Building a $25M Portfolio Through Seller Financing & Development Deals w/ Cody Davis

Mike DeHaan: [0:00] Real quick, guys. If you want to take your real estate investing business from 6 to 7 figures in the next twelve months, and you wanna do without being a slave to your business, then you have to check out our scale community. You can get the full details at collectingkeys.com/scale. But very basically, it is a community of like minded investors who are working to become the absolute top tier investors in their market. Along with three coaching calls per week led by Dan and myself, we also have a whole bunch of videos and materials that go into all the different SOPs that we use to run our business on a daily basis. This includes how we manage our sales team, how we hire, how we do our marketing systems, how we get the best assignment fees possible, how we do renovations, how we do all the different kinds of creative financing. And if you are serious about taking your real estate business to the next level, it is absolutely something that you should check out. So go to collectingkeys.com/scale, see all the details, and see if you're a good fit.

Cody Davis: [0:59] Developers are the richest people on planet Earth until they can't finish their project. So you need to build a cash flow business so that when you start learning how to develop and you do your first couple deals, if you don't have help from someone, you could cash flow through your mistakes, and you can keep it.

Mike DeHaan: [1:20] What is going on, guys? On today's episode of the collecting keys, a real estate investing podcast, we have Cody Davis. And if you happen to know that name, he was on Bigger Pockets episode five five four. And he is a young dude whose claim to fame is he has accumulated this massive portfolio all through seller financing. And I know you've heard, like, that story before, but this guy's actually legit. Like, he's going through I don't know how many times he said in this episode, he's like, oh, I just, like, cold called this person and built a relationship and wasn't able to purchase the property. Right? Like, he said that so many times, and he goes into the deal structure about how we build these relationships, how we structure these seller financing deals, how we brought on partners to cover some of the different down payments and other expenses. And this dude has built this up by legitimately just hustling and doing the work besides only being 24 years old. He has a ton of great takeaways in this episode. As we get kind of to the end of it, we even go into, like, one of his deals that went badly and how he was able to recover from it. It's actually his crazy story that he shares at the very end, but how he was able to recover from a apartment complex where all of the pipes burst and the property was basically rendered completely worthless. And the way he does it despite being completely leveraged and buying a seller finance is super, super sharp. So make sure that you listen to that. So anyways, guys, really, really good episode with Cody Davis here.

Mike DeHaan: [2:41] He's based out of Washington State as well. So if you are local up here in the same area as I am, then definitely hit him up. He's doing a lot of deals. He's speaking a lot of events, and he would love to converse with you. Remember, people come on these shows because they want you to reach out for them. So don't be shy. Anyways, guys, thanks so much for listening and enjoy the show today with Cody Davis. Alright, Cody Davis, my man, super excited to have you on the show today. You are quite I'm gonna say like the big deal. You have been doing a lot over the last few years despite your very, very young age. So really excited to hear about everything that you have going on. To give people some context about why they should be excited to listen to the show today, give us a little breakdown about what exactly your business looks like, and also a little bit of a hint about who you are because, you know, you're how old are you? Like, in your early twenties? 24 this year. Yeah. 24. Okay. So at 24 years old, what does your real estate business currently look like?

Cody Davis: [3:38] Yeah. So right now, primarily buy and hold multifamily. I've got a couple hospitality deals, and then I've also got an RV park that I'm flipping right now. But bulk of my business is long term buy and hold, 10 plus rentals, and I have built all that seller financed without any money down. All seller financed and 24 years old. So I guess, like, all in all,

Mike DeHaan: [4:03] you said you have RV park that you're flipping. You have some multi families. But how many units were total portfolio value?

Cody Davis: [4:08] I was at a couple 100. I was a little north of 200. I just exited some stuff. It just exited partnership more than anything. Yeah. The asset value right now is probably around 25,000,000.

Mike DeHaan: [4:21] 25,000,000. That's great, man. At at 24. I was definitely still trying to figure out anything at 24, and I think that most people are in the same boat. Right? I mean, I'm in my early thirties. I'm typically used to be in the young buck a lot of places, but you're at you're at a whole another level. So that's awesome, man. So at 24, I guess, how could you even start to get into that? Right? If you're talking about everything at seller finance, feel like seller financing even is kind of like a newer concept. I guess it's like an older concept of something that is only more recently become popular with people. So how did you get exposed to that so early? And what was that learning curve like, especially because you're probably negotiating those? Were you a teenager who needed some of these, or was it were you all in your twenties by the time you started buying some of them?

