\n<\/p>\n
Which rental property \u201cdeal-breakers\u201d<\/strong> could kill your <\/strong>cash flow<\/strong><\/a>? When is the right time to stop saving and start investing<\/strong>? And what should you do once you\u2019ve hit your passive income<\/strong> goals? These are all questions that everyday real estate investors like you are asking, and on this episode of Seeing Greene<\/strong>, David will provide all the answers you need. So whether you\u2019re just getting started, questioning when to invest, or ready to retire early<\/strong><\/a> but don\u2019t want to regret the decision, this is the episode for you!<\/p>\n David Greene, your expert investor, agent, broker, and podcast host, can help you reach your wealth-building goals<\/strong> faster than ever. This time, David outlines the three pillars of saving and investing<\/strong> and how following this simple guideline can stop you from losing all your wealth <\/strong>in one fell swoop. Next, we debate whether or not paying off a rental property <\/strong>makes sense in today\u2019s unstable interest rate <\/strong>environment and how inflation<\/strong><\/a> is making real estate investing more challenging than ever before. Finally, we touch on rental property \u201cdeal-breakers\u201d and what your agent should tell you before you buy a deal.<\/p>\n Want to ask David a question? If so, <\/strong>submit your question here<\/strong><\/a> so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums <\/strong>and ask other investors their take, or follow David on Instagram<\/strong><\/a> to see when he\u2019s going live so you can hop on a live Q&A and get your question answered on the spot!<\/p>\n David: Matthew: David: Branco: David: JD: David: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast, show 735.
The reality is, every property I\u2019ve ever seen in my career is not up to code. Okay? Most cities in the Bay Area where I live require you to get permits, if you change the flooring, if you change the faucet, if you change your landscaping in the yard. If you actually look at what the city requires you to get permits for, it\u2019s everything.
Even homes that are built like new home construction are not up to code with every single thing. Now, that does not mean it\u2019s okay to not get permits. It just means it\u2019s not a deal breaker immediately because something isn\u2019t permitted.
What\u2019s going on everyone? My name is David Greene, and if you don\u2019t know, now you know. This is the best, the biggest and the baddest real estate podcast on the planet, and we are here to talk with you. In today\u2019s episode, a Seeing Greene style show, I take questions from you, the BiggerPockets community, and I answer them for everyone to hear, and boy is it fun.
We get into some tough stuff that doesn\u2019t get asked very often, and I had a very fun time answering some challenging questions. These included topics like, \u201cHow much of the money that I am making in savings should I be investing? Is there a formula that I should be following?\u201d \u201cShould I pay off the existing properties that I have right now or should I continue to expand? I\u2019m not sure what the right road is for me.\u201d And, \u201cI\u2019m buying a property, but it\u2019s not all permitted. Should I go forward with it or should I not? How do I know what to make of this?\u201d All that and more on today\u2019s show.
Before we get into it, I have a quick tip for you. This is very near and dear to my heart, and I hope all of you listen closely.
Wealth building is about more than just buying property. I know you are here to learn about real estate investing and that\u2019s what this show is. But it would be wrong not to tell you that if you want to build wealth, you also need to save money. Now, this is like telling you that you need to eat your vegetables. I understand no one likes it, but pay attention to where your money is going.
Tracking your expenses is incredibly frustrating, but incredibly fruitful. I\u2019ve been sharing this within the communities that I run, all of the people that are following me, I\u2019m telling everybody, we have a recession coming down the road. Every dollar you make needs to be protected. There are people that want to take it from you. Get serious about saving your money so that when the right deal comes, you\u2019re in a position to take it down. All right, let\u2019s get to our first question.<\/p>\n
David pilf study Greene, thank you so much for taking my question. My name is Matthew Van Horn. I\u2019m from Memphis, Tennessee. I have a small portfolio. I own three short-term rentals here in Memphis, and I have a side business managing short-term rentals for other folks. By the way, if people don\u2019t understand the pilf study reference, they need to listen to episode 674 with Ashley Hamilton. It is informative and very, very funny, I thought.
David, my question is this, how often should I invest relative to my savings rate? I hope that makes sense. Just to throw out an example, let\u2019s say that I\u2019m able to accumulate $5,000 per month, whether that be from job, business, real estate income. Let\u2019s say I can accumulate $5,000 per month that can be reinvested toward future deals. Is there any formula or some sort of rule of thumb that says how often I should invest that?
