BiggerPockets Real Estate Podcast - 735: Seeing Greene: Rental Property Deal-Breakers That Could Kill Your Cash Flow

Starting point is 00:00:00 This is the Bigger Pockets podcast show 735. The reality is every property I've ever seen in my career is not up to code. Okay? Most cities in the Bay Area where I live require you to get permits if you change the flooring, if you change the faucet, if you change your landscaping in the yard. If you actually look at what the city requires you to get permits for, it's everything. Even homes that are built like new home construction are not up. to code with every single thing. Now, that does not mean it's okay to not get permits. It just means

Starting point is 00:00:35 it's not a deal breaker immediately because something isn't permanent. What's going on, everyone? My name is David Green. And if you don't know, now you know. This is the best, the biggest, and the baddest real estate podcast on the planet. And we are here to talk with you. In today's episode, a seeing green style show. I take questions from you, the bigger pockets community. And I answer them for everyone to hear. And boy, is it fun. We get into some tough stuff that doesn't get asked very often, and I had a very fun time answering some challenging questions. These included topics like, how much of the money that I am making and saving should I be investing? Is there a formula that I should be following? Should I pay off

Starting point is 00:01:15 the existing properties that I have right now, or should I continue to expand? I'm not sure what the right road is for me. And I'm buying a property, but it's not all permitted. Should I go forward with it or should I not? How do I know what to make of this? All that and more on today's show. Most investors spend all their time talking about their high level returns. But that's not the number that actually matters. What actually matters is what you keep after taxes, and that's where multifamily real estate quietly stands out. With built-in advantages like depreciation, the right deals can generate steady cash flow while reducing the tax drag. Bam Capital structures its multifamily investments around those fundamentals, pairing tax efficiency with disciplined

Starting point is 00:01:58 operators and a long-term approach. This isn't about chasing hype or guessing market timing. It's about building durable, tax-aware wealth over time. Learn more at biggerpockets.com slash bam. We all joke that rentals are passive, but if you're spending nights matching receipts or guessing what a property earned last month, that's not passive at all. Baselain fixes that part of landlording, the financial chaos. Their banking and AI bookkeeping system automatically tags every transaction, updates cash flow insights in real time, and builds the reports you need for tax season. You can even automate transfers and move money around without paying wire fees. It's just cleaner. sign up at baselane.com slash BP and get a $100 bonus. Base lane is a financial technology company and not a bank. Banking services provided by Threadbank. Member FDIC. For decades, real estate has been a cornerstone of the world's largest portfolios, but it's also historically been sort of complex, time consuming, and expensive. But imagine if real estate investing was suddenly

Starting point is 00:02:50 easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the funds. full portfolio, check out historical returns, and start investing in just minutes.

Starting point is 00:03:31 Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. Before we get into it, I have a quick tip for you. This is very near and dear to my heart, and I hope all of you listen closely. Wealth building is about more than just buying property.

Starting point is 00:03:50 I know you are here to learn about real estate investing, and that's what the show is. But it would be wrong not to tell you that if you want to build a lot. wealth you also need to save money. Now this is like telling you that you need to eat your vegetables. I understand no one likes it, but pay attention to where your money is going. Tracking your expenses is incredibly frustrating but incredibly fruitful. I've been sharing this within the communities that I run, all of the people that are following me, I'm telling everybody we have a recession coming down the road. Every dollar you make needs to be protected. There are people that want to take it from you. Get serious about saving your money so that when

Starting point is 00:04:24 the right deal comes, you're in a position to take it down. All right, let's get to our first question. David Pilfaddy Green. Thank you so much for taking my question. My name is Matthew Van Horn. I'm from Memphis, Tennessee. I have a small portfolio. I own three short-term rentals here in Memphis.

Starting point is 00:04:41 And I have a side business managing short-term rentals for other folks. By the way, if people don't understand the Pillsaddy reference, they need to listen to Episode 674 with Ashley Hamilton. It is informative and very, very funny. I thought, David, my question is this. How often should I invest relative to my savings rate? I hope that makes sense. Just to throw out an example, let's say that I'm able to accumulate $5,000 per month,

Starting point is 00:05:14 whether that be from job, business, real estate income. Let's see I can accumulate $5,000 per month. that can be reinvested toward future deals. Is there any formula or some sort of rule of thumb that says how often I should invest that? Is there kind of a rule of thumb that says you should invest once per year? So I should invest when I have that 60K after a year? Does it make sense to invest just simply as often as I can no matter how small the deals are? am I asking a dumb question?

