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<v Speaker 1>You're listening to KFI Am six forty on demand.

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<v Speaker 2>Justin Worsham back again for week two to talk southern

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<v Speaker 2>California real estate. If you're new to the show, you

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<v Speaker 2>might recognize me for my regular appearances on The Gary

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<v Speaker 2>and Shannon Show. Recently, I do a parenting segment on

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<v Speaker 2>Wednesdays eleven thirty to noon with them. If you're a

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<v Speaker 2>longtime KFI listener and also new to the show, you

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<v Speaker 2>might remember me. I was the board op on the

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<v Speaker 2>Bill Handle Morning Show for a while, doing dumb comedy

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<v Speaker 2>bits there, and then I became a realtor and a

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<v Speaker 2>real estate broker, and so now they asked me to

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<v Speaker 2>come in and give what I think everybody should be

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<v Speaker 2>learning is a class in real estate.

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<v Speaker 3>So great news.

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<v Speaker 2>If you were here last week and you liked the

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<v Speaker 2>show and appreciate the show, they gave me two more weeks,

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<v Speaker 2>so you're truly's going to be here two to four

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<v Speaker 2>every Sunday through the month of April. So thank you

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<v Speaker 2>to the fantastic Michelle Cube and Oscar for giving me

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<v Speaker 2>that shot.

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<v Speaker 3>Very appreciative of that. But let's get into it.

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<v Speaker 2>I don't want to waste too much time talking about me,

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<v Speaker 2>because why should you care about me? I want to

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<v Speaker 2>talk about tariffs. There's all over the news today, the

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<v Speaker 2>pause on the tariffs, the tariffs, the trade wars. They're coming,

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<v Speaker 2>it's coming, it's happening now. And I already saw ABC

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<v Speaker 2>News was talking about what impact tariffs could have on

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<v Speaker 2>the housing market, and it would have to be an

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<v Speaker 2>indirect cost, because really, what tariffs are going to do

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<v Speaker 2>is they're going to increase the cost of good So

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<v Speaker 2>what we're seeing is people are not moving as frequently

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<v Speaker 2>as they used to, mostly because of interest rates. Right,

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<v Speaker 2>interest rates during the pandemic were down as low as

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<v Speaker 2>two percent. I know some people that got one point

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<v Speaker 2>eighty five percent on their home loan. Now they're hovering

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<v Speaker 2>around seven and a quarter ish, somewhere in that range.

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<v Speaker 2>And so because of that, people are planning to stay

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<v Speaker 2>in their houses longer. So we're not going to see

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<v Speaker 2>a lot of inventory here in southern California. It's virtually

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<v Speaker 2>impossible to build new houses. We're going to only be

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<v Speaker 2>able to build like new condo buildings maybe, but even

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<v Speaker 2>that can be difficult. I know that Santa Clarita has

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<v Speaker 2>seen some growth. They just had a bunch of houses

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<v Speaker 2>built up there and so could cause the prices to

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<v Speaker 2>go up. I've also flipped houses, and I know that that,

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<v Speaker 2>you know, affected the flip costs when I was doing that,

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<v Speaker 2>especially during the pandemic when we hit those heavy cycles

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<v Speaker 2>of inflation. There was a house that I was flipping

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<v Speaker 2>and we had to resheet everything underneath the floor. So

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<v Speaker 2>if you're not familiar, you have your flooring inside your

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<v Speaker 2>house that you walk on, and underneath there is like

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<v Speaker 2>a subfloor, and in most cases there's plywood sheeting that's

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<v Speaker 2>underneath there. If anybody's frequents home Deep or Lows or

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<v Speaker 2>any hardware store. A while ago, sheets of plywood were

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<v Speaker 2>around thirty bucks, and then during the pandemic they hit

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<v Speaker 2>ninety dollars. And that was because of supply chain issues.

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<v Speaker 2>Right nobody was working, so they weren't manufacturing the goods,

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<v Speaker 2>or if what was happening is goods were being held

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<v Speaker 2>off port, I guess to quarantine.

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<v Speaker 3>I don't know.

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<v Speaker 2>I'm not a doctor, don't know a lot about all

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<v Speaker 2>that stuff, but I know that it definitely raised the prices.

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<v Speaker 2>But honestly, it didn't really impact my rehab budgets significantly.

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<v Speaker 2>It's not like I saw a thirty percent jump to

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<v Speaker 2>match the well three hundred percent jump in plywood costs.

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<v Speaker 2>I didn't see that really really jump up a ton.

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<v Speaker 2>It was maybe an extra ten to twenty thousand dollars

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<v Speaker 2>where I did see increases, but this was after the pandemic.

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<v Speaker 2>This is more recently is roof replacement costs. For whatever reason,

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<v Speaker 2>Skyrock like I was getting roof estimates from roofers from

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<v Speaker 2>like twenty eighteen to about twenty twenty two ish in

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<v Speaker 2>the range of about fifteen to eighteen thousand dollars on average,

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<v Speaker 2>and the average homes that I was selling were anywhere

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<v Speaker 2>from fifteen to eighteen hundred square feet, maybe thirteen hundred

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<v Speaker 2>square feet on the low end, right, so somewhere around

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<v Speaker 2>about I'm guessing, what is that one hundred bucks of

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<v Speaker 2>squarefot a thousand bucks square foot anyway, Now they're like

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<v Speaker 2>thirty to forty thousand dollars. And the way I found

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<v Speaker 2>this is that I had a client who just called

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<v Speaker 2>a roofer that they found online and they said, hey,

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<v Speaker 2>I just got a roofing quote, and they said it's

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<v Speaker 2>going to be forty six thousand dollars to reroof my

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<v Speaker 2>sixteen hundred square foot home, and I look like an

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<v Speaker 2>idiot because I was like, no, you got a bad roofer.

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<v Speaker 2>Let me connect you with my roofer, the one I

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<v Speaker 2>like to refer. So call them and they got a

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<v Speaker 2>bid that was only like four thousand dollars less, and

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<v Speaker 2>I called a roofer and they said they go to

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<v Speaker 2>supply costs or just they're astronomical now. But so my

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<v Speaker 2>point is is that what I think happens in these situations,

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<v Speaker 2>and that the reason that people get so focused on

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<v Speaker 2>this stuff, at least in southern California, is because we

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<v Speaker 2>have such an affordability issue, like it's so hard, and

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<v Speaker 2>so people love to blame other things. This is why

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<v Speaker 2>I can't afford to get a house, and this is

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<v Speaker 2>what's going to change things, Like leading into the pandemic.

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<v Speaker 2>After we had the crash in eight, everybody was waiting

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<v Speaker 2>for another crash because it's supposed to happen every fourteen

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<v Speaker 2>to twenty years is when we're supposed to have a

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<v Speaker 2>reset of the pricing cycle on real estate, and we

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<v Speaker 2>just haven't seen it yet. And what I'm hearing is

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<v Speaker 2>that they're not going to They don't anticipate anything like oh,

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<v Speaker 2>eight a big reason why eight happened from my perspective,

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<v Speaker 2>was that banks started collecting on their mortgages and people

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<v Speaker 2>were just walking away from their houses, and so they

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<v Speaker 2>flooded the inventory with their own collateral for the loan,

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<v Speaker 2>which devalued that collateral and made it difficult to sell

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<v Speaker 2>during that time period.

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<v Speaker 3>But it still took what was it, oh, eight was

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<v Speaker 3>a crash.

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<v Speaker 2>By twenty I think it was twenty fourteen, Orange County

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<v Speaker 2>had reached back to pre crash prices. In twenty sixteen,

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<v Speaker 2>La County got back up there. So we want this reset.

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<v Speaker 2>We want tariffs to maybe be the thing. Or if

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<v Speaker 2>you're or you want to blame tariffs for the reason

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<v Speaker 2>why you can't buy a house, and I got to

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<v Speaker 2>be honest with you, like housing is just unaffordable because

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<v Speaker 2>simple supply and demand. There's not enough space to add

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<v Speaker 2>more houses, so we don't have enough houses for all

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<v Speaker 2>the people that want houses. I've heard people also they

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<v Speaker 2>want to blame foreign investors that they think the reason

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<v Speaker 2>why they're getting beat is because some foreign investor is

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<v Speaker 2>coming in and they're paying all cash and buying houses

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<v Speaker 2>up like crazy. And I have yet to see any

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<v Speaker 2>of it. The only time I've ever heard that example

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<v Speaker 2>is somebody saying that they think they don't know, they

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<v Speaker 2>think they got bought out because they don't understand why

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<v Speaker 2>somebody else is paying so much more for a house.