Is there kind of a rule of thumb that says you should invest once per year, so I should invest when I have that 60K after a year? Does it make sense to invest just simply as often as I can no matter how small the deals are? Am I asking a dumb question? Just hoping you can help me out with this, David, I appreciate you.<\/p>\n
All right, thank you, Matthew. I appreciate seeing you again and yes, that was a hilarious episode with Ashley Hamilton. I highly recommend everybody who likes to laugh to go listen to that one. It was very fun as well as inspiring.
All right, let\u2019s talk about your question. I\u2019m going to do what I normally do. I\u2019m going to start with a broad take on it and then slowly get more narrow. My personal opinion, this is just David Greene talking right now. I\u2019m not representing everyone at BiggerPockets or everybody in the world.
Is that it doesn\u2019t work to frame the question the way that you did, but yet we all want to do that, okay? So people will say, \u201cWhat percentage of money should I set aside for repairs or emergencies?\u201d People will say, like you, \u201cWhat percentage of my income should I be investing?\u201d There\u2019s this comfort that comes from clear, concise formulas. If I can put it in a spreadsheet, it makes me feel like I\u2019m being safe and I\u2019m doing the right thing.
The danger in this, is that life does not work according to these rules that we create. A lot of these rules, if I\u2019m being completely frank, come from financial advisors that are selling people like you that are listening to this, on methods that come with the inherit comfort, but they\u2019re not real, okay?
So when Suze Orman or Dave Ramsey or whoever the stock trader person that you\u2019re listening to is talking, they have to package the information in a way that your brain can receive it and say, \u201cThat makes sense. I will do that.\u201d They\u2019re trying to get you to take action, which is not inherently wrong. It just becomes dangerous when you think life works in a spreadsheet because it really doesn\u2019t. Okay? And it actually becomes constricting for your own growth when you think this way.
I had to go through the same little thing where you are, where Morpheus is holding out the red pill and the blue pill and he is like, \u201cYou could take the blue pill and you could wake up and you could go right back to how you thought before, or you could take the red pill and you could accept the truth, but it\u2019s going to be very discomforting.\u201d And so I can\u2019t tell everybody when they need to take that pill or if they should. You have have to make that decision for yourself. Okay?
So I don\u2019t want to make it sound like I\u2019m insulting you, Matthew, because I\u2019m not. You\u2019re asking a great question that applies to so many people. I\u2019m just trying to give some background that you\u2019re not going to hear in other places. The reality of real estate is you don\u2019t know when the thing\u2019s going to go wrong. Okay?
I\u2019m going through a process right now where I was kind of forced into it by someone stealing title to my properties and me having to sell and going into a 1031 and buying a whole bunch of real estate in a very short period of time, and then the perfect storm hit me. I can\u2019t get cities to approve permits. I can\u2019t get architects to drop plans. I can\u2019t get contractors to finish jobs. I\u2019ve got eight vacant multimillion dollar properties that are bleeding right now, and there is nothing I can do to get out of this mess. I did not see this coming because I didn\u2019t realize how bad the permit process would be.
If I didn\u2019t have wildly big reserves because I\u2019m extra conservative, this could tank me. I\u2019ll be fine because of the reserves, but it doesn\u2019t feel good. It sucks in the short-term. And if I set it up where I have six months of reserves for every single property and I put it in a spreadsheet and this is the way that it works, I\u2019d be screwed right now.
I take a different approach. When I took that red pill, which is not to be confused with political stuff, just that understanding that it\u2019s not going to work in a spreadsheet with real estate, I realize that there are three pillars that I need to focus on and excel at, that actually work, whereas the spreadsheet approach doesn\u2019t.
The first pillar is defense. I have a challenge every day. What percentage of my money can I save? Can I avoid buying the Ferrari? Can I avoid spending money extravagantly just because I have a lot of it? When I travel and I go to a hotel, do I upgrade to the presidential suite just because I want to look cool and I have the money to do it or do I stay disciplined and not do it? When I travel, do I make sure that my assistant is still looking for the cheapest flight, not just taking the shortest road of, \u201cOh, David\u2019s got plenty of money. I\u2019ll just book him on this flight.\u201d That\u2019s losing at defense and defense wins championships, so I\u2019m always keeping my spending low.
That doesn\u2019t mean I\u2019m depriving myself, but I don\u2019t spend money just to spend it. You will never see me, I hope, pouring out champagne from a bottle that\u2019s expensive. Just so everyone knows I have so much money I can burn in. I think that\u2019s wildly disrespectful to the finance gods when you live that way.
The next pillar is offense. Am I making as much money as I possibly can? You\u2019re saying, you\u2019re making five grand a month. I would much rather have you asking a different question, \u201cDavid, how can I make more than five grand a month? How can I double the amount of money I\u2019m able to make and save?\u201d Rather than, \u201cAt what rate should I be investing the money that I am making?\u201d It\u2019s just a better question to ask. If we\u2019re all keeping our pedal to the metal with offense, we\u2019re making as much money as we can. We\u2019re growing personally. We\u2019re looking for ways to challenge ourselves. We\u2019re getting out of our comfort zone.