Starting point is 00:05:55 Just hoping you can help me out with this, David. I appreciate you. All right. Thank you, Matthew. I appreciate seeing you again. And yes, that was a hilarious episode with Ashley Hamilton. I highly recommend everybody who likes to laugh to go listen to that one. It's very fun as well as inspiring.

Starting point is 00:06:12 All right. Let's talk about your question. I'm going to do what I normally do. I'm going to start with a broad take on it and then slowly get more narrow. So my personal opinion, this is just David Green talking right now, I'm not representing everyone at bigger pockets or everybody in the world, is that it doesn't work to frame the question the way that you did, but yet we all want to do that. Okay, so people will say, what percentage of money should I set aside for repairs or emergencies?

Starting point is 00:06:41 People will say like you, what percentage of my income should I be investing? There's this comfort that comes from clear, concise formulas. Okay, like if I can put it in a spreadsheet, it makes me feel like I'm being safe and I'm doing the right thing. The danger in this is that life does not work according to these rules that we create. A lot of these rules, if I'm being completely frank, come from financial advisors that are selling people like you that are listening to this on methods that are, that come with the inherent comfort. but they're not real. Okay, so like when Susie Orman or Dave Ramsey or whoever like the stock trader person that you're listening to is talking, they have to package the information in a way that your brain can receive it and say that makes sense, I will do that. They're trying to get you to take action, which is not inherently wrong. It just becomes dangerous when you think like life works in a spreadsheet because it really doesn't. Okay. And like it actually becomes constricting for your own. when you think this way. I had to go through the same little thing where you are, where Morpheus is holding out the red pill and the blue pill. And he's like, you could take the blue pill and you could

Starting point is 00:07:54 wake up and you could go right back to how you thought before or you could take the red pill and you could accept the truth, but it's going to be very discomforting. And so I can't tell everybody when they need to take that pill or if they should. You have to make that decision for yourself. Okay. So I don't want to make it sound like I'm insulting you, Matthew, because I'm not, you're asking a great question that applies to so many people. I'm just trying to get a, some background that you're not going to hear in other places. The reality of real estate is you don't know when the thing's going to go wrong. Okay, I'm going through a process right now where I was kind of forced into it by someone stealing title of my properties and me having to sell and going into a 1031

Starting point is 00:08:29 and buying a whole bunch of real estate in a very short period of time and then the perfect storm hit me. I can't get cities to approve permits. I can't get architects to drop plans. I can't get contractors to finish jobs. I've got eight vacant multimillion dollar properties that are bleeding right now and there is nothing I can do to get out of this mess. I did not see this coming because I didn't realize how bad the permit process would be. If I didn't have wildly big reserves because I'm extra conservative, this could take me. I'll be fine because of the reserves, but it doesn't feel good. It sucks in the short term. And if I set it up where I have six months of reserves for every single property and I put it in a spreadsheet and this is the way that it works, I'd be screwed right now.

Starting point is 00:09:10 I take a different approach. When I took that red pill, which is not to be confused with like political stuff, just that understanding that it's not going to work in a spreadsheet with real estate, I realize that there are three pillars that I need to focus on and excel at that actually work, whereas the spreadsheet approach doesn't. The first pillar is defense. I have a challenge every day. What percentage of my money can I save?

Starting point is 00:09:35 Can I avoid buying the Ferrari? Can I avoid spending money extravagantly? just because I have a lot of it. When I travel and I go to a hotel, do I upgrade to the presidential suite just because I want to look cool and I have the money to do it? Or do I stay disciplined and not do it?

Starting point is 00:09:52 When I travel, do I make sure that my assistant is still looking for the cheapest flight, not just taking the shortest road of, oh, David's got plenty of money. I'll just book them on this flight. That's losing at defense. And defense wins championships. So I'm always keeping my spending low.

Starting point is 00:10:08 That doesn't mean I'm depriving myself, okay? but I don't spend money just to spend it. You will never see me, I hope, pouring out champagne from a bottle that's expensive just so everyone knows I have so much money I can burn it. I think that's wildly disrespectful to the finance gods when you live that way. The next pillar is offense.

Starting point is 00:10:27 Am I making as much money as I possibly can? Like you're saying, you're making five grand a month. I would much rather have you asking a different question. David, how can I make more than five grand a month? how can I double the amount of money I'm able to make and save, rather than at what rate should I be investing the money that I am making? It's just a better question to ask. If we're all keeping our pedal to the medal with offense,

Starting point is 00:10:50 we're making as much money as we can, we're growing personally, we're looking for ways to challenge ourselves, we're getting out of our comfort zone. And the third pillar is investing. How do I invest as prudently as I can? Now, this is, you're sort of asking me a question in Spanish, and I'm answering it in French.

