← The David Greene Show
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- [00:01]
David Green
Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no BS, and no sales pitches. I'm David Green and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you, too. So if you want to build wealth through real estate or you just love learning about it, you found your home. All right, so we're going to open this thing up for questions. Christian and Lindsay are going to come up here. Did anyone else have any last minute ones? Oh, we got one right here, Joe. So it was a couple weeks ago, a couple months ago you mentioned a disaster that was going on in Miami was one of your properties. And I just kind of wanted to get the update on what the current situation is at, maybe give a little bit of background for what it is. Appreciate the balls on this one. Several years ago, I had 40 or so properties in Jacksonville, Florida that someone figured out how to steal the title to. There was a glitch in the website that manages legal entities in Florida, which I don't want to say because people are going to listen to this. I don't want more people to go figure out how to do it because I don't know if they've actually fixed that glitch. It wasn't through the assessor's office where title is actually held. It was the LLCs that I was owning the properties in. And this person figured out that you can't delete information that's in there, but you can add information to other people's stuff. Anyone could do this at any time. So this person added himself as a manager to my LLCs, found a notary that he paid off to say that they witnessed me signing and transferred the title of 40 properties from my LLC into his. It could have happened anywhere in Florida. The entire state of Florida had this issue with their website. When we brought it up, they said, we're aware of it, we can't fix it, and it's on the block to be voted on by the voters. If we can fix this in like a year and a half. What the guy did was he started driving around Florida, going to real estate meetups like this one and saying, hey, you want to buy three houses for $60,000? And he's selling this stuff like hotcakes. Well, the people that are buying them are getting their title insurance and they're like, that's weird because they just bought these Houses, like, a couple weeks ago. And why is he selling them to me for so cheap? So strangers, thank God, start messaging me on Facebook messenger, and they're saying, hey, by any chance, do you still own these? I'm like, yes. Do you know this guy? No. Well, he says these are his houses. But here's the thing. He has legal title to them. He obtained it fraudulently, but it's legit. So he shows this to the cops, and there's nothing they can do. He has legal title. So he goes to the property manager and he says, start paying me the rents. Not David, I have title. Property manager calls me. I tell him that the guy is a criminal. The property manager says, I don't know what to do. So he starts holding the rents. He doesn't want to pay anybody. He then goes to the houses with the tenants, and he tells the tenants, hey, guys, you got to start paying me the rents. Not the property manager. I'm the owner. And he brings the title there. The tenants call the property manager. The property manager explains the situation to them, and they decide, I don't want to deal with this at all. So they start moving out of the houses. Now I've got 20 vacant houses that all become trap homes for D boys and prostitution. And then my air conditioning units start getting stolen, and my copper starts getting stolen, and I don't have title to them to where I can go fix this. And if I want to go spend a bunch of money to fix my houses, I don't know if I'm fixing my houses or this guy's or the people that he sold them to that think it's theirs. I don't want to talk about it because I don't want everyone else to get hammered like I'm getting hammered. And I don't want more of my properties to get stolen. When more people figure this out, year and some change goes by, it's so strenuous that these people that I'd hired to manage my portfolio quit because they can't keep up with it. Causes me a ton of damage. The properties get run to hell. A judge finally gives them back to me, and they're in crazy condition. And insurance doesn't cover any of this. This isn't a thing that's, like, covered in your policy. So I asked this the state, what's your plan? And they're like, we've got another year and a half before we know if this is going to change. So I sold the whole portfolio to a buyer just so that I didn't have to worry about this happening again. Right now I have to do a 1031 exchange. And by the way, these properties were almost all paid off, which is what you're told to do to get cash flow. This is my plan. If you're a person stealing properties, do you want to steal four million dollars worth of properties with three and a half million of debt, or do you want to steal four million dollar properties with $500,000 of debt? It's a big, nice, juicy target, right? You're that mosquito. You're like, look at that big juicy one. I want to suck all the blood out of that, right? So now I have to do a 1031. And this is right when rates are starting to like rumors that they're going to start going up. Not when you want to buy a bunch of real estate. This is the worst time. This is not the natural equity market you want to buy. This is the market that you want to keep your money to the side and wait, see if rate increases, open up opportunities. So my plan is to go to the different cities that I think are going to have opportunities, identify all the properties that I can for my 1031, and then wait and see because I have, you know, like 180 days before I have to close. Once they've been identified, which of these markets softens the most? So I'm looking in Scottsdale, I'm looking in Nashville, I was looking in Savannah, Georgia, I'm looking in south Florida, a couple other markets. And I'm just, I will identify as much as I can. And I'm like, all right, let's see which one of these areas goes down by the way. You don't want to identify. Houses are going to sell really quick because if you use up all of the houses that you've identified and then someone else buys them, you can't do your 1031. So I have to buy houses that are going to sit on the market longer if this is even going to be applicable at all. And what price range is that going to be? Are they going to be the cheap houses? No, they're going to be the expensive ones. Right. So it forces me into a higher range of house. Now if you're going to buy an expensive, a more expensive house and you want it to cash flow, what do you have to do? Short term rental. I've now become a short term rental investor against my will