Epic Real Estate Investing - Best Practices Dealing with City Officials | HTH 011 | 504

Episode Date: October 24, 2018

Dealing with city officials is like dealing with police officers. Instead of making your life really hard, make it easy! Learn the best answer you can give to a city official (and to a police officer); the importance of knowing their system, procedure, and general rules; and why you should be proactive rather than reactive. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Don't wait for appreciation to buy real estate. Buy for cash flow. And wait. In other words, Hold That House. Your host's Matt Andrews and Matt Terrio. Hey, flipping houses.

Can make you rich. Holding them will make you wealthy. This is the Hold That House show. I am Matt Terrio. And over there to my left is Mr. Matt Andrews. Bust a move. There he goes. Before we begin, we've got a free gift for you.

We've got a great show for you today, but before we get started, we got a free gift for you. Go to hold thathouse.com, hold that house.com, and download the four-hour work month. It's the 10 commandments to managing property managers, really the key ingredient to financial independence through real estate that no one's talking about, that no one's telling you about. And you can get that for free at hold that house.com. All righty, Maddie. We've got a, I don't know, rather specialized subject. today. We do. Right? But it certainly can impact a buy and hold investor's long-term results. Absolutely. For sure. Absolutely. This is good for, you know, if you are landlording yourself and you're

managing your own properties, or if you are hiring out property managers, this is stuff they need to know. Right. And a good property manager will know this stuff, but we're going to tell you and talk to you today about how to play nice with the city officials who have some control over your property and how you do things, right? They have more control than you can really imagine when you start getting into it. They really do. And they have a lot of, you know, subjectivity on how much control they can exert. And a lot of that really depends on how you deal with them, you know. So what we're going to talk about today, and it'll be a pretty quick, you know, podcast because I want to just break down just a few keys of how we work with different inspectors and city officials.

So, you know, who are the people that we're talking about for starters? We're talking about, I mean, it could be one of any number of these people, like a building inspector, a plumbing inspector, electrical inspector, a compliance, you know, code. city code inspector. That's a big one, right? A plans examiner, a city planning department, you know, fire department, health department, tax collector, anybody who... I'll forget that weed abatement guy. Oh, yeah, that weed abatement guy, yes. And Section 8 inspectors, right?

So all of these people are people who will, you know, could be inspecting your property for one reason or another. And, you know, depending on how you interact with them and how you comply with what they're asking you to do, they can make your life really easy or they can make your life a living nightmare, right? And cost you a lot of money and kill your cash flow if you don't deal with them, right? So, you know, I think about it like, you know, when a police officer pulls you over. Let's say you were speeding and you were clearly speeding and you know it, right?

And they pull you over. There's two ways to react. Right. You know, you can either say, you know what? You're absolutely right. I was speeding. I totally deserve a ticket. I'm sorry.

You know, appreciate what you guys do. Do whatever you got to do. You know, and you're just cool. you know, or you could say, yeah, I know why you pulled me over. You know, everyone was going that same speed. I was falling the flow of traffic. I don't know why you got to be such a jerk. Well, guess who's getting a ticket?

Right. That guy. Right. That guy is getting a ticket. There's another side of that equation, getting pullover speeding and you actually weren't. That's true. Trying to be right about it, even if you are right, you're wrong. That can be a very expensive proposition.

Exactly. Well, the bottom line is you're never right. Right. Right. The only thing that's right is, yes, sir. Yes. That's the only right answer. So even if you weren't speeding, you didn't roll through that stuff.

stop sign, no matter what, it doesn't matter. You got pulled over and they're going to react based on how you react. And that can either end up with a warning and, hey, you know what, slow down. I'm going to give you a warning on your way. Or that could be, okay, you know what, pal, get in the back of the car, we're going to chat for a while. Right. You know, and so those are the opposite extremes and they exert a lot of control over you.

These inspectors, I approach them the same way. Right. All right. They need to be validated. Maintain the big picture. Keep the big picture in mind. Exactly. So you want to win the war.

Yeah, exactly. Absolutely. Absolutely, because the war is long-term cash flow in a battle is, you know, hey, you're paying a little bit of money right now to do a quick fix on something, you know? So, you know, here are my basic guidelines. Number one, know who the players are. You know, right? So know who these city officials are that could affect your rental. The big one's going to be like city code inspectors. Okay, these guys, depending on the area you're in, the market you're in, have a wide berth of what they can do and what they can ask you to do. okay and they will you know depending on how you react to them and how you interact with them

they can decide to be kind of lenient or they can decide to be pretty tough on you right so you have to know who those players are uh know who those people are and you may not know the exact inspectors but know the city code enforcement agency know what their process is know from a general framework what's expected of you as a property owner right and your manager should know that too obviously if he's managing properties for you so know who those players are Second, get to know the system. Get to know if it's Section 8, you know, if that's the office that's coming to inspect your house for a Section 8 renter. Get locked in on that process.