Cody Davis: [5:04] So my first 12 plaques, that was what I started with. I really like 10 plus, that's what I've fallen into. But the first deal I ever bought was 12 units. It was on the MLS for over five hundred days. It was listed with owner financing. That wasn't my first intro, but that was the first deal I bought. Before that, the way that I heard about it, I was at real estate agent, and I wasn't a very good one. There, you know, there was people in the office that were selling stuff left to right. I wasn't that person. But one of the other brokers, she was making a lot of money. He had a a deal under contract for someone. It was seller finance. This the first time I ever heard about it. They were gonna put about 20% down on the deal, and their cash on cash return was north of 20%. They were gonna almost be earning 2% a month cash flow, which in Washington state is really is really good. That's really good anywhere, but on apartments. And so they were gonna buy the seller financed apartments, and so I was what is that? And someone in the office ended up recommending a book, Deals on Wheels by Lonnie Scruggs, to start learning more about private financing. And they introduced me to Carlton Sheets, who he was super popular way back when. Yeah.

Cody Davis: [6:17] That's, like, old, old dude. That's, like, nineties. Well, yeah, before I was born. His topics, his principles, and overall business, some people say it's outdated, but things don't really change in real estate. You've got a building. You've got a way to finance it. And the only thing that's really changed since then is there's extra clauses with most of those contracts. That's what I found to be true over the last half decade that I've been investing. So I started learning about it, doing some research through the Carlton Sheets that I had in 1999 no. '91 Miata. So had a little disc player. So I'd I plug in the old discs and listen as I was driving over. My first deal was three hours away from where I grew up, so I've had plenty of time to listen. Nice.

Mike DeHaan: [7:00] Yeah. That's awesome. So that that was kinda like the initial intro there. And then found this one, an owner financing. How old were you when you said that you you bought this property?

Cody Davis: [7:09] I was 19 when I got my first one.

Mike DeHaan: [7:11] That's great. Yeah. And so how did you even get them to be willing to work with you as a 19 year old? Did you have, like, a cosigner? Did you have, like, some kind of finances, or or what was that?

Cody Davis: [7:22] I didn't have any finances. I had been a gymnastics coach for four years. I wasn't even really able to coach for four years. I had been volunteering before that, and then I was officially coaching for three. But at the local YMCA, so I didn't really have any finances to back up my purchase. And I don't have any family that's ever owned anything other than a house. And they definitely weren't hot on me buying real estate because I had just dropped out of college. And I was the opposite of a lot of people's stories. I was the first person to not go to college in my family. There was a lot, and there was a little battle between me and them at the time. They're happy with my decision now, but it also didn't have to go this way. I could have just dropped out and, you know, done nothing with my life. So I didn't have a family to back me. I didn't have any history in the family. I didn't have any finances to to back up the purchase. But what I found to be true, which I didn't know then, is that when people are lending you money on a seller finance deal or private money in general, there's only three things they care about. Where's the money going? What's the stability of what backs it? And how are they getting paid? And that that's the the name of the game for private money.

Cody Davis: [8:29] And with seller financing, the reason it's so simple, and when you start having the conversations, it gets easy to put together, is where's the money going? Well, it's already in that building. What's the stability of it? Well, they already own the assets. So super stable. They already know the situation, how they need to pay back the building. They don't expect the buyer to be able to pay them. They expect the building to be able to pay them, which is why getting those seller finance loans is so easy when you understand that that's how it works. And back then, I was afraid of everything. I didn't I didn't know what I didn't know, and I had to find that was the case by having the conversation. But it came down to just speaking as confidently as I can and not getting into conversations if I didn't understand what I was trying to talk about. Yeah. Right. That's a big mistake a lot of people make when they're getting started.

Mike DeHaan: [9:24] That's true. Right? They're just completely full of bullshit to the point that they don't even believe, like, their own nonsense after a while. Yeah. So no. That's great. So all of your portfolio you've bought off of seller finance now, how many offers are you making for deals that you get accepted? Because, I guess, our experience, seller financing can traditionally be hard to make completely mutually beneficial because people always want, like, large down payments. They want, like, high interest. They want monthly payments that vastly exceed the rental potential. So are you just like a master negotiator? Are you making tons and tons of offers?

