Deal Analysis | 7 Figure Property - Episode 19
36:23 Share

What's going on, everyone, to welcome to the David Green show, real talk, real state. I am joined today by daa home flipper in california, whose exploded his business into different areas. And we are going to be analyzing a real life deal that he got he to be sharing, how he got IT asking for my advice on what I think he should do.

If you've ever wanted to be a fly on the wall in my world, or the world of a successful whole seller, real, said investor, you've come to the right place to. And thanks for join me today. Yeah, yeah.

So you and I met at a real state meet up that the David Green team put together in was at all the greek up one time. And here to share a deal with us. So let's get into this thing. How did you find this deal?

So I do a lot of direct to cell er marketing and the seller received one of our mailers when on our website and gave us a ring. IT was actually the father in law of the seller who originally called me trying to get some help for his mother in law.

All right, so you said, you have a website and these people come to you tells how that thing is set up. Did you hire our company to build this website?

Did you do at yourself? We hire somebody to build up for us and we have an seo company that um does seo for us monthly.

okay. So this is one of those big deals. So you get a phone call, tell me how the phone call goes when you first connect with the sellers.

yes. So when somebody calls, I just go off the four pillars of motivation, a timeline recent for selling condition and Price, and I filter her a lot of leads. We probably get five leads today.

And if they're not somebody who hits at least one of those pillars, i'm not talking to them. So when this particular seller called, they mentioned that their mother in love was elderly. SHE wanted to move out.

The house hadn't been renovated since the sixties, and I had massive foundational, the image, the government was basically thinking. So I knew that there are a pretty motivated lead. And it's interesting that I actually haven't ever been to this property.

The seller wanted to they were kind doing the due diligence process. They got a they said he had won to sell in about four, five months. And I was a good enough deal that I said, hey, well, what if we could buy IT within seven days, give your mother in law another four, five months to move out, and then take care of the renovations.

And they were all pumped for that. That's what we ended up doing. okay?

Now, when people hear the word foundation, they immediately think, run away. Give a little bit education on what the foundation is. Are these area parable damages? What should people expect to pay when there is foundation to educate? Is a little bit of why that didn't scare you from this deal?

Yeah, this is a pretty flat lot. I can show the pictures. It's not on a hill at all. Most of IT was just water damage when he sent, the seller sent me pictures and there was a gutter that you could tell was just leaking water out.

And right, where is leaking a water out? That's where you started to see the roof line start caving in and the foundational cracks. So I knew that we would probably have to jack up the wall, jack up the roof and then lay a new foundation underneath, which is probably twenty thirty thousand dollars for that in a lot of cases of the houses and on a hill.

And I just sagging, usually just do the water damage. So you can put in like a french drain around the house. And then you can also do, you can have a foundational specialists come in and and jack up the peers. It's really kind of a situation base situation by situation IT can be as low as five grand, as high as one hundred and fifty grand for a house.

Now how do they determine if it's going to be five grand or hundred fifty grand? And what are they doing?

Again, a situation by situation basis, like for a five thousand dollar fix on a foundation IT would be something where maybe there's horizontal cracks at something to look for when you're flipped the house. If there is vertical cracks is not a huge issue really. It's when there's horizontal cracks, that's when there's bad news on a foundation OK. So vertical .

cracks should be like something going up the walls, your tag like something in the floor going horizon or .

in the foundation itself. So if you if you there's two types of foundation, right, there's a slab foundation and then there's a raised foundation the way you can tell the differences. If you just walk around house, you're gonna see little rectangular events two or three feet above the ground. If you see those, that means it's a race foundation. And the under the house.

usually there's a stair that will go up to the front door as well.

right? Exactly for a lab. You're just gonna see the sighting or the stucco is gonna go almost right to the ground and might be up in inter, two above the ground for so no water get on the site.

And slab foundations, usually nothing happens. If something does happen, it's really easy. We had a situation where we just dug out the slab foundation, import a new one.

And I think IT was three grant for a ten by fifteen space. Of course, we had our own guys to do this was a little bit cheaper. But if it's a slap then and that has some draining issues, then it's probably not a huge deal. You will see cracks in the walls, especially around the windows.

right? So this property that you're looking at that is this a slab, is this race foundation? And did you get specifics on why this garage I was thinking .

into the ground like you said, yeah. So the IT was a race foundation and IT was really, the sellers had converted the garage into a living space and they did IT back in, I think, the sixties before you ever had to get permits. So they never had a promise, they never had inspection.

