BiggerPockets Real Estate Podcast - 945: Seeing Greene: Stolen Properties and Why Your Rate Doesn't (Really) Matter

Starting point is 00:00:00 This is the Bigger Pockets podcast show 945. What's going on, everyone? This is David Green, your host of the Bigger Pockets Real Estate podcast here today with a Seeing Green episode for you. And I brought back up, Rob Avis Solo. How are you today? I'm doing well. I'm excited.

Starting point is 00:00:15 I'm stretchy. I'm stretched. Were you dabbing just now? I was dabbing. Yes, that's right. I think I'm doing it wrong, but I believe that's what the, what the children are doing. You got to do it again and then look at your armpit. You can't look where you're dabbing.

Starting point is 00:00:29 Like that. I look the, yes, there it is. Okay. Gabelicious. In today's episode, we're not just going to be talking about dance moves. We're going to be talking about a lot of real estate related topics, including title fraud and how to protect yourself, how to value lower interest rates when considering a sub two deal.

Starting point is 00:00:46 If investing in Hawaii or other high appreciating markets is still an option, how to protect yourself as a short term rental investor, what to do when positive cash flow disappears. A lot of people going through this as interest rate and taxes are going up and rents are not keeping up, getting into the trades, recasting loans, all that and more on another amazing fire episode of Seeing Green. I will say, hey, the first question, a little eye-opening, you may learn something. I didn't know that this was possible. So hopefully this helps some of you all prevent that. All right, everybody, we're going to get to our first question. But before we do,

Starting point is 00:01:20 remember, head over to BiggerPockets.com slash David and submit your question to be featured on this great show. Hey, David, my name is Bobby Kemp. I'm from Laowland, New York. And my question to you is, what should I do with my single family home that's also new construction in Rotunda West Florida? So I've had this home for about a year and a half now and I've been renting it out almost the entire time. Cash flowing great. Except now my tenants are about to leave at the end of March and my private manager has told me he's kind of worried that we're not going to be able to rent it right after because rental market's not that great. And on top of this, my mortgage went up. So I'm penciling the math out and it doesn't look like I'm really going to cash flow with anything at all now.

Starting point is 00:01:56 So I'm in a bit of a tough spot there. And on top of that, I'm in contract as of a couple days ago on a triplex in the St. Petersburg market. I'm going to house hack that and really make the most of that. So I really want to make sure I'm set up for success. So really, what should I do? Sell the single family home 1031 or just sell it or just keep it and really do my best to cash flow even just a little bit. Let me know your thoughts. I really appreciate everything you do at bigger pockets.

Starting point is 00:02:22 It's helped me tremendously in my journey with real estate so far. And I look forward to hear what you say. Well, thank you, Bobby Kemp. And shout out to all of our Long Islanders out there. A couple of my buddies, Chris Whiteman and Al Jemaine Sterling are from Old Island. And they're real estate investors as well, fans of seeing green. So let's break down your situation. First off, great energy.

Starting point is 00:02:41 You could be a podcast, so you've never thought of it. Hold on, don't get my ideas. Rob wants to keep his job. Second off, if you guys were listening to this on YouTube, you would see that Bobby has a strong resemblance to Colby Covington. We got a lot of UFC coming through. In this clip, and speaking of UFC, he's trying to figure out if he should fight to keep that property or let it go and tap out. What do you think, Rob?

Starting point is 00:03:06 Well, initially, I mean, it was a bit of a roller coaster because initially he said that it was cash flowing great. And then something happened with his mortgage. And now it's not cash flowing at all. My guess is that they had an escrow analysis. Taxes went up. And now his mortgage went up. Maybe insurance, too. Oh, yeah.

Starting point is 00:03:22 Insurance could change a lot. So if that's the case, listen, there are a lot of ways to, you know, to build wealth and real estate. Cash flow is not everything. With all that said, I prefer to make some cash flow. So if you're just breaking even on this bad boy, I would say sell a thing and get out of it into something that will hopefully produce a little bit of cash flow and then build your wealth with the other three benefits, tax pay down, appreciation and appreciation.