Cody Davis: [9:59] I'm definitely not making tons of offers. Over 90% of my offers have been accepted. So it's not like I've made a ton of offers because all my buildings are multifamily or hotels. So the bulk of my doors are under, you know, one or you know, it's under a couple roofs. So I don't focus on sellers per se. They're not sellers. They're owners. And it's a different approach, but I'm not reaching out to people saying, hey. What'd sell your property? I tried doing that at the beginning because I bought my first deal off the MLS, and that was very transactional. I started building a relationship with that person afterwards. You know, we went water skiing together and had had a lot of fun hanging out after the fact. But in the beginning, I was transactional. And that's where people get into the trap of, oh, I gotta write all these offers, and it's it's just a number, and that's it. And if it works, it works. The way that I've done it is I view people as owners, not sellers. They own assets, and they own their freedom. I don't yet, and this is the thought process years ago. And so I might as well, instead of trying to buy their stuff, I might as well figure out how they bought their stuff and see if I can repeat it. And the beauty of the seller finance game is this is how all real estate traded in the small to midsize multifamily space decades ago.

Cody Davis: [11:16] Way back when, before I was born, before you were born, everything traded on a contract in the small to midsize range. So the the thought process was I should learn how they built their portfolio, start cultivating a relationship with owners instead of treating them like a number. And that resulted out really well.

Mike DeHaan: [11:35] Yeah. I mean, I I like how you kinda say that. Right? Because it's so true. If you talk to anyone that's been around real estate for a while, so many of the patterns start to repeat. Right? Whether it's the way the real estate market goes, you know, we've seen it go up. Now it's gonna go down again, and now it's gonna, you know, fluctuate in different ways to how the transaction styles go. Like, I was at a conference last week, and one of the guys that operates is very successful multifamily investor. And he was talking about when he started buying multifamily properties in like the early two thousands. And like syndications weren't even a thing. He's like, basically, what you do is you would call all your friends that had money, and you would basically all just agree to go buy a property together, and you would have a little bit of a paper trail. But the actual process of going and recording a syndication as, like, a security and having the LPGP split and all the stuff that we do now wasn't even something that existed really. And, you know, it's kinda seems like it's almost going back that way again where you're starting to see more of these JV partnerships, more of these partnerships with the seller, more of the contract style, especially because so many people lost so badly that has syndications over the last little bit since commercial real estate has turned over. So I mean, that's that's wisdom, I would say, code beyond your years to be exploring stuff like that.

Mike DeHaan: [12:48] So as you're as you're going into this, right, like, what are some of the key pieces that you look for when you're trying to analyze opportunities or you're going to be making an offer? Because you said you haven't made a ton of offers, so there must be things that you're looking for initially before you even start to go down that path.

Cody Davis: [13:04] Well, yeah, I I don't make offers to people I don't know. I've tried to build the the relationship up like that so that my portfolio could scale. I really haven't bought anything outside of one deal that one of my business partners brought me into. I was 20% owner. It was my smallest deal. It made a little bit of money, but it was not in that market. It was just in King County random one off. Other than that, everybody that I bought from, I've had a relationship with that I've cultivated from nothing, from a cold call. So the big thing is the the order of operations for real estate is you have your deal, then your debt, then your equity. You find the deal, and then you put together the debt that allows that deal to work. And if you can't get a 100% debt, then you figure out the money down. But before all of that comes the relationship, and the relationship is senior to the deal. And without the deal, you don't need to talk about any of the money, the debt or the equity, the two types of money, because it's irrelevant. It does not matter. As you don't have the deal, then you don't need the debt or the equity. And that deal will never be as important or valuable as the relationship with property owners. So the reason I'm able to make few offers and make things work is because I'm not looking for the property right now. I'm looking for the people that own it. They're gonna know more than any guru online, more than YouTube University. And

Mike DeHaan: [14:29] if

Cody Davis: [14:29] I build that relationship with them, that will present me with more opportunities and to where I don't have to go out and look. Because if they present me with a development deal and I'm in a place to where I can figure out the numbers and make it work, I'll proceed. And I could just make an offer based on what they're giving me, you know, the details. If they give me a multifamily deal, I could put it together then and there based on the numbers that they're giving me. And if it works, it works. If it doesn't, I'll just let them know where I can make it work. And it's either a function of price or a function of interest rate or down payment. There's a few pieces you can maneuver there. But they're they're giving me all the pieces to put together an intelligent offer that is not just a shot in the dark. Sure.

Mike DeHaan: [15:13] Yeah. So how many of these deals are you doing, like, 100% seller financing versus bringing on, like, a strategic partnership to cover, like, a large down payment? Or do you do you have anything that has, like, a hybrid with sophisticated money, like banks, things like that, like, where you're having the seller carry a second for your down? Or

Cody Davis: [15:32] Yeah. I haven't had the seller carry a second yet. I have repositioned some of my notes as as I became more bankable, and it took probably three years, three or four years to get bankable knowing what I knew. But the actual seller finance piece to your question of do you get creative with a second, I haven't done that. I have had a couple structured partnerships, but my first three deals, I didn't do that. I did deal debt. Instead of equity, I did more debt. And I just pitched everyone my first deal, pitched everyone in the real estate office I was working at, hey. Do you have any clients that would be interested in lending money? Interest rates were three and four. I offered twelve and two. Nice.