They never got an engineer to take a look at IT. And what they forgot to do was put up gutters in the right places. So there was a downspout for a gutters, and IT was just water every time IT rained for the last forty, fifty years, the water was going under that garage and slowly began. One part of the garage was just thinking. And you can see in the pictures is about a three inch gap where you can see the foundation is separating from the house.

Alright, so this was an issue that water had got underneath. The house had warned out the foundation itself. Water damage is real, say all the time.

I don't think people realize that it's almost always bad when water touches a house, which doesn't happen in california very often. But in case in this case, IT did. And so what was your estimate to get .

this stuff fixed? So we spent um we're almost done. We spent about IT was a big foundation job. We spent about seventy grand on the foundation and then the rest of the house just under a hundred, about about eighty five, ninety thousand to renovate the rest of the house. It's it's a pretty big place, about two thousand .

and so eighty five thousand .

for the the garage all the way to the back, the house, to keep compliance with code and problem.

And this was a parent be okay. So they are gonna to basically jack the house, fix the the peers that the beam sit on something times they have to replace the beam itself, lower a backup. And that's gonna seventy thousand, mostly from the labor involved because it's expensive, because not everybody knows how to do this.

Yeah, we actually had the poor new beams. Yeah, new beams as well. That's why IT was so expensive because they jack them up, new ones, then put him back down, right?

And the sellers of this property knew they had a problem with the foundation, but maybe they didn't know how expensive I was going to be to fix that.

right? Yeah, they knew would be expensive, but I was just one of those things where they didn't know. The first thing about foundations was really daunting, really intimidating. And so we were able to create a when went situation where we bought IT, and we still gave them a million dollars .

for the house money. So how did you up with doing? Ask what they go on the house. They propose a million. And how did you guys settle there?

yes. So usually how my, usually how my go is all just say, tell me, look IT about the house. Why do you want to sell? So i'll get first reason for selling.

And then that's a pretty natural transition to have the condition because if they're motivated, the condition probably isn't great. I'll then ask them what what their timeline is when they're actually looking to sell. And kind of a money line that I use is also great.

I'll start running numbers on your property. You guys have an idea of what you're hoping to get out of IT and that kind of instead of saying how much do you want to sell a house for or something like that, I cannot gives the president say i'll run my numbers. I'll do my do diligence.

Do you know how much you want? And IT really puts people at is lets them kind of open their shell, give me a number. And I asked them that, and he said we would be really happy if we could get a million dollars for the house.

I said around my numbers on IT, I was actually in the car, headed to another appointment. I went to that appointment. I got that deal. And then I drove an hour back to my house, started running numbers on and realize, okay, this is a great deal. I gotto call this guy right now and lock to see in contract.

Yeah, that's awesome. And how did you come up with the L. V? You have agents at work with you.

Do you do this yourself? Yes, I do. You yellow. Just look at what comparable homes are shelling for, punched in the mind spread. And yes, see see what our target profit is versus are actual. And then once you put them .

under contract for the million, is that when you came up with the numbers for the foundation work, seventy grand plus eighty five for the rest, the reno.

I actually, when I got IT in, I didn't even know how much I was gonna to do. I didn't even know the house looked like I just knew. So we purchased IT for a million, and it's worth fully renovated about two point two, two point three.

I knew that no matter how much we on this house, we would make a profit. So he was worth locking IT up at that. I don't do that with all the properties, but this one specifically.

How many school feet is this house?

One thousand nine hundred and seventy five?

That's not very big. This is going be a really good igher or hood does have like a really nice view or anything.

No, no, it's just a high Price steria people love to move there. There's a lot of there. So we get revalue that.

Lets share some pictures this succinctly s go through and see that if you have some before pictures because I don't think if you started to work .

on how we're pretty close to be and done with.

So we start with before pictures and see what you are buying.

So this was the master bedroom, kind of towards the back of the house. IT wasn't quite the garage, but I did have quite a bitter, but I did have quite a bit foundational issues. You can see here, there's fn, there's cracks all over the house from the foundation, but relatively good shape.

This was the kitchen. He was pretty updatable. So we were we doing the kitchen and we were opening up this little door right here. So there's no wall that's the front door.