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<v Speaker 2>And I think what ultimately ends up happening is that

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<v Speaker 2>you take these anecdotal experiences and you extrapolate them out

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<v Speaker 2>to mean something much much larger, and chances are that's

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<v Speaker 2>not the case. The fact is is that with the

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<v Speaker 2>high demand for real estate in southern California, you're going

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<v Speaker 2>to be competitive. Like during the pandemic, I was getting

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<v Speaker 2>seventeen twenty offers on a property, and we had this

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<v Speaker 2>model where you could price a house at a dollar

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<v Speaker 2>and the demand would drive it up to whatever the

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<v Speaker 2>market would bear and then a little bit. And it

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<v Speaker 2>was crazy because you would get probably where like a

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<v Speaker 2>cluster of if you got twenty offers, eleven of them

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<v Speaker 2>would be clustered around where the price of the home

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<v Speaker 2>should be in your opinion, based on past data, and

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<v Speaker 2>then the rest of them would be outliers that would

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<v Speaker 2>start from that price all the way up to as

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<v Speaker 2>high as you were actually going to sell it for.

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<v Speaker 2>And that number would not be crazy to be two

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<v Speaker 2>hundred thousand dollars above your listing price and where that started. So,

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<v Speaker 2>I don't think and at no point during that time

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<v Speaker 2>where they're foreign investors trying to buy houses, and they

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<v Speaker 2>were more affordable then than they even are now, like

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<v Speaker 2>prices just keep going up. The other one that I

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<v Speaker 2>want to do some more research on is that they

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<v Speaker 2>blame boomers, baby boomers like that generation, saying that they're

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<v Speaker 2>the ones that inflated the cost of housing. And I've

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<v Speaker 2>looked into it and I need to do some more

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<v Speaker 2>digging to see, but I can't see a single reason

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<v Speaker 2>why a generation could have an impact on housing. I

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<v Speaker 2>don't see how because they're buying houses. I really think

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<v Speaker 2>that we're over complicating it. When we talk about tariffs,

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<v Speaker 2>when we talk about trade wars, when we talk about

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<v Speaker 2>cost of goods, all of that, from my perspective, is

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<v Speaker 2>just making it more complicated than it really needs to be.

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<v Speaker 2>The fact is that in Southern California, I talked about

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<v Speaker 2>this last week. I'll say it again, the governments of

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<v Speaker 2>the counties of southern California got together and they said,

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<v Speaker 2>in order to meet the demand of housing, we have

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<v Speaker 2>to build just under one point four million houses by

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<v Speaker 2>twenty twenty nine.

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<v Speaker 3>That's to meet the demand.

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<v Speaker 2>That would create a balanced market, right where prices wouldn't

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<v Speaker 2>jump up by double digit percentage points like they did

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<v Speaker 2>in Orange County last year. Twenty one percent appreciation in

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<v Speaker 2>the median house price in Orange County in twenty twenty four.

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<v Speaker 2>So if it was a balance market, that would be

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<v Speaker 2>the case. So one point four million dollars is how

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<v Speaker 2>many housing units the governments of southern California think we need,

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<v Speaker 2>but they can only legally build because of restrictions on

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<v Speaker 2>land and zoning, four hundred thousand of those units, so

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<v Speaker 2>a third of those units to meet the demand, and

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<v Speaker 2>they're still behind on that. They're still not able to

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<v Speaker 2>do that. And it's because here in California there's just

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<v Speaker 2>a lot of costs associated with building houses. There's a

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<v Speaker 2>lot of I mean, try getting a permit. I tried

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<v Speaker 2>to pull a permit in the city of Burbank. It

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<v Speaker 2>was during the pandemic in their defense, but I started

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<v Speaker 2>at pre pandemic and it took me twenty two months

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<v Speaker 2>to get a permit for a five hundred square foot

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<v Speaker 2>addition to my home in Burbank. Twenty two months, and

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<v Speaker 2>in the time that it took me to get that permit,

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<v Speaker 2>the cost of the construction had increased by a third

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<v Speaker 2>thirty percent increase in the cost of construction, so I

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<v Speaker 2>had to kind of hold off on the on the

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<v Speaker 2>rehab on the house because of what it costs. So

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<v Speaker 2>in short, don't I don't see a huge impact.

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<v Speaker 3>I do.

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<v Speaker 2>I'm sure there's going to be an impact, but when

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<v Speaker 2>people talk about impact, they want it, They're expecting big numbers,

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<v Speaker 2>but I don't really think it's going to be noticeable.

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<v Speaker 2>The things that are going to impact housing in Southern

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<v Speaker 2>California is either we need to have a mass exodus

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<v Speaker 2>of people, large numbers, like over a million people need

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<v Speaker 2>to be leaving Southern California in a year, or we

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<v Speaker 2>need to I think that's it actually, Or we have

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<v Speaker 2>to build houses, which is why I stop. It's not

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<v Speaker 2>gonna happen. They can't build houses. They can't build houses.

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<v Speaker 2>All right, when we come back, we're gonna be talking

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<v Speaker 2>about multi generational housing. Why is that a thing? What

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<v Speaker 2>does it mean? Why is it becoming more popular?

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<v Speaker 1>You're listening to KFI AM six forty on demand.

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<v Speaker 2>Talking Southern California real estate and now we're going to

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<v Speaker 2>be talking about multi generational housing. So culturally, right, there's

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<v Speaker 2>a lot of cultures that there's like this is just

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<v Speaker 2>a thing. Like I have friends that have lived with

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<v Speaker 2>their parents until they're well into their thirties. There's a

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<v Speaker 2>thing where people wait until they get married before they

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<v Speaker 2>even leave the house. And even in those cases, they

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<v Speaker 2>don't always leave the house. There's I know of lots

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<v Speaker 2>of people where they buy, like buy a larger house

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<v Speaker 2>so that the family can stay together and live together.

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<v Speaker 2>That was not my experience growing up. My experience was

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<v Speaker 2>my dad. When I turned eighteen, he was a lot

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<v Speaker 2>more harsh, just out of nowhere, and it's my birthday,

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<v Speaker 2>was halfway through my senior year, and he was just

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<v Speaker 2>mean to the point where I was like, screw you,

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<v Speaker 2>old man, I'm out of here. And I moved out

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<v Speaker 2>about six months after I graduated high school. And I

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<v Speaker 2>kind of put it together when I got into my

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<v Speaker 2>early twenties like most of us do, and I asked

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<v Speaker 2>my dad one time, I said, Hey, were you like

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<v Speaker 2>mean on purpose because you like you wanted me to leave?

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<v Speaker 2>And he was like, I didn't want you to be comfortable.

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<v Speaker 2>So in the research that I was doing for this segment.

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<v Speaker 2>I found that, for whatever reason, Caucasian people are not

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<v Speaker 2>big fans of the multi generational housing.

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<v Speaker 3>But it's growing, it's growing.

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<v Speaker 2>So a twenty twenty three paper found half of adults

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<v Speaker 2>ages eighteen to twenty nine live with their parents. That's

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<v Speaker 2>in twenty twenty three, and that's up from twenty five

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<v Speaker 2>percent in nineteen sixty So in nineteen sixty so in

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<v Speaker 2>eighty years we went from twenty five percent of people

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<v Speaker 2>that are less than thirty but still adults living with

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<v Speaker 2>their parents to now half. And then they also showed

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<v Speaker 2>that the house price, because this is just to make

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<v Speaker 2>everybody throw up, in nineteen the median house price in

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<v Speaker 2>nineteen sixty three, thank god, this is a national average

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<v Speaker 2>was eighteen thousand dollars. And then they're saying that the

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<v Speaker 2>present day equivalent was one hundred and eighty six thousand dollars.

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<v Speaker 3>Is what that would get you?

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<v Speaker 2>So what they're saying is when you account for inflation

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<v Speaker 2>in nineteen sixty three, with today's dollars, you would spend

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<v Speaker 2>one hundred eighty six thousand dollars on a house, But

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<v Speaker 2>the actual average house in the nation is four hundred.

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<v Speaker 3>Thousand according to the Census Bureau.

