BiggerPockets Real Estate Podcast - 840: Seeing Greene: Rehab Costs, Renting vs. Owning, and The END of Real Estate?

Episode Date: November 5, 2023

Could the end of real estate investing already be upon us? How do you know how much to spend on a renovation before buying a house? And is a negative cash flow rental EVER worth investing in? On this Seeing Greene, we’re answering the tough questions you’ll be forced to ask in a hard housing market so you can build wealth while the masses run for the hills. Thankfully, David has his co-pilot on this episode! David and Rob are back to answer YOUR real estate questions, EVEN if you’re too scared to hear the answers. On today’s show, a live caller asks, “How do I get a renovation estimate BEFORE bidding on a BRRRR?” If you’ve stressed over which comes first, the bid or the buy, stick around. We’ll also touch on negative cash flow and when it makes sense to buy a rental that’s losing money every month (there’s a science to this). Then, for all you doomsayers, David and Rob give their take on what happens when the population declines, and no one is left to rent houses. Finally, we answer the age-old question, “should I rent or buy in today’s market?” Want to ask David a question? If so, submit your question here so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums and ask other investors their take, or follow David on Instagram to see when he’s going live so you can jump on a live Q&A and get your question answered on the spot! In This Episode We Cover: How to estimate rehab costs BEFORE you bid on a BRRRR When it’s worth it to buy a “cash flow negative” rental property  The secret to getting out of ANY contract if you need to exit a deal The long-term effects of declining populations and whether real estate investing could meet its end Renting vs. buying and when it makes sense to invest while you're still a renter And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area Davids's BiggerPockets Profile David's Instagram Subscribe to David’s YouTube Channel Rob's BiggerPockets Profile Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube Sign Up for BiggerPockets Pro to Get Rental Property Calculators, Leases, and More Hop On the BiggerPockets Forums to Connect with Other Investors Books Mentioned in the Show: Pillars of Wealth by David Greene Buy, Rehab, Rent, Refinance, Repeat by David Greene Long-Distance Real Estate Investing by David Greene Connect with Sean: Sean's BiggerPockets Profile Sean's Instagram Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-840 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets Podcast Show 840. What's going on, everyone? It is me, David Green, your host of the Bigger Pockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet for a long time bringing you what you need to know about real estate to stay up to speed, current, and in the know of what's going on in this market, which is changing now more than ever. In today's episode, Rob Abasol and I will be handling it seeing Green's style. Now, normally there's a green light behind me. That's not the case right now because I am

traveling to promote pillars of wealth, but that doesn't stop us from bringing you educational, powerful, and free real estate content. In today's show, ooh, you're going to love it. We get into sequencing the work for rehab projects. What is the order that you should do when it comes to getting pre-approved, getting bids on construction, ratting offers, moving forward with the escrow, and strategies you can use to put that in your favor? When cash flow is or isn't appropriate. This is a really good discussion about the complicated question of, is it okay to cash flow negatively if I'm making a lot of money and what needs to go into that question? With the aging population, is real estate a risk long term? I thought that was a really

good discussion that we had as well, Rob, with like, what are the factors that make real estate go up or down in value? And what will that be like in the future if the population of America stops increasing like other first world countries have? And can I own real estate while still renting where I live. All that and more on today's show. But before we get to our first question, today's quick tip is simple. Get your team together, build your core four, and start your journey, and bigger pockets can help.

We've got an agent finder, which you can find at biggerpockets.com slash agents. I'm one of the people on there, so go look for me as well. You can find an agent in your area and ask them if they can help you put your core four together. If they know what that means, it means they probably read my book and you're off to a good start. Rob, anything you want to say before we get to our first question? This is very fun. This is a very fun format. I can't believe I've been missing out on this for two years. Thank you for allowing me to come on this. I want to do this more. Have me on.

First time you've ever put me in fun in the same sentence. Hey, there's a first time for everything. There's a second time for everything too. So if you hold out, maybe I'll say it again. The only time people really talk about me being fun is when I'm talking about fundamentals, which people think are fundamentally boring. That's the name of your 11th book that you're currently writing for 2027, right? Very. All right, let's get into the show. Most investors spend more time chasing deals

than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy walkways, and seasonal wear and tear can increase the likelihood of claims.

And traditional insurance companies aren't always built to handle these claims, quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr-builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in minutes at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor.

Okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple. Is my time better spent elsewhere? I use a tool that cuts down on a lot of landlord hassles. And the wild part is, it's just $12 a month. It handles rental screenings, rent collection, maintenance requests, and accounting, all in one platform via a mobile app or desktop. It saves me time in tenant communication and keeps me organized for tax season. It's called rent ready. and you can sign up for a six-month plan for just $1 with promo code BP 2025. Pro users get it for free because we believe in it. Just sign in through your pro account to get started.

Rent Ready helps ensure on-time rent with auto reminders, keeps communication professional, and lets you post listings to multiple sites. Check it out at rentready.com slash bigger pockets. That's rent-R-E-D-I-com slash bigger pockets. Did you know your house gets bored when you leave? I can't actually prove that, but it, probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be

contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport while your staircase at home is fully capable of sending your income upwards. Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property,

you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days.

That means less stress and more time enjoying your trip. You can relax, knowing guests are taken care of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host, but could use some help, find a co-host at Airbnb.com slash host. Sean, welcome to the show. What's on your mind today?

Thanks, David. First of all, I'd like to say thank you for taking the time to have me on and answering my question. You and Rob have been instrumental in my decision to get into real estate, so it's really quite surreal being here and talking to you both lives. So thank you. Hey, hey, happy to do it. A bit of relevant background. My cousin and I have teamed up with partners. He is an investment banker living in New York City, and I am a corporate lawyer living in Boston. We have leaned into the concept of long-distance real estate investing, given our expensive local markets. We own a couple of properties and want to continue building our portfolio, and we're looking to enhance our returns on future investments by employing the Burr strategy, and we are working with an investor-focused realtor in an out-of-state market we have selected.