Starting point is 00:03:47 Yeah, yeah. Do that on the next property. But try to get that fourth cash flow one in there, if possible. I like it. I was talking to my real estate team yesterday about contacting our past clients about selling their house. And one of the agents said, I just hate telling anyone to sell a house because I want them to keep it as a rental. So I don't want to go back to our past clients and ask if they want to sell their home because I want them to keep it. And I said, well, yeah, if you sell the house

Starting point is 00:04:10 and you go buy a motorcycle and an RV and you take a bunch of vacations, that's dumb. But if you sell a house in an area that's so-so to buy in an area that's better, if you sell a house that's worth a little bit of money to buy a house that's going to be worth more and make more cash flow and appreciate, you just move the equity from a bad place to better place. Don't look at it like selling a house looking like replanting a tree. You're transferring. There you go. You're transferring your wealth into a better pot for that plant to live in. It sounds like the Long Island market or at least this specific property ain't working out. If a property is not cash flowing and even more so, if you can't find a tenant,

Starting point is 00:04:45 get out of Dodge. That is not a good scenario. The one Achilles heel for all real estate investing is it depends on having tenants. Yeah, yeah. He said that his property manager is a little nervous that he's not going to be able to rent it. I mean, if you're, or rent it for the same amount. So if your property manager is feeling that way, well, how much do you like them? Are they experienced? Maybe find a new property manager and confirm that this is true. I would hate for you to sell it without doing a little bit of due diligence. But if it seems correct, then yeah, just get it. Yeah, move the, I like that analogy. Move the flower pot, move the flower planting stuff into a bigger pot, David. I get it. Bobby also mentioned in our notes here that this,

Starting point is 00:05:25 property is actually furnished. And you don't want to lose all that furniture because the stuff's freaking expensive. No one knows better than Rob, buy nice, not thrice, obis, solo. And so you don't want to waste furniture. You're probably not going to get a lot for it in a traditional sale. So a couple things we could do with that. Maybe Bobby, before you sell, look if you could rent this thing out as a medium or a short-term rental. You never know. Is there a strong market out there for a furnished property? And Rob, where would you recommend he go? Price Labs, AirDNA. What's your advice? I typically use AirDNA. Just make sure that you are sifting through the bad comps and the good comps.

Starting point is 00:05:59 There's a whole strategy around this. But you just want to find comps that are very comparable tiers, right? Same bed bath, same square footage, same location-ish, same amenities. And that's how you can get a gauge of how much you could possibly make. But typically, AirDNA is the one that I use. Or you could talk to a property manager that manages short-term rentals and get a feel from a more experienced hosts in that realm. But let's say that that doesn't work.

Starting point is 00:06:20 The next thing I would do is I would go into forums. like Facebook forums or online communities in the Long Island area for people that are short-term rental and midterm rental operators. And I would see if anyone there wants to buy furniture because you're probably going to sell it to them easier and for more money than if you just sell it along with the house if you end up selling that thing. The last place I would go is Facebook Marketplace. I'd advertise some of that furniture for sale. I'd sell it there. But you don't want to just be like, oh, I'll give it to the sellers because the sellers are going to throw in a couple grand maybe if they even want that furniture. They might actually tell you that you need to

Starting point is 00:06:52 get rid of it because they have their own furniture. It's a very inefficient way to capitalize there. Yep, good points. Honestly, yeah, I mean, midterm rental, short-term rentals could be the exit strategy that helps, but a lot more management. And then also, just a little word to the wise here, just because of short-term rental grosses from a revenue standpoint a lot more than a long-term rental, it doesn't mean that it'll make more money. Because to run it as a long-term rental might cost you, now let's say $1,500 a month. And then you have operational expenses. with midterm rentals and short term rentals, that could cost you $3,500 or $4,000 a month to run as a business. And you have to make more than that. There's just some complexities there. So just make

Starting point is 00:07:33 sure you're running your numbers and that it's actually worth it to short term rent it because you don't want to just take a look at that gross revenue at face value. You want to make sure it's still going to be profitable. There's a fine line there, though. All right. There you go. Bobby, thank you for your message, man. Best luck to you. Love the energy. Love that you're making happen and good luck on that triplex out there in St. Petersburg. All right, we're going to be back after a quick break and we're going to get into some advice for protecting yourself from title fraud. So stick around. 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