Starting point is 00:11:05 I understand this can be confusing. I'm just saying, I don't think I can answer the question you're asking because the world does not work that way. It works that way if it's like I'm going to invest in stocks, they're going to get me a 7% return. And I can calculate that in the next 40 years of time, if I invested a 7% return, I can expect to have X amount of money. The reason that doesn't work is because inflation is higher than 7%. Not just CPI inflation, but like how much money is being printed. Those predictable strategies that are comforting will cause you to lose.

Starting point is 00:11:34 You cannot keep up with how much money is being printed doing that. The only way you win now is by excelling at the three pillars, saving as much as you can, making as much as you can, investing the difference. Now, when it comes to investing, I'm not going to say every month you should be spending $5,000 or investing it or when you get to $60,000, you should spend $40,000 of it. Okay. What I'm going to say is you should be looking to excel in the pillar of investing, which means finding the best deal that you can. You might not buy a house at all for three years. And at the end of those three years, you come across two deals that you can buy for $400,000. thousand that will have an ARV of 600,000 and will be great short-term rentals that will cash flow

Starting point is 00:12:12 incredibly strong. And you got to buy them both. Okay, like that's more realistic for how things work out. You might put your attention on offense and make more money. And in the process of taking on more investors and managing their houses for them, challenging yourself in that way, a couple of them are like, we don't want to own these anymore. Do you want to just buy them from me? And you get great deals that you're like, oh, if I wouldn't have spent all my money on mediocre deals because I was supposed to spend it at a certain rate, I would be able to buy these amazing deals. That's much more my style. I might not buy much real estate over a three or four year period and then go buy a whole

Starting point is 00:12:49 bunch of them at one time when I see the market open up, right? I might buy a lot of one asset type and then switch and move into another one and make big moves in these moments because I'm not asking to live life in this predictable way that you're saying. Now, Susie Ormond could answer this question. there are absolutely financial people that could, they're probably not real estate investors. Because real estate investors

Starting point is 00:13:10 got to jump on the deal when it comes. I would much rather have you say, I buy great deals, I'm looking for great deals. I will be ready and liquid to pounce when I see a great deal. I have tools in my toolbox that I can use like seller financing

Starting point is 00:13:24 or whatever it is that you can excel at to get those great deals. But you don't control when a great deal comes. What you can control is how much money you're spending, how much money you're saving, and how much money you're making. Okay, so I want you to come back, go to biggerpox.com slash David, spend another video, and I want you to say, thank you, David.

Starting point is 00:13:43 I'm a little upset. You didn't answer my question, but I'm going to forgive you. What advice do you have for me for how I can make or save more than $5,000 a month? Here's what my business looks like, and we will take the question from that angle. For everyone who's listening, I hope this made some sense. Okay, you got to look at money differently if you want to be able to accumulate it like the wealthy people do. wealthy people don't ask questions like that. You're not going to see the people that are really, really good with money saying,

Starting point is 00:14:09 how much of my money am I supposed to spend or invest out of the month? You hear them saying, where are my opportunities? How do I take advantage of them? And how do I push myself to be a better version of me tomorrow than I was today? Our next video clip comes from Branco in Raleigh, North Carolina. Hey, David. What's on? It's Branko with EXP here in Raleigh, North Carolina.

Starting point is 00:14:29 I'll be brief. Thanks for everything you do, man. My wife and I, we're both 29 years old. about $250,000 a year, have four homes, three house hacks and one off market deal. For the sake of this question, we would just pay off the three house hacks. And that's basically the question. Plan A, play off, plan B don't pay off. And the reason we even think about plan A paying off is because after paying off the $750,000 worth of mortgages, we would fund the great life, which is about 10 grand, 11 grand cash flow. And that was still play around with HELogs from those properties. And

Starting point is 00:15:04 and still look for other deals, which is fun for me. Plan B would be to keep doing what we're doing and buying a house like a year, house like every year and a half, two years maybe. And I know that plan B financially makes more sense because we would have more properties, obviously. But I don't know, it's just since it's already funding the life, it's just is enough enough. And I don't know, I would still look for deals. So it's tempting to pay it off.