This is the half bathroom that in the garage you can see the the singer block, the garage, the whole house was built with these cinder blocks. So we're putting up some we're going to put up some dry wall. So IT looks like house, not a government .

or a prison .

ah so this is an example um in the master bedroom you can see the foundation was had completely song. He was about three inches down and where .

the ceiling was like these, we will get a feel fur with the problem. Looks like typically when you get in an off market opportunity at a good deal, usually in disrepair, just like this, doesn't like bad. On the outside.

you can see this is the garage that was converted. You can see the cracks front.

Look at all.

So yeah.

that does .

that think?

And right into the ground.

yes, so we completely had the jack all of this up, and then put a new foundation in right here. Yeah, the house was in relatively good condition, was just really outdated.

And I had that one foundation.

ard. The thing about this house is the original buyers. So mother parents purchase this property, they actually purchase two lots because they wanted a bigger lot. So they purchase two and merge them together.

And then you, what's that building? You showed that like a the back somewhere?

Just a little. Does I have .

plumbing run to IT?

No, but IT does have elected right now.

let's see. But IT looks like after some of the works been done.

I actually don't have .

any those pictures. Okay, we'll keep IT mysterious then. So you got this deal. You lacked up at a million. You put about one hundred fifty thousand and two winter, so about one fifty, okay? And now you think is worth over two two million, two point two or so.

yeah. And as is can not renovated like R, S, to be solid, two point one five. And renovated comes about three months ago. We're selling two, two, two, three.

okay. So you got to close a million dollars back here. If you sell, you're going to have short term capital against taxes .

we classify as ordinary income. So probably a bit worse.

So would you be able to shelter in that ordinary income with any cost segregation or accelerated appreciation?

Not a tone because we only only get to own IT for eight, nine months. Well, no.

I mean from other property, sorry, as a real professional .

oh like other rental like long have holds no, we got we recently got rid of all of our long term holds just because of the tenant laws that are we do a lot of business in oregon, california and had a utah. And historically, tenant laws are getting worse in organ, california. So we sold all of our rental switcher, right?

So there's give me a pretty big tax hit if you flip IT and you're trying to figure out if you might want to hold IT. Is that why you trying to avoid the taxes? Or you just think it's going appreciate you? I want to get some that to both.

Yeah definitely the attacks and then appreciation because this is a pretty hot area. There are not make a new land here anymore. So there's nowhere to put new houses. So that's it's going to be the same house been sold day and day out.

okay. So let's talk what questions you have for me.

Dos, yeah, my main question is, so if we sell there, this is my spread. He, if we sell IT two, three, we purchased one one, our profits gonna be about nine forty. But if I get taxes, ordinary income, it's almost gonna get cutting half. So i'm curious to know, I know that if I do a burr with this, if I refinance IT and start renting IT out, I won't be able to pull out the four two point three million of equity that actually in the home.

I'm not sure how much i'd be able to pull out so that one of my concerns with a bird, but I guess my my interest in doing a burr is even though i'd pull out less money from the refinance, would that actually be more than what I be pain in ordinary income tax and what I would that be for advantage taxwise now? And since I can do, what is the twenty nine years of depreciation? Would that be more advance antares in the future as well?

That seems to be the only reason that question is because you're trying to figure out how to have more capital to deploy the future deals. Is that where your thoughts are? Yeah, absolutely.

So if I can understand you correctly, if you burn IT, would you be able to get more money out than you would have if you sold IT and pay taxes? right? yes.

Are you open to me chAllenging you on that perspective or that framework being how you make this decision? Yeah, because i'm assuming your business doesn't need that does IT need that much capital. Like are you not using any hard money loans .

when you're buying properties? We are, but i'm pretty Young and only i'm twenty six hundred and twenty seven and in a month. So I don't have crazy amounts of cash. So if I could take at this point of my life, i'd love to take as much cash as I can to be able to build up to a point that, that makes sense to put that money in trentals because right now, it's the money that I make and that I turn back and put into houses is that's that's where my income comes from.

But are you having to turn down deal because you don't have enough money to put into these the next deal?

no.

And I would argue if this is probably an easier time in history than ever to build a race. Capital to buy real state doesn't mean you want to have to do that. Is that capital the cost? obviously? But let's take a step back.

Let me break down the ten ways that we make money in real state, then will talk about for you specifically if getting the most capable this deal is the best move or if maybe IT makes more sense not to. So haven't talked about this a lot, but you've got four equity means for cash flow means and then you've got taxes and load paid out. Is there alone on this property right now? Or did you pay cash for IT?