Mike DeHaan: [16:17] That twelve and two would just cover, like, your your down payments and closing costs and

Cody Davis: [16:21] everything else. And so it was standard first lien, second lien. And because it was seller financed and not commercial, I was allowed to have a further encumbrance on title. And it's so cash flowed because the while that was expensive money, that was a very small portion of the deal. I spent 10% down. And so expensive 10% down and cheap 90%. And so I did that for my first 30 apartments. So it was a 12 plex, another 12, and then a six. And then after that point, I took on partners with buyouts because I found, well, if I have a partner, I can do the value add. I can use all the cash flow from the property to get the value up. And then eventually, my goal was at that point, because I started building a little bit of network, I can go get a bank loan, and I can buy these people out. And so then I viewed it as debt, but it didn't have the monthly payments associated with borrowing the down.

Mike DeHaan: [17:13] Sure. Yeah. No. No. That's smart. So when when you're going into these then, you say they're still cash flowing. Are your properties still cash flowing okay right now with increased values, taxes, things like that? Have you been able to, like, actually exit any of the sellers, or are they all sort of, like, longer term?

Cody Davis: [17:28] My first deal, thirty year fixed rate with Nobelin. Oh, wow.

Mike DeHaan: [17:33] That's great.

Cody Davis: [17:34] Not too shabby. Yeah. That and I I didn't know what I didn't know back then. And when I put together the PSA, because I was a real estate agent, I just put thirty year amortization, 6% interest. They accepted that. I didn't realize you're supposed to put a balloon, and they were fine with it. So we just have a thirty year fixed rate loan with no balloon. And since you're paying yourself off, I owe almost a $100 less than I did back then. I think it's, like, 70 less. So it started to pay itself down, which is nice. But the second deal was a ten year balloon. The third deal was a a five. I've refinanced the second deal since. I actually pulled a little bit of money out to do an exterior rental, took a flat roof to a pitch roof, repainted it. The other deal, the third one, the six plex, I'm refinancing right now. It's set to close in about thirty days. And I've done some plumbing work there over the years. But to your point, am I cash flowing okay? The name of the game is long term fixed rate debt with cash flow and margin. And a lot of people did variable debt. I didn't because I didn't even know you could like, you shouldn't do variable debt with sellers. It's just too and it's not tied to really. So I did fixed rate debt, because that's what made sense. My payments my payment will not change till the end of the loan. And the plan was if I can get the rents up over time, which it's done for the history of forever in The United States, especially in Washington state, my payments stay the same.

Cody Davis: [19:06] My cash flow will go up, which will eventually make me more bankable and allow me to reposition these notes, and that's exactly what we did.

Mike DeHaan: [19:12] Yeah. Nice. That's great. And so, yeah, you you kind of alluded to my next question on that too is how do you cover CapEx expenses reserves if you're like, are you bringing do you have your own cash reserves for that, or do you work that in with, like, your money partners that are helping with the down payments?

Cody Davis: [19:30] I didn't in the beginning, so I had to make sure that the deals cash flowed really well. And my fourth deal, which is the first one I did with my buddy Christian, I met him. He was at two rentals, helped him get to four, then helped me get to 42, about 38 plexiglass. That deal, we didn't bring any of our own money to the table, but we we both had a credit card at that point, and then we threw new appliances on a credit card to get the cash flows up. And we took our collective cash flows to fix up the building because I had 30 rentals. He had some rentals that cash flowed really well, and he had a w two. So we just started fixing it up little by little. And after a year, did a cash out refinance. They took our interest rate from seller finance 4% up to it was supposed to be 4.75. The lender tanked the deal the day of closing. Sixty days after that, we got, like, a six point like, a 6.25. So we were pretty upset about that. But, at the time, that that really hurt. But we got $270 cash out, and that allowed us to to finish the project.

Mike DeHaan: [20:40] There you go. And that's huge. Was that was that, like, your first big, I would say, like, cash injection that you've received that was, like, your guys'?

Cody Davis: [20:47] That was pretty great. And then less than a year later, we got a loan on it for 2,300,000. And we actually spent probably 200 of that 400 we pulled out, and we threw it on the building. So we did new siding, new windows, new doors, repainted it. Like, we we did a lot. And we took the rest to reinvest it into other deals. Awesome, man.