And the third pillar is investing. How do I invest as prudently as I can? Now, this is, you\u2019re sort of asking me a question in Spanish and I\u2019m answering it in French. I understand this can be confusing. I\u2019m just saying, I don\u2019t think I can answer the question you\u2019re asking because the world does not work that way. It works that way if it\u2019s like, \u201cI\u2019m going to invest in stocks, they\u2019re going to get me a 7% return and I can calculate that in the next 40 years of time, if I invested a 7% return, I can expect to have X amount of money.\u201d The reason that doesn\u2019t work is because inflation is higher than 7%, not just CPI inflation, but how much money is being printed.
Those predictable strategies that are comforting will cause you to lose. You cannot keep up with how much money is being printed doing that. The only way you win now is by excelling at the three pillars. Saving as much as you can, making as much as you can, investing the difference.
Now, when it comes to investing, I\u2019m not going to say every month you should be spending 5,000 or investing it, or when you get to 60,000, you should spend 40,000 of it, okay? What I\u2019m going to say is you should be looking to excel in the pillar of investing, which means finding the best deal that you can.
You might not buy a house at all for three years, and at the end of those three years, you come across two deals that you can buy for 400,000 that will have an ARV of 600,000 and will be great short-term rentals that will cash flow incredibly strong and you got to buy them both. That\u2019s more realistic for how things work out.
You might put your attention on offense and make more money and in the process of taking on more investors and managing their houses for them, challenging yourself in that way, a couple of them are like, \u201cWe don\u2019t want to own these anymore. Do you want to just buy them from me?\u201d And you get great deals that you\u2019re like, \u201cOh, if I wouldn\u2019t have spent all my money on mediocre deals because I was supposed to spend it at a certain rate, I would be able to buy these amazing deals.\u201d That\u2019s much more my style.
I might not buy much real estate over a three or four year period and then go buy a whole bunch of them at one time when I see the market open up. I might buy a lot of one asset type and then switch and move into another one and make big moves in these moments, because I\u2019m not asking to live life in this predictable way that you\u2019re saying.
Now, Suze Orman could answer this question. There are absolutely financial people that could, they\u2019re probably not real estate investors. Because real estate investors got to jump on the deal when it comes. I would much rather have you say, \u201cI buy great deals. I\u2019m looking for great deals. I will be ready and liquid to pounce when I see a great deal. I have all tools in my toolbox that I can use.\u201d Like seller financing or whatever it is that you can excel at to get those great deals. But you don\u2019t control when a great deal comes. What you can control is how much money you\u2019re spending, how much money you\u2019re saving, and how much money you\u2019re making.
So I want you to come back, go to biggerpocketes.com\/david, send me another video, and I want you to say, \u201cThank you, David. I\u2019m a little upset you didn\u2019t answer my question, but I\u2019m going to forgive you. What advice do you have for me, for how I can make or save more than $5,000 a month? Here\u2019s what my business looks like.\u201d And we will take the question from that angle.
For everyone who\u2019s listening, I hope this made some sense, okay? You got to look at money differently if you want to be able to accumulate it like the wealthy people do. Wealthy people don\u2019t ask questions like that. You\u2019re not going to see the people that are really, really good with money saying, \u201cHow much of my money am I supposed to spend out or invest out of the month?\u201d You hear them saying, \u201cWhere are my opportunities? How do I take advantage of them, and how do I push myself to be a better version of me tomorrow than I was today?\u201d Our next video clip comes from Branco in Raleigh, North Carolina.<\/p>\n
Hey, David, what\u2019s up man, it\u2019s Branco with eXp here in Raleigh, North Carolina? I\u2019ll be brief. Thanks for everything you do, man. My wife and I we\u2019re both 29 years old, make about $250,000 a year, have four homes, three house hacks, and one off-market deal.
For the sake of this question, we would just pay off the three house hacks, and that\u2019s basically the question. Plan A, pay off. Plan B, don\u2019t pay off. And the reason we even think about plan A paying off is because after paying off the $750,000 worth of mortgages, we would fund the great life, which is about 10 grand, 11 grand, cash flow, and that would still play around with HELOCs from those properties and still look for other deals, which is fun for me.