Our skill sets are great on the transactional and analytical sides, but we have little to no experience in renovation and construction, and any Burr investment would be made from afar, so we did not have the ability to see properties firsthand, which leads me to my question. Could you explain the sequencing of arriving at a renovation estimate for a Burr? Do we try to get contractors to the property and provide bids before we submit our offer? This would provide surety for our offer, but I can see it being hard to send contractors out for every property we want to offer on, particularly if you want to get bids from multiple contractors. Alternatively, if we cannot get contractors the property before making an offer, what should we do as inexperienced rehabers to inform our renovation estimate without a bid from a contractor? We found that given the increasingly slim margins in the current market,

picking the wrong end of estimate range could be in the different. difference between a good deal and a bad one. Any help is appreciated. Thank you. Sure. Yeah. So, David, I'm going to let you jump in on this one first. He actually answered this not too long ago because I had this question, if you recall, where I was like, well, do we get the offer accepted first and then get the contractor? Or are we trying to get the contractor first and then get the offer accepted? So you provided some pretty good insight. Can you let us know what your process is? I love these questions. Why can't everyone ask me a question as simple as like, what's the system or the sequencing. It's always like, what do I do? Because I don't know what the

market's going to do. And you're like, well, great. Now I have to try to dive into that ocean of confusion. This is really easy. Let me ask you before I answer that, Sean. Did you have chat GPT help you formulate that question? No, I did not. I've listened to your takes on AI. And I agree with you. I wrote that myself. So you are AI. Dude, that was really good. Anytime someone has to ask you if AI helped you write it. That's saying that you sound too good as a human to be believed. Are you married? I'm married.

I think it's the corporate lawyer in me coming out. Yeah, that's not surprising either. Tell your wife that she married like the pinnacle of masculine perfection, at least when it comes to the written word. She's a very lucky woman. All right. So to simplify this,

you're asking here, do I get a bid from a contractor before I write my offer or do I do it after? Correct? Yes. Okay. You want to get a range from your contract? before you write the offer, but you're not going to get it locked in until after. And the reason being is if you try to do it what feels like perfect, which is what most people do, I want the bid before

I write the offer because I got to get everything lined up before I squeeze a trigger. Someone else will buy it. I mean, I've taken lots of, I've broken a lot of hearts in the real estate space by moving in and buying that thing right before somebody else had their offer written because they were taken too long. And then when you're in contract, you get the information. And if it doesn't work out, you just back out of the contract. Really, I forget sometimes that people don't really. realize how real estate transaction works because I'm a real estate agent. And so I do this all the time. Writing an offer is an incredibly low commitment. I just want to say this again. It is like getting on a first date. It doesn't really mean a whole lot. If the person smells like Fetuccini Alfredo,

if they've got a lot of nose hair, if there's something weird going on, you just don't go back for a second date and you're out the price of an Applebee's dinner or whatever it is, right? People look at it like asking for a date is asking for someone's hand in marriage and you're going to have to pay a lot of money to reserve a wedding venue. That's more like when you waive the contingencies. So two things to keep in mind that this strategy, on execution, they'll make the strategy easier. One, include contingencies so you can back out of the deal. If you can't put a very, very low earnest money deposit in there, right? As low as you can get, because worst case scenario, if there's no contingencies and it was a hot deal and it all falls apart, you're only out

whatever your earnest money was. You're not out the potential tens of thousands of dollars. or more that it could be if the deal goes wrong and you feel like you're compelled to close on it. So my formula is to have a home, like to get the property that I see, have someone go out there and make a video. If I like it, get my contractor to go walk it. And the contractor shouldn't need you to tell them every tiny little detail that's done. Like they should look at it and say, yeah, it's going to need paint. We're going to need to frame up a bedroom right here. Like, what's your plan for this thing?

And I give them an overall vision and they will say, hey, it's going to be summer. between 25 and 50 grand, depending what you want done. Okay? That should be enough for you to make the decision on where to write the offer. You write the offer. Now, during your inspection period, you have a home inspector go out there and a contractor go out there at the same time. This is probably the part that Rob was liking when I was talking about it before.

The inspector talks to the contractor and is like, did you see that outlet right there's not working? Make sure you put that in your scope of work that you're going to need to replace that electrical outlet. Or the panel over here isn't working or that window is completely done. It's going to need to be replaced. And so that goes into the scope of work of the contractor at the same time that the contractor can say the home inspector, you know, that's weird. Why isn't this faucet working? And he can kind of like look at the plumbing. The two of them work

together to figure this out. Then they come back with a menu, right? This is in long distance rail station investing. Here's all the work that needs to get done. And here's how much each of these things cost. Not do the work equals 50 grand. It needs to be itemized, which I'm sure you as a corporate lawyer can understand because you guys are always trying to get us to just give you a retainer and waste all of our money. And we're trying to keep, I'm just kidding. It's not that bad. So once you've got that, now you can decide if you need to drop the price of the home, move forward with closing or back out of the deal completely. What do you think? Yeah, that works. And so that was, you answered one of my follow-up questions was, you know, if you've estimated

incorrectly, how do you fix that after the fact, where you say, okay, you know, it looks like I just replace a couple outlets, but you get in there and you realize you need to totally rewire the place or, hey, the floor is going to be five grand. No, it's actually going to be 20 because it's rotted underneath and you need to rip it up. You're saying you're going to use the inspection contingency that you have to say, hey, look, this isn't what I thought it was. I need to pay you 20,000 less because these costs a lot more. Here's the magic words. That's, yes, you got the right idea.