Starting point is 00:15:32 we again I'm an agent maybe I'm thinking about it because market's kind of slowing down I don't know any advice wisdom would be greatly appreciated take everyone bye bye all right brand okay all right brand co this is a good question and I appreciate your transparency this is going to be like the last question we're going to have to break it down a little bit deeper I can't just give you your answer there are merits to both approaches paying off your real estate living off the cash load not trying to be a multi multi multi millionaire just living a good life or Using leverage, using the skills you have as an agent, using the knowledge you're getting on bigger pockets, using the skill set that will continue to increase every year to get better and better deals and build a bigger life. I can't tell you which is the right road for you and you know that.

Starting point is 00:16:16 Here's what I can tell you. The approach of paying off your real estate made much more sense when interest rates were really high. It also made much more sense when we weren't printing money like we are right now. It doesn't mean that I'm telling you the other option of continue to scale is better. for you. I'm saying that the scales are tipped in the favor of the people that are growing because of all the money that we printed. Let me give an example. I remember very clearly a certain point in my life. I was probably 28 years old. I had just bought my house in Discovery Bay, California. It was a foreclosure. I paid who I believe I paid 272 for it. I bought it at an

Starting point is 00:16:58 auction, used an FHA loan to get it. And I put like three and a half. half percent down, but I was at a point where I really wanted one of the new Corvettes. They were like the Stingray model had come back. They were super cool. I had probably seven rental properties, a couple in California and a couple in Arizona. I hadn't gone out to Florida yet. And I had talked with Tim Road, who we've had on the podcast several times about my future. And he's like, figure out how much money you want to, you need to retire. Work to that number. Stop when you get there. So I was like, all right, if I got five grand a month coming in from rental properties and I got five grand a month coming in for my retirement as a cop. Oh my God,

Starting point is 00:17:37 10 grand. That's way more money than I would ever need. And if I pay off my house, I could drop my mortgage by another like, it was like $900 or something like that. Okay. Here's what's crazy. When I was 28 years old, 10 grand was significantly more money than what it is right now. So my plan was I talked to another police officer, Shane Caduti, and he's like, why do you care so much about money. You don't need it. Buy yourself a Corvette and enjoy life. And I actually had planned on hanging it up. Like, okay, I got my rentals. I don't need to worry about this stuff anymore. I'm just going to buy that Corvette. I'm going to keep a little lump sum in the bank to cover me. And then I'm just going to live an easy life. Something did not sit right with me. It was not greed. It was not

Starting point is 00:18:24 ambition. I didn't have to prove anything. It was this little still voice that was like, this is a huge mistake if you do this. Don't do it. And I actually went a different route. I just, I told somebody about my dilemma. They connected me with the bank in North Florida. I got a line of credits to start by rentals. I learned the Burr method. I sold one of my Arizona houses. I went and bought about 10 or 11 more properties in Florida with the same 80 grand that I just kept recycling through Burr. I got way better at understanding construction, finding deals. I negotiated because I was doing this so often. I grew that to like probably 40 properties or so in Florida plus my other ones. I got better. I wrote a book called Long Distance Real Estate Investing. I got involved with bigger pockets here I am today,

Starting point is 00:19:07 teaching this stuff at a high level as a business owner that owns different companies and I can influence a lot of people. Real estate did so much more for me than just gave me five grand a month to live a life. And here's the scary thing. When I look back at where I was, if I had hung it up, I would still be working as a cop. I would only have five grand a month of passive income. Maybe with rent bumps, it might be like $6,500 or something right now. But living in the Bay Area in Northern California, that is not, I don't want to make it sound like I'm elitist because I definitely love a modest lifestyle.

Starting point is 00:19:40 It's not a lot of money, okay? Like, you can live like that, but you can't travel anytime you want. I wouldn't be able to just go to Hawaii to go see Brandon. I would have the budget when I actually can travel. I would not own the condos that I own in Hawaii that I'm able to send family members to business associates to close friends I have. One of my favorite things is when a couple that's close to me is going through marital problems, I could just send them to my Hawaii condos and be like, listen, I'm taking care

Starting point is 00:20:07 of everything. I'm paying for your plane. I'm paying for a babysitter. I'm paying for the condo. You're going to go and you're going to have a good time. Okay. Or I can send family members that love it. My mom loves visiting those places.