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Starting point is 00:11:45 This question comes from Brian, and he says, I've got five rentals across four states, and I own most of them completely outright, so no loan. I'm looking for advice on how to protect myself from title fraud, as this is one of my biggest fears. This title theft stuff is coming up a lot, hearing more and more about it. When I read the question, my first thought was, well, if you don't have a lot of equity, this is something that's not likely to happen. However, well, Brian here's got himself a buttload. That's a technical term. Yeah, it is. Of equity. So I believe his fears are founded here. Yeah, I got a question. What is the, what's the problem? Like, I didn't know, is you owning a house

Starting point is 00:12:28 outright open you open you up to more title fraud? Yeah, basically, if someone's going to steal title to your home, okay, you got a million dollar home, but you owe $950,000 on it, what are they going to do with a million dollar home that only has to the $1,000 of equity. They're going to have a hard time selling it to anybody else. It's not really that valuable to them and they don't know how to operate the thing. So nobody steals those houses. What they look for is a $300,000 house that's been completely paid off. Because now they could go sell it to somebody else for $100,000 who thinks that they just got a great deal.

Starting point is 00:13:00 And the fraudster just made themselves a quick $100K. This is very educational for me. Run me through a scenario where this might happen. So I have a house. It's paid off. It's worth $300,000. Some fraudster can come in and what finagle some documents to make it look like. Yeah.

Starting point is 00:13:15 Or forge my name and then basically steal my house title from me. I don't know the exact process, but what it would involve would be. And that's because I'm not a criminal. You weren't a wire. You got to tell me if you weren't a wire. That's funny. Are you a cop? You got to tell me if you're a cop.

Starting point is 00:13:29 Yeah, you got to tell me. So what you would do is you would forge documents just like you said that show you created a doc, like an LLC and that person owns a property and they are going to, to be transferred the title from their own name or their entity into yours. You would then take that to a notary, which you could pay. I mean, it's not like notaries work for the CIA.

Starting point is 00:13:49 I guess you can still buy someone off in the CIA. They're not that hard to buy off, so I'm getting that. I've seen pain and gain. Yeah, there you go, exactly. If you and I were in that movie, who would be pain and who would be game? I think you would be Dwayne Johnson

Starting point is 00:13:59 and I'd be the other guy. Mark Wahlberg? Oh, Mark, oh, I'd be Mark Wahlberg? Hey, say hello to your mother for me. Look how happy Rob just got. First time you'd ever been compared to Mark Wahlberg. First time. Marco Walberg, actually, is what was... Marco Walbergo.

Starting point is 00:14:16 Walbergo. No, Wal-Amburgessa. That means hamburger in Spanish for anyone who's trying to put the piece together. Very nice. And we're back. So you would just go to a notary and you would say, hey there, I'm buying this house. I need you to notarize these documents. Here's a little five grand to grease the wheels for you.

Starting point is 00:14:33 They would say, oh, I happen to have an ID from Rob Abasolo here saying that I want to sell my house to David Green. And now I take that to the county assessor's website and I say, I've got documents here showing. There's a grant deed. This property has been transferred from Rob to David. And now they record it as belonging to David. And there's nothing you can do. You could go to the tax assessor's office and you could say, this was stolen from me.

Starting point is 00:15:00 I never agreed to it. And they're going to say, I don't care. If it's recorded as his, it's his. It's a civil matter taken up with the judge. and during that period of time, you've lost access to the house. And then what I can do is I can go sell it to somebody else. Now, I can't sell anybody else this house if it's got to lean on it for a lot of money. Because when I go to transfer the title from me to them, the lender's going to get notified and they're going to ask me paid off.

Starting point is 00:15:24 So if I try to sell them the house at a discount of $900,000 when it's a million dollar house, but there's a note on it for $950,000. There's no money in it for me. So that's why they target houses that have a lot of equity particularly that's what paid off. Wow. Okay, that's super interesting. I guess I would say, can you get title insurance after, I mean, title insurance is just protects buyers. Like pre-purchase. Yeah, that's the problem is if you're being, if someone's fraudulently stealing your properties, you are the seller in that situation. So the title insurance would be protecting the person who's stealing the properties from you. So that's like putting a bulletproof vest on the bad guy. That's not helping us here. So for anybody else that's worried about