The execution of it. Don't say, this isn't what I thought it was. Say, hey, this wasn't disclosed. That's my favorite thing to say when I'm an agent. Hey, seller, unfortunately, this part wasn't disclosed when we made the offer. You didn't tell us that the electrical's not working and the roof is leaking and the walls are bad and it's got rodents. Like, you didn't tell us.

So in order for us to fix these things, we have to make these changes. And the listing agent will come back with. the but but but but why did you write the offer if you weren't going to close well we write the offer assuming that the only stuff wrong with the house is what you told me you didn't tell me about all the baggage that it's coming with so now here's what it is going to be worth to us and it puts you in a position where they can't really like they can't question your motives if you're a bad person they can't look at it and say oh you were never intending to pay that price in the first place and and also as a side note when i'm listing a house that's one of the reasons that you

disclose everything that you know is wrong with it ahead of time so that the buyers can't come back and ask for a discount because I can always as a listing agent go back and say, no, you knew about this. The disclosures were given to you. We even did an inspection report before you wrote your offer. You saw all of this. My seller is not going to grant any of those credits. That's very helpful.

And the other follow-up question I had is do you have any advice for getting to a sufficiently specific range of an estimate for purposes of submitting an offer? So that's an estimate that I'll be creating and I need to go and say, okay, you know, floor is between five and ten grand and uh doing the kitchen will be between 10 and 15 uh a lot of times i've spoken with people and they say well every job's different and i can't really can't really give you a good right i need to see it um or or even worse i know you like uh the the places that have five photographs and the um ls that look like they're taken on a potato um and those are the ones that you like to go after because they're the value at well that's really tough for me

to estimate a rehab on those five potato pictures, and I only see half of the house and I don't see a floor plan. So can you give some advice on that as well? Have you read long-distance real estate investing? I feel like you haven't read it yet. Yeah. It's right over my shoulder, as is Burr. It's in the queue. No, no, I have read it, and that's the basis. So I'm trying to find long-distance real estate investing and Burr. It is, you're right. It's impossible to judge by the pictures. The pictures are just like we're going to go back to online dating okay like i can't get a good feel for what this person's like based on their pictures but i can get enough of a feel by the way i don't do online dating so if you guys out there see a profile that looks like me it's a catfish don't fall for it as happened before yeah

they got me pretty good with that one that's how rob and i met actually funny story about that on the next episode of bigger romance you can know enough from the pictures know if you want to go on a date but the date's going to tell you what you need to know okay those pictures will tell you if you want to look into it deeper you still need to send someone to the property with the phone to take a video of the house. Now, if your contractor won't do it, have the person get really good video and then send that to the contractor. And if they're like, well, you know, every job's different. I need to look at it. I'll say, okay, assume that we have to replace all of these cabinets and all of these appliances and put a new floor in here.

Give me a range from here to hear of what you think it'll cost. Now, that helps because they get to, they're worried you're going to blame them if they don't, if their number's too high. But they're also worried that if they go too low, they could have made more money off of you. That's why they don't want to give you the hard and fast answer. But if you get given the video and say, give me a range, they're much more likely to say, okay, well, it could be anywhere from here to here. I'm not afraid of telling him something that I can't actually back up. And then you still have negotiating power to go to the contractor and say, well, it needs

to be on the lower end because you're talking to other people. So they can't, they got to still respect you a little bit. Does that make sense? Yes, that's very helpful. Thank you. And ideally, you want your real estate agent to be the one that takes these videos for you. One of the reasons that you can use a buyer's agent. If you just can't find a way to do that, the listing agent

usually doesn't want to go and take video because that's going to be like helping you in the negotiations over them. So I've used people that are in the area from the bigger pockets forums. If I needed a video taken, you just have to figure out some way to get in the door. Makes sense. Thank you. All right. Anything you want to add, Rob? No. I mean, there's no, there's no room for someone like me at the top. You answered it perfectly. Rob, keeping his dollars per word. really, really high right now. This is expert work. Well, awesome, Sean. Thanks for the question. If people want to connect with you on the internet, or can they do that? Yeah, sure. I'm on Bigger Pockets, Sean Linahan, S-E-A-N-L-I-N-E-H-A-N, and also on Instagram, same name,

Sean Lin-A-H-Lennahan. Awesome, man. Thank you. Thank you. Thank you. Thanks, Sean, G-P-T. Thanks, David. All right, thank you, Sean for that incredibly accurate and well-worded statement. that you gave there. Thanks for being on Seeing Green. I thought that was pretty good. Rob, what did you think about that? It was good, man. Honestly, I think it's the first time we've ever heard sequencing on the show. So there's a first for everything. And now the sequence of events that we move on. That's right. That's right. Favorite comments? Yes. We're getting into the section of the show where we are going to share comments that you all have left on previous episodes on YouTube. If you would like to be featured on Seeing Green, we'd love to have you. Head over to

Biggerpockts.com slash David, where you can submit your question. And remember, if you're listening to this on YouTube, in addition, leaving a comment, please like the video, subscribe to the channel, and share the video with someone you love. All right, our first comment comes from Javon Music Group. I have grown to love my half hour drive to church every Sunday. Thanks to your videos, I learned so much each week. That's right. Seeing Green, making even church fun. Glad to hear that. Next one comes from A. Davidich. I love saying names like that. I think it's a David Ovid. You're probably right.

I'm doing it completely wrong. Do you think, is it possible that you've read so many of these over the years that, like, you've mispronounced their handle so much that they actually never knew that it was their own comment that they left? Oh, and so they were thinking that someone else left something brilliant, but it turns out it was them? Yeah, they're like, they have no idea their question was answered. They're like, oh, that guy has a name that sounds kind of like mine. That's cool. Yeah, because it's much more likely that his name is Davidovich than it is Davidovich.

