Retiring with Rentals, ADU Investing, & Down Payment Options

[@bruce8204]

Every single podcast, David Greene goes off against cash flow. "Cash flow is unreliable." If you have one property, maybe. But as his ex-podcast partner Brandon Turner would say, if you put aside 15-20% for repairs and maintenance and capital expenditures, you can accommodate for this. With multiple units and building your rental portfolio, it becomes more reliable and easier to live off. That's the point of real estate investing. To say people shouldn't leave their jobs and live off of cash flow, I am living proof that this incorrect, after about 15 units. And I know many other investors who are the same. The appreciation is nice - but it's the cash flow that has gotten me here.

[@goowatchi]

His investment properties are in markets (Bay Area, Scottsdale, etc) that have appreciated significantly in the last 3-5+ years, while not necessarily cash flowing during that time period. I wouldn’t be surprised if some of those properties have even or negative cash flow just for the sake of the appreciation play. If property values go up from $1M to $1.8M, he wouldn’t care if he loses $500/month on cash flow. Extrapolate that to 5 years, $30k loss on cash flow which you can then write off and cash out refi up to 75-90% of the $800k equity. Short term pain for long term gain.

[@allphaselandscape]

@@goowatchi Yes, but every bit of that depends on timing. The market. The market does not only go up. Negative cash flow on too many properties Can put you in the poor house when things go bad and you lose the asset in its entirety. Nobody is saying that appreciation and equity aren't incredible. We all want that and we all enjoy it.... Just not at the expense of the fundamentals of investing. You can only play that game if you get royalties from books and podcasts and syndications and everything else. To steer average investors into that is shameful.

[@Ambrosha385]

I love this. Thank you so much. Exactly-what is the whole point of cash flow if not to eventually retire on it

[@yonmoore]

My first few properties didn't really cash flow much (10-15 yrs ago) and I used to feel lucky if I could use some of that money to go out to dinner or buy some new tools once in a while but now, I live on it and don't miss running my painting business one bit!!

[@joshkathrinus5934]

Thank you. I love your philosophy about the Toyota Camry. That is what we are striving for is a better us. Having more time to think about improving every aspect of our life.

[@allphaselandscape]

I really am disturbed by how bigger pockets has abandoned cash flow as the most important thing in investing. Feels like they have gotten too rich (or too California) to remember the fundamentals for smaller investors. Literally everything said in this podcast was in Stark contrast to Brandon's freedom number concept and the fundamentals laid out in his book. I understand the game has changed since then but only because we're at a different point in the CYCLE. Feels a lot like 2007 right now And I'm not banking on appreciation.... If it happens, that's just a bonus. Why is cash flow unreliable If you are analyzing setting aside money for management, repairs, CapEx, and fixed expenses?

[@alexgrinage]

Its just an opinion and depends. I never cared about cash flow whenu got 7x in equity

[@allphaselandscape]

@@alexgrinage I love making gains in appreciation and equity And I've done so quite a bit recently. That said, not caring about cash flow is what bankrupted everybody in the last crash. I fear A lot of people are about to get that lesson unfortunately. Younger investors may think that the market only goes one way, but that couldn't be further from the truth. What's next, we going to start steering people into adjustable rate, No doc loans?

[@alexgrinage]

@All Phase Landscape & Building Services, Inc. lol no. you're saying that cash flow is what pays the bills. The the small difference in cashflow shouldn't makeor brake u

[@allphaselandscape]

@@alexgrinage cash flow IS what pays the bills. That's called an investment.... The asset pays for itself and you make profit via cash flow, appreciation, tax advantages, debt pay down. These are called fundamentals. If your financing to be a lot of pocket and your only play is appreciation, that is called gambling. Thats okay though....i love Vegas too!

[@alexgrinage]

@All Phase Landscape & Building Services, Inc. if the extra 100 dollars a month of cash flow is what u need u have other problems. Also, it's equality and cash flow, and it's not a gamble; it's a guarantee. 100 dollars is one days work

[@justinbolton1157]

There is a city on the Texas Coast where some of the original foundations are now under water in what was always a shallow bay, but it's 175 years old.