because of this freaking criminal. The good news is I've got two of them in Maui at this time and they're both doing Great. But guess when I bought those two in Maui during COVID when I bought them at like a fire sale because they were sitting vacant for four months when nobody could visit the entire island, right? So I'm able to buy these awesome condos for like 500, $550,000. As soon as Covid ends, they shoot up to like 800, 900,000. Like they're doing good because I got a really good deal on them. I'm not like considering myself to be raw built over here, the short term rental guy. But now I have to try to figure it out. Long story short, I found out there's a 1031 exchange rule that I've never heard of in my life. And I found it out on day 89 of 90 when I submit the properties. Apparently you are only able to identify 200 times as much real estate as you sold. What that means is if you sell $1 million worth of real estate, you can only identify $2 million worth of real real estate. Now, in most cases, if you sell a million dollars worth of real estate, you probably owed 700,000, so you had 300,000 of equity. $2 million of real estate is plenty to figure out how you're going to invest 300 grand. But in my case, my portfolio was almost paid off. So I now have only so many houses that I can identify. I pretty much have to close on almost everything that I identify, and I have one day to do it. Christian was with me that day. He was very, very helpful. It was probably not me at my best, if I'm being honest. Right. It's like the last thing you want is to have to make this many big decisions that quickly. And it's not just what house you're going to buy, but you guys got to think about this. If you have one day to to identify properties that you have to close on. If I identify anything that I can't put in contract, the whole 1031 exchange falls apart. You can't identify and then try to put it under contract because if you don't, you don't complete your 1031 because I can't identify that much. I can only identify like $8 million worth of real estate. But I have $4 million that I have to go figure out how to invest. Here is a horrible situation. So here's how I looked at it. I decided of all the markets I'm looking at, I want the one with the lowest downside that's probably going to come with the lowest upside. I have to minimize risk because I'm in a position that is going to be devastating. And I just want to figure out right now it's just surviving. I don't have the opportunity to get these great deals like I was thinking about before. So I picked the Smoky Mountains. That's why I became a Smoky Mountain investor. Because I'm like, well, people visit there all the time. If they're not amazing performers, at least they're going to be pretty good. That's my safest bet out of all of it. So I go on one of the craziest days of my life, riding offers all day long on Smoky Mountain cabins, trying to learn the market in the same day. Learned a ton. Learn a ton. For instance, you guys might not know that there is a rule in Tennessee that you can only advertise how many bedrooms a property has by the size of its septic tank, Right. Some people here nodding. Okay, so if the septic tank is big enough to be allowed to have two bedrooms, then this 4,000 square foot cabin will say two bedrooms, which does provide a pretty good opportunity if you're careful and you're looking at how many bedrooms it actually has. But I figured this out about halfway through the day, so all the shit that I thought I was going to buy goes out the door. And I'm like, no, let's find the big ones that only have two bedrooms that are sitting on the market for a long time. Because really, they have five bedrooms, and that's what the revenue is going to be based on. Right? So it's literally like sending emails, looking at opportunities, sending offers, signing documents, getting counter offers, calling the people that I know over there. Like, it just. We barely stopped for like the entire day. Right? Literally. One of the houses, Christian remembers this when it was sunset, is owned by a pilot. The pilot is flying his plane. We wrote the offer, and the agent said, yeah, we'll get back to you tomorrow. We're like, there is no tomorrow. There is four hours. Yeah. Because if you don't buy this house, if he can't put it under contract with you, we got to go buy two other houses that are going to be cheaper than this expensive one. I'm like, this is. If I can get a big one here, I can save myself some other trouble. But they're like, he can't do anything. He's flying. Okay. We figure out you can look up the flight number and find who the flight attendants are on the plane. We find the flight attendant's Facebook messenger. I get a hold of her family member, I explain the situation. We get a phone number. Their WI fi is on the plane. We have the flight attendant go knock on the door and tell the pilot, you have to sign this document today or he can't buy the house. And the dude does it. Right. I didn't expect to stand. He flies there. That's really nice. That's how insane today was. Like, this does not fit any kind of a model for how you're going to get the whole thing done. Now, he was pissed, right? Because he didn't understand. And I don't want to tell him. Well, it's because I'm in a 1031, which means I can't back out of your deal at all. So if you accept this, I'm getting screwed. If anything's wrong with this cabinet at all. You also got to remember that there is no inspection. See, I can have a contingency, but I can't back out. The only. I can ask for credits here. But you can't know that this is a 1031. You're going to tell me no. Now, my agent had to tell some of them, this is why you have to sign today because it's a 1031. So all those ones, no chance not getting anything credited to me at all. Horrible day. Somehow we end up pulling this thing off. And I'm now going to be owning like 10 cabins in the Smoky Mountains. Okay? I sign up with the property manager that I have that was recommended to me out there. It's the same person that helped us buy these cabins. So they're telling me, David, this is how much they'll rent for. This is how much we can get it for. We're now assuming that the numbers that they're giving you are accurate because they're your agent and they're a property manager that's out there, right full of shit. Gave us ridiculously high estimates on all of these properties. Then. No, it's not Lindsey. She's not the property manager. The name of this person will probably come out. You're going to hear why in a minute. I'm not saying it right now. I signed the agreement with them only. And then we negotiate a better split because they're getting 10 cabins at one time. And these are not like cookie cutter cabins. These are like gorgeous