Plan B, would be to keep doing what we\u2019re doing and buying a house like a year, house every year and a half, two years maybe, and I know that plan B financially makes more sense because we would have more properties obviously, but I don\u2019t know. It\u2019s just since it\u2019s already funding the life, it\u2019s just is enough, enough and I don\u2019t know. I would still look for deals, so it\u2019s tempting to pay it off.
We, again, I\u2019m an agent. Maybe I\u2019m thinking about it because market\u2019s kind of slowing down. I don\u2019t know. Any advice, wisdom would be greatly appreciated. Take care, man. Bye-bye.<\/p>\n
All right, Branco. This is a good question and I appreciate your transparency. This is going to be the last question. We\u2019re going to have to break it down a little bit deeper. I can\u2019t just give you your answer.
There are merits to both approaches, paying off your real estate, living off the cash flow, not trying to be a multi, multi, multimillionaire, just living a good life or using leverage, using the skills you have as an agent, using the knowledge you\u2019re getting on BiggerPockets, using the skillset that will continue to increase every year to get better and better deals and build a bigger life. Okay?
I can\u2019t tell you which is the right road for you and you know that. Here\u2019s what I can tell you. The approach to paying off your real estate made much more sense when interest rates were really high. It also made much more sense when we weren\u2019t printing money like we are right now. That doesn\u2019t mean that I\u2019m telling you the other option of continue to scale is better for you. I\u2019m saying that the scales are tipped in the favor of the people that are growing because of all the money that we printed. Let me give an example.
I remember very clearly a certain point in my life, I was probably 28 years old. I had just bought my house in Discovery Bay, California. It was a foreclosure. I paid, I believe I paid 272 for it. I bought it at an auction, used an FHA loan to get it, and I put three and a half percent down, but I was at a point where I really wanted one of the new Corvette\u2019s. They were like the Stingray model had come back. They were super cool.
I had probably seven rental properties, a couple in California and a couple in Arizona. I hadn\u2019t gone out to Florida yet, and I had talked with Tim Rhode, who we\u2019ve had on the podcast several times about my future, and he\u2019s like, \u201cFigure out how much money you need to retire, work to that number, stop when you get there.\u201d So I was like, \u201cAll right, if I got five grand a month coming in for rental properties and I got five grand a month coming in for my retirement as a cop, oh my god, 10 grand.\u201d That\u2019s way more money than I would ever need. And if I pay off my house, I could drop my mortgage by another, it was $900 or something like that.
Here\u2019s what\u2019s crazy. When I was 28 years old, 10 grand was significantly more money than what it is right now. So my plan was I talked to another police officer, Shane Caduti, and he\u2019s like, \u201cWhy do you care so much about money? You don\u2019t need it. Buy yourself a Corvette and enjoy life.\u201d And I actually had planned on hanging it up like, \u201cOkay, I got my rentals. I don\u2019t need to worry about this stuff anymore. I\u2019m just going to buy that Corvette. I\u2019m going to keep a little lump sum in the bank to cover me, and then I\u2019m just going to live an easy life.\u201d Something did not sit right with me.
It was not greed, it was not ambition. I didn\u2019t have to prove anything. It was this little still voice that was like, \u201cThis is a huge mistake if you do this, don\u2019t do it.\u201d And I actually went a different route. I told somebody about my dilemma, they connected me with the Bank of North Florida. I got a line of credits to start buying rentals. I learned the BRRRR method. I sold one of my Arizona houses. I went and bought about 10 or 11 more properties in Florida with the same 80 grand that I just kept recycling through BRRRR.
I got way better at understanding construction, finding deals. I negotiated because I was doing this so often, I grew that to probably 40 properties or so in Florida, plus my other ones. I got better. I wrote a book called Long Distance Real Estate Investing. I got involved in BiggerPockets, here I am today teaching this stuff at a high level as a business owner that owns different companies and I can influence a lot of people.
Real estate did so much more for me, than just gave me five grand a month to live a life. And here\u2019s the scary thing, when I look back at where I was, if I\u2019d hung it up, I would still be working as a cop. I would only have five grand a month of passive income, maybe with rent bumps. It might be like 6,500 or something right now.
But living in the Bay Area, Northern California, that is not, I don\u2019t want to make it sound like I\u2019m elitist because I definitely love a modest lifestyle. It\u2019s not a lot of money. You can live like that, but you can\u2019t travel anytime you want. I wouldn\u2019t be able to just go to Hawaii to go see Brandon. I would have to budget when I actually can travel. I would not own the condos that I own in Hawaii that I\u2019m able to send family members to business associates to close friends I have.