All right. Moving on here. Helveteka. Mr. David O. Vitch, thanks for regularly creating great free content. I found a lot of useful information just by listening to you guys.

Also, I love the tools that are made available with the pro membership. Yep, that pro membership is probably the best deal in real estate. Couple hundred bucks a year and you get unlimited use to calculators,

discounts on all kinds of stuff. Like it leases to like every state or something? My team uses the rent estimator tool constantly for our clients. that are considering buying houses all across the country and want to know what the rent would be. So if you're not already a pro member, definitely keep listening to the show. And occasionally you'll get a discount. Next up from Sudhata Linden.

Thank you, David, for all that you do. Your podcast share immense knowledge and provide courage to take the steps necessary. I wish I knew about bigger pockets during COVID time. I could have started early. But better than not buying ever, thank you for your guidance. Oh, that's sweet. That's so sweet. That is really nice, isn't it?

Yeah. I look at all the exclamation points that are in there. And smiley face. That's how you know that they meant it because they put like, they didn't even do the emoticon version. They did like the actual like, or they didn't do the emoji version. The emoticon. Yeah, exactly.

Amoticon? They're OG. Is that what happens when a transformer becomes an emoji? Yeah. I think an emoticon is the original emoji before it was like, you know, like the yellow circles. Look at Rob with the history lesson for all of us. All right. That's right.

Moving on to our last comment from Big Mike 8981, David knows. how to tell you the truth and give you the tough conversation that nobody wants to have with you. Bravo, my man. That is probably my favorite comment that we had today because that's exactly what I strive to do. And let me tell you it is not fun to be the person that says it is going to be difficult. You could get hurt. And this is very tough right now when all of the competition is like, nah, just go in and buy it and you'll figure it out later. Jump out of the plane and build your parachute on the way down. Rob, do you have any insight you want to add on any conversations we've had that you're like, that's not what I wanted to hear, or any advice for me of how I can make the

medicine go down a little smoother? Well, I invested a lot of money recently into bell bottoms thinking that they were going to come back in and I was committed to them and you're like, hey, can I sit down with you for a second? You can't wear those to BP con. They're not working. Stop trying to make them work. And it hurt. And I've since donated them to goodwill. But I'm honestly, in retrospect, I'm really happy. Thank you. I'm glad to hear that. That's what what real friends do. They tell each other what they need to hear, not what they want to hear. I recently reached that to you because you're doing so good with your fitness and your diet. And I was like, hey, I need to hear what diet you're on. And your reply was, you already know what to do.

Eat more meat and work out. Leave me alone. I'm working. So it's not just me that gives helpful advice. Thank you, Rob. For absolutely nothing. It was a little nicer than that. It was a little. But see, I said that because you've done it before. You know, look, you know, we all know, wake up early, work out, eat healthy. Repeat. That's the book that I'm going to write. Wake up early. It's like...

Make an acronym out of that, yeah. I'll let you do the words while I'm reading the next part here, and then you can come back and call it the waker method or whatever it's going to be. Most investors spend more time chasing deals than reviewing their insurance. But a quick coverage check can be fast, easy, and one of these smartest ways to protect and even improve your property's cash flow. As the months get colder, frozen pipes, icy, walkways and seasonal wear and tear can increase the likelihood of claims. And traditional

insurance companies aren't always built to handle these claims quickly or smoothly. That's why more real estate investors are turning to steadily. They focus exclusively on landlords, whether it's a single-family rental, a burr builder's risk policy, or midterm holiday guests. You get fast quotes, flexible coverage, and protection for property damage, liability, and even loss of rental income. Now is the perfect time to review your rates and coverage. Get a quote in at biggerpockets.com slash landlord insurance. Steadily, landlord insurance designed for the modern investor. The rise of the tech savvy investors here.

You don't need a huge team or tons of overhead to manage rental properties. Just the right tools. So I want to tell you about how I use rent-ready to get ahead. For landlords who treat their time like capital and recognize the cost of sweat equity, this tool gives you everything you need to scale. Rent collection, tenant screening, maintenance accounting, so that you're organized come tax season, and you can run numbers in preparation for future deals and more,

all in one platform via a mobile app or desktop. Modern landlords don't just own property. They optimize it. Rent Ready will keep you organized, running leaner, and ready to grow. Start with RentReady.com slash bigger pockets. That's RentR-E-D-I.com slash Bigger Pockets. And use code BP 2025 to get Rent Ready's six-month plan for a dollar. Did you know your house gets bored when you leave?

I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave. It's sitting there in the dark thinking, I could be contributing right now. Your side room wants a side hustle. Even your Wi-Fi is like, we could be networking. You're on vacation, spending money like it's a sport while your staircase at home is fully capable of sending your income upwards.

Here's the twist. You can go on a trip and actually earn money. Airbnb makes that possible with the co-host network. If you're away for a while or have a secondary property, you can hire a vetted local co-host with real hosting experience to handle it all. A co-host can handle guest communications, it can manage reservations and keep things running smoothly so you don't have to check your phone between beach days. That means less stress and more time enjoying your trip. You can relax, knowing guests are taking care of. of and your place is in good hands. You travel, your house works. Everyone wins. If you're ready to host but could use some help, find a co-host at Airbnb.com slash host. Tax season reminder for all the real estate investors listening.

If you own rental properties, short-term rentals, commercial buildings, basically anything that's not your primary residence, you need to know about cost segregation. It's an IRS-compliance strategy that lets you accelerate depreciation on your properties, which means you're paying less in tax.

this year and keeping more cash in your pocket for your next deal. Cost segregation guys is the go-to firm, having done over 12,000 of these studies with $500 million in total depreciation identified. Head to costsegregationguise.com slash BP to get a free proposal and see your potential tax savings. Tired of traditional lenders holding you back, host financial is here to change the game. They've ditched the DTI restrictions and they zero in on what really matters, your property's income potential.