Know how that works. When do they schedule the inspection? After the lease is turned in, is that what generates the inspection? After the lease is turned in, how many days is it until that inspection happens? Once that inspection happens, how many days until that gets back to the Section 8 office to okay them to move in? Understand what that process is because there are ways you can take things that take five days. sometimes and put them down to two days or take things that take two weeks and shrink it down to a week. And all those things can add an extra month, sometimes even two months to the time it takes to rent a

property. And that's, I mean, holding cost is, you know, where a lot of people lose their money, right? Just holding property too long before it's cash flowing. So know that process, know the system, know the general rules that you're operating in, whether that's city code compliance section 8 or whatever it is. Next, get to know the people. So if you were actually renting out property of Section 8 and these inspectors are meeting you there or meeting your property manager there to let them in and look at it, get to know those people.

You know, if you're investing in a particular area, a particular market, and let's say you're investing in a particular segment of a city, many times there's just one or two inspectors in that area. You know, like I know in Tampa where I do a lot of investing, there's one inspector that has, you know, this whole 10-mile radius where I own a lot of my rentals. So that guy is kind of the guy, you know?

you better believe I made friends with him. Right. You know, when I was managing my own properties and then when I pass that off to a manager, you better believe I introduce those two. And, you know, hey, Mr. Inspector who loves me, this is my manager, you're going to love him too, you know, and we're going to do everything you ask us to do and everything's going to be great, you know. So, you know, get to know the actual people if there are the same inspectors coming in

or the same city code inspectors. A friend is going to help you so much, you know, if those people are your friends, it's going to help you in so many different ways. And it saved me, I mean, probably. hundreds of thousands of dollars over the years by not having to get certain things done on a certain schedule. And that's about remembering the goal. Remember in the long

term. You're like, what are you trying to do? You're trying to make sure this property cash flows at its maximum peak efficiency. So that's what the goal is. So if that's the goal, then don't get into an argument and win the day because you're going to lose the goal. It's not about who's right or wrong.

It's a math equation inside your portfolio. It's pragmatics. Yeah, exactly. It's about okay let me do my math today. Here's the pluses. Here's the minuses. Let me add them all up. And what do I want actually to have in the long run?

That's your decision. That's your course of action. That's right. Absolutely. And, you know, I like to look at it from their perspective. You know, understand, you know, this might be the biggest thing in your day meeting with them. And if they don't give you what you want or do it like you want to, it's going to wreck your day, right? Well, guys, you might just be one check mark in a box of 800 other boxes they have to check that day.

Right. Right. So what's their perspective? They want to get into this and get out of this with the easiest possible, peaceful resolution and move on with the day because they've got to have 800 other check marks, right? And you might think, you know, I'm the only person on your docket today. And that's you thinking like you. Right. Think about it from their perspective.

So how do you make their job easy? You know, think about it like that. You know, hey, and I even tell them, you know, when I'm, I almost romance these guys. I'm like, man, I appreciate what you do. I know there are a lot of renters around here that, you know, do some crazy things and you probably see everything. You know, I bet you've seen some crazy stuff. And when you tell somebody something like that, and an inspector, they'd be like, most of the time,

the answer I get is, man, you wouldn't believe it. The other day, and they'll start to tell you a story almost, you know. And now you've shown that you understand what they do and you have respect for what they do. And you know that it's hard. You know, you've identified their high horse, you know, a little bit. And so that's, that kind of ingratiates them to you and it turns them into a friend.

So if you look at it from their perspective, you try to make their life easy. They're going to make your life easy. because they're going to appreciate that. Again, just like the police officer that pulled you over, the last 10 people smarted off to him, he's in a bad mood and he pulls you over and you're just super cool, respectful, and deferring to him and everything, that's going to go a long way. And it's the same thing with these inspectors.

You know, I say, you know, remember Fonzie from Happy Days? Of course. Who does not remember Fonzie? The Fonsi, right? Fonzie was cool. Everybody liked Fonzie because Fonzie was cool. So when an inspector comes to you and is requesting something, it was Section 8, person to ask you to do this, that even if you don't think it's right, just be Fonzie.

Stick those two thumbs up and say, hey, you know, and just be super cool. That's the way to get things done. Just remember, it made me think of when Fonzie was about to lose his cool. You do the woo, woo, woo, woo, you know what I think? That's right. Like he totally fought off losing his composure. That's right. And it took everything within his being to resist that loss of control. That's right. You know, yeah. Then he went and took it out in the jukebox. That's okay. The jukebox is inanimate object. Can't hurt you. After, what was the officer, what?