million or multimillion dollar, really nice cabins that are out there. They sneak in the contract that because I got a better rate on the cabins, it actually extended to a three year contract instead of what it should have been. But no one on my team sees this when they're signing it. So now I end up in a three year contract that was absolutely fraudulent that I never should have been a part of at all. With cabins that they gave me numbers on that are absolutely not true. And I end up stuck with these things that are like constantly underperforming and I can't do anything to get out of it. Now we find out that this property manager is not putting them on Airbnb or vrbo. And then when they finally do put them on there, because I make them, they use the pictures from the mls. And I bought the houses with the ugly pictures. That's my strategy, legit. Some of these pictures are taken and uploaded sideways. That's how I got the deal. It's like a sideways picture of the kitchen. And that's what they're putting on VRBO and Airbnb for these things. They, they're doing this like direct sell. What's the word I'm looking for here? When they do like they. Direct marketing. Yes. Direct bookings. Thank you. And the reason we find out that they do this is because there's no way for the person who's staying at the cabin, the tenant, to complain because they booked them directly through that website. All of the reviews that came on VRBO and Airbnb are horrendous. 2 stars, 1 stars. Horrible service, rude people. Cabin wasn't ready when I got there. Beautiful place, but it's in terrible condition. Non stop shit. And that's why the cabins are doing so bad and they refuse to do anything to fix it because they're like, you're in a contract, what are you going to do? So these cabins are doing terribly that I didn't even want to be in in the first place. And I just like, just give them back to me and I'll figure out how to do it myself. And they hit me with a lawsuit for breach of contract. I also didn't tell you guys, I was messaged by someone who used to work there that told me that they're letting their friends and their families stay in the cabins for free. And they've been nickel and diming me for things that are not actually being done to get extra money out of me. Yeah. Then I get served with a lawsuit and a threat of a bigger one for breach of contract because of these. And that's not even the things that have been going wrong. Okay. I also bought some properties right after this, 1031, because I did all this market research and I'm like, I found some really good deals. Now let me tell you how good the buying equity part went. At the end of the day, when I looked at everything I bought versus how much it appraised for, I made over $1 million of equity from these purchases that I bought over like 60 days. Okay? I did the part that I knew to do well. I got good deals on the properties. Some of them we went in forced equity. They were bought in areas where short term rentals are legal. You cannot tell someone you can't do short term rentals here. Most of us would think that if the law says you could do a short term rental, you're probably going to be safe, right? Most of us would also think, well, worst case scenario, if it doesn't cash flow, I'll just sell it. I'll lose some money, but I'll get out of a bad deal. Especially if I paid so much under market value, I'll still make money even if I have to sell. I found myself with several different cities in a position where the city does not want short term rentals in their municipality because the neighbors don't want them. But they can't tell me that I can't do a short term rental. So when we apply for the permit, like good little boys and girls, like we're supposed to, they walk your property. And the zoning department and the building department tags it for all the things that are wrong with it that you never did. And they go apeshit. No, not even. There was no work. I'm talking about a property like the one that you asked about north of Miami, okay? The house was built in, I think 1901. Old House doesn't have a garage because they didn't have cars. You tied up your horse in the front of it. It's like a block from the beach. Beautiful house, okay? It had two bathrooms added to it sometime over the 125 years it's been existing. The guy didn't get permit in 1924 when he put that bathroom in. They figured out to tag me for that. The water heater is not big enough. The duplex that's on the property that was advertised as a legal triplex when I bought it. It's a house with a garage that's been turned into a duplex. The city is telling us that the zoning today does not allow for that. We have to tear the whole structure down. Okay? That's one property. This happened to me in four other cities. And no one's talking about this. It's like the mayors of the city and the city departments have ways they can get you that. You wouldn't think another one in another city north of that. I bought it. It had been remodeled. When I applied for the permit, they made me tear apart the kitchen to make sure the remodel of the guy that did it before me did it well. They made me tear down the pergola in the backyard because the pergola was too big. The big wooden thing that just sits back there, the ADU that was on there, they said didn't have the permit process completed in 1978 when it was built. And it has to be taken down and they go through a list of bullshit that they hit you with. Okay. I had put in the garage a little box and some movie theater style chairs. And then I painted the garage and I put a big screen TV on the wall and some LED lights. If any of you did that in your own house, would you think that you'd be in trouble from the city? No. They told me that now made it livable, like habitable space. And in order to do that I needed to get permits, which meant I needed to pour so much concrete that it was even with the rest of the house you couldn't have a step down into the garage. I said, you know what, I really don't need that movie theater. You can have it. I'll take the chairs out and I'll put them somewhere else. And they said, well, actually when this garage was converted from a carport to a garage, no permits were pulled in the 60s. Every house on this street has a garage. Nobody has a carport in this really nice area in Pompano Beach, Florida. These properties have been sitting for two and a half years vacant and red tagged. And I cannot get them to issue me permits. I cannot sell them to anybody else who's going to buy it. It's got these permits. You can't, they won't give you a certificate of occupancy. The lenders are not going to let me stop making the mortgage payments on them. And these are all like million dollar homes. And it's because people don't want the short term