Starting point is 00:20:18 Hawaii is her favorite thing. I could not do that if I didn't have those properties, and I absolutely would not have them if I had retired earlier. Okay, I'm not trying to sway you in any direction. Just being honest about this idea that I had that if I just stopped growing and I stay where I am was wrong. I would not have stayed where I was. Inflation, things probably cost a legit three times as much as what they did. At that time in my life, I could probably buy like a steak at Safeway for $8. bucks. That same steak is like $25 right now. It is everything is so much more money. That car that I was

Starting point is 00:20:54 driving eventually is going to wear down. Okay. I bought that thing. It was a brand new camera and I bought it for like 22 grand. It was so cheap by today's standards. Like now that same car might be 40, 50 grand or more for just a normal base model car. Well, I'd be screwed when my stuff wore out and I had to go buy another one. The repairs on the house I live and the house payment's the same, but everything costs more money to me to fix up because of inflation. And I realize that the world isn't going to stop growing just because we stop growing or we stop working. You're always an uphill battle. Things become more expensive with time. So I would encourage you to strongly consider continuing to work as an agent, continuing to invest in real estate, continuing to house hack every year,

Starting point is 00:21:41 continuing to make decisions that will make the version of you 10, 20, 30 years down the road happy and not take the assumption that everything's hunky dory, that everything will be fine, that you'll pay off your properties and you'll be fine. That money that you could get from paying off your properties could very well not be enough to live on. You might have another kid. You might get a sick family member. The market for real estate ages might change and commissions go away.

Starting point is 00:22:05 You can't make a living like that anymore. And you find yourself having to go back to work in a factory not like that. liking your life because we cannot predict what's going to happen. I think it's a big mistake when we assume the best. The world's going to get easier. It's going to get better. We can just stop. You don't know what's going to happen. What if you get sick or you end up dying and your family is left without their breadwinner? If you have a bunch of real estate they can sell, that's some money that they can live off of. If you're gone, it's not the same case. So you can tell that I'm leading more towards you're a young guy, you're ambitious, you're working

Starting point is 00:22:38 as an agent, you're well-spoken, you're articulate, you have skills. freaking use them. Like I would never tell someone that was really into fitness, go win a fitness competition and then retire and never exercise again. You don't need to. It's true. You don't have to. But why would you want to get unhealthier?

Starting point is 00:22:53 Once you've learned fitness and you're good at exercise and you're good at eating good, you don't have to compete at the highest level ever. But why would you throw that away? It's easier for you to exceed at these things than it would be for other people. So if the genesis of your question is coming from maybe shame or guilt like I shouldn't be this ambitious I don't need this much don't don't buy into that I had to face that same battle and I never became a greedy a hole I never became the person that was buying buggotties and McLaren's with all my money I never bought a private jet I'm not I still live in

Starting point is 00:23:28 that same house believe it or not okay like I never went bought a big baller property I don't need to I don't have a family right now that that property is fine in fact I could probably downgrade I could move into one of the units of the short term rentals that I'm developing and sell that house and I might end up doing that. I don't need a humongous property. I didn't assume that everything would go better. I knew it could go worse. And I am so glad. I am so glad that I built the businesses and I kept expanding that I kept moving forward because money is now becoming an issue for more and more people. And the more of it I have, the more I'll be able to help. So hope that helps answer your question. If there's any further clarity I can give,

Starting point is 00:24:06 please send us another video. Let me know, okay, David, I heard what you're thinking. Here's my question about what I should do. I'd love to follow up with you. And thank you for for kind of being vulnerable and showing us all the question that many people in your boat are all facing. Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multi-family real estate offers structural advantages. Many investors are overlooking, including depreciation that can help offset taxable income while cash flow continues. Bam Capital builds its investment with that reality in mind. They are focused on solid. operators, tax efficiency, and long-term performance. For investors who want real estate exposure

Starting point is 00:24:45 without being landlords and who care about consistency over hype, this is a smarter way to allocate capital. Learn more at biggerpockets.com slash bam. When I bought my first rental, I thought collecting rent would be the hard part. Nope. The admin crushed me. Every night was receipts, tax forms, and checking who was late on rent. I kept thinking, if this is one unit, how do people run 10? Base lane changed that. It's Bigger Pockets official banking platform that handles expense tracking, rental reporting, rent collection, and even tenant screening, all in one place. It's the system I wish I had from day one. Sign up today at baselane.com slash bigger pockets and get a $100 bonus.

Starting point is 00:25:19 Baseline is a financial technology company and is not an FDIC insured bank. Banking services provided by Threadbank, member FDIC. For decades, real estate has been a cornerstone of the world's largest portfolios, but it's also historically been sort of complex, time consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt.

Starting point is 00:25:56 They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the fund's prospectus at funrise.com slash

Starting point is 00:26:24 flagship. This is a paid advertisement. New Year, clean slate, and maybe a vacancy that needs to get filled fast? That's where a veil comes in. With Avail, rental listings can be published to 24 top rental sites with one click, completely free. That includes places renters are already searching, like Realtor.com, Apartments.com, Redfin, and more. No copying and pasting. No juggling multiple platforms, just one listing that shows up everywhere. If getting rentals organized and filled fast is on the list this year, start with Avail. Sign up for free at Avail.co. slash Bigger Pockets. That's AVAI-I-L-C-O-Slar Bigger Pockets. Our next question is a video submission from J.D. Mims. Hi, David. My question is about real estate agents.