Mike DeHaan: [21:11] Good for you. That that's, like, the the true power of real estate display. Like, I know for me personally, where I really kinda felt like I had made good decisions was I did a huge cash out refinance in 2021. When rates were super low on a handful of properties that I'd bought in previous years. And I pulled up on $500,000 in cash, it's like tax free, that was just sitting in my account. And my cash flow dipped a little bit, but not that much. Right? Not enough that I cared about having $500,000 in cash. And when you do that, you can like immediately be like, okay, here's the true value of buying a property where you can add value, being in the right place at the right time when appreciation happens, which we all experienced in 2021, that we're in the game, and, you know, having things that can cover their own debt and their own costs. Like, that that is truly the magic of it. You can do it at an even higher level with multifamily stuff.

Cody Davis: [21:59] Yeah. And it it's important because, I mean, I just did the same thing. Of course, my rate's not probably where yours is. Yours probably in threes, fours, fives. Mine's higher than that. But I just refinanced an asset and pulled out, like, 50, and my cash flow went down about a thousand bucks. Some people say, well, that sucks, but it's still cash flows. I've still got the debt coverage. And I basically got four years plus of all that cash flow out tax free now, which builds a big buffer Mhmm. For some of these buildings. Oh, yeah. It's a ton.

Mike DeHaan: [22:32] Hey. We really appreciate being a listener of the collecting keys podcast. Did you know that we also are on social media and on YouTube? You should go and shoot us a follow on those as well. You can find both Dan and I on Instagram. I am at Mike underscore invests. Dan is at investor man Dan. You can also find short clips from the show at collecting keys podcast on Instagram. And if you wanna see our faces talking while you're listening to this show or you wanna check out some of our crazy animated adventures we've been putting together into some funny little web cartoons that sort of show the crazy stories that guests tell on the show, then you should go over to YouTube and check out the collecting keys channel. Shoot us a subscribe over there. It really helps continue to grow our audience. We really, really appreciate it. Well, anyways, enjoy the rest of the show you guys. We appreciate you all. So how many of these places that you're buying are, like, true value ads? Like, you're having to go and inject capital versus, you know, like you said, buying new appliances and increasing rents?

Cody Davis: [23:28] Yeah. First deal that I bought was nice. I didn't have to do anything. Since then, that first deal, I've had another apartment. I've replaced the electrical panels. I've replaced a lot of the plumbing, but I didn't have to do that. I did it because I had the available funds, and I still had my fixed rate loan. So my payment staying the same. So every improvement I do, I just get extra profit. The second deal, though, that I bought, I had to do a lot. I had to do the roof if I wanted to refinance it. It's called butterfly roof. It's not actually flat like I mentioned earlier. It goes down. And when it snows a lot, you're in Spokane. Most lakes has similar weather. The, the snow is not good because it'll pile up, and it'll make it look like a pitch roof. It's super heavy, and it can cause it to collapse. So not a great combination. So within two years of that, I had to do a brand new roof, new trusses, everything. And I've updated probably nine of the 12 apartments there since I bought it, and they needed it. So that took time, and that took a lot of my cash flows for a while. Just throwing it at the building. I was doing some of the work myself for the first year and a half, two years. I don't do that anymore.

Cody Davis: [24:39] But there's probably half and half of what are true value add and what our turnkey. Because it it's good to buy some turnkey stuff, set it, forget it. If I could only buy turnkey, I would. But that that's just not the opportunity that's been laid in front of me. Sure. I mean,

Mike DeHaan: [24:55] it's not the opportunity that lays in front of most people, to be fair. So those are like the unicorn deals that people usually say for their podcast interviews that are not realistic expectations for everybody else.

Cody Davis: [25:05] They're not.

Mike DeHaan: [25:05] No. Yeah. So nice then. That's awesome. So I guess a lot of these two you said they're three hours from you. That's essentially a remote market. I'm assuming you're not driving out there on a regular basis to walk all these properties, or maybe you are every so often. How did you build out, like, your your team, your property managers? I guess you have contractors that you deal with your property managers that organize all of the construction work for you. At a higher level, I know it's a

Cody Davis: [25:31] little bit more sophisticated than residential, but you obviously had to do some legwork. Well, the nice thing about doing multifamily 10 plus is the amount of inventory you accrue. It gets pretty big in comparison to the single family buyer. They're just buying a single family rental and another single family. They go buy 12 properties before they catch up to my first purchase. So that the the amount of inventory that I managed within three years, three years into it, was up to 81 rentals. And so it started it started with me just doing it myself. I drive over, do the work. After 30 rentals, someone sent me a desk and said, Cody, you're not a plumber, and you're not driving three hours or three hours back to fix this. Call someone. And so I went through the most expensive plumbers and then most expensive contractors, most expensive handyman. And then I went through the really cheap ones because I thought that was gonna be saving me money, and then they messed it all up. So I had to go back to the expensive people. So I wasted all my cash flow for a while. And then eventually, as I got big enough, got well north of a 100 rounds, I started getting to work with the good people because it's a word-of-mouth.

