along the way. So, while you're 3:21 slowly and steadily building this 3:23 income, how are you making money? 3:25 Myself, I like to buy buildings that are 3:29 12 to 75 units. That's kind of the sweet 3:31 spot. I am closing on 76 right now, but 3:34 you get the picture. I like that size of 3:36 real estate. you don't have a ton of 3:38 competition for it and it can still make 3:39 millions and millions of dollars. Your 3:41 first year or so, a few thousand dollar 3:43 a month of cash flow is not going to 3:45 carry you all that far. It does take 3:47 some time to build up that income. It 3:50 will get insane, but while you're 3:51 building it up, what we do is called 3:53 wholesaling for yourself. You don't 3:54 become a broker. You don't become a 3:56 wholesaler. You don't become a property 3:57 flipper. You become a property manager. 3:59 Don't give yourself a new job other than 4:01 be an investor. However, when you know 4:02 how to line up a deal and you know how 4:04 to find the debt products and if you're 4:05 partnering, if you know how to raise the 4:07 equity, you're putting together a lot of 4:09 things on the front of of a deal. If 4:11 you're doing all this work on the front 4:12 end, you should be paid for the work 4:13 that you're doing. What I do is 4:15 wholesale to myself. Now, a traditional 4:17 wholesaler, what do they do? They put a 4:18 deal under contract and they say, "Hey, 4:20 I'm going to sell this contract for a 4:22 premium to a new 4:24 buyer." Now, I hate this method because 4:27 you're taking an otherwise great deal 4:28 that you should be buying and you're 4:30 giving it to someone else. And if it's 4:31 not a deal you should be buying, I don't 4:33 think ethically you should be selling it 4:34 to someone else. You should be putting 4:36 together excellent deals. And if you 4:38 have an excellent deal, you should be 4:39 the one buying it. But if you need to 4:41 get liquid, what you do is you do all 4:43 this work on the front. I put together 4:45 the deal. I negotiate the debt product. 4:47 I put together the entire business plan 4:49 and I assemble the team for this. I 4:51 usually charge 1 to 2% of the purchase 4:53 price. I have it under contract and I 4:56 have a great deal under contract. I 4:57 control this deal. I lay out what the 5:00 returns are projected to be for my 5:02 investors. And then I simply charge an 5:05 assignment fee that I disclose to them 5:06 because of all the work I put into this. 5:09 This is my full-time job. I need to get 5:12 paid to do this. And this is how I'm 5:14 getting you in a deal that's going to 5:15 make you guys a lot of money. Here's how 5:17 the deal is going to work. As part of 5:19 this, I have, let's say it's a $2 5:21 million purchase. I have a 2% fee 5:24 because this deal is a relationship that 5:25 I've been working for a year and there's 5:27 a lot of work that's gone into this and 5:29 I found a very very very good debt 5:31 product for us. I've aligned the right 5:33 team and my management teams could be 5:35 involved. I explain why I'm getting 5:37 paid. So for that $2 million deal, I'll 5:40 get paid about 5:42 $40,000. It shows up on the final 5:44 settlement statement as assignment fee 5:46 to Christian Osgood. So, if I'm buying 5:48 it with partners in 123 LLC, that's the 5:51 company we put together. Three people 5:53 joined together by this property. Well, 5:55 now I'm getting paid $40,000 to change 5:58 it from Christian Osgood andor signs to 6:00 the final entity. It's been disclosed. 6:03 Everyone can see it on the record. It's 6:05 on the credit and debits in your final 6:06 settlement statement when you close. You 6:08 have been paid. Congratulations. Now, 6:11 since I do three or four deals a year, 6:12 that is roughly at $40,000 a pop. you 6:16 know, you're looking at $120 to 6:20 $160,000 a year in fees for the hard 6:23 work that I do. For most people, that's 6:25 a pretty good job that you can live on. 6:27 In addition, every time I do this, I'm 6:28 building equity in real estate. Every 6:30 time I do this, I'm also upping my 6:32 personal cash flow. So, my monthly 6:33 income is also going up. Difference 6:35 there, though. I'm not just getting paid 6:37 once. The income goes up forever into 6:40 eternity because we're buying on 6:42 long-term cash flow. Great. The second 6:43 secret, the option contract. Like 6:46 variable rate debt, that's a no no. I 6:48 don't want variables in my portfolio. 