Starting point is 00:27:07 So I am looking for a property here for my personal residence in California in Sacramento. And I found a place that checked all of the boxes. The only issue I had was there was some work that was done to turn it into a duplex that was not permitted. Now, I asked the agent about the permits because I haven't actually bought property here in California. So I thought perhaps it works differently by state. And so I said, you know, this is my concern. There's not, the work hasn't been permanent. I'm worried about what will happen if I try to sell it and if I put a renter once I move out.

Starting point is 00:27:52 The agent is a newer agent. So he asked his boss, his boss says, well, as long as the work is done in a workman-like manner, then you're fine. as long as the appraiser comes in and it passes the appraisal. I reached out to the city and they said that that is not true. So my question is, should this be a deal breaker? Or is there some type of a gray area that I'm not understanding? Because I feel like the answer that I was given was just to pacify me

Starting point is 00:28:28 because we've been looking for a while and the market is very difficult. and they just wanted me to buy something and move on. But my feeling is that it should be a big deal, but I don't know if I'm making it bigger than what it really should be, because I feel like as an agent, you should be looking out for me and give me correct information. But I don't know. Maybe there's a great area.

Starting point is 00:29:00 Maybe I'm making it a bigger deal than it needs. needs to be. So I would love your feedback on this. Thank you. All right, J.D., sounds good. Let's break down this situation because you're not the only one who's here. Man, there's so many angles to tackle with this. First off, when you're saying, is this a big deal? We have to define what big deal is. There's many different angles to approach this. So the analogy I'm going to give is when we talk about there is free speech in America. Okay, this is something you deal with a lot when you're like in law enforcement or if you're following, like what's going on with social media, there is free speech in America.

Starting point is 00:29:39 The problem is when somebody says something offensive and then people get mad at them or they lose their job or they get kicked off of a platform or something like that, right? The response is always, well, I have free speech. You can't do this to me. It's just they're applying it in the wrong way. In the arena of other people liking you or the job you're holding or the rules of whatever that social media platform are, you can't just say anything. They have their own rules. In the arena of the penal code, you do have freedoms. Like, you can't go to jail for saying, I don't like the

Starting point is 00:30:15 president. But you can lose your job, I suppose, for saying something like that. Like, private companies are allowed to have their own set of rules, whether you agree with them or not. The protection of free speech does not apply to everything. It just applies to the government being able to punish you. You can't get an infraction or get a citation for saying something unpopular. And when people get confused about that,

Starting point is 00:30:37 then they don't know what to make of it because they're like, well, isn't there laws to protect my free speech? And like, yeah, but that doesn't mean that you can do certain things in certain environments without consequences, okay? This applies to your permitting situation.

Starting point is 00:30:52 Is it a big deal? Well, if you call the city and say, does it need to be permitted, 100% of the time they're going to say yes. They have to say yes. This would be like when I was in law enforcement and someone walks up to me and they say, hey, I want a j-walk right now. Am I allowed to do it? I am not allowed to say, yeah, go ahead and j-walk because if you get hit by a car, I'm going to be responsible for that. So, like, I can't say yes, go j-walk. On the other hand, does it mean that I, like, chase down every single

Starting point is 00:31:21 person I saw across the street without using a crosswalk? No, I probably didn't care unless it was like a super busy intersection and they were causing a big deal. That's the best example I can give for permitting situations. The reality is every property I've ever seen in my career is not up to code. Most cities in the Bay Area where I live require you to get permits if you change the flooring, if you change the faucet, if you change your landscaping in the yard, if you actually look at what the city requires you to get permits for, it's everything. Even homes that are built, like new home construction, are not up to code with every single thing. Now, that does not mean it's okay to not get permits.

Starting point is 00:32:05 It just means it's not a deal breaker immediately because something isn't permitted. Also, I'm going to tell you, and everyone was going to tell you, always get it permitted. But that's because people have to tell you that. It just isn't practical that everyone's going to do that. Now, if you're trying to figure out, will this get me in trouble? It depends on what the stuff is. you say work was done without permits, he didn't give me enough specifics on what happened. If they put up some drywall or some sheetrock or something and they didn't get a permit,

Starting point is 00:32:36 they turned one living room into two bedrooms. I've never seen in my career. It doesn't mean it can't happen. I've just never seen the city get involved and say, you put up drywall without a permit. You're in huge trouble. We're going to put you in jail. Okay. But what if the property is in an area that is zoned for single?