Starting point is 00:16:03 this checkout episode 808, where we interviewed Sheila and Territus. Risa, who have a company consortia that's a blockchain company that's designed to help with property details and ownership. It was kind of like Carfax for a home. It might be able to protect yourself with some of the offerings they have. And then look for these warning signs. This will alert you to the fact somebody might have stolen title to your property and you don't know it. You stop receiving water bills or property tax assessments because if the title changes from

Starting point is 00:16:29 you to somebody else, those bills are going to go to that person when the county tax assessor office has their mailing address listed instead of yours. The utility bills on a vacant property rise suddenly or you find other people living there. You stop receiving your tenant's rent payments and learn that they've been making the payments to another person in location. That should alert anybody if that happens. But if you're using a property manager, they might not have understood that you didn't sell the property.

Starting point is 00:16:54 You receive payment books or other information from a lender with whom you haven't done business. So if you get letters in the mail from a lender and you never did business with them, that's a sign that something might have gone on, or you find yourself in default on a loan or are notified of foreclosure proceedings through a notice of default. Any of these things like, what's up this? Might indicate title fraud you want to call your county tax assessor's office immediately and say, hey, I own this property. Can you make sure that it is still in my name? Now, if it's not in your name, they're going to have the name of the person who recorded it under their name. And now you can start your gum shoe work of hiring a private eye, a detective, or doing your own work to

Starting point is 00:17:33 figure out who that person is and how they took title. Now, the good news for you is because most states require someone to have valid ID, in fact, all states that I know of to buy a property, they would have had to make up a fake ID and somehow pulled the wool over people's eyes to not use their own identity. So most of the time when this happens, you could find out who the person is that did it. Yeah, I mean, there's definitely some paper trail and I guess corrective action that could be taken, but it sounds very expensive. And I'm really glad we'd answered, I mean, mostly, we talked about this question, but I think it's important because I bet you there's a lot of people at home listening right now that we're just like, wait a minute, this can happen. Yeah.

Starting point is 00:18:12 And I'm one of them. Yeah, it actually can't happen. It happened to me. It didn't happen this same way, but it did happen to me. And it was a huge, huge, huge problem for me that triggered a domino rally of a bunch of other things that went wrong. So especially if you're a prominent investor like we are where people know who we are and we can become targets, it's even more easily to happen and if you own properties that are paid off or have a lot of equity, you're basically running around the big target on your back. Yeah, that's right. Remind me, have you mentioned it the other day?

Starting point is 00:18:40 What was your mother's maiden name again? So at this part of the show, we like to read some comments from previous YouTube post, as well as comments people left when they left us a review on their podcast app. Our first comment comes from Brady Morgan, and he says, David, you said it. Learn the trades. I left the corporate world about five years ago earlier in my real estate. and investing journey from the first bird deal that I did and I learned that construction is the biggest margin on real estate and I needed to know more about it. I started working as a framing carpenter,

Starting point is 00:19:11 joined my local planning and zoning board as a volunteer and then became a building inspector for my town. Today I have my own construction company building rentals and specs. Investing in new construction homes becomes so much easier when you don't have to pay someone the 20% general contractor fee. Honestly, learning the trades and construction has been more valuable than my MBA degree. plus I enjoy it so much more than sitting in a computer all day in a windowless office crunching data. That is a cool. I love this story. In fact, we need to get Brady Morgan on the podcast and talk to all Brady about how we pulled this off.

Starting point is 00:19:42 Because I think this is a great strategy for how you can make deals work in a tough environment. What do you think, Rob? Yeah, it's great. Yeah, doing the whole construction thing, whether you're doing it yourself, you know, DIY or professionally, I'm always an advocate for trying to build stuff at cost. And if you're doing that, I mean, it's, I think new construction. is one of the best ways to build wealth because you're getting amazing assets at cost to you. I think as long as you're willing to suffer through the construction process and all that stuff, but super sound, I love doing it. I'm doing more new construction this year.