Cody Davis: [26:40] Small town, 35,000 people, somewhere in there. The people talk, and they know who the owners are. So I started getting referred business from like, people would reach out to, hey, to x contractor that they should reach out to me and try and do some work. And so I started meeting good people that I thought were really good. They do a good job, and then they taper off with quality and eventually found good people that I could stick with. But that was a five year process. It's not like it's gonna happen overnight. You have to go through the really expensive people that really don't want new clients, but they'll do it if you pay them that much. And then you a logical progression is, let's go find the cheaper people. And then they do a terrible job, and then you you work away to the the good quality people as you have enough inventory and enough money to pay them.

Mike DeHaan: [27:26] Yeah. And that's a an unspoken sort of benefit of being in a smaller market, right, is there are a players everywhere. And if you can show yourself as also an a player to those people, they're gonna want to assist you and do work with you. You know, we see we see the same thing even out here in Spokane. It's bigger than Moses Lake, but it's still a small market, but it's not like being in Houston, right, where there's you're just a tiny fish in a small pond in a big pond rather, regardless of how big you get. Right? You can even be a guy that's worth a $100,000,000 there, and there's still gonna be a bunch more guys that are also worth $100,000,000, you know, versus if you're the guy in Moses Lake that owns half the multifamily properties, you're gonna get the best of the best that wanna work with you because they want your repeat business. So that's great, man. And then as on your Instagram here, you also had some stuff you're doing with the development of townhomes. Is that something that you're still working on?

Cody Davis: [28:19] Yeah. I've got a couple lots for that. I'm working on building townhome development. I'm also working on buying some brand new townhome developments, just buying and seller finance that are already built. But I've got a lot where I I think I can fit six. I'm working through it'll leave me five or six. It'll be a quad and a duplex or a triplex and a duplex. Yeah. And so I'm working on building that on the back of a a multifamily lot I've already got. I've got another multifamily building that has land on the back of it to build just a standard six plex that won't be townhome. So it's single level, two bed, one bath, or one bed, one and half bath, and going back and forth on that. Nobody would build one bed, so I'd have no competition. But and then I've got one other lot where I could build 10 townhomes over on Broadway. And so I'm looking into the feasibility, all that. The only problem with the Broadway one is it's on septic. So I'm fighting the sea on everything to try and put that there.

Mike DeHaan: [29:13] Yeah. That's interesting. What has that transition been like going into the development space? Because I feel like a ton of people have ambitions to do that. My my business partner actually really wants to do that because we regularly find these buildable lot opportunities. I mean, right now, we have a place that we're we're wholesaling. It's a house, and it's two separate lots that are buildable. We just don't necessarily have, like, the skill set or even know where to start if we did wanna develop something. So, I guess,

Cody Davis: [29:41] how are you taking that leap? Well, I I heard from one of my first mentors, and this is a guy who I I look up to like a father now. He I I cold called him. He sold me my second 12 plex ever. A great guy. And he started from nothing. He had nothing. If you look at the back one of my six plexes, when I build there, I'll remove them, but I've had no reason to. He used these conveyor belts as weed guard that from his factory that he's working at because he didn't, you know, he didn't wanna go out and buy it. He got it for free. So he he really came from nothing, and he sat me down and said that the way to play the game is and he used his story. He you go out and you get 40 rentals, and then use cash flow from that to to go be a builder. And you'll you'll build to sell if you don't have the apartment. So if you get the apartments first, you can build to keep. And developers are the richest people on planet Earth until they can't finish their project. So you need to build a cash flow business so that when you start learning how to develop and you do your first couple deals, if you don't have help from someone, you could cash flow through your mistakes, and you can keep it because that's where the developers make the biggest mistake is they offload the project instead of figuring out the systems to manage it and keep it. So I listened to what he said, and I went out. I bought more than 40 apartments. But, yeah, I'll I'll blame that on inflation. I had to inflate his number.

Cody Davis: [31:10] But I I followed his model to a t, And so now I'm building to keep. I'll I'll reposition the debt, put it on a long term fixed rate, probably, like, ten year fix or a five five with commercial lender, and then just pull out the, basically, the cost of the development and move to the next. And as I get bigger and bigger, sell out of the old stuff, sell out of the the older properties that I remodeled, and pay down all the new stuff and have a debt free portfolio. And that's where I envision this going.

