Creative Financing Strategies for Building a Successful Real Estate Portfolio

In a recent episode of the Profitable Rental Podcast by Landlord Studio, Logan Ransley, co-founder of Landlord Studio, delved into a compelling discussion with Christian Osgood, a real estate investor and entrepreneur who, with his partner and leveraging creative financing strategies, has successfully built a portfolio of over 100 units over the last couple of years.

In this article, we explore some of the valuable insights from their conversation, focusing on the essential strategies for effectively managing and building a real estate portfolio.

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1. The Journey to Rapid Success

Christian's journey from college to a successful real estate entrepreneur was guided by a pivotal piece of advice: to focus on his strengths and passions. "Choose the one thing that you could be the best in the world at and do that because you can do anything. Find where you're gifted and what you enjoy doing, and find where those two things intersect and just do that." - Christian Osgood

Christian also emphasizes the importance of continuous learning and adaptation. He states, "In the real estate business, the only way you get better is by learning more and trying more things." This commitment to ongoing education and evolution allowed him to navigate changing market dynamics and stay ahead in the industry.

This philosophy has fueled his rapid growth, leading him to build his impressive portfolio of over 100 units in just a couple of years.

2. Scaling Quickly Through Creative Financing

Christian's approach to scaling quickly hinged on a key decision: to prioritize larger buildings early on in his career - to focus on the number of doors. "Making the decision to scale faster and buy bigger early in my career made a huge difference from what I think a lot of people do, which is I'm going to buy a duplex and a fourplex and maybe in the future I'll buy my first commercial building." - Christian Osgood

By leveraging the power of creative financing Christian and his partner have been able to close some big deals early on, including a 38-unit building which has allowed him to expedite his growth and achieve his goals faster than traditional methods would allow.

Moreover, he emphasizes the significance of building strong relationships with lenders. Christian notes, "It's not just about the money; it's about who's lending you the money. Having those relationships is super important." These relationships enabled him to secure favorable financing terms and access the funds needed for ambitious acquisitions.

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3. Navigating Partnerships for Growth

Christian acknowledges the challenges of partnerships in real estate, emphasizing the need for clear communication and well-defined exit strategies. While partnerships can accelerate growth, they require careful planning and alignment of goals to avoid potential conflicts. "Partnerships are gonna be difficult... if you're going to do it, be prepared for a ride and just have some basic idea of how you're going to exit it. All Partnerships need to have a planned exit."

In addition, Christian highlights the role of complementary skills in successful partnerships. He states, "You have to bring different things to the table. If you're good at the same things, it's not going to work." He goes on to explain that he excels at the management side, while his partner focuses more on securing the deals they need to grow.

4. Financial Management When Building A Real Estate Portfolio

Christian's approach to financial management is rooted in conservative underwriting. By anticipating higher expenses and longer timelines for rent increases, he minimizes surprises and ensures their properties remain profitable even during unforeseen challenges. "Everything will be easier if you underwrite really conservatively... everything's going to cost way more than you expect and your rent increases are going to take twice as long."

He also emphasizes the value of thorough due diligence to try and get as accurate a picture of the property and work required before you purchase. Christian explains, "You have to do your due diligence on every deal. I can't stress that enough." He goes on to talk about one particular incident where the previous owners didn’t disclose the location of several of the building's septic tanks. When they finally got in they found they were leaking, but had no idea where these tanks were. The more meticulous your research and analysis the better you’ll be able to make informed investment decisions and identify potential red flags before they become critical issues.

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5. The Importance of Real Estate Bookkeeping

Christian advocates for consistent daily efforts to track expenses, rents, and finances for each property, making end of year tax preparations and financial assessments significantly easier. It’s important to build "systems that are repeatable for every single property,” he says. “Five minutes a day is way better than five hours a day for like two weeks at the end of the year."

He highlights the role of technology in simplifying bookkeeping. Christian suggests, "Get some sort of property management software. It's worth its weight in gold." Utilizing technology not only streamlines the bookkeeping process but also provides valuable insights into the financial health of the portfolio.

6. Leveraging Creative Financing in Today's Market

Christian highlights the current advantage of creative financing in a market that has seen a slowdown in conventional lending. By sidestepping banks and leveraging seller financing, investors can unlock unique opportunities and continue to grow their portfolios. "If you can operate the same business without utilizing banks, you can do all these deals that everyone else can't do. While the market slows down, this particular strategy is a really easy way to implement your acquisition."

He stresses the importance of building a reputation and establishing strong relationships within the industry. "Your reputation is everything in real estate. It's a small world, and people talk," Christian states. A solid reputation not only opens doors to potential financing options but also fosters trust and credibility among partners, lenders, and other stakeholders.

Final Words: Leveraging Creative Financing For Scale

Christian Osgood's remarkable journey from college graduate to real estate magnate is a testament to the power of strategic decision-making, embracing creative financing, and adopting efficient management practices.

By focusing on strengths, making informed partnerships, and staying vigilant in financial management, investors can streamline their portfolio management for scale and build a successful real estate portfolio.