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<v Speaker 2>So what I saw like there was this big burst

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<v Speaker 2>of ADUs. If anybody doesn't know what ADU is, it's

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<v Speaker 2>essentially a guest house. They call them granny flats, mother

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<v Speaker 2>in law cottage. ADU stands for accessory dwelling unit and

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<v Speaker 2>that is like the zoning code for it. And it

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<v Speaker 2>became really popular and there's a lot of nimbiism. I

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<v Speaker 2>learned this term after being a realtor. I didn't know

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<v Speaker 2>what it was. That's not in my backyard. And so

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<v Speaker 2>there are people who live in predominantly single family neighborhoods

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<v Speaker 2>and they are historically not fans of ADUs because what

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<v Speaker 2>that means is if you can put another two bedroom

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<v Speaker 2>house in the backyard of your house, you've essentially maybe

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<v Speaker 2>doubled or even tripled or more the number of people

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<v Speaker 2>living in that area. And you would that means there's

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<v Speaker 2>more cars, you know what I mean. And if it's

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<v Speaker 2>a rental, people don't like having a rental single fan

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<v Speaker 2>home in their neighborhood because they want people to be

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<v Speaker 2>invested there. I don't know why, Like I mean, chances

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<v Speaker 2>are people who are renters move just as frequently or

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<v Speaker 2>less frequently if they're given the opportunities people who are

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<v Speaker 2>buying homes.

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<v Speaker 3>Maybe I just I don't know. I don't understand why

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<v Speaker 3>a renter.

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<v Speaker 2>I could understand maybe an Airbnb situation, but I can't

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<v Speaker 2>understand why you would not want to rental in your neighborhood.

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<v Speaker 3>That just doesn't make sense.

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<v Speaker 2>So there was a lot of people that were against

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<v Speaker 2>these ADUs because they thought they were going to be

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<v Speaker 2>rental properties. And my take on it was always the

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<v Speaker 2>same people who buy a house because they want to

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<v Speaker 2>live in a single family home, right, they don't want

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<v Speaker 2>to rent out the house in the backyard.

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<v Speaker 1>Now.

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<v Speaker 2>I did see some more, like you know, millennials on

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<v Speaker 2>the younger end of that generation. We're looking at it

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<v Speaker 2>as saying like, oh, I could convert this garage into

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<v Speaker 2>an ADU and then I could rent it out as

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<v Speaker 2>a way of offsetting the expense of the mortgage. I

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<v Speaker 2>did see some of that, But predominantly what's happening is

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<v Speaker 2>you get these people that want they want an ad

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<v Speaker 2>in their backyard because it's either a young family that's

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<v Speaker 2>about to start having kids and they want grandma and

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<v Speaker 2>grandpa to be able to come and stay in the

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<v Speaker 2>house whenever they come to visit, they want to have

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<v Speaker 2>a space for them. Because that's another thing my dad

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<v Speaker 2>used to always say is that I'm sure everybody's heard

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<v Speaker 2>this company's like fish. It starts to smell after three days, right,

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<v Speaker 2>so or stink, I think is the real way you're

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<v Speaker 2>supposed to say it. Because you guests don't smell, it

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<v Speaker 2>stinks to have them around.

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<v Speaker 3>Anyway. My point is I've had it.

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<v Speaker 2>I have an unpermitted guest house on the back end

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<v Speaker 2>of my garage in my house, and I bought it

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<v Speaker 2>that way. It made my house purchase a pain in

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<v Speaker 2>the butt, but I have it, and it's great. It's

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<v Speaker 2>great for when family or friends come to visit because

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<v Speaker 2>they have their own space. My parents would come and

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<v Speaker 2>they would hang out, and if they ever just wanted

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<v Speaker 2>a break, they would just go at My mom loves

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<v Speaker 2>to watch Doctor Phil, so she would just go in

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<v Speaker 2>the back and she would watch whatever TV show she

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<v Speaker 2>wanted to watch. And so you get the nice convenience

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<v Speaker 2>of the visit without everybody feeling like they're on top

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<v Speaker 2>of each other like they do for the holidays. But

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<v Speaker 2>these adu that's what I think Adu's were mostly going

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<v Speaker 2>to be used for. In fact, I had a lot

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<v Speaker 2>of clients who were getting help. I said last week

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<v Speaker 2>that anybody who's younger than my age of forty six

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<v Speaker 2>that I helped buy a house, they have some kind

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<v Speaker 2>of family help to cover the down payment because they

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<v Speaker 2>need some kind of an additional kick in. And it's

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<v Speaker 2>to the tune of a quarter to half a million

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<v Speaker 2>dollars is what some of these folks are getting from

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<v Speaker 2>their parents, and that's the only way they can afford

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<v Speaker 2>a house at southern California. So a lot of these

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<v Speaker 2>parents are saying, I will help you with this down payment,

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<v Speaker 2>but my money is going towards a place for me

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<v Speaker 2>to live when I retire and I can't take care

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<v Speaker 2>of myself anymore. And that's how you start getting into

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<v Speaker 2>multi generational housing. You got grandma, you got parents, and

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<v Speaker 2>you got kids all living in the same house. In

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<v Speaker 2>this case, it's usually grandparents with the parents. So parents

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<v Speaker 2>and the kids are living in the main house. Grandma

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<v Speaker 2>and grandpa are in the back house and they're staying there.

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<v Speaker 2>Another interesting thing I want to share with you that

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<v Speaker 2>in looking at this whole multi generational housing was that

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<v Speaker 2>they look back at the social Security data. Let me

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<v Speaker 2>find this here in my notes. So back America, sixty

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<v Speaker 2>five and older were once the most likely of any

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<v Speaker 2>age group to live in multi generational housing, with more

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<v Speaker 2>than half doing so in nineteen hundred. So in the

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<v Speaker 2>early nineteen hundreds, more than half of people who are

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<v Speaker 2>retiring age sixty five or older were living with their kids.

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<v Speaker 3>So it was a very common thing.

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<v Speaker 2>But after the US government introduced things like Social Security

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<v Speaker 2>and Medicare, that by the seventies it was nine percent.

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<v Speaker 2>Nine percent of those over sixty five were living with

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<v Speaker 2>their kids because they could afford it. It gave them

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<v Speaker 2>the ability to be able to afford it, and so

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<v Speaker 2>I just I thought that was interesting because what we're

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<v Speaker 2>seeing is an exact reversal of that. Is that before

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<v Speaker 2>older people couldn't afford to live off of Social Security

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<v Speaker 2>and pay for housing and everything that they and their

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<v Speaker 2>healthcare right, so they had to move in with their

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<v Speaker 2>kids and that was just expected. And now their kids

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<v Speaker 2>can't afford to buy houses, so the parents have to

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<v Speaker 2>kick in money and they need a place to stay.

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<v Speaker 2>And so I think that we're going to see more

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<v Speaker 2>of this because we have more people and we don't

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<v Speaker 2>have a lot of land, so we're going to see

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<v Speaker 2>more of this. This is I think the my Caucasian

365
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<v Speaker 2>friends are going to have to start getting this.

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<v Speaker 3>This is going to become a part of our culture.

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<v Speaker 2>You're going to have to get used to your parents

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<v Speaker 2>living in a back house, and that's going to mean

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<v Speaker 2>that lots of land are going to be more important.

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<v Speaker 2>By lots of land, what I mean is that most

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<v Speaker 2>of the San Fernando Valley houses are in the like

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<v Speaker 2>six thousand to seven thousand square foot size lot, and

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<v Speaker 2>that's kind of hard to build a good ADU size

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<v Speaker 2>on that.

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<v Speaker 3>So there's probably gonna start.

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<v Speaker 2>You're going to see a premium on lowst eight to

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<v Speaker 2>ten thousand square foot lots because people are Then then

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<v Speaker 2>you can have I've had one client who bought a

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<v Speaker 2>house with the full intent of converting the garage to

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<v Speaker 2>a full ADU, and they were going to build a

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<v Speaker 2>second ADU on that same lot in North Hollywood, and

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<v Speaker 2>that's where grandparents were going to be there, and then

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<v Speaker 2>adult son was going to live in the garage and

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<v Speaker 2>then the parents were going to live in the main

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<v Speaker 2>house with the rest of the family.

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<v Speaker 1>You're listening to kfi AM six forty on demand.

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<v Speaker 2>I'm justin Worsham here talking Southern California real estate with

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<v Speaker 2>you this segment. What I want to talk about is

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<v Speaker 2>townhomes and condos versus single family homes. When you have

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<v Speaker 2>an issue with affordability, like we do here at Southern California,

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<v Speaker 2>I get clients a lot who always want to talk about, well,

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<v Speaker 2>what if I did a condo, what if I did

393
00:18:23.759 --> 00:18:26.839
<v Speaker 2>a town home? They obviously always want townhomes more than condos.