rentals in the neighborhood. And there's no accountability for the cities. They can do whatever they want. So I've got like millions and millions and millions of dollars of real estate that if I'm just being honest with you guys, I didn't know this could happen. I did not know you could get in a situation where the city tags. You won't let anybody be in the house and you can't sell it to Anybody else. And then they just don't answer your emails or that you finally pay like $50,000 between engineers and architects and all of these people to submit plans. And the building department goes, okay, yeah, we're good. And then the zoning department goes, nope, not going to happen. And then you spend another nine months. And then the zoning department says, okay, we're good after another $30,000 of engineering and architectural fees. And then the fire department goes, no, we're not going to allow that. And this just every one of these is three to four months of time plus tens and tens and tens of thousands of dollars that they make you jump through these hoops and nobody cares. There's nothing you could do about it, right? So this idea that like, oh, these real estate investors are making tons of money and they're just trying to keep it all to themselves. Like, I'm just being transparent with you guys. It's not going great. It's been horrible. There's probably stuff I can't even remember that has been going wrong that I haven't even brought up right now. And I've been talking for a long time, so I'm gonna move on. But, like, if I talk about on the podcast too much, it invites more people to do the same thing. Right now that I'm not with bigger pockets anymore, I feel like, okay, I can come out, I can explain. This is what's going on. This is why I'm still working. This is why I'm not on the beach shrieking my ties. Like, everybody seems to think that I should be doing right. This I'm not this super wealthy rich person that shouldn't be taken serious. And in some ways, I'm similar to you, gu, that are trying to work your way out of a bad position and improve your life and things can go wrong that I will just say I did not anticipate this could go wrong. I did not know that a city could send people to your house, walk it, and tag you for shit. Like, Christian called and they told him, when he said every single house on this street has the same adu. And they said, yeah, we know. We wait till people apply for a short term rental permit and that's when we get. They admitted that's what they were doing. Now, it wasn't in an email where we can go to a lawyer or anything like that, but like, these municipalities will just straight up tell you and they don't care at all. They look at you as a real estate investor like you're a billionaire and you're like the scourge of society. So that one house you're referring to, here's the position that we're stuck with. They've turned off the power for two years in South Florida. What do you think that does with mold? It rains nonstop. So the entire interior of that duplex is rotted out, needs to be taken down to the studs. Okay. If we tear it down to fix it, that would be considered substantial improvement. If you do substantial improvements on a home, you lose your zoning, which means that duplex that we fought to be able to keep gets taken away. It has to be turned into a garage again. So I have to spend, like, 70, $80,000 to demo something to make it a garage instead of a duplex. And that's for that little thing. The main house, we were told, needs a bigger water heater because they added two bathrooms. My electrical panel cannot take a bigger water heater in order to put a better electrical panel in there. In fact, during that, they found out that the panel is not pulling as much electricity as the city says the house needs. The problem is the line that runs from the city to the house is too small to provide the energy that they're saying that it needs, which means I have to put my own line in. All new wire has to be dug under the ground and run in there. It has to go through my neighbor's yard in order to be able to get it there. This is the neighbor from hell. She has been calling the police every time a contractor goes to the house, screaming at everybody that goes there, calling the city every single day because she does it. She's like one of those Karens that you can't imagine. Like the worst of the worst. All right? They have said, we will not let you dig under our yard to do this. The city has said, yeah, you need to work it out with her because we're not going to force her to let you run the electrical, but we're not going to let you turn the power on in your house until you get the electrical. And you can't have the certificate of occupancy. And we're like, do you see what you are doing here? And they're like, not my problem, bro. I'm now trying to hire a lawyer to force the city to do something. And the lawyers are like, we've never seen this. We don't even know how we're going to go about doing it. This all happened, by the way, when interest rates went up suddenly and out of nowhere and people stopped buying houses and People stopped getting loans and the whole industry that my businesses were based completely, like, went down. And now all the stuff's happening with bigger pockets that you guys are hearing about. So it is a very tough time right now. And this is where my advice comes from. Can you imagine if I had quit and just tried to live off my cash flow and this happened? Can you just imagine what would have happened to me? It would be humiliating. The David Green, the bigger pockets guy, goes into massive foreclosure and financial ruin and everyone's like, I told you so. It's because he didn't invest for cash flow. But it's all the cash flow properties that are causing me these problems. Right? It's only because I had so much in reserves. It's only because I live so far beneath my means. I still drive a Toyota Camry. I've only survived this crap, which I'm sure there's mistakes you could say that I made. But when I look back at him, like, I didn't do anything irresponsible. I didn't do anything stupid. I wasn't like gambling or something dumb. This is just something that I've never even heard could happen, that I don't know how you get out of it. I only survived it because of the principles that I'm trying to teach you guys. And that's where it comes from. Like, you can't always plan on the best case scenario and be mad about the life that you have. There's things about our life that we have right now that could be way worse. I mean, this is going to sound like cheesy, but just think about people living in other countries. Even with what I just said, this disaster, they would trade places with me in a heartbeat. People in this room would trade places with me in a