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- [00:00]
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. What's going on, everyone? Welcome to Real Talk Real Estate. This is the David Green Show. I'm your host. David Green would have started this podcast years ago. I just couldn't think of a name for it. Just kidding. We have a great show for you today. Lots of questions from you, the community in the Seeing Green style show. This is your first time listening. Let me just say, you're welcome here. Thank you so much for being here. In these shows we take questions from you, the community and answer them for everyone to hear. You can submit a question to be answered on the show@davidgreen24.com Ask where you can contribute to the quality and the value of the show as well as get your question answered. If you're listening to this on Apple Podcasts or Spotify, thank you very much. I'd love it if you would leave me a five star review and a comment letting us know what you love about the show. And if you're listening on YouTube, consider subscribing to the podcast over there so that you get reminded whenever a new episode comes out. Today's show we've got several different questions about different loan products, if you should sell or if you should rent, rehab questions, how to find a down payment for a new property, and more. Make sure you listen all the way to the end because it gets funnier the longer that we go. All right, thanks for being here with me. Let's get to the show.
- [01:30]
Dustin K.
What's up Dave? I'm a big fan of your content. Been watching you for pre pandemic days and I wanted to ask a question. I live in Chicago. I am currently working a owner financing deal with a family member who owns a nine unit building here in the city of Chicago. He's just looking to retire, looking to just unload the property and so he is being very open to creative financing, different opportunities. The question I have for you, is there, is there any way for me to utilize the equity in the building as either a down payment or of some sort? I would prefer not to utilize the equity that I have in my other buildings. And I would love to just try to see if I could utilize the equity that's in his building already. The, the seller owns the building outright. And so there's close to, you know, he, he, we, we just got recently appraised a few months back, and it appraised for 1.2 million. And so he, he has a pretty large amount of equity in it. And so I just wanted to reach out to you and ask if there was any way for me to ask, access that equity without having to tamper with the equity in my other buildings. Thanks, Dave. Appreciate it, man.
- [02:51]
David Green
All right, Nice to meet you. Glad you've been listening since before the pandemic. It feels weird to say how long ago that was because it feels like it wasn't that long ago that the entire world changed by the crazy virus going around. So glad you finally got a chance to get your question answered on the show. All right. Your question was about using the equity in the building for the down payment, which I'm assuming would be to your family member. If you're doing seller financing and he owns a building outright at 1.2 million, the way that this typically works is you would owe him a note and you would make a payment to him every single month. So let's say that you buy it from him for 1.2 million. Now you owe him 1.2 million. You're going to make the monthly payment on that amount. I think what you're asking me here is he also wants a down payment from you, and you don't want to get the money from somewhere else. In this case, you can't use the equity from the building that you're buying for the down payment of that same building, because it's not your equity yet. You won't even have equity in it until you've bought it from your family member. And if you're borrowing the full amount, the 1.2, there won't be equity in the building. So you're going to have to. If this person's insisting on getting a down payment from you, you're going to have to take it from somewhere else. Now, what you could do is you could borrow, say, $300,000 from a different property. You could use that as the down payment that is going to your relative. So Instead of borrowing 1.2, you'd be borrowing 900,000. Now you have the equity in this building. You could look into putting a HELOC on it or some other tool to get the equity out of it to pay yourself back from the money you borrowed from another building. But when you're doing seller financing, if they're asking for a down payment, you can't use the equity from the building that you don't own yet for the down payment. My recommendation would be you borrow the full amount from your family member. So instead of saying, hey, I'm going to give you a down payment, you just say, I'm going to borrow the full 1.2 and I'm going to make payments on that. If they're asking for some cash from you because they want some cash in the deal, they don't want to front you 100% of the financing. Your only options are going to be to borrow it from somebody else, to borrow it against the property you already have, or to take it from your savings. Good question though, and I hope this deal ends up working out for you, my man. All right, our next question comes from Dustin K. In Cleveland, Ohio. Cleveland Believeland I think you guys are going to love Dustin's haircut and face.
- [05:18]
Dustin K.
Hey David, quick question for you. Quick little background. Full time W2 as a school teacher might be the background noise you're hearing during this video. I'm also a licensed agent and a licensed home inspector since 2019. Getting to the point where I'm pretty much working every day from 6:30 in the morning until 10 at night. Monday to Friday and usually 8 to 10 hours at least on Saturday and Sunday. 27 units in total. Never sold any of my own units. I have a property I house hacked and lived in from 2018 to 2022. I then rented out for the previous two years, bought it for 135. Currently worth close to 250,000. Debating if I should sell that property and take those, gain those gains tax free or continue to rent it for numbers sake. It rents for $2,000 a month and my mortgage tax insurance is about 1,050. It is a nicer property that I've only spent about $600 in repairs on the last two years. So it's one of my lease maintenance properties. But also have a lot of equity in it. It might not be doing as much as it could. So just seeing your thoughts, any advice would be appreciated.