One of my favorite things is when a couple that\u2019s close to me is going through marital problems, I could just send them to my Hawaii condos and be like, \u201cListen, I\u2019m taking care of everything. I\u2019m paying for your plane. I\u2019m paying for a babysitter. I\u2019m paying for the condo. You\u2019re going to go and you\u2019re going to have a good time.\u201d Or I can send family members that love it. My mom loves visiting those places, Hawaii is her favorite thing.
I could not do that if I didn\u2019t have those properties and I absolutely would not have them if I had retired earlier. I\u2019m not trying to sway you in any direction. I\u2019m just being honest about this idea that I had, that if I just stopped growing and I stay where I am, was wrong, I would not have stayed where I was.
Inflation, things probably cost a legit three times as much as what they, at that time in my life, I could probably buy a steak at Safeway for eight bucks. That same steak is like $25 right now. It is. Everything is so much more money. That car that I was driving eventually is going to wear down. I bought that thing. It was a brand new Camry and I bought it for 22 grand. It was so cheap by today\u2019s standards. Now, that same car might be 40, 50 grand or more for just a normal base model car.
Well, I\u2019d be screwed when my stuff wore out and I had to go buy another one. The repair is on the house I live and the house payment is the same, but everything costs more money to me to fix up because of inflation. And I realized that the world isn\u2019t going to stop growing just because we stop growing or we stop working. You\u2019re always in a uphill battle. Things become more expensive with time.
So I would encourage you to strongly consider continuing to work as an agent, continuing to invest in real estate, continuing to house hack every year, continuing to make decisions that will make the version of you 10, 20, 30 years down the road happy, and not take the assumption that everything\u2019s hunky-dory. That everything will be fine, that you\u2019ll pay off your properties and you\u2019ll be fine.
That money that you could get from paying off your properties could very well not be enough to live on. You might have another kid, you might get a sick family member. The market for real estate agents might change and commissions go away. You can\u2019t make a living like that anymore, and you find yourself having to go back to work in a factory not liking your life because we cannot predict what\u2019s going to happen.
I think it\u2019s a big mistake when we assume the best. The world\u2019s going to get easier, it\u2019s going to get better. We can just stop. You don\u2019t know what\u2019s going to happen. What if you get sick or you end up dying and your family is left without their breadwinner? If you have a bunch of real estate they can sell, that\u2019s some money that they can live off of. If you\u2019re gone, it\u2019s not the same case.
So you could tell that I\u2019m leaning more towards. You\u2019re a young guy, you\u2019re ambitious, you\u2019re working as an agent, you\u2019re well-spoken, you have skills. Freaking use them. I would never tell someone that was really into fitness, \u201cGo win a fitness competition and then retire and never exercise again. You don\u2019t need to.\u201d It\u2019s true you don\u2019t have to, but why would you want to get unhealthier? Once you\u2019ve learned fitness and you\u2019re good at exercise and you\u2019re good at eating good, you don\u2019t have to compete at the highest level ever, but why would you throw that away? It\u2019s easier for you to exceed at these things than it would be for other people.
So if the genesis of your question is coming from maybe shame or guilt, like, \u201cI shouldn\u2019t be this ambitious. I don\u2019t need this much.\u201d Don\u2019t buy into that. I had to face that same battle, and I never became a greedy a-hole. I never became the person that was buying Bugattis and McLarens with all my money. I never bought a private jet. I still live in that same house, believe it or not. I never went and bought a Big Baller property. I don\u2019t need to. I don\u2019t have a family right now. That property is fine. In fact, I could probably downgrade.
I could move into one of the units of the short-term rentals that I\u2019m developing and sell that house, and I might end up doing that. I don\u2019t need a humongous property. I didn\u2019t assume that everything would go better. I knew it could go worse, and I am so glad. I am so glad that I built the businesses and I kept expanding that I kept moving forward because money is now becoming an issue for more and more people, and the more of it I have, the more I\u2019ll be able to help.
So hope that helps answer your question. If there\u2019s any further clarity I can give, please send us another video. Let me know. \u201cOkay, David, I heard what you\u2019re thinking. Here\u2019s my question about what I should do. I\u2019d love to follow up with you and thank you for being vulnerable and showing us all the question that many people in your boat are all facing.\u201d Our next question is a video submission from JD Mims.<\/p>\n
Hi, David. My question is about real estate agents. So I am looking for a property here for my personal residence in California in Sacramento, and I found a place that checked all of the boxes. The only issue I had was there was some work that was done to turn it into a duplex that was not permitted.
Now, I asked the agent about the permits because I haven\u2019t actually bought property here in California, so I thought perhaps it works differently by state, and so I said, \u201cThis is my concern. The work hasn\u2019t been permitted. I\u2019m worried about what will happen if I try to sell it and if I put a renter once I move out.\u201d The agent is a newer agent, so he asked his boss. His boss says, \u201cWell, as long as the work is done in a workman-like manner, then you\u2019re fine as long as the appraiser comes in and it passes the appraisal.\u201d I reached out to the city and they said that, that is not true.