heartbeat. Right? Doesn't make any. It doesn't make sense for me to get upset about it and mad and focus on like, well, it could be better. And I used to be better. This is what it is. Like, how do we make the most out of the position that we're in? How do we learn from this? And that's why I'm sharing it with you guys. This is not fun to get up here and share, like, these words, right? But I made the commitment that the new podcast is going to be called Real Talk Real Estate and we're going to share the real Talk. And my hopes would be that even though it's not going to help me, you guys would avoid getting into a position like this buying a short term rental In a neighborhood and understanding that this is a thing that can actually happen if you're going to do it, rather than just saying, well, is it legal to do there? You got to have that call the city and ask, like, what are you going to do if the neighbors don't like the house? There's a question in the back. What are my lessons learned? Whatever you think you need in reserves, you need more. Don't depend on cash flow because it's wildly unpredictable. I will also say this. If I didn't have to buy so many of them at one time, if I would have bought a couple of them and then ran into this problem, I would still be in the problem with those properties, but it wouldn't have been compact. Like, that's the one thing that I can look back and say, where I made the mistake was buying so many houses at one time. Now, it looked in the beginning like a great move because I hit this perfect pocket where rates started to go up and everyone got scared and people dumped their properties because they thought we were going into a recession. I mean, I bought one of them that was listed at a million five hundred thousand for a million fifty because the guy panicked and was like, oh, God, we're going to depression. I'm dumping all my stuff, right? Like, that part looked good. It was just when all these things happened that I couldn't control, it made the investments look like they're bad. So when you're in a position like, you, hey, guy, I got a good thing going, and you want to scale, scale, but maybe don't go so big that it's like you couldn't get out of it if it went bad. I didn't tell you about the fact that during the 1031 exchange, the escrow company missed a lien for $550,000 on that portfolio. They did not find it. Okay. The lien ended up coincidentally being due about a week after it closed. So the bank calls me and they say, hey, we need this thing paid off. And I'm like, that you should have been paid off because there was a loan for five lien for $500,000. Well, there was a second one for the same amount that I just paid. Had forgot about in my head. They were the same one because it was, like, from nine years ago. The title company protects the person buying it, not the person who's selling it. I then had to pay a penalty of $100,000 for being late paying off this $550,000 loan, $650,000 out of my reserves, it didn't come out of the 1031. And I had to. I bought way more real estate than I actually needed to because that's six, that's $550,000. I shouldn't have had to reinvest. Like it was a period of time, it's not as bad right now, but it was every day I went into work and I'm like, this cannot be real. That can't have happened. What you guys have heard me say is just the things that are popping in my head right now. There are so many more that went wrong. And it's not just me. There's a lot of people that bought a. Like, if you're a multifamily apartment syndicator, a lot of those guys are losing all their clients money, all their LPs money. There's capital calls going on all over the place and people don't know what they're supposed to do. And it never gets put on YouTube, it never gets put on Instagram. None of those people are going on Instagram and saying, hey, I screwed up and I lost a bunch of people's money. And none of the people who are losing their money want to come to a meet up like this and be like, let me tell you about the $200,000 that I lost in a syndication.
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Lindsay
Have you explored AI in real estate investments?
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David Green
The question is, have I explored AI in real estate investments? No. Okay, so the problem when you ask me about AI is I think in practical terms what that means is do you use ChatGPT? Right. And I'm not saying you're saying that, but I think that's what I hear and that's what my mind goes to. Are there other forms of AI that. If there was a form of AI that could predict where jobs were going to move and where populations were going to move, I would say yeah, but it's useless to me unless I understand what market appreciation equity is. Now I know how I would even use AI in the first place and what it would be looking for. I think most people's understanding of AI is it's going to do it for me so I don't have to do it and it's going to do it accurately so I don't mess it up. My perception of AI is if it does that, it now does it for everybody, which means everyone who didn't come to this meetup can do the same thing. You can, because you were here and blackrock and Invitation homes and all of these hedge funds that have better AI. Than you do and access to it are going to smash you and buy everything that. I don't think AI is going to be this amazing thing for the mom and pop investor. Basically, the only reason we have an opportunity to buy a house at all is because these hedge funds are so huge. They're like a whale that just swallows tons of krill and they don't even really know what they're getting. We have the advantage that we can slow down and look at every house we're buying and read an inspection report, and we can, like, strategically pick up opportunities in the market. If AI comes in and makes these decisions easy for you, it doesn't mean you're not going to screw up. It means the other people are going to now be able to do the same thing you were doing. Your only advantage is gone. I'm terrified of the fact that what this is going to do is give a huge advantage to the people that have all the money and have all the resources and have all the connections with the government. Politically, I'm not one of those guys that's like, oh, AI is going to make it so I never make a bad investment anymore. Like, the fact that you can screw up in real estate is the only thing that gives people like us a chance. Because the whale doesn't want to swallow every single form of krill because some of it has food poisoning. Is that a decent analogy? That make any. Okay, thank you. But now you made the AI people hate me and the cash flow people hate me. I'm going to be canceled before we leave here. Any other questions on the 10 Ways?