Yeah.

there's hard money one on that. So the first of the equity ways is buying equity. You've done that. You thought a button ad equality when you bought this thing more than we can even calculate here. Then there's forcing equity, which you are also doing as well.

You spent about one hundred fifty grand probably going to sell for two hundred fifty to three hundred fifty thousand years more because of the work you did. Some of that work you had to do like you had to do the foundation. So I would include that seventy thousand, not as forcing equity.

I would just take that out of what the equity that you bought was, but you've done those two things are ready and that equal around a million and some change, nine, forty. But then taxes, you have no way to shelter. So that's going to get cut in half.

It's going to hurt, which is what i'm trying to avoid. Here is one of the main things. Now you've got market appreciation, cash flow, which is a form of cash flow that you developed when you buy in the area where rents rise faster than the national average, which in this area, they absolutely will no this area, that's the case. And then you ve got natural cash flow.

Natural cash flows, what you get when you just buy a property and IT cash lows for you on its own, then you've got force cash flow, which is what you get if you change the use of a property like a traditional rental to a shorter mental or if you add unit to a property which these people already did when they added the age. If they had made a separate unit that could have been forcing cash flow as IT is they force equity when they did that because they added score footage to a small house to make IT worth more. The equity ones that we skip there, you have natural equity.

That is what you get when your own real state that appreciate over time because the government inflate the currency and then you have market appreciation equity, which is what you get when the area appreciates faster than the national average, similar to market appreciation casual, which area absolutely does, kay. And then you've got loan pay down and taxes. If you flip IT, you basically capitalized on the buying equity and the forcing equity of already done, and then you lose half of that or so to taxes.

So you're getting two out of the ten ways of building wealth. If you sell this thing, if you keep IT, you buy equity, you force equity, you've to market appreciation equity because it's going to appreciate at a rate much faster than the national average with that's why it's worth so much. Now it's already done that you are going to get natural equity because the government is lowering rates, which means home Prices are about to go up even more and even faster.

So you're going to ride this rising tide. That's gona be way more than if somebody bought a property in inDiana that has the same dilma from an equity standpoint. This is a hard you should keep this thing.

You don't need to get rid of IT right now. You also have so much freaking me on the bone with this because you got IT at such an incredibly good deal. You'll be able to find a way to make this casual, most likely whether other people wouldn't have somebody paid one point seven for this and is where two point one.

That's still a good deal. They proudly wouldn't build a cash. You might be able to.

So I sk about your cash al options. Natural casual. I don't think it's probably going to naturally cash. Have you looked into like what the rents would be .

just in its current condition? Yes, it's anywhere from about thirty six to forty two.

yeah. So you ve been a million. You're know we're close to the one percent rule. If you're running IT out for four grand a month, right? That's one of the downsides.

So you've got market appreciation casual that will be good for the future because rents are going to go up in this area more. Um I didn't mention buying cashala as one of the ten. That's another one that doesn't really have a ten to do with real state.

That's one if you're investing in reads or stocks or something like that, but you do have a force cash flow option here and that's going to be turning that garage into a separate unit as well as, uh, basically putting some more money into rehab that shared or whatever that structure was in the backyard as well as if I had plumbing as electrical, it's pretty close to the main house. You'll be able to run plumbing to that thing without a ton of money. You may even be able to make a little bit bigger.

But even if you don't, you can easily turn that into a studio. Studios trying going to rent for, what do you think? Twenty five hundred box? Yeah, hard to see and be much less than that in that area. It's very difficult to get anything for under two thousand dollars. This is a really good night's hood.

So if you able to convert that garage into its own studio and read that out for fifteen hundred, and you're able to get, even if it's only two thousand and months for that studio, you're at thirty five hundred. Now if the main house for rents for three thousand, you're at sixty five hundred. And you refinance that note into a thirty year fixed rate out of the hard money, you can buy IT below six percent right now.

You're probably be in the high five, you actually can cash flow. Now the cash low itself will be so insignificant compared to the equity here. I'm not selling you on.

You should do that because of the cash flow. Let me get that part straight. However, IT won't be losing money. You will have all the ways that is going to gain money through equity. Building this property is going to, at some point, be worth five million dollars, seven million dollars with the way that we're debasing our currency.