- [06:29]
David Green
Thanks. All right Dustin, great question and way to go man. Acquiring 27 units as a school teacher, a real estate agent and a home inspector. This folks is a man after my own heart. Not only does he have beautiful hair and beard, but he's also doing it the right way. There's lots of ways to do it, there's lots of people that are going to share their story with you and their philosophy. I think today's economy is hard. It is tough. This is a grind economy. You can't look for the easy way to make money. You just have to look for any way to make money and hopefully it's something that you enjoy doing. Dustin loves real estate. He's out there teaching kids and then selling houses when he's not doing that and doing home inspections. So he's doing something he loves, he's making money, he's putting it back into owning real estate and he's preparing for his future. So well done. Just Justin, let me just take a minute here to applaud you for the job that you're doing. And now let's get to your question. I, like a lot of people, don't like selling property. The way that I have gotten around this when I need to sell it is I stop looking at it like I am selling a property and I look at it like I am exchanging the equity in the property for equity somewhere else. So if you sell this property that you don't want to have to sell and you take the tax free money, can you then go invest that money into something different? If so, you didn't sell a property, you exchanged that property into a different one or maybe two or even three different properties or units. So that will help you get over the hump. Now, when it comes to the specifics of this deal, the question is, is the equity working for you as hard as it could be? You said you bought it for 130, it's worth around 250. So you've got around $100,000 of equity after closing cost sales and it's making you $1,000 a month or so, maybe a little bit less than that. It's right around a 12% cash on cash return. That, that is not bad. I don't know if you're seeing other opportunities out there. So if you sold this thing for 250 and you bought another property for around the same price, would it make more than the $2,000 a month that you're getting on this one? If so, I would say yeah, that might be a good move to make. Especially if you've got some other way to build wealth. You're going to force equity, you're going to buy equity. Those are topics that I cover in my new book, Better Than Cash Flow. You guys can get that on pre order right now at Amazon for Kindle and coming soon in paperback. In fact, for the first time ever this book is going to make its cameo appearance. This here, folks, is the long awaited Better Than Cash Flow. Look how thick that sucker is. All kinds of good. This is your real estate analysis bible going forward, the 10 ways that you make money in real estate. You can get your copy now pre ordering on Amazon. So, Dustin, hopefully that helps you. But my advice would be if you're going to sell it and you're going to buy another one, look for something with meat on the bone. You want to pay less than what it's worth. You want to add equity by doing some construction work, make it bigger, make it better, and then you want to hopefully force some cash flow as well. You seem like a talented investor. You've done really well up to this point. So for you, I'm going to say don't feel bad about pulling the trigger. It seems like you make smart decisions, so if you make more decisions, you're likely to make more smart decisions. If someone's in a position where they're making bad decisions, I would usually tell them, hey, don't make as many moves. Just keep focusing on making money and paying off your loans and acquiring properties slowly. Also, thanks for what you're doing out there for the kids. I will keep you in my prayers, brother. Keep on trucking along. All right, our next question comes from Ronnie, you in Detroit.
- [09:42]
Ronnie Urquhart
Hi, David, my name is Ronnie Urar from Detroit, Michigan. I'm interested in your opinion on a.
- [09:47]
David Green
Deal I'm interested in.
- [09:49]
Ronnie Urquhart
It's a 12 unit, three building, one.
- [09:52]
David Green
And two bedroom multi unit. Five of the units experience either fire or smoke damage. The other seven units are being rented out. I don't know what the rents are as yet.
- [10:03]
Ronnie Urquhart
I'm interested in this because it was.
- [10:06]
David Green
Purchasing 2001 for 1.3 million. The ARV on it is 1.2 million. I'm fairly new at this.
- [10:16]
Ronnie Urquhart
I only purchased my first four unit last year.
- [10:20]
David Green
Other than that, just two single family.
- [10:22]
Ronnie Urquhart
Homes on my own. If you can give me your opinion on this, I would greatly appreciate it.
- [10:27]
David Green
I'm a huge fan. Keep up the great work, you guys.
- [10:30]
Ronnie Urquhart
And I appreciate you wanting to help people. Thanks a lot. Ronnie Urquhart from Detroit, Michigan.
- [10:35]
David Green
Ronnie Urke, with a lot of heart. Thanks, man. I appreciate your patronage and always following me and I got my fingers crossed for you with your career out there. All right, let's break down your situation. So you've got two properties that you own, both residential. This would be your first foray into commercial real estate. And this property has 12 units. I believe you said seven of them are being rented and five of them have fire damage, so they're not being rented. So you didn't say what you think you can get it for, but you said you think the ARV is 1.2. I'm assuming that means the ARV after these five properties or five units have been fixed up from the fire damage. So we need to figure out how much money it's going to cost to do that. Where are you going to get that money from if you have the time to oversee the project and how cheap of a price you can get this deal at? If you told me that you could get this thing for like 500 grand or something, I would be thinking, yeah, this is probably a great deal. I'd love it if you could get it at a price that the seven units would cover your nut until you get the five units going up so you're at least breaking even. And then once you got the five units up and running, that's all profit. That's probably the way. If I was you, I'd be pursuing this thing. Couple things that you need to be aware of and that if people are considering venturing into commercial real estate, that they need to be aware of, because not everybody understands the difference between this asset class and residential. First off, the value of the property is going to be less tied to comparable sales, which is what we are used to with residential property, and more tied to the profitability of the property itself. When I say profitability specifically, that refers to the NOI or the net operating income. So the way that appraisers are going to determine how much this property is worth is they're going to say, how much money does it make in a year? So that would be your noi. And then they are going to divide that by the cap rate, which would be how much do properties in that area tend to trade for? And they're going to come up with a number that's what it's worth, which is what I'm assuming that that 1.2 is based on. So with rents at this point and expenses at this point, you get an noi. You divide that NOI by the cap rate. Boom, you've got the arv. Now in Better Than Cash Flow, the book that I just talked about briefly, I have a whole chapter dedicated to forcing value in residential property and forcing value in commercial property specifically tied to cash flow. So there's two different ways to force cash flow. There's residential methods, which I have a chapter on, and then there's commercial Methods. So that might help you if you're thinking about venturing into this space, that chapter in particular. So the name of the game when it comes to making money in commercial real estate is you've got two levers to pull on. Oh, and I feel like, is this the trump dance that everybody's doing right now? There you go, trumping it up. You've got the lever of noi. That's where you're going to increase how much money it makes in a year by bumping up rents, bringing down expenses, or both. Then you've got the lever of cap rate, which means if you buy into a market and cap rates go down or compress, your property will become worth more. What makes cap rates go down is when more people want to buy properties in that area. The cap rate is an indicator of the demand for the asset. So when cap rates get higher, that means less people want these