So no more chasing papers for tax returns or personal income statements. Think about it. A lender that values your property's worth over your paycheck, that's the host financial difference. Approved in 47 states, they are ready to help you make your next big move. Curious if you qualify, just head over to hostfinancial.com and find out. Stop letting outdated lending practices hold you back. That's hostfinancial.com where your property's potential meets unlimited financing. All right.

Let's get back to the questions from you, our audience, and see what we'll see. what we can do to help you build wealth in your journey. Rob, I hear we have an update from you live on scene with the new method. What is it going to be? Whoop here. Wake up early, eat, healthy, and repeat. The whoop here method. Whoop, there it is.

All right. Our next question comes from Aiden in L.A. Hi, David. My name is Idan from Los Angeles. And my question for you is, if I'm purchasing rental property in good growing area area that should appreciate very well. For example, in North Carolina, I have a few neighborhoods that I know that they are very good. If I'm purchasing a property that after all the expenses, I'm running the calculations through the bigger pockets tools. After all, the repair,

CAPEX, vacancies, mortgage, insurance, taxes, after everything, I'm negative cash flow 300, 400, because of the interest today and the high prices. This is a very good area. And I'm buying it in market prices, not below too much. Obviously, I'm trying to find a creative way to add value, but if I'm negative cash flow, $400, and I can afford it, I'm okay with it. I don't need the cash flow right now, and I'm counting on appreciation in the future. Does that make sense to do something like that if I can afford it? And it's important to me to be in a very good location. Any help about it will help. Thank you so much for everything you do for us. Thank you. All right, Edan bringing the most controversial question in all of real estate investing right to our doorstep.

This is probably going to go viral as half of the country will love us and half will hate us. Welcome to the controversial firing. Rob, what do you have to stay? Let me rephrase the question, should I buy a property and lose money on it if I believe that it will appreciate like crazy over the next few years? My answer is now. because, you know, the thing is when you are accepting of a loss, listen, and again, I'm not going to fault anyone who does this, but given the current economic climate, I would say this, losing two or 300 or 400 or 500, I don't know what he said, dollars every single month feels okay when you're making a lot of money and that you feel like you can absorb it. But it doesn't feel so good when your other income sources deplete or whenever you lose your job or whatever happens in the next couple of years, your financial situation. That two or $300 a month starts burning a hole in your pocket. I would not bet on appreciation in 2023 as your savior in this situation. Had you told me that in 2019, 2020, 2020, 2021? Absolutely. But I think we've got to be a little bit more conservative with that. I'm fine with

breaking even. I will say that. Losing money, I'm out. What about you? All right. This is a little more nuance that it sounds because it's not as simple as can I lose two or 300 a month if I might make more money somewhere else. I have lost money in real estate, especially lately with how things have gone, but it has never been from the cash flow not being enough to $200 or $300 a month. It's been from city regulations, construction projects going wrong, permits not being given, work being done incorrectly that needs to be redone. There's lots of ways you can lose money in real estate outside of just the cash flow not being there, but that doesn't get discussed. We typically only talk about, Well, the calculator said that my cash flow would be this much and it was less than that.

I'm losing money. The reason that I am not as worried about this particular gentleman losing $200 to $300 a month is because in general, that is the amount of money that somebody can make picking up an extra shift at a restaurant once a month or picking up a coffee shop shift twice a month. It's not something that's going to cause you to actually lose a property. I'm more worried about a tenant destroying it, things going wrong with the property that you don't have the money to fix. Getting into the short-term rental game without reserves where you can't keep up with

what your competition is doing and slowly falling further and further behind and not having the option to rent it out in a traditional sense. Like those big things are much scarier to me than the possibility that he might lose a little bit of money. I'd also say that if he's banking on appreciation and there's no reason to buy it, that's speculation, okay? But if he's buying in an incredibly good area with constricted supply, increasing demand where it is reasonable to think that rents are going to go up and you're going to get a very good

tenant. That actually makes the investment safer, even though it's losing a little bit of money. So we didn't get quite enough information to give this particular gentleman a take on if he should buy the property or not. I would have needed to know the actual city, the ability that he could create revenue in other ways. Is there a value add to this property where he could add an ADU to it? He said that there wasn't really a value add. And he said that he believed in the city itself. So I think it's like assuming that he those two things are correct. It's a great appreciating city. He can't add value that.

I think that's sort of the particular situation here. Well, my take would be all of the, the X factor is the money you're making now isn't necessarily the money you're going to make in the future. Okay. So he says in the note that he is a contractor making very good money in Los Angeles. Now, if that was going to continue, yeah, it's okay to lose two or $300 a month for the short term because you're going to make money later. The difficulty becomes if you lose your job and you can't make that money.

But then again, like, is $200 or $300 a month going to actually kill you? Right? You could probably cancel a couple cable subscriptions or eat out a little bit less. You could probably take that money out of the budget you have. That's not the most dangerous thing. The most dangerous thing would be if your tenant doesn't pay rent at all. Okay, like we get focused on the numbers aren't working in the calculator. We don't think about what if the tenant just stops paying and it takes four or five months to a victim.

that is so much more significant than $200 a month as far as how much money you'll actually lose. So, Rob, does that weigh into your advice on the location of the property and the quality of the tenant? It kind of, I guess what you're saying is absolutely true. If the tenant doesn't pay, they're not only losing the two or three hundred bucks or losing the actual rent to. Like $2,000 or $3,000 a month. And that's over $3.4 a month. Yeah, that's way more money than a couple hundred bucks. But I think that extra $300 on top of the payment, sorry, the tenant.