6:49 Well, people tend to be a huge 6:52 variable. They have different 6:54 objectives. They have different 6:55 emotions. Their financial situation can 6:57 change partway through the deal having 6:59 nothing to do with you. So, if you have 7:01 all these different partners and you 7:02 build all of these partnerships and get 7:04 all these assignment fees and all these 7:06 properties like I did, you have hundreds 7:08 and hundreds of units and you have like 7:10 25 to 30 partnerships. 7:13 That's a lot of people and that's going 7:14 to be a lot of problem for you at some 7:16 point. They're all going to have 7:17 different needs and wants and there's 7:18 going to be reporting. It's going to 7:19 take up a lot of your time. I have the 7:21 ability to own 100% of my portfolio by 7:23 myself. Every time I go into a 7:25 partnership, we negotiate a fixed price 7:28 and a fixed period of time in which I am 7:30 allowed to buy them out at that price. 7:32 For example, someone puts $100,000 into 7:34 one of my deals. And while we split cash 7:37 flow somewhat throughout the deal and 7:38 say maybe they're getting a a modest 7:40 return in cash flow through the deal, I 7:42 reserve the right to buy them out at 7:44 1.75x of their money. So they put in 7:47 100,000. I have a right within we'll 7:49 call it 3 years to buy them out for 7:52 175,000. Now what we do when we buy our 7:55 real estate is we calculate the value of 7:56 the real estate today and very 7:58 conservatively what will the future 8:00 value be? The goal of this is for the 8:02 real estate to buy the real estate. So, 8:04 if I can increase the value of the real 8:05 estate through the performance of that 8:08 project, increasing the income, 8:10 improving the building, what have you, I 8:13 can refinance throughout somewhere in 8:16 this loan. I can do a refinance, cash 8:17 out, and the real estate will buy the 8:18 real estate. I'll buy out the partners, 8:20 and yes, I'm giving up some of the 8:22 equity, but I built an income stream for 8:24 myself. I've been paid to own this. 8:26 Oftentimes, I'm in the deal zero dollars 8:28 out of pocket personally. They get a 8:30 fantastic return on the upside of the 8:32 property and I keep the cash flowing 8:34 asset and all of the future upside and I 8:36 don't have the partnership. I move it 8:38 into my personal portfolio. They get an 8:40 amazing return on a great deal. I get to 8:43 keep the real estate and I've increased 8:44 my income. I have hit my goal. They have 8:46 hit their goals. It is a simple clause, 8:48 but if you put an option contract in 8:50 every single partnership that you have, 8:53 what you're going to be able to do is 8:55 control the 8:56 partnerships. If there's a problem in a 8:58 partnership, you now have a fixed price 9:00 and a fixed period of time in which you 9:02 can simply just buy them out, refinance, 9:04 borrow the money, bring another partner 9:05 in, whatever you have to do, you have a 9:07 fixed way to buy them out. Now, yes, 9:09 have great operating agreements and have 9:11 great dispute resolutions, but there is 9:13 nothing like the safety and security of 9:15 I have a clear path for my real estate 9:17 to buy itself for me. And as I play this 9:20 game, I get more and more and more 9:22 equity and less and less and less 9:23 partners. I have found that these are 9:26 the ways to navigate real estate. You 9:28 have the assignment contract where you 9:30 can essentially wholesale to your own 9:32 LLC that you're a member of and you pair 9:35 that with an option contract to purchase 9:37 the partners out at a pre-negotiated 9:40 price that everyone is happy with and 9:41 agrees on at the beginning so that you 9:42 get paid in the beginning of your deal 9:44 and your deal will buy the real estate 9:46 and the partners out. So in the end you 9:48 got paid to buy a deal. No money into 9:51 the deal. Everyone is happy. Everyone 9:54 has exited the deal except for you. 9:56 You've kept the real estate. You've paid 9:57 no money. You've been paid a lot of 9:59 money. You've increased your income. And 10:01 you have now won capitalism. 10:04 Congratulations. Those are the secrets 10:05 to real estate. By the way, if you want 10:07 more tactical advice on how to actually 10:09 play the game at what I think is pretty 10:11 much the highest level of creative 10:12 finance, you need to like and subscribe 10:14 to this channel. If you haven't yet, hit 10:15 that like button. Comment below with any 10:17 questions. I answer every single one. 10:20 Subscribe to the channel for more tips 10:21 and I'll see you on the next
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