properties. When they get lower, that means more people want them. So that you can kind of time the market, in a sense, if you think that a lot of money is going to flood into an area and you buy there first, you're going to get there at a higher cap rate, and then the cap rate is going to compress. Your property is going to be worth more. The opposite can happen, too. And oddly enough, the opposite did happen in your hometown, Detroit. At one point, Detroit was Motown. This was where all of the goings on were happening. There was a lot of money. It was kind of like the Hollywood of middle America. And then when a lot of that left, when the auto industry left, when they kind of dipped, decimated the industry of that town, cap rates expanded. They got really big, really fast. And so the value of the properties went down a lot. And it would stay that way for a long time, frankly, until you had the mortgage industry actually moved into Detroit. It brought a lot of jobs. People that got jobs. They needed houses to live in and rent. So investors went in and bought houses, and people rented them, and people bought houses to live in. And the next thing you know, the whole economy started to get up. And now Detroit is somewhat healthy. Little fun fact here. Back in the early days of the BiggerPockets podcast, before I was even on there, when I was listening to it as a little sprout, a little seedling green, little tiny evergreen tree. Brandon Turner and Josh Dworkin were hosting that podcast, and Josh used to rip on Detroit all the time, because investors would go out there and buy a $12,000 house and get their lunch ate because they didn't know anything about how to manage the property. We've come a long way since those days. Detroit actually is a pretty healthy market in a lot of ways. Okay, so that's how you value real estate. That's commercial. The next thing, Ronnie, I want you to understand is that the financing for commercial real estate is very, very different. You are not going to get a 30 year fixed rate loan like you're used to on residential property. You are going to get a loan that has to be refinanced every three, five or seven years. Now, you can sometimes get a 10 year loan, but in general, most banks and lenders are going to offer you a five year balloon payment, which means you get that loan for five years. At the end of the five years, you got to pay the whole thing back. During that period of time, you will still make a monthly payment that is on an amortization schedule. That could be a 30 year schedule, a 25 year schedule, a 20 year schedule. They'll give you options there too. But here's the thing. You can get a property that you buy well, that cash flows well, that you added value to, you did nothing wrong. And if interest rates go up and you have to refinance it, when rates are higher than what you have, your cash flow can go away. If cap rates expanded and you're looking to refinance that property at the time when it's worth less because cap rates went up, you can lose money. This is what's tough with commercial properties. There's a lot that's outside of your control now. That's true with residential, but it's less the case with residential. Things can go wrong in residential real estate. But my financing doesn't change, right? The value of the property. We might hit a dip where the economy's bad and it's hard to sell the house, but as long as I get a tenant, I'm okay. But not the case with commercial. You can be in a situation with commercial where values have gone down, rents have gone down, interest rates have gone up, and you literally lose the property to foreclosure as it's cash flowing because you're forced to refinance it and you can't. And so then you're forced to sell it. And if no one's buying it at the price that you paid or at the money that you owe on it, you're stuck holding this thing. This has happened to a lot of commercial investors. Right now, this was the hottest thing ever and you had to pay high prices to get into the asset class. And you had all these cool tax incentives that would come from the property. Rents were going up every single year like clockwork. And then boom. We raise interest rates incredibly quick, the economy goes into recession super fast, inflation races through, and the next thing you know, this was the best asset class to be in. It's now one of the worst. Now, I say this as I'm trying to prepare you and stop you from making the bad decision. In case you weren't aware of it. I also want you to think about the fact that trying to rebuild these five units with fire damage is a big undertaking. This isn't like going in and just doing a remodel for cosmetics. You're going to have to get the city involved. You're going to have to get government oversight involved. Your contractor is going to have to be involved. Your contractor is going to get pulled away from this job and onto other jobs and it's going to take up a whole bunch of their time. It gets ugly with this. So if you don't have experience dealing with the city, knowing people in the city and managing rehabs, especially this kind, we call them burnouts or fire damage, this can be a very, very big case to take on. That's another reason you might not want to do it. Now on the flip side, that's why there's opportunity here. There's a lot of work, There's a lot of people that don't want to deal with this. So here's how I'm going to boil down the advice that I give to you. If you have a competitive advantage in the following areas, I would say you should look into this deeper. You know how to manage these properties, or you know someone that does, you know how to fix the stuff that needs to be fixed, or you know someone that does, you have experience dealing with the city or you know someone that does. Because permits are going to have to be pulled. And if you have a financing connection or you understand the financing of this, or you know someone that does, if you don't have those, Ronnie, I'm going to say you probably pass on this. You should stick to the residential properties you're aware of and keep looking for deals there. If you feel like you have somebody that can walk through this thing through you, and you're not taking as huge of a risk buying a big property like this, a million dollar property, and trying to learn how to do it on a million dollar property, I'd say probably pass up on this one and get exposed to commercial real estate with something That's a little bit easier to get your feet wet. Thanks for the question though. Hope you keep listening and I hope we hear from you again. All right, coming up next, we have a question about a USDA rural loan which a lot of people don't know about, so we get to talk about that. But we're gonna take a quick break before we do. Everyone, Today's show is brought to you by Performance Property Management. This is my short term rental property management company. We are currently taking on new clients who own cabins in the Smoky Mountains of Tennessee and want them to perform better or want their time back. I've got a lot of properties out there myself. I manage my own and so I use my in house team to manage people's properties, improve their income and help them get their time back to focus on other things. So if you've got a cabin in that area and you would like someone else to manage it and you're tired of getting ripped off by the other people, send us an email. Stravid green24.com that's str, like short term rentalavidgreen24.com all right, getting back into it folks. Our next question comes from LA D in Georgia. This is about the USDA Rural Loan.
- [19:59]
Ronnie Urquhart
Hi David, I'm hoping you can give me some information on the USDA Rural Development Loan. I know the basics are that it would only be applicable to people whose income is below a certain threshold, that there is a limit to how much the loan will cover, that no down payment is required, that I would need to live in the home for at least 12 months before renting any part of it. And of course the residence has to be in a designated rural area. In my mind, this is a great option for someone wanting to make a first time home purchase and to use the money that would have been spent on a down payment as cash reserves instead. I would ideally live in a home for 12 months and then potentially find a tenant to either house hack with or to move in and take over the mortgage if I want to go find another property. Could you let me know if this is a good idea? What are some of the pitfalls that could happen with this type of loan? Thanks for your help.