not paying is a lot more painful in that moment than the 300. And that's why I'm like, you know, listen, I'm an aggressive investor. All right? I'm not the kind of person that makes very conservative purchases or investments, but I don't, no matter how aggressive I am, rule number one is to never lose money. There are some situations where I have and there are some situations where the tax benefits make it to where I actually save a lot of money. But in general, if I could break even, that's at least like requirement number one. I think that's like always a fair way to approach it no matter what, especially in 2023. But I could be swayed. It's a hot topic, right? I don't know if there isn't a right or wrong answer here. It really does depend on the

person and their financial position, right? No, there's a right. It's what I said. No, I'm just kidding. What if I, like, just came in like guns blazing? Listen to me. I agree. There's no wrong right. There's just what's right for you. Yeah, because you could always just put more money down and the property cash flows then. But the question becomes like, okay, now it's cash flowing $100 a month instead of losing $200 a month, but you had to put $100,000 into the property. Is that a better use of your money than putting that same $100,000 in reserves and you can get by if it doesn't cash to as much, right? Someone asked me yesterday if they were like, hey, can I just ask, is it stupid for me to put

half down on this house? And I was like, look, maybe a year or two ago, I would have been like, hey, don't do that. And right now I'm kind of like, I mean, that's fine. Honestly, could you make more money somewhere else? Yes, but could you be a lot happier if your mortgage payment was a lot lower and you didn't have to worry about a high mortgage payment every month during like whatever's coming in 2023, 2024. I'm good with it, honestly. So would you rather have the theoretical $100 a month of cash flow instead of $200 a month of losing money, but you had to put $75,000 down to get it? Is that $75 grand in reserve safer or is the cash flowing element safer? That's the question that I think people need to be asking. And if you had to put $75,000

down to make a cash flow. Most people would say, well, that I don't want to do it. Now you're not buying real estate at all. And that's kind of the circles that we're going back and forth in right now, right? So let us know with the comments. What do you think about this negative cash flow? What's the right perspective to take? What would you have told Don in this question? And let us know, should we do an entire show on the cash flow conundrum to cash flow or not to cash flow? That is the question. Thy question. Thank you. For the question, as you would often say. Rob wants me to change my Instagram name to the David Green 24. Yeah.

T-H-E-E. Yes. The dork game is strong with this one. Our next question comes from Josh in Baton Rouge. I always think of Gambit from X-Men whenever I hear of Baton-Rooge. Let me know in the comments if any of you think of Gambit from X-Men every time you hear of Baton-Rooge. What is that? X-Men?

I don't remember that. Oh, really? A dork like you doesn't rarely need of X-Men. Not likely. The comments are going to be exploding right now with Cap. No way. All right. Josh here has a couple of short-term rentals in vacation markets in Arkansas and Florida, as well as a long-term rental in Louisiana. What are your thoughts on how the supply and demand for real estate will change in the coming decades as the baby boomer generation ages?

Some fear that this will result in a drastic enough change in population that there will be an oversupply of many goods, including real estate, causing prices to fall, rather than the fairly steady increase we're all used to. I strongly believe that real estate will ultimately survive economic cycles, but I fear the effects of this on the medium-term outlook for investors. like myself in our 30s and 40s. Do you think this is a legitimate concern or are the other forces at play strong enough to counter this effect? Thank you for all you do and thank you for all your resources. Wonderful question. I love this, Rob. What goes through your head? What's your perspective here? Yeah, I was nervous you'd ask me first. I guess I would say that ultimately real estate has existed since like the beginning of time. Like people build houses and they sold them, lived in them, rented them. I don't know when real estate truly became prevalent, but I mean, it's been around

for in its current form, I would say at least 100 years, right? So it has survived many things. It has survived the Great Depression. It has survived World Wars. It has survived recessions. It has survived big booms in the economy. I would say, like, yes, there's a legitimate concern in some capacity, but I don't think it's anything that would really destroy the real estate market in any significant way? Well done. That's a great answer for being unprepared for how you were going to. Did you, Michael, got that?

Did you just start talking and then figure out where you wanted to go when you were halfway through it? Exactly. Well, I have a list of answers that are always like kind of laminated by me that I've just been waiting to use over the last year and a half since being on the show. So. Eats of emergency break glass and pull out laminated. Exactly.

That was pretty good. Yeah, I've actually thought a very similar thought, maybe six, seven years ago where I was like, you overthink things, right? like I was buying in Phoenix. Like, are they going to run out of water? Should I not be buying in Phoenix? Then you start Googling Phoenix water supply. And you get all these crazy conspiracy things about like what the government's doing to stop the water.

It's like really hard to get information that you can rely on. This is another one because while everything you said is true, Rob, it is also true. I don't know in the last 100 years. Please don't quote me on this. I'm not sure. I don't believe that population growth has ever been a concern. It's now starting to become a concern. In many developed countries, population growth is not all.

flowing, it's going the wrong way. Okay? Definitely. So it's one thing to consider here. Like if we don't have as many babies, we're not going to need as many houses. And I think I love his last point. Is this a legitimate concern or are other forces at play strong enough to counter this effect? Because that is the question. Okay. There's opposing forces here, pros and cons. And you're trying to weigh which one of them is stronger. So I think population decreasing is a legit concern and threat to real estate wealth. Now let's talk about the other side of that. First off, but we just stopped having, stopped having babies completely right now. No babies were born.

It would be like 25 years before that would act, that lag would hit us. Because you've got all the one and two year olds that still need to grow. They're still going to need a place to live. So it's not like if babies stop being born immediately were in trouble. It's a long time before it catches up with us. So if the population does slow, this doesn't change tomorrow. In that much time, your property's probably almost paid off, which is going to reduce some of the threat right there. Another thing would be when I was looking at this,

I assume that what a dollar was worth is what a dollar would always be worth. But that is a shifting target too. As inflation continually makes money worth less, you need more of it to buy the same thing. So in 30 years, if we do have population problems, well, how much have properties appreciated and how much has rent appreciated? And is that threat as significant if your property's worth five times as much. So if you had to sell it for half of what it should be worth, it's still two and a half times more than what it is right now.