[@yakster87]

Seeing Greene is Gold! 🤩🤩🤩

[@RealNickATX]

Politicians buy properties on Martha’s Vineyard despite “climate change “ I think you’ll be ok .

[@nellosnook4454]

Barack Obama doesn’t believe Martha’s Vineyard is going to be under water soon. He recently bought a big house on the shoreline there!

[@RealNickATX]

Yup not to mention Bill Gates recent $43 mill San Diego Beachfront property.

[@sarahjavandel5344]

Came here to post exactly this! Also, the banks have no problem lending on my rentals that are on Florida coastline for 30 year fixed. I think if they were even slightly concerned, that would show up as an increased % to compensate for that risk. If they aren't worried, I am not worried.

[@ownerbuilder3406]

I've been converting and building ADUs since 2016. It's an amazing investment.

[@olacraig2883]

Thank you Mr Green for your perspective, especially when there is so much engineering ( not all good) going on related to climate change, think checking immediate local issues thru research for such and approach from that angle should help, she should be more concerned with ESG and owning nothing deployment

[@evafranco7888]

Love your responses, and the way U explain

[@catherinedavis3165]

Thank you so much, David, for sharing your words of wisdom and experience!

[@rickmancc]

(SAN DIEGO GUY)Nail on head ADVICE. As an appraiser in the area and an investor (that has duplex on the beach) this is 100 % correct advice. Randomly ran across this but if every need any help please reach out.

[@andreawisner7358]

You've convinced me to go out and plant a tree.

[@johnirvin9222]

On the down payment question, you would have to also consider the PMI in addition to the additional mortgage payment. How much is PMI these days? Haven't paid PMI in almost 20 years

[@tinawalker5335]

.5%

[@jjfade2391]

Another great episode the way David solved that depreciation problem was genius. I could listen to him talk shop all day!! David you my favorite BP mentor!! Over Brandon all day !!😂

[@raiderkaos5280]

Rates in Denver just went up to 5% now people are scared. Does that make it a better time to buy?

[@happyinquiring]

Hey David and the BP Team, could you do an episode on rising interest rates and how it might effect the market moving forward? A trusted advisor recently predicted that we might be "nearing the top" of this market. I know it's all very speculative, but what do you see happening as we move into the spring/summer buying season?

[@ownerbuilder3406]

40:50 he invest in California, he can now legally convert the property to a Duplex by SB9. He can even Split his property and create (2) duplexes each lot. I advise him to build the detached ADU and later use SB9 to convert the ADU to a property DUPLEX.

[@codebebop]

Green grass always been my favorite color

[@olacraig2883]

Cash flow is great when you buy right. Cash flow is great when you know what you are doing. Cash flow is more important than appreciation. That is called speculation. Been on both sides of the coin Cashflow is king, just stabilize and keep diversifying to increase cashflow

[@joekim4345]

fantastic video. very realistic understanding of cash flow and why the rush to retire is dangerous - And working on what you want - that kind of freedom is actually MORE enjoyable than retirement (for many). Doing it right now. Actually got myself free of real estate (almost) to even more passive investments.

[@veronicasolomon1904]

Hey David!! I live in Raleigh,NC now . I listen 🎧 to you all the time . It was really cool 😎 to hear where you are from . I am originally from California too. I have lived in Lodi, worked in Manteca went to college in San Francisco , went to Linden High School & I ‘m guessing we both went to Delta college in Stockton ?? Just fun to hear we have similar roots :)

[@MemosToyPlay]

This must be an OLD recording because it says you uploaded 1 day ago, but you’re talking about a 3.5% interest which it is now 4.5-4.875%. Pls update or upload Vids faster. Thanks for the great conte.