- [20:54]
David Green
Let me just say, completely independent of your question about the loan, you worded that great, super articulate. You've clearly done your research. If I could invest in an investor, I would be buying stock in you right now because I feel very confident that you either are successful or going to become successful. So if you're Having any thoughts of negativity, of self doubt, of wondering if you have what it takes, Let me just push those right out of your head. Those come from a dark place. They're not real. You're going to do great at this. You were meant to do this. You should keep doing it and continue on the path that you're on because you're doing everything great. Thank you for your question and for your appearance on the David Green Show. You are welcome to come back at any time. Davidgreen24.com Ask to submit another question. All right, a little bit about this loan. First off, we do these at the one Brokerage. So if you guys would like to know more about USDA loans, you can send us an email asking about it. Intakehone brokerage.com. one of our loan officers will walk you through it and help you determine if that's the right loan for you. But what should you know about these things? Well, first off, the reason that they're valuable and people like them is you can put 0% down. That's right, folks, nothing down. You can get a loan for no money down. Kind of like a VA loan, even if you're not in the va, if you're buying in one of the areas that is designated for these loans. Now what are those areas, pray tell? Well, these would be the rural areas. These are going to be kind of like farms, ranches or homes that are really far away from everything else. If you're looking to live there and rent out later. Yes, this would be a good option, especially if you've got no money for a down payment. Now I'll be honest with you, sometimes the zero down payment options outside of the VA loan, the VA loans, awesome. It's a super loan. We always tell people they get it. And if you're someone who wants a VA loan, you should come to us for sure at the one brokerage and let us help you. But outside of those, oftentimes it's better to put three and a half percent down, 3% down, 5% down. Like we play with the numbers there because you're getting a better rate and lower closing costs and sometimes you can avoid some of the pmi. So even though zero down often sounds enticing, it usually comes at a cost you don't hear about all the time. But here's one of the reasons that I think you should use a mortgage broker, not a direct lender. Direct lenders are only able to lend out the money from their financial institution. So if they work for quick loans or if they work for Wells Fargo or whatever. You go talk to the loan officer. They say, here is the loans that we have. When you come talk to a broker like us, we say, here's the 120 banks that we have a relationship with. This is all of their loans. Let's find the one that works best for you. Let's find the best combination of rate, closing costs and service so that we know how long we need to close in and we can save you as much money as possible. That's why I set up the one brokerage. So this might be a good loan for you. This might not be a good loan for you. It sounds like you've just heard about it later from somebody else. Let us explain to you what the options are and help set you up with the right loan. Great question, though. Thanks for bringing that up. We don't get to talk about the USDA very often. All right, our next video question comes from Koya in Kentucky. Koya and her fiance have some debt and five properties that need some repairs. And she's got questions about what to do.
- [23:51]
Ronnie Urquhart
Hi, David, my name is Koya and I'm a huge fan. Quick question. Sorry if you hear my dog in the background. Quick question. My fiance and I have five properties. I've recently lost my job. Not too recent, but I lost my job. And because of that, we acquired over $35,000 worth of debt. We have now paid that nearly off and only have $12,000 left. However, with the five properties, each of these properties require something to be fixed that is anywhere between 5 to $12,000. Roofs. We need to do subflooring and flooring in one home. And we're trying to figure, figure out if it's better to just sell instead of fixing these things or if we could do a refinance, a cash out refi. Two of the properties, we do not want to do a refinance because it's at a 2 or 3% and they both. Well, one requires a roof, but another Property has an 8.5% interest rate and we're thinking about maybe doing a refinance there. However, I'm just also a big fan of Coach Carson where I really want to pay these properties off. So I hate to refinance or sell these off because I don't want to go back into more debt with the property itself. I don't know if I'm looking at this wrong. I don't know if it's something that I should be considering. Thanks for any help that you could.
- [25:17]
David Green
Give on this Coya, this is a great question. This is going to give us some really good stuff to dive into here. And one of the reasons that I love it is I think it speaks to what is really going on in the market today that is not getting talked about on other podcasts. So this is why you're on Real Talk Real Estate, because we're talking about the real stuff. I don't know other podcasts that want to get into the ugliness. I don't know about the other hosts that want to take questions like this. It's always inspirational stuff you see everywhere else of people sharing their wins. But this is what people are actually dealing with on a daily basis. And it can be depressing, it can bring anxiety. Financial hardships, losing your job, needing repairs you don't have the money to do are a completely different component to life that most people have not had to see or experience in the world of real estate for the last decade because it's been almost all sunshine and rainbows the whole way. And even if you made money, you felt bad, you didn't make as much money as what somebody else made, right? Well, there's a lot of hardship coming. I was just on the phone with my good buddy Andrew today, and he was telling me about some of the commercial investors that he knows that are literally raising money to pay off loans, to pay off investors that lost money on their previous offerings, kind of like a Ponzi scheme. He talked to me about some of the issues that people are having legally, where they raise money. And it was gray area. And now all the investors, when they lose money, what do you think they do? They go run and they go tattletail. And they go say, hey, this person did this thing. Now that person gets investigated. They get busted for it. I think you're going to be seeing a lot of stuff in the news that comes out talking about real estate investors, commercial operators that were doing things that were wrong. When people were doing this stuff for the last 20 years, it just when the deal goes good, nobody cares. It never comes up. But when something bad happens, all of a sudden, boom. We point the finger and we say, greedy people. I think it's going to get messy and it's going to get worse before it gets better. So Kwe, I'm just saying this to say don't feel bad. Don't feel terrible about yourself. Don't think that you're doing something wrong. This is what so many people are going through right now. My thoughts, my prayers are with you. I Need you to hang T, hang with it. Find some other people that are also struggling and just accept it's okay for things to be tough. Also, side note, I don't know that your dog likes me. I think your dog might be a little jealous. I noticed he didn't start to whine until you said my name. And he's like, hey, I wanted to be the only dog in your life. I don't know about this guy's voice, but why aren't you paying attention to me? So if your dog's listening to this right now, I didn't get it their name, but it's okay. I'm on your side. I'm helping to take care of her so she can give you a better life and more treats. Now let's talk about your scenario. You have properties that need repairs between 5 to $12,000 each. You don't think that you have the money to make the repairs. And the money that you do have, you don't want to spend on real estate because you want to live on it because you just got let go. That is happening a lot right now, too. People are losing their jobs. People had work ethics. And I'm not saying this applies to you, but I think it does apply, generally speaking, to