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<v Speaker 2>Fun fact, there isn't actually a title designation for a

395
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<v Speaker 2>town home. It's something that we've kind of just adapted

396
00:18:33.000 --> 00:18:36.599
<v Speaker 2>as a style. They're all condos, and this means that

397
00:18:36.799 --> 00:18:40.640
<v Speaker 2>usually there's a development of some kind that is everybody's

398
00:18:40.640 --> 00:18:42.839
<v Speaker 2>all under either a common roof. I've seen a couple

399
00:18:42.839 --> 00:18:45.359
<v Speaker 2>of these single family developments where they're like in well

400
00:18:45.359 --> 00:18:47.119
<v Speaker 2>you have them big, like up in port A Ranch.

401
00:18:47.160 --> 00:18:48.920
<v Speaker 3>I helped the client get a house where.

402
00:18:48.720 --> 00:18:52.119
<v Speaker 2>It's like huge, just beautiful, like two three million dollar

403
00:18:52.240 --> 00:18:54.319
<v Speaker 2>homes and there's a guard shack and a gate and

404
00:18:54.359 --> 00:18:57.319
<v Speaker 2>they have an HA. But if you've got you're living

405
00:18:57.359 --> 00:18:59.720
<v Speaker 2>in like an apartment, but you get to own your apartment,

406
00:18:59.759 --> 00:19:03.400
<v Speaker 2>then that's traditionally called a condo and you would have

407
00:19:03.440 --> 00:19:06.480
<v Speaker 2>an HA, but there's also town homes that they have

408
00:19:06.599 --> 00:19:10.799
<v Speaker 2>shared walls or even separated like I said before, And

409
00:19:10.880 --> 00:19:14.039
<v Speaker 2>the homeowners association the intent of it is that they

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00:19:14.039 --> 00:19:17.599
<v Speaker 2>are supposed to, I think, be more of a mediary

411
00:19:17.720 --> 00:19:20.759
<v Speaker 2>for the common areas, right because if you all have

412
00:19:21.039 --> 00:19:23.480
<v Speaker 2>in between these two units, you have common roofs. The

413
00:19:23.519 --> 00:19:26.279
<v Speaker 2>plumbing is feeding it, the sewage system that takes everything

414
00:19:26.319 --> 00:19:28.720
<v Speaker 2>away from your home that there's a part where it

415
00:19:28.839 --> 00:19:31.000
<v Speaker 2>leaves the walls of your house. So there's a term

416
00:19:31.000 --> 00:19:32.880
<v Speaker 2>that we use in condos called paint to paint. So

417
00:19:33.000 --> 00:19:35.839
<v Speaker 2>just the interior you're responsible. So a lot of the

418
00:19:35.920 --> 00:19:39.960
<v Speaker 2>systems that become the responsibility of the community at large.

419
00:19:40.359 --> 00:19:43.359
<v Speaker 2>And so they elect a board they usually hire, depending

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00:19:43.359 --> 00:19:46.720
<v Speaker 2>on the size of property management company that also costs

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00:19:46.799 --> 00:19:49.480
<v Speaker 2>money to help them advise them and guide them. Because

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00:19:49.480 --> 00:19:51.720
<v Speaker 2>if you think about it, people who run for the

423
00:19:51.759 --> 00:19:54.079
<v Speaker 2>board on an h away are all just your neighbors.

424
00:19:54.440 --> 00:19:58.359
<v Speaker 2>They're not necessarily experts. They may not understand construction, they

425
00:19:58.440 --> 00:20:01.200
<v Speaker 2>might understand the costs of they may not even understand

426
00:20:01.200 --> 00:20:02.839
<v Speaker 2>what a homeowner's association does.

427
00:20:03.240 --> 00:20:05.200
<v Speaker 3>They're just the people who volunteered to do it.

428
00:20:05.240 --> 00:20:07.680
<v Speaker 2>I mean, stop yourself and ask would I want to

429
00:20:08.240 --> 00:20:12.519
<v Speaker 2>be on a homeowner's association board? No, so to get

430
00:20:12.559 --> 00:20:15.279
<v Speaker 2>into what's more affordable single family home or not. The

431
00:20:15.279 --> 00:20:17.759
<v Speaker 2>reason why I talk so much about homeowners association is

432
00:20:17.759 --> 00:20:20.960
<v Speaker 2>because that's the primary difference, and that's a big variable.

433
00:20:21.480 --> 00:20:23.920
<v Speaker 2>So a lot of times, back when I was a comic,

434
00:20:24.079 --> 00:20:26.519
<v Speaker 2>comics talk about when you did a college gig, you

435
00:20:26.519 --> 00:20:29.240
<v Speaker 2>would get like ten thousand dollars. But if you played

436
00:20:29.279 --> 00:20:31.839
<v Speaker 2>a comedy club, if you were headlining, and most comedy

437
00:20:31.839 --> 00:20:33.680
<v Speaker 2>clubs and you're just like you're not really a big name,

438
00:20:33.720 --> 00:20:36.039
<v Speaker 2>you're getting about fifteen hundred dollars, right, So there's this

439
00:20:36.079 --> 00:20:38.920
<v Speaker 2>big difference in what you pay. And it's because college

440
00:20:38.920 --> 00:20:41.680
<v Speaker 2>gigs were really tough, they were horrible, they weren't fulfilling,

441
00:20:41.680 --> 00:20:44.599
<v Speaker 2>where comedy gigs were easy. So a comedy club could

442
00:20:44.640 --> 00:20:47.240
<v Speaker 2>afford to pay you less, whereas I think the colleges

443
00:20:47.319 --> 00:20:49.119
<v Speaker 2>really have to try hard to get a comic to

444
00:20:49.160 --> 00:20:50.519
<v Speaker 2>go out there, so they throw a lot of money

445
00:20:50.559 --> 00:20:52.839
<v Speaker 2>your way. And I think it's the same thing when

446
00:20:52.880 --> 00:20:54.960
<v Speaker 2>you look at the difference between a single family home

447
00:20:55.000 --> 00:20:57.480
<v Speaker 2>and a condo or a town home. The reason a

448
00:20:57.519 --> 00:21:00.720
<v Speaker 2>condo or a town home is so much deeper is

449
00:21:00.720 --> 00:21:03.519
<v Speaker 2>because it's significantly less desirable. In most cases, you don't

450
00:21:03.559 --> 00:21:06.160
<v Speaker 2>get a private yard, and you have to deal with

451
00:21:06.200 --> 00:21:09.559
<v Speaker 2>those hoas. So those has have to have insurance that

452
00:21:09.599 --> 00:21:11.559
<v Speaker 2>you're helping to pay for. They have to you have

453
00:21:11.640 --> 00:21:14.119
<v Speaker 2>to trust that they're doing enough preventative maintenance to take

454
00:21:14.160 --> 00:21:18.000
<v Speaker 2>care of the building and the complex. I've found there's

455
00:21:18.160 --> 00:21:20.799
<v Speaker 2>there's these companies that what they do is they audit

456
00:21:20.960 --> 00:21:24.359
<v Speaker 2>the books, the finances of hoas. And this guy I

457
00:21:24.440 --> 00:21:26.160
<v Speaker 2>was talking to because I was trying to learn how

458
00:21:26.240 --> 00:21:28.440
<v Speaker 2>to read these documents. When you help somebody buy a

459
00:21:28.440 --> 00:21:31.000
<v Speaker 2>condo or a town home, you get the HA docs,

460
00:21:31.000 --> 00:21:33.559
<v Speaker 2>you get the rules and regulations, you get the CCNRS,

461
00:21:33.599 --> 00:21:36.240
<v Speaker 2>which is a different version of rules and regulations, and

462
00:21:36.279 --> 00:21:38.720
<v Speaker 2>then you get like the articles of organization and the

463
00:21:38.720 --> 00:21:40.440
<v Speaker 2>budgets and the minutes, and you have to go through

464
00:21:40.440 --> 00:21:42.119
<v Speaker 2>all this stuff, and every once in a while you

465
00:21:42.200 --> 00:21:44.359
<v Speaker 2>get one that has this really helpful kind of audit

466
00:21:44.519 --> 00:21:46.759
<v Speaker 2>of the of the HOA. And what he told me

467
00:21:46.920 --> 00:21:50.200
<v Speaker 2>was that eighty six percent of h oas in southern

468
00:21:50.200 --> 00:21:52.519
<v Speaker 2>California are underfunded in the reserves.