So my question is should this be a deal breaker or is there some type of a gray area that I\u2019m not understanding? Because I feel like the answer that I was given was just to pacify me, because we\u2019ve been looking for a while and the market is very difficult and they just wanted me to buy something and move on.
But my feeling is that it should be a big deal, but I don\u2019t know if I\u2019m making it bigger than what it really should be, because I feel like as an agent you should be looking out for me and give me correct information, but I don\u2019t know, maybe there\u2019s a gray area. Maybe I\u2019m making it a bigger deal than it needs to be, so I would love your feedback on this. Thank you.<\/p>\n
All right, JD, sounds good. Let\u2019s break down this situation because you\u2019re not the only one who\u2019s here. Man, there\u2019s so many angles to tackle with this.
First off, when you\u2019re saying, \u201cIs this a big deal?\u201d We have to define what big deal is. There\u2019s many different angles to approach this. So the analogy I\u2019m going to give is when we talk about there is free speech in America. Okay? This is something you deal with a lot when you\u2019re in law enforcement or if you\u2019re following what\u2019s going on with social media.
There is free speech in America. The problem is when somebody says something offensive and then people get mad at them or they lose their job or they get kicked off of a platform or something like that, the response is always, \u201cWell, I have free speech. You can\u2019t do this to me.\u201d It\u2019s just they\u2019re applying it in the wrong way. In the arena of other people liking you or the job you\u2019re holding or the rules of whatever that social media platform are, you can\u2019t just say anything. They have their own rules.
In the arena of the penal code, you do have freedoms. You can\u2019t go to jail for saying, \u201cI don\u2019t like the president.\u201d But you can lose your job, I suppose for saying something like that. Private companies are allowed to have their own set of rules whether you agree with them or not.
The protection of free speech does not apply to everything. It just applies to the government being able to punish you. You can\u2019t get an infraction or get a citation for saying something unpopular. And when people get confused about that, then they don\u2019t know what to make of it because they\u2019re like, \u201cWell, isn\u2019t there laws to protect my free speech?\u201d They\u2019re like, \u201cYeah, but that doesn\u2019t mean that you can do certain things in certain environments without consequences.\u201d Okay? This applies to your permitting situation.
Is it a big deal? Well, if you call the city and say, \u201cDoes it need to be permitted?\u201d A hundred percent of the time they\u2019re going to say yes. They have to say yes. This would be like when I was in law enforcement, and someone walks up to me and they say, \u201cHey, I want a jaywalk right now. Am I allowed to do it?\u201d I am not allowed to say, \u201cYeah, go ahead and jaywalk.\u201d Because if you get hit by a car, I\u2019m going to be responsible for that. So I can\u2019t say, \u201cYes. Go jaywalk.\u201d
On the other hand, does it mean that I chased down every single person I saw across the street without using a crosswalk? No, I probably didn\u2019t care unless it was a super busy intersection and they were causing a big deal. That\u2019s the best example I can give for permitting situations.
The reality is, every property I\u2019ve ever seen in my career is not up to code. Okay? Most cities in the Bay Area where I live require you to get permits, if you change the flooring, if you change the faucet, if you change your landscaping in the yard. If you actually look at what the city requires you to get permits for, it\u2019s everything.
Even homes that are built like new home construction are not up to code with every single thing. Now, that does not mean it\u2019s okay to not get permits. It just means it\u2019s not a deal breaker immediately because something isn\u2019t permitted.
Also, I\u2019m going to tell you, and everyone was going to tell you, always get it permitted, but that\u2019s because people have to tell you that. It just isn\u2019t practical that everyone\u2019s going to do that. Now, if you\u2019re trying to figure out, \u201cWill this get me in trouble?\u201d It depends on what the stuff is.