the country as a whole that are less than perfect. People aren't showing up to work every day, working as hard as they can. They're showing up to work every day trying to get one over on their boss. And now that the reven revenue is drying up and companies don't have as much money, they're letting people go just doesn't get talked about a lot. No one wants to go on Instagram and broadcast the embarrassing thing that happened. They only want to talk about the good stuff. Sometimes in life we have to sell a property that we like to put the money that we got from the sale into the other property so we can keep those ones alive. It might be a situation where you got to sell one, two, maybe three properties, take the money, pay taxes on it, then reinvest that into the other properties that you do have to make the repair so you at least you have something. Then you can focus on accelerating the loan pay down like what Chad Carson talks about. You also mentioned some refinance potential. If you're going to refinance out of an 8 and a half percent rate and you could save money, I'm up for it. The reason I think you don't want to is because you're thinking, if I refinance it, that's not paying it off. Well, if you refinance it into a lower monthly payment and you take the money that you saved and you put that towards paying it off quicker, there's a break even point. So let's say that the refinance costs $10,000, but you're able to pay a property off $5,000 a year faster from the money that you saved. Or let's, let's make it $3,000 a year faster. In about three years and some change, you'll be right back at the money you spent on the refinance. And then the next 27 years you're ahead. Now, if it's a cheaper refinance or if you save more than $3,000 a year, this works even better. I can't give you the specifics, but at the one brokerage we walk you through an analysis to find your break even point. Then we help you decide if a refinance makes more sense or if you should keep the loan you have. And if a refinance doesn't make sense, at what rate it would make sense. And then when you get there, you call us. So maybe you need to look at your portfolio and take a look at each property and break down what you should do with it. Now, in your case, koia, it's really going to take someone going through each of these properties and saying, this one's a refi, this one's a sell, this one's a hold, this one's change this thing and get more money. This one's a sell. With seller financing, there's lots of different tools and an experienced contractor can kind of help you figure out what we should do with each one. So I'm going to send you an email and see if you want to come on the show and do a full interview where we break down your whole portfolio for everyone to be able to see. And I give you my thoughts on what to do and most importantly, why. I think that that's what you should do, hopefully get you stabilized and most importantly, get you out of the financial stress. Look, folks, I'm just going to go ahead and say this. If you're holding on to anything in life that is ruining your quality of life, if you've got a relationship that you know isn't working out but you don't want to be alone, if you've got a belief about yourself that you know isn't true, but you're having a hard time letting it go, if you've got real estate that is just sinking your entire life but you don't want to throw in the towel because you feel like it makes you a failure. I just want to encourage you. You are not a failure to let it go and start over again. It's okay to let a relationship go if you're going to work on yourself and come back stronger. Is okay to admit failure in humility and then come back with a renewed vigor and a new perspective and do better than you did before. Now, this also applies to your real estate portfolio. So if you can hold on to something forever, do it. But if you can't, don't let shame hold you back. It's okay to say, I swung, I missed, I struck out. I'm going to get back in there and I'm going to do better on the next one. And our last question of the day comes from Kyron in North Carolina. Hey, David, my name is Kyron.
- [31:40]
Dustin K.
I'm in the Hickory, North Carolina area.
- [31:43]
David Green
About an hour outside Charlotte. Love your stuff.
- [31:46]
Dustin K.
Been following for a couple years and.
- [31:48]
David Green
Love the new podcast. My question is on property ratings you've.
- [31:52]
Dustin K.
Mentioned in the past.
- [31:53]
David Green
Sometimes you'll refer to properties being like.
- [31:57]
Dustin K.
A C rating property, a rating property.
- [32:00]
David Green
Just want a little bit more information on this, what you're referring to. If that's just like a, an internalized rating for, for you to describe what the property is like, or is this.
- [32:11]
Dustin K.
Like some kind of official list on what property and zoning you're walking into?
- [32:17]
David Green
I don't know. Can you explain a little bit more? Kyro? Great question, man. I love this, especially because it's fun and easy to answer. I mean, I like answering the tough ones, too, but sometimes I do one of these seeing greens and I'm just like, my word. I get the toughest questions. It's like, I don't know where else to go. I don't know what else to do. Let's take this to David Green. And they're not always fun. It kind of reminds me of my career in law enforcement. Right? You never get called to some. You know, my kid can't decide what kind of ice cream they want to buy. Do you want to come and help them decide between rocky road and mint chocolate chip? And you get to have fun. It's always all these grown adults can't figure out how to solve their own problem and they're angry and violent. Let's bring in some professional referee that everyone hates to solve their problem. But that is not the case with you, my man. You're getting to ask me a fun and easy question, so thank you and folks, if you've got one like this, if you've ever said, I don't understand what a cap rate means, why do we call it a rehab instead of a reno? What is sub 2 and why isn't it sub 3 or even sub 4? Or why is it called commercial real estate when I never see an advertisement or a commercial anywhere in the property? I. I want those questions, too. Go to davidgreen24.com Ask where you can submit those. All right, Kyron. Short answer is when we give a rating like this is A class, B class, C class, or D class, we're not rating the property. We are rating the location. That's something to keep in mind. I don't know of anyone that uses that classification system on an actual property. We don't use a classification. We just use a number. We say, this is a $30,000 remodel, a $40,000 remodel, an $80,000 remodel. When we're using those classifications, we are describing the neighborhood. Now, I also will acknowledge a couple things about the system that I recognize are confusing and it's probably stupid that we do it. First off, there is no objective measurement that anyone can go to. Somebody else's A minus could be someone else's B plus or even their B. Somebody else's C minus could be somebody else's C plus. It's. It's very, very subjective. So I'm going to give you guys how I think you should understand when they say A, B, C, or D. I'm also going to give you a different system that I tend to use, and it's in the books that I write if you want to check it out. I have it in Better than Cash Flow as well. That should basically just be like today's show was sponsored by Better than Cash Flow. So go get yourself a copy of it because I think you're going to really like it. First book that Real Talk Real Estate has ever published, by the way, folks. We are making waves. Groundbreaking stuff happening over here. All right. I like the framework that isn't abcd. I prefer luxury home, Step up home, starter home. That's the way that I tend to look at things. But in the ABCD category also, there's no E and there's no F. I don't know why it stops at D. D's, like, as bad as it gets. You'll often hear these called war zones, and you'll hear people say, don't invest there. An A class property is like luxury real estate. There is no reason that anyone would have bought it unless they lived in it or possibly it's a short term rental. You do see some people getting A class properties to use as a short term rental. But before we had short term rentals, you literally could not own one of these things as a rental property unless you had bought it to live in. And 20 years later rents have gone up