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Lindsay
What is your personal philosophy and your.
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David Green
Advice to newer investors around when you're.
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Lindsay
Doing out of state investing, how do you establish a community of trusted ecosystem members?
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David Green
Right. Plumbers, technicians, H vac repair, electricians, contractors. Like, what is your approach to doing.
- [30:00]
Lindsay
That and how do you advise newer investors to establish that community?
- [30:04]
David Green
The first thing is, you got to understand there's going to be some trial and error. You're not going to get it right right off the bat. Like, I'm doing deals in Oklahoma right now. I've never done them before, and I'm going to make some mistakes. I have an advantage over the layperson because, I mean, the people I found that I've been using right now came from the guy whose Airbnb I was staying at. And my assistant says, hey, the bathtub's not draining. So he comes by to fix it. He opens the door and I'm sitting there on my computer and he goes Holy shit, you're David Green. And I'm like, yes, I am. By the way, who painted this place? And that turned into, can I get your floor guy? Can I get your granite guy? Right? And then you ask the same question of other people, and they give you names, and you meet them at the property, and you have them give you an estimate. And I ask questions. I think that too many people don't ask questions and don't know what to look for. So the floor guy, I said, hey, can you also give me a bid on what it would cost to retail the showers? And he does is like, well, I'm going to need new bathtubs. Can you install that? There's a very long pause before he said, yeah, we can do that. He didn't pause that long when I asked him at the tile. So I think you can safely deduce he was going over his head. Who do I know they could put in a bathtub? And can he actually do this before he said yes, or I'm going to have to find a person, but I'm going to say yes, right? So safe to say that person will not be doing the showers. But these principles that I'm telling you guys, they're. They're just. They're not rocket science, right? I think people get in trouble when they say, I want you to give me a blueprint that I can follow step by step and know exactly what to do. Everybody wants this. There isn't one. I don't have one. It's a lot of, like, me on the fly, literally. I was. Got a bid on carpet, and it was like $12,000. And I was talking to another investor out there and told him. He goes, oh, you got to go to this place. It's like secondhand carpet. They sell it for cheap, but you can't even tell that it's bad. So I show up, and it's a bunch of toothless hillbillies, and it's exactly what you'd expect out of a discount carpet place. And I asked him, like, about carpet. He's showing me around, and I just happen to say, what about that one? He goes, oh, that one. I'll get you a deal on that one. I got so much of that, I don't know what to do with it, right? And it was like, I think it used to sell for, like, $40 a yard or something. And I bought it for, like, seven, right? So my $12,000 carpet problem became, like, a $2,500 carpet problem. But that wasn't because of a blueprint that I followed it just as I'm talking to that human being. Instead of letting him show me everything, I asked him a couple of questions and then keyed in on the fact that he was very excited to sell all of that carpet, if that makes sense. Now I got cheap carpet with a super expensive pad. Pads a whole lot cheaper than carpet is. It's going to match. And then I just said, well, I guess I'll be painting the walls a little bit different color than I thought because I got this carpet. I'll just paint the walls to match the carpet instead of buying the carpet to match what I was going to do with the walls. Right. If everyone could take that approach, people that work in companies, the people that are trying to do this and get away from what's the blueprint, Tell me exactly what to do. Make this as easy as you possibly could. The answers kind of start to materialize for you. It was a good question, though. Lindsey, you bought out of state and you bought turnkey. Do you mind sharing with some of the people who said, I don't want to buy in Southern California because it's too expensive. I'm going to go buy a turnkey property that cash flows in another state because it's cheaper and safer.
- [33:25]
Lindsay
Yes. So we actually. So our first house that was a triplex in Long Beach, Va loan, zero down, three and a quarter percent interest rate. We were paying like 1300 bucks a month to live walking distance from the beach. And then we were about to have our second baby, so we moved out of that little craftsman home, bought another primary, kept that triplex as a rental. So we had 200 grand in equity and had some problem tenants, couldn't do he lock, couldn't do a cash out, put 100% or zero down. So financing, no room. We just had to sell it. So the 10:31 exchange, I followed the cash flow model. We said, we'll scale, let's get more cash flow. Right. So we went to a turnkey company, which we thought was a turnkey company.
- [34:12]
David Green
Where did you hear him advertise to start the.