[@johnnyb33good21]

@14:34. the Fed funds rate peaked at 19-20% December 1980. and for mortgage rates, the average annual was 1982 (16.04%) 1981 (16.63%) 1980 (13.74%) according to Freddie mac

[@cwr8618]

and people are tripping when it gets to the 4s right now. kinda funny

[@timtaylor9339]

Bought my first house in 1983, such whiners today ;-).

[@johnnyb33good21]

@@timtaylor9339 yes you are. Home sells did trend down because of higher mortgage rates however home prices continued to increase. So just because we have higher mortgage interest rates it isn't always a guarantee in lower prices. Something definitely to keep your eye on and thumb on the pulse of the market

[@onealr]

I think a better question would be how much cash flow is good to live on? I'm sure if you have a certain per month your fine.

[@ernstpierre7021]

8k and im ok i dont need a bently and big mansion

[@onealr]

@@ernstpierre7021 I figured some modest number like that will be good enough. David is speaking as if you should never do it.

[@michaelbigham3367]

If my goal shouldn’t be to retire early on cash flow, what am I doing investing in RE? I should use real estate ‘income’ to allow me to get a different W2 job or start my own business? Isn’t this the classic ‘Do what you love’ cliche but as long as you aren’t relying on cash flow and are still working? I’m not saying David is wrong or that he shouldn’t say it just because I don’t want to hear it, I’m saying this shakes the entire reason I’m investing in real estate, partly based on BiggerPockets teachings, and makes me question buy and hold strategies as an avenue to FI. I need to hear more please.

[@lyndayam4182]

Thank you for sharing your knowledge.

[@allanburias3031]

Great show David. I learned so much from you on these questions and answer type of videos. More to come.

[@jksinsin-cheng9329]

Hey David, just wondering what books are on your table in the background?

[@Ranndomlax1]

I miss the old BP. The David Greene show hits different.

[@kylemanship2628]

David, wear what ever you want. :) We don't tune in because of your clothes. lol The knowledge and your demeanor and personality are the best! Thank you!

[@thejmz]

I love the climate change question. I've been shopping around, considering just that.

[@simonmartinez8480]

That first question made me scratch my head…. I’m not sure how that relates to real estate investing .

[@chicagohavoc]

I added an ADU and it's cashflowing great since I paid cash but my appraisal came back negative because no other unit owners around me did the same thing so I am unable to pull my money back out. Realtor said you can likely get your money back but you'd have to sell. 😡 This was after my realtor told me it would add 100k in value after the reno was complete. I found the $100k in supposed added value would only be realized if I sold the property. It did not mean I could brrrrr my money out once reno was complete. Had I known that I would have done minor renovations and used the remainder to buy another 3 flat!

[@nellosnook4454]

Can you appeal the appraisal? If not, can you seek another lender? Can you still receive rental income from the ADU? I’m adding a permitted ADU onto my personal residence in 2023. Hot rental market in my area. Realtors always want you to sell so they can make their commission.

[@cwr8618]

I was in the EXACT SAME BOAT. We did an ADU in San Diego a few years ago and it brought awesome cash flow. Went to refi, appraiser hosed us for the exact same reasons/guidelines, so we couldn't pull out the equity we expected for our next home. So we kinda left it at that - it's cash flow has added a great buffer for our personal growth

[@user27278]

just save the income from the rental and thats how you get your money back?

[@chicagohavoc]

@@user27278 Thanks for replying Arturo. You ideally want to get your money back ASAP so you can pour into a new project. If I were to wait for rent it would take 9 plus years to get my cash back from the property!

[@chicagohavoc]

@@nellosnook4454 Appeal was an option however mortgage lender advised it would not come back in my favor due to the underwhelming proof in the .7 mile range around my house. Its not the Lender its the appraiser you are dealing with who provides the value. I am receiving rental income as the ADU was done legally with permits and proper zoning was received. $$$$$ Best luck on adding your ADU, you will learn that the budget will climb higher than you planned for. I'm still satisfied that I added an ADU for $145K and its under the same roof vs trying to buy a condo of same size at 190-200 k which would have had an HOA. The entire cashflow belongs to me with no parts going to an HOA for them to control.