Okay, if you sell IT, your question has to be i'm losing half of the equity I have and i'm losing all of the equity I could build by keeping IT as well as all the cash so that I could get by keeping IT. The only way that makes sense is if you can take that five hundred thousand dollars you left with and you can make money with that capital at a faster rate than what could have happened in the property itself, that which you probably can based on how you're telling your business bottle works. I just don't know that you would need that five hundred thousand dollars to do IT.

If you keep using hard money loans and you keep making money flipping houses in whole sAiling, you can build up this capital. So maybe only have to use the hard money loans for another year to three years and still have this thing over here with a massive amount of equity starting off and equity growing and now you're paying off a million dollar one or whatever the case would be, you could probably accelerate appreciation on that thing to save you taxes that you are making from your flipping business. If you qualify as a real state professional, you'll be able to take the income from, uh, your flipping business and shelter IT with some of the appreciation from this asset.

That's a two million dollar asset. That's a good chunk money. So it's going not only going to save you taxes on itself, it's going to save you taxes on some of the other stuff you're doing.

In my mind, i'd only tell you to sell this thing with the crazy taxes you going out to pay if there was no other way to get cash, if you were, like, do some cash poor. I got deals coming to me all the time that I can't take down because I have no money would be painful. But I like you probably got a butcher, the golden goose.

But I want you to keep that golden goose and get those eggs, man. I want you to delay gratification with this, if you can, because in such a good area, you'll be able to make IT cash flow. You you have the money right now. You could even take another option of thinking as you can take a hey, lock on IT and use that to fund your flips at a cheaper rate of what you're probably paying for hard money. You will be able to get all the equity out, but you'll be able to get some of IT and you blend the cost of your financing with that he lock. And with the hard money rates that you're paying, you're going to make less money per flip, but you're going to build up a mistake that you can eventually because i'm guessing that your your goal here, you don't want to have to pay hard money rates when your flip houses is way Better if you could .

pay cash right eventually. I mean, the nice part about heart money is you take a hungrily, you buy one house, or you take that hundred hundred grand, you can buy four houses.

We use hard money for most of the houses that i'm flipping because I really like that I can borrow money for the rehab and the house. It's really easy with some of the bridge products we have. I put I got one right now.

I bought, I paid uh two thirty years. So I put about um I put more than I thought I was going to put into IT. I met about like eighty or and its A R V is going to be between four hundred and four twenty five.

So i'm looking at between eighty eight hundred thousand dollars for this property. I put thirty thousand dollars down because I borrows ninety percent of the cost to buy, and then I borrowed ninety percent of the rehab. So like, I wasn't that bad for me, actually was more.

I borrows less than I saw. I borrowed more than ninety percent because I paid two twenty seven, but in a praise for way more. So they based off the a praise of Price, right? So like because you have these options, having cash is not as advantages as IT was unless your margins are so slim that the deals don't make sense if you have to pay a cost for the capital.

But in your case, doesn't you have plenty meat on the bone these deals are make sense of? You're not at that, right? I just don't think you need the capital as much as you think you do.

So are you not worried about the tenant laws going throughout the country ah and being stuck with, say, I have the house, I convert the garage into an A D U and then also that back I have three tenants in their you not worried about the tenant laws going through a, say I get stuck with three tenants .

that won't leave. Here's where that's unlikely to occur to you in this neighborhood. I would be worried about IT if you were buying this thing and stocked in california. Like tenant laws are only applicable when you're in a worst case scenario as a bin hood investor, which is you have a literal eviction if you ever hear this one was evicted from their property.

That's worse than just, hey, I couldn't pay the rent how to move out if you I about hard times and we coulda pay the rent, we tell landlord, I don't have the rent and what do you want me to do and they would either say, well, what can you pay me or they say, I want you to leave and if you leave that IT, they usually don't care. They put another person in there. You go live with somebody else.

You live at your whatever you got to do to be a personal integrity. You don't make them get the sherifs to come forcefully, make you leave a property you haven't staying in but not paying for. That's it's stealing. Basically, you're stealing utilities, you're stealing the use of the property, right? Evictions don't happen all the time, and when they do, there are significant consequences for the tenant that was evicted.