469
00:21:53.079 --> 00:21:53.960
<v Speaker 3>So what does that mean?

470
00:21:54.400 --> 00:21:56.880
<v Speaker 2>The reserves is money that they's supposed to be a

471
00:21:56.920 --> 00:21:59.759
<v Speaker 2>percentage or a chunk of every HOA payment that you

472
00:21:59.799 --> 00:22:03.279
<v Speaker 2>see in monthly that gets allocated for reserves, just like

473
00:22:03.359 --> 00:22:05.640
<v Speaker 2>if you were a city government, you want to have

474
00:22:05.920 --> 00:22:08.279
<v Speaker 2>a chunk of money set aside in case of an emergency.

475
00:22:08.680 --> 00:22:13.079
<v Speaker 2>So most recently they have this engineering requirement for balconies

476
00:22:13.079 --> 00:22:15.279
<v Speaker 2>that you have to have them inspected by an engineer

477
00:22:15.319 --> 00:22:17.480
<v Speaker 2>to make sure that they're sound. About I want to

478
00:22:17.480 --> 00:22:19.400
<v Speaker 2>say seven eight years ago, it might be closer to ten.

479
00:22:19.640 --> 00:22:22.279
<v Speaker 2>They had the earthquake soft retro fit that was a

480
00:22:22.319 --> 00:22:25.240
<v Speaker 2>thing that you had to do with your HOA. And

481
00:22:25.720 --> 00:22:28.440
<v Speaker 2>so like I had clients that had when they bought

482
00:22:28.480 --> 00:22:31.440
<v Speaker 2>a condo, they had an HOA of about three hundred

483
00:22:31.480 --> 00:22:33.240
<v Speaker 2>bucks a month, and like, this is great because that's

484
00:22:33.279 --> 00:22:34.799
<v Speaker 2>on the lower end of the average, at least in

485
00:22:34.880 --> 00:22:37.519
<v Speaker 2>La County. And then they got hit within a year

486
00:22:37.599 --> 00:22:41.519
<v Speaker 2>with a thirty three thousand dollars special assessment. So when

487
00:22:41.640 --> 00:22:44.200
<v Speaker 2>your HA your community gets hit with a bill, like

488
00:22:44.279 --> 00:22:47.799
<v Speaker 2>maybe it's maybe it's the fires that unfortunately happened, maybe

489
00:22:47.799 --> 00:22:51.079
<v Speaker 2>there's an earthquake, or maybe it's just that nobody's painted it,

490
00:22:51.160 --> 00:22:53.559
<v Speaker 2>or it's been twenty years and the roof hasn't been repaired,

491
00:22:53.559 --> 00:22:55.960
<v Speaker 2>so now we're getting leaks. Something comes up that was

492
00:22:56.000 --> 00:22:58.720
<v Speaker 2>not expected, not planned for, and they don't have the

493
00:22:58.720 --> 00:23:02.000
<v Speaker 2>finances for it, and they do what's called a special assessment.

494
00:23:03.000 --> 00:23:05.240
<v Speaker 2>As an example too, I was helping a client sell

495
00:23:05.960 --> 00:23:09.440
<v Speaker 2>a town home and while we were in escrow, the

496
00:23:09.480 --> 00:23:13.880
<v Speaker 2>insurance policy was up for renewal with the HIA, and

497
00:23:14.039 --> 00:23:16.480
<v Speaker 2>they had the replacement cost to rebuild the structure was

498
00:23:16.519 --> 00:23:18.759
<v Speaker 2>forty two million dollars and they had the insurance to

499
00:23:18.799 --> 00:23:20.680
<v Speaker 2>cover that. But when they went to renew the insurance,

500
00:23:20.680 --> 00:23:23.359
<v Speaker 2>because insurance has gone up so much in California, the

501
00:23:23.599 --> 00:23:25.920
<v Speaker 2>HIA couldn't afford it. So they had to hit everybody

502
00:23:25.920 --> 00:23:28.480
<v Speaker 2>with a twelve hundred dollars special assessment. So that's over

503
00:23:28.519 --> 00:23:31.119
<v Speaker 2>one hundred and fifty units in this development that were

504
00:23:31.119 --> 00:23:33.559
<v Speaker 2>each asked to pay twelve hundred dollars. And that wasn't

505
00:23:33.599 --> 00:23:35.720
<v Speaker 2>even for them to get the full insurance coverage. That

506
00:23:35.799 --> 00:23:38.240
<v Speaker 2>was for them to get half the insurance coverage. In

507
00:23:38.279 --> 00:23:41.480
<v Speaker 2>this instance, the property manager that the HIA had hired

508
00:23:41.519 --> 00:23:44.200
<v Speaker 2>to help kind of guide them and manage things for them,

509
00:23:44.599 --> 00:23:48.079
<v Speaker 2>had said, well, you don't need the full replacement costs

510
00:23:48.160 --> 00:23:51.880
<v Speaker 2>because the individual units their homeowners and policies that cover

511
00:23:51.960 --> 00:23:54.400
<v Speaker 2>paint to paint right, like I said, inside of the unit,

512
00:23:54.880 --> 00:23:57.839
<v Speaker 2>that will cover the reconstruction of their unit. And that

513
00:23:58.000 --> 00:24:01.160
<v Speaker 2>was wrong. It was absolutely wrong. And what happened now

514
00:24:01.400 --> 00:24:03.759
<v Speaker 2>is that lenders who look they do what's called an

515
00:24:03.920 --> 00:24:06.839
<v Speaker 2>HAA certification, so they look at certain details in the

516
00:24:06.880 --> 00:24:09.799
<v Speaker 2>finances of the hway and they use that to decide

517
00:24:09.839 --> 00:24:12.599
<v Speaker 2>if it's okay to lend money for somebody to buy

518
00:24:12.680 --> 00:24:16.319
<v Speaker 2>this condo. The lenders now were like, this is non conforming.

519
00:24:16.359 --> 00:24:18.599
<v Speaker 2>This means it doesn't fit into our cookie cutter that

520
00:24:18.640 --> 00:24:20.680
<v Speaker 2>we like it, that makes it look nice and pretty,

521
00:24:21.359 --> 00:24:23.359
<v Speaker 2>so they wouldn't do a loan. So now you have

522
00:24:23.400 --> 00:24:26.000
<v Speaker 2>to find somebody who's willing to do a non conforming loan,

523
00:24:26.319 --> 00:24:28.400
<v Speaker 2>which is riskier, which means that they're going to charge

524
00:24:28.400 --> 00:24:30.839
<v Speaker 2>a higher interest rate because they need to be compensated

525
00:24:30.880 --> 00:24:33.559
<v Speaker 2>for that risk. So there was a moment where it

526
00:24:33.599 --> 00:24:35.640
<v Speaker 2>looked like it was going to be really, really tough

527
00:24:35.759 --> 00:24:38.720
<v Speaker 2>for my client to sell their town home and they

528
00:24:38.720 --> 00:24:40.799
<v Speaker 2>had already bought a new place and we're planning to

529
00:24:40.839 --> 00:24:43.799
<v Speaker 2>carry the mortgage maybe a couple months. And now through

530
00:24:43.880 --> 00:24:46.759
<v Speaker 2>something that they had zero control over and no saying.