[@omarghosn8655]

If you have a mortgage and your house went up in value...would it make sense to do a cashout refi to get money out and buy a rental? Because prices did rise so the cash flow rental would have also risen

[@taylorpedersen6381]

What advice would you give to someone who wants a low time investment strategy. My wife and I enjoy our jobs and earn a comfortable living. We own our home and one B class rental. Our goal is to have enough rentals to get freedom with time, but with a new daughter and both working at jobs that we can see ourselves at for the next ten years, I don’t have a lot of time for time heavy strategies like the BRRR. Also, what advice would you give on diversifying within a company match Roth retirement account. I currently fund it with 10% of my income, when you started did you keep your funding to a minimum in order to raise capitol for your next deal. I am just worried that I am not diversified enough in my investments if everything is in real estate. Thanks for the info you put out for free, I love learning about real estate investing during my commutes

[@macgarcia6471]

Yea I am kind of confused. I'm just getting started in investing and want to leave a 9-5 job. But how do I do that if I do not bank on the cash flow? I understand it's good to have both. So how do I grow and leave my W2 and become free?

[@bullishharvey8793]

Just make sure it's the Toyota Camry sport edition ya know

[@natusfreedom472]

David green .. u always make sense and , convey it so simply.. your books .. are u fee valued .. I’d pay 100 .. easy for your knowledge

[@wealthcreation5962]

Great insights!!

[@tyronetoliver4461]

I have 3 properties and I am stuck. Don't know if I should sell or buy

[@JuancoPRoFlow]

What type of properties and where?

[@luismejia5678]

Hi I'm not working right now do you think is good Idea to pay off my 4 family To have cash flow

[@robotrex23]

Hey! You are a local boy! I am born and raised in Modesto .

[@JasenF]

Thanks for the info man!

[@kevinbriggs9143]

I'm New to RE investing, I was told that I have to put down 20-25 % for investment properties.....How can I put down less than 20%....I was listening to your podcast

[@travisskeans2511]

Depends on what your trying to do. You can put 5% down on single family homes. Duplexs you can do the same if you plan on house hacking it. Not sure how'd you do less than 15% on duplexes.

[@cwr8618]

@@travisskeans2511 true but trying to find a lender who will finance 5% on units is very difficult, even 10%, or at least it has been for me. And my credit and income are solid.

[@kevinbriggs9143]

Thanks for the reply

[@wbawba4275]

I have 23 properties and they still make me put down 20 to 25 percent. Credit score 830 had enough money on bank to pay cash for it but they didnt care.

[@cwr8618]

@@wbawba4275 for sure. According to one of the lenders I know, it's just less risk on SFR vs units. More pride in ownership and more likely to try and retain 'your' house, and less likely to have vacancies and overextend

[@400nilsa]

Sounds like I need your help.

[@davidstephens9594]

David Green how do I get in touch with your lending company?

[@domp6029]

Super Dope Bro keep up the good work

[@ComputerGUY27332]

16:00 do you have a virtual meet up?

[@PittToNYC]

Where can we submit questions?

[@biggerpockets]

Hello! You can submit questions to www.biggerpockets.com/david?

[@dennishowland7495]

Mr. David green my name is Dennis Howland I am in the Florida area West Coast to Florida I was looking at purchasing a mobile home for a long-term rental Airbnb and I’m wondering what you thought of that but I in a mobile home in renting it out long-term if you thought there was any money and I know I think I want to know what do you think of Vienna mobile home lots did she won in Florida I believe it was 30,000 and if you thought that was too much money thank you

[@kenziecashflow]

David Greene forgets that it’s cashflow that allows him to say “you don’t need cashflow”

[@ginalowe9103]

What is an ADU?