Mike DeHaan: [31:41] How are you getting stuff to pencil right now? Just with the general cost of labor and construction. I think it's where most people are getting caught up.

Cody Davis: [31:50] Yeah. You have to have an insider connect on that. You have to get a deal. If you're gonna try and build right now, everything's expensive. And the city of Moses Lake, I don't know about Spokane, but Moses Lake's adding a ton of fees. Now they have landscape architects and a whole bunch of stupid stuff that now they're just adding fees to add fees. Like, you got a fee fee. Right? And it's expensive. So you have to have someone you have to have that relationship. Just like you gotta build the relationship to get a lot of owner contract deals consistently. You gotta get the relationship with who who are the players, who are the people that are actually out there that are building real estate and keeping it? I should go meet with those people. And that's what I did. So the top builders in that town, some one of them is building a 96 plex right now, 36 plex, 32, and stuff like that. That those are the people that I'm reaching out and meeting with. One of them built 25 high school, and that I'm reaching out to to those people and building those relationships so that as I was building my portfolio, trying to get to the the 40 rentals, which was the original, And that was the number he gave me. You get the cash flow first, then I'd have all those relationships, and I could go into the market and get the best deals with the contractors, get the best pricing, skirt through everything I needed to with the city. You know, don't get strung along. If you just come in and say, I wanna build all this, they'll string along.

Cody Davis: [33:12] They don't care about you. They don't know you. Exactly. Yeah. But that's the way you gotta do it.

Mike DeHaan: [33:17] Yeah. Out here, it's the same thing. The fees on top of fees. The the current thing that they just added was, like, this it's, sewer connect fee. That's insane. I wanna say it's, like, it's, like, $15 a unit in your property or something. So if you have a 10 unit property, it's, like, 150 k that just is you're doing the same thing you're gonna do before. They just charge you a lot of money for it now for sewer raising.

Cody Davis: [33:38] And and the result of that is people won't build or rents are going to go up. Mhmm. Yeah. And they they try to make all these reasons about why that's not gonna happen. But those of us that

Mike DeHaan: [33:50] are playing the game, we know exactly where it's gonna get passed down to the consumer, to the renter, just like everything else within capitalism. But It

Cody Davis: [33:56] has to. Because if you're getting a bridge loan, you're not gonna take on the risk. There's no reason. You're not gonna take on a recourse loan that could topple everything you build to break even. There's no reason to do it.

Mike DeHaan: [34:06] And so is that where you're getting your money to

Cody Davis: [34:08] do these builds, is you're getting debt from from banks? No. I'm getting private. So the people that have seller financed stuff for me in the past, I've refinanced a couple buildings. It's a phone call, a coffee meeting, a dinner, and showing them my game plan and asking for a loan.

Mike DeHaan: [34:26] The master networker. That's awesome, man. I love it. Just old school real estate. It's all about who you know and treating people the right way to make

Cody Davis: [34:35] it so that it's You gotta take care of people and remember where you came from because they're gonna remember where you came from if you're building relationships with these people. And if you forget, then they're not gonna wanna work with you.

Mike DeHaan: [34:46] Yeah. Absolutely. Very, very cool. Awesome, man. Well, congrats on the success you've had so far. You're really, really getting after it, and it's it's cool to see. And, you know, guess what? In five years, at a very young age, you've built a portfolio that is, like, I would call it a bucket list portfolio for a lot of people. So very, very awesome.

Cody Davis: [35:03] One thing I will share before we jump off is that the the unit count thing and the assets that you own, like, the value of it, those are irrelevant. It's it's cool to put on social media, but it doesn't matter. If you want $10 a month I've got a buddy who's leasing a plot of land he bought for a 100,000. He bought it in middle of nowhere Kentucky. He leased that, and he bought it probably two years ago. He just leased that land for 20 I think it's 23,000 a month to a trucking company, and there's a lot of demand for it. He just bought land. He just found an opportunity, and he bought a 100% seller finance. His payment, 4% I owe is, like, 330 a month. And so he since refinanced and pulled money out, but $20 a month net of every fee and every mortgage and taxes on a piece of land. And his assets value is way less than what I've got, but he's got free and clear cash flow that he doesn't have to think about, doesn't have to worry about without any units. And he's got some multifamily, but I think people get caught up in the, you know, account asset value thing, and that just doesn't matter. It really doesn't.