Like it gets tricky when you start trying to work all of these things into the the algorithm here. So with that information, Rob, does that change your perspective on this? Well, first of all, I know that the population decreasing is a real problem in other countries. I don't know if that's the case in the United States. Like, I don't know. Right. So it is hard to really say. I think we have some time to figure that one out. Like, I don't know if that's really a problem yet. Right. Or I don't know if it'll really be a problem for, like you said, like the next 10 to 15 years. And then there's immigration, right? Are people going to keep coming to America from other countries, which would keep our population higher, or is that going to change in 10 years and 20 years

it's America, not a desirable place to come to? It is impossible to factor for all of those variables when you're trying to make this question. So I love the question itself, because this is something that I think about all the time coming from Josh. Overall, I think that there are enough tailwinds making real estate desirable to combat the headwinds of possible population growth or less people needing homes in the future. I think I'm more. more realistic threat would be like 3D housing. What if they figure out a way to just like build houses for $20,000 or something like that? And now we've got these homes that used to cost $500,000 to build or $200,000 to build. And you had to go through all this red tape and the city and the

local municipalities made building incredibly hard. And now people can just throw something up real quick, right? Assuming that this is something that's actually safe. It'll probably be a while before the technology goes there. But I've thought about that. That could just saturate the market with rental supply. That's interesting. Man, you know, what would be a really good show is if we researched theories for real estate like 50 years from now, like what some of the thought leaders in the space think what will be the case? Yeah, like ownership of real estate on Mars or like, yeah, things like this or whatever, like if you own homes on a beach or whatever and just talk about some of the bigger, I don't know, questions that arise over like,

what does real estate look like in 50 to 100 years. That would be very interesting because we get to hear like why they thought green shag carpet was a good idea maybe that was meant to combat a threat at the time or they're like one of the biggest threats to the real estate space is the open concept and we have to do everything we can to defeat that so we're just going to put walls everywhere inside of our houses and like to their dismay they found out that we just tore all those homes down and like blasted it on house hunters talking about how these closed concepts are terrible yeah well you know I've always talked about I would love to have Elon Musk on the show I think that would be a the perfect person for it. So hey, Elon, I know you're listening out there. Hit us up. David Green 24 on Instagram.

Oh, I'm sure he's already following. I'm sure. Probably from one of his brander accounts. Probably. Yeah. All right. Our last question here comes from Alyssa Horn in Alaska. By the way, I forgot to say on our previous question, are you screaming at your computer or your car right now saying, what are you guys talking about? You missed something. Let us know in the comments if on this whole, will real estate become a problem in the future because of population growth? Let us know if you think we miss something and what should be brought into the conversation here. I love it. It's very interesting.

It's a fun thought process. I'll ask chat GPT tonight and I'll let you know. I'll text you the answer. Rob knows how much I love that. All right. Alyssa says, Hi, David. Thanks for taking the time to read this.

My sister and I are looking at combined funds of the house hack a duplex in Anchorage, Alaska. However, we realize that the amount we could potentially charge for rent is greater than the amount we currently pay for rent in the place we currently live. Does it make more sense to continue rent to? and rent out the two sides of the property we buy. Mathematically, this seems like a no-brainer, but it also doesn't seem normal. Are we missing something? First of more context. We're happy living in the place we rent but want to work our way to financial freedom by building a

real estate portfolio and obviously people who rent don't have a portfolio. Thanks so much for helping two Alaskan sisters find their way to vacations and warmer climates. All right. So here is how I understand Alyssa's question. So she wants to buy real estate and buying real estate if she moved into it would increase her housing expense because her rent is low, but if she keeps paying the low rent, she never owns a property. Her alternative to this dilemma is to buy an investment property, rent out all of the units, which it looks like this is a duplex that they're talking about. They'll make more money that way, but now they're still renting out the property that they live in. They don't live in the house they're in. Now, the downside to that is they're going to put 20 or 25% down if it's

investment property versus 5% if it's a house hack. So we factor all of these questions together. Welcome to seeing green. This is what we get to do every single week. What advice do you have for Alyssa and her sister? I think you have to, it's rare. Okay, it's not rare, but it is common where rent is cheaper than mortgages. And so I had to do this. When I lived in L.A., my rent was $1,850 for a 600 square foot home. I then was so tired of paying that much money to a landlord that I was like, I'm going to buy a house. I don't care if that makes me a little bit more house poor. At least I own it.

I'm building equity. So I bought a house and my mortgage was $4,400, which was more than double. Now, with that house, there were some house hacking opportunities. I had a studio underneath. I ended up building that tiny house. We all know the story there. But I went into that understanding I was going to pay more for the home ownership. Fast forward to today, that house has doubled in value due to the beautiful thing called

appreciation. And I'm very happy that I was house poor. Brent's gone up as well. And rent has gone up. Yeah. So I'm happy that I was house poor for all those years. Yes. It paid off in the end.

So it hurts now more because you're like, dang, I'm actually, I'm not saving as much. You know, I'm spending more every month. It hurts more. But you are also getting principal pay down. inversely, the landlord is getting the principal pay down in the other scenarios. I love how you brought this up so far. In the book I'm working on right now, it's about all the ways you make money in real estate instead of just the cash flow.