Starting point is 00:20:14 Next comment, this is from dash zub0-885. He says, the recast explanation was a little light. Most lenders now will allow you to do it purely because it will typically free up lower interest rate capital that they wouldn't see and now can relend at a higher rate. Inflation has some benefits, I suppose. Basically, a recast is tied to a reduction of principle, and then the payment is reduced as the remaining balance is reamortized over the remaining term. If you, as a borrower, don't mind the opportunity cost of not investing the principal reduced amount, assuming it's a lower rate, then the lender slash borrower, it is a win-win scenario. Borrower gets a lower payment at same interest rate to pay less interest over time,

Starting point is 00:20:56 and lender will get to reinvest those funds in another borrower at a higher rate. Did you keep up with all that? That was a nice summation of the recast dilemma that we were talking about. So yeah, when rates go up, but you have a lower interest rate, lenders are more likely to let you pay them back quicker because they let you borrow money at 3%. You're paying it back. They can lend it at a higher rate. That also puts them in a position where they are incentivized to now call notes that are due. If you assume a loan from someone else at 3% or 4% and rates go up to 8, 9, 10%, lenders are like, hey, if I could get that money back for me, I can lend it out at three times the rate that I let somebody borrow it at. Sure. It increases the odds that that could

Starting point is 00:21:36 happen. And it decreases the odds that could happen. Obviously, when rates go low, but when rates go low, people refinance are not going to hold on to assume mortgages at 9%. So that is a great point. And if you're having trouble finding loans and you're sitting at a high interest rate and you're just trying to find a way to get more of a return cash flow-wise, hey, putting $100,000 or $50,000 towards your principal balance and decreasing it, especially if you're at an 8, 9, 10% interest rate is a way to increase your cash flow without buying more real estate. Yeah, I love it. One little note here from Island Derek, he says, recasting your mortgage, they typically

Starting point is 00:22:10 require a 30 to 50% equity before they can recast. I don't know if that's you, I've never looked into it that much, but something to keep in mind, I suppose, for some mortgage companies. Thank you, Rob. Great job there. I'm glad I brought you along. We love you guys. We appreciate your engagement. Please continue to like, comment, and subscribe on YouTube. And if you're listening to this in a podcast app, take some time to follow the show so you get notified every time seeing green comes out. All right, we're going to take a quick break. And then after that, we're going to get into advice for investing in Hawaii if it's still possible and how to do it.

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Starting point is 00:23:19 slash landlord insurance. Steadily, rental property insurance for the modern investor. The rise of the tech savvy investor is 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,

Starting point is 00:24:00 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. All right, rental property investors, listen up. Our friends at Dominion Financial already have some of the best DSCR rates in the industry. Now, they're the fastest, too. They just launched 10-day DSCR closing. That's right, 10 days. And they're still the only lender with a DSCR price beat guarantee. That means faster closing, the best terms, zero guesswork. That's Dominion financial. Check them out at biggerpockets.com slash dominion. Again, that's biggerpockets.com slash dominion. Tired of traditional lenders holding you back, host Financial is here to change the game.

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Starting point is 00:25:11 Stop letting outdated lending practices hold you back. That's hostfinancial.com where your property's potential meets unlimited. financing. Welcome back. We're going to close out today's show with one final question. This comes from G. Pettit in Florida. David, what's your opinion on investing in Hawaii? Where do you invest there and what strategies work on what islands?

Starting point is 00:25:31 You have mentioned frequently having different property types there, but is it worthwhile market over the long term? Many properties that I see are scummy leaseholds, condos that don't seem to appreciate due to their vast quantities and overpriced shacks. Is the Hawaiian dream dead? and what strategies actually work on the island from your experience? Is it worth it to burn cash on a house hack just to live in the area and get high appreciation? Are condos worthwhile with their fees and lack of controller appreciation? And can Airbnbs actually make money past all the regulation? Rob, I'm going to let you start with this one. Well, this is very much a like, hey, do you have five minutes to chat? And then it's like 80 questions and like it turns into an hour. There are a lot of questions to unpack here. So what is your opinion on investing in Hawaii, to be honest? I don't know if maybe I'm,

Starting point is 00:26:15 I'm just, I don't know, I think too much about it, but I haven't really put a lot of thought into it because I hear, you know, the different backlash and people not being super happy with, I don't know, real estate being snatched up. I got to be careful about how I word that, because I know you own real estate there, but I like the idea, but I don't know. I just don't really, I do think about it a little bit, I guess. I think about that. I'm like, well, I don't really ever want to, it's already hard enough to be a real estate investor in the United States where everyone on TikTok hates you, but if I were to talk about how I invested in Hawaii, I don't even want to know what those TikTok comments would say. So I guess I haven't really thought