Mike DeHaan: [36:13] Yeah. The the door count thing, it I feel like it's a way for newbies to kinda flex on each other. Right? It it's like the, you know, what do you bench version of, like, real estate? You know, it's like, it doesn't matter at all to your overall fitness. But it might impress one person sometime. I don't know. Awesome, man. Yeah, that that's a great knowledge there. So right on. Well, we're gonna go into our end of show questions here. So we have the same three questions that we ask everyone who comes on the show. Don't worry. I know I didn't tell you them beforehand, but they're not too complicated. So the first question, which is always the crowd favorite is what is your craziest real estate investing story? This can be a big win, a big loss, crazy tenant. If you're trying to think of one, just think about, like, the story that immediately comes to your mind if you're in a car with, like, a Uber driver. Right? And they're like, oh, have you ever seen any weird stuff as a real estate investor? Just tell that story. Tell everyone what comes to your

Cody Davis: [37:06] mind right away. I bought a 24 plex value add deal. Seller financed, seared all the other pocket with a partner. We were doing some rental on it. It was empty. We did rent out. We had a builder's policy for insurance. We had the coldest streak of days ever seen in Grant County history, and every pipe exploded. All the units flooded, and because it was vacant, it wasn't covered in the builder's policy. So it was total loss of building. Ceilings fell, floors black gold, pipes were toast, and I ended up seller financing it to my partner. So I actually now get I got a note. I actually profitably exited that deal, and they're gonna take it to

Mike DeHaan: [37:55] the next level. Nice. That one that you just did this past year, because it was freezing up here Uh-huh. In, like, January.

Cody Davis: [38:01] Yeah. That just happened.

Mike DeHaan: [38:02] Yeah. Man, that's brutal. Yeah. That was I I wondered how many places got bit because, like, that the temperature range was in, like, the

Cody Davis: [38:10] well below negatives out here in Spokane.

Mike DeHaan: [38:13] Yeah. So we had we had several properties that had pipes burst that even had people in them and had people running heat, and it still couldn't prevent it. So well, that's pretty good exit. And so you sold it to him on a seller finance. So is that, like, a basically a wrap with

Cody Davis: [38:28] the other loan? That guy, he's got a 9 figure portfolio, I actually met him from Google Maps. It was a cold call. But, yeah, but he had the box to do it. So I just had him sign a personally guaranteed note, and my attorney put together a strong case. And if he defaults, which I don't think he will, but he's got more than enough assets to make me whole. I didn't have to put it on the title.

Mike DeHaan: [38:53] Yeah. That's great. Awesome, man. Yeah. That's a that's a rough one. I'm glad you were able to get out relatively unscathed.

Cody Davis: [38:58] Me too. Yeah.

Mike DeHaan: [39:00] Always could always be worse. Alright. Second question. What is the number one tip you have for a real estate investor trying to take their business to the next level?

Cody Davis: [39:08] You need to figure out how to simplify what you've got in front of you. To the extent that you can simplify your universe, it becomes repeatable. Most people try and keep busy, and they equate that with moving forward and being successful. But if you had nothing going on and you could leave town and your business was better next month than it was this month, that's a stronger case argument for a successful business. So you need to be able to simplify everything. And, don't worry if somebody will say, oh, you're oversimplifying things. There's no way to oversimplify it if it works. If it works and it is just that simple, it it could be that simple. Yeah. I that's very, very

Mike DeHaan: [39:51] good point. I feel like a lot of people, when things they feel too simple, they they choose to pursue complexity because it like you said, it makes you feel like you're busier. Right? I don't know if that came from going up in, like, school projects or, like, like, that inherent root sort of feeling in human beings came from, but it's, like, universal. I feel like if you go most cultures is gonna be the same. If you go all across The United States, it's gonna be the same. But people I don't know. Maybe there's, like, drama. They feel like if it's too simple, it's, like, not exciting enough, and so they kinda,

Cody Davis: [40:23] like, seek that out.

Mike DeHaan: [40:25] So awesome. Alright. Last question. Where can people find you, follow you, and reach out to you?

Cody Davis: [40:30] Yeah. My Instagram page is at doing Cody things. And on YouTube, if you look up Cody Davis business adventures, you'll find me there.

Mike DeHaan: [40:40] Awesome. Cool, man. Well, I just subscribed both of you on those, and I'm excited to following along and seeing what you do over the next five years too, because your first five years in business have been really, really impressive. So awesome, Cody, man. Well, I appreciate you coming on the show. Thanks so much for the time. And you guys go and shoot Cody a follow, reach out to him, and let him know that you enjoyed the show. And if you have anything going on in Central Washington, I bet that he would probably be interested in having a conversation with you as well because he is actively doing deals and getting things done up here. So Cody, man, thanks again for coming on. And we appreciate you all listening. We'll talk to you guys next week.