So there's this principle. When you look at something two-dimensionally, certain things make sense. Like, why would I buy a house when renting is cheaper? I frequently get this when I go on other people's podcasts that are not real estate experts, right? So, like, I'm getting ready to go on value attainment. We're going to be talking with like Patrick Bet David's crew. they say this all the time. Renting is cheaper than owning. Why would anyone buy a house? It makes sense when you're looking at a snapshot, not a whole movie. When you look at everything that real estate does

to make money, it starts to change things. So her rent is less right now, but she doesn't control the rent, the landlord does. Maybe she has a really nice landlord. What happens if they sell the house, they pass away, someone else takes it over, they realize that they could be charging more. That changes very quickly. During that period of time, housing might have become more expensive. Also, in most markets, rent goes up every single year. So though renting may be cheaper than owning right now, if you do five years of rent increases, it's often not cheaper than owning because when you buy a house, your mortgage gets locked in place. Now consider house hacking. Not only are you not having your rent increased on you every year, but you are charging more to your tenants every year.

And now becomes twice as valuable that rent increases are working in your favor to build your wealth. And you extend this over five years, 10 years, 15 years, it starts to become way cheaper to own. that rent, especially when your house hacking. Now, we haven't thrown in principal reduction. We haven't thrown in potential tax advantages. We haven't thrown in what you just said, Rob, which was appreciation. All of these other things end up being even more impactful than just the rent. And it becomes a no-brainer that you should own. The thing I want to highlight here is that it rarely looks wise when you're just looking at right now. When you're looking at 10 years down the road, 15 years down the road, I don't know that I've ever seen a scenario where renting is actually

cheaper unless it's like you're living with your mom and she's going to let you live for free or something like that. Does that change your take on this question? Yeah, definitely. I would say ultimately, like almost everyone looks like a genius, like a real estate genius if they hold onto property for 30 years. Yeah. So it might, like I said, it might hurt now, but yeah, if you hold onto it for 30 years, people are going to be like, oh my gosh, you bought a house in Los Angeles when it was $600,000, that's so cheap. I cannot believe that. And people will be mad at you, that you, that you got into real estate 30 years earlier. You know what I mean? But when you bought it at 600,000, did it feel cheap? No, God, no. I was scared to tell everybody. And everyone was telling you that

you were stupid, right? I was scared to tell my parents. I was scared to tell my coworkers, because my coworkers knew kind of how much I made. They were like my peers and they were like, you can't afford that. And they just didn't know that I was like, well, I'm thinking about it. Like, how can I afford it? Yeah, you say, well, I'm going to rent out part of my house. Oh, I don't want to do that. That sounds like, I like my space. Yeah, I don't want to, I don't want to know my tenant. Yeah, it's all that whole thing. Yeah, you like your space. You also like being poor forever. Like if you can't afford to put money into a property, you got to put your comfortability and your convenience away, right? It's going to cost you something. So might as well cost comfort instead if you don't have the money at the time.

I remember you and I were heading to a real estate meetup when we were hanging out in L.A. to record at the Spotify studios. And we drove by a property that you pointed out in L.A. And you were like, that house right there was hit the market, had been renovated by wife and I looked at it. And it was $1.1 million. And we said that it's insane that those people think they will ever get that much money for that property, right? Fast forward with four or five years. Is that about how long it's been?

Okay. And what do you think it's worth now? Oh, like 1.8, 1.9, maybe two somewhere in there. It was insane. You were overpaying. And then you go five years in the future. And all of a sudden, like, if you could buy it for 1.1 right now, you'd be walking into $700,000 of equity in Tuzzi cash flow.

Yeah. And it was a little bit more like, it's so expensive. I wish I could afford that someday. And then now it's like in retrospect, it is, it was a good deal. Everything is a good deal in the past, right? That's a great point. And that's all we're trying to say is try to exist outside of just this moment. Think about your whole life and where you're going to be in five or 10 years and factor that into your decision making process. And if you got to sacrifice comfort or you got to have a little bit more housing than you wanted in order to own, but you're in a good area where rents are going to be increasing and you've now

taking control of your financial future and your housing expense where you know the worst case scenario is this is my mortgage and it can only get better from that. I would rather see people do that than not have control and be at the mercy of a landlord or somebody else. So taking this long-term approach makes the most sense, which is why we're talking more and more about financial responsibility, playing defense and making money in other ways outside of real estate, which is playing offense in business because when you have those two things going for you, you can use the delayed gratification approach with real estate and build the portfolio we're talking about. Oh, one thing she said that people who rent obviously don't have a portfolio false. I'm sure we've

said this already. But honestly, the people that I'm proudest most in life of are people who sacrifice short-term gain and continue renting and use the money they have to get into a rental property. And they sacrifice owning a house so that they can rent longer and build equity. I'm always like, hey, that's actually pretty cool of you that you did that. So don't feel bad if that's where you end up netting out, Alyssa. All right. We hope you enjoyed today's show. We sure enjoyed having it with you all. If you did, please do me a favor. Leave us a review on wherever you listen to your favorite podcasts and let us know what you like about the podcast so other people can find it. And leave us a comment on YouTube telling us what you thought of today's show. Hopefully we read

your comment on a future episode and you will be supporting the show. Also, if you'd like to be featured, here. We would love to have you. Head over to biggerpockets.com slash David, where you can leave your question for us to answer on a future episode. Rob, for people that were absolutely blown away by your insight, intelligence, sense of humor and dashing good looks, where can they get more, Rob? You can find me on YouTube at Rob Built, R-O-B-U-I-L-T, and Instagram at Rob Built. If you want short-form real estate funnies. If you want long-form real estate wackiness, go to YouTube. up to you or do both. There you go. I'm there as well. You can find me at David Green 24 on social media, David Green Real Estate on YouTube or Davidgreen24.com on the internet to find my web page. Thanks again,

everyone for joining us today. It's been our pleasure to be teaching you and instructing you and encouraging you in your real estate journey. I really hope that we were able to help some of you brain souls who took action to ask us questions and I look forward to answering more of your questions this year. This is David Green for Handsome Rob. Alba Solo, signing off. 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.

I'm the host and 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 included, involves risk.

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