- [34:18]
Lindsay
I think it was. I think it was your voice that advertised it. All right. And to make it worse, they're not actually a turnkey company. They are a lender. They fund the deals for these toothless hillbillies that flip properties. And they had. They're not a fiduciary. They loan them the money. They put the properties on their online Google sheet platform and 1031 exchange, we had 45 days to identify properties. Right. With this very specific formula we had to follow. I had a newborn and a toddler at the time, and David knows analysis is not my thing. I made that very clear to him. I can do it, but I still have a very good track record. So we looked at the property, said, this works. This works. It says it's going to cash flows. It's going to cash flow.
- [35:06]
David Green
Wow.
- [35:06]
Lindsay
That covers our new mortgage. So ultimately, we bought a property that I think we. We bought it one in Kansas City, Missouri. I bought two there. One of them we bought for 130 and tenants didn't pay during COVID Black mold, raccoons in the attic, all the things. So all the cash flow at 200 bucks a month in cash flow went away real quick. 200 is an exaggeration, but you get my point, right? There was nothing there. And we couldn't affect the tenants because during COVID So we're losing money on it. We go to sell it and try to do a second 1031 exchange, find out there's a $40,000 foundation issue that was not disclosed to us. In fact, the toothless hillbilly who was doing the renovation purposely covered it up like almost a duct tape, if you would. Wasn't disclosing the inspection reports. And we couldn't go after the company that we bought these properties from because, oh, no, we're just a lender. We just lent the money. We didn't sell you the property. You bought it from this company. That company went bankrupt. We kept wondering, like, why can't we sell this property? We keep having buyers back out. So took a total loss on that home, sold the other two as well. So ultimately, we took like, that property. And by the way, that duplex or the triplex that we had that we zero down 200,000 in equity after about two years of owning it. We sold it for 950. It just sold last year for 1.7 million. So does that answer your question?
- [36:35]
David Green
Yeah, it highlights this idea that cash flow is safe and appreciation is not and equity is not and that you listen to all the experts. Right. Like you, everything you were given, that's what we have to make decisions on. You read an inspection report. The inspector said that's the case. You cannot be expected to know what a foundation should or should not look like. The numbers that were provided to you would have worked had you didn't have real life stuff go wrong, like raccoons in an attic and Covid and all of these issues.
- [37:05]
Lindsay
And I'm an agent Imagine how much other people who don't have my experience and my negotiation skills missed.
- [37:12]
David Green
Right?
- [37:12]
Lindsay
And they're misleading people. We have, I mean some people, some of you in this room, I've talked to you, I know you bought from the same company and you've lost money. We've had a lot of clients who have bought in SoCal. They buy their primary home, their house, hacking, they have a short term rental or whatnot. They go with this company or another truck company. I interned at a shrinking company too in Indianapolis before I got my license. I saw a whole world that was like, oh, that's shady. I didn't buy from that turkey company. Right. So there's a lot of them out there. But they sell you a rundown house at the dollar blinds and they upcharge for everything what seems safe because it's a less expensive property. It does not work that way. My California properties have always made me more money. That's how my husband resigned from lapd was our equity that was built in our California properties and then doing smart moves with that equity. So essentially we learned a lesson from that.
- [38:05]
David Green
The things that go wrong with real estate are usually only masked by the equity gains that you got. There is hardly ever enough cash flow to pay for all the things that can go wrong when you're owning property. I mean, I, if you guys just sat in my office in a day, it's the AC went out on four houses in the same week. We're going to spend $50,000 on air conditioning you units, why is it that much? Because these in this area, these are the only people that can install the unit. There was a flood, a bird went through a window pane and broke the window. And then it happened to rain that day and a bunch of rain got in and the tenant wasn't home to tell us about it. And now there's $3,500 of water damage from like and a dead bird somewhere. I'm not trying to discourage anyone from buying real estate. I'm just saying when you're told that cash flow is safe and appreciation is not, or equity is not, it's not accounting for all the variables that you don't know are going to go wrong in real estate. And I would venture to bet that all of you in here that own real estate, very few if any of you would disagree with what I'm saying. The people that own the real estate are like, yeah, it net. You never know if you're going to have cash flow at the end of that month or not until you've owned it for a long time. When you've owned it for a long time and you fixed all the things that could go wrong, and you plan for the future, and rents have tripled from whatever you paid for it. Now cash flow is pretty reliable. Now if you're like, hey, I want to quit my job and live off it, I can endorse that.
- [39:26]
Lindsay
During the time where you're dealing with all this, how did you stay mentally and emotionally strong day to day? Did you have a coach?
- [39:35]
David Green
I mean, do you guys think I did? I'm sure they've saw me sucking my thumb on the floor. I want to quit, but I can't. There's no way out of it, right?
- [39:44]
Lindsay
I mean, there's a difference between. You wake up in the morning like, okay, it's a great day, and there's another one, oh, my gosh, what am I going to face today?