Starting point is 00:26:54 about it. I could have said that. Yeah. Thank you for answering like a true politician with a lot of words and very little substance in anything. I'm scared, okay? I'm scared. All right. So I own properties in Maui. They are short-term rentals. I'm trying to get to all the questions that was asked to me here. They are in a form of an HOA in Hawaii. I guess they would be technically classified as condos. They're not leasehold. So these scummy leaseholds that G. Petit is describing is when, um, how would I describe this? Like basically instead of owning the land, you own the building that's on the land and you are leasing the land from the owner, which is usually a Hawaiian native. so they didn't want to sell all their land to people coming in that didn't live there.

Starting point is 00:27:41 So they said, look, I'm not going to say land, but I'll let you lease it from me for 100 years. And at the end of that 100 year term or whatever it is, we'll have to renegotiate another lease on this land. Otherwise, I get to keep all the improvements that you made on the property, which can obviously be scary. Because if you go build yourself a nice waterfront villa and the leaseholder says, hey, I don't want to renew the lease, or here's my real expensive lease terms, they'd be able to take your property. The other way of owning property is called fee simple, which means that you own it yourself, which is how most of us are used to owning property. As far as should somebody do it or not, should they buy in Hawaii, I'm going to just relate this to every appreciation market. In the golden era of real estate where we had low rates, lots of inflation, lots of opportunities to buy real estate before it became easy to do because software was created and podcasts were created and strategies were shared, you could get cash and appreciation in the same market.

Starting point is 00:28:34 it's getting to the point where I'm starting to see in my mind a delineation between these two strategies. You've got cash flow markets, which tend to be low priced homes, closer to 1% rule, where you can get cash flow, you're probably not going to get a lot of appreciation. And then you've got appreciation markets that are almost the opposite. You're going to get appreciation, but you're probably not going to cash flow. Okay. In order to invest in these appreciation markets without losing money every month, you have to put a very sizable down payment down. So what's starting to happen is that if you want to get into the appreciation markets where you will make more money long term, you have to have more money to play. So what happens is instead of buying a million dollar place and putting $200,000 down, you buy a million dollar place and you put $500,000 down.

Starting point is 00:29:18 And then that million dollar place becomes worth $1.2. So you made $200,000 on your $500,000 investment, which is a 40% return on your money, but it did not come as a cash on cash return. It came as a cash on equity return. Let's call it that. Like your ROI basically, right? Oh yeah, your ROE. Yeah, a return on investment has been synonymous with cash on cash return, but it really shouldn't be.

Starting point is 00:29:41 There's different ways that you get an investment. That's kind of the topic of the book that I'm writing. So if you don't have a really big down payment, you really shouldn't be investing in a market like Hawaii or like Malibu or like Miami, some of these places that are going to be more expensive because you're not going to cash loan. If you're not in a financially strong position through a lot of money or or through the ability to whether a lot of not cash flow, you shouldn't be playing there.

Starting point is 00:30:05 You're gonna have to go to these cash flow markets that aren't gonna get appreciation and just go slower. You're gonna slowly build equity. You're gonna slowly 1031 into something better. You're gonna learn the principles of real estate investing. You're gonna take a couple years to get it down and then maybe a 1031 into a market like Hawaii. And I guess that's the way that I'm starting to notice investors

Starting point is 00:30:25 have two different routes that they can take. Well, we never had to have this conversation before. It was, do I want a lot of cash flow in a cheaper market or a little bit of cash flow in an appreciation market. And I think that the skills have kind of tipped away from that. What do you think? Yeah, interest rates have made it harder to, yeah, have made everything a little bit tougher. I want to impact something you said, which is the cash on cash versus ROI because some people might be like, whoa, what? I totally get this. This cash on cash, you right, has been synonymous with that. So basically, cash on cash is how hard

Starting point is 00:30:53 your money works for you in one year time. So if you invest $100,000 into a property and the profit after all of your expenses is $15,000, you would divide that $15,000 by the $100,000 investment, and that would be a 15% cash on cash return. That is the golden metric and a lot of different real estate investments for sure in Airbnb too. Whereas you get into the ROI side of things, and I think ROI is a breakdown of cash on cash, the tax benefits that you got from deductions, appreciation. When you factor all four of those in, that's what gets you your IRA or your rate of return. Which is another metric for. measuring return on investment. Are you agreed with that definition? And that's what literally the next