Like when I was a cop, I tell people I don't know that I ever took a person to jail, didn't choose to go to jail like if you're trust passing and i'm like, hey, you got to go and you leave, you don't go to jail if you're like, F, U, i'm not going and anywhere well, now I have no option but to take you to the jail. Well, I wasn't taking people to jail that really wanted to be at work the next day. I wasn't taking people to jail that we're like, man, I got a lot.

I got ta get done. IT was always people who have nothing to lose. So jails not a big step down in their quality of life, is the same with tenants.

If you're tennant, values their credit, values their rental history, values their integrity, they don't make you a vx. I would never ever make someone to vict me because of the fact that it's it's wrong and it's going to destroy my create. I care about that.

I just gona leave right in this city. I don't think you are going to be finding many tenants that are like going to a force you tube victim where rental laws are actually going to apply. It's a very rare, especially if you have a property manager got experience with picking the right people.

You're probably going to get a tech bro who's like, oh my god, he is only too grand and I going to have my own space and I don't have to be in a loud apartment complex who's got a bright future ahead of them. That isn't going to make you a big of that. They probably check their credit score more than you do.

Yeah have you had Better experiences hiring property management companies or doing your own self property management?

If you're going to do self, you have to understand all those laws. You have to understand how you could be violating the law because if there's things you're supposed to do that you're not doing as a property manager, a lot of the time they don't have to pay red. The courts will take their side.

In that case, property managers know what the rules are, what the laws are, what the fair housing regulations are. It's not fun. I think I paid mine in california like six percent of the rent is not the four ten percent. Because when rents are more expensive, though, usually take less so like it's not fun, but it's a way Better to not have the risk of screen things up. Do not have the vacancy because you were busy, you we're not gonna able to put time towards finding these tenants, screening these tenants and do not have the headache of the tenant texting me that something needs to be done. Also, if I do have to say no, screw IT they're on the red, kick him out IT is way easier for me to tell a property manager and make them be the bad guy that if I know that tenant and .

now I have to go be the bad guy, the wall between you the that's .

exactly how it's another reason why I recommend people do IT even if you're not onna hire a third party property manager. You need to hire an assistant that access a property manager. There has to be a third party in here.

That's a wall between you and the ten because otherwise the tenant is going to manipulate you or try to become your friend to use something against you. You want a neutral person who's communicating this stuff that you could just make a business decision and let them go execute on IT. Now obviously have to make sure the property casuals might have to put a little bit more money into IT if you're going to develop that back unit into an you. But if you can do that, I like that way more, especially because you're getting market of cash flow. So your rents are going to go up in this area more the national average, and they're going to be going .

up for three units, not one. So what that makes sense? If I kept IT as one unit, do you think you'd make sense? Just keep IT as one unit, take a small amount of equity out and rented out and then slowly over the next couple of years, then do the if you .

can make a cash flow at one unit. Yeah, I think that makes sense to do IT. Right now. You can do the storage unit conversion while you ve got your contractors on scene. It's almost always cheaper to do the work now.

And here's why inflation makes everything expensive, right? So if it's going to cost you fifty grand to convert that thing into you right now, it's going to cost you seventy grand to do IT in five years or in six years or seven years, right? The other thing is, if you do the work later after you refinanced, you have the refinanced again to try to get some of that equity out.

If you do the work before you do the refinance, the equities there, when you go to complete your bird now if rates go down and you hold IT, you can refinance them to even Better rate and on a million dollar loan baLance or whatever. It's at eight hundred thousand, nine hundred thousand, that's a pretty significant savings that you're going to get, right. You've got the upside of getting a lower interest rate if you sell IT doesn't really matter to you.

And interest if you hold onto IT and then Price is skyrocket, you can either refinance into a lower rate and hold a longer or you be like, holy cow, this thing is appreciated to three point five billion. I mean, to sell IT, you sell IT for more because you've got that garage conversion, you're force even more equity when you did IT. Like objectively, I see all the things leading towards this is a more powerful wealth builder for you. If you improve the property to its maximum potential and hold IT, the downside is just gonna. It's onna slow down areas in the other party of business because you not can have as much capital to play.

I see a lot of people, especially out in the middle st, buying these properties for forty, fifty grahm. They're putting sixty into IT and then they're instead of getting a conventional alone. There are refined into A D, R alone. An opinion about those are we do today.