so much that you can rent it out. So when I was new in real estate investing, you'd hear about somebody in Beverly Hills that rented out a property for $10,000 a month. And I'm like, who the hell pays $10,000 a month? Would be some actor or some musician or someone visiting Southern California that wanted a really nice property to stay in, either on the beach or a mansion or something, but they knew they weren't going to live there, so they would pay that much money to rent it out. But then when you looked at how much it would cost to buy it, 10,000 grand a month would never cover your mortgage. So these are people that had owned the properties for a very long time, probably got very wealthy, said, hey, I need a property with a helicopter pad. I want three tennis courts instead of one. I need an eight car garage, not a four car garage. So they bought another house and they didn't have to sell this one to get that one and that became a rental property in Malibu or whatever the case was. Then you have the B class property. So my nicest homes that I own are mostly B class properties. I do have a couple A class properties, but again like I said, it's because they're short term rentals, otherwise I could never have them. A B class property would be your higher end neighborhoods where you have very little crime in high school score. This is going to be where your normal well to do people live, but they're people that can't afford the helicopter pad on their property. So I don't know what Hickory's like, but if you're ever driving through a gated community, these are usually going to be like probably B plus or maybe A minus properties if you're air, like oh, I'd love to live over there. They have parks, you get a really good tenant. There's still probably step up homes in the David Green classification system. These are not a house that you could save up money to buy. These are houses that you would have to sell something and move the equity to be able to buy that house. Hence the name Step Up Home. So those are B class properties. The majority of the B class properties that I bought were during the recession when houses were cheap, I could go get B class properties because the whole market was depressed and I could get in. Today you wouldn't be able to buy properties like that as a rental. Then you have C class properties. This is where the majority of real estate investors are going to spend their time and they're going to play their game. C class properties can be really rough, like C minus or they can actually be really good, like C plus. These are areas where working class people are going to live and you're going to be close to the 1% rule. Now, C class neighborhoods can be high crime. We typically would call these like a C minus type of an area. But then maybe two blocks over you can have solid, really good neighborhood with people that own their homes, but they're blue collar workers. These are people that frame houses, that pour concrete, that clean pools. Right. Most of them are not business owners. They probably work at somebody else's business. This can also be like younger people that are working in tech or they're getting a job at a hospital or something like that and they haven't bought a house yet, so they started a family when they're young. These are usually the C class neighborhoods. The majority of properties that you will see as a real estate investor will be in the C category. That's why you need to understand the difference between C minus and C plus. C plus are probably going to be a little too expensive for you to make work. C minus are probably going to be in the price range you want, but you're going to have issues that you don't want. And this is why real estate investing is so fun. Because you get to play this game of biting into a candy from the seas candy box and not knowing if it's going to be a delicious cherry interior or a disgusting feces flavored candy. It could go either way when you're playing in the C category. And it typically is the experienced investors that know which properties to use and which ones to avoid, which candies to pick out of the box. Now how do I get around this myself, you ask? Well, I tend to rely on experienced property managers. I like to have a property manager in the area that knows it really, really, really well and run my deals by them because they know the difference between the C minus and the C plus. And there you have it folks. Now D class properties, don't buy them. Don't even think about buying them. Unless you grew up in that town. You know specific people that would rent those properties. You, you know the neighborhood really, really good. And you are really good at picking tenants. If you're choosing your own tenants and you can tell the difference between someone that's going to pay their rent, someone that's going to take advantage of you, maybe you can get into this category, but anyone other than that, don't even think about it. The one thing about a property that you cannot change is a location. And when you buy into these D class neighborhoods, they look good on a spreadsheet and then they make your life hell when you actually own it. So avoid those. Hope that helps you. I appreciate the question. Thank you very much, my man. All right everybody, that's going to wrap up the video question portion of today's show. If I didn't get to your question and you had one that you want to ask, don't fear. You could go to davidgreen24.com ask to submit your question. Or you can look me up on the minect app. M I N N E C T this is an app that valuetainment put together. I'm on there. You can ask me a question in like written format over there and I can answer it. All right. Up next, the comment section. In the segment of the show we take comments from my YouTube and my Instagram and we answer them for everyone to hear from. Menard Tech Sampson why I love this podcast right here. I started listening about three days ago and I'm just finishing up listening out of the gate. Everything sounded good and then to the end the reality sets in. As usual, I love the realness of this podcast and the struggles that it really matches what's going on in real estate investment market today with a lot of us. I've barely done any deals that I hadn't have major issues and not talk about that much. On podcasts they usually lightly go over it which is fine, but in this market it is very sketchy. You have to actually be a good investor and operator in today's market. Thanks Mr. Green. Well, thank you Menard. I appreciate that. From Kelly Rachel35 we all love to make fun of Vegas, huh? LOL. Jokes aside, Vegas has some good stats for Investors are over 200,000 new residents since 2020. Average population growth of almost 3% per year and 43% of those come from California. Only 42% own homes meaning a lot of people rent. Job growth is nowhere near the population growth that equals downward pressure on wages and More renters add 11,000 units per year compared to 50,000 new residents in 2024. More demand than supply equals more renters and equity growth. We also have low property taxes, no state income taxes, very low risk of natural disasters. It's only risky because it's a tourist economy for all the weirdos who enjoy the Strip. But the higher the risk, the higher the potential payoff, right? At least that's what they say. Definitely. Either way, people are moving to Vegas in droves. Well, if that wasn't an advertisement for Vegas, I've never heard one. And I would expect nothing less from someone who is in Las Vegas. From Curtis Foster, can you clarify the proposed change to the SALT deduction? Right now it's capped at a $10,000 deduction limit. Is he saying that he will remove the limit? This comes from a Mortgage Monday episode. So if you guys are not listening to Mortgage Monday because you're listening to this on Apple Podcasts or Spotify, make sure you subscribe to my YouTube channel. You can find me on YouTube.com avidgreen24 or you can look up Real Talk Real Estate, or you can look up the David green show on YouTube and you can catch Mortgage Mondays, which coincidentally come out every Monday, where Christian Bashelder and I covered the SALT changes that Trump is proposing. From Shay Marcella. Here we go again with the old idea that giving more money to corporations will trickle down to their employees. Please, David, I thought you were better than this. You played dumb like it hasn't been done before. And of course you don't have any good examples of this lie working ever unsubscribed