531
00:24:46.880 --> 00:24:49.200
<v Speaker 2>It's just like I say, eight to twelve people get

532
00:24:49.240 --> 00:24:51.880
<v Speaker 2>together maybe once a month if you're lucky, more often

533
00:24:51.920 --> 00:24:54.200
<v Speaker 2>it's three to every six months or only once a year,

534
00:24:54.480 --> 00:24:58.119
<v Speaker 2>and they decide the fate of your financial future. So

535
00:24:58.319 --> 00:25:01.240
<v Speaker 2>I think that that is not a good reason to

536
00:25:01.279 --> 00:25:03.200
<v Speaker 2>get a condo or town home. The only way you

537
00:25:03.240 --> 00:25:04.799
<v Speaker 2>buy a condoor a town home is if you can

538
00:25:04.839 --> 00:25:06.839
<v Speaker 2>afford it. Now, what I will tell you is that

539
00:25:06.880 --> 00:25:10.160
<v Speaker 2>the nice part about the rate it increases is that

540
00:25:10.160 --> 00:25:13.759
<v Speaker 2>that to me, really impacted the condo and townhome market

541
00:25:13.799 --> 00:25:17.759
<v Speaker 2>in southern California. We are seeing how condos and townhomes

542
00:25:17.799 --> 00:25:19.680
<v Speaker 2>it's not out of the ordinary for them to sit

543
00:25:19.720 --> 00:25:22.359
<v Speaker 2>on the market for like six seven months in a

544
00:25:22.440 --> 00:25:24.480
<v Speaker 2>time period where the average days on the market for

545
00:25:24.519 --> 00:25:27.640
<v Speaker 2>a home is around twenty eight to thirty. So the

546
00:25:27.759 --> 00:25:31.039
<v Speaker 2>inventory stacks up so much in that condo and townhome

547
00:25:31.119 --> 00:25:34.000
<v Speaker 2>space that that's where you could see the prices kind

548
00:25:34.000 --> 00:25:36.519
<v Speaker 2>of come down, and they can it can it can

549
00:25:36.559 --> 00:25:39.200
<v Speaker 2>help you? Like we I had clients who they're about

550
00:25:39.200 --> 00:25:41.039
<v Speaker 2>to close on Tuesday on their new place, but they

551
00:25:41.039 --> 00:25:43.119
<v Speaker 2>were looking at another place that they felt was kind

552
00:25:43.119 --> 00:25:46.359
<v Speaker 2>of just overpriced, and when we looked at comparable homes,

553
00:25:46.400 --> 00:25:49.400
<v Speaker 2>we found that in that same development. So this place

554
00:25:49.480 --> 00:25:52.000
<v Speaker 2>was listed for eight twenty five. My clients wanted to

555
00:25:52.000 --> 00:25:54.559
<v Speaker 2>offer closer to like seven to twenty five because we

556
00:25:54.599 --> 00:25:56.759
<v Speaker 2>had seen this was a two bedroom, two bath unit,

557
00:25:57.119 --> 00:25:59.680
<v Speaker 2>and we had seen three bedroom units in that same

558
00:25:59.720 --> 00:26:03.119
<v Speaker 2>complex sell for about seven fifty and so we thought

559
00:26:03.160 --> 00:26:06.599
<v Speaker 2>that the prices had come down. Well, she had bought

560
00:26:06.640 --> 00:26:08.559
<v Speaker 2>the owner that was selling it. She bought it just

561
00:26:08.559 --> 00:26:11.400
<v Speaker 2>two years ago for seven seventy five. So now she's

562
00:26:11.400 --> 00:26:15.039
<v Speaker 2>buying it at a loss. Now I looked at it,

563
00:26:15.079 --> 00:26:17.240
<v Speaker 2>I did some I look back, and the chances of

564
00:26:17.279 --> 00:26:19.000
<v Speaker 2>her she's not going to pay out a pocket, right,

565
00:26:19.039 --> 00:26:21.079
<v Speaker 2>It's not like trying to pay off your car after

566
00:26:21.119 --> 00:26:23.599
<v Speaker 2>it's upside down. It's not like that kind of a thing,

567
00:26:23.599 --> 00:26:26.359
<v Speaker 2>because she put you know, arguably ten to twenty percent down.

568
00:26:26.559 --> 00:26:28.640
<v Speaker 2>It's just she wouldn't get as much as she probably

569
00:26:28.720 --> 00:26:31.680
<v Speaker 2>would like and maybe arguably should based on when you

570
00:26:31.759 --> 00:26:34.400
<v Speaker 2>sell a house or buy a house. But that's that's

571
00:26:34.440 --> 00:26:36.440
<v Speaker 2>also why I tell people, if you know, if you're

572
00:26:36.480 --> 00:26:38.559
<v Speaker 2>not planning to move in like two years, I like

573
00:26:38.640 --> 00:26:39.839
<v Speaker 2>five to ten. If you're going to be in a

574
00:26:39.839 --> 00:26:41.720
<v Speaker 2>place five to ten years, chances are you're not going

575
00:26:41.799 --> 00:26:42.519
<v Speaker 2>to lose your money.

576
00:26:43.880 --> 00:26:45.559
<v Speaker 3>Here's the thing. What are we going to do next?

577
00:26:45.640 --> 00:26:50.720
<v Speaker 2>I want to talk about, ooh, California real estate investing?

578
00:26:51.240 --> 00:26:53.519
<v Speaker 2>Is it a good place to invest in California? Also,

579
00:26:53.559 --> 00:26:55.240
<v Speaker 2>I want to get questions. If there's something you want

580
00:26:55.240 --> 00:26:57.640
<v Speaker 2>me to answer on the show, hit the talkback feature. Also,

581
00:26:57.640 --> 00:26:59.559
<v Speaker 2>I forgot to mention last time. What I also want

582
00:26:59.599 --> 00:27:01.200
<v Speaker 2>to hear is if you have questions about a home loan.

583
00:27:01.200 --> 00:27:03.000
<v Speaker 2>Because I have a fantastic guest coming up in the

584
00:27:03.000 --> 00:27:05.480
<v Speaker 2>next hour, Christine Hatch with the Mortgage Group. She's a

585
00:27:05.559 --> 00:27:07.359
<v Speaker 2>lender I use a lot with my clients, really knows

586
00:27:07.359 --> 00:27:08.680
<v Speaker 2>her stuff, geeks out about math.

587
00:27:09.440 --> 00:27:12.960
<v Speaker 1>You're listening to KFI AM six forty on demand if

588
00:27:12.960 --> 00:27:13.839
<v Speaker 1>you're just tuning in.

589
00:27:14.200 --> 00:27:17.079
<v Speaker 2>I will be here two to four every Sunday at

590
00:27:17.160 --> 00:27:18.559
<v Speaker 2>least through the end of April.

591
00:27:18.839 --> 00:27:21.400
<v Speaker 3>They're trying the audition. Last week was my first show.

592
00:27:21.559 --> 00:27:24.400
<v Speaker 2>This one's going by faster, I feel like, but they

593
00:27:24.440 --> 00:27:26.759
<v Speaker 2>added two more weeks, so that means at least I'm

594
00:27:26.759 --> 00:27:29.119
<v Speaker 2>not burning the place down. What I want to talk

595
00:27:29.119 --> 00:27:32.240
<v Speaker 2>about this segment is is California a good place to

596
00:27:32.319 --> 00:27:34.759
<v Speaker 2>invest in real estate. I've always felt, even before I

597
00:27:34.799 --> 00:27:38.559
<v Speaker 2>became a realtor, I've always been biased for real estate investing.

598
00:27:39.559 --> 00:27:42.440
<v Speaker 2>I have a good friend who's a financial advisor. Shout

599
00:27:42.440 --> 00:27:44.400
<v Speaker 2>out to Chris Reddick at Edward Jones. He's my dude,

600
00:27:45.319 --> 00:27:48.240
<v Speaker 2>and we've offen joked about trying to sit down and

601
00:27:48.279 --> 00:27:51.519
<v Speaker 2>do the math on whether it's better to let someone

602
00:27:51.640 --> 00:27:54.920
<v Speaker 2>like a financial advisor like Chris handle your investments or

603
00:27:54.960 --> 00:27:57.480
<v Speaker 2>if it makes more sense to invest in real estate.

604
00:27:58.039 --> 00:28:00.759
<v Speaker 2>I like, I'm going to steal his word. His words

605
00:28:00.759 --> 00:28:02.839
<v Speaker 2>are phrases that he likes to say. Why not why

606
00:28:02.920 --> 00:28:05.400
<v Speaker 2>only use one toolbox on you or tool on your

607
00:28:05.480 --> 00:28:08.079
<v Speaker 2>tool belt, Use all the tools, use everything, do all

608
00:28:08.119 --> 00:28:10.839
<v Speaker 2>of the things. But what I like about real estate

609
00:28:10.880 --> 00:28:12.640
<v Speaker 2>investing is that I feel like if you have a

610
00:28:12.720 --> 00:28:16.200
<v Speaker 2>base understanding of basic arithmetic, you can figure out how

611
00:28:16.240 --> 00:28:18.559
<v Speaker 2>to invest in real estate. The rest is just gonna

612
00:28:18.599 --> 00:28:20.400
<v Speaker 2>There's tons of books out there that will teach you

613
00:28:20.440 --> 00:28:24.119
<v Speaker 2>like shortcuts. There's great message boards. Bigger Pockets is a

614
00:28:24.119 --> 00:28:27.720
<v Speaker 2>great resource. They have a great podcast and message board

615
00:28:27.720 --> 00:28:30.559
<v Speaker 2>that you could go and learn a ton about investing

616
00:28:30.599 --> 00:28:33.039
<v Speaker 2>in real estate. And I've learned a lot from a

617
00:28:33.039 --> 00:28:35.839
<v Speaker 2>lot of the people there. Here's what I'll tell you

618
00:28:35.880 --> 00:28:38.559
<v Speaker 2>to answer my own question is if is California a

619
00:28:38.559 --> 00:28:41.519
<v Speaker 2>good place to invest in real estate? Really it depends,

620
00:28:41.559 --> 00:28:44.400
<v Speaker 2>but in short, no, I don't think California is a

621
00:28:44.400 --> 00:28:47.720
<v Speaker 2>good place to invest in real estate. Here's why. The

622
00:28:47.799 --> 00:28:51.599
<v Speaker 2>cost of housing is astronomical. So the amount of money

623
00:28:51.640 --> 00:28:54.799
<v Speaker 2>it takes for you to be able to put down

624
00:28:55.240 --> 00:28:58.720
<v Speaker 2>on an investment property so that it would cash flow right, so.