When you say work was done without permits, you didn\u2019t give me enough specifics on what happened. If they put up some drywall or some sheetrock or something and they didn\u2019t get a permit, they turned one living room into two bedrooms. I\u2019ve never seen in my career, it doesn\u2019t mean it can\u2019t happen. I\u2019ve just never seen, the city get involved and say, \u201cYou put up drywall without a permit, you\u2019re in huge trouble, we\u2019re going to put you in jail.\u201d
But what if the property is in an area that is zoned for single-family properties and they are operating it as a duplex? The zoning situation could become a big deal. If you\u2019re not allowed to have more than one door in that neighborhood and you\u2019re working in it as two doors, they could shut you down. The city could go in there and say, \u201cHey, this isn\u2019t going to work.\u201d
Now, California, because you mentioned you\u2019re in Sacramento, does have laws that prohibit municipalities from not letting you put an ADU in your property. So this is one work-around when the city tries to say, \u201cYou can\u2019t have a second unit, you can\u2019t make it a duplex.\u201d Where you can come in and say, \u201cYou can\u2019t stop me from doing it. I\u2019m allowed to have an ADU.\u201d The city can come back and say, \u201cDoes this unit that you are calling an ADU meet the requirements that we have spelled out as an ADU?\u201d That\u2019s the one of the ways I would take your question to your agent or the city.
\u201cHey, this property had work that was done. It\u2019s now a duplex. Will the second unit count as an ADU?\u201d And I\u2019d get information on that to see if maybe you\u2019re going to be covered there. I might also say if I buy the property and the work wasn\u2019t permitted, what are the consequences that could cut? Maybe the city says, \u201cWe have no idea. If nobody complains, we\u2019re not going to care.\u201d
Maybe the city says, \u201cOh, we would send an inspector immediately and make you fix the work.\u201d But I think JD, you got to do a little bit of legwork to figure out what is actually going to happen. The vibe I\u2019m getting, is you\u2019re wanting your agent to do this legwork for you and tell you this is a big deal, and then possibly go to the seller and get the seller to drop their price or get the permit work done, and you want everyone to be like, \u201cOh, we cannot let this stand.\u201d And that\u2019s where your frustration might be coming from.
The seller\u2019s probably not going to care because the seller knows that nobody has work done with permits. That there\u2019s another buyer that will buy the property and they might not care about it whatsoever. The permit thing is such a hot button topic because there is no clear line in the sand that we can navigate these situations with, which is what we want. It\u2019s more comforting when it is clear what should be done and what shouldn\u2019t be done.
I can\u2019t give you a more direct answer because I don\u2019t have any more information, but what I can say is I wouldn\u2019t be mad at your agent for the response they\u2019re giving you, because this is what every agent everywhere is going to say. I\u2019ll also say it\u2019s not immediate, it\u2019s not permitted, so don\u2019t buy it because almost every property, probably every property I\u2019ve ever seen has some form of work done that was not permitted. But I don\u2019t know the type of work.
If they took a single-family home and they put this, they literally built an extended, the square footage of it and they didn\u2019t get any permits and you don\u2019t know if it was done safely, that\u2019s a huge deal. You can\u2019t just build onto a house with, maybe the contractors didn\u2019t do it. Maybe the homeowner built it himself.
But maybe they just took an area of the home and they walled it off from the rest of it, and even though they didn\u2019t tell the city the work was still done up to code and still done safely, and it\u2019s perfectly fine. I think you need to get some more specifics on the situation before you make your decision on if you should purchase the property or not, and unfortunately I didn\u2019t get those, so I can\u2019t give you a more direct answer. Hopefully, the advice that I have given you does help with the decision you have to make.
All right. We\u2019re moving on to the part of the show where I get to share the comments from previous shows on YouTube, and I love this. I want to encourage you guys to please leave more comments for me to read. The funnier, the more insightful. The more clever, the better. And even if it\u2019s something that you don\u2019t agree with or you want more clarity on why I said what I said or you\u2019re confused or you have a topic you want us to talk about more, tell us in the comments. We read them for every single show and we incorporate them into future shows.
Our first comment comes from John Conrady. \u201cDavid, you are a boss and have been so helpful in my journey. Just want to say you explained things super clear and keep up the good work.\u201d Thank you, John.
That\u2019s probably the hardest part of the job. It\u2019s not always knowing what to tell everybody. It\u2019s, how do I say this clearly without leaving out anything that could get somebody in trouble without taking too long where I lose their attention. This is always where my stress levels come from when I\u2019m talking is like, \u201cDid I leave anything out or did I say too much and how do I find that perfect balance?\u201d
Zachary Hitchcock says, \u201cI love the podcast and it has helped changed my behavior from paycheck to paycheck to being on my path to long-term generational wealth.\u201d Zachary, that warms my heart. Love hearing that.
He goes on to say, \u201cQuestion. I\u2019ve learned quite a bit from these podcasts as well as books about negotiation. What is the best way to go about utilizing this knowledge while having to negotiate through agents? Is it taboo to speak to a seller agent directly or is it best to focus energy to strategize with my agent?\u201d
Yeah, that\u2019s tough. I\u2019m tempted sometimes to go around my agent and also, and I\u2019m an experienced person. In general, you don\u2019t want to do that. What you probably want to find is you want to choose an agent that is receptive to your advice. So when you say, \u201cHey, I want you to go say this.\u201d You want the agent that actually listens to you and says, \u201cOkay, I\u2019ll go say it that way.\u201d Or pushes back and says, \u201cI don\u2019t want to do it that way.\u201d You want to get the impression the agent cares about how they\u2019re negotiating, okay?