I bet you at the one brokers, we do more D S C, R loans that anyone in the country, we are like one of the first people to do them. Yeah, we are experts in these where you could get into trouble with what we're talking about at the C R. One is they send in a praiser and they may say, hey, you didn't get this permitted with the city as an official at u and junior at u. So we're not going to take the income that comes from these to include towards your that .

service coverage ratio that make sense. But as long as I get the permits, i'm getting permits for everything we're doing all the foundation work with permits like like for like permits and it's all clean yeah so if if you .

already having a good relationship of the inspector or hey, I think I want to convert that shed into an eighty, you what has be done if they give you a long replace of stuff? That's a maybe this plan doesn't work out as good, but if he's like, yeah, no problem. Here's what you need to do.

You're gna need to do these things all approve his way. Get easy for you. At that point. I be like, we'd ink.

Can I make a little bit bigger? How much would I cost if I built an and onto IT instead of a studio? I turn ed IT into a one bedroom.

How much can I get for rent if I turn IT into a two bedroom with one and a half bathroom? Now you almost have like a second house, just a very small one. It's already at the end of a driveway.

You can run a fense very easily between your main house, that thing. And now it's almost like you got two houses on one lot in an amazing area. You have a huge backyard that's like begging for this to be done.

Now you've got a property that when you go to sell IT, it's worth more more than what you could specially begin right now and the future dosson. Five years down the road, eight years down the road is like this, maybe two, three million dollars. I am so glad I hang on to IT.

Instead, a present day does. And that I, I don't want to swell this pill. I really want that cash. I want to be able to increase my flipping business in my whole business.

I've even thought about doing a have you heard about the new S B nine loss bit laws, the forming second .

before you say that another reason to hold IT, if you hold IT for more than a year and then you decide to sell IT because you need the money, you move from regular income tax to long term capital gainst taxes, which I think you're like fifteen percent for long term, is way less. Whatever IT is, is way less. So your tax burden goes down if you could just hold a afraid here you ask me about the S B nine.

yeah. So one thing that i'm considering doing is doing the S B nine law. You can do essentially do a many last split because there is that room on the side of the house to essentially put another driveway. So i'm thinking about keeping IT ranting IT out and then set off, keeping that rages in A U or building, converting that road into an ai about tarring IT out and putting another house in the backyard.

Because the law, I don't even know that you need to tear IT .

out to build the other house. No.

another big if you can build another property back there, which you have the see you if you keep IT, you can even like keep flipping properties, whole ceiling properties, keep your business going like IT is. And then started investing some of that capital into building this thing. Now you've gotten away from the fifty forty five percent capital in short term rate.

You put yourself at fifteen percent rate. If you decide you want to sell IT, you've let the property appreciate. You have added value through building two houses on one lot, or you split the lot, you keep one house, you sell the other house. You get all the capital back you would be getting right now in two or three years. And now you have a free house in an incredibly good area that's going to continue to appreciate and it's going to provide well for your family for the rest of life.

Yeah, glad I asked you about that. That's an interesting perspective that I didn't have before. We did.

Yeah, there's I don't know that it's what you should do because I don't know any moving pieces you have going on in your life. But I think objectively speaking, you will definitely make more money if you hold on to this thing and you just push IT to entire and vessels. If this was in a rough area, my advice would be significantly different.

You can apply the same advice to every single property. But because of you and I know this is basically one of like the niceties in the entire barry and yeah, the people that live there make really good money working in cities like emphasis go oakland even maybe send hazy at times. But they don't want to live in those cities.

They want to live somewhere where it's safe for there's nice parks where they have really good school scores like it's centrally located. I go hiking in that area all the time. I don't live there, but i'm driving up to that area constantly.

I go to church not too far away from there. So it's very hard to see that area not continue to appreciate the rest of the area can struggle that one. Well, I doesn't.

Thanks for be here. Any last questions for me before let you go. No.

I think that's IT. Thanks for thanks for walk me through.

I know you probably came wanting to get some clarity and I actually created more problems for you.

but you're smart guy.

I trust lizer settle. Thank you for I don't want to find out more about you.

Where can they go? Me, instagram. I think of a few .

thousand lowers.

So god, it's C R I D D L. yeah. I don't put out a lot of content, but if you have a deal you're looking to sell, I might buy IT done deals all over lousianner loui da all over the place.

alright. So if you're looking for content, go to David Green and twenty foreign instagram. And if you're looking to contact dozen cradle, go to dozen cradle on instagram. Give him a follow. Thank you. next.