625
00:28:58.720 --> 00:29:00.359
<v Speaker 3>You need it. You need to be able to put

626
00:29:00.440 --> 00:29:01.799
<v Speaker 3>enough down. I looked into it.

627
00:29:01.799 --> 00:29:05.039
<v Speaker 2>The average rent in southern California's around three thousand dollars.

628
00:29:05.240 --> 00:29:08.839
<v Speaker 2>The average mortgage payment is around six thousand dollars. So

629
00:29:09.599 --> 00:29:11.920
<v Speaker 2>you have to put so much money down so that

630
00:29:12.039 --> 00:29:16.720
<v Speaker 2>your mortgage payment now is three thousand dollars. So if

631
00:29:16.759 --> 00:29:18.759
<v Speaker 2>you took that amount of cash that you have, with

632
00:29:18.799 --> 00:29:20.519
<v Speaker 2>the rest of it being borrowed, so that you could

633
00:29:20.519 --> 00:29:23.000
<v Speaker 2>have bought that property, more than likely we're talking at

634
00:29:23.039 --> 00:29:26.039
<v Speaker 2>close to three quarters maybe half a million dollars, depending

635
00:29:26.039 --> 00:29:27.920
<v Speaker 2>on the property. If you took that half a million

636
00:29:27.960 --> 00:29:30.480
<v Speaker 2>to three quarters of a million dollars and you put

637
00:29:30.519 --> 00:29:33.480
<v Speaker 2>it in a state like Ohio, you could probably buy

638
00:29:33.480 --> 00:29:36.720
<v Speaker 2>an entire apartment building cash with that money, and it

639
00:29:36.759 --> 00:29:40.640
<v Speaker 2>would cash flow, it would make you money. So I

640
00:29:40.680 --> 00:29:43.480
<v Speaker 2>think most of the time there's these examples where people

641
00:29:44.680 --> 00:29:47.799
<v Speaker 2>they inherited home, so there's not really a cost that

642
00:29:48.359 --> 00:29:50.039
<v Speaker 2>I would be willing to at least hear you out

643
00:29:50.079 --> 00:29:52.519
<v Speaker 2>and talk about it. But like I shared last week

644
00:29:52.519 --> 00:29:54.599
<v Speaker 2>about a story where I had a listing appointment to

645
00:29:54.599 --> 00:29:56.680
<v Speaker 2>meet with some people who had inherited a house in

646
00:29:56.720 --> 00:30:00.119
<v Speaker 2>Tuluca Lake and they wanted to rent it out. The

647
00:30:00.480 --> 00:30:02.519
<v Speaker 2>rent for it would be about ten grand a month,

648
00:30:02.559 --> 00:30:05.000
<v Speaker 2>and I'm like, the amount of people that would be

649
00:30:05.079 --> 00:30:08.119
<v Speaker 2>interested and able to pay ten thousand dollars a month

650
00:30:08.319 --> 00:30:10.799
<v Speaker 2>to rent this very beautiful home in a very beautiful

651
00:30:10.839 --> 00:30:14.000
<v Speaker 2>area is so small that I don't really think there's

652
00:30:14.079 --> 00:30:16.599
<v Speaker 2>much there. Whereas if you sold this house for the

653
00:30:16.640 --> 00:30:18.559
<v Speaker 2>one point two value that it had just right there,

654
00:30:18.599 --> 00:30:21.799
<v Speaker 2>without touching it, without making any improvements, you're walking away

655
00:30:21.839 --> 00:30:24.480
<v Speaker 2>with about one point two million dollars cash. You set

656
00:30:24.519 --> 00:30:26.640
<v Speaker 2>aside some money for capital gains, and you go and

657
00:30:26.680 --> 00:30:29.240
<v Speaker 2>reinvest that somewhere. You're probably going to get a better

658
00:30:29.279 --> 00:30:33.440
<v Speaker 2>return on that investment elsewhere. So it becomes this game

659
00:30:33.559 --> 00:30:35.480
<v Speaker 2>like if you want to people like to invest in

660
00:30:35.519 --> 00:30:38.559
<v Speaker 2>California because it appreciates. It's going to be hard for

661
00:30:38.599 --> 00:30:41.240
<v Speaker 2>you to find another property that will appreciate in value

662
00:30:41.240 --> 00:30:44.079
<v Speaker 2>at a rate that it will in California. But to me,

663
00:30:44.519 --> 00:30:46.200
<v Speaker 2>I think the name of the game in real estate

664
00:30:46.240 --> 00:30:49.119
<v Speaker 2>investing and why people like it is cash flow. So

665
00:30:49.200 --> 00:30:52.039
<v Speaker 2>that's all about monthly profit. What are you netting from

666
00:30:52.119 --> 00:30:55.440
<v Speaker 2>the property. So in California, the reason why it's so hard.

667
00:30:55.440 --> 00:30:57.200
<v Speaker 2>As we talk, Richie found it. I paid them off

668
00:30:57.240 --> 00:30:59.960
<v Speaker 2>in his pop tarts today. Last week, Richie, I think

669
00:31:00.000 --> 00:31:02.279
<v Speaker 2>I thought it was fifteen, but maybe twelve. He confirmed it

670
00:31:02.319 --> 00:31:05.519
<v Speaker 2>was sixteen percent affordability in the state of California. So

671
00:31:05.559 --> 00:31:08.839
<v Speaker 2>what that means is that when you account for income

672
00:31:08.960 --> 00:31:11.799
<v Speaker 2>per the census data, and people putting about twenty percent

673
00:31:11.880 --> 00:31:15.079
<v Speaker 2>down on a house, what that payment would look like

674
00:31:15.799 --> 00:31:17.960
<v Speaker 2>the median house price, which is in the mid nine

675
00:31:18.079 --> 00:31:20.680
<v Speaker 2>hundreds right now in the state of California. Only sixteen

676
00:31:20.720 --> 00:31:23.880
<v Speaker 2>percent of people that live in California make enough money

677
00:31:23.880 --> 00:31:26.680
<v Speaker 2>to afford that. But you start looking at other states,

678
00:31:26.680 --> 00:31:29.039
<v Speaker 2>So let's look at our neighbor in Arizona, sixty six

679
00:31:29.079 --> 00:31:34.000
<v Speaker 2>percent affordability index there. The national average is seventy two percent,

680
00:31:34.079 --> 00:31:38.200
<v Speaker 2>but California is only sixteen. Fun fact, West Virginia eighty percent,

681
00:31:39.519 --> 00:31:42.079
<v Speaker 2>So I think that's the housing price, and then you

682
00:31:42.119 --> 00:31:44.720
<v Speaker 2>start looking at southern California, it's so much that it's

683
00:31:44.720 --> 00:31:46.480
<v Speaker 2>going to make it hard to cash flow. The first

684
00:31:46.519 --> 00:31:48.839
<v Speaker 2>rental property I bought was actually up the street from

685
00:31:48.839 --> 00:31:51.400
<v Speaker 2>where I live in Burbank, and it cost me twelve

686
00:31:51.480 --> 00:31:54.039
<v Speaker 2>hundred dollars a month. But I bought it because real

687
00:31:54.160 --> 00:31:57.240
<v Speaker 2>estate was appreciating so fast after the crash that I

688
00:31:57.279 --> 00:32:00.079
<v Speaker 2>was like, oh, this is how you invest money. And

689
00:32:00.119 --> 00:32:02.240
<v Speaker 2>I actually learned from some other investors, and I love

690
00:32:02.279 --> 00:32:03.680
<v Speaker 2>the way this guy put it. He's like, you don't

691
00:32:03.680 --> 00:32:06.480
<v Speaker 2>have an investment. You're running a charity where you provide

692
00:32:06.480 --> 00:32:08.960
<v Speaker 2>housing for a family in Burbank. Is what you are.