Officer, what? Officer Kirk. Was it Officer Kirk? It might have been, yeah. I think it was Officer Kirk was his nemesis and, uh, yes, hello Kirk. That's right. Hello, Fonzarelli. Awesome. So yeah, after Kirk was gone, then he went and beat up the jukebox.

Right. But don't beat up the jukebox in the presence of Officer Kirk. Exactly. And if there's only one thing you remember from today, it's don't beat up the jukebox in the presence of the officer. Exactly. Take it out of context. You have no idea what we're talking about, but you all will know,

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And then another really best practice here is make a friend at the office. And this seems super simple, but this goes such a long way. And I'm thinking about this particularly with Section 8. You know, we have a particular procedure. Some of the markets I work in, and, you know, in Tampa we were doing and are doing a lot of Section 8 rentals. So a lot of our buy and hold properties there are Section 8 renters. And it's a fantastic program that works really well in Tampa. I know it's different all over the United States.

Some people might hate Section 8. I love it in Tampa because it's a great office. But still, it's government. And sometimes things can take way longer than they should just because of inefficiencies. Right. And I'm not going to get on a government ramp, but we all know it's not the most efficient company run in the world. Right. So one thing we did when we decided, hey, we're going to start doing a lot of Section 8 rentals. I went down there myself to the office.

and, you know, they weren't expecting me, you know, there was no one I had an appointment with or anything. But I just introduced myself, first of all, to the front gatekeeper. You know, the woman answering the phone at the front, I introduced myself, hey, I'm a new landlord in the area, and, you know, we're renting Section 8. We're really happy to be working with you guys. This is great. That just blew her away. Her jaw just dropped. Like, you're coming here telling me you're really happy to be working with us.

No one has ever, you know, given me any sense that they are pleased that they're working with us or anything like that, you know? So that went a long way. she then helped me make a contact with someone else in the office who had some real power. I made friends of this girl named Tina. And, you know, I mean, long story short, there were certain things that were going to take three or four weeks to get approved. And I called Tina a few times and said, look, this is going to take like three or four weeks. And I don't know if there's anything you can do, but, you know, is there any way you can help me out? And Tina remembered that I brought her candy a few weeks before that or whatever.

I'm like, I'm the guy that bunch of candy that time. Is there anything we can do? She's like, oh, yeah, you know what? I could probably just get this push through for you. It took two days. Okay, so four weeks shrunk down to two days. You know what that meant to me? That meant an extra $800 in rent that I wasn't going to have.

Or what a $5 box of candy? Right, on a $5, yeah, some good and plenty. That's a good ROI right there. It's a really good ROI. So, you know, simple things like that, guys, just letting people know and making a contact, a personal contact, you know, just goes a long way. So if you guys are managing your own rentals, do that yourself. You know, if you have a property manager, you know, tell them they should be doing this.

If they're going to be renting a ton of properties through the Section 8 program, having a friend on the inside, you know, an inside player, so to speak, is absolutely key. And like I said, it took me from four weeks down to two days on a couple different situations. So I really can't, you know, I can't emphasize that enough. Make a friend at the office. Be Fonzie. Be cool. You know, make sure everybody likes you and make sure you're complying. And then lastly, you know, you want to be proactive, not reactive, right?

You want to do that in every phase of your real estate business. But especially when we're talking about this type of thing, if you get a letter in the mail from CityCo that says your trees need to be trimmed or your lawn needs to be mowed or whatever it is. You know, your doorbell needs to be replaced. Whatever the request is, don't sit on that. Don't let that, you know, don't put that on the side of your desk and let it sit there for two or three weeks. Like Fonzie.

Like Fonzie. Don't sit on it. Don't sit on it. Right, exactly. So you want to call them back right away or respond back however they've asked you to. Usually it's a phone number you would call that. actual inspector. In Tampa, it's the actual inspector. So as soon as I get it, even if it's something I know I can't fix in a day or two, I call them

and say, hey, you know, we've got this information. I see that there's, you know, overgrowth in that yard. They need to mow the yard. I want you to know that, you know, that's my tennis responsibility, but I'm going to go ahead and send my guy out there to do that. Would it be okay with you? Today's Tuesday, would it be cool with you if I have that done by Friday? And would that work for you? Right. Okay. And that person, that inspector, most of the time I was going to say, you know what, Matt, that's fine. I appreciate you calling. A lot of people ignore us.