Starting point is 00:32:56 family properties and they are operating it as a duplex. The zoning situation could become a big deal. If you're not allowed to have more than one door in that neighborhood and you're working at it as two doors, they could shut you down. The city could go in there and say, hey, this isn't going to work. Now, California, because you mentioned you're in Sacramento, does have laws that prohibit municipalities from not letting you put an ADU in your property. So this is one workaround when the city tries to say you can't have a second unit, you can't make it a duplex where you can come in and say, you can't stop me from doing it. I'm allowed to have an ADU. The city can come back and say, does this unit that you are calling an ADU meet the requirements that we have spelled out as an ADU?

Starting point is 00:33:41 That's the one of the ways I would take your question to your agent or the city. Hey, this property had work that was done. It's now a duplex. Will the second unit count as an ADU? And I'd get information on that to see if maybe you're going to be covered there. I might also say if I buy the property and the work wasn't permitted, like what are the consequences that could come? Maybe the city says we have no idea. If nobody complains, we're not going to care. Maybe the city says, oh, we would send an inspector immediately and make you fix the work. But I think, J.D, you got to do a little bit of legwork to figure out what is actually going to happen. The vibe I'm getting is you're wanting your agent to do this legwork for you and tell you this is a big deal and then possibly go to the seller and get the

Starting point is 00:34:25 to drop their price or get the permit work done and you want everyone to be like, oh, we cannot let this stand and that's where your frustration might be coming from, the seller's probably not going to care because the seller knows that nobody has work done with permits. That there's another buyer that will buy the property and they might not care about it whatsoever. The permit thing is such a hot button topic because there is no clear line in the sand that we can navigate these situations with, which is what we want. It's more comforting when it is clear what should be done and what should be done. didn't be done. I can't give you a more direct answer because I don't have any more information.

Starting point is 00:35:01 But what I can say is I wouldn't be mad at your agent for the response they're giving you because this is what every agent everywhere is going to say. I'll also say it's not a media, it's not permitted, so don't buy it because almost every property, probably every property I've ever seen has some form of work done that was not permitted. But I don't know the type of work. Okay. If they took a single family home and they put this like, they literally built, it extended the square footage of it and they didn't get any permits and you don't know if it's done safely, that's a huge deal. You can't just build onto a house with maybe the contractors didn't do it. Maybe the homeowner built it himself. But maybe they just took an area of the home

Starting point is 00:35:40 and they walled it off from the rest of it. And even though they didn't tell the city, the work was still done up to code and still done safely and it's perfectly fine. I think you need to get some more specifics on the situation before you make your decision on if you should purchase the property or not. And unfortunately, I didn't get those, so I can't give you a more direct answer. Hopefully the advice that I am giving you does help with the decision you have to make. All right, we're moving on to the part of the show where I get to share the comments from previous shows on YouTube. And I love this. I want to encourage you guys to please leave more comments for me to read the funnier, the more insightful, the more clever, the better.

Starting point is 00:36:16 And even if it's something that you don't agree with or you want more clarity on why I said what I said or you're confused or you have a topic you want us to talk about more, tell us in the comments we read them for every single show and we incorporate them into future shows. Our first comment comes from John Conraddy. David, you're a boss and have been so helpful in my journey. Just want to say you explain things super clear and keep up the good work. Thank you, John. That's probably the hardest part of the job. It's not always knowing what to tell everybody.

Starting point is 00:36:42 It's how do I say this clearly without leaving out anything that could get somebody in trouble without taking too long where I lose their attention. This is always where my stress levels come from when I'm talking is like, Did I leave anything out or did I say too much? And how do I find that perfect balance? Zachary Hitchcock says, I love the podcast and it has helped change my behavior from paycheck to paycheck to being on my path to long-term generational wealth. Zachary, that warms my heart love here and that. He goes on to say, question, I've learned quite a bit from these podcasts as well as books about negotiation.

Starting point is 00:37:14 What is the best way to go about utilizing this knowledge while having to negotiate through agents? Is it taboo to speak to a seller agent directly or is it best to find a seller agent directly? or is it best to focus energy to strategize with my agent? Yeah, that's tough. I'm tempted sometimes to go around my agent also, and I'm an M-experienced person. In general, you don't want to do that. What you probably want to find is you want to choose an agent that is receptive to your advice.