and bye bye. All right, everybody, a moment of silence for Che Marcella, who unsubscribed to my podcast because I talked about part of Trump's plan and describe what he said. And this person is assuming that this was my plan, which I'm not the President of the United States and it's not my plan and I'm not going to defend it because it isn't my plan. However, I will defend what I actually said and maybe defend what this person wasn't listening to because they got triggered and ran away. Trickle down economics is this idea that if you give tax breaks or tax cuts to large corporations, which also become known as greedy corporations, that money will trickle down to their employees and everyone will be richer. People who don't believe in that, which could include socialists, but would not be confined to only socialists. It could be a lot of other people too, want the government to give money directly to the people themselves so that they can go spend it. Now, here are my 2 cents. Since I never actually gave my 2 cents then. And it's sad to see that Shay Marcello will not be here to hear them. First off, I don't think that if you give money now. You know what, before I even say that, first off, not every corporation is Google and Apple. I'm a corporation. All companies are corporations. When you give a tax cut to the pool cleaning service, you're giving them more money to hire more people. Like, don't get caught up in this idea that every single corporation is Apple and Netflix. That is not the case. Although they are corporations, they make up less than 1% of them. They make up less than 1% of 1% of them. Your average everyday American, that's a business owner that owns a pawn shop, that owns a restaurant, they all own it as a corporation. We're talking about giving tax cuts to them. Genius. Second off, when you make a restaurant person pay less, when you make a restaurant owner pay less in taxes, they have options of what they do with the money. Can they keep it as complete profit for. For themselves? Yes, that's one option that they can do. However, if all the other restaurants decide that they're going to lower their prices, and you're the one that kept that money as a profit, nobody eats at your restaurant. They eat at the other restaurant. So what happens is somebody lowers their prices, then everybody else has to lower their prices, and that leads to lower prices for all of us that eat food. So if Shay Marcella is a food eater, she might find that this is a good thing. It also allows them to hire more employees. When you get more employees, you get people that can do the work that they like to do, not the word that they don't like to do through quality of life. And work does tend to go up when you give the money directly to the person. Some people will be smart and put it in the bank. Some people will be smart and they'll open a business with that money. You know what most people will do? They'll buy a new car. They'll buy some new clothes, they'll buy some jewelry. They'll buy a new tv, they'll go on a vacation. They will throw the money directly to the business owner that is providing the thing, and they'll get the money from it going from the bottom up instead of tax breaks going down. Just something to think about here, everybody. This insistence that we have on, well, the government needs to give it to me. Give me, give me, give me, give me, give me. Doesn't always work out best for everyone. But thank you for your comment. I'm sorry you won't be able to hear my reply as you are now gone. All right, moving on to the next segment of the show, this is the Real News Report, our news segment where we share what's going on in the world of real estate to keep you abreast of what's happening in the world of real estate. First article Sales of existing homes rise annually. For the first time in three years, home sales are increasing. Existing home sales rose by 3.4% in October, reaching a seasonally adjusted annual rate of almost 4 million, marking the first year over year gain since 2021. The median home price increased by 4% from October of 2023 to $407,200, continuing a 16 month streak of year over year price hikes. Mortgage rates averaged 6.43% in October, slightly up from September's low, with the October bump reflecting a response to lower rates earlier this year. And all four U.S. regions saw an increase in home sales, with the south, the Midwest, the Northeast and the west all experiencing monthly and annual gains. Now, if you were one of the people who were following my Instagram in September, you saw that I put several posts out saying you got to get on the refinance right now. Some people played the greed game. No shame in that. They said I'm going to wait for rates to come down even more. And they didn't. Those people are now stuck. Many people got into a refinance with the one brokerage and are going to be saving a lot of money and if rates do come down again for some reason, they have the option to refinance again. If you want to know where rates are every single week and you don't want to have to remember to go look them up, you can get that and more, including news like this in my free newsletters. I have two One goes to email, one goes to text messaging. All you got to do do is find me on Instagram @DavidGreen24 follow me and send me a DM that says text T E X T. You will get a reply. Follow the prompts if you put in your email and your phone number, you will get subscribed to the two newsletters and in those letters include the weekly interest rates on mortgages. You're welcome. Up next, we have an article on the impact of Trump's proposed tariffs on new home prices. President Elect Trump plans to impose tariffs on imports, which critics argue could raise prices and fuel inflation, particularly in construction materials for new homes. Many industry experts believe that these tariffs will have a minimal long term effect on new home prices, citing factors like interest rates and supply chain issues as bigger challenges for affordability. Builders have already diversified their supply chains, moving away from China to countries with friendlier trade relations, reducing potential impacts for future tariffs. A steep tariff on Canadian lumber could raise home prices temporarily, but experts expect any tariffs on lumber to be gradual, allowing US Production to ramp up over time. This tariff talk is quite the talk of the town. I'm seeing this everywhere. Bigger pockets put on Instagram post about this and had some ruffled feathers if I remember correctly. Let me know in the comments. What do you think about tariffs? Do you think that they're bad for the economy? Do you think that they're good for the economy? Do you think they're going to bring jobs back to America? Or do you think that they're going to increase the price of goods? Are you happy about them or concerned about them? And are you also concerned about the Canadian lumber concerns? Do you think that we're going to have wood that's too expensive to keep building? That would be a problem, especially right now because we need to build more homes. And our last article, How New Real Estate Industry Rules Around Brokers Commissions Will Impact Home Buyers and Sellers the National association of Realtors, NAR and major brokerages signed to pay over 950 million to settle lawsuits about inflated commissions with with new rules promoting transparency in agent compensation. Under the new rules, offers of compensation can no longer be made on the MLS and buyers must sign a written agreement with their agent, which is already required in some states. Buyers will have more control over how their agent is compensated, potentially negotiating fees with sellers or opting for a flat fee model, but must agree on payment terms if the seller doesn't offer compensation. And it's unclear if commissions will decrease. But the changes may challenge less experienced agents while providing opportunities for skilled professionals to adapt and thrive in the evolving market. Are you a real estate agent that wants a better brokerage to work at or better training? Well, I've got something coming for you, including a new addition to this channel where we'll be making content for real estate agents in particular because lord knows they need it. If so, either send me a DM on Instagram or look on my email and send me an email letting me know that you would like interest about the new brokerage. We'll put you on a list to be notified notified when it rolls around. All right, the next