Starting point is 00:31:34 book that I'm writing is about is ROI should not be synonymous with cash on cash return. They're not the same thing. There's 10 ways you make money in real estate and I have invited in the four categories you said, Rob, cash flow appreciation, tax savings, which is depreciation. That's why you keep getting mixed up as well as loan pay down. So you can make money in real estate in all of these ways, but that doesn't mean that they're all equally good for everybody. If you're someone who's got a $3 million net worth, you can go invest in Hawaii and delay gratification and make your money through equity, which is energy stored in the property. But if you're someone who's living paycheck to paycheck, you don't really have that luxury. You're going to have to go into somewhere that's lower risk where you actually

Starting point is 00:32:13 get cash flow every single month and you're going to make your money through energy you put in the bank, which would be the cash. And we've never needed in the past to differentiate between these two things. What we always said was invest for cash flow and hopefully appreciation will happen. So the question was, is the Hawaiian dream dead? It probably is not dead, but it is out of reach for the new investor who's like, I want to buy my first house. I want to do it in Maui. No, you don't. That's like, I'm going to start going back to the gym and get in shape. I should go to CrossFit. Absolutely not. You will die. Don't do that. Start taking a walk. Measure your steps. Go to a gym, work out at a pace that you can handle and earn the way to get into CrossFit.

Starting point is 00:32:51 I think investors should look at it the same way with these appreciation markets. Final little thing on the question he ended with, which is, can Airbnbs actually make money past all the regulation and what locations do you invest in? I do want to say one little thing, you know, going back to my non-answer earlier about genuinely considering what the Hawaiian population, kind of their feedback about investors coming in and snapping up property, there is a housing shortage in Hawaii. And typically in cities like L.A., New York, San Francisco, and then places like Hawaii where there are such extreme housing shortages, the regulations typically follow suit. And so for that reason, I'm also uninterested in investing in Airbnbs out in Hawaii because I just don't, I don't know

Starting point is 00:33:33 if I can trust that regulation will keep me as an Airbnb investor, you know, keep my interest at play. I think it's, you know, they don't really, they're not going to watch out for us, which is, you know, I don't have an issue necessarily with that, but that is my... I mean, that happened to me in Maui. I bought properties. Luckily, I bought in a resort zone. A lot of people were not buying in resort zones and they all had the hammer come down on them. Our producer here put ordinance 227, which was packs in October of 2022, basically spelled out that Hawaiians can find people for operating short-term rentals if it's not in a resort zone.

Starting point is 00:34:04 And I believe it's like $10,000 a day. And they actually have department officials that proactively go look for these. They send someone in a car. They take pictures of your guests, checking it out with their suitcases. They hit you with a $10,000 fine. So they're not joking around. It's not just Hawaii. I'm seeing this everywhere, and they only do it when people apply for a short-term rental permit. So it is, it's not like it's a bad strategy, but you have more due diligence going into this than people ever had before. All right, everybody, we hope you enjoyed today's show. Rob and I sure did. So if you like this stuff, please make sure that you subscribe to this podcast. Rob, anything you want to say before we go?

Starting point is 00:34:40 No, I liked all of. These were all thinkers. Usually we have a couple softballs, but I feel like we really had to talk through every one of these questions. Absolutely. This was a tough show. Thanks for being here with me to take some of the pressure off, Rob. If you want to know more about Rob or I, our info is in the show note. So go check that out and keep it out for the next episode of Seeing Green. This is David Green for Rob Aristotle Abasolo, signing off. What's the connection on that one? You're a thinker. Oh, I like it. Thank you. That's the nice thing you've ever said about me. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by some subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. On the host, an executive producer of the show, Dave Meyer, the show is produced by Ian K, copywriting is by Calicoe content, and editing is by Exodus Media.

Starting point is 00:35:51 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. 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 indicative of future results.

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BiggerPockets Real Estate Podcast - 945: Seeing Greene: Stolen Properties and Why Your Rate Doesn't (Really) Matter

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