[@biggerpockets]

An ADU is an accessory/additional dwelling unit and a great way to house hack! Here's some more information about ADUs: kzbin.info/www/bejne/oWqug3WVjshshJo

[@jeadie8131]

Great topics. The first question about climate change has been on my mind for a long time.. I have a hard time believing that living in a part of the Southwest that hits 110F for several months of the year is viable. AC is fine, but there has got to be a point where people want to be outdoors. I've lived in Dallas and coastal North Carolina, so I am not totally ignorant about hot summers. As to the availability of water, this will be a severe economic issue long before it is an existential threat. As an engineer by training, I am an optimist. As you said, people are ingenious. They are also pretty short-sighted and wait until the house is on fire before they think about smoke alarms. My opinion is that the 5-10 year impact of water shortages will be that water becomes an economic problem, much like high gasoline prices seen this year. It will result in other increased costs. These will include more expensive appliances, water restrictions on landscaping, unpopular low flow toilets and showers, etc. There will also be increases in taxes the government will need for acquiring water rights from other states or regions. Lots of politics here, room for wasted money and long decision times. Be prepared for possible restrictions in new construction, fewer lots for multi-family projects and even building moratoriums. What about too much water? We lived in Eastern NC for many years. It is LOW and FLAT. The highest hill in town was at the golf course. We joked that the wise long term plan was to buy land on the East side of I95 because it would eventually be water front property. This may be a wild exaggeration,, but there is a kernel of truth. My family had property on Cape Cod, MA for many years. We had a photo from the late 1930's of the family playing ball on the front lawn. Then there is the photo of the front porch of the house hanging off a cliff that went down to the beach. There were too huge hurricanes that ate more than half the lot. Take a look at videos online of parts of the Miami area where regular monthly high tides can flood the streets. Hmmm. Hint hint? Will Miami be wiped out. No, but there will be storms that someone has to pay to clean up and massive municipal infrastructure improvements that will be necessary. People will resist the needed tax increases needed ti 'fix' the problem and thing will get worse. Just my 2 cents. Lastly, in a past show I heard you had bought into a project in the greater Minneapolis/St. Paul area. I am considering that area and would live to hear about your project. Thanks.

[@WillertMorris]

Frankly, I agree, I like not seeing Lambos. Love the pure education.

[@FinancialFiguresandFacts]

Smartest dude i kno

[@lauriekline8655]

Meet more,people.

[@JuancoPRoFlow]

@@lauriekline8655 lmao 🤣

[@JoeR0331]

If anyone is concerned about climate change when it comes to buying rentals they shouldn't be investing any money. That's just stupid.

[@michaelsherk7645]

nice

[@ThreeUsee1]

Follow your Fire, not a Ferrari David Greene.

[@andreawisner7358]

Suzanne, ssssh! Don't tell the rest of them the reality! Hahaha.

[@Srbog1]

Trying to reach Suzanne. Very interested in the Hudson Valley area for investment

[@ComputerGUY27332]

It's funny when you talking about the culture and not having half naked women and just knowledge at Bigger Pockets. There was an ad there that came up with half naked women. 😂😂

[@amafid]

The climate has been changing for 4.6 billion years lady SMH.

[@elvispresley3234]

I love your show, but it is way too long and talkie. Shorten it, get to the point, don't repeat yourself, and you will be more effective with a larger audience. It is just too dang long. :))

[@philmadriaga4521]

Let’s worry more about China and India with there non attempts to help climate change. And while we are at it. How about all those behind the new green deal who fly in private keys? Just a thought. Ps. Love capitalism

[@nellosnook4454]

Barack Obama doesn’t believe Martha’s Vineyard is going to be under water soon. He recently bought a big house on the shoreline there!

[@natusfreedom472]

Who tha f, is nag barguzi or whoever

[@natusfreedom472]

Shit . David .. doesn’t know how to reply to climate change lol . Great , answer bro lol .. show me the money , cuz , by that time , we’ll all be dead lol , that’s some for our kids to worry about lol

[@marinajohn1290]

When it comes to the world of investing,most people don't know where to start. Fortunately great investors of the past and present can provide us with guidance.

[@chicagohavoc]

And here we go with the spam B.S! Watch out folks!!a