- [39:52]
David Green
I mean, I didn't even tell you guys all the bad stories, right? Huge freeze in Blue Ridge, Georgia, on a property I bought out there where I bought a house that has a big four car garage with an au pair living space above it. Gorgeous. And for $60,000, I can convert the entire garage into a second cabin on the same lot. Like the burr of the century, right? And then we get a freeze. And while the construction crew is turning the garage into a second cabin, the water pipe breaks in the main house, starts spewing water. Three weeks goes by, nobody sees it. We asked the guy to take a video of the inside of the cabin while he's there working on the second one, because I was trying to figure out, like, what color pool table I wanted or something. And he can't push the door open because it's been sitting in like 4 inches of water for God knows how long. The entire floor is gone, the cabinets are gone, the subfloor is gone. The water's leaked into the basement, and it's all moldy. This is just like a Tuesday at this time. It's every day something like this is happening. As far as how I got through it or how I'm getting through it, right? I've always been a believer. And when you reach the end of yourself is when you're more likely to be like, all right, God, I'm listening, right? What was very frustrating about this is he's not coming to bail me out. Like, you're praying and praying and praying and asking and like, okay, you can have my life. I'm trying to help people. I'm trying to do the right thing, come fix it now. I'm ready to be saved. I'm ready to get out of the way. Jesus, you can come take the wheel. And it's just crickets. Okay? It's easy at that time to think, oh, God doesn't care. Or well, if God was real, he would come do something. But here's what I've learned about people that get bad attitudes in general. When you get a bad attitude, what's really behind that? Your motives is you are trying to pressure somebody else to come fix your problem. When a 2 year old screams because they wanted candy they couldn't have or they wanted to go to bed, they wanted to stay up and you want them to go to bed, what's really going on, why that's effective for a two year old is mom is so unhappy from this person, she loves being in pain that she's likely to, to give them what they want to get to get out of pain so she doesn't feel the pain. Okay? And then something happens that we don't grow out of this where we go through life thinking, my boss made me do something I don't want, the client's making me do something I don't want. This person's bothering me. The answer is to get in a really bad mood and make everybody around me unhappy until they're so unhappy that they give me what I want and then I'll stop making them miserable. I just had this like epiphany in the middle of, like, this is why my employees get bad moods. My clients get bad moods. Every human being on the planet, when something goes wrong that you don't like and you just get in a pissy attitude about it, what you're doing is saying, I'm in a way, you're trying to force God to give you what you want. And then, okay, now I'll be nice to you again. God, like a three year old, right? Well, I realized that my own bad attitude was coming from that same manipulative place and a guy in my 40s, I didn't realize that's what I was doing. And it doesn't help. Like, you're not going to pressure God to do what you want. He's not a genie that you rub on a bottle and say, I'm ready for you to come help me. Right? The only thing you can control is the attitude you're going to have when you're going through these tough times. So I don't really have an option other than have a good attitude and try to figure it out and ask what I'm learning. It's that or be a baby. Now, I think everybody in this room would. If I was a baby about it, you'd probably cut me some slack for that. I don't think you'd blame me. And again, you guys heard, like, 10% of it. It's been worse than these things. Right. But you wouldn't respect me. Right? And I wouldn't have the stories to tell you or other people. I wouldn't have the same depth of character that I kept going when it's getting hard. Like, another way to look at it would be, you cannot get bigger muscles if you don't lift heavy weights. You can't have a good workout without it being miserable. Lindsey is in crazy good shape. What are your workouts like? Are they fun right now? Are you loving every one of them?
- [43:45]
Lindsay
I mean, honestly, Yes, I do love them, but. Okay, you say, well, they suck, but I like the results of them.
- [43:50]
David Green
Yeah, that's what I'm getting at. When you're doing it, it hurts. It hurts so bad. It is not fun. And it might even feel like, why would I ever want to do something that's this hard? But that's where the result will come, right? I think that when these things happen to us in life, our character is getting a workout, like our body. Right? And I wouldn't have this perspective of where bad attitudes come from and how manipulative that we really are and how we think that everything should work out good and these things shouldn't happen because I think I'm a good person or whatever the case would be. Like, someday I'll know why this is going on and why it's happening right now. I don't. But I don't have a right to have a bad attitude until I understand it and that, oh, now I'll have a good attitude until again, like, there's nothing that could stop me from still being a servant, still trying to be mentally tough, still trying to focus on other people, still doing the best I can. And then lastly, holding it with the loose hand. Right. Does it make sense for me to be mad that I'm losing so many things that I had when I never could have had them in the first place? Right? Like, I'm super blessed to be in a position where I hosted the Bigger Pockets podcast, where I had these kind of properties. Like, most people would say, oh, I'd love to be in. I. I'd take all his problems if I had everything that comes with it. And that's a good point too, right? So when you take that perspective, all of a sudden, like the bad attitude, the fear, the anger, the I'm not in control becomes much easier to stomach. Thanks for listening to Real Talk Real Estate. If you would like to be featured on the podcast, I'd love to have you visit davidgreen24.com Ask and submit your question there. Also, please do me a huge favor and share the show with someone that you love, that you think would benefit from his message, and make sure you're subscribed to get notified for future episodes. If you want to reach out directly, you can also DM me on Instagram or social media and check out davidgreen24.com.