What most agents do, they\u2019re not very good, is they say, \u201cI don\u2019t want to do that. Let\u2019s just write them something. Let\u2019s just put it in writing and send it over there.\u201d But they don\u2019t think about presenting it in the right way. It is tricky. The problem with you talking to the listing agent directly is you\u2019re still, you want to be talking to the seller. You go talk to the seller\u2019s agent and then your words get put through their filter as it comes to the seller and it still isn\u2019t going to be what you want.
It\u2019s very difficult to negotiate the way that I describe when it\u2019s through agents. You just want to make sure you pick an agent that has some skill in this area, and when you communicate with them, the better that they\u2019re able to sell you, it\u2019s very likely that they\u2019re able to sell the other agent in the same way.
These comments come from episode 717, by the way, if you guys want to go check that one out. The next one comes from Joe Chavez, \u201cGolden Girls. Blanche Devereaux was the original house hacker and who wouldn\u2019t want Sophia as a tenant? Picture it. Sicily, 1925 looking for a BRRRR.\u201d This is hilarious because we talked about Golden Girls on that episode and yes, I suppose Blanche was a house hacker, having all the other girls living with her. \u201cHouse hacking before and had a name goes right back to Golden Girls.\u201d Well done, Joe. That\u2019s hilarious.
Steve Borowski says, \u201cWow, hold on there, David. People were stealing titles to your property and you just glazed over it. I get that you don\u2019t want to go into personal detail about the issue, but I would love it if you could talk a little bit about how to protect yourself from such things. In my mind, I\u2019m thinking if it can happen to David G, it could happen to me and how do I avoid it?\u201d Yeah. I\u2019m trying to not become a target of that more in the future and the way that this worked out, it could not have been avoided, unfortunately.
So I\u2019m restructuring things to make it so that this can\u2019t happen again, but title theft is very real and it is caused a cascade of problems for me. It forced me into a 1031. I bought more properties at one time than I wanted to. The city permits have come in and they\u2019ve screwed things up. I\u2019ve had all kinds of issues with trying to get stuff approved.
I had people on my team that were managing my portfolio that had to quit from this. It\u2019s been absolutely horrible and it\u2019s put me into a place where I\u2019m trying to claw my way out of the disaster, but that create, but that happens with real estate. That happens with life. You can\u2019t turn yourself into a victim just because you got dealt a raw deal. And in my experience, when you continue to do the right things, God, the universe fate, however you want to look at it, will work this around for my benefit in some way.
So the reason I\u2019m not sharing more details about that how that happened is I don\u2019t don\u2019t want to dangle it out there for more people to learn how they could go do the same thing. I think there\u2019s a lot more predators out there looking to steal other people\u2019s stuff than we\u2019re aware of, but if you would send me a message, I do talk about it in a private group that I run. If you\u2019re in that group, you could hear more about it there, so thank you.
All right, everybody. That is our show for today. I hope you enjoyed listening to that as much as I enjoyed making it. I also hope you\u2019re enjoying these Seeing Greene episodes. Again, if you want to be featured on here, go to biggerpockets.com\/david and submit your question. I would love to answer it and please continue to engage in the YouTube comments.
Lastly, if you are liking this and you liked it, you don\u2019t have to pay for it. All I would ask that you would do is go to wherever you listen to your podcast, Apple Podcast, Spotify, whatever it is, and leave us a five star review and just tell people why you like the show. That helps a ton.
If you want to know more about me, you want to see what I got going on, you want to want to kind of like peek the curtain and see what is going on in Greeneland, you can follow me @davidgreene24 on all social media.
You can also check out my new website, davidgreene24.com, and then DM me or let me know what you think of the website. I had to pay a lot of money to get this thing made. It is launching very soon or probably should be out by the time this is there, so please give me some feedback on that.
And lastly, if you have some time, watch another video, listen to another podcast, educate yourself further, and if you don\u2019t, I\u2019ll see you on the next episode. Love ya. Appreciate you. I know you can be getting your information from anywhere, and so I appreciate that your attention, the most valuable commodity you have is on us at BiggerPockets.
Check out the BiggerPockets website with the forums if you want to learn more, and you don\u2019t want to have to do so by listening, if you like reading, I\u2019ll see you guys on the next show.<\/p>\n