693
00:32:09.400 --> 00:32:12.799
<v Speaker 2>And that person was right, Like, again, I made money

694
00:32:12.799 --> 00:32:15.519
<v Speaker 2>off of it. I eventually used it when the tenants left.

695
00:32:15.799 --> 00:32:17.880
<v Speaker 2>I flipped the house and I use that to fund

696
00:32:17.960 --> 00:32:20.240
<v Speaker 2>my flipping business, and so I made more money out

697
00:32:20.279 --> 00:32:22.720
<v Speaker 2>of it. So even this is why I think real

698
00:32:22.839 --> 00:32:24.799
<v Speaker 2>estate investing is so great, is that even though I

699
00:32:24.839 --> 00:32:28.599
<v Speaker 2>made a mistake and the math I could afford, the math,

700
00:32:29.160 --> 00:32:30.960
<v Speaker 2>I still was able to make. I think I made

701
00:32:30.960 --> 00:32:33.039
<v Speaker 2>like eighty grand off of the sale of that home,

702
00:32:33.359 --> 00:32:35.519
<v Speaker 2>and I use that to make another quarter of a

703
00:32:35.599 --> 00:32:38.400
<v Speaker 2>million over the few houses that I flipped over the

704
00:32:38.640 --> 00:32:43.119
<v Speaker 2>years that follow that. Now, right now, let's go into that. Oh,

705
00:32:43.319 --> 00:32:44.799
<v Speaker 2>I'm so mad, I didn't even think of that. I

706
00:32:44.839 --> 00:32:47.200
<v Speaker 2>might actually do that. When we come back. I might

707
00:32:47.240 --> 00:32:50.160
<v Speaker 2>want to talk about flipping because I get so many

708
00:32:50.200 --> 00:32:53.599
<v Speaker 2>people that watch these shows on HGTV and they when

709
00:32:53.640 --> 00:32:55.880
<v Speaker 2>they find out I flip houses, they're like, I want

710
00:32:55.880 --> 00:32:57.680
<v Speaker 2>to flip houses too, and they think it's so great.

711
00:32:57.759 --> 00:33:00.119
<v Speaker 2>So before I do that, though, we'll talk flipping as

712
00:33:00.119 --> 00:33:02.640
<v Speaker 2>a real estate investment strategy in southern California when we

713
00:33:02.759 --> 00:33:05.440
<v Speaker 2>come back. But what I want to talk about now

714
00:33:05.599 --> 00:33:08.279
<v Speaker 2>is that also the legislative part of California. It is

715
00:33:08.519 --> 00:33:12.200
<v Speaker 2>very tenant friendly in the state of California. So a

716
00:33:12.240 --> 00:33:15.039
<v Speaker 2>few years ago we had AB fourteen eighty two, which

717
00:33:15.200 --> 00:33:19.119
<v Speaker 2>basically created a state wide rent control. It caps at

718
00:33:19.160 --> 00:33:22.920
<v Speaker 2>I think it's five percent plus inflation is what you

719
00:33:23.000 --> 00:33:25.640
<v Speaker 2>can cap rent with an absolute cap at ten percent.

720
00:33:26.039 --> 00:33:28.359
<v Speaker 2>LA County already had a ten percent cap, by the way,

721
00:33:28.400 --> 00:33:32.400
<v Speaker 2>because it's considered a fire hazard area ABBY, so that

722
00:33:32.519 --> 00:33:33.440
<v Speaker 2>was already in existence.

723
00:33:33.480 --> 00:33:34.240
<v Speaker 3>Didn't really affect it.

724
00:33:34.720 --> 00:33:36.559
<v Speaker 2>And I think that the rent control if you live

725
00:33:36.599 --> 00:33:39.440
<v Speaker 2>in like La Proper areas. Burbank doesn't have this where

726
00:33:39.440 --> 00:33:41.960
<v Speaker 2>I live, but in La Proper they have. It's like

727
00:33:42.000 --> 00:33:44.599
<v Speaker 2>two point ninety seven. It's some weird number that's below

728
00:33:44.640 --> 00:33:47.759
<v Speaker 2>three percent. La County actually did a survey and found

729
00:33:47.759 --> 00:33:51.200
<v Speaker 2>that on average, rent increases were less or we're just

730
00:33:51.240 --> 00:33:53.519
<v Speaker 2>about two percent, So that was less than the cap

731
00:33:53.799 --> 00:33:58.599
<v Speaker 2>for what the city ordinance was for rent control rent increases.

732
00:33:58.960 --> 00:34:01.759
<v Speaker 2>So you have all this legi rent control and everything

733
00:34:01.799 --> 00:34:04.680
<v Speaker 2>that really over regulates the industry in which you're trying

734
00:34:04.720 --> 00:34:08.239
<v Speaker 2>to invest. So that's gonna restrict your freedom. The latest

735
00:34:08.280 --> 00:34:10.159
<v Speaker 2>thing that came out was that they put a cap.

736
00:34:10.320 --> 00:34:12.840
<v Speaker 2>Most people are there exempt from it if you just

737
00:34:12.880 --> 00:34:14.719
<v Speaker 2>have like a one or two rental properties and you

738
00:34:14.760 --> 00:34:16.800
<v Speaker 2>didn't put them in a corporation or something like that.

739
00:34:17.519 --> 00:34:20.239
<v Speaker 2>But you can used to be able to charge up

740
00:34:20.280 --> 00:34:23.360
<v Speaker 2>to twice the rent and security deposit for an unfurnished house,

741
00:34:23.440 --> 00:34:26.159
<v Speaker 2>three times the rent on a furnished house, and they

742
00:34:26.199 --> 00:34:29.480
<v Speaker 2>capped it at just one month's rent because so they

743
00:34:29.519 --> 00:34:31.519
<v Speaker 2>couldn't do that. The other thing that they're now doing

744
00:34:31.599 --> 00:34:35.360
<v Speaker 2>Assembly built twenty seven forty seven requires landlords to give

745
00:34:35.400 --> 00:34:37.519
<v Speaker 2>the option I think they have. It's this month of

746
00:34:37.559 --> 00:34:39.960
<v Speaker 2>this year that you have to start offering at least

747
00:34:39.960 --> 00:34:43.719
<v Speaker 2>once a year to your tenants the ability to report

748
00:34:43.840 --> 00:34:47.719
<v Speaker 2>their payments for their rent as positive things for their credit.

749
00:34:47.760 --> 00:34:50.800
<v Speaker 2>So you have to report their rent payments as to

750
00:34:50.840 --> 00:34:53.599
<v Speaker 2>a credit union at least one credit reporting agency.

751
00:34:55.159 --> 00:34:56.760
<v Speaker 3>I really stammered that one.

752
00:34:56.599 --> 00:34:59.639
<v Speaker 2>Credit reporting agency has to find out from you if

753
00:34:59.679 --> 00:35:01.880
<v Speaker 2>you're are paying their rent on time, and it's supposed

754
00:35:01.880 --> 00:35:03.639
<v Speaker 2>to be a way that they can increase their credit score.

755
00:35:04.400 --> 00:35:07.320
<v Speaker 2>And they said that you can charge the tenant ten

756
00:35:07.400 --> 00:35:10.599
<v Speaker 2>dollars for that service. But I found the most common

757
00:35:10.639 --> 00:35:14.199
<v Speaker 2>service costs the landlord nineteen dollars and fifty cents a month,

758
00:35:14.400 --> 00:35:16.599
<v Speaker 2>and that gives them up to twenty three leases. So

759
00:35:16.719 --> 00:35:18.519
<v Speaker 2>if you just have one property, you're already in the

760
00:35:18.559 --> 00:35:22.280
<v Speaker 2>negative just from that alone. Okay, So, like I said,

761
00:35:22.320 --> 00:35:23.920
<v Speaker 2>when I come back, we're going to talk house flipping.

762
00:35:24.400 --> 00:35:26.920
<v Speaker 1>KFI AM six forty on demand