segment of our show is the Quick Hitters segment. This is where we get funny statements or quippy comments from my Instagram and social media from the best Kevin. He isn't shredded. I can't listen to him, man. Am I not shredded enough for you? Do I need to be yoked? Do I need to be jacked? What do I need to do here? I'm wearing a fitted T shirt, man. This is the best that I'm ever gonna look. If you're listening to this on Apple Podcasts, I feel sorry for you because you can't see the video like you can on Spotify or YouTube, and you're missing the aesthetic wonder that is the David Green Show. But I would highly recommend that you occasionally go check out a YouTube video or two so you can see that the best Kevin is totally wrong, man. I'm so shredded that I can grate cheese on my abs. From the Virginia Brewster so serious question. If women are hearing super blatantly that their worth is in their looks, why wouldn't they prioritize building a career? I love the conversation about the loss and hardships from the Ryan Pineda podcast. All right, Virginia Brewster. I love this topic, so thank you for asking it. But I won't go too deep into it because the other people listening to this tend to be looking for real estate advice more than cultural advice. I don't know that people are telling women that their value is in their looks. I think that's the way that it's often interpreted by women, but I don't think that's what people are saying. I think there is a very big differentiation between the value that we have in God's eyes, the value that we have to ourself or our family, and the value that we have as the dating pool. Okay, I may find a house that I own to be very valuable to me. It may have sentimental value. It might be the perfect location because it's right next to my office. But that doesn't mean the person who would buy the house from me will see it the same way. And I cannot insist that because this house is valuable to me and I know it's worth that you have to pay the same thing. The market is going to decide what the market thinks that the house is worth. And there is a dating market just like there is a real estate market. And my advice in that realm is the same as it is in the real estate realm. The goal is to make your property as appealing to as many other buyers as you possibly can and then find the one that likes it the most and sell it for the most money. You build wealth in real estate by providing value in the property. The same thing applies to a business. If you are the best real estate agent available and you provide the same value, other people are going to come to you and they're going to pay a higher commission because you're going to give them more value in exchange for it. You can't tell people when you're a new agent and you don't know anything that you want a 7% commission because you know your worth. You don't know your worth. You know your worth to you. You don't know your worth to the person that's going to be hiring you. The same thing happens in the dating market. Now, in the episode, one of the things that we talked about is that there has been a confusion in American culture with what the opposite sex finds to be valuable. And we've become very narcissistic in many ways. So there's a lot of guys that say, hey, I'm a level 76 Warloc at World of Warcraft, or I'm internationally ranked at Call of Duty. I'm a stud. Why can't I get a girlfriend? I know my worth. And we laugh at those people because that may be valuable in that community. It is not valuable in the dating market. And the same thing can be true of women. There's a lot of women that are doing business. We love you. We want you to keep doing business. I don't want you to stop doing business. The podcast is for you. I'm sharing all the same information for you that I'm sharing for everybody else. Spartan League is full of women. There are some of our best members. I am pro women. I don't want women to be under the impression that because they're successful in something like business, that's going to translate into the dating market. And that's what Ryan and I were talking about. It would be foolish to tell a guy that because he's really good at Call of Duty, he's going to get a hot girlfriend. If he wants a good girlfriend, he's going to have to do the thing that women like. He's going to have to be good at the stuff that the market wants to be good in that realm. You see what I'm saying here? So if you're a lady and you're struggling with finding the right guy, the answer is not going to be to go build a bigger business. That's going to be the answer. If you're giving up on guys, if you're giving up on the dating market and you don't want to do good, then yeah, you can go put your effort into that. But if that's not the case, understand that all the effort you're putting into building a business is great. It's going to help you at a lot of things in life. It's not going to help you in the dating market. And fellas, the same thing goes for you. If you're having a hard time finding a girlfriend, you're probably putting all your energy into things that women don't value. We could all do from having a little less narcissism and selfishness and expecting everyone else to see our house the way that we want them to see it and putting ourselves in their position, seeing our home from their eyes and improving it to be what the buyer would want. Thank you for your question. That was the slowest quick hitter that I probably ever answered, but I love it. Virginia from Wealth Trading David, please look at home equity invoice agreements. When I say this is revolutionizing real estate, what I mean is that it is redistributing wealth in a healthy way, AKA the Monopoly board game's original intention. I don't know that the Monopoly board game had an intention other than making money for whoever it was that owns at Warner Brothers or something like that. And I don't know about home equity invoice agreements. My guess would be that you sell a portion of your home to somebody else in exchange for money that they give you. So instead of getting a HELOC on a property which is a loan, you're literally selling away a chunk of your equity to someone else. And we're, we're calling that revolutionizing Real estate and wealth redistribution. If anyone knows, leave me a comment here on YouTube letting me know what you think about this. And from David Long. David seems like one of those true upstanding, God honoring dudes. Happy pivoting, David. Oh, that's really nice. Thanks, David. All right, rounding out the show here, we've got the sneak peek segment of the show. I'm just going to share. Like I've said many times before, better Than Cash Flow is my new book. It is available for pre order on Amazon now. It is planned to release January 7th. So if you guys would like to get your copy of my new book, you can bring it wherever you're going to meet me and I'll sign it. I think it will blow you away with a new way to approach looking at real estate where you look at 10 ways to make money in real estate instead of the one that you've been taught. Go check that out. All right, folks. And that's our show for today. We covered quite a few topics including why we tend to rate properties abcd, if you should sell property, keep property, pay off property or let the thing go, when to refinance, and how to look at refinancing. My free text letter for everybody. A teacher that scaled to 27 units and is trying to figure out what to do with the property that he has that he thinks is underperforming and how ripped I am or am not. Remember everyone, I have more content than just this. So if you like this kind of stuff, if you're immersed in real estate and you're tired of hearing fluff, you want the real talk. My YouTube channel has Mortgage Mondays as well as three episodes of the David Green show coming out every single week and I need to hear from you. So I head to davidgreen24.com Ask where you can submit your question to be featured on the show, make your appearance, get it answered, and help everyone else keep an eye out for RealTalk. Real Estate.com should be up in a couple weeks where we have a community that is being formed of real estate investors sharing what's working, what's not working, and what they wish that they had been told earlier, as well as new books coming from Real Talk Real Estate Publishing. Thanks again everyone. I super appreciate you. Make sure you leave me a review and a comment on today's show and I will see you next week on the David Green Show.