And then we start fining them. And then, you know, when they feel validated, when they feel heard and you call them back right away, it's easy to get things done. Right. You know, where it's really hard is when they've sent you four notices. Yeah. You haven't responded to any of them. They've called you.

You haven't responded to a call. And then finally you call them a month later, the day before your fines are about to start and you say, oh, I need two more weeks to get this done or get this roof repair done or whatever it is. Well, they have the power to say, sure, we'll extend it for you. But if you've ignored them four or five times, they're not going to do that. They're going to say, well, you know, dude, we sent you notices for a month. We try to call you. As far as we knew you were dead because we got no response. Now we know you're alive and you were just ignoring us. We don't like you. Right. So no. We're not going to give

you extra time. And it's going to be $15 a day until this problem is corrected. And it's just a cruise. This is how I know. And we do this back and forth all the time. This is how we know each other. We actually do invest in real estate because like, oh God, boy, I remember that one. This is the kind of stuff you only know when you've really done it, right? Yeah, you don't read this in a book. You do not. There's no course that prepares you for that. This is real world experience. Yeah, absolutely. And so that's really it. Those are the main points that I would, you know, just say that all of you should be implementing in one way or another. Get to know the players. Get to know the system. Get to know the people. Show them respect. Remember your long-term goal.

is to make cash flow and realize that these people can crush that goal for you if you don't deal with them the right way. Right. Right. And most problems are not that big. Most of them are pretty simple fixes. They only get big when you leave them, right? And always be proactive, not reactive. Always get back to them right away when they send you a notice.

Validate it. Tell them what your plan is to correct it and make sure that works for them. Because if it works for them, it works for you. If it doesn't work for them, trust me, it ain't going to work for you either. It's, you know, good luck with that. And you can try and fight inspectors. Good luck with that, too. Right.

Because I learned that lesson really early on too. And, you know, I learned it hard. Here in the office, we've got really like three things around this aspect. Because you've managed so many of your own properties, so many more properties personally than I have. When we have to deal with it, usually it's gone above and beyond the property manager. And it's up to the owner now to deal with an issue. And one is don't be right. Don't try to be right.

there is no ROI on being right except your pride and your pride in this business, particularly dealing with the city officials, can be very expensive. You're going to sit on your pride, right? Yes, absolutely. Just say, you know, the whole cop analogy, yes, sir, no, sir. The other one that you would hit on was, we don't delay. Do not delay. As soon as you get that response, you got to drop everything and get right on it.

And, you know, even a couple days worth can make a big difference. And, you know, go ahead. When you have a chance of our paths cross, go ahead and ask me how I know that one. Right. You know? Yeah, exactly. That's not a good lesson that you want to learn or you don't want to learn it that way. Yeah.

Learn it here because it's absolutely free and unobtrusive and it's actually a much more comfortable environment to learn that lesson. Absolutely. And the third one was don't make their job difficult. Yeah. You know, you hit it right there. So perfect. Put yourself in their shoes.

Make their job easy. And you make their job easy. Life is going to be much easier for you as a buy and hold investor. And if you make their job easy, it's going to come. back to you. I mean, I'll give you one quick example. One of our main property managers in Tampa has a fantastic relationship with, you know, like I said, one area, like a 10 mile radius there where we own a lot of rentals. So, you know, my manager, John, has done a ton of interacting with this manager. On one of the last properties, you know, I was looking at my statements and I'm just like, wow, how did we get those people moved in so fast?

Like, we had someone move out and someone moved in like seven days later. Usually, if you're renting at Section 8, you then have to go through the process again. And you're going to have probably a 30 day, at least a 30 day, even efficient property manager will have a 30 day gap there where you don't have any income. We had somebody moved in at seven days. I was like, John, how did we do that? And he said, you know, I called the inspector. I said, it's ready for inspection. And he said, you know what, I'm booked solid. I can't even get to you for the next like few days or whatever. But you know what? I've checked the last hundred times you've done this. You've always done exactly what we asked. So just go for it. I'm going to sign off on it.

He didn't even inspect it. You know, hopefully I didn't just get him in trouble. But, you know, Don't tell on him if, you know, if you're listening to this. We didn't drop which city, I don't think, did you? No, I didn't. Okay, I didn't. It's in Poughkeepsie, Idaho. Yes. It's where this happened.

Section 8, Pekipsy, Idaho. It's my favorite cash flow market. He didn't even, he didn't even ask, I mean, he didn't even go by and inspect it. Based on the reputation of my manager and based on the fact that my manager had forever made his job easy. Fantastic. He didn't even look at it. Fantastic. And you can't put a price all that worth, exactly.

Exactly. Invaluble. All righty. That's it for today. Flipin houses can make you rich. Holding them will. will make you wealthy. We'll be back next week.

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