Starting point is 00:37:41 So when you say, hey, I want you to go say this. You want the agent that actually listens to you and says, okay, I'll go say it that way. Or pushes back and says, I don't want to do it that way. You want to get the impression the agent cares about how, they're negotiating. Okay, what most agents do, they're not very good is they say, yeah, I don't want to do that. Let's just write them something. Let's just put it in writing and send it over there, but they don't think about presenting it in the right way. It is tricky. The problem with you

Starting point is 00:38:06 talking to the listing agent directly is you're still, you want to be talking to the seller. Okay, like you go talk to the seller's agent and then your words get put through their filter as it comes to the seller and it still isn't going to be what you want. It's very difficult to negotiate the way that I describe what it's through agents. You just want to make sure you pick an agent that has some skill in this area. And when you communicate with them, the better that they are able to sell you, it's very likely that they're able to sell the other agent in the same way. These comments come from episode 717, by the way, if you guys want to go check that one out. The next one comes from Joe Chabas, Golden Girls. Blanche Devereaux was the original house hacker.

Starting point is 00:38:47 And who wouldn't want Sophia as a tenant? picture it, Sicily, 1925, looking for a burr. This is hilarious because we talked about Golden Girls on that episode. And yes, I suppose Blanche was a house hacker having all the other girls living with her. House hacking before it had a name goes right back to Golden Girls. Well done, Joe. That's hilarious. Steve Moroski says, wow, hold on there, David. People were stealing titles to your property and you just glazed over it. I get that you don't want to go into personal in detail about the issue, but I would love it if you could talk a little bit about how to protect yourself from such things. In my mind, I'm thinking if it can happen to David G, it can

Starting point is 00:39:25 happen to me and how do I avoid it? Yeah, I'm trying to not become a target of that more in the future. And the way that this worked out, it could not have been avoided, unfortunately. So I'm restructuring things to make it so that this can't happen again. But title theft is very real. and it caused a cascade of problems for me. It forced me into a 1031. I bought more properties at one time than I wanted to. The city permits have come in and they've screwed things up. I've had all kinds of issues with trying to get stuff approved.

Starting point is 00:39:58 I had people on my team that were managing my portfolio that had to quit from this. It's been absolutely horrible and it's put me into a place where I'm trying to claw my way out of disaster that that created. But that happens with real estate. That happens with life. You can't turn yourself into a victim just because you got dealt a raw deal. And in my experience, when you continue to do the right things, God, the universe, fate, however you want to look at will work this around for my benefit in some way. So the reason I'm not sharing more details about how that happened is I don't want to

Starting point is 00:40:26 I don't want to dangle it out there for more people to learn how they could go do the same thing. I think there's a lot more predators out there looking to steal other people's stuff than we're aware of. But if you would like, send me a message. I do talk about it in a private group that I run. If you're in that group, you could hear more about it there. So thank you. everybody. That is our show for today. I hope you enjoyed listening to that as much as I enjoyed

Starting point is 00:40:49 making it. I also hope you're enjoying the seeing green episodes. Again, if you want to be featured on here, go to biggerpogs.com slash David and submit your question. I would love to answer it and please continue to engage in the YouTube comments. Lastly, if you are liking this and you like that, you don't have to pay for it, all I would ask that you would do is go to wherever you listen to your podcast, Apple Podcasts, Spotify, whatever it is, and leave us a five-star review and just tell people why you like the show that helps a ton. If you want to know more about me, you want to see what I got going on. You want to kind of like peek the curtain and see what is going on in Greenland.

Starting point is 00:41:23 You can follow me at David Green 24 on all social media. You can also check on my new website, Davidgreen24.com and then DM me or let me know what you think of the website. I had to pay a lot of money to get this thing made. It is launching very soon or probably should be out by the time this is there. So please give me some feedback on that. And lastly, if you have some time. watch another video, listen to another podcast, educate yourself further. And if you don't,

Starting point is 00:41:48 I'll see you on the next episode. Love you. I appreciate you. I know you can be getting your information from anywhere. And so I appreciate that your attention. The most valuable commodity you have is on us at Bigger Pockets. Check out the Bigger Pockets website with the forums if you want to learn more and you don't want to have to do so by listening. If you like reading, I'll see you guys on the next show. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday.

Starting point is 00:42:39 On the host, an executive producer of the show, Dave Meyer, the show is produced by Ian K, copywriting is by Calico content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate, including involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not

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BiggerPockets Real Estate Podcast - 735: Seeing Greene: Rental Property Deal-